The beauty of Magdoff's little book is that he simplifies imperialism into a system. It's not a conspiracy, a mistake or bad policy. It's inherent in the way capitalism operates.

Imperialism is an unequal playing field. Magdoff asks: what happens when players of vastly different sizes compete in a world market? He shows that, in every key area of the world economy, the U.S. and the major capitalist powers do better than poor countries. Their size ensures they write the rules of the game.

Those rules are:

a) Foreign investment

U.S. companies invest in overseas production. That investment generates profit, which goes back to the corporations. They invest in key sectors of poor countries' economies. This means turning those countries into suppliers of the raw materials the American corporations need. They import those materials back to America, where they're finished and sold back to the poor countries for profit.

I work all day, but I never seem to add much value - plantation tea worker

Poor economies become tied to raw material production, subject to vast fluctuations of price. When the price drops, they have to borrow money from U.S. financial institutions - who ensure they dedicate more of their energies to raw material production. In this way, entire economies are taken over by U.S. corporate capitalists. They never diversify, never industrialize and never achieve the stability that a high value-added economy allows.

b) Regulating trade

The international financial institutions work hand-in-glove with global corporations. U.S. banks capture overseas credit & lending markets. They issue loans repayable in American dollars - which the poor countries can't produce on their own. This means more goods for the American market, more raw materials for U.S. businesses, and more domination by imperialism.

No one bombs this one - Bank of Afghanistan, Kabul

c) Global currency

The U.S. dollar is a universally convertible currency (even in 1966, when the book was written.) To get it, countries have to invest in the U.S. The U.S. has an infinite line of credit, unlike poor countries. (Unless other countries stop using U.S. dollars, of course. It could happen.)

d) Aid

I loved this part. Magdoff shows most aid was in the form of grants to buy American goods, or loans (to poor countries), payable in American dollars, of course. Or aid is in American military goods, which means parts and upgrades bought from America. Increasing foreign aid, as teary-eyed liberals often demand, actually just subjugates poor countries further.

I'm leaving out lots: Magdoff has dozens of charts & graphs to show how the system works. But the point is, it is a system. As soon as there are a few big players, a level playing field works to their advantage. Poor countries can only become poorer.

Harry Magdoff, 1913 - 2006

For global justice types, this isn't a surprise (though writing it in 1966 shows a keen grasp of imperialism.) But Magdoff talks politics too, addressing the same questions radicals have today about Iraq: does the U.S. go to war for its economic interests? Does it act directly on behalf of a corporation?

Magdoff says no. Imperialism is about control, creating the conditions for the spread of American capitalism:

What matters to the business community, and to the business system as a whole, is that the option of foreign investment (and foreign trade) should remain available. For this to be meaningful, the business system requires, as a minimum, that the political and economic principles of capitalism should prevail and that the door be fully open for foreign capital at all times... How much or how little an open door may be exploited at any given time is not the issue. The principle must be maintained, especially for a capitalist super-power like the United States.

You can't have one without the - other!

Here's where Magdoff's analysis is so relevant today. As many people have pointed out, the U.S. only gets 17% of its oil from the middle east. Canada only gets t-shirts and heroin from Haiti. But 'rigidities' in the market, like Arab nationalist or social democratic regimes, threaten the free flow of investment. Worse, they could give investment opportunities to someone else (e.g. France's ELF oil corporation, which had huge contracts in Iraq.)

And, as Magdoff points out, arguments about the 'waste' of war are wrong-headed. War is tremendously profitable, particularly for the 'investment goods' industries - machines, plant equipment, etc. - that drive the military-based U.S. economy. You couldn't just shift funding from the military to consumer goods, without calling into question the entire profit system, because profits would fall awfully quickly. In short, imperialism is a credit to capitalists: it's a product of their longterm planning, utilizing all the resources - economic, political and military - at their disposal.

Imperialism today?

Magdoff's book raises an interesting question. Imperialism in the 20th century was about 'saving the market', defending the capitalist sphere of influence against the Communist system. Today, the statist dictatorships that denied a good chunk of the planet to western capital are gone. What does this mean for imperialism?

As long as Communism existed, the U.S.-led pecking order had to be stable. Only the U.S. had the ability to defend the free world, making everyone else into "junior partners", as Magdoff terms it. Today, there's no common enemy. The 'terrorists' are just as capitalist as the forces of law and order. I'd argue we're back to a more traditional form of imperialism: capitalist empires competing directly for regions. So we see the U.S. invade Iraq, not for its oil, but to deny others oil. Big capitalists (well, capital-state formations, but let's not get too technical) have to punish small capitalists who step out of line. We may be further away from Mutually Assured Destruction, but the victory of market capitalism hasn't made the world any safer.

We have so much productive capacity, we will sit back and enjoy popcorn while we bury you!

Two caveats:

1) as a comrade once put it, "So the Soviet Union wasn't capitalist. What does that mean: we want another Soviet Union? Of course not!" I'm not engaging in nostalgia for the Eastern Bloc. I'm just agreeing with Magdoff about how its existence shaped 20th century capitalism. One could also argue that the USSR was just another capital bloc to compete with - albeit more successful because it was so closed to foreign investment.

2) Perhaps the major capitalist groupings are united, and they just have to get the small ones in line. The 'Americas - EU - China' tripartite axis may not exist; after all, they're heavily invested in each other. Magdoff published a collection of essays, Imperialism Without Colonies, a couple of years ago. That's my next read.