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A Seismic Shift

Georgia showed the limits of US power and the beginning of a new multi-polar world. What happened next will be seen as a key moment in world history which changed the entire geo-strategic balance.

The momentous events of the last few weeks have ushered in a new global era. The brief war in Georgia showed the limits of US power and the beginning of a new multi-polar world. What happened next will be seen as a key moment in world history which changed the entire geo-strategic balance. The collapse in global markets and the meltdown of the American and British banking systems do not mean the end of capitalism. At least not yet. But they do mean the death of the entire neo-liberal project which has been exported across the world courtesy of Wall Street, the IMF, the World Bank and the European Union. The unfettered rule of the market, the untouchable gods of privatisation and deregulation are no more.

 

The implications of these events can hardly be overstated. In the developed world it is ordinary people who will pay the price. Our money is being pumped into collapsed banks, insurance companies and mortgage lenders at a frenzied rate in the US and the UK - over £150bn in Britain, and well over $1 trillion in the US. The result will be soaring inflation and unemployment and falling living standards. But it is in the developing world where the impact could be catastrophic with huge increases in prices for food and fuel tipping the world’s poorest into famine and global instability. Perhaps most importantly, it means a fundamental shift in global power. The US military budget accounts for almost half of global military spending, having more than doubled in real terms since 2001. That has been financed by a huge budget defi cit and the role of the dollar as the world’s trading currency forcing many countries to hold large amounts of their reserves in dollars. Both of these are likely to become unsustainable in the light of the events on fi nancial markets. And this, in turn, makes current US military spending likely to be unsustainable in the short and longer term threatening the entire empire of bases, its air and sea power and its ability to garrison and control the world.

Dangerous and unstableImage 

On the other hand, now that the credit bubble has burst it is largely arms spending driven by the Pentagon which is sustaining the economy and which could help generate future growth. That is why the current period is so unstable and dangerous. Any incoming US president may have little room for manoevre, unless he decides to resist the immense pressure from the arms lobby and the Pentagon - something which neither candidate has shown any sign of doing. With the US economy imploding and the dollar collapsing, he could use his only remaining asset, his overwhelming superiority in military power, to control the access of rival economies to key energy resources and kick-start the US economy with a new arms drive. This would put it on a direct collision course with those countries such as Iran and Russia with huge oil and gas reserves which the US does not yet control.

Welfare not warfare

What are implications of all this for our economy. Because of its dependence on financial services and rising house prices, the UK economy is likely to be especially badly hit by the conomic crisis. You might have thought the Brown government would decide this was the right time to pare down unnecessary spending on weapons of war. You would be wrong. Spending on Trident is increasing year on year. Next year it will be £2billion, a sum only matched by the £2bn Britain spends annually on the unwinnable wars in Iraq and Afghanistan. That vast sum of money, and what could be done with Scotland’s share of it, will be the subject of the Peoples’ Budget for Peace scheduled for October 25th in George Square, Glasgow

Who threatens whom?

 

Military Spending 2007

 
   

Country

 Expenditure

   

Iran

6.59

Russia

35.37

China

58.27

UK

59.71

USA

562.00

World

1214.00

 

 

 (US $ bn at constant 2005 prices and
exchange rates)
 
 Source: SIPRI Yearbook 2008