Dollar Imperialism and the Limits of US Productive Power
Costas Lapavitsas is Professor of Economics at the School of Oriental and African Studies. He has published widely and taught at several universities across the world. The IMR is delighted that Costas has agreed to be interviewed on his recent work on ‘Dollar Imperialism’. This is the idea that US Imperialism increasingly relies on the dollar based financial system to exploit the world’s working class and that this creates a more dangerous capitalism as the rise of Chinese productive dominance comes into conflict with US monetary dominance.
The Breakdown of Bretton Woods and the Neoliberal Turn
Q. The post-war Bretton Woods system kept finance under tight control for several decades. What caused its breakdown, and how did the US ruling class respond in the 1970s?
A. The Bretton Woods system, established in 1944-45, was built on the specific material foundation of the United States commanding roughly half of global manufacturing output and enjoying overwhelming productive and technological supremacy. On that basis it could anchor the dollar to gold at a fixed rate and bind allied central banks into dollar reserve accumulation. It was a hegemonic arrangement, but one that rested on genuine productive dominance.
That dominance eroded through the 1950s and 1960s as Western Europe and Japan recovered and rebuilt. By the late 1960s, the US was running balance of payments deficits, gold was draining to pay for these deficits, and the fixed parity became unsustainable. In 1971 Nixon suspended dollar convertibility into gold, and by 1973 the fixed exchange rate system had collapsed entirely.
What happened next is crucial. The US ruling class faced the choice of either accepting a diminished role in the world economy or finding new mechanisms to sustain hegemony as its productive primacy diminished. Unsurprisingly, it chose the latter and its response unfolded on two fronts.
Domestically, the Federal Reserve under Paul Volcker launched a dramatic tightening of monetary policy in 1979 driving interest rates to extraordinary heights, crushing inflation but also crushing workers' wages and living standards and beginning the long era of financial deregulation.
Internationally, the US leaned into dollar dominance not through gold convertibility, but through the sheer weight of its financial institutions, its control over payment systems, and above all, through the recycling of petrodollars after the 1973 oil shock. Oil was priced in dollars; surplus dollars flowed to Wall Street; Wall Street re-lent them. The dollar's global role was preserved but now began to be based primarily on financial and political-military power rather than productive supremacy.
Keynes had warned at the Bretton Woods conference that an unanchored system of this kind would be unstable, that finance unchained from productive constraints would tend toward speculation rather than investment. He was right, but his warning went unheeded. The capital controls that had kept finance subordinate to productive priorities were dismantled progressively through the 1970s and 1980s. What replaced them was the first great wave of neoliberal financialisation.
Financialisation Mark I & Mark II
Q. How did the financial system evolve through the 1980s and 1990s under neoliberalism, and why did that first phase of financialisation eventually collapse?
A. In ‘The State of Capitalism’ that was co-authored by the EReNSEP Collective in 2023, we used the term ‘interregnum’ to describe the period that opened after 2007-9.1 It is a time of profound instability in which the old order of globalisation and financialisation has lost its momentum, but no new configuration has taken its place. That book also first presented the analysis of a fundamental break in the character of financialisation itself. That is, the landmark crisis of 2007-9 marked the exhaustion of a specific regime centred on commercial banks and household debt, and what followed is qualitatively different. In a subsequent article in the New Left Review, in early 2026, I gave that distinction sharper labels, namely Financialisation Mark I for the period from the early 1980s to 2007-9, and Financialisation Mark II for what emerged after.
Financialisation Mark I was driven by commercial banks. Deregulation allowed them to expand their balance sheets rapidly, moving beyond traditional lending into tradable financial assets (securities), derivatives, and most consequentially, into the balance sheets of ordinary households. Banks discovered that workers’ homes, credit cards, and student loans were a vast new terrain of profit extraction. Net interest margins, fees, and trading profits all surged. US bank profits, as a share of total profits, peaked at close to 40 percent in the mid-2000s, which is an extraordinary figure.
This system had an internal logic but also a fundamental fragility since it depended on continuously rising asset prices, above all house prices, to sustain the collateral underpinning an enormous pyramid of debt that mostly households had incurred. When US house prices peaked and began to fall in 2006-7, the pyramid collapsed. The crisis of 2007-9 signalled the exhaustion of a specific regime of accumulation drawing on this type of financial profit. The deeper point is that Financialisation Mark I developed on the terrain of a weakening productive base in the USA.
The deregulation and globalisation of the 1980s and 1990s allowed US multinationals to export productive capital, construct global production chains, and shift the centre of gravity of their profit-making. Domestically, real wages stagnated while household debt expanded to sustain consumption. The US financial system grew enormously by drawing on these household balance sheets rather than on expanding domestic productive activity. When that process reached its limits as house prices could no longer rise and household debt could no longer be extended, the entire structure collapsed.
Q. How is ‘Financialisation Mark II’ different from what came before?
It is a change that reflects, first, a shift in the relative weight of different kinds of financial institution. Equally important, it reflects a transformation in the role of the state, the sources of financial profit, and the mechanisms through which global liquidity is organised. Under Financialisation Mark I, commercial banks were the central agents, their profits deriving primarily from the spread between their borrowing and lending rates — the net interest margin — supplemented by fees and trading income. But after 2007-9, commercial bank profitability never recovered its previous levels as the net interest margin was compressed and household debt contracted and remained subdued for over a decade. That model of accumulation had run its course.
What took its place centres on shadow banks, that is, non-bank financial intermediaries, above all asset managers, holding portfolios of public and private securities. They were certainly present before 2007-9 and indeed played an important role in generating the bubble and the subsequent crash, but they became far more prominent afterwards. The key point here is that their profit mechanism is fundamentally different from commercial banks. Shadow banks do not rely on interest rate spreads but earn from fees on assets under management, from dividends and interest on securities, and — crucially — from capital gains. In Marxist terms, their profits depend on the spread between the average rate of profit and the average rate of interest across the economy, which drives asset price appreciation.2 This is why, under Financialisation Mark II, stock market inflation became the primary channel of financial accumulation, and why preventing sharp falls in equity markets became a central concern of economic policy.
During the same period the state’s role changed decisively. As private debt creation faltered after 2007-9, US public debt exploded from roughly 60 percent of GDP in 2007 to over 100 percent by 2025. The Federal Reserve — and other central banks — undertook wave after wave of quantitative easing, absorbing public and private securities on a historically unprecedented scale and driving interest rates close to zero for over a decade. The US central bank became in effect the dealer of last resort for the entire shadow banking system. It determines which securities qualify as collateral, sustaining the repo markets on which shadow banks depend for liquidity, and underwriting the asset price inflation from which they extract their profits.3 It can act in this way because it holds a monopoly on issuing state-based money which functions as the ultimate means of payment domestically. This is state-based financialisation, and it is a qualitative shift from anything that preceded it.
The scale of what has followed is extraordinary. New research that we have conducted, compiling a dataset tracking 426 major asset managers and all billion-dollar listed companies globally between 2013 and 2025, shows that the equity managed by these institutions rose from $13 trillion in 2013 to approximately $46 trillion by mid-2025. Asset managers now control roughly 40 percent of the equity of all billion-dollar firms worldwide. The Big Four — BlackRock, Vanguard, State Street, and Fidelity — increased their combined stakes in S&P 500 companies from around 6 percent in 2008 to over 20 percent by 2025. And in every major world region outside North America, US asset managers are the single largest group of foreign investors.
Lest it be misunderstood, there is no conflict or opposition between commercial and shadow banks. Indeed, commercial banks finance shadow banks and often create them. But the core mechanism of profit extraction in financialised capitalism has changed as shadow banks rose to prominence.
Dollar Imperialism and Financialisation Mark II
Q. In that context, what do you mean by the ‘New Dollar Imperialism’, and what advantages does the US ruling class gain from controlling world money?
The starting point for understanding imperialism in our day is a paradox that lies at the heart of contemporary capitalism. The United States currently produces roughly 16 percent of global manufacturing output, down from nearly half in 1945. Yet the dollar accounts for nearly 60 percent of global foreign exchange reserves, dominates international payments, and underwrites the collateral chains on which global finance depends. The USA has lost productive primacy but not financial and monetary dominance. Understanding why, and what follows from it, especially in connection with the shift to Financialisation Mark II, is the central analytical task of my recent work.
The key point is that the dollar is not simply a reserve currency in the conventional sense of mainstream economics. In terms of Marxist political economy, it is world money, that is, the global unit of account, the primary means of payment across borders, and the dominant form of value preservation in the world economy. No other currency performs all three of these functions simultaneously at a global scale. The euro, the yen, sterling, and the Swiss franc occupy secondary positions. The renminbi, despite China’s extraordinary productive rise, accounts for less than 3 percent of global reserves and cross-border payments. This is a point we will return to.
What does world money confer on its issuer? First, the United States settles its international obligations in its own currency, while every other state must earn or borrow dollars to meet its external commitments. Second, the Federal Reserve has a decisive role in determining which liabilities count as ‘globally liquid’ and which securities can serve as collateral in international financial markets.4 This decisively influences the relative values of financial assets globally. Above all, the Fed uses its swap line arrangements with other central banks to determine which national financial system could be stabilised relatively quickly in a crisis and which will be left to manage on their own.5
Dollar invoicing penetrates deep into global production chains. Between 1999 and 2019, roughly three-quarters of exports across the Asia-Pacific and virtually all exports in the Americas were invoiced in dollars. This is not because of bilateral trade patterns but because lead firms in global chains, predominantly US multinationals in conjunction with US financial enterprises, including the shadow banks, impose dollar settlement as a contractual requirement. The dollar’s dominance therefore reflects financial convention as well as the operational requirements of a specific organisation of global production. These are active mechanisms of power for the USA. Dollar scarcity becomes a direct lever of coercion, while access to dollar liquidity is a permission structure, and the United States controls who gets permission.
Q. How do the US Treasury and Federal Reserve deploy dollar liquidity and the national debt in the interests of the US ruling class?
These mechanisms became fully visible during the crisis of 2007-9 and the pandemic shock of 2020. In both episodes, the Federal Reserve extended emergency dollar swap lines to fourteen central banks, five of which have permanent unlimited facilities, including the European Central Bank, the Bank of Japan, the Bank of England, the Swiss National Bank, and the Bank of Canada, and nine have large temporary arrangements. These fourteen central banks can obtain dollars directly from the Federal Reserve within days, stabilising their financial systems and allowing their governments to sustain fiscal expansion. Major emerging economies, such as India, Indonesia, and South Africa, have no such access. In a crisis they would face currency depreciation, reserve depletion, and the kind of procyclical austerity that compounds the negative economic impact rather than containing it. This is not a technical arrangement. The fourteen central banks with swap line access account for roughly 55 percent of US imports and 60 percent of US exports. They are also home to the overwhelming bulk of US military personnel posted overseas. The geography of dollar liquidity and the geography of US military power are the same structure viewed from different angles.
The US national debt plays an equally central role. US Treasury securities function as the primary safe asset and benchmark collateral in global financial markets. Foreign officials and private investors hold about one third of the marketable stock of US Treasuries. Central bank balance sheets around the world are loaded with US public debt. The United States therefore borrows heavily from the rest of the world and sustains the liquidity of the assets it issues precisely through dollar dominance. It is a self-reinforcing system, since the more the world needs dollar assets, the more the US can borrow; the more it borrows and the larger the stock of dollar assets, the more indispensable those assets become as global collateral. Sanctions complete the picture.
Exclusion from SWIFT, the international bank settlement mechanism, asset freezes, and restrictions on dollar clearing can disable a state’s financial system without a single military deployment. The freezing of approximately $300 billion in Russian central bank assets in 2022 made the inherently coercive foundations of the dollar order fully visible. These were not emergency measures but the routine expression of latent power that is activated when the hegemon chooses. It is imperial power exercised through balance sheets and ownership networks rather than territorial occupation. This imperial power is anchored in the dollar hierarchy and is ultimately guaranteed by US military force.
Finance, Production and the Irish Tax Haven
Q. How do you understand the relationship between globalised finance and the offshoring of production?
This is one of the central analytical problems for Marxist political economy today and we should be careful to guard against two common misconceptions, one on the left, one in mainstream economics.
The mainstream view treats finance and production as largely separate spheres, with financial flows responding to productive opportunities through market signals. A common left-wing view, by contrast, tends to see finance as having displaced and dominated production. Neither captures the actual relationship.
The work that I and several co-workers have done shows that contemporary capitalism rests on a structural pairing of internationalised productive capital with globalised financial capital, neither dominating the other. They are distinct but mutually reinforcing, jointly structuring the world division of labour. Productive capital today is organised through global chains dominated by multinational enterprises that operate as lead firms controlling design, intellectual property, logistics, pricing, and access to markets. Peripheral suppliers perform labour-intensive, often low-technology tasks with compressed margins and heavy dependence on dollar-denominated credit. Financial capital conditions the liquidity and the financial articulations of these productive circuits, including credit access, setting collateral requirements, imposing payment terms. Productive capital provides the material basis from which financial claims ultimately draw their value.
The dollar is the hinge between the two, not least as dollar invoicing penetrates deep into chain transactions. A supplier in Vietnam or Mexico ships components today and waits sixty to ninety days to be paid, while wages and inputs demand immediate cash outlays. That gap must be financed, and under dollar invoicing it means financing in foreign currency. This is not an economic choice but a structural condition of chain participation. Thus, the liquidity conditions under which firms across the world manage their inventories, receivables, and production capacity are ultimately set by global financial capital, and the entire cycle is affected by Federal Reserve interest rate decisions.
When the Fed tightens, peripheral suppliers face immediate deterioration in their cash conversion cycles, rising hedging costs, and restricted access to trade finance. In other words, their costs of doing business and managing risk rise when the Fed tightens the supply of dollars. This is a structural mechanism of domination, not an incidental feature of market competition.
The offshoring of production by US multinationals therefore did not weaken dollar dominance but deepened it. The globalisation of productive capital and the globalisation of financial capital reinforced each other, with the dollar operating as the organising mechanism for both. US multinational enterprises led this process. In recent work in Socialist Register 2026 we have shown that US corporations hold roughly 44 percent of live intellectual property publications among the largest globally active enterprises and 43 percent of total profits. China, by contrast, holds 11 percent of intellectual property but 34 percent of profits. This is a vivid illustration of China’s position as upstream producer within chains that US multinationals design, price, and control.
Q. Ireland’s position seems almost tailor-made to illustrate these mechanisms. With one of the world’s largest shadow banking systems and roughly 60 percent of corporate tax revenues coming from ten US transnational corporations, is it reasonable to describe Ireland as a node in the system of US financial and imperial dominance?
It is difficult to describe it any other way. Ireland illustrates subordinate integration into the dollar-centred imperial order, though with features that distinguish it sharply from the subordinate financialisation of the Global South.
Ireland is not a peripheral economy in the conventional sense. It is a small, open economy at the core of the European Union, with a highly educated workforce and sophisticated institutional infrastructure. But its integration into global capitalism is structured around serving as the primary European node through which US multinationals route their intellectual property income, tax liabilities, and financial flows. The concentration of shadow banking activity in Ireland — gigantic by assets — is not an accident of geography or financial ingenuity. It reflects the operational requirements of US asset managers and multinationals that need a low-tax, English-speaking, legally reliable jurisdiction inside the European single market through which to manage their European balance sheets.
The corporate tax figures tell the story with brutal clarity. When 60 percent of corporate tax revenues flow from ten US corporations, the fiscal capacity of the Irish state is structurally dependent on the continued willingness of those corporations to maintain their Irish booking arrangements. That is not sovereignty in any meaningful sense, but a form of structural subordination dressed up as comparative advantage.
The data we have used show Ireland appearing in the balance sheet analysis of the world’s largest manufacturing enterprises. This is a striking presence for such a small economy, entirely explained by the booking of multinational profits and assets through Irish subsidiaries. The OECD’s Base Erosion and Profit Shifting initiative, which attempted to curtail exactly these arrangements, was vigorously resisted by Ireland and was ultimately gutted, with active support from the US government under Trump, who withdrew from the global minimum tax agreement as one of his first acts in office. Ireland’s position is a structural feature of the imperial apparatus providing one of the institutional mechanisms through which surplus is redirected from fragmented global production chains toward the monetary and financial centre. For the Irish left, this means that the prosperity associated with the multinational presence rests on foundations that are both politically dependent and economically fragile. Any serious programme of economic transformation would have to confront the question of Ireland’s place in the dollar order directly.
The Interregnum — Trump, China, and the Danger of War
Q. How do you explain Trump’s recent aggression toward European allies and his escalating economic and military coercion globally?
Trump is a symptom as well as a cause. To understand his naked aggression, it is necessary to start with the structural predicament of US capitalism. The United States faces a structural paradox that no administration has been able to resolve. US multinational enterprises remain globally dominant and lead in intellectual property, technology, finance, and the commanding heights of global production chains. But the productive power of the United States as a national entity has been declining for decades. Its share of global manufacturing value added has fallen to just over 16 percent. Labour productivity growth has remained anaemic throughout the interregnum (2007-2026). Real wages have stagnated for more than a generation. The domestic industrial base that once anchored US hegemony was hollowed out. This is not due to Chinese competition alone, but to the profit-seeking decisions of US multinationals themselves, who led the export of productive capital and the construction of global chains that shifted industrial capacity across borders. Enterprise dominance and national decline are two sides of the same process for the USA.
Trump’s political project is to address the national decline without touching the enterprise dominance. He wants to restore US industrial capacity through tariffs, while simultaneously defending the global privileges of US multinationals, maintaining dollar supremacy, and expanding the military reach of the US state. These goals are in fundamental tension with each other. The dollar’s role as world money depends on the rest of the world running surpluses with the US economy and recycling the revenue into US assets. But eliminating the trade deficit, which Trump presents as the measure of unfairness, would undermine the very demand for dollar assets that sustains US fiscal capacity. A country cannot simultaneously be the issuer of world money and run a balanced trade account.
The aggression toward European allies follows directly from this logic. The United States no longer acts as a true hegemon, that is, a power that sets rules from which others also benefit and that maintains a degree of consent among its subordinates. It now conducts itself as the largest and most aggressive contestant, using financial, commercial, and military power narrowly to enforce compliance. Germany’s acceptance of US-led sanctions on Russian energy in 2022, at severe cost to its own industrial base, demonstrated that even the dominant European economy will subordinate its core economic interests to the dollar order when pressure is applied. Trump has simply made this coercive relationship more explicit and more brutal. He demands payment for security provision, extracts concessions on trade, and treats allies as subordinates who owe tribute rather than partners who share interests. The form has changed, but the underlying structure has not.
Q. China now has productive dominance while the US dominates financially and militarily. Why is that combination so dangerous?
This is the central geopolitical question of our time. The danger arises from a specific structural impasse, not from ideological antagonism or the personal characteristics of the leaders.
China has risen remarkably in historical terms and now accounts for nearly 30 percent of global manufacturing value added and roughly 15 percent of world merchandise exports, placing the USA firmly second. State-owned enterprises dominate strategic sectors, and China has started to build institutions, such as the Belt and Road Initiative, the Asian Infrastructure Investment Bank, the Cross-Border Interbank Payment System, which partly bypass US-led multilateral structures. And yet China is hemmed in by a monetary and institutional hierarchy that it does not control. The renminbi accounts for less than 3 percent of global reserves and cross-border payments. Chinese public debt does not function as international collateral. The People’s Bank of China provides no liquidity backstop for international markets. Chinese enterprises carry disproportionately high short-term debt relative to their US counterparts and cannot routinely fund themselves at long maturities in their own currency. CIPS, China’s alternative to SWIFT, processes little more than 12 percent of SWIFT’s dollar volume.
The reason is structural. The capital controls and state ownership that enabled China’s extraordinary industrialisation and protected it from the subordinate financialisation that devastated other developing economies now block renminbi internationalisation. World money status requires deep and liquid markets in safe public liabilities, legal protection for foreign holders of claims, and capital account openness. But these are precisely the conditions that Chinese development deliberately avoided, for good reason. China is therefore subject to rules it did not write, settling obligations in a currency it does not issue, and accumulating reserves in its rival’s public debt. That is a remarkable asymmetry for the world’s leading manufacturer.
The dangers of this configuration are clear. China — and other challengers — have achieved sufficient productive and military capacity to resist subordination but lack the monetary and institutional power to rewrite the rules. The hegemon retains world money dominance but faces eroding productive primacy and increasingly constrained military freedom of action. Neither side can impose resolution; neither can accept permanent subordination. The result is escalation simultaneously across trade, technology, finance, payments, reserves, and military positioning. This is not a matter of political or strategic choice but the structural expression of an impasse that has no obvious peaceful resolution within the existing monetary order.
Q. What do the conflicts in Venezuela, Iran, and Ukraine tell us about the current moment?
These conflicts are not separate episodes but expressions of a single structural logic. They tell us that the interregnum has entered a more openly militarised phase, and that the distinction between economic warfare and military action is collapsing. Venezuela illustrates what happens when the full imperial set of mechanisms is deployed in sequence: sanctions compress the economy, asset freezes disable state finances, and when those instruments reach their limit, military force completes what balance-sheet coercion began. Trump's explicit linkage of the intervention to oil revenues makes the imperial extraction logic impossible to deny. Iran confirms that control over energy chokepoints remains a material foundation of dollar dominance. The nuclear facilities were a target precisely because Iranian capacity threatens the Gulf pricing arrangements that underpin petrodollar recycling. Ukraine introduces a further dimension. The US-Ukraine Reconstruction Investment Fund agreed in 2025, and the earmarking of frozen Russian assets reveal that financial mechanisms developed under Financialisation Mark II are now being openly deployed as instruments of war finance.
What unites all three is that the boundary between economic coercion and military action has effectively dissolved. The dollar order has always rested ultimately on military force; what is new is how openly that foundation is now being acknowledged. Taken together, these conflicts are the early expression of a deeper structural conflict that is also the systemic basis for war, namely the impossibility of orderly succession within a global monetary hierarchy that is singular, coercive, and increasingly contested. The nuclear constraint makes outright world war unlikely, but it does not remove the driving logic of confrontation. Capitalism has resolved blocked hegemonic succession through great power wars before. The escalation already underway, involving reserve seizures, payments exclusion, technology embargoes, militarised logistics, proxy wars, and now direct military intervention is the early phase of a deeper conflict whose end point is not yet visible.
What Should Socialists Do?
Q. How would the financial system need to be reorganised to serve people and planet, and what strategies should socialists develop in a world of increasing financial and imperialist tensions?
The dollar order is not a policy choice that can be reformed away. It is a structural feature of contemporary capitalism, embedded in law, in payment infrastructures, in collateral chains, in the balance sheets of states and enterprises across the world. It is enforced by the largest military apparatus in human history. Any serious socialist politics must start from this reality rather than from the illusion that international financial institutions can be persuaded to behave differently, or that a better-regulated version of the existing system is within reach. The immediate priorities are clear enough at the level of principle, even if their implementation is enormously difficult. Capital controls are not a relic of the Bretton Woods era but a necessary instrument for any state that seeks to subordinate financial flows to productive and social priorities. There is nothing natural about the free movement of loanable capital across borders. It is a political choice, made by specific ruling classes in specific historical circumstances, that systematically transfers power from democratic institutions to financial markets. Reversing it is a precondition for any serious development strategy in the periphery and for any serious industrial policy in the core.
Beyond capital controls, the reorganisation of finance requires confronting the shadow banking system directly. Asset managers now operate as huge owners of equity and buyers of financial assets globally. This is not a market outcome that can be corrected through disclosure requirements or governance codes. It represents a concentration of ownership and potentially of power over economies that is historically unprecedented. Confronting it means confronting the question of ownership itself — who controls the commanding heights of the global economy, in whose interests, and accountable to whom.
Public banking and democratic control over credit allocation are the operational requirements of an economy oriented toward social need rather than financial return. The Federal Reserve’s role as dealer of last resort for the shadow banking system — underwriting asset price inflation, stabilising collateral markets, determining whose balance sheets survive a crisis — is a form of public subsidy to private financial accumulation on a colossal scale.6 Socialising that function means making it serve social purposes, including financing the green transition, rebuilding public infrastructure, supporting productive investment in industries that markets will not fund because the returns are too long-term or too uncertain.
On the international plane, the dollar hierarchy cannot be dismantled by any single state acting alone, including the United States itself. But it can be contested, eroded, and eventually replaced, and that process has already begun, however tentatively. The development of alternative payment systems, bilateral currency arrangements, and regional financial institutions that bypass dollar clearing is the slow construction of the institutional infrastructure that any successor monetary order would require. Socialists should support these developments critically, not because the states pursuing them are socialist, but because the erosion of dollar dominance is a precondition for the kind of policy space that genuine development and social transformation require.
For the Irish left specifically, the implications are stark. A fiscal base that rests on the tax arrangements of ten US corporations is a structural dependency that ties the Irish state to the perpetuation of the very order that needs to be challenged. The question of Ireland’s place in the dollar order, its function as a node in the imperial apparatus of intellectual property routing and shadow banking, cannot be bracketed as a secondary matter to be dealt with after more immediate concerns. It is a first-order political question.
Finally — and this is perhaps the most important point — the domestic degradation of the United States and the exploitation of the periphery are not separate problems with separate solutions. They are two outcomes of the same system. The dollar order that enforces balance-sheet discipline on peripheral economies, extracts liquidity tribute, and immobilises development resources in low-yielding US assets is the same order that hollowed out the US industrial base, suppressed US wages, and produced the social wreckage that became Trump’s political raw material. There are no durable gains for the working class of the hegemon from the dollar order that sustains its coercive power. On the contrary, the more the United States pursues imperial pre-eminence, the more it undermines its own domestic economy. This is the material basis for genuinely international anticapitalist politics. Antiwar struggle and opposition to the existing order of accumulation are two aspects of the same structure. Understanding the mechanisms, contradictions, and points of fragility of the structure are the preconditions for overthrowing it.
Endnotes
1. The EReNSEP Writing Collective (European Research Network on Social and Economic Policy) is an international group of economists and social scientists associated with Marxist political economy. Led by SOAS University of London professor Costas Lapavitsas, the collective analyses the global economy, financialisation, and state intervention, proposing anticapitalist alternatives. [IMR Addition]
2. The average rate of profit is normally higher than the average rate of interest, reflecting the distinction between the direct exploitation of labour and the mere lending of money capital. The gap is vital for making capital gains. If, for example, interest rates fall, the future profits generated by a productive enterprise are capitalised more highly, raising the price of shares and generating capital gains for existing shareholders. Mechanisms of this kind became particularly consequential under Financialisation Mark II, where asset managers derive a significant share of their returns from asset appreciation rather than interest income [IMR Addition].
3. A shadow bank is a financial institution that does not take deposits from consumers and so operates outside the regulations applied to commercial banks. Nevertheless, shadow banks depend critically on the Federal Reserve and on US state debt for their operations. This dependence reveals the central role of public power in ostensibly private financial accumulation under Financialisation Mark II. Their business model is outlined below.Step 1 – Shadow banks accumulate large quantities of US Treasury securities which earn interest and serve as collateral in short-term money (repo) markets.Step 2 – Shadow banks pledge their Treasuries as collateral in repo markets in exchange for cash. The Federal Reserve restricts eligible repo collateral largely to US Treasuries and other dollar-denominated assets. This supports the US state when it issues debt.Step 3 – Shadow banks use their liquidity to purchase equities and other financial assets in global markets, generating dividends and capital gains. This is a major mechanism driving asset price inflation under Financialisation Mark II, and a key reason why protecting equity markets became a central concern of US monetary policy. [IMR Addition]
4. Liquidity defines how quickly as asset can be turned into cash without affecting its price. This is an extremely desirable feature in a capitalist economy, ensuring that assets can be depended on to hold their value. [IMR addition]
5. Swap lines are currency exchanges by the world’s Central Banks. Given the role of the dollar as world money, it is vital for the US Federal Reserve to maintain a steady flow of dollars globally, particularly in a crisis. Central Banks with guaranteed ‘swap lines’ thus have guaranteed access to global money. This helps to stabilise their financial systems by maintaining liquidity and reducing the risks of panicked sell-offs. [IMR Addition].
6. As we saw above, acting as the ultimate provider of US liquidity allows the Federal Reserve to underpin the repo markets that, in turn, (1) allow shadow banks to swap dollar denominated debt for liquidity, and (2) use this liquidity to buy higher yielding financial assets. This is an important source of dollar dominance globally, but it also creates the conditions for stock market price inflation as shadow banks pump vast liquidity into Wall Street (see endnote 2). [IMR Addition]
Member discussion