Here at Anti-Imperialism.com, we are interested in uncovering the laws of motion of global capitalism and the following imperialist mechanisms that perpetuate the divide between oppressed and oppressor nations; one such mechanism, hardly ever mentioned in Leninist (or even mainstream) economics is the mechanism of imperialist seigniorage.
Seigniorage is a social relationship of appropriation that can be national or international. National seigniorage, the classic case, is that of a sovereign state which holds monopoly on currency and can print money that cost the state less than what can be purchased with it. Printing dollar bills can cost between 5.4 cents and 9.8 cents per note, with a difference between cost and purchasing power of 94 cents to 99.9 dollars. With a US monetary base of 2,610,864,000,000$ at the end of 2011, we can begin to think about the magnitude of national seigniorage.
International seigniorage is the relation of appropriation resulting from the international utilization of the US dollar as the general equivalent (currency). The US dollar is the dominant currency worldwide, and this dominance expresses itself in several different ways. It can present itself when a country’s population holds its financial assets in dollars, regardless of it being a legal tender or not; it can happen when countries allow the dollar as a second legal tender, and here we have the example of Argentina in the 90s which, with Domingo Cavallo, minister of economy and instrumental puppet of neoliberal imperialism, pushed for market-oriented reforms, privatizations, and dollarization, which made pesos and dollars effectively interchangeable. Finally, a country can replace its national currency for the US dollar, with an old example in Panama and a more recent one in Ecuador, which makes countries integral parts of the US monetary system. These countries’ supply of currency is determined by their balance of payments (monetary base grows when exports are greater than imports and if capital inflows are greater than outflows; it shrinks in the opposite case).
Imperialist seigniorage is multiform. Let’s begin with trade. When the US imports goods from a producer in an oppressed country, it pays said producer with dollars with no intrinsic value, but with an assigned purchasing power, and it acquires commodities with embodied value. If those producers use dollars to import American goods, the US gets back dollars with no intrinsic value and exports commodities with intrinsic value; if the country doesn’t purchase American goods, however, those dollars represent cost-free imports for the US, an appropriation of foreign value. According to the Federal Reserve, around two thirds of all dollars are outside the US; since the Federal Reserve puts the total amount of dollars in circulation at 1.21 trillion dollars, 806 billion must be circulating abroad. To complete the realization phase of the M-C-C’-M’ process (C’-M’), exports are vital for imperialist countries, as they provide a market for commodities which can’t be sold domestically. Another mechanism of seigniorage involves debt, for inflation, i.e. the depreciation of currency, makes sure that creditor countries and entities lose value to the US and that the US debt diminishes in real terms.
For countries that accept the dollar as their main currency, the effects are deeper. To begin with, dollarization strengthens trading ties between the US and the dollarized country; as we already know, trade between peripheral and core countries of the capitalist world-system represents unequal exchange, which siphons value from the global South to the US. Secondly, tying the US with the country facilitates one of the main aspects of imperialism, the export of capital. When American financial investments in dollarized countries increase, capital leaves the US, postponing the possibility of overaccumulation, while profit repatriation increases. These profit repatriations are important types of imperialist rent. For instance, according to ECLAC, Latin America loses around 100 billion dollars (or 4% of its total production) every year to Europe and North America in property income transfers. Thirdly, dollarized countries lose control over monetary policy, i.e. over their central bank’s ability to purchase and sell government bonds denominated in domestic currency for purposes of controlling the monetary supply (and hence lose control over the cost of credit), and lose control over fiscal policy for domestic economic needs. This is the case for semi-peripheral countries in the Eurozone who adopted the Euro, so it is by no means a novelty.
On this note, with the qualitative leap marked by the Eurozone’s transition to the Euro, international value appropriation by means of seigniorage enters the phase of inter-imperialist rivalry.
- Klaas V.