Vestnik RUDN. International Relations 2021 Vol. 21 No. 2 243—251 http://journals.rudn.ru/international‐relations Вестник РУДН. Серия: МЕЖДУНАРОДНЫЕ ОТНОШЕНИЯ DOI: 10.22363/2313-0660-2021-21-2-243-251 Research article / Научная статья Prelude to America’s Downfall: The Stagflation of the 1970s Vassilis K. Fouskas 1 University of East London, London, Great Britain [email protected] Abstract. Since the end of the Bretton Woods system and the stagflation of the 1970s, the transatlantic core, under the leadership of the United States of America, has been trying to expand its model of free market capitalism embracing every part of the globe, while addressing its domestic overaccumulation crisis. This article follows a historical methodological perspective and draws from the concept of Uneven and Combined Development (UCD), which helps us consider the structural reasons behind the long and protracted decline of the American economic power. In this respect, according to the UCD concept, there is no global power that can enjoy the privilege for being at the top of the global capitalist system forever in a world which develops unevenly and in a combined way. Power shifts across the world and new powers come to challenge the current hegemonic power and its alliance systems. The novelty of the article is that it locates this decline in the 1970s and considers it as being consubstantial with the state economic policy of neo-liberalism and financialisation (supply-side economics). However the financialised capitalism of the transatlantic assemblage lack industrial base producing, reproducing and recycling real commodity values. Further, the article shows that this attempt to remain at the top of the global capitalist system forever has not been successful, not least because the regime which the recovery of the core had rested upon, that of neo-liberal financialisation represents a major vulnerability of the transatlantic assemblage eroding the primacy of the United States of America in it. Key words: neo-liberal financialisation, financial statecraft, China, USA, Great Recession, stagflation For citation: Fouskas, V.K. (2021). Prelude to America’s Downfall: The Stagflation of the 1970s. Vestnik RUDN. International Relations, 21(2), 243—251. https://doi.org/10.22363/2313-0660-2021-21-2-243-251 Начало падения Америки: стагфляция 1970‐х гг. В.К. Фускас Университет Восточного Лондона, Лондон, Великобритания [email protected] Аннотация. С момента краха Бреттон-Вудской системы и стагфляции 1970-х гг. трансатлантическое ядро под руководством Соединенных Штатов Америки пыталось расширить свою модель капитализма свободного рынка, охватив все части земного шара, и в то же время урегулировать внутренний кризис чрезмерного накопления. Автор следует исторической методологической перспективе и опирается на концепцию неравномерного и комбинированного развития (НКР), которая помогает рассмотреть структурные причины длительного и продолжительного упадка американской экономической мощи. Вместе с тем, согласно концепции НКР, в мире, развивающемся неравномерно и комбинированно, не существует мировой державы, которая единолично занимает лидирующие позиции в глобальной капиталистической системе. Смена власти по всему миру и новые страны бросают вызов современному гегемонистскому государству и системе его союзников. Новизна исследования заключается в том, что она относит спад © Fouskas V.K., 2021 This work is licensed under a Creative Commons Attribution 4.0 International License. https://creativecommons.org/licenses/by/4.0/ THEMATIC DOSSIER: Intensifying U.S. — Сhina Strategic Rivalry… 243 Фускас В.К. Вестник РУДН. Серия: Международные отношения. 2021. Т. 21. № 2. С. 243—251 американской экономической мощи к 1970-м гг. и рассматривает его в контексте государственной экономической политики неолиберализма и финансиализации (экономика предложения). При этом основной проблемой финансового капитализма трансатлантического объединения является отсутствие промышленной базы для производства, воспроизводства и переработки сырьевых товаров. Отмечается, что попытка этих стран навсегда остаться на вершине глобальной капиталистической системы не увенчалась успехом, в особенности из-за режима, на котором базировалось восстановление ядра — неолиберальной финансиализации. Сделан вывод, что неолиберальная финансиализация угрожает трансатлантическому объединению, подрывая в нем первенство Соединенных Штатов Америки. Ключевые слова: неолиберальная финансиализация, управление государством посредством финансов, Китай, США, Великая рецессия, стагфляция Для цитирования: Fouskas V.K. Prelude to America’s Downfall: The Stagflation of the 1970s // Вестник Российского университета дружбы народов. Серия: Международные отношения. 2021. Т. 21. № 2. С. 243—251. DOI: 10.22363/2313-0660-2021-21-2-243-251 Introduction data from the sources reviewed here are cross- checked against contemporary macroeconomic This short article defines “globalisation” as “financialisation”. Primarily, this is because data. The argument put forth is that neo-liberal finance was the first sector in the post-Bretton financialisation constitutes a major vulnerability Woods era of floating exchange rates that was of the US system of global power, undermining truly globalised. “Closing the gold window”, as its primacy and giving way to its sheer was characteristically put [Gowa 1983], was a competitors, first and foremost China, but also conscientious decision taken by US state elites to Russia and India. Although there is no space here solve a lingering balance of payment crisis that to examine in detail the grounding of China in appeared in the early 1960s. Secondarily, this is the global political economy or how the because finance and fictitious commodity EU/Eurozone can offer a response to its own markets have dominated the political economies existential crisis especially in the midst of the of the transatlantic assemblage since the 1980s, COVID-19 pandemic, the driving structural force when supply-side neoliberal policy-making of uneven and combined development (UCD) in became embedded displacing Keynesian aggregate bringing about such drastic change in the global demand management along with the manufacturing distribution of power should be factored in. sector and Fordist wages [Glyn 2007; Gowan UCD, a notion first developed by Russian 1999]. Thus, financialisation is neo-liberal and Marxist revolutionary Leon Trotsky, is defined was initiated and led by the US state. As a as a “loosely articulated web of events, actors Council on Foreign Relations publication suggests, and processes developing at different speeds, financial statecraft is “the active participation of whose individual courses were interconnected in the US state’s monetary institutions in facilitating labyrinthine ways” [Tooze 2015: 29; Rosenberg new forms of global capital flows” that, by and 2010]. large, were dormant since the 1930s (securities, To sum up, this essay maintains that US asset management, derivatives and futures, credit primacy has been eroded, first, by an internal default swaps and collateralized debt obligations, competitive constraint combining the portfolio investment, special vehicles, etc.) antagonistic economic correlation between [Steil, Litan 2008]. Japan, West Germany and the USA during the My narrative follows a historical “Golden Age of Capitalism” [Marglin, Schor methodological perspective and draws from the 1992; Hobsbawm 1995]; and then by China’s concept of uneven and combined development economic rise since the 1990s, adding on another (see below). This approach has assisted the competitive constraint. The structural driving research design in that it made clear the force of these developments has been UCD structural asymmetries of global accumulation empowered and guided by the state, whether processes and their contradictions. The various Chinese, Japanese, German or American. 244 ТЕМАТИЧЕСКОЕ ДОСЬЕ: Нарастающее стратегическое соперничество между США и КНР… Fouskas V.K. Vestnik RUDN. International Relations, 2021, 21(2), 243—251 Two Phases of Financialisation / however, tend to be increasingly financialised — Globalisation and often dollarized — as the dollar was freed of its gold fetter and investors realised that Neo-liberal financial statecraft marks a speculation on paper assets denominated in historical phase of capitalist modernity that dollars is more profitable than employing pertains to a double transformation: first, it aims unionised workers handing out full-time at transforming the internal environment of the contracts and high (Fordist) wages [Foster, state via the public policy of neoliberalism, for Magdoff 2009]. Anglo-Saxon states, and ordoliberalism for It should be noted, that neo-liberal financial European Economic Community / European statecraft was and remains a project structured, Community / European Union / Eurozone states; primarily, along the reproductive expansionary second, it transforms the external environment of needs of the American empire-state and comes as it via the liberalisation of the exchange rate a response to the overaccumulation crisis of the mechanism, the opening-up of money/financial 1970s2. This crisis, unlike the Great Recession markets and the transnationalization/globalisation of 2008, manifested itself in the real of the corporation. Both transformations are economic sector, especially in industry. The feeding each other1. overaccumulation crisis of the 1970s was caused In this new dialectic of national / by multiple factors — strong social and trade