Who’s hiding under our umbrella?

Paul Kennedy – The International Herald Tribune

Copyright The International Herald Tribune
An excerpt.
This is a question that will be increasingly asked in the years to come. It is already being asked in a few circles, as we strive to understand the larger implications of the enormous surpluses of sovereign wealth funds, the soaring cost of raw materials (especially oil and gas), the weakening of Wall Street’s once-great banks, and the increasing purchase of American assets by dollar-rich Asian and Middle Eastern enterprises.
The argument goes something like this: The United States has recently expended vast amounts of money, blood and energy in fighting two Iraq wars. On each occasion, the White House had its own secular reasons for going to war (to punish aggression, to protect American consumers from catastrophically high gas prices, and so on). But the chief beneficiaries were clearly our Arab allies like Saudia Arabia and the Gulf states, together with East Asia and Europe, which depend much more than the U.S. does on the uninterrupted flow of Middle East Oil. How convenient to live under the American strategic umbrella.
Yet all the fighting by the U.S. armed forces in those wars has not been able to prevent the great rise in the price of oil and gas, which hits petroleum-dependent Americans hard but puts billions of dollars into the pockets of certain free riders in the system. As the United States takes its economic hits – and while the White House insists on record defense spending to maintain its hegemonic “umbrella strategy” – foreign financial interests are steadily acquiring American companies, especially banks. And Wall Street houses now paying the price for their reckless stoking of dubious subprime loans have little alternative but to sell; as I write, some chief executive will be flying to Dubai or Singapore to sell off a chunk of the firm’s assets.
Those bankers, and the free-market economists who service them, will assure you that such asset sales are perfectly O.K. Asian and Arabic sovereign wealth funds are extremely discreet and cautious. They do not play politics. They are not asking for a seat on the board. They have to invest their monies somewhere. So this is just a normal commercial transaction. Stop worrying.
Well, if you think that way, then nothing can be done to help you. But every sensible homeowner or farmer or small businessman knows that, once you take out a loan (mortgage) from another party, or sell a share of your property, a subtle or not-so-subtle power relationship has changed. To a greater or lesser degree, you have become dependent upon other players who can probably influence you more than you can influence them. And in this case, since hundreds of other companies and banks are doing the same, the collective result is that the United States is ceding influence.
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