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The End of Influence: What Happens When Other Countries Have America’s Money

America finds itself cash poor, and to a great extent, power follows money. A new book explores the grave consequences this loss will have for America’s place in the world.
February 11, 2010 |

Editor’s Note: America’s leading role in the international economy is waning as other world powers find themselves holding onto trillions in U.S. debt. Recently, former Treasury Secretary Hank Paulson’s claimed in his new book that Russian officials encouraged the Chinese to ditch their Fannie Mae and Freddie Mac bonds in 2008 in an attempt to make the United States bail out the troubled mortgage giants. (Russia that year sold all of the bonds it had in both public firms.) And then a few days later came news that Chinese military officers have proposed that their country sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan. Power follows money, and Stephen S. Cohen and J. Bradford DeLong’s new book The End of Influence: What Happens When Other Countries Have the Money (excerpted below) explores what will happen in this new world, where other countries have America’s money.

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For more than a quarter century now the countries of the world have been dreaming the neoliberals’ dream. They have been trying to shrink their states back to their core competencies to promote economic efficiency, global economic integration, and growth, and to slash through red tape, rent-seeking, and simple corruption. They have been actively privatizing state holdings. They have hugely reduced their ownership and their active involvement in “national champion” companies. They have cut back on interventions to affect market outcomes and on regulation to scrutinize and control market players.

But now they are waking up. And the neoliberals’ dream is at an end.

To understand why, we need to journey back to the mid-20th century. The coming of World War II ensured that whatever money still remained in Britain left quickly. Franklin Delano Roosevelt ruled an isolationist country that he wished to cajole into engaging in the war with Hitler as early and as completely as he could. But part of Roosevelt’s strategy (and a not-altogether unwelcome consequence, for many who worked in the State, War, and Navy Building-a Victorian-era structure just west of the White House that looked like a French brothel) was to make Britain broke before American taxpayers’ money was committed in any way to the fight against Hitler. Only after Britain had sold off the family silver to pay for the nozzle would America “lend” Britain its garden hose to fight the Hitlerian fire.

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