Geopolitics and Trajectories of Development: The Cases of Korea, Japan, Taiwan, Germany, and Puerto Rico 1557290970, 9781557290977

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Geopolitics and Trajectories of Development The Cases of Korea, Japan, Taiwan, Germany, and Puerto Rico

Edited by

Sungho Kang and Ramón Grosfoguel

RESEARCH PAPERS AND POLICY STUDIES 45

Notes to this edition This is an electronic edition of the printed book. Minor corrections may have been made within the text; new information and any errata appear on the current page only. Research Papers and Policy Studies 45 Geopolitics and Trajectories of Development: The Cases of Korea, Japan, Taiwan, Germany, and Puerto Rico Sungho Kang and Ramón Grosfoguel, editors ISBN-13: 978-1-55729-166-0 (electronic) ISBN-13: 978-1-55729-097-7 (print) ISBN-10: 1-55729-097-0 (print)

Please visit the IEAS Publications website at http://ieas.berkeley.edu/publications/ for more information and to see our catalogue. Send correspondence and manuscripts to Katherine Lawn Chouta, Managing Editor Institute of East Asian Studies 1995 University Avenue, Suite 510H Berkeley, CA 94720-2318 USA [email protected]

May 2015

Geopolitics and Trajectories of Development

RESEARCH PAPERS AND POLICY STUDIES 45

Geopolitics and Trajectories of Development The Cases of Korea, Japan, Taiwan, Germany, and Puerto Rico

Edited by Sungho Kang and Ramón Grosfoguel

A publication of the Institute of East Asian Studies, University of California, Berkeley. Although the institute is responsible for the selection and acceptance of manuscripts in this series, responsibility for the opinions expressed and for the accuracy of statements rests with their authors. The Research Papers and Policy Studies series is one of several publication series sponsored by the Institute of East Asian Studies in conjunction with its constituent units. The others include the China Research Monograph series, the Japan Research Monograph series, and the Korea Research Monograph series. Send correspondence and manuscripts to Katherine Lawn Chouta, Managing Editor Institute of East Asian Studies 2223 Fulton Street, 6th Floor Berkeley, CA 94720-2318 [email protected] Library of Congress Cataloging-in-Publication Data Geopolitics and trajectories of development : the cases of Korea, Japan, Taiwan, Germany, and Puerto Rico / edited by Sungho Kang and Ramón Grosfoguel. p. cm. -- (Research papers and policy studies ; vol.45) Includes bibliographical references. Summary: “This edited volume compares and contrasts the geopolitics and trajectories of South Korea, Japan, Taiwan, Germany, and Puerto Rico in response to post-World War II U.S. foreign policy to show how these countries have developed within the modern capitalist World-System”--Provided by publisher. ISBN-13: 978-1-55729-097-7 ISBN-10: 1-55729-097-0 1. Geopolitics--Case studies. 2. Postwar reconstruction--Case studies. 3. United States--Foreign relations--Case studies. I. Kang, Song-ho, 1959- II. Grosfoguel, Ramón. JC319.G4855 2010 338.9--dc22 2010018561

Copyright © 2010 by the Regents of the University of California. Printed in the United States of America. All rights reserved. Front cover: Deoksu Palace in Seoul, Republic of Korea. The image shows three types of buildings—a traditional Korean palace, a European-style stone building from the nineteenth century, and skyscrapers built since the 1960s—exhibiting the development of Korea from premodern to colonial to modern times. Photograph used by permission of the Korean Cultural Heritage Administration.

Contents

Contributors Foreword Clare You Introduction Sungho Kang and Ramón Grosfoguel 1. Beyond Divide and Rule? From the Washington to the Beijing Consensus Thomas Ehrlich Reifer 2. U.S. Policies and the Rise and Demise of Japan, Korea, and Taiwan: An Examination of the World-System during the Cold War and After Satoshi Ikeda 3. The United States and the Internal Development of Korea in the Post-WWII World-System Sungho Kang 4. Patronage, Partnership, Contested Solidarity: The United States and West Germany after World War II Bernd Schaefer 5. Puerto Rico: A Cold War Showcase in Rapid Decline Ramón Grosfoguel

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Contributors

Ramón Grosfoguel, Department of Ethnic Studies, University of California, Berkeley Satoshi Ikeda, Department of Sociology and Anthropology, Concordia University, Canada Sungho Kang, Department of History, Sunchon National University, Korea, and Center for Korean Studies, University of California, Berkeley Thomas E. Reifer, Department of Sociology, University of San Diego Bernd Schaefer, German Historical Institute, and Cold War International History Project, Woodrow Wilson International Center for Scholars, Washington, D.C. Clare You, Chair, Center for Korean Studies, University of California, Berkeley

Foreword

This volume has a very humble origin. In the fall of 2006, Sungho Kang, Professor of History at Sunchon National University, Korea, and a visiting scholar at the Center for Korean Studies at the University of California, Berkeley, for the 2006–2007 academic year, hesitantly asked if the center would support a small seminar inviting Professor Ramón Grosfoguel, also of UC Berkeley, who had done much research on coloniality, international comparative development, and World-Systems, among many other areas. That small seminar led to the next step, the 2007 Korean Regional Seminar, titled “Modernity and Coloniality in the Post-WWII World-System: Germany, Japan, Korea, Puerto Rico, and Taiwan,” with invited scholars of different regional expertise in the same field of studies: Dr. Bernd Schaefer from the German Historical Institute, Professors Satoshi Ikeda from Concordia University of Montreal, Thomas E. Reifer from the University of San Diego, Ramón Grosfoguel, and Sungho Kang. The essays collected here are revised versions of the papers originally presented at the regional seminar, which was held at the Institute of East Asian Studies at the University of California, Berkeley, on April 26, 2007, supported by the Center for Korean Studies, the Institute of East Asian Studies, and the Shorenstein Foundation at UC Berkeley. This volume of articles is meaningful in two respects. First, it focuses on quite different parts of the world to compare the common threads woven through the issues of modernity and coloniality in the post–World War II era. Second, the project was initiated and organized by a visiting scholar at the Institute of East Asian Studies and eventually culminated in a publication by the institute. A half century has passed since the end of World War II, sufficient time to permit us to reexamine U.S. policies toward such former and present client states as Germany, Japan, Korea, Puerto Rico, and Taiwan. We may therefore focus anew on the changing relationships between each of these nations and the United States, as well as among the group, in the context of the present dichotomy between East Asian and U.S. spheres of influence. These issues can move beyond the theoretical debates and

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assumptions to the virtual realities of our times as new and historic U.S. government policies are taking place at this very moment. A corollary to the seminar is the current state of Afghanistan and the Iraq War. This, if I dare interject, presents the nagging question of the possibility of forming yet more U.S. client states. I hope the day will come, sooner rather than later, when we can examine in a similar vein the Afghanistan-U.S. and Iraq-U.S. relationships in the post–Middle Eastern War era. I thank Dr. Yangwon Ha, who gave Professor Kang encouragement and advice for planning the seminar, and Dr. Jonathan Petty for editing the present volume. Most of all, I thank Professors Kang and Grosfoguel, who brought these fine scholars together at our Berkeley conference and who afterward worked incessantly as coeditors to make this volume possible. Clare You Chair, Center for Korean Studies University of California, Berkeley January 2009

Introduction SUNGHO KANG and RAMÓN GROSFOGUEL

The essays in this volume are revisions of papers that were first presented at the 2007 Korean Regional Seminar titled “Modernity and Coloniality in the Post-WWII World-System: Germany, Japan, Korea, Puerto Rico, and Taiwan” and held at the Institute of East Asian Studies, University of California, Berkeley. Through collecting and editing the papers, we have formed a book that compares and contrasts the geopolitics and trajectories of South Korea, Japan, Taiwan, Germany, and Puerto Rico in response to post-WWII U.S. foreign policy to understand how these countries have developed within the modern capitalist World-System. Throughout the Cold War, the United States protected these states by extending preferential economic, military, and diplomatic treatment to contain perceived socialist threats from North Korea, North Vietnam, China, the Soviet Union, East Germany, and Cuba. Under this protective umbrella, the development of these states responded strongly to U.S. preferences, but the directions and patterns of their development differed greatly according to their disparate geopolitical locations, social structures, subjective efforts, and historical backgrounds. In the post–Cold War period, the states studied here have suffered economic decline as a result of changes in the rules of accumulation and governance imposed by the United States. Following their more or less successful recoveries, they have begun to chart their own individual courses within the changed international environment. Unified Germany has managed to become the regional hegemonic state of continental Europe, while Japan, South Korea, and Taiwan are now steering their own courses between U.S. hegemony and the reemerging Sinocentric East Asian regional system. We focus on the changing relations between the United States and these societies from the Cold War to the post–Cold War periods. Through these papers, we may not only better understand the past and present of these states but also essay to forecast the future of the rapidly changing modern capitalist World-System.

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Thomas E. Reifer’s paper underscores some of the critical features of the global Cold War division system, analyzing the ways in which U.S. divide-and-rule strategy allowed for the resurgence of parts of Europe and East Asia, albeit to varying extents as semisovereign states and regions. Although this power configuration underscores what Peruvian sociologist Anibal Quijano calls the “coloniality of power” that has constituted the modern World-System, Reifer argues that the transition from U.S. hegemony to U.S. domination reconfigured on increasingly narrow and militarized social foundations may pave the way for remaking the modern World-System on new and enlarged social foundations. These foundations may provide for a true universality, based on the reconciliation of differences within a cosmopolitan world-order. Of particular importance here will likely be the resurgence of a China-centered civilization in Asia, as an alternative to “colonial modernity.” Satoshi Ikeda’s paper examines the trajectories of Japan, Korea, and Taiwan in the Cold War and post–Cold War periods and offers a WorldSystemic explanation for the miracle and debacle of these economies. The U.S. policy to contain communism provided conditions favorable for these East Asian countries to achieve rapid economic expansion. However, their success, together with the growth of European core states, rising Third World resource nationalism, and U.S. engagement in the Vietnam War, led to changes in U.S. policy throughout the 1970s and 1980s, which in the end brought about neoliberal globalization. In the 1990s, U.S. policy prepared the economic demises of Japan, Korea, and Taiwan, and increasingly the economies of these states have become integrated into the Sino-centered East Asian regional economy. Though these states have followed the United States in attempting to counter rising Chinese domination in the region, they have an alternative choice—a path of postU.S. hegemony, postcapitalist World-System, and anti-Chinese regional hegemony that they may establish by working toward the end of the monopoly or oligopoly of global rule-setting capacity, the end of ecologically unsustainable capitalist exploitation, and the end of polarizing and society-degrading capitalism. Sungho Kang’s paper examines certain characteristics, such as the process of change, in the Korea-U.S. relationship in the post-WWII WorldSystem. Korea has successfully negotiated a simultaneous industrialization and democratization over the last sixty years. Based on a strategy to contain communism and secure U.S. interests in the East, the United States engaged in the Korean peninsula and defended Korea against socialist countries. In general, the Korea-U.S. relationship has been moving from dependency to interdependency because of the rapid growth of Korea since 1945. Korea’s fast-paced development is the result not of

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a single factor but of complicated interactions of various factors from inside and outside the state. Internal factors have become more important in the swift and sustainable development of Korea, especially since 1987. Bernd Schaefer’s paper examines post-WWII relations between the United States and Germany. Initial patronage, subsequent partnership, and contested solidarity became the main features of U.S.-German relations between 1945 and the present. During the course of the Cold War, these relations grew remarkably, coming to permeate German society and affect American elites across the board. It remained a doctrine for all West German governments, conservative and social-democratic alike, to preserve smooth transatlantic relations and minimize conflicts with Washington in order to be a reliable junior partner—periods of antiAmericanism in German society during the late 1960s and especially the 1980s notwithstanding. Temporary irritations between statesmen at the top remained mostly internal and did not affect relations in general; the overall bilateral relationship between the United States and the Federal Republic of Germany did not suffer. Political, military, cultural, and economic networks between the two countries have grown considerably since the 1950s and guaranteed a permanent underpinning of stable bilateral relations. Military cooperation was always close, mutual cultural affinities remained high, and economic relations were solid but of lesser importance. Ramón Grosfoguel’s paper discusses Puerto Rico in the context of Cold War developmentalist showcases. As part of the anticommunist strategy against the Soviet Union, the United States designed a Cold War strategy to manufacture examples of developmentalist success. Puerto Rico was the first showcase used as a training ground by the U.S. State Department’s Point Four Program in the 1950s and 1960s. The island’s industrializationby-invitation program influenced many Third World countries, including the Asian states of Singapore, Thailand, Malaysia, Taiwan, and South Korea. Using declassified archival documents, the paper compares Puerto Rico with other Cold War showcases, including South Korea and Taiwan. Before turning to the papers, we would like to mention that we are grateful to our colleagues at the Center for Korean Studies who made the organization of the conference possible. We would like to express our gratitude especially to the CKS chair, Clare You, for her encouragement and full support. We are also grateful to Dr. Yangwon Ha, Dr. Jonathan C. Petty, Jae Kim, and Aaron Miller, whose active and intense work made the conference possible. Each of the contributors to this volume deserves our hearty thanks for their careful authorship and patience through a good number of e-mails and letters back and forth. Any mistakes remaining herein are the responsibility of the coeditors.

ONE

Beyond Divide and Rule? From the Washington to the Beijing Consensus THOMAS EHRLICH REIFER

Introduction Accounts of Asia-Pacific regionalism have historically focused on the developmental states of East Asia, U.S. foreign policy, or both. Scholars have examined product cycles, “flying geese,” and hegemonically led growth in the making of Asia-Pacific regionalism or have tried to go beyond these conceptualizations for a more complex understanding of East Asia’s resurgence (Cumings 1987; Bernard and Ravenhill 1995; Hatch and Yamamura 1996; Ozawa 2007; see Reifer forthcoming a and b). Other authors have instead emphasized U.S. hegemony and the making of a world of regions or the rise of late-industrializing developmentalist states (Katzenstein 2005; Woo-Cumings 1999; Chang 2003). Still others have underscored the role of domestic political coalitions in the emergence of U.S. hegemony (Snyder 1991; Trubowitz 1998). More recently, a host of scholars have stressed the importance of the regional cultural inheritance, from the history of the Chinese-centered tributary system to * Variants of this chapter were previously presented at the conference “Modernity and Coloniality in the Post-WWII World-System” (Institute of East Asian Studies and Center for Korean Studies, University of California, Berkeley, 26 April 2007), the panel “New Challenges to the International Financial Institutions” (Transnational Institute Fellows Meeting, “The Power of Money,” 15 June 2007, Amsterdam), and the conference “Andre Gunder Frank’s Legacy for Critical Social Science” (University of Pittsburgh, 11–13 April 2008). I want to thank the various participants and sponsors of these meetings for their comments. This chapter also draws heavily from Thomas E. Reifer and Christopher ChaseDunn, The Social Foundations of Global Conflict and Cooperation: Globalization and Global Elite Integration, Nineteenth to Twenty-first Century, a funded proposal for the National Science Foundation, 2003. Thanks also to Christopher Chase-Dunn, Tom Dobrzeniecki, Wally Goldfrank, and Jonathan C. Petty for helpful suggestions.

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the contemporary role of the overseas Chinese diaspora in Asia’s rise and dramatic growth (Arrighi 2007). This chapter offers an original synthesis of these views in analyzing the rise of Asia-Pacific regionalism and its changing foundations, although East Asia’s Chinese-led historical centrality in the global system will be discussed primarily in later works by the author. Stressed here instead are the ways in which Cold War militarization has long been central in processes of Asia-Pacific regional integration. Even more importantly, today, twentieth-century Cold War hegemonic divisions may be giving way to alternative twenty-first-century regional visions, with critical implications for the future of the global system as a whole, as explored herein. In The Long Twentieth Century, Giovanni Arrighi ([1994] 2010) put forward the argument that historical capitalism evolved through recurrent systemic cycles of accumulation (SCA). In these SCAs, material expansions of the world economy eventually result in more capital than can be profitably invested in trade and production, at which point money moves into finance. Financial expansions, related periods of interstate competition for mobile capital, and growing systemic chaos all signal the autumn of a particular stage of capitalist development and the larger hegemonic cycles of which they are a part. Recurrent financial expansions were historically powered by the intensification of interstate competition for mobile capital. The rise of speculative finance and related interstate competition, however, led to increasing systemic chaos and eventually ushered in new forms of global governance under the leadership of a rising hegemonic power able to remake the global system on new and enlarged social foundations. For as Max Weber noted, international competition for mobile capital allowed capitalists to dictate to states the conditions under which they would be assisted to positions of power. This resulted in the concentration of capital and related capabilities of war making and state making in rising centers that provided for new forms of hegemonic leadership in ever-larger containers of power, endowed with ever-greater organizational capabilities to manage the environment for capital accumulation on a global scale (Arrighi 1994, 2007). Arrighi’s analyses (1994, 2007) draw on Braudel’s (1977, 1982, 1984) distinction between Adam Smith’s ([1776] 1976) market and capitalism as the antimarket, the nexus of monopoly through which the great predators roam and the law of the jungle operates. Arrighi also draws on Marx, who noted that, recurrently, “unconditional development of the productive forces of society . . . comes continually into conflict with the limited purpose, the self expansion of capital.” The marriage of the state and capital through the alienation of the state via public debt and related

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mechanisms was crucial to the emergence of a distinct capitalist layer above the market in Western Europe. This contrasted dramatically with the market-based systems of what Braudel (1984) calls the super world economy of the Far East centered on the Chinese tributary system (Arrighi 2007). In the West, the great civilizations of the East encountered what Braudel (1984) calls the European assault force: merchants with a difference, as capital in conjunction with state power turned Asia’s markets to their own advantage through the fecund synthesis of violence, profits, and power. It was precisely this synthesis that allowed Western Europe and its settler offshoots to conquer much of the globe (Arrighi 2007). The United States appears to be trying to use this same synthesis today to hold fast to its declining power in the face of the world economic center’s apparent shift back toward the Chinese-centered civilization of the Far East. Yet instead, the decades-long reconfiguration of U.S. power on ever-more narrowly militarized and financially precarious social foundations appears to be yielding to the deepening reemergence of a Sinocentric East Asian regionalism. Concomitant with this trend may be observed gradual regional moves to overcome the historical divisions that have long ensured the area’s subordination to U.S. power in the “long twentieth century.” In the Cold War divide-and-rule system, the United States aimed to limit trade links between East and West by containing enemies and allies, the latter as semisovereign states. The reason for this policy is that the United States feared that such linkages would lead to the emergence of alternative regional configurations able to limit U.S. access to overseas markets and resources, or to the formation of vibrant labor or socialist movements, neutralism, or hostile military alliances (Davis 1986; Kolko 1968, 1988; Kolko and Kolko 1972, Chomsky 1991; Leffler 1992, 1993; Eisenberg 1983, 1996, Reifer 2002a). The United States thus fostered European and East Asian regional divisions in the interests of its global hegemonic visions (see Osterman 1995, 2001; Chomksy 1991; Trachtenberg 1999). The Soviet Union and the United States alike had their own domestic and imperial reasons for maintaining Cold War divisions (Jones 1981, 1992; Konrad 1984; Maier 2007; see also Chomsky 1991).1 And in fact, a central aspect of U.S. global policy has long been to forestall alternative regional systems and prevent the emergence of regional or world Of course, American imperial policy was quintessentially global, involving overlapping interests of power and profit, whereas Soviet imperial policy was mostly confined to its empire in Eastern Europe and was primarily “security-oriented.” As a telling example of the lack of significant comparative research on these issues, there is no serious study that compares American imperial policy in Latin America with that of the Soviet Union in Eastern Europe (see Chomsky 1991, 243–251; see also Konrad 1984). 1 

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powers potentially able to displace the United States from its central role in the global system (Layne 2006). Cold War divisions and U.S. control over Middle Eastern oil have ensured security and resource dependency among European and East Asian vassals of the United States (Ellsberg 1989; Brzezinksi 1997; Cumings 1993a, 1997). Yet, this system of militarized Cold War division may ironically and increasingly be giving way to alternative regional visions, from Europe to Latin America to East Asia. Here, the emergence of an Asia-Pacific regionalism led by China poses perhaps the most serious challenge to U.S. leadership. For more than any other contemporary development perhaps, the Chinese trajectory poses the sharpest “alternative to colonial modernity” (Chun 2006, 1). Yet to understand an emergent China’s potential ability to overcome the neocolonial relations that have long characterized the global system, it is necessary to review the changing social foundations of Cold War militarization and the emerging transpacific regional configuration. The Social Foundations of Cold War Militarization and Asia-Pacific Integration Though rarely mentioned, the specific world-historic conjuncture that allowed for the making of U.S. global hegemony on new and enlarged social foundations must be noted here. A large body of literature has demonstrated the close relationship between rising levels of proletarianization, economic development, military conflict and the winning of democratic citizenship rights. In terms of military participation, ruling elites have found it necessary to extend citizenship rights to national subjects in exchange for the latter’s taking on obligations of military service as citizen-soldiers or engaging in military production as shop-floor citizens (Weber 1961, 240; Giddens 1987, 233; Downing 1992; Rueschemeyer, Stephens, and Stephens 1992; Lichtenstein 1995). As Weber (1961, 240) noted long ago: “The basis of democratization is everywhere purely military in character; it lies in the rise of disciplined infantry, the hoplites in antiquity, the guild army in the middle ages. The decisive act was that military discipline proved its superiority over the battle between heroes. Military discipline meant the triumph of democracy because the community wished and was compelled to secure the cooperation of the nonaristocratic masses and hence put arms, and along with arms political power, into their hands. In addition, the money power plays its role, both in antiquity and the middle ages.” As argued herein, though, it was not only the democratization of citizen-soldiers but also that of shop-floor citizens that was an integral part of the socialization of war making and state making ensuring the recurrent remaking of the modern World-System

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on new and enlarged social foundations (see Lichtenstein 1995; Arrighi 1990; Dickson and Allen 2004; Klinker 1999). From the late nineteenth to the middle of the twentieth centuries, this socialization of war making and state making, first through Taylorism and then through Fordism—both of which were intimately tied to military production—laid the material basis for the democratization of both citizen-soldiers and shop-floor citizens (Reifer 2002b, 2004; see also Davis 2006, 385). The cooperation of these groups became increasingly important for national elites. The concomitant expansion and generalization of civil, social, and political citizenship rights to the largely white, working, middle-income and upper classes in both core and noncore countries became crucial in the reconstruction of the global system on new and enlarged social foundations under U.S. hegemony. By 1945, many U.S. and European elites had come to understand that volatile currency fluctuations and speculative capital flows played important contributing roles in the breakdown of England’s global economic order, recurring depressions, the rise of fascism, world wars, and global revolutionary waves (Gardner 1980, 75–76; Arrighi 1990, 1994; Polanyi 2001). These concerns led these elites to create a liberal international economic order replete with governed markets that provided tangible benefits to workers in the core and a modicum of state-led nationalist development in the Third World. This compact was a fundamental part of the real but uneven expansion of civil, political, and social citizenship rights across the globe. In this vision, that of a global New Deal, full citizenship rights and high mass consumption were to be generalized to the core (de Grazia 2006). This expansion of citizenship rights ranged from social democracy in Western Europe and Japan to Cold War business unionism via the New Deal warfare-welfare state in the United States (Lichtenstein 1995; Fraser 1989, 1991; Davis 1986). At the same time, the ideology of modernization and development offered a promissory note: to allow the world’s poorer states to catch up with standards of wealth and the full extension of citizenship rights and high mass consumption achieved for the largely white working classes and middle strata of this zone (Reifer 2006a, 2006b, 2006c). Here, though, U.S. hegemony’s promise of full citizenship and high mass consumption in the core and self-determination and development in noncore zones revealed definite limits (Davis 1986). The U.S. New Deal warfare-welfare state originally provided tangible material benefits for working- and upper-class constituents in urban cores and suburbs (and later edge cities) while also providing the military stimulus to prop up U.S. violence, profits, and power (Davis 1986, 2002, 2006; Reifer 2007). This system differed dramatically from the one hoped

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for by U.S. labor after World War II. During this period, the most progressive sectors of the U.S. labor movement aimed to overcome the historic divisions that limited the power of labor through Operation Dixie, an ambitious plan to organize the South and the Southwest across lines of race, class, and gender (Goldfield 1994; Rosswurm 1992; Stepan-Norris and Zeitlin 2003; Davis 1986). Hopes for the success of Operation Dixie were largely curtailed by the advent of the Cold War, which secured the deepening alliance of Southwestern and Northern reaction, which had long been the main force arrayed against progressive social change in the United States (see King Jr. 1969, 16). Though of course drawing upon earlier divisions within the working class, Cold War divide-and-rule policies ensured instead the incorporation of select segments of the U.S. labor movement as junior partners in U.S. hegemony (Du Bois [1935] 1969; Goldfield 1997; Davis 1986). Instead of universalistic social provisions, organized workers were forced to negotiate private welfare provisions tied to firms, propped up by a permanent war economy and the G.I. Bill of Rights (Lichtenstein 1995; Davis 1986; Campbell 1997, 2004). Blacks and Latinos in the South and Southwest—largely excluded from New Deal programs via the exemption of agricultural workers and domestics from coverage—were either left out entirely of the benefits of the New Deal warfare-welfare state or incorporated into the most miserly and stigmatized programs (Gordon 1994a, 1994b; see also Weber 1994; Chacon and Davis 2006). Cold War anticommunism and related elite strategies to divide the working class by race, class, and gender played a central role in U.S. political development. The development of unequal forms of citizenship, stratified by race, class, gender, and nationality, lay at the heart of the New Deal warfare-welfare state and associated rise and demise of the New Deal world order. The evolution of this unique “American exceptionalism” ensured that the United States would have no labor party and no national universal health insurance program, radically differentiating the United States from all other advanced capitalist states, as Michael Moore’s documentary film Sicko so vividly illustrates (Navarro 1993; Gordon 2003; Quadagno 2005; see also Public Broadcasting System 2008; Ngai 2004; Montejano 1987; Tichenor 2002). The freezing of Cold War divisions at home and abroad solidified race, class, gender, and related regional and spatial divisions within the working class. This virtually ensured the defeat of the more ambitious social-democratic aspects of the black freedom struggle and Second Reconstruction, solidifying the earlier defeat of Black Reconstruction in the late nineteenth century that had skewed U.S. political development (Du Bois [1935] 1969; Davis 1986).

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This Cold War division system on a world scale, replete with the purge of left-led unions and the related anticommunist witch hunt, thus decisively set back prospects for a universalistic U.S. social democracy (Brown 1999; Davis 1986; Goldfield 1994, 1997, forthcoming; Zeitlin and Weyer 2001; Stepan-Norris and Zeitlin 2003; Rosswurm 1992; Lipsitz 1994; Griffith 1988; Klinker 1999; Mettler 1998; Gordon 1994a, 1994b; Glenn 2002). The failure to unionize the South and ally the labor and civil rights movements in turn paved the way for the white backlash and various Southern strategies from Goldwater to Wallace that ushered in the rise of Reaganism and the New Right in the 1980s. Concomitantly, during this period the South went from being wholly Democratic to being a Republican stronghold (Edsall and Edsall 1991; Carter 1995; White 1998; Davis 1986; see also Gordon 1994a, 1994b; Black and Black 2003). Instead of universalistic forms of social citizenship, military service– related government transfers—notably veterans’ benefits, the watershed G.I. Bill of Rights and low-interest loans, and free health care—went primarily to white male citizen-soldiers. Entitlements such as Social Security and unemployment went initially to white male shop-floor citizens, who also benefited from military-subsidized private welfare states tied to firms. Second-class, means-tested benefits, stigmatized as “welfare,” went to the most oppressed—notably women, persons of color, and the white working poor more generally (Campbell 1997, 2004; Gordon 1994a, 1994b; Williams 2003; Katznelson 2005; Davis 1986, 2002, 2006; Lichtenstein 1995; Poole 2006; Jansson 1991). In fact, as Mike Davis (1986, 96) notes, “The entire edifice of Democratic conservatism, as well as the interlinked corporate and Cold War political alliances which it sustained, ultimately rested on the linchpin of Black disenfranchisement and the poll tax” (see also Goldfield 1994). Cold War divide-and-rule politics at home and abroad were in fact inextricably linked (see also White 1998). After World War II, U.S. elites were confronted with the global dilemma of how to reconstruct the capitalist world economy in a time of revolutionary change while also limiting progressive social change in the United States. Here, the division of Korea and Germany, the formation of the Soviet empire in Eastern Europe, and the Chinese communist victory in 1949 posed the problem of how to reverse course and revive Japan and Germany as the industrial workshops of Europe and Asia in the context of the developing Cold War. In what William Borden (1984) has aptly called the new “capitalist bloc multilateralism,” the United States sought to underpin regional cores by reviving the former Axis powers Japan, Germany, and Italy (the “three founding members of the Anti-Comintern Pact”) while providing an open door so they could exploit their peripheral areas as colonial empires broke apart

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(McGwire 1987, 15; Cumings 1981, 1990). This Cold War divide-and-rule strategy was premised upon cutting off Japanese and West German trade with U.S. rivals in the East by providing U.S. client states with lucrative alternatives, from their own peripheral areas to the U.S. market (see Woo 1991a, 1991b). Yet, this strategy also entailed an increasingly militarized Cold War with the Soviet Union and its allies (Jones 1992; Chomsky 1991; Leffler 1992; McGwire 1987; Eisenberg 1996). Herein lay the origins of the U.S. commitment to Europe, the Middle East (as, for example, expressed in the Truman Doctrine), and Vietnam, as the United States sought to ensure an open door for Japan in East and Southeast Asia (Rotter 1987; McGlothlen 1993; Cumings 1987; Leffler 1992; Borden 1984; Painter 1986). Among the main problems confronting U.S. elites beginning in the late 1940s was the economic nationalism of the U.S. Congress that limited their willingness to give overseas economic aid to reconstruct former U.S. enemies in Europe and Asia. Because of this reality, U.S. officials turned instead to stimulating military nationalism to achieve their aims. Here, the outbreak of the Korean revolutionary and civil war and the entry of some 2.5 million Chinese troops into the conflict following McArthur’s march to the Yalu River provided a unique opportunity for U.S. elites; it was the Korean War crisis that made it possible to overcome Congressional fiscal conservatism and proceed to quadruple U.S. military expenditures and create the regional economic cores envisioned in the policy documents NSC 48 and NSC 68 (Borden 1984; Cumings 1981, 1990; Harrison 2002). Specifically, the Korean War was instrumental in overcoming the divide between Europe-first internationalists and Asia-first nationalists in Congress, both of whose support was required for the massive increases in military spending necessary to reconstruct the world economy within the developing U.S.-led global military alliance systems. America’s hegemonic vision depended crucially on Korean division (Schurmann 1974; Snyder 1991, chap. 7; Cumings 1981, 1990, 1993a, 1993b, 2005). As Cumings (1990, 747) notes, the “crisis . . . was the genesis of a new global empire, a national security state, and, finally, the means to pay for it. The Sino-Korean defeat of rollback did more than anything else to bring the NSC 68 process to a conclusion, a crisis that finally pushed the cash through Congress.” Korea is also where the limitations on rollback were set, leading almost inexorably to the Vietnam War while simultaneously making Vietnam largely the war of the containment liberals (Cumings 1990b; Borden 1984; McGlothlen 1993; Rotter 1987; Ellsberg 1972, 2002; Reifer 2002a, 2002b). During the Korean War, U.S. military spending more than quadrupled, rising to roughly $50 billion, a Cold War level at which, in constant dollars, it has hovered ever since. The internalization of allied protection

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costs and the related security dependence of U.S. allies provided the fount and matrix for U.S. state-corporate capitalism, high technology and regional development, and the social foundations of U.S. hegemony more generally both at home and abroad. “International military Keynesianism” played a crucial role in reviving Western Europe and Japan as the regional workshops of Europe and Asia while resuscitating the neocolonial triangular trading patterns necessary to overcome the dollar gap in world trade (Borden 1984). The outbreak of the Korean War was also critical in creating the crisis atmosphere not only to implement NSC 68 but also to allow the United States to go ahead with its innovative decision to permanently place massive numbers of forward-based troops in Western Europe, notably West Germany. The Cold War decision to divide Korea and Germany and separate Eastern and Western Europe as well as Japan, China, and Taiwan allowed the United States to rebuild its allies and regions and to integrate them into a system of U.S.-led global military alliances that targeted its potential adversaries (Eisenberg 1983, 1996; Cumings 1981, 1990, 1997, 2005). Cold War militarization was crucial to rebuilding the world economy and U.S. regional workshops in Europe and Asia. Yet, America’s hot wars in East Asia ensured that the pecuniary benefits of Cold War militarization flowed primarily to the Asia-Pacific region from the promised land of the New Right—the Sunbelt (southwestern United States)—to East Asia (Davis 1986, 2002, 2006). For as Peter Wiley and Roger Gottlieb (1982, 31) note, in actuality, “the war in the Pacific never ended. The continued militarization of the region had a hothouse effect on the Western economy as federal funds flowed into the western states. The great boom gained momentum, linking the West permanently to this Washingtonfunded military Keynesianism” (see also Lotchin 1992; Markusen et al. 1991; Cumings 1993b). Here, as John Hay notes, America’s frontier expansionism moved relentlessly to “those distant regions where the Far West becomes the Far East” (quoted in Cumings 1990b, 24, 88, 772–775; Drinnon 1990). Cold War militarization and Asia-Pacific regional integration were deeply intertwined in the making of U.S. hegemony. U.S. wars with Asia were a gift from the gods for the developmental states of the region (Borden 1984; Woo 1991a, 1991b; see also Samuels 1994). And though it is little known, the U.S. military, in cooperation with Asian producers, notably Toyota, played a major role in the emergence of flexible accumulation through the development of just-in-time production and distribution systems via lean retailing systems and the rise of big-box retailers such as Wal-Mart (Reifer 2004, 2005a, forthcoming a and b; Abernathy et al.

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1999). These lean production techniques have long been a key aspect in the competitive advantage of East Asia’s transborder multilayered subcontracting networks in the global value-added hierarchy of the world economy (Ozawa 1994; Lazonick 1991; Arrighi 1994). The Vietnam War also played a critical role in the logistics revolution that was an essential ingredient in the exponential increase in transpacific trade by spurring the development of containerization to transport goods for America’s wars with Asia. Similarly, the geopolitical economy of U.S. Cold War militarism allowed for the development of the satellitetelecommunications revolution that formed a critical aspect of just-intime production and distribution systems so essential to the rising power of big-box retailers in the global economy (Appelbaum and Lichtenstein 2006, 113; Reifer 2004, 2005a; see also Nye and Odom 1996). The rise of Chinese-led East Asia as the new workshop of the world, the growth of transpacific trade, and the rise of big-box retailers such as Wal-Mart in the United States have thus all been entwined (Feenstra and Hamilton 2006). Taken together, these developments played a major part in making the Asia-Pacific region the center of the global market, from Chinese-led East Asia to the port cities of Los Angeles and Long Beach in Southern California, the main artery for the flow of cheap Asian commodities into the U.S. market (Reifer 2004, 2005a; Bonacich and Wilson 2008). The United States is, of course, the leading trading nation in the world, its largest debtor and largest importer. The world’s second largest trading nation is China. Other East Asian states are also in the top ten, along with Mexico, many of the European Union states, and Canada. Today, China has surpassed the United States and Japan as the workshop of the world, with some 109 million employees in the manufacturing sector, fueled in part by the massive overseas expansion of the transborder multilayered subcontracting networks of multinational firms (Bonacich and Wilson 2008). Whereas a mere five years ago, the United States exported twice as many goods as China, in the first half of 2006, China became the fourth largest economy and is today the world’s biggest exporter. In the first half of 2006 alone, China exported some $404 billion dollars’ worth of goods, compared to just $367 billion in exports from the United States (McCormack 2006; Donovan and Bonney 2006, 211; Organisation for Economic Co-operation and Development 2005; U.S. International Trade Commission 2007). Here, Wal-Mart—the largest U.S. importer, the world’s largest company and the largest employer in the United States and Mexico—along with other big-box stores, plays an instrumental role in matching global supply and demand (Appelbaum and Lichtenstein 2006, 107). Big-box retailers increasingly pull cheap low-cost Asian commodities across the

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Pacific, thus functioning as central intermediaries of the global supply chain (Feenstra and Hamilton 2006). No surprise, then, that China is Los Angeles’s biggest trading partner, drawing $126 billion in 2006, followed by Japan, South Korea, and Taiwan. Low-cost Asian commodities arriving in the ports of Los Angeles and Long Beach are trucked through the Alameda Corridor, the gateway to the United States, after which they are shipped by rail further east (Weikel and Rabin 2008). Moreover, China, the number two exporter to the United States, accounts for some 90% of Wal-Mart imports, so much so that the firm is effectively one of China’s largest trading partners (Smil 2008, 130; Bonacich and Wilson 2006, 238). Not surprisingly, then, Wal-Mart’s global procurement department is extensively involved in dictating production regimes and prices, notably in southern China’s Shenzen Special Economic Zone, thus illustrating how it is a manufacturing firm in all but name, as many have noted. In fact, along with a number of other big-box retailers, WalMart locates its main procurement offices in China. The firm’s outsourcing to the lowest wage zones and search for ever-cheaper production and transportation costs have gone hand in hand with pressures against labor throughout the global supply chain (Reifer 2004). Southern California has become the central gateway to the United States, the world’s largest market. Currently, some 16 million containers pass through the ports of Los Angeles and Long Beach annually, a figure estimated to grow to 20 million by the year 2010, accounting for well over $100 billion of the total $300 billion in trade (estimated to grow to $373.4 billion in 2007) coming from China (Los Angeles Economic Development Corporation 2007). China accounts for over 30% of all the containerized goods coming into the United States, and Shanghai is well on its way toward becoming the busiest port in the world (Cudahy 2006, 238). “In 1978, China’s imports and exports totaled $20.6 billion. . . . In 2004, three years after China’s admission to the WTO, China’s foreign trade was 56 times higher at $1.1 trillion, representing 70% of the country’s GDP” (Donovan and Bonney 2006, 204). In fact, with the rise of Asian trade and production networks, the twenty-seven U.S. West Coast ports saw their supply of container traffic increase from 8.8 million tons in 1970 to 361.1 million tons in 2006 (relative to roughly 6.17 billion tons of world seaborne trade as a whole). U.S. trade with Asia surpassed that with Europe as far back in 1978 (Bonacich and Wilson 2008, 59). In 2000, U.S. waterborne foreign trade using container ships came to 142,332,000 metric tons, over 50% of which comes into the United States from the Far East and Southeast Asia. Nearly 50% of all waterborne foreign trade comes through the West Coast ports while the figure from the Far East and Southeast Asia stands at nearly 80%. By

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2002, West Coast ports were responsible for just over half of the U.S. container trade, and over 80% of the trade with Asia (Reifer 2004, 21). Today, the Asia-Pacific region is the center of the global market, the arena in which world supply and world demand meet, with Los Angeles and Long Beach serving as the primary gateways to the U.S. market. Yet strangely enough, analyses of the world economic impact of the greater Los Angeles metropolitan region and Southern California are largely absent in the global cities literature. Perhaps this invisibility is due to the fact that this relatively unique global-city region does not quite fit into a literature that has traditionally emphasized finance, insurance, real estate, and the making of global control capabilities for the global economy, though not transportation or logistics. Los Angeles complicates this view of global cities, for it is both the major manufacturing center of the United States—with some 16,000 manufacturing establishments and 462,000 workers—and the major hub for world trade, most especially as the principal distribution center for Asian goods coming into the United States (Erie 2004; Los Angeles Economic Development Corporation 2007). In fact, this global city-region is best conceptualized as specializing in what Saskia Sassen (2001, 91) calls the rise of producer services—“services produced for organizations, whether private sector firms or governmental entities, rather than for final consumers”—in other words, these firms serve as intermediaries for governments, corporations, and businesses of all sizes, notably those involving transport. The growth of specializedlogistics firms serving the global transport needs of the big-box retailers with their increasingly global supply chains, from offshore manufacturing production to their massive distribution centers, is a critical aspect of the rise of these producer services. Southern California’s geographical location at the gateway of the Pacific Rim is crucial (Reifer 2004). The Asia-Pacific region is, in fact, where the beginnings of a new material expansion of the world economy began long ago, centered increasingly in East Asia. As in the past, East Asia’s movement up the value-added hierarchy of the world economy has been accompanied by increasing moves toward financial integration and independence, as in previous hegemonic transitions and SCAs. Most notable of all, perhaps, the current growing wealth and market power of Chinese-led East Asia, expressed in its accumulation of the world’s largest amounts of productive and surplus capital and its ongoing regional financial integration, gives this region an increasing capacity to play a major role in remaking the global system on new and enlarged social foundations. Yet, to what extent the legacy of Cold War militarization can be reshaped to further Asia-Pacific integration instead is a question that remains to be answered in the twenty-first century.

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Cold War Divisions and Alternative Regional Visions Clearly, U.S. policy and that of other Asia-Pacific regional actors will be crucial in the trajectory of the twenty-first century World-System. To understand this, it is important to review how the system of militarized Cold War division in the twentieth century is yielding to the emergence of alternative regional visions in the twenty-first. Recurrent cycles of militarization in World War II and during the Cold War provided for the military “tax-led” industrialization of the modern Sunbelt regions of the South and the West, not to mention suburbs more generally. Here, the disproportionate Congressional power of this region, in part a legacy of the defeat of Black Reconstruction in the late nineteenth century, assured that the Sunbelt was the primary beneficiary of federal military spending right up to the present (Davis 1986, 194–195, 2006, chap. 7; Mollenkopf 1983; Du Bois [1935] 1969; Calder 1997, 166–167; Luker Jr. 1997; Trubowitz 1998; Kupchan and Trubowitz 2007; Kane 2001; Gray et al. 1990). America’s interminable wars with Asia, the military industrialization of the Sunbelt from the Second New Deal Coalition onward, the economic growth of East Asia, and the rapid expansion of transpacific trade here went hand in hand (Wiley and Gottlieb 1982; Davis 2006, chap. 7). The beneficiaries of domestic military spending and transpacific trade were primarily the “Sunbelt and Western states that became steadily more important in the American political economy . . . and that are where the bulk of the three million American jobs generated by transpacific trade, as well as the eight million Americans of Asia origins, are concentrated” (Calder 1997, 166–167). Such tangible material benefits anchored Congressional support for recurrent bouts of Cold War militarization and fertilized the rise of the New Right have-coalition (Trubowitz 1998, 169–234; Kupchan and Trubowitz 2007; Davis 1986). For in the aftermath and in reaction to the movements of the 1950s and 1960s and related civil disturbances—from civil rights and free speech to Watts and the emergence of the antiwar movement—and the subsequent U.S. defeat in Vietnam, and with military spending seeding the Sunbelt regional boom and its rising political influence, a broad-based New Right emerged, eventually converging with the right turn of the “Eastern Establishment” (Davis 1986; Dallek 2004; Perlstein 2001, 2008; Reifer 2002b). The rise of a broadly based U.S. New Right aimed to valorize the accumulated gains of corporate capital and the broad propertied strata built up during the Cold War (Davis 1986, 302, 157–255, 284–289). This new hegemonic social bloc was solidified by resentments generated in part by the stratification of U.S. social provision by race, class, and gender, which helped facilitate the unraveling of the New Deal coalition and related

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world order. This newly emerging hegemonic bloc included the more privileged segments of the white ethnic working classes and middle strata, arrayed against workers of color, labor, and the poor, along with the Soviet Union and the Second and Third World (Davis 1986; Gordon 1994a, 1994b). During World War II and the early Cold War years, U.S. military spending was based on progressive taxation of corporations and the rich. This was accompanied by limitations on pecuniary accumulation, including federal regulation and antitrust efforts. And of course, the complications of the Cold War for civil rights in the context of the powerful civil rights movement allowed for dramatic gains, however limited in space and time, in the enfranchisement of African Americans (Klinker 1999). Here was the social basis of the rise of the New Deal world order: New Deal and Great Society reforms at home and support for socioeconomic reconstruction and limited forms of nationalist development abroad. By limiting large fluctuations in currency exchange rates and speculative capital movements, fixed exchange rates provided a temporary basis for forms of expansion consonant with the New Deal’s political-economic and social objectives (Gardner 1980). Yet, the very success of this militarized material expansion of the World-System via the Cold War division system led to the fiscal crisis of the New Deal warfare-welfare state during the attempt to pay for both guns and butter during the Vietnam War. The pursuit of guns and butter during this period led to a pay explosion, the resurgence of intercapitalist competition, a squeeze on profits, and an overaccumulation of funds beyond that which could be profitably reinvested back into trade and production (Arrighi 1994, 2007; Borden 1989). The need to finance the Vietnam War in fact first forced the rise in U.S. interest rates to pay for borrowing. The move was critical in ushering in the “money-market mutual fund revolution,” now worth trillions, as borrowers moved from banks to the money market (Steinherr [1998] 2001, 40, 383; see also Reifer 2002b). As capital sought spaces for accumulation where it could escape taxation and regulation, offshore money markets proliferated and high finance was reborn. Shortly thereafter, U.S. elites scrapped the Bretton Woods agreements on pegged exchange rates they had created after World War II. In the future, sharp increases in U.S. military expenditures would be financed through borrowing on the global capital markets. In fact, more than anything else, it was America’s debt-finance militarization and the opportunities for financial gain its regressive financing allowed that welded together the New Right have-coalition (Beckett 1996; Davis 1986, 1998, 2002; Phillips 1990, 2002; Edsall and Edsall 1991; Jonathan Simon 2007; Social Research 2007; Donahue 2008; Nunn 2002;

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Quadagno 1994).2 This dramatic change toward neoliberal forms of regressively financed militarization has in turn helped ensure the steady demise of the New Deal world order (Arrighi 1994; Davis 1986, 2002; Reifer 2002a, 2002b, 2007; Stiglitz and Bilmes 2008a, 2008b). The demise of the New Deal world order here was also associated with a dramatic shift from the “urban welfare state to the suburban warfare state” and the related expansion of the carceral state, most especially in California and the Sunbelt states (Castells 1989, chap. 7; James Simon 2007; Davis 2002, 2006). And once again, as so many times before, Cold War militarization speeded forward Asia-Pacific integration (Flamm 1996; see also Arrighi 1994, 325–356, 2007; Trubowitz 1998, 169–234; Katzenstein and Shiraishi 1997). Ironically, this very success of U.S. militarization cycles in rebuilding the workshops of Europe and East Asia has created new dilemmas for U.S. elites, most especially with the resurgence of Chinese-led East Asia as the new workshop of the world. For the collapse of the Soviet empire, the reunification of Germany, the breakup of the Soviet Union, the formation of the European Union, and the rise of East Asian regionalism today raises the possibility of the emergence of new regional and world powers that threaten to displace the United States from its hegemonic role The New Right also successfully highlighted single wedge issues, often racialized, from affirmative action to the property tax revolts, along with anti-immigration and tough-on-street-crime politics. The outcome has been the reinforcement of a twenty-firstcentury American apartheid, as has been widely noted in the scholarly literature (see Massy and Denton 1993). The racialized politics of divide and rule has seen the continued enfranchisement of white citizens in newer suburbs and edge cities in roughly equal proportion to the disenfranchisement of increasingly criminalized constituencies of color, as revealed so dramatically with Hurricane Katrina (Reifer 2007). Blacks, Latinos, and immigrants in declining deindustrialized urban cores hit hard by cheap Asian imports have been hurt the most and are now saddled with second-class schools but first-class prisons. The turn from the War on Poverty and the Great Society to the war on drugs and crime, gangs, and immigrants was useful in propping up the political coalition of the New Right yet has resulted in the extraordinary figure of over one in a hundred U.S. adults now being incarcerated, overwhelmingly youths of color. The United States, with just 5% of the world’s population, now holds some 25% of its prisoners and has the largest incarcerated population in the world (Beckett 1996; Miller 1996; Tonry 2006; Davis 2002, 2006; PEW Center on the States 2008; Reifer 2007, forthcoming b). Here, of course, the U.S.-Mexican border plays a special role in regulating the supply of cheap immigrant labor, devoid of citizenship rights, while stimulating nativist racism (Chacon and Davis 2006; Davis and Moctezuma 1999; Nevins 2002). Moreover, the domestic incarceration boom and the new rounds of resurgent militarism, from the war on drugs and “terror” right up to the trillions currently being spent on the Iraq and Afghan wars, rather than being financed through taxation on corporate profits and the rich as during the early years of the Cold War, has been funded instead by new rounds of regressive debt-financing. Yet, the benefits of such spending flows primarily to the suburban-based New Right and away from declining cities (Davis 2002; Reifer 2007). 2 

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in the global system. Not surprisingly then, in the aftermath of the collapse of the Cold War superpower confrontation, the United States began to articulate a vision of a unipolar one-superpower world, within which it sought to prevent regional powers from acquiring greater regional or global roles that might challenge U.S. power (“U.S. Strategy Plan” 1992). Maintaining Cold War–like divisions has been almost as central to the current U.S. hegemonic vision as has its perceived imperative to control world oil (Bromley 1991; Brzezinski 1997; Layne 2006; Spiro 1999; Painter 1986; Cumings 1990). Such a strategy has been thought to permit the United States to derive the primary pecuniary benefits of the contemporary massive expansion of trade, production, and financial wealth in both Europe and East Asia (Gowan 1999, 2000). At the same time, the tilting of the world economic epicenter toward Chinese-led East Asia has again motivated a major U.S. military redeployment from Western Europe to East Asia, indicating the growing importance of the Asia-Pacific region to American hegemonic visions and global ambitions. The United States, of course, maintains continued interest in Europe, East Asia, and the Middle East. Yet, its moves to deploy a Star Wars system in Europe that could ensure its strategic superiority over both Russia and China has led European states to condemn U.S. efforts to rekindle Cold War–like divisions (see also Berend 1996; Gowan 1999, 2000). And in East Asia, the United States continues its time-honored commitment to Western military superiority to ensure that the increasingly dense regional trade links serve American and not Asian regional interests (Steensgaard 1974, 1981; Lane 1979). Indeed, an influential RAND (2001, 13–15) report close to Bush administration planners has stated that in regards to East Asia the “most fundamental question . . . is whether Japan will continue to rely on U.S. protection,” going on to express concern about a rapprochement between China and Japan, which it says would “deal a fatal blow to U.S. political and military influence in East Asia.” It should be noted that, although Cold War divisions undoubtedly limited the autonomy of U.S. client states, such divisions also provided a huge impetus for the rapid productivist industrialization of Western European and East Asian developmental states (Woo 1991a; Woo-Cumings, 1999). In Europe, the reunification of Germany and the breakup of the Soviet Union have effectively overcome Cold War divisions there and yet, as the conflict of Georgia showed in the summer of 2007, the divisions are far from over. Cold War–like divisions persist too in East Asia, between China and Taiwan and the two Koreas and in the ongoing historic enmities between Japan and China and the rest of Asia. Such divisions remain challenging obstacles to the more fundamental desideratum of overcoming the unequal power

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relations in the present World-System that form the coloniality of power (Paik 2000). The Korean peninsula, for example, remains “one of the most heavily militarized zones in human history. Significantly more than one million troops and 20,000 armored vehicles or artillery pieces, as well as more than one million land mines, abundant chemical weapons, and fortified defensive positions, are found between Pyongyang and Seoul (the distance from the four kilometer-wide DMZ to Seoul is roughly forty kilometers and from the DMZ to Pyongyang about 125 kilometers). Forces in Korea are more densely concentrated than the Warsaw Pact and NATO units were in Central Europe during the Cold War” (O’Hanlon 1998, 139–140; see also Reifer 2001; Anderson 1996). Again, despite increased economic integration, China and Taiwan continue to languish in a state of Cold War division. Thus, the Korean division system and the division of China and Taiwan alike have led to bilateral arms races that place severe constraints upon the ability of these states to achieve alternate regional visions to that of the so-called Washington Consensus. Indeed, this consensus has been upheld by Washington’s adroit manipulation of divide-and-rule opportunities presented by prior regional divisions. Thus, current divisions between India and its neighbors China and Pakistan date from the end of British rule on the Indian subcontinent, and scholars have also noted that “based on historical patterns extended back nearly 200 years, the current rates of competitive growth of at least two key weapons systems by PRC and Taiwan match or exceed those of the great majority of pairs of states whose rivalry ultimately ended in war” (Wallace et al. 2001, 186–187). Again, Korean and Chinese distrust of Japanese intentions can be dated back to the days of Hideyoshi’s invasions of Korea (1592–1598). Nevertheless, the United States has proved highly successful in honing history to serve its divide-and-rule policy, for instance, in wooing nuclear Pakistan as a strangely unlikely ally in its “war on terror,” thereby increasing India-Pakistan tensions, and in its Cold War economic reconstruction of the old Japanese “East Asia Co-Prosperity Sphere” under the new American aegis. Through such strategic methods, historical animosities have acquired new Cold War meanings and continue to impede international efforts to overcome the historical divisions that are constitutive features of what Anibal Quijano calls the “coloniality of power.” Ironically though, the very success of U.S. divisive policies has had unintended consequences that help to weaken the Washington Consensus. American wars in East Asia have served to drive the economic dynamos of Korea, Taiwan, and Japan and thereby provide the economic foundations for East Asia’s contemporary resurgence and growing

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regional economic integration. Thus, many believe that continued trade integration will diminish any possibility for war in the Taiwan Straits (Anderson 2004). Such integration in turn increases regional resistance to U.S. divide-and-rule policies and thereby potentially undermines the Washington Consensus. This contemporary integration of trade in East Asia and in the transpacific region as a whole sharply differs from the old Fordist-based transatlantic economy in which increases in military spending stimulated aggregate demand. In contrast, today’s transpacific economy is increasingly based on huge inflows of foreign capital to the United States, from U.S. Treasury securities to the subprime mortgage market. “About one-fifth of securities issued by Fannie, Freddie, and a handful of much smaller quasi-governmental agencies, some $1.5 trillion worth, were held by foreign investors at the end of March. One out of every 10 American mortgages is, in effect, in the hands of institutions outside the United States. . . . Asian institutions and investors hold some $800 billion issues by Fannie and Freddie. . . . China held $376 billion and Japan $228 billion as of June 2007” (“Trouble at Fannie and Freddie Stirs Concerns Abroad” 2008). For a time, these flows enabled the United States to shore up global demand. Today, however, the bursting of the superbubble has led to a wave of bankruptcies in the U.S. retail sector, raising the question of the sustainability of a world economy based on Chinese and Asian underconsumption and U.S. overconsumption (Barbaro 2008; Davis 1986; Fallows 2008; Fajnzylber 1990a, 1990b; Hung 2008). “On the money-sector side, East Asia recycles accumulated dollars (the outcome of a huge trade surplus) back to the United States so that the latter’s trade deficit is adequately funded and its growth can be further stimulated without inflation. Dollar recycling also helps prevent Asian currencies from appreciating so that the value of Asian financial investments in the United States remain protected—and Asian exports maintain price competitiveness” (Ozawa 2004, 19; see also Mikuni and Murphy 2002). This unique situation can again be traced back to the unintended outcomes of the militarized Cold War division system. This system provided for East Asian nations’ rapid ascent in the global economy, albeit— excepting China—as semisovereign states. By shouldering the primary costs for military protection of Asia’s developing states, the United States, prompted in part by overarching security threats, unintentionally left the region free to focus on rapid capital accumulation. This division of labor, with the United States focused primarily on violence and East Asia primarily on profits, has left the region with the lion’s share of productive investments and surplus capital and the United States with the lion’s share

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of global military power. This is a major anomaly from the perspective of past Western hegemonic transitions, in which productive and military power went hand in hand with growing surplus capital (Arrighi 1994, 2007). These unique aspects of the current conjuncture should give pause to predictions based on the history of the World-System. For in previous hegemonic cycles and SCAs, there was a convergence between the dominant centers of productive and surplus capital and the centers of global military power in the West. This convergence formed part and parcel of what historians call the original “great divergence” between East and West (Pomeranz 2000; Arrighi 2007; McNeill 1982; see also Hobson 2004). Today, in significant part as a unique and unintended consequence of the militarized Cold War division system, there is instead a second great divergence in which the world’s productive and surplus capital has accumulated above all in Chinese-led East Asia and, as a result of neoliberal militarization, military power has become ever-more concentrated in the United States. This unintended and unnatural imbalance between the American near monopoly on violence and the increasingly China-led commandeering of economic accumulation has had a dramatic negative impact on U.S. efforts to restore its waning hegemony as hoped for by the Project for the New American Century, many of whose members came to serve in leading positions in the Bush administration (Arrighi 2007; www.newamericancentury.org/). This can be discerned, for instance, in the misfiring of the U.S. invasion of Iraq by which the United States has aimed to control the strategically vital world oil supply. Although perhaps leading to a temporary efflorescence of U.S. power, American expansionism has further narrowed U.S. global options to an increasingly inflexible and unsustainable neoliberal militarism while speeding up the resurgence of a Chinese-centered East Asian regionalism (Arrighi 2007; Ozawa 2004, 2007; Layne 2006). Narrowing U.S. resource options likewise increase American reliance on overtly predatory policies that in turn constantly increase the political and social costs of U.S. power and hence regional incentives to break free of Washington’s grip. This may by now have become a snowballing process beyond Washington’s power to arrest or reverse. The present-day spectacle of a World-System reconfigured on unsustainable socioeconomic foundations thus raises the serious question of whether emerging Asian and transpacific regionalism can move beyond the legacy of the Cold War division system to remake the World-System on new, enlarged, and environmentally sustainable social foundations.

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From the Washington to the Beijing Consensus Over the past three decades, the world has seen enormous transformations. The new Cold War, beginning in the late 1970s, ended dramatically with the collapse of the Soviet empire, the dissolution of the Soviet Union, and the demonstration of U.S. military prowess in the 1991 Gulf War. Thereafter, “neoconservative” intellectuals began to talk about the end of history with the emergence of a one-superpower world during the period of American ascendancy. Predictions of the imminent demise of U.S. hegemony gave way for a time to astonishment at the U.S. economic boom of the 1990s and talk of the superiority of the U.S. capitalist model after the 1997 Asian financial crisis. Soon enough though, the exposure of U.S. crony capitalism with the collapse of Enron, the economic disintegration of IMF darling Argentina, and the bursting of the U.S. stock market bubble put a damper on this feeling of triumph. Indeed, when historians look back, what may be most memorable is how quickly the world went from the Washington to the Beijing Consensus (Serra and Stiglitz 2008; Ramo 2004). To understand this dramatic change requires a brief review of the remaking of U.S. power on increasingly narrow and precarious militarized and financial foundations. As early as the 1970s, U.S. elites had begun trying to compensate for the decline of a robust hegemony through increasingly exploitative forms of domination, in ways that exacerbated financial volatility and global insecurity (Gowan 1999; Ellsberg 1986). Their efforts to increase global dependence on U.S. financial markets and military protection enjoyed partial if brief success. American entry into competition on the global capital markets to finance the new Cold War initially ushered in the growing power of highly speculative and increasingly mobile financial capital through the Wall Street–Treasury nexus, from hedge funds to derivatives (Bhagwati 2002). Where traditional Republicans had been more fiscally conservative in tilting to the high-tech sectors of the U.S. Air Force and Navy, Democrats had historically embraced expansionary fiscal policies. Reagan gave corporate and state-sector elites the best of both worlds. American military spending doubled to some $300 billion annually but was funded by the fantastically regressive means of borrowing on the global capital markets rather than by taxing corporate profits and the wealthy, as when New Deal limitations on the power of money capital such as interest rate caps had been in effect. The resultant boon to the cyclical resurgence of high finance and mobile capital increased the power of the global capital market over states and was an unmitigated disaster for the Second and Third Worlds. These states had borrowed money at variable interest rates during the 1970s for

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the purposes of “development.” Indeed, during the 1960s and 1970s, the Third World appeared to be gaining ground on many fronts. In the 1980s, these gains were reversed as debt payments flowed from the global South to North and terms of exchange and trade turned dramatically against the Third World. Beginning in the 1980s, the old ideology of development was to be increasingly discarded. Thus, under the Washington Consensus, states were expected to liberalize, open their markets, export, and pay back their debts (Williamson 1990; Silver and Arrighi 2000). The U.S. abuse of its privilege of seignorage to shore up its military and financial power led to the temporary efflorescence of American hegemony but ultimately reconfigured U.S. power within increasingly narrow, exploitative, and unstable forms of global domination. This in turn paved the way for the slow but uneven formation of alternative regionalisms that today pose significant challenge to U.S. power, from Europe to Latin America to East Asia (Gowan 1999; de Brouwer 2001; Bhagwati 2002; Reifer 2007). The limits of America’s unsustainable expansionist path have become increasingly obvious over the last few decades. The result is that the Washington Consensus of the late twentieth century now faces increasing challenges from the Beijing Consensus of the twenty-first. Few today dare to speak of any gains posted by the policy currents making up the Project for the New American Century and commentators are instead already talking about the role of “America in the Asian Century.” Joshua Cooper Ramo (2004, 3–4) has outlined the “new physics of power and development behind the Beijing Consensus . . . [that] replaces the widely-discredited Washington Consensus [that] left a trail of destroyed economies . . . around the globe.” The Beijing Consensus emphasizes “equitable, peaceful . . . growth,” innovation, multilateral cooperation, and global interdependence (Ramo 2004, 4). Though the Beijing Consensus is still relatively undeveloped, China’s rejection of unilateralism, support for independence of sovereign states (putting aside here the special questions of Taiwan and Tibet), and emphasis on the governance of capital markets has been welcomed by states fed up with Washington’s emphasis on opening others’ markets while enforcing protectionism at home. Of course, questions of labor and human rights, democracy, and environmental pollution still remain controversial, but the human rights abuses of the U.S. “war on terror,” the U.S. role in curbing global environmental agreements, U.S. attacks on labor, and the more general atrophy of American democracy has left few to look to U.S. leadership in these areas. Here, a brief review of how Cold War divisions have paved the way for alternative regional visions is in order. As noted earlier, the Cold War division system in its first few decades provided opportunities for

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“development by invitation” and by “regional integration” in both Western Europe and East Asia (Selden 1997). Yet whereas the original Cold War system of divide and rule was premised upon the exclusion of U.S. enemies—notably China—America’s long wars in Asia, in particular with Vietnam, eventually led to the U.S. opening to China and the latter’s incorporation into the region’s spectacular expansion of production, trade, and finance. By consolidating the U.S.-China alliance against the Soviet Union, Nixon’s triangular diplomacy strategy of divide and rule arguably played a significant role in the Soviet empire’s collapse and the breakup of the Soviet Union itself; the Soviets found themselves caught in a two-front war between the eastern and western wings of the continent, just as had their predecessors Spain, France, and Germany (Tucker 1995–1996; Dehio 1962; Thompson 1992). Ludwig Dehio (1962) demonstrated the ways in which recurrent territorialist challenges to Western hegemonies led Western powers to bring in the eastern and western wings of the Eurasian continent as counterweights to continental land forces, around which power in turn migrated. Though Dehio thought this system came to an end with the emergence of Cold War divisions, the analysis put forward here questions this conclusion. For during the Cold War, the United States arguably brought the eastern and western wings of Eurasia into play against the Soviet’s strategy of offensive defense, and this, more than anything else, provided the structural context for the rise of the European Union and Japan-led and now Chinese-led East Asia (see also Thompson 1992; Rasler and Thompson 1994). The growing U.S.-China alliance, right up until the present, has been central in facilitating China’s emergence as the new leader of East Asia’s expanding regionalism in the areas of production, trade, and finance, supplanting to a large extent the role of Japan. Central to this hegemonicled growth has been the recycling of trade and industry throughout the region and America’s “reverse Open Door,” whereby the U.S. open market ensured continuous high demand for cheap East Asian commodities (Woo 1991a, 1991b; Woo-Cumings 1993; Ozawa 1994, 2007). Moreover, East Asian countries succeeded in moving up the value-added chain and increasing their pools of surplus capital exactly by violating the tenets of the neoliberal Washington Consensus, a fact not lost on those in the region and across the globe (Reifer 2006a, 2006b, 2006c). The effects of the snowballing East Asian miracle—now joined by China—are already being felt worldwide. Though still dependent on the U.S. market, in 2002 China supplanted the United States as the world’s largest exporter to Japan. And in July of 2008, China replaced the United States as the largest importer from Japan for the first time since World War II while, of course,

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U.S. imports from China have been rising exponentially and creating a massive U.S. trade deficit (Ozawa 2004, 1). Today, the rise of Chinese-led East Asia and with it the growing in influence of the Beijing Consensus signals the reemergence of a region whose relatively low labor, consumption, and protection costs pose world-historic challenges to the unsustainable foundations of the U.S.dominated global system with its high consumption and protection costs (see Fajnzylber 1990a, 1990b; Hung 2008; Arrighi 1994, 348–356). To be sure, China’s present path is arguably unsustainable socially, environmentally, and politically. Yet, a China transformed by social movements such as its leadership repressed in 1989 and larger regional and global social movements, and by its new links with the global South, may mount more effective challenges to the coloniality of power in the World-System than all the radicalism of the Bandung generation, as Arrighi (2007) has intimated (see also Wang 2003). China’s newly acquired market power and wealth may provide an opportunity for East Asia, in conjunction with other Southern forces and their Northern counterparts, to overcome historic divisions between global North and South and within East Asia that have played a critical role in shoring up the inequalities of the global system (Guerrero and Manji 2008). Such possibilities for a resurgent South mark a notable change from the 1980s, often referred to as the South’s lost decade, which followed closely on the heels of the great gains it had appeared to make in the 1970s (Arrighi 1994, 2007; Silver and Arrighi 2000; Milanovic 2005). In response to these gains of the 1970s and the more general decline in U.S. world power of which it was a part, beginning in the late 1970s and early 1980s the United States launched a resurgent militarism (Arrighi 1994). Yet as noted earlier, whereas such military Keynesianism was financed largely by taxation on the wealthy and corporations in its earlier phase of robust hegemony, this new round of neoliberal militarization was financed by regressive borrowing on the global capital markets. And so, the world went from the age of statist-led development replete with governed markets to the hegemony of the Washington Consensus and the ideology of the self-regulating market, all propped up by U.S. military power and related privileges of seignorage—effectively, the right to mint the coin of the realm. Moreover, in the United States and abroad, the resurgence of Wall Street, financial capital, and private rating agencies from Standard and Poor’s to Moody’s has given ever-greater power to financial capital in determining corporate valuations and the costs of borrowing, often in ways that fueled speculative bubbles. Indeed, the bursting of the Asian bubble in 1997 led money to flow into the stock market, and after that bubble

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burst into subprime mortgages, which are continuing to melt down even as this volume goes to press. The result has been the financialization of corporations and recurrent speculative booms followed by their inevitable bursting in financial crises (Blackburn 2002, 2006a, 2006b, 2008; “How Rating Firms’ Calls Fueled Subprime Mess” 2007; Kindleberger 2005; Arrighi 2007). American seignorage privileges still find expression in the massive reserve holdings of dollars by U.S. client states in the Persian Gulf, in the London financial markets, and most especially in East Asia, with China playing an ever-greater role as what leading Wall Street analyst Joe Quinlan (2007, 4) calls “America’s financial sugar daddy” while the United States falls ever deeper in debt to China—deeper in fact than it ever has to a single country (Fallows 2008). American military power and related seignorage powers are crucial here, as the ability both to print dollars and to borrow money in its own currency—notably from China and other East Asian and Persian Gulf money boxes—frees the United States to a greater degree than all other states from balance-of-payment constraints (Gowan 1999, 35; McKinnon 2005; Arrighi 1994, 2007). Yet nothing lasts forever, and signs can already be seen as to the limits of America’s declining power and wealth. And whereas a glimpse of what might replace this current unstable configuration of global geopolitics, production, trade, and high finance is unclear, insight can be gleaned by examining the area of what for a time appeared to many as the greatest reversal of fortune of the late twentieth century, namely, the Asian financial crisis. Although in some ways the crisis heralded the end of the hopes that the twenty-first century would be Asia’s rather than America’s, a deeper look reveals quite a different picture. The spectacular rise of East Asian shares of world GDP, the rise in GNP per capita, and the impressive trade and productive expansion that has made the region and above all China the new workshop of the world has been adequately discussed elsewhere (Ozawa 2004, 2007; Arrighi 1994, 2007). Here, we will examine how a crisis that to many signaled the end of hopes for the Asian “miracle” may instead have been the harbinger of a growing centrality illustrated by China’s meteoric ascent. Similarly, events that had seemed to herald the era of endless U.S. power may in retrospect appear to be what George Soros (2003) has called, and thus titled his book, The Bubble of American Supremacy. To evaluate this possibility, it is necessary to review the crisis and the initiatives that followed in its wake. A host of structural conditions led to the East Asian crisis. Crucial enabling features were capital account liberalization and the elimination of capital controls pushed for by what Jagdish Bhagwati (2002) calls the Wall Street–Treasury nexus, which allowed highly leveraged

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institutions—notably hedge funds—to carry out financial warfare against vulnerable national currencies (Gowan 1999; de Brouwer 2001; Financial Stability Forum Working Group on Highly Leveraged Institutions 2000; see also Wade and Veneroso 1998a, 1998b). But perhaps the most neglected factor in the Asian crisis was the rise in Chinese exports from the region, the depreciation of the yuan and appreciation of the dollar, all of which put pressure on the other economies and rendered their currencies (pegged to the dollar) more vulnerable (Kahn 1997). If these currencies had alternately been tied to some combination of currencies such as a mix of the dollar, yen, and now the euro, they may not have appreciated as much as they did and thus might have left financial markets less vulnerable to external shocks, or so some believe. All of this is of contemporary concern since many of these states have effectively returned to a dollar peg, though they argue their currencies are actually floating via market rates (Chung and Eichengreen 2007; cf. McKinnon 2005). And though the crisis did indeed allow for Wall Street and other financial investors to come in and gobble up assets, it actually led to moves in radically different directions, financial liberalization as in Seoul’s recent “big bang,” and the imposition of capital controls in states such as Malaysia (see Chang 2003). Yet most importantly, the crisis gave additional impetus to East Asian–Pacific trade and monetary integration blocked at the time by the United States. And as Injoo Sohn (2007) argues, the continuation of this process may eventually give East Asia the power to remake the rules of the global system. During the 1997 crisis, local initiatives for regional or global leadership were vetoed by the United States. For example, Japan proposed an Asian Monetary Fund (AMF)—essentially an Asian equivalent of the IMF—and was willing to contribute some $50 billion of a proposed $100 billion to a common fund. This initiative was rejected by Washington, which feared the plan would displace America’s hegemonic role in the region. At the time, China also did not support Japan’s proposal. The advent of the IMF with its structural adjustment programs and tight monetary policies through interest rates rises that enforced austerity and shock therapy (as in Latin America and Eastern Europe, beginning with the Volcker shock of 1979) depressed economic growth and led to steep recessions, sharp declines in GNP, and widespread misery (Cumings 1998; Gowan 1999). Yet, the region quickly recovered (Arrighi 2007; Cumings 2005). Moreover, as former chief World Bank economist Joseph Stiglitz argued, pressure for capital account liberalization led to the crisis in the first place, and IMF proscriptions worsened it thereafter. The result: a legacy of animosity against U.S.-dominated supranational financial

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institutions and Wall Street in Asia, where some two-third’s of the world’s poor reside, that lives on today. There is presently a movement in the region to overcome such vulnerabilities resulting from the weakness of regional financial markets and the limited abilities of the regions’ currencies to serve as stable stores of value. In 2003, at the executives’ meeting of East Asia Pacific Central Banks, representatives from states including Australia, China, Hong Kong, Indonesia, Japan, Malaysia, New Zealand, South Korea, Singapore, Thailand, and the Philippines decided to create a $1 billion Asia Bond Fund. The money was to go into “U.S. dollardenominated regional bonds” put out by Asian issuers (Sohn 2005, 498). A number of states are contributing between $25 and $120 million each to the fund. In this same year, eighteen states that were part of the second Asia Cooperation Dialogue meetings agreed to support the Asian Bond Fund Initiative (Sohn 2005, 498, 2007, 4). And in April 2004, India agreed to give another $1 billion for the Asian Bond Fund, whereas eleven of the cooperating Asian states announced moves toward a second Asian Bond Fund, this time to be invested “in local currency-denominated Asian bonds” (Sohn 2005, 498, 2007, 5). China recently agreed in principle to allow renminbi-denominated bonds to be issued by the Asian Development Bank (ADB) and other international financial institutions. Further, Thailand stated that it was going to launch $30 billion baht of currencydenominated bonds through the Asian bond market (Sohn 2005, 499). The moves to increase the regional bond market in Asia are being funded by a number of countries hoping to attract additional investments from states and institutional investors such as pension, mutual, and insurance funds, half of which are in the United States and over a fourth of which are in Europe. Today, these funds are capitalized at $53 trillion, close in amount to the some $55 trillion in world stock market capitalization and roughly equivalent to the value of the international bond market (International Monetary Fund 2007a, 2007b; “Sovereign Wealth Funds” 2007). Additionally, in May 2006, a number of East Asian states agreed to study the idea of an Asian Currency Unit, a basket of Asian currencies, which many believe is a move toward creating an “Asian Euro” (Sohn 2007, 7, 5). There is even talk of an “Asian oil market trading in Euros” (Chomsky 2007, 170). In May 2005, as part of the Chiang Mai Initiative begun in 2000, the thirteen nations of ASEAN+3 agreed to increase to $80 billion their common pool of rapidly expanding foreign exchange reserves to deal with such crises. China alone has the largest foreign reserves in the world at over $1.333 trillion—surpassing even Japan—while the region’s reserves altogether are now at an all-time high of $3.52 trillion (Bennet 2007;

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“Governments Get Bolder in Buying Equity Stakes” 2007; cf. de Brouwer 2007, 77). China’s foreign trade surplus of some $1.4 trillion is growing at $1 billion a day and is currently largely invested in U.S. Treasury securities and other dollar assets. Dramatically illustrated here is how China’s underconsumption, exemplified in its tardy investments in much-needed social improvement—and U.S. overconsumption—radically misdistributed along the suburban-edge city, race, class, and gender divide (as so tragically exposed by Hurricane Katrina) are opposite sides of the same coin (Reifer 2007; Fallows 2008; Hung 2008). More recently, China has been funneling investment dollars to some of the world’s largest “moneycenter” banks and Wall Street investment firms, many of which were closely tied to the Bush administration, from Citigroup to Blackstone (Fallows 2008). Today, China boasts some $5 trillion in financial assets, over threefourths of which are in bank deposits, while India holds assets totalling roughly $1.4 trillion (McKinsey and Company Global Institute 2007, 8). The emergence of East Asia as the holder of the lion’s share of the world’s surplus capital has come with moves toward independence, even as Asia’s dollar reserves holdings show its continuing dependence on the United States. For the moment the latter is, along with Europe, still one of the consumers of last resort, though becoming less so as intraregional trade in Asia, especially with China, expands rapidly. And the global capital market as a whole has reached unprecedented levels, standing at $167 trillion, although only four areas—the United States, the United Kingdom, the Eurozone, and Japan—are responsible for over 80% of this amount (McKinsey and Company Global Institute 2008, 8, 2007, 8). The United States remains the world’s largest financial market, with some $56.1 trillion in assets, almost 33% of the world total. It is followed by Europe with some $53.2 trillion (including the United Kingdom with $10 trillion) and Japan with $19.5 trillion. In 2005, the financial stocks of the Eurozone increased 21%, or by some $3.3 trillion, more than the comparative growth of U.S. financial stocks, which grew $6.3% for a total of $3 trillion in gains (McKinsey and Company Global Institute 2008, 2007, 8; Farrell 2007). The over-the-counter derivative market remains by far the largest of all financial markets, rising from $415 trillion in 2006 to $516 trillion at the end of the following June (Bank for International Settlements 2007a, 2007b). Some $126 trillion of this is held by U.S. commercial money-center banks, with a mere five banks holding 97% of this total global amount (Comptroller of the Currency 2006/2007, 1). Europe holds $42 trillion of commercial bank assets, 65% of global totals, almost four times that of

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the United States, with its $11 trillion forming only 17% at the end of 2005 (International Financial Services, London 2006, 3). As for world equity market capitalization, accurate figures are hard to come by. Nevertheless, it is clear that East Asia shows some signs of strength here. For instance, the Japanese equity market increased by some $1.5 trillion in 2005, the highest such increase in the world. Even more significantly, these increases have been driven by higher corporate earnings rather than “higher price-earnings valuations” (Farrell 2007). Yet, Asia and the Eurozone still have far to go to match or surpass the breadth and depth of U.S. financial markets (McKinnon 2005). For all of the power of the yen and Japan’s role as the world’s third largest financial market, its capital ties are “overwhelmingly with the U.S., Britain and Europe, not with its own neighbors. At the end of 2004, Japan held $1.5 trillion of U.S. and European equities and bonds, but only $29 billion of bonds and equities from other Asian countries” (Farrell 2007). Yet with China’s growing monetary reserves, increased cooperation between China and the ASEAN+3+3 group, and China’s sustained outreach to regions including the Middle East, South Africa, and Latin America, the Chinese-led East Asian region may increasingly develop track-laying vehicles that not only give it more independence but also allow it to transform the global system as a whole. The direction of such a transformation remains an open question certain to be influenced by social movements. Returning to the specifics of Asian monetary integration, Asia’s May 2005 Bilateral Swap Agreement consisted of some sixteen BSAs among eight states. ASEAN+3 is currently trying to refashion these BSAs into a broader multilateral agreement, which many see as a move toward creating the very AMF earlier rejected by the United States. In May 2005, the finance ministers of East Asian states increased the approved lending ceiling from 10% to 20%, the other 80% being conditionally subject to the IMF (Sohn 2007, 1, 2005, 4). Fearful of U.S. opposition and worried about repayment, China and Japan have supported IMF conditionality requirements opposed by others such as Malaysia, which has long been a leading critic of speculative capital and U.S.-dominated international financial institutions (de Brouwer 2004, 29; Sohn 2007, 3–4). This $80 billion is, of course, dwarfed by ASEAN+3 holdings of U.S. Treasury securities, which in November 2009 stood at $789.6 billion for China, $757.3 billion for Japan, $146.3 billion for Hong Kong, $78.4 billion for Taiwan, $39.1 billion for South Korea, and $36.4 billion for Singapore (U.S. Treasury 2010). Yet, $80 billion is still far too little to effectively prevent or resolve financial crises relative to the flows of speculative capital that took aim at Asian currencies in the late 1990s or which are available

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today. Moreover, even under the new regional agreements, the largest amounts that states can borrow range from $3 billion for Singapore to $22 billion for Korea (de Brouwer 2007, 77). As Gordon de Brouwer (2004, 29, 2007, 77) and others emphasize, though, short positions on the Thai baht in mid-1997 were some $27 billion, roughly the size of the Bank of Thailand’s foreign exchange reserves. Also, short positions against the yen were believed to be some $200 to 300 billion in 1998, and positions against other Asian currencies were thought to have totaled some $47 billion in mid-1998. As demonstrated by the collapse of Long Term Capital Management, speculative hedge funds, based largely in the United States and Western Europe and now capitalized at some $2 trillion, have virtually unlimited access to liquidity and leverage from money-center banks and other institutions. These funds can deploy huge amounts of liquidity in ways that could dwarf the efforts by central bankers to protect national currencies (Anderson 2007; Gowan 1999). Indeed, since April 2004, daily turnover in the foreign exchange markets has grown at unprecedented rates—by 69%—to reach a new high of $3.2 trillion by April 2007, exceeding the foreign exchange reserves of the G8 (Bank for International Settlements 2007a, 2007b). Central banks’ pouring of anywhere from hundreds of billions to trillions of dollars of liquidity into the global economy to deal with the subprime loan crisis is indicative here of the risks of financial contagion from the bursting of what Soros calls the latest speculative “super-bubble,” this time centered in the multitrillion-dollar U.S. housing market. It should be noted that the “wealth of nations” is increasingly being held not by private firms but instead by sovereign wealth funds (SWFs), government investment vehicles composed of foreign exchange reserves more actively managed for higher returns, albeit with greater risk, than those reserves held by central banks. Estimated today at $2.5 trillion, analysts believe that SWFs could increase to $12 trillion by 2015. East Asian states are increasingly the lead holders of such funds, with China’s Huei Lian Company poised to have the largest such fund by 2009 (Morgan Stanley 2007). Of course, if a truly regional or global fund with enough resources were established, drawing on the huge foreign exchange reserves in East Asia and beyond, it could very likely thwart currency attacks and help to prevent or resolve financial crises, as might SWFs with agreements with their central banks that they can call on funds in a crisis. This would more likely materialize if these funds were made available in conjunction with stricter capital controls and other restrictions on financial capital. Moreover, if Asian nations begin to more actively manage their growing pools of surplus capital, as many believe they will increasingly do, rather than

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depositing them in Western currencies where they can be used as instruments of Northern domination of the South, this could lead to a radical shift in power in the global system (Arrighi 2007). Today, China and Japan hold most of their foreign reserves in dollar holdings and U.S. Treasury securities, with Japan’s investments in these assets coming to 90% of its total holdings (Bennet 2007). East Asia accounts for some 45% of the current account surpluses globally and 55% of the U.S. deficit (Yoshitomi 2007, 23). The ongoing efforts to increase the breadth and depth of Asia’s financial markets are designed to reduce their dependence on the United States and Western Europe. This is seen as especially urgent as many in the region, notably Hong Kong Monetary Authority Chief Executive Joseph Yam, have noted the irony of Asian savings being deposited in the West only to be used in financial warfare through speculative attacks on Asian currencies (Gowan 1999, 52). The move toward regional monetary cooperation and currencies is a direct outgrowth of the rise of alternative regionalisms, part of the larger dissatisfaction with the U.S.-dominated international monetary system and related supranational financial institutions. In an amazing change, the influence of these institutions appears to be rapidly declining today after reaching new heights of power in the 1980s and 1990s. Indeed, a host of countries have recently repaid their IMF debts, with Argentina and Brazil paying off all their loans early in 2006. And today, Venezuela’s Banco del Sur (Bank of the South) would bypass the IMF altogether. Such moves come at a time when IMF lending has substantially declined and private capital inflows as well as funds flowing from such states as China into so-called developing countries dwarfs that of the IMF (Helleiner and Momani 2007, 2, 11, 42). Early repayment is steadily reducing funds flowing into the IMF, with a recent estimate projecting that payments of charges and interest to the fund will drop from roughly $3.19 billion in 2005 to $635 million in 2009 (Griesgraber and Ugarteche 2006, 352). These changes point toward the possibilities for remaking the global system on more sustainable foundations. Yet, to truly remake the world and incorporate previously excluded constituencies in the global South, social movements, and the Southern states and their Northern counterparts requires engagement with questions of environmental and other related global inequalities and world security (Roberts and Parks 2007). For example, today cooperation on climate change is hampered by deep divisions between the North and South and by the policies of China and the United States, the two largest emitters of greenhouse gases. Moreover, today’s growing inequalities in China and East Asia generally restrain the growth of domestic markets while reproducing dependence on American and European markets, which despite the rapid

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growth in intraregional trade still act as the consumers of last resort for East Asia’s low-cost labor-intensive imports. Such issues are especially problematic as trends toward increased uneven East Asian development and its attendant growing inequalities departs ever more strikingly from the more-even East Asian development of the past (Arrighi, Hamashita, and Selden 2003). In many ways, today’s global income inequalities and related patterns of under- and overconsumption seem similar to those of the late nineteenth and early twentieth centuries, the flip side of which was the accumulation of surplus capital beyond the bounds of profitable investment, which Hobson ([1938] 1965) foresaw as the taproot of imperialism in the Anglo-American states (Arrighi 1983; Gowan 1999; Reifer 2002a, 2002b). Yet if the rise of China and East Asia provides new opportunities for remaking the World-System on more socially just and peaceful social foundations, despite huge obstacles, a key problem facing this goal is that U.S. elites have long seen China’s rise in competitive terms. The core aspect of U.S. policy since World War II has been to revive the European and Asian workshops while simultaneously resisting the rise of regional or global challengers to U.S. supremacy. Control over world oil has historically been among the most crucial mechanisms for ensuring U.S. hegemony, thus the high stakes in the U.S. invasion of Iraq (Bromley 1991; Spiro 1999). There has long been a debate in U.S. elite circles about the rise of Chinese-led East Asia. Richard Betts (1993/1994, 55) asked in the early 1990s: “should we want China to get rich or not?” Given both U.S. elite insecurities and that of their Chinese counterparts, there is a real danger of another clash between the declining and rising powers, as with Britain and Germany in the late nineteenth and early twentieth centuries (Shirk 2007; Kennedy 1980; Snyder 2000). Another cause for concern is the historic inability of the U.S. National Security establishment to understand China (Peck 2006). And yet, another scenario may be that of a U.S.-China hegemonic transition (Arrighi 2007). Here, the continued U.S. pursuit of primacy, as in its obsessive pursuit of a preemptive first-strike counterforce against the perceived threat of a rising China and Russia, poses serious obstacles to the successful negotiation of a peaceful transition and to the achievement of a true commonwealth of civilizations, instead of a clash among them as promoted by the likes of Samuel Huntington (Lieber and Press 2006a, 2006b, 2007a, 2007b; Kristensen, Norris, and McKinzie 2006; “Correspondence” 2007; “Nuclear Exchange Forum” 2006; RAND Corporation 2003; Arrighi 2007).

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What is remarkable is that China’s minimal deterrent strategy and initiatives against the militarization of space in the face of the U.S. pursuit of ever-greater global military primacy have led some mainstream American security analysts to hope that China might provide the leadership necessary for cooperative security on a global level. Analysts are increasingly looking to China to develop cooperative security mechanisms in the twenty-first century as a counter to the “appreciable risk of ultimate doom” that the U.S. pursuit of primacy arguably heightens (Steinbruner and Gallagher 2004a, 2004b; Lewis 2007; Gill 2007; see also Farer 2002, 2008a, 2008b). Commenting on the U.S. embrace of preemption—really, preventive war—in a powerful editorial comment in the American Journal of International Law, Tom Farer (2002, 359) notes, “At this point, there is simply no cosmopolitan body of respectable legal opinion that could be invoked to support so broad a conception of self-defense. It is in fact reminiscent of the notion of strategic preemption that animated German policy in the early years of the twentieth century.” More recently, Farer (2008b, 63) also stated that the “administration’s view of law bears an ironical resemblance to views exhibited by Wilhelmine Germany around the turn of the twentieth century and thereafter in the practices of the Third Reich.” Farer then goes on to list the potentially apocalyptic violence that may ensue from such a rejection of the United Nations Charter (see also the United Nations Secretary-General’s High Level Panel on Threats, Challenges, and Change 2004). Rarely are such stark pronouncements heard from the heart of the American Establishment.3 Ironically though, America’s relentless pursuit of continued primacy appears to be leading to the formation of new Eastern and Western counterweights against America’s interminable imperial ambitions (see Calleo 2002). Independent initiatives are being seen in particular in the oil, financial, and security sectors of Eurasia. India and China have made recent moves to overcome historic rivalries so as to explore a new partnership in the global energy markets, agreeing in 2006 to cooperate in technology and hydrocarbon production and exploration while similar and related initiatives have been developing among Asian energy producers and consumers. And the formation and evolution of the Shanghai Cooperation Organization formed in 2001 is also of great significance here in the context of ongoing geopolitical rivalry between the great powers in Central Asia, most recently over Georgia. As mentioned earlier, with trillions of reserves in the region now being held in dollars, steps toward I owe this formulation to Noam Chomsky (2005), who used it in the context of Sanford Levinson’s argument in regard to the similarities between the Bush administration’s attitude toward international law and that of the Nazis’ chief legal philosopher, Carl Schmitt (Levinson 2004, 5–9). 3 

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diversification in the context of the widening and deepening of Eurasian financial markets and new energy and security initiatives could provide for new forms of regional cooperation and eventually lead to the remaking of the global system on new and enlarged social and alternative regional and global foundations. For the moment, American elites seem bent on using increasingly desperate means to shore up U.S. power in the military, monetary, and productive realms. Yet, it is possible that the United States, pressed by social movements from below, will see the rise of policy currents more interested in fostering U.S.-China cooperation on the world stage, in conjunction with rising powers of the South such as India and the European Union (see Reifer and Chase-Dunn 2000). To achieve this, the United States must renounce its dreams of a new American Century and embrace interdependence and multilateralist economic, environmental, and security leadership. Here, the end of the Cold War superpower confrontation offers some real possibilities for progressive social change in the United States and abroad. As Dan Ellsberg (1990) has noted, “The breaching of the Berlin Wall could lower the wall between American unions and the multitude of social movements that continue to emerge and grow. . . . The ending of the Cold War opens up the prospect of conversion of the economy that would break the dependence of labor unions on arms spending.” Here it is essential to organize the growing numbers of immigrant workers, workers of color, women, and labor throughout the global supply chain and to ensure that the U.S. trade union movement does not substitute a reflexive knee-jerk anti-China attitude for yesterday’s Cold War business unionism (see Reifer 2004, 2005b; Fletcher Jr. and Gapasin 2008; see also Silver and Arrighi 2000). The role of the burgeoning populations of Latin Americans, now the largest group of persons of color in the United States, as the country moves toward being majority nonwhite by 2040 or 2050, will be particularly important here (Davis 2008). Similarly, overcoming Cold War divisions on the Korean peninsula could also hold out the promise of similar transformations in East Asia, for example between China and Taiwan, as Paik Nak-Chung, editor of the leading South Korean intellectual journal Changbi (Creation and criticism), has argued (see also Anderson 1996; Cumings 2005, 509). If moves toward a more peaceful and interdependent world were to progress, new and growing social movements across the globe might hasten global transformations such as those envisaged in the World Social Forum meetings and which found previous expression in the world revolution of 1968 and the Eastern European revolutions and Chinese student uprisings of 1989.

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Conclusion In past hegemonic transitions and cycles of global capitalist development, social movements and the emergence of a rising hegemonic state endowed with ever-greater global governance capabilities remade the global system on new and enlarged social foundations. Rapid industrialization and accumulation in China and Asia as a whole will surely shake the world once again, but today, more than ever before, questions of ecological, social, and political sustainability, at present significantly unaddressed, are critical. If East Asia and the larger Asia-Pacific region can overcome the legacy of division, most especially that left by Japan’s brutal colonialism and the Cold War division system that grew out of this, achieving reconciliation while beginning to more actively manage its growing foreign exchange reserves, including for the benefit of the global South, it could potentially help remake the global system (Sohn 2007; Arrighi 2007). Of course, a key aspect of forward movement here would have to be a truly sustainable development model based on overcoming present-day global inequalities of wealth and power. Should Asian social movements continue to join hands with similar world movements including the World Social Forum and regional social forums from North America, Asia, Europe, and the Middle East, the global system might well be remade on truly peaceful, just, and sustainable foundations. The future is uncertain. Meanwhile, as the center of the world economy continues to swing toward Asia, emerging voices from China, India, and the world beyond are certain to play central roles in this remaking of the modern World-System (Wang 2003). Whether social movements, scholar-activists, and others in the global South and North will rise to the occasion and offer a new vision for a true commonwealth of civilizations based on truly universal values of democracy, peace, and social justice is a question that only the future can answer.

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______. 2007. Institutions, Industrial Upgrading, and Economic Performance in Japan: The “Flying Geese” Paradigm of Catch-Up Growth. Cheltenham, U.K.: Edward Elgar Publishing. Paik, Nak-chung. 1993. “South Korea: Unification and the Democratic Challenge.” New Left Review 197:67–84. ______. 1996. “Habermas on National Unification in Germany and Korea.” New Left Review 219:14–21. ______. 2000. “Coloniality in Korea and a South Korean Project for Overcoming Modernity.” Interventions: International Journal of Postcolonial Studies 2.1:73–86. Painter, David S. 1986. Oil and the American Century. Baltimore, Md.: Johns Hopkins University Press. Partnoy, Frank. 2002. “Hearings before the United States Senate, Committee on Governmental Affairs: The Unregulated Status of Derivatives and Enron.” January 24. Peck, James. 2006. Washington’s China: The National Security World, the Cold War, and the Origins of Globalism. Amherst: University of Massachusetts Press. Perlstein, Rick. 2001. Before the Storm: Barry Goldwater and the Unmaking of the American Consensus. New York: Hill and Wang. ______. 2008. Nixonland. New York: Scribner. PEW Center on the States. 2008. 1 in 100: Behind Bars in America. Available at www.pewcenteronthestates.org/uploadedFiles/8015PCTS_ Prison08_FINAL_2-1-1_FORWEB.pdf. Phillips, Kevin. 1990. The Politics of Rich and Poor: Wealth and the American Electorate in the Reagan Aftermath. New York: Harper Perennial. ______. 2002. Wealth and Democracy. New York: Broadway Books. Polanyi, Karl. 2001. Great Transformation: The Political and Economic Origins of Our Time. Pomeranz, Kenneth. 2000. The Great Divergence: Europe, China, and the Making of the Modern World Economy. Princeton, N.J.: Princeton University Press. Poole, Mary. 2006. The Segregated Orgins of Social Security: African Americans and the Welfare State. Chapel Hill: University of North Carolina Press. Public Broadcasting System. 2008. “Sick around the World: Can the U.S. Learn Anything from around the World about How to Run a Health Care System? Lessons from Five Capitalist Democracies.” Available at www.pbs.org/wgbh/pages/frontline/sickaroundtheworld/. Quadagno, Jill. 1994. The Color of Welfare: How Racism Undermined the War on Poverty. New York: Oxford University Press. ______. 2005. One Nation Uninsured. Oxford: Oxford University Press.

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Quinlan, Joseph P. 2007. “China: America’s Financial Sugar Daddy.” Capital Market Outlook, Investment Strategies Group. Ramo, Joshua Cooper. 2004. The Beijing Consensus: Notes on the New Physics of Chinese Power. London: Foreign Policy Centre. RAND Corporation. 2001. The United States and Asia: Towards a New U.S. Strategy and Force Posture. By Zalmay Khalilzad, David T. Orletsky, Jonathan D. Pollack, Kevin Pollpeter, Angel M. Rabasa, David A. Shlapak, Abram N. Shulsky, and Ashley J. Tellis. Santa Monica, Calif.: RAND Corporation. ______. 2003. The Future of U.S. Nuclear Forces. By Glenn C. Buchan, David Matonick, Calvin Shipbaugh, and Richard Mesic. Santa Monica, Calif.: RAND Corporation. Rasler, Karen A., and William Thompson. 1994. The Great Powers and Global Struggle, 1490–1990. Lexington: University Press of Kentucky. Reifer, Thomas. 2001. “The Global Significance of Korea’s Cold War Division System and the International Movement for Reconciliation.” In Melting the Iceberg: Ending the Cold War in the Korean Peninsula and the Search for Global Peace, edited by Brid Brennan, 15–32. Amsterdam: Transnational Institute in Cooperation with Focus on the Global South. ______. 2002a. “Globalization and the National Security State Corporate Complex (NSSCC) in the Long Twentieth Century.” In The Modern/ Colonial Capitalist World-System in the Twentieth Century, edited by Ramón Grosfoguel and Margarita Rodriguez, 3–20. Westport, Conn.: Greenwood Press. ______. 2002b. “Geopolitics, Globalization, and Alternative Regionalisms: Possibilities for Global Peace, Democracy, and Social Justice.” In Asia Europe Crosspoints, Transnational Institute Handbook, edited by Paul Scannell and Brid Brennan. Amsterdam: Transnational Institute. Available at www.focusweb.org/publications/2002/geopoliticsglobalisationand-alternative-regionalisms.pdf. ______. 2004. “Labor, Race, and Empire: Transport Workers and Transnational Empires of Trade, Production, and Finance.” In Labor Versus Empire: Race, Gender, and Migration, edited by Gilbert Gonzalez, Raul Fernandez, Dorothy Fujita-Rony, Vivian Price, David Smith, and Linda Trinh Võ, 17–35. New York: Routledge. ______. 2005a. “Satellites.” In Encyclopedia of Intelligence and Counterintelligence, edited by Rodney B. Carlisle, 554–559. Armonk, N.Y.: M. E. Sharpe. ______. 2005b. “Latin@ Century, Pacific Century: Twenty-first Century Possibilities in World-Systems Perspective.” In Latin@s in the WorldSystem: Decolonization Struggles in the Twenty-first Century U.S. Empire,

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edited by Ramón Grosfoguel, Nelson Maldonado-Torres, and Jose David Saldivar, 199–211. Boulder, Colo.: Paradigm. ______. 2006a. “Development Theory.” In The Cambridge Dictionary of Sociology, edited by Bryan Turner, 133–135. Cambridge: Cambridge University Press. ______. 2006b. “Modernization.” In The Cambridge Dictionary of Sociology, edited by Bryan Turner, 394–396. Cambridge: Cambridge University Press. ______. 2006c. “World-Systems Analysis.” In The Cambridge Dictionary of Sociology, edited by Bryan Turner, 682–685. Cambridge: Cambridge University Press. ______. 2007. “Blown Away: U.S. Militarism and Hurricane Katrina.” In Racing the Storm: Racial Implications and Lessons Learned from Hurricane Katrina, edited by Hillary Potter, 197–223. Lanham, Md.: Lexington Books. ______. Forthcoming a. “Unlocking the Black Box of Globalization.” In The Traveling Box: Containers as the Global Icon of our Era, edited by Nelson Lichtenstein. New York: New Press. ______. Forthcoming b. Violence, Profits, and Power. ______, and Christopher Chase-Dunn. 2003. The Social Foundations of Global Conflict and Cooperation: Globalization and Global Elite Integration, Nineteenth to Twenty-first Century. Available at http://irows.ucr. edu/research/glbelite/globeliteprop03.htm. Reuschemeyer, Dietrich, Evelyne Huber Stephens, and John D. Stephens. 1992. Capitalist Development and Democracy. Chicago: University of Chicago Press. Roberts, J. Timmons, and Bradley C. Parks. 2007. A Climate of Injustice: Global Inequality, North-South Politics, and Climate Policy. Cambridge, Mass.: MIT Press. Romero, Federico. 1992. The United States and the European Trade Union Movement, 1944–1951. Chapel Hill: University of North Carolina Press. Rosswurm, Steve, ed. 1992. The CIO’s Left-Led Unions. New Brunswick, N.J.: Rutgers University Press. Rotter, Andrew J. 1987. The Path to Vietnam. Ithaca, N.Y.: Cornell University Press. Samuels, Richard J. 1994. “Rich Nation, Strong Army”: National Security and the Technological Transformation of Japan. Ithaca, N.Y.: Cornell University Press. Sassen, Saskia. 2001. The Global City: New York, London, Tokyo. 2d ed. Princeton, N.J.: Princeton University Press. Schurmann, Franz. 1974. The Logic of World Power. New York: Pantheon Books.

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______. 1987. The Foreign Politics of Richard Nixon: The Grand Design. Berkeley: University of California Press. Selden, Mark. 1997. “China, Japan, and the Regional Political Economy of East Asia, 1945–1995.” In Network Power: Japan and Asia, edited by Peter J. Katzenstein and Takashi Shiraishi, 306–340. Ithaca, N.Y.: Cornell University Press. Serra, Narcis, and Joseph Stiglitz, eds. 2008. Washington Consensus Reconsidered: Towards a New Global Governance. Oxford: Oxford University Press. Shirk, Susan L. 2007. China: Fragile Superpower. Oxford: Oxford University Press. Silver, Beverly J., and Giovanni Arrighi. 2000. “Workers North and South.” In Socialist Register 2001, edited by Leo Panitch and Colin Leys, 53–76. London: Merlin Press. Simon, James. 2007. “Rise of the Carceral State.” Social Research: Punishment, the U.S. Record 74.2:471–508. Simon, Jonathan. 2007. Governing through Crime: How the War on Crime Transformed American Democracy and Created a Culture of Fear. Oxford: Oxford University Press. Slezkine, Yuri. 1996. Arctic Mirrors: Russia and the Small Peoples of the North. Ithaca, N.Y.: Cornell University Press. Smil, Vaclav. 2008. Global Catastrophes and Trends: The Next Fifty Years. Cambridge, Mass.: MIT Press. Smith, Adam. [1776] 1976. The Wealth of Nations. Chicago: University of Chicago. Snyder, Jack. 1991. Myths of Empire: Domestic Politics and International Ambition. Ithaca, N.Y.: Cornell University Press. ______. 2000. From Voting to Violence: Democratization and Nationalist Conflict. New York: W. W. Norton. Sohn, Injoo. 2005. “Asian Financial Cooperation: The Problem of Legitimacy in Global Financial Governance.” Global Governance 11:487–504. ______. 2007. “East Asia’s Counterweight Strategy: Asian Financial Cooperation and Evolving International Monetary Order.” G-24 Discussion Paper Series 44. Soros, George. 2003. The Bubble of American Supremacy. New York: Public Affairs. “Sovereign Wealth Funds: The World’s Most Expensive Club.” 2007. Economist, 24 May. Spiro, David E. 1999. The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets. Ithaca, N.Y.: Cornell University Press.

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Steensgaard, Niels. 1974. The Asian Trade Revolution of the Seventeenth Century: The East Indian Companies and the Decline of the Caravan Trade. Chicago: University of Chicago Press. ______. 1981. “Violence and the Rise of Capitalism: Frederic C. Lane’s Theory of Trade and Tribute.” Review 5.2:247–273. Steinbruner, John, and Nancy Gallagher. 2004a. “Constructive Transformation: An Alternative Vision of Global Security.” Daedalus 31.3:83–103. ______. 2004b. Prospects for Security Transformation. Available at http:// www.cissm.umd.edu/papers/files/prospects_for_security_transformation.pdf. Steinherr, Alfred. [1998] 2001. Derivatives: The Wild Beast of Finance. Chichester, U.K.: John Wiley. Stepan-Norris, Judith, and Maurice Zeitlin. 2003. Left Out: Reds and America’s Industrial Unions. Cambridge: Cambridge University Press. Stiglitz, Joseph E., and Linda J. Bilmes. 2008a. The Three Trillion Dollar War: The True Costs of the Iraq Conflict. New York: W. W. Norton. ______. 2008b. “Cost of Occupation in Iraq: $3 Trillion Estimate Was Too Low.” 8 April. Available at www.alternet.org/story/81589/. Thompson, William R. 1992. “Dehio, Long Cycles, and the Geohistorical Context of Structural Transition.” World Politics 45.1:127–152. Tichenor, Daniel J. 2002. Dividing Lines: The Politics of Immigration Control in America. Princeton, N.J.: Princeton University Press. Tonry, Michael. 2006. Thinking about Crime. Oxford: Oxford University Press. Trachtenberg, Marc. 1999. A Constructed Peace: The Making of the European Settlement, 1945–1963. Princeton, N.J.: Princeton University Press. “Trouble at Fannie and Freddie Stirs Concerns Abroad: A Test of Faith in U.S. Markets for Overseas Institutions that Invested Heavily.” 2008. New York Times, 21 July, C1–2. Trubowitz, Peter L. 1998. Defining the National Interest: Conflict and Change in American Foreign Policy. Chicago: University of Chicago Press. Tucker, Nancy Bernkopf. 1995/1996. “China as a Factor in the Collapse of the Soviet Empire.” Political Science Quarterly 110.4:501–518. United Nations Secretary-General’s High Level Panel on Threats, Challenges, and Change. 2004. A More Secure World. Available at www. un.org/secureworld/. U.S. International Trade Commission. 2007. “U.S. Missile Deals Bypass, and Annoy, European Union.” New York Times, 18 April, A4.

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“U.S. Strategy Plan Calls for Insuring No Rivals Develop—A One Superpower World: Pentagon’s Document Outlines Ways to Thwart Challenges to Primacy of America.” 1992. New York Times, 8 March, A1, 14. U.S. Treasury. 2010. “Major Foreign Holders of Treasury Securities.” Available at www.ustreas.gov/tic/mfh.txt. van der Pijl, Kees. 1984. The Making of an Atlantic Ruling Class. London: Verso. Wade, Robert, and Frank Veneroso. 1998a. “The Asian Crisis: The High Debt Model Versus the Wall Street-Treasury-IMF Complex.” New Left Review 228:3–24. ______. 1998b. “The Gathering World Slump and the Battle over Capital Controls.” New Left Review 231:13–42. Wallace, Michael D., Brian L. Job, Jean Clermont, and Andre Laliberte. 2001. “Rethinking Arms Races: Asymmetry and Volatility in the Taiwan Strait Case.” Asian Perspective 25.1:157–193. Wallerstein, Immanuel. 1974. The Modern World-System I: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century. Orlando, Fla.: Academic Press. Wang, Chaohua, ed. 2003. One China, Many Paths. London: Verso. Wang, Hui. 2003. China’s New Order. Edited by Theodore Huters. Cambridge, Mass.: Harvard University Press. Weber, Devra. 1994. Dark Sweat, White Cold: California Farm Workers, Cotton, and the New Deal. Berkeley: University of California Press. Weber, Max. 1961. General Economic History. New York: Collier Books. Weikel, Dan, and Jeffrey L. Rabin. 2008. “Cargo Heading East Has LA at a Crawl.” Los Angeles Times, 10 June, A1, 16. White, John Kenneth. 1998. Still Seeing Red: How the Cold War Shapes the New American Politics. Boulder, Colo.: Westview Press. Wiley, Peter, and Roger Gottlieb. 1982. Empires in the Sun: The Rise of the New American West. Tucson: University of Arizona Press. Williams, Linda Faye. 2003. The Constraint of Race: Legacies of White Skin Privilege in America. College Park: Pennsylvania State University Press. Williamson, John. 1990. “What Washington Means by Policy Reform.” In Latin American Adjustment, edited by John Williamson. Washington, D.C.: Institute for International Economics. Woo, Jung-en. 1991a. Race to the Swift: State and Finance in Korean Industrialization. New York: Columbia University Press. ______. 1991b. “East Asia’s America Problem.” World Policy Journal 8.3:451–474. Woo-Cumings, Meredith. 1993. “East Asia’s America Problem.” In Past as Prelude: History in the Making of a New World Order, by Meredith

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TWO

U.S. Policies and the Rise and Demise of Japan, Korea, and Taiwan: An Examination of the World-System during the Cold War and After SATOSHI IKEDA

Introduction Japan, Korea, and Taiwan were once celebrated as “miracle” economies of the post–World War II World-System. Academic and popular publications in the 1980s sought to uncover the secret of the East Asian miracle, including the tiger economies (Korea, Taiwan, Hong Kong, and Singapore) and the mini-tiger economies (Malaysia, Thailand, and Indonesia). In the early 1990s, these “miracles” turned into “debacles” starting with Japan’s recession following the burst of its asset-price bubble. Other East Asian economies faced financial crises in 1997, followed by a painful recession and by restructuring imposed by the International Monetary Fund (IMF). Recent popular and academic attention has shifted to China, eroding our memories of “miraculous” growth experienced by the countries surrounding it. China is emerging (or reemerging) as the primary political power in the East Asian region. It holds the largest share of intraregional imports, which implies that it is not only becoming the factory for the world but the absorber of exports from neighboring countries. China is also becoming a major actor in international geopolitics. Thirsty for oil, China is expanding its energy-supply sources all over the world, from Russia and the Middle East to Africa, and Chinese natural gas extraction in the South China Sea is still carried out despite Japan’s objection. A 2006 conference held in Beijing for African development exhibited China’s determination

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to gain access to natural resources.1 In contrast to China, Japan, Korea, and Taiwan have been eclipsed in the international diplomatic theater. This political marginalization of the U.S. client states in East Asia marks a strong contrast with U.S. client states in Europe, such as Germany. Germany is one of the leading states in the European Union, and its economy is the largest in the union. Together with Italy, Germany in the post-WWII period established an amicable relationship with its former enemies, including France and the United Kingdom. Whereas European countries have managed to create political and economic unity, East Asian countries have so far failed to overcome ideological differences. Despite deepening economic relationships between China and its democratic or capitalist neighbors, the region is far from forming a union similar to Europe, and with China as a rising star in international politics, Japan, Korea, and Taiwan appear to be resettling in their historical place in the region, the periphery of a Sinocentric regional order. Why have the trajectories between Germany on the one hand and Japan, Korea, and Taiwan on the other hand diverged despite their common existence as U.S. client states during the Cold War? This chapter examines the economic stagnation and political marginalization of Japan, Korea, and Taiwan in the post–Cold War period and asks how we can interpret this development. As the key analytical framework, the chapter uses the World-System perspective. In this view, the phenomenon of economic stagnation and political marginalization of the three countries is considered not as a collection of the individual trajectories of the three countries, but as part of the larger politicoeconomic system of which the three countries are a part. In particular, the successful economic development of the three countries under the Cold War will be analyzed by identifying the features that were common to these countries, especially the U.S. policy in East Asia. The demise of these economies in the 1990s will also be analyzed by placing them in a larger context, and the concept of the structure of accumulation will be employed to show how advantages these economies enjoyed under the Cold War World-System were turned to their disadvantage. The methodology used in this analysis is historical sociology following the tradition of Karl Polanyi (1957) and Terrence K. Hopkins (1979, 1982) as applied and expanded extensively by World-System researchers such as Immanuel Wallerstein (1979, 1984). In order to analyze long-term and large-scale social transformations, this method guides our attention to concordant and contradictory historical processes as well as the actions 1  Beijing Summit and Third Ministerial Conference of Forum on China-Africa Cooperation, 5 November 2006. China offered development assistance and support for export promotion from the countries of Africa to China.

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of historical agencies and institutions and their intended and unintended consequences. The objective of the study is to provide a new interpretation of historical processes such as the transformative historical process (including cycles and long-term trends) and the reproductive historical process (that continuously promotes structurelike relations among historical agencies). In addition to the World-Systemic processes that were produced as intended and unintended consequences of U.S. policies and counteraction by other countries in the post-WWII period, historical processes in the East Asian region that predate the modern period will be invoked as part of the narrative account of the trajectories of that region. In the following, economic trajectories are examined to show how Japan, Korea, and Taiwan performed from the 1950s to 2005. After summarizing their economic performance, this chapter will discuss systemic features of the East Asian “miracle” involving these three countries. The rise of East Asia, however, became one of the processes that eroded U.S. domination, and U.S. counteraction to restore U.S. advantage altered the rules of the global accumulation game. This chapter will compare the key features of the old and new structures of accumulation and the impact of the new structure, which is commonly referred to as “neoliberal globalization,” on East Asian countries. The divergent trajectories of the U.S. client states under the Cold War will be examined to offer an explanation based on the intended and unintended consequences of U.S. policies toward U.S. client states. From “Miracle” to “Debacle” The East Asian economic miracle and debacle were complex processes involving technological, institutional, educational, and political developments. The result of economic development is often measured by using macro indicators such as Gross Domestic Product (GDP) or per capita Gross National Income (GNI). Figure 1 shows the GDP trends of the United States, Japan, Germany, and China. U.S. GDP grew steadily with a minor setback every ten years, whereas the GDP of Japan and Germany grew until 1989 in their respective national currencies (except for the middle of the 1970s). When converted into U.S. dollars, GDP for Japan and Germany fluctuated due mainly to the changes in exchange rates. Rapid appreciation of the Japanese yen and the German mark between 1985 and 1995 pushed up GDP figures for these countries, but they have since stagnated. Meanwhile, Chinese GDP stagnated in the 1980s but increased steadily in the 1990s and 2000s. In 2005, the real U.S. GDP was 11

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Satoshi Ikeda Figure 1. GDP at 2000 Price (Billion USD)

12000

USA

10000

Japan Germany China

8000

6000

4000

2000

0

1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Sources: International Monetary Fund, International Financial Statistics; available at http://www.imfstatistics.org/imf/ (accessed July 2007). See also Republic of China (Taiwan), National Statistics; available at http://eng.stat.gov.tw/ (2007). Note: GDP figures in currencies other than the U.S. dollar were converted into U.S. dollar figures using the market exchange rate. The GDPs in the U.S. dollar, then, were converted into constant figures using the U.S. GDP deflator.

trillion dollars (at the 2000 price) while it was 4 trillion for Japan, slightly over 2 trillion for Germany, and 2 trillion for China.2 The GDP figures for Korea and Taiwan during the same time period also show steady expansion in the 1970s followed by stagnation in the first half of the 1980s (fig. 2). These economies grew steadily in the second half of the 1980s and in the 1990s until the East Asian financial crises. The use of market exchange rates for the conversion of national currency figures to the U.S. dollar allows us to compare how large the economy is in the international markets, provided that the market exchange rate reflects the strength of national currency without government intervention. When the exchange rate is fixed by the monetary authority, as in the case of China, it fails to reflect the strength of a national currency. According to the World Bank’s World Development Indicators, the purchasing power parity of the Chinese RMB is significantly stronger than the government-set exchange rate. The size of the Chinese economy as measured by GDP and converted by purchasing power parity exchange rate would make the size of the Chinese economy twice larger than that of Germany and about the same as that of Japan. 2 

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Figure 2. GDP at 2000 Price (Billion USD) 800 700 600

Korea Taiwan

500 400 300 200 100 0

1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Sources: International Monetary Fund, International Financial Statistics; available at http://www.imfstatistics.org/imf/ (accessed 21 April 2007); Republic of China (Taiwan), National Statistics; available at http://eng.stat.gov.tw/ (accessed 21 April 2007). Note: Annual GDP at the national currency was converted to the US dollar using the annual average market exchange rate.

The Korean economy, from its peak of $594 billion (in 2000 USD) in 1996, experienced a sharp decline in 1997 and 1998. Since then, Korean GDP had recovered and surpassed its 1996 level in 2004. In contrast, Taiwan’s economy has stagnated since 1997, around the level of $300 billion (at the 2000 price). Figure 3 shows the real per capita GNI figures for the East Asian countries, United States, and Germany.3 Real U.S. per capita GNI increased stepwise every ten years or so with stagnation between 1972 and 1982, 1988 and 1992, and 1999 and 2005. Japanese and German figures rose until the late 1970s, followed by stagnation until they jumped between 1985 and 1995. Again, this jump is a result of the appreciation of the Japanese yen and the German mark, but their per capita GNI in their national 3  GNI is derived by subtracting or adding international income transfers from or to the GDP, and it is an indicator of the income level of an economy. By dividing GNI by population, per capita GNI is derived.

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Satoshi Ikeda Figure 3. GNI Per Capita at 2000 Price (USD)

50000 45000 USA

Japan

Korea

China

Taiwan

Germany

40000 35000 30000 25000 20000 15000 10000 5000 0

1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Sources: International Monetary Fund, International Financial Statistics; available at http://www.imfstatistics.org/imf/ (accessed 21 April 2007); Republic of China (Taiwan), National Statistics; available at http://eng.stat.gov.tw/ (accessed 21 April 2007). Note: Annual GNI at the national currency was converted to the U.S. dollar using the annual average market exchange rate. The U.S. consumer price index was used to convert current figures into real figures.

currencies also increased until 1989/1990. Since 1995, real per capita GNI declined for Japan and Germany and remained stagnant in the 2000s. Taiwan and Korea’s real per capita GNI increased until the 1970s, stagnated in the first half of the 1980s, then increased from 1985 to 1996/1997. Since then, Taiwan’s figure has continued to decline while Korea has recovered. Chinese per capita GNI has lagged far behind, and, even in 2005, Chinese per capita GNI was one-eighth that of Taiwan, one-tenth that of Korea, and one-twentieth that of Japan. Taken together, the GDP and per capita GNI figures suggest that Japan, Korea, Taiwan, and Germany experienced remarkable growth from the 1950s to the 1970s, and then between 1985 and the middle of the 1990s. But, such “miraculous” growth was replaced by the “debacles” in the 1990s for Japan and Germany and in the second half of the 1990s for Korea and Taiwan.

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These economic trajectories from “miracle” to “debacle” were accompanied by divergent political trajectories for Japan, Korea, and Taiwan on the one hand and for Germany on the other. During the Cold War, these countries were treated by the United States as strategic allies for the containment of communism. Germany was integrated into NATO and served as the U.S. military base at the front. In East Asia, the Cold War became “hot” in the form of the Korean and Vietnam Wars. Japan provided the service base for the U.S. military in both wars, and Korea sent troops during the Vietnam War. These East Asian countries were “protected” by the United States through bilateral security treaties, but they in turn accepted a subordinate position to the United States. The post–Cold War period, however, saw divergent trajectories in East Asia and Europe. In the process of integrating former socialist states into Europe, Germany emerged as the leader of European continental integration while Japan, Korea, and Taiwan became marginalized in East Asia due to the rise of China as the regional powerhouse in both economic and political terms. In terms of security, these countries remain subordinated to the United States. Moreover, Japan’s failed attempt to become a permanent member of the United Nations Security Council gives an impression that it is falling further into global insignificance, on top of its slipping status as an economic powerhouse. How can we understand the historical transformation of Japan, Korea, Taiwan, and Germany from “miracle” under the Cold War to “debacle” after the Cold War, with a divergent political trajectory between Germany and the East Asian countries? Explanations for the “Miracle” of East Asia The topic of East Asian “miracle” development has dominated academic and popular attention. After the recession and stagflation in the 1970s, American attention focused on how Japan managed to catch up and even take over some U.S. manufacturing industries. In the 1980s, an increasing number of Third World countries became “structurally adjusted” (some repeatedly) by the World Bank and the IMF. In stark contrast, the East Asian tiger and mini-tiger economies have enjoyed steady growth, especially since 1985. Popular and academic attention toward the East Asian “miracle” culminated in the World Bank report titled The East Asian Miracle (1993) that reluctantly accepted the role of government intervention in the successful economic development and growth of East Asian countries. Various studies were offered for the analysis of the “miracle” phenomenon. The majority of the analyses sought after unique features of these countries that allowed successful economic development. However,

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these studies took the country (or nation-state) as the unit of analysis and pursued the “key factors” that enabled the country to succeed. The single country–based analysis focused on various aspects of the society, economy, and politics of East Asian “miracle” economies. They included the existence of a developmentalist state that guided resource allocation under distorted market conditions (Deyo 1987; Johnson 1982; Koo 1984; Lim 1983), business systems and practices that reduced transaction costs through informal communication (Abegglen and Stalk 1985; Dore 1989; Fields 1995), hard-working but docile workers trained by a competitive and high-quality education system (Eccleston 1989; Galenson 1992; Thomas 1993), corporate employment practices that lowered longterm costs and raised productivity (Kwon 2001), and such cultural factors as Confucian traditions that promoted the “spirit of capitalism” (Dore 1987; Tu 1996). Ironically, these same factors were used to explain why the “miracle” economies faced economic crises in the late 1990s and subsequent stagnation. Neoliberal ideologues, spearheaded by neoclassical economists at the World Bank and IMF, blamed East Asian countries for excessive government intervention including foreign exchange and internal financial mismanagement, nontransparent and unaccountable business and employment practices that distorted market mechanisms, and cronyism of developmentalist state leaders with the culture that promoted or allowed these practices to continue.4 The main limitation of these explanations is their orientation toward ahistorical, universal theory, a key feature shared by positivist social science (including neoclassical economics) and Marxist developmentalist discourse. What, then, might be an alternative explanation of the East Asian miracle? Arrighi, Ikeda, and Irwan (1993) insist that the East Asian miracle is a single phenomenon and not a collection of “miracles” of East Asian countries. Among the common features that promoted the miracle is the fact that the countries were client states of the United States under the Cold War setting and exhibited postcolonial dependency on the U.S. security network. The U.S. policy toward Taiwan and Korea was to allow these economies to pursue industrialization programs with government support of finance and technology promotion with the open U.S. market under the preferential tariff arrangements that favored the East Asian countries. The United States tolerated developmentalist intervention in Japan, Korea, and Taiwan that promoted domestic enterprises with limited involvement of U.S. firms (the markets of these economies were too small and insignificant for U.S. multinationals until the 1980s). 4 

See Furman and Stiglitz (1998) for the economists’ review of the crises.

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In addition, the U.S. policy to contain communism in the region triggered two hot wars that stimulated economic development there (Cumings 1973; Stubbs 2005). The Korean War gave Japan a big push for economic development, and the Vietnam War brought U.S. procurement demand to the region. Another feature common to the region was the transborder expansion of Japanese subcontracting networks. As wages rose the Japanese firms in labor-intensive manufacturing shifted plants to neighboring countries where wages were lower. This practice later expanded into capital- and technology-intensive sectors as production costs continued to change and the local market expanded and matured. Later, Korea and Taiwan joined Japan and used foreign direct investment to access low-wage workers in other East Asian countries. Production-process innovation and product development had spread from Japan to Korea and Taiwan in the 1960s and 1970s, and to Thailand, Malaysia, and Indonesia in the 1980s, thus upgrading the industrial structure in the East Asian region (Arrighi 1996). These features of the East Asian miracle supplement our understanding of the phenomenon together with the historical and institutional transformation within each respective country. For example, Korea and Taiwan needed to industrialize and strengthen their economies under enormous pressure from their communist counterparts North Korea and mainland China. For Japan and Germany, industrial promotion and national economic development became the instrument to suppress internal communist revolutionary movements. Another important aspect of understanding the East Asian miracle is that the success of East Asian countries foreclosed possibility for other countries to achieve similar industrial and development success. Also, although lacking significant natural resources, East Asian countries possessed abundant supplies of high-quality labor. The international division of labor forced those with high natural resource endowment to specialize in the production and export of natural resources while those without natural resources found comparative advantage in other activities, including manufacturing. The United States provided East Asian miracle countries free access to natural resources of formerly colonized resource-rich countries and also prepared a liberal trade environment in the form of GATT (General Agreement on Tariff and Trade). This environment was further complemented by activities by the World Bank that issued infrastructure loans and by the IMF that supplied loans to ease short-term balance-of-payment difficulties. With liberal international arrangements pushed by the United States, and favorable U.S. treatment based on geopolitical conditions under the Cold War, the East Asian miracle economies achieved economic

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development and growth by employing industrialization strategies that concentrated investment funds on select industries and firms without causing uncontrollable inflation or economy-crippling embezzlement. Background of U.S. Policy Change in the 1970s and 1980s Successful economic recovery and growth by Japan and Germany in the 1960s became one of the developments that pushed the United States to alter its policy from the 1970s so as to restore its economic advantage. Numerous other processes formed the background of U.S. policy change. First, the U.S. policy to contain communism under the Cold War promoted European recovery from the devastation of the Second World War. The U.S. tolerated the formation of the European Economic Community (EEC), which served as the regional tariff union, in the exchange of free direct investment to European markets by U.S. firms even though the EEC contradicted the nondiscriminatory idea of GATT. With Marshall Plan aid, U.S. direct investment, and access to latest technologies from the United States, the Western European countries mobilized their resources toward economic reconstruction and development. By the late 1960s to early 1970s, French, German, and Japanese economies caught up with the United States in some industrial areas and emerged as the major competitor to the United States.5 American engagement in hot wars in Asia, in particular the Vietnam War, eroded U.S. advantage in the global economy. During the second half of the 1960s, when U.S. involvement in Indochina deepened, it started suffering from twin deficits, a balance-of-payments deficit and a government budget deficit. Spending in East Asia to support the U.S. war effort was the direct cause of the balance-of-payment deficit, but the mounting U.S. dollar held by foreign governments under the fixed-exchange-rate system eroded confidence in the U.S. commitment to dollar-gold convertibility, one of the major pillars of the Bretton Woods arrangement. In response to mounting demand for dollar-gold exchange, particularly by France, the U.S. government unilaterally nullified its commitment to dollar-gold convertibility in 1971, which was followed by a substantial devaluation of the dollar against major currencies. In 1973, the fixedexchange-rate system was also abandoned. The dollar depreciation indicated the erosion of the dominant position of the U.S. dollar based on the U.S. capacity to generate trade surplus in the 1950s. During the 1970s, the U.S. trade deficit increased since U.S. advantages in industrial sectors had eroded vis-à-vis the European and Japanese, and natural resource costs increased after the OPEC oil embargo in 1973. The success of the For the relative decline of the U.S. automobile industry, see Fieleke (1982) and Jeffreys (1983). 5  

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oil embargo stimulated Third World resource nationalism (a movement demanding an improvement in the return on resource export), and it looked as though competition to the United States came from both rival core countries and peripheral countries. In addition to the rising competition from the First World and the Third World, the United States faced the challenge of the Second World, that is, socialist countries. The U.S. defeat in the Vietnam War was followed by expanded activities of the Soviet Union and its allies in the Third World. The revolutionary movement stimulated both by anticolonialist and fundamental religious ideologies spread in Africa and the Middle East, thus threatening U.S. interests in these regions.6 Consequently, the U.S. economic advantage started eroding in the second half of the 1960s, and politico-military domination was challenged particularly in the 1970s. Given this background, U.S. policy was adjusted so as to restore U.S. domination both in the economy and the military. The policy change that is recognized as key to ending the Cold War is President Reagan’s “strong U.S.” policy in the 1980s involving massive military buildup that the Soviet Union could not match. However, the U.S. economic policy change started in the 1970s and eventually led to the restoration of U.S. domination in the form of the debacle of its rival economies in the 1990s. U.S. Policies that Led to Neoliberal Globalization Richard Nixon’s decision to stop gold-dollar convertibility along with the failure to maintain the fixed-exchange-rate system from 1973 suggest U.S. acceptance of the eroded position of the U.S. dollar. However, it is important to situate this in a long-term perspective of U.S. financial domination throughout the post-WWII period. Given U.S. financial domination, especially during the 1990s, it is possible to interpret U.S. financial policy in the 1970s as actually having laid the foundation for neoliberal policies fully deployed in the 1980s and 1990s. How can we characterize the U.S. policy regarding finance in the 1970s? In a nutshell, the U.S. financial policy was to deregulate and liberalize the financial sector. The measures used in this process included reduced intervention in the foreign exchange market, elimination of the import-export requirement in foreign exchange transactions to open the market to speculators, and the gradual elimination of regulations to separate banking, insurance, and security brokerage.7 One of the reasons for the U.S. balance-of-payment difficulties in the 1970s was a significant expansion of the euro-dollar market. This market 6  7 

Arrighi (1994, 300–324) describes the process where U.S. hegemony was challenged. See Swann (1988) for the process of deregulation.

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was composed of the U.S. dollar deposit in European banks or U.S.bank branches in Europe that were outside of the regulatory framework of any government. This market expanded, especially after the 1973 oil price increase gave petroleum exporting countries windfall income. The petrodollar (income from the export of oil) was deposited in the eurodollar market to avoid U.S. government intervention. The U.S. government’s main motivation in deregulating the financial sector was to bring the euro-dollar back to the United States to ease its balance-of-payments deficit. However, another important consequence of financial deregulation was the reformulation of the U.S. economy where finance took the leading position vis-à-vis production—a process that progressed in the 1980s, expanded in the 1990s, matured in the 2000s, and collapsed in 2008. Krippner (2005) reports that the share of the finance, insurance, and real estate sectors in U.S. corporate profits rose from 20 percent until the middle of the 1980s to above 30 percent in the 1990s and to 45 percent in 2000 (Krippner 2005, 179, fig. 3). The victory of finance over production and service industries was not only a U.S. domestic phenomenon but also a process where the United States reestablished its economic domination over the rest of the world in the 1990s. This was a process in which neoliberal globalization was imposed by the United States on Third World countries, rival core countries such as Japan and Germany, and semiperipheral countries such as Korea and Taiwan. Let us examine this process. Petrodollars played an important role in imposing neoliberal globalization on Third World countries.8 The major global banks that accepted petrodollar deposits had loaned the money to Third World governments through a revolving arrangement in which one-year loans would be renewed as long as the interest was paid. Interest rates were set by the short-term interest rate prevailing in the U.S. financial market. Inspired by the success of the OPEC countries, many Third World countries such as Mexico and Brazil borrowed petrodollars to finance industrialization projects based on the expectation to repay the loan with earnings from exports upon completion of the projects. Their plan did not go as expected, due to the Iranian Revolution and the subsequent second oil price increase in 1979. The world economy entered a severe recession, eliminating the possibility for Third World countries to earn income to pay interest on their loans. On top of this, the U.S. government raised shortterm interest rates to combat inflation, and Third World debt therefore mushroomed at an alarming rate until Mexico declared the possibility of default in 1982. This development led to an imposition of neoliberal policies on Third World countries through the Structural Adjustment Wood (1986) argues that the petrodollar changed the structure of Third World borrowing patterns that later led to accumulated debt crisis. 8 

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Programs (SAPs) administered by the World Bank and the IMF. The objective of the structural adjustment loans was to “rescue” private lenders (in particular, U.S. banks) that loaned petrodollars. In exchange for a structural adjustment loan to postpone a payment obligation, the borrowing country had to implement neoliberal policies such as deregulation, liberalization, and government spending cuts. The SAPs were launched from 1982 throughout the world and were repeatedly applied in many countries. The dream of national economic development was dashed under neoliberal globalization, and the bourgeoisie in the peripheral countries were “emancipated” to participate in global financial speculation and investment. Consequently, states were crippled by an inability to implement any policy, in particular social programs, and lost legitimacy among their citizens. This allowed the rise of competing claims on sovereignty (often leading to fundamentalist challenges and fragmentation). The major policy change the United States took toward the rival core countries involved industrial protectionism, exchange rate manipulation, and trade and financial liberalization. In order to protect U.S. industrial firms, the U.S. government imposed local content requirements as well as tariffs on imports. U.S. market closure scared Canadian businesses, and Canadian corporate interest groups pushed the Canadian government to negotiate a free trade agreement with the United States. Even though this agreement was not a keen policy issue for the United States, it gave the U.S. government an opportunity to integrate the Mexican economy into the U.S. economy. The continental free trade zones established by NAFTA allowed U.S. industrial and agricultural firms to directly incorporate low-wage Mexican workers and peasants into their accumulation processes. Trade liberalization and financial deregulation allowing U.S. firms easier access to the markets of rival core countries proceeded in the form of multilateral negotiations at the WTO. U.S. protection measures such as high tariffs on imports from Japan or substantial U.S. dollar devaluation did not bring the result anticipated by policy makers. For example, the Plaza Accord in 1985 pushed the dollar value down significantly vis-à-vis the Japanese yen and German mark. According to the neoclassical economists, currency devaluation is supposed to improve a country’s balance of trade since the price of imports becomes higher and the exports cheaper. But initially, the balance of trade may deteriorate because the cheaper currency will inflate the payment needed to settle outstanding import orders, and the earnings from exports will shrink for the outstanding export contracts. The eventual improvement in the balance of trade was theorized as the J-curve effect, but the curve did not bend after dollar devaluation following the

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Plaza Accord. This was due to the fact that price elasticity of the demand for foreign imports was low (even though the price was higher, Americans kept buying foreign imports of high quality and better design) and because the exporters (particularly the Japanese) absorbed the impact of dollar devaluation through cost cutting to keep the sales price in the United States from rising. Dollar devaluation policy, despite the failure to achieve its objective, brought an unexpected consequence of the Japanese “debacle.” When the Japanese yen appreciated starting in 1985, the Japanese government expanded its money supply to compensate for the negative impact of an anticipated recession due to the strong yen. This in fact proved unnecessary, since Japanese exports kept growing. Redundant government money supplies in Japanese banking institutions were invested in assets such as real estate and corporate stocks, causing asset inflation. By mistaking asset inflation as harmful commodity-price increase, the Japanese government (as advised by Minister of Finance Kiichi Miyazawa and the head of the Bank of Japan Satoshi Sumita) decided suddenly to tighten the money supply in 1989. This decision was based on misinterpretation of economic theories. First, Milton Freedman’s monetary theory targeted inflation as enemy number one and advocated controlling money supply (via interest rate adjustment) so as to control wholesale and consumer prices. The Japanese government’s decision to adjust the money supply did not follow this guideline. It simply mistook asset inflation as one of the regular inflations involving price increase in goods and service. Furthermore, the rational expectations theory, which became quite popular in the 1980s, advocated that policy measures would be effective only when the market does not know them beforehand. Later, in the 1990s, it was proven that this claim was based on a particular assumption made in the model and was not applicable in most cases. Thus, a surprise hike in interest rates to tighten money supplies to combat asset inflation was an unwise policy measure that led the Japanese economy to the Heisei Recession, which continues despite the government’s claim that Japan is on the longest expansion spree in postwar history. During the Heisei Recession, the Japanese government committed further policy mistakes based on economic models that were inapplicable to Japan’s current situation. One example of such policies was massive government expenditure on public works and wasteful investments through the “third sector” (a quasi-government entity that took charge of projects with taxpayers’ money) to allegedly counteract the Heisei Recession. While failing to aid the economy, government spending created the largest government debt in Japanese history and produced numerous useless monuments and facilities that later burdened municipal governments.

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Another policy that failed to deliver expected results was the zerointerest-rate policy. This policy did not stimulate investment or housing construction, since the fundamental problem was the erosion of investor confidence due to the debt that mushroomed after the bubble burst. Price adjustment does not give incentive in the absence of income. The outcome of the zero-interest policy was a lump-sum transfer of income from the general public (who had no choice but to deposit their money in banks since the option of buying stocks was removed under severe recession) to the private banks, where retired bureaucrats descend from the Ministry of Finance and the Bank of Japan. In short, the Plaza Accord imposed upon Japan by the United States did not bring the expected result of reduced Japanese exports. It produced instead an unexpected consequence: the debacle of the Japanese economy and Japanese subordination to U.S. financial power. Insolvent loans accumulated during the Heisei Recession were bought by American investors at bargain prices, and U.S. insurance companies gained significant shares in the Japanese market. Another example of how unintended consequences worked in favor of the United States is the interest rate policy taken by the U.S. government. Alan Greenspan was heralded as the “maestro” of Wall Street and the U.S. economy while he chaired the Federal Reserve Board. The main objective of his interest rate policy was to control inflation, and he adjusted interest rates by carefully looking at inflationary possibility. The basis of this policy was Freedman’s monetary theory, but the origin of this policy was the stagflation in the 1970s. After the oil price increase in 1973, the U.S. economy entered into recession while the price level kept going up due to higher oil prices. This situation, in which economic stagnation was accompanied by inflation, was out of the framework of existing macroeconomics. Without carefully incorporating the actual situation into the economic model, macroeconomists in the United States abandoned the Keynesian model and adopted Freedman’s theory, which simply reduced inflation to excessive money supply. The cause of inflation in the 1970s was the oil price increase after the OPEC oil embargo, and the proper policy to counteract this inflation was to reduce oil consumption. But, by the time of the second oil price increase in 1979, the U.S. government simply adopted high interest rates. This policy unexpectedly produced the Third World debt crises, since the interest on petrodollar loans was determined by the short-term interest rate. Since the debt crises allowed the U.S. government to reformulate the role of the World Bank and IMF to open Third World countries’ markets to multinational corporations, we could say that the mistaken policy to counter inflation allowed the U.S. government to achieve neoliberal globalization vis-à-vis the Third World countries.

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Since the late 1970s, U.S. interest rate policy has been dictated by inflation or inflationary threat, or the “ghost” of inflation. In the 1980s, the price of petroleum continued to fall as global oil exploration generated new wells in various parts of the world. Thus, the key factor that caused inflation in the 1970s was eliminated. There existed mild inflation as the Reagan administration increased military spending while providing tax cuts for the rich, thus expanding the government budget deficit and accumulated government debt. However, no external “shock” emerged to throw the U.S. economy into a whirlwind of inflation. In the 1990s, the Clinton administration reduced the government deficit, and it looked as though the U.S. economy was free from the worries of inflation. Was this reflected in the U.S. interest rate policy? Not at all. Greenspan kept invoking the “ghost” of inflation to keep the U.S. interest rate higher than those of rival core countries. In the 1990s, European core countries were suffering from stagnation due to (1) the incorporation of the East European economies following the end of the Cold War; (2) the speculative bubble and bubble burst caused by hedge funds; and (3) the self-imposed balanced government budgets and balanced trade in preparation for joining the European Union. The interest rate was low, reflecting the stagnant economies under these conditions. Japan’s interest rate was likewise low because of its zero-interest-rate policy. The interest gap between the United States and its rival core countries, together with the stagnation in these economies, gave an incentive for investors to move their money to the United States in the liberalized global financial markets. This movement accelerated, especially after 1995, when the dollar began to appreciate against key currencies. In the 1990s, the inflow of capital into the United States from the rest of the world kept rising until the stock of U.S. external liabilities surpassed the size of the U.S. GDP. Also, U.S. external assets kept increasing (but not as much as external liabilities), suggesting that the United States become the hub of global financial flow (fig. 4). NonU.S. investors preferred to invest in the United States or through U.S. financial institutions, again indicating the emergence of the United States as the hub of global investment. The policy that brought an end to the “miracle” of Korea and Taiwan, as well as other East Asian tiger and mini-tiger economies, was financial liberalization after the fall of communism. Based on Wall Street’s advice, the Clinton administration demanded financial liberalization of the East Asian countries. Since the Soviet Union was no longer a threat and China had become a favored U.S. trading partner, the U.S. government lost its shyness about demanding freedom for U.S. financial interest. The Department of Commerce replaced the Department of Defense as policy setter. The tiger and mini-tiger economies also welcomed financial

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Figure 4. U.S. GDP, GNI, External Investment Position (Billion USD) 16000 14000 12000

Assets

Liabilities

GDP

GNI

10000 8000 6000 4000 2000 0

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Source: International Monetary Fund, International Financial Statistics; available at http://www.imfstatistics.org/imf/ (accessed July 2007).

liberalization. These countries, especially Korea, took Japan’s stagnation as a chance to upgrade their industries. However, massive capital inflow under the fixed-exchange-rate arrangement invited speculative attacks on their currency when the trajectory of payment obligation surpassed the government’s foreign currency reserve. The result was the East Asian financial crisis that struck most of the East Asian countries (except China). Although the immediate losers of the Cold War were the former socialist states, the medium-run losers were the semiperipheral countries that had achieved upward mobility during the Cold War thanks to preferential U.S. treatment. This outcome was also an unintended consequence of the Reagan administration’s effort to regain military advantage against the socialist states. New Structure of Global Accumulation In the 1990s, intended and unintended consequences of U.S. policies returned the United States to its role as the World-System’s leading economy, and the World-System appeared to have entered a distinctive stage. The outcome of these policies is called neoliberal globalization (Cohen and Clarkson 2004). In order to highlight the features of neoliberal globalization, this section uses the concept of the structure of accumulation

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(Arrighi 1994; Arrighi and Silver 1998). My argument here is that we can distinguish between the types and features of how accumulation activities were conducted as a cyclical feature of the World-System. To understand the transformation of the structure of accumulation from the 1980s, I will identify three structures, namely, imperialism/colonialism, Fordism, and neoliberal globalism. The term “Fordism” was used by French regulationists to identify characteristics of post-WWII regimes that focused on national regulation. I extend their argument to include post-WWII developmentalist states, as they were also motivated to emulate development following national state leadership in industrialization. To achieve the goal of economic development (or accumulation), the modernization of industry, of the political system, and of cultural norms was pursued primarily through state-led education and acculturation of the working masses to the norms of bourgeois domination. Repression against worker-led movements, be they union or socialist movements, was often justified in the name of nationalism. Fordism is named after Henry Ford, who raised wages so that workers could purchase the automobiles they were producing. Therefore, the main feature of the Fordist structure of accumulation was rising wages that allowed workers to become consumers of their own products, and this led to the formation of a national market. Another feature of the Fordist structure of accumulation was that the key node of accumulation was production and the production process, and product innovation became the focus of international competition. Also, the government took the role of a macroeconomic manager through fiscal and monetary policies to regulate the level of economic activities. In contrast, the pre-Fordist structure of accumulation (referred to as “imperialism/colonialism” here) was characterized by low wages and harsh working conditions, which in turn narrowed the domestic market. A typical example of the pre-Fordist structure can be seen in the United Kingdom of the nineteenth century. Raw cotton produced in the American South was imported to manufacture cotton threads and textiles by lowpaid women and children while men worked in mines and steel mills. Due to low wages the domestic market was narrow, and this drove the British Empire to expand overseas markets, especially the Asian markets. Therefore, the pre-Fordist structure of accumulation was the imperialist/ colonialist structure of accumulation involving imperial formation by the core states and colonial subordination of the periphery. The term “post-Fordism” was used to express a shift from mass production and mass consumption to the production of specialty products for small-quantity consumption. However, what appeared under neoliberal globalization was much more than a shift in product types. The

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major characteristic of the neoliberal globalist structure of accumulation is that the key node of accumulation is finance, distribution, and culture (such as value creation through branding), rather than production. Theorists such as Krippner (2005, 199) argue that “accumulation is now occurring increasingly through financial channels.” In contrast to Fordist income distribution, neoliberal globalism has polarized income and asset distribution. Also, trade liberalization and government deregulation opened the hereto “closed” national markets to transnational corporations (TNCs). The government’s role in economic management was substantially reduced through deregulation and government spending cuts (in order to cut taxes for the rich). Table 1 summarizes the characteristics of the three structures of accumulation. Table 1. The Three Structures of Accumulation Imperialism/ Colonialism

Fordism

Neoliberal Globalism

Rough Periodization

Nineteenth century

1910s–1970s (U.S.) 1950s–1970s (non-U.S.)

1980s to present

Market

Abroad (Asian markets)

National

Global

Wage and Working Condition

Low wage and harsh working condition

Rising wages in the core, low wages in the periphery

Polarizing both within the zones and across zones

Key Nodes of Accumulation

Control of labor and market

Production

Finance, distribution, culture

Role of the Government

Empire

Keynesian intervention

Recede behind market

Outcome of Neoliberal Globalization As a result of neoliberal globalization, the United States regained economic domination in the world economy, albeit relative to the past and to its core rivals. In the 1990s, the United States became the hub of global investment flow partly because of its singular superpower status after the fall of communism and the “successful” military emancipation of Kuwait from Iraq in 1991. The U.S. dollar became the secure container of investor value. Also, investment through U.S. financial institutions was considered safe even when the borrower defaulted, as in the case of the Third World debt crisis. The United States had the capacity to cause the

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World Bank and IMF to “rescue” American investors. A good example of this capability occurred when Argentina defaulted in the early 2000s. The samurai bonds, or yen-denominated bonds issued by the Argentine government and sold to the Japanese, became worthless since the World Bank and IMF did not cover them as part of the rescue package, whereas the U.S. dollar–denominated loans were in fact rescued. Clearly, the Japanese government lacked the capacity to mobilize the World Bank and IMF to protect its citizens’ international investments. Also, the United States enjoyed sustained growth in the 1990s based on its strong performance in finance, marketing, distribution, and housing construction, in stark contrast to Europe and Japan. How can we summarize the impact of neoliberal globalization on the periphery? Under the neoliberal globalist structure of accumulation, peripheral aspiration for national economic development was replaced by pre-Fordist, imperialist-, and colonialist-style exploitation of workers, environment, and resources. Despite post-WWII independence and two to three decades of developmentalist experiment, most peripheral countries were subordinated to the global structure of governance and accumulation dominated by the core states. The new (or renewed) forms of subordination included politico-military subordination (with or without force), debt bondage through structural adjustment loans, and economic subjugation to powerful TNCs, which pillaged workers, the environment, and natural resources alike. Also, peripheral countries experienced income-class polarization, where the new middle class was emancipated from the national development framework and connected to the global market through investing and consumption. The impact of neoliberal globalism on East Asian countries was also disturbing. China became the “factory of the world,” the major exporter of low-cost products worldwide. China achieved this by exploiting its workers and environment in a way similar to that of the United Kingdom in the nineteenth century. China’s overheating economy demands energy and other natural resources at an increasing rate, thus driving the Chinese to pursue resources in Third World countries. In contrast, the Japanese economy continues to stagnate, and other “miracle” economies in the region are either bust or stagnant. Ten years after the East Asian financial crises, only Korea among the East Asian tiger and mini-tiger economies has recovered per capita GNI to the level prior to the crises. Since the financial crisis, Korea has repaid its IMF loans, and with deeper integration with China, the Korean economy has managed to get back on the growth track. In terms of politics, Japan, Korea, and Taiwan have been marginalized in the regional politics that is now dominated by a U.S.-China rivalry. Japan’s aspiration to become a permanent member of

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the United Nations Security Council was defeated by China. Korea continues to depend on the United States for security, especially against the rogue state of North Korea, and Taiwan is further marginalized as China increases its political influence across Pacific countries through the expanded ODA. Given this situation, how can Japan, Korea, and Taiwan escape from economic “debacle” and political marginalization? Before examining this question, we need to evaluate the current situation and future possibilities. The End of U.S. Hegemony and the Current Conjuncture Arrighi and Silver (1998) argue that hegemony is defined by the rulesetting capacity. Consent in the Gramscian sense comes from the fact that the rule set by the hegemon is deemed acceptable by the ruled. What happened to the global rule-setting capacity in recent years? As discussed earlier, the United States continued to maintain its rule-setting capacity on global economic matters until the U.S.-originated financial crisis triggered a global economic recession in 2008. Neoliberal economic ideology lost its legitimacy, and the United States lost economic leadership. Also, in terms of politico-military matters, the United States has lost its hegemonic position since 2002, when it invaded Iraq. The U.S. government managed to obtain consent for this invasion from over fifty countries, but Canada, Germany, and France, which have been the major U.S. allies in the post-WWII era, did not participate. In matters regarding Iraq and increasingly Iran, Germany, France, and Russia continue to object to U.S. foreign policy. China also threatens the United States with its determination to gain access to resources in competition with the United States. Together, these developments suggest that the rule-setting capacity in world politics is now trifurcated into a U.S.-U.K. alliance, a continental European alliance (France, Germany, and possibly Russia), and China. One interesting development in global finance is the weakening of the U.S. dollar vis-à-vis the euro. The U.S. dollar lost value against the euro from 1.063 euro per dollar in 2002 to 0.68 euro per dollar in 2008.9 Euro appreciation, it appears, was accompanied by the rise of the European Union as the node of global finance. The European Union’s external assets (the amount of investments made by Europeans outside Europe) surpassed that of the United States in 2000, and the European Union’s external liability surpassed that of the United States in 2003 (International Monetary Fund 2007). In 2007, the European Union’s external assets 9  The euro lost value vis-à-vis the U.S. dollar between August and November of 2008. This is a result of a temporary increase in demand for U.S. treasury bills and U.S. government bonds that increased their appeal as a safe investment venue in turbulent times.

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were 20.8 trillion USD and external liabilities were 22.7 trillion USD while those of the United States were 17.6 trillion USD and 20 trillion USD, respectively. The other aspect of U.S. dollar domination is its position as the global currency for settlement. Currently, the U.S. dollar is held as the global currency by non-U.S. residents, including drug and illegal arms dealers, because the U.S. balance-of-payments deficit allows foreign residents to own U.S. dollar notes. This allows the United States to import goods and services from abroad without paying back to exporting countries. The U.S. trade deficit (or current account deficit that reached a historical high of $753 billion in 2006) is partly financed by U.S. dollar holdings of nonU.S. residents. This is possible because the U.S. dollar has an interesting and unique characteristic: it is the only currency whose credit worthiness does not deteriorate despite the U.S. trade deficit. For non-U.S. countries, a balance-of-trade deficit would exert downward pressure on its currency value, making others avoid holding the currency. Yet, the U.S. dollar maintains its value. This position of global currency is not yet threatened by the euro mainly because the European Union does not run a trade deficit. This self-imposed restraint is actually preventing the euro from taking over the position of the global currency for settlement from the U.S. dollar. Possible Future Directions for Japan, Korea, and Taiwan Given the previous observations, what are the possible future directions for Japan, Korea, and Taiwan? The current path is to follow the United States. But in reality, the three countries will be further marginalized between the United States and China due to China’s rise as the regional political, military, and economic powerhouse. Following China as it exists today would be disastrous, since China is emerging as the champion human- and worker-rights violator and exploiter of unsustainable resources and the environment. Japan, Korea, and Taiwan may benefit from trading with China, but such benefit will not last long due to its global, regional, and national resource exhaustion. The other possible path is to pursue post-U.S. hegemony, postcapitalist World-System, and antiregional hegemony by becoming the promoters of postsystemic social movements. All three countries experienced the negative aspects of a society driven by excessive greed and domination by a few. Instead of further pursuing capitalist accumulation, the three countries can become the promoters of a global alliance of peripheral and colonized states to achieve an end to monopoly (or oligopoly) of global rule-setting capacity.

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Contradictions of neoliberal globalization take the form of environmental degradation, social erosion, and resource exhaustion, and the rise of China will further aggravate these contradictions. There are emerging practices and imaginations for postsystemic movements at local, national, and international levels. A good example of how a country can overcome “peak oil,” an eventual decline in oil production, is Cuba in the 1990s. Under a tight energy situation, the Cubans transformed large-scale industrial production into small-scale production for local consumption. A lesson from this example is that resource sustainability goes along with localized small-scale production managed by local residents. Such alternatives to large-scale operation that is controlled by transnational corporations will allow Japan, Korea, and Taiwan to counter the economic, social, and resource problems they face after a decade (or decades) of prolonged recession. It is now time for Japan, Korea, and Taiwan to realize that they will be continuously subordinated to the United States and the U.S. dollar if they do not abandon the developmentalist goal of unlimited growth. Otherwise, they will be marginalized in a reconstituted Sinocentric East Asian regional order. It is time to renounce materialist greed and recreate a society in which the market (and its materialistically oriented culture) is subordinated to communal well-being without exploitation.

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References Abegglen, James, and George Stalk Jr. 1985. Kaisha: The Japanese Corporation. New York: Basic Books. Arrighi, Giovanni. 1994. The Long Twentieth Century. London and New York: Verso. ______. 1996. “The Rise of East Asia: World Systemic and Regional Aspects.” The International Journal of Sociology and Social Policy 16.7/8:6–44. ______, Satoshi Ikeda, and Alex Irwan. 1993. “The Rise of East Asia: One Miracle or Many?” In Pacific-Asia and the Future of the World-System, edited by Ravi Arvind Palat, 41–65. Westport, Conn.: Greenwood Press. ______, and Beverly Silver. 1998. Chaos and Governance. Minneapolis: University of Minnesota Press. Cohen, Marjorie Griffin, and Stephen Clarkson, eds. 2004. Governing under Stress: Middle Powers and the Challenge of Globalization. London and New York: Zed Books. Cumings, Bruce. 1973. “The Political Economy of the Pacific Rim.” In Pacific-Asia and the Future of the World-System, edited by Ravi Arvind Palat, 21–37. Westport, Conn.: Greenwood Press. Deyo, Frederic C. 1987. “Coalitions, Institutions, and Linkage Sequencing—Toward a Strategic Capacity Model of East Asian Development.” In The Political Economy of the New Asian Industrialism, edited by Frederic C. Deyo, 227–247. Ithaca, N.Y.: Cornell University Press. Dore, Ronald P. 1987. Taking Japan Seriously: A Confucian Perspective on Leading Economic Issues. Stanford, Calif.: Stanford University Press. ______. 1989. Japan at Work: Markets, Management, and Flexibility. Paris: OECD. Eccleston, Bernard. 1989. State and Society in Post-War Japan. Cambridge, Mass.: Polity Press. Fields, Karl J. 1995. Enterprise and the State in Korea and Taiwan. Ithaca, N.Y.: Cornell University Press. Fieleke, Norman S. 1982. “The Automobile Industry.” Annals of the American Academy of Political and Social Science 460:83–91. Furman, Jason, and Joseph E. Stiglitz. 1998. “Economic Crises: Evidence and Insights from East Asia.” Brookings Papers on Economic Activity 2:1–114. Hopkins, Terrence K. 1979. “The Study of the Capitalist World-Economy: Some Introductory Considerations.” In The World-System of Capitalism: Past and Present, vol. 2, edited by Walter Goldfrank, 21–52. Beverly Hills, Calif.: Sage Publications.

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______. 1982. “World-System Analysis: Methodological Issues.” In World-System Analysis: Theory and Methodology, by Terence K. Hopkins, Immanuel Wallerstein, et al., 145–158. Beverly Hills, Calif.: Sage Publications. Jeffreys, Steve. 1982. MTI and the Japanese Miracle: The Growth of Industrial Policy, 1925–1975. Stanford, Calif.: Stanford University Press. ______. 1983. “Car Town in Trouble.” New Society 63.1054:134–136. International Monetary Fund. 2007. International Financial Statistics. Available at http://www.imfstatistics.org/imf/. Koo, Hagen. 1984. “The Political Economy of Income Distribution in South Korea: The Impact of the State’s Industrial Policy.” World Development 12.10:1029–1037. Krippner, Greta R. 2005. “The Financialization of the American Economy.” Socio-Economic Review 3:173–208. Kwon, Seung-Ho. 2001. The Chaebol and Labour in Korea: The Development of Management Strategy in Hyundai. London and New York: Routledge. Lim, Linda Y. C. 1983. “Singapore’s Success: The Myth of the Free Market Economy.” Asian Survey 23.6:752–764. Polanyi, Karl. 1957. Reprint. The Great Transformation: The Political and Economic Origins of Our Time. Boston: Beacon Press. Original edition, New York and Toronto: Farrar and Reinhart, 1944. Republic of China (Taiwan). 2007. National Statistics. Available at http:// eng.stat.gov.tw/. Stubbs, Richard. 2005. Rethinking Asia’s Economic Miracle: The Political Economy of War, Prosperity, and Crisis. Houndmills, U.K., and New York: Palgrave Macmillan. Swann, Dennis. 1988. The Retreat of the State: Deregulation and Privatization in the U.K. and U.S. Ann Arbor: University of Michigan Press. Thomas, James E. 1993. Making Japan Work: The Origins, Education, and Training of the Japanese Salaryman. Sandgate, U.K.: Japan Library. Tu, Wei-Ming, ed. 1996. Confucian Traditions in East Asian Modernity: Moral Education and Economic Culture in Japan and the Four MiniDragons. Cambridge, Mass.: Harvard University Press. Wallerstein, Immanuel. 1979. The Capitalist World-Economy. Cambridge, U.K.: Cambridge University Press. ______. 1984. The Politics of the World-Economy. Cambridge, U.K.: Cambridge University Press. Wood, Robert E. 1986. From Marshall Plan to Debt Crisis: Foreign Aid and Development Choices in the World Economy. Berkeley: University of California Press. World Bank. 1993. The East Asian Miracle. Oxford: Oxford University Press.

THREE

The United States and the Internal Development of Korea in the Post-WWII World-System SUNGHO KANG

Introduction Over the last sixty years, the Republic of Korea (ROK; hereinafter “Korea”) has accomplished both enormous economic progress and social democratization. As a consequence, Korea has greatly improved its position in East Asia and the World-System. During this period, American military and economic aid have proved to be important factors for Korean development (Cho 2005, 500; Woo 2006). This raises many significant questions. Why has Korea been able to develop while many other countries receiving U.S. assistance have not (Grosfoguel 2003, 3)? Why does Korea possess conditions for pursuing economic growth and accomplishing social democratization? How long did U.S. assistance play an important role in Korean development? What are the limitations of U.S. policies toward Korea? The purpose of this chapter is to examine what is important in the external and internal developmental factors of Korea and how their interrelationships have changed. Accordingly, it will examine external factors such as America’s Korea policy and cyclical fluctuations of the post-WWII World-System, and internal factors such as the Korean state’s intervention in its economy, the Korean democratic movement, and the inheritance of an advanced traditional Korean society. Over the past few decades, a number of studies have explained stateled economic development as a typical internal factor (Lee Kijun 2005, 118–121). But, we need to consider two more factors: the Korean people’s desire for democracy and their abundant historical inheritance, without which such state-led growth would have been unsustainable. The Korean people were eager to develop a new democratic country based on the

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high growth of their economy. However, Park Chung Hee’s military coup in 1961 oppressed the democratic government established in the 4.19 (19 April) Revolution in 1960. Strong challenges from the democratic movements forced Park’s government to take a specific road to rapid economic development, because it sought to produce prosperousness to justify his dictatorship and thus try to buy off the social democratic movements with prosperity. Furthermore, the fierce rivalry between the two Koreas and the military threat from North Korea soon after the Korean War restricted Park’s methods to harsh repression or doing nothing (Baek 2006, 271). Unless we understand the Korean people’s pride in their advanced culture prior to the twentieth century, it will not be easy to explain their belief in being able to catch up with the more industrialized Japan and achieve a high level of economic development (Cumings 2005, 11). Here we are concerned with the periodization of the post-WWII World-System, characteristics of U.S. foreign policy in Korea, the changing Korea-U.S. relationship, and internal factors for the successful growth of Korea. As a beginning, we will examine the interrelationship between Korean development and the periodization of the post-WWII World-System. Korea and the United States in the Post-WWII World-System Contemporary Korean history and Korea-U.S. relations have been strongly affected by fluctuations in the post-WWII World-System. So, it is important here to describe the changes in Korea-U.S. relations and the main turning points of the post-WWII World-System. Characterizing the various periods of Korean history since 1945 should take into account political changes brought about by the U.S. military government and the Korean governments: Syngman Rhee, Chang Myon, Park Chung Hee, and Chun Doo Whan (Kang 1994; Kim et al. 1998; Yeoksahakyeonguso 1995). The problem is that an analysis based on short-term political power changes cannot explain the domestic and international structural factors that cause such changes. I therefore wish to explore the interrelationship between Korea and the post-WWII World-System and important turning points in the Cold War that directly affected the Korean historical process. Following the Korean liberation from Japan in August 1945, the United States and the Soviet Union, respectively following their perceived national interests, divided the Korean peninsula into South and North Korea at the 38th parallel. Subsequently, the establishment of the Republic of Korea (South Korea) and the Democratic People’s Republic of Korea (North Korea) fixed the division of the Korean peninsula in 1948. Thereafter, each state developed separately along different political and

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economic lines. The Korean War gave the United States an opportunity to rearrange U.S. world strategy into a post-WWII World-System in 1950 (Reifer and Sudler 1998, 18). The collapse of the Syngman Rhee government and the 4.19 Revolution in 1960 were closely connected to SovietAmerican détente. Park seized power in the May 16 military coup amid intensification of the Cold War in 1961, and the October Revitalizing Reform of 1972 was a counteraction to the détente based on the Nixon Doctrine of 1969. In the context of a new phase of the Cold War triggered by the Soviet invasion of Afghanistan, the Chun government, brought to power in a coup on 12 December 1979, militarily suppressed the May 1980 Gwangju People’s Resistance at the estimated cost of a thousand human lives. The 1987 Democratic Resistance achieved democratization of Korea in the midst of Gorbachev’s perestroika and the dissolution of the Cold War. From 1989 to 1991 new multiparty talks and relationships were established between the United States, Japan, Korea, North Korea, China, and Russia. Wallerstein’s periodization of the post-WWII World-System is a useful tool for inquiry into Korea’s relation with the post-WWII world. His categorization of political, economic, and social changes in the World-System and emphasis on the recent emergence of Korea and East Asia provides a good starting point to explain the interrelationship between Korea and the post-WWII world. Wallerstein divides the post-WWII World-System into phases covering the periods from 1945 to 1990 and 1990 to 2025. He thinks that the period between 1945 and 1990 showed the usual characteristics of Kondratieff’s cycle, although the B-phase had not yet ended in 1990 (Wallerstein 1998a, 210). In the first period, he chooses from 1967 to 1973 as the turning point on the grounds that these dates were bound by several major economic and political events: the 1968 revolution, the Tet offensive, the proclamation of Soviet-American détente, the normalization of U.S.-Chinese relations, the removal of the U.S. dollar from the gold standard, and the OPEC oil shock. Wallerstein thinks that U.S. power in the World-System declined after 1973. In the 1970s, the Third World debt crisis accentuated world economic stagnation and, in the 1980s, had a destabilizing effect on governments in peripheral and semiperipheral states. The fiscal crises of these states led to internal clamoring for democracy and IMF restructurings, and “the collapse of East European communism was merely the culminating event of this series” (Wallerstein 1998a, 220). Wallerstein portrays the collapse of communism from 1989 to 1991 as “the climax of the process of disillusionment that had surfaced in 1968” because it ended both “the political justification for a continuing

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subordination to U.S. leadership” by Western Europe and Japan and “the constraint that the anti-systemic movements had placed on mass political activity” (Wallerstein 2002, xxxvii). He predicts that we can expect two real possibilities for the present and future, the period from 1990 to 2025 (Wallerstein 1998b, 226). One is that the World-System will continue to function and that the Kondratieff cycle will resume its path of reconstruction. The other is that we can expect “the burgeoning of a systemic crisis or bifurcation.” He also anticipates that the World-System that was becoming triadic (the United States/Western Europe/Japan) in the mid1990s might lead to an emerging dyad (the United States/Japan/China versus Europe/Russia) (Wallerstein 1998b, 228, 232). Wallerstein thinks that we find ourselves “in the terminal phase of a historical system, an age of transition,” and we are face-to-face with uncertainty (2002, xxxix). We can find similarity in the periodization of Korea and elsewhere in the post-WWII world. Since the United States is the core state of the postWWII world, Wallerstein helps us by indicating the main turning points in Korea-U.S. relations. For example, we may easily identify the conflicts and switches in the 1967–1973 relationship with Korea that marked the beginning of America’s waning domination of Korea. However, Wallerstein does not explain why Korea’s economy grew rapidly during the world economic stagnation nor why Korea’s democratic movement achieved great success in the economic booms of the late 1980s in contrast to the often indeterminate democratic struggles of other Third World countries during their own governmental and fiscal crises. In East Asia, Japan has suffered from long-term economic stagnation, China has developed rapidly to become the world’s fourth largest economy, and Korea has overcome the IMF financial crisis to become the world’s eleventh largest economy in 2006. Currently, East Asia is represented not by Japan alone but by a group of three countries—Korea, Japan, and China—that have been rapidly emerging as a core of the WorldSystem (Baek 2006, 230). So, the possibilities of an emerging dyad (the United States/Japan/China versus Europe/Russia) that Wallerstein expected are not being realized because of the unpredicted rapid economic growth of China. Since Korea and China resumed normal relations in 1992 they have grown closer economically, politically, diplomatically, and culturally. Since 2002, China has become Korea’s largest export market, and Korea has become China’s largest capital investment country. Unlike the United States and Japan, since 2006 Korea and China have looked upon instability on the Korean peninsula as a greater threat than North Korea’s nuclear weapons program (Armitage and Nye 2007, 8). During that time, Korea did not welcome America’s strong restrictions on North Korea.

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The Characteristics of the Korea-U.S. Relationship Korea was unable to establish itself as a single unified nation-state under its own leadership in 1945. The United States and the Soviet Union divided the country as they pursued their own interests in the post-WWII World-System. At the Cairo Conference in 1943, the United States sought to determine a way to place a liberated Korea under a trusteeship (Chung 1996). At the Yalta Conference of February 1945, which fixed “the boundaries of prospective postwar garrisoning of troops and therefore geopolitical influence as well as the modalities of constituting governments of liberated countries” (Wallerstein 2002, xxxiv), Roosevelt suggested to Stalin that Korea be placed under a Soviet-American trusteeship. The Soviet Union examined the possibility of establishing a single pro-Soviet government in Korea but decided to choose the trusteeship program in June 1945. When Japan surrendered to the United States in August 1945, the United States proposed to the Soviet Union that the Korean peninsula be divided along the 38th parallel, and the Soviets accepted. Korea has been divided into two countries ever since. Based on a strategy of containing communism and securing U.S. interests in East Asia, the United States became engaged in the Korean peninsula and defended Korea against the Soviet Union and North Korea. The U.S. government ordered its military based in the southern part of the Korean peninsula to support organizations coincident with U.S. purposes and demands and to dissolve any other organizations in October 1945 (Kim et al. 1998, 26). The United States determined that if the American army should retreat in 1947, the Soviet Union would take over and control Korea as a satellite state and use the whole Korean peninsula as an ice-free Soviet port. The United States therefore decided to maintain its Korean aid program. After the Korean War, a report recommended that the U.S. government continue its military and economic aid to Korea and sustain it as a symbol of growing liberty, justice, and progress (Kim et al. 1998, 153). The United States provided substantial economic and military aid to Korea until 1983 (Woo 2006, 486–487), with the emphasis on the latter. Economic aid did not match military aid and was not used for independent Korean economic development. Instead, American policy favored the economic reconstruction of Japan with the integration of the Korean economy in order to restrain the Soviet Union in East Asia (Woo 2006, 504). This involved exporting Korean agricultural products and raw materials to Japan and importing Japanese industrial products. After the Korean War, President Rhee refused to subordinate Korea’s economy to that of Japan. However, under the U.S.-Japan Defense Pact, the United States continued to assist Japan in establishing East Asian economic hegemony

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(Wallerstein 2002, xxxv). Although Rhee’s strong opposition delayed implementation of the U.S. plan, it was eventually carried out through the resumption of Korea-Japanese relations by Park in 1965. Since 1945, the influence of both internal and external factors have greatly changed Korea-U.S. relations, which can be divided into three overlapping periods: first, 1945 to 1969 or 1972; second, 1969 or 1972 to 1987; and finally 1987 to the present. In making this periodization, we consider not only U.S. Korean policy but also major events and fluctuations in the current World-System, the role of a strong state, the democratic movements of the Korean people, the competition between the two Koreas, and the changes in the international relationship of Korea, Japan, and China. It would be hard to understand the reasons for and the process of changes in the Korea-U.S. relationship without considering such factors. In the first period (1945–1969), Korean dependence on the United States was great; the latter part (1969 to 1972) was the era of transition to the second period. Between 1969 and 1972, the Park government participated in the July 1972 Common Declaration between the two Koreas, established the October Revitalizing Reforms, and strengthened heavy and chemical industries to cope with the Nixon Doctrine. In the second period (1969 or 1972–1987), Korea became a highly industrialized country by fostering independent heavy and chemical industries and built a democratic society through such movements as the Gwangju People’s Resistance (May 1980) and the Democratic Resistance (June 1987). In the third period (1987–present), due to the elevated status and role of a highly industrialized and democratized Korea in East Asia, the KoreaU.S. relationship has moved from dependency to interdependency. External factors such as the Cold War and U.S. Korean policy determined the major events of the first period, resulting in the division of the Korean peninsula, the Korean War, and the subordination of the Korean economy to that of Japan. After the transition from the first to the second period, the Korean government sought independence from American aid. In the third period, Korean internal factors have played a greater role in political decisions, including selection of political leaders and setting foreign policy. Considering the internal factors since the late 1960s and early 1970s, we can better understand Korea’s rapid growth. Changes in the Korea-U.S. Relationship Korea-U.S. relations have experienced large changes over the last sixty years. Considering the hard times of 1945, Korean political, economic, and social accomplishments have been outstanding. From 1953 to 2006, the per-person GDP increased from $57 to $24,200 (PPP). An agricultural

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country where over 80% of the population consisted of farmers has been transformed into a highly industrialized country where farmers make up only 6.4% of the total workforce, and automobile, ship, steel, semiconductor, electronics, and machine exports make up a substantial portion of the economy. Korea’s trade with the United States has escaped adverse balance of payments since 1982, and exports to the United States have shifted from light industry to high-tech and heavy industry goods (Lee Hunchang 1998, 471–472). Concurrently, Western people’s recognition of Korea has improved greatly. An article posted in the Development Bank Research Bulletin (Feb. 2006) described Korea as “an economic superpower” because Korea’s population is similar in size to that of France; was more innovative than Portugal’s with a similar income level; invested 30% of its GDP, a ratio that was close to China’s (40%); and had been manufacturing products under their own global brand names, such as Samsung and Hyundai, unlike companies in Taiwan (Squared 2006). According to the 2007 CIA Fact Book, based on 2006 estimates, Korea’s national GDP (purchasing power parity) was $1.18 trillion, GDP per capita (PPP) was $24,200, investment (gross fixed) was 29.1% of GDP, public debt was 29.1% of GDP, and population was 48,846,823. Furthermore, a 2005 Goldman Sachs report predicted that Korea could overtake Italy by 2020, and that by 2050 Korea’s per capita income could be higher than that of each of the G7 except for the United States (O’Neill et al. 2005, 9). After 1987, Korea developed from a U.S. client state under a military government into an independent liberal-democratic state, but Korea-U.S. military and diplomatic relations remain vital to Korean security. Still, Korea has paid a high price for maintaining U.S. armed forces and, at the behest of the United States, has invested significantly in modernizing its own military (Lee Samsung 1993, 311). In 2007, Korea and the United States agreed to establish separate commands replacing the current Combined Forces Commands after Korea regains wartime operational control of its troops from the U.S. military in 2012. After the collapse of the socialist bloc from 1989 to 1991, Korea has independently developed various diplomatic relationships with many countries in East Asia and throughout the world (Armitage and Nye 2007, 8). Yet, Korea has failed to establish a self-sufficient and creative higher education system to train students and scholars to compete with those from other advanced countries. Thus, Korean higher education remains dependent on the United States. In 2007, Korean students studying in the United States outnumbered those from all other countries, and many professors at major Korean universities had graduated from U.S institutions.

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In general, the Korea-U.S. relationship has been moving from dependency to interdependency because of Korea’s rapid growth. Rapid Korean development results not from a single factor but from complicated interactions of various internal and external factors. Thus, to correctly assess Korea’s development and its ability to effectively cope with the newly forming East Asian order, we need to consider America’s Korea policy based on its East Asian security strategy; Korea’s strong state intervention; the competition between South and North Korea; the growth of Korean democratic and social movements; and the inheritance of an advanced traditional society. Since 1987, internal factors have been becoming increasingly important in the rapid and sustainable development of Korea. U.S. Aid to Korea After Korea’s liberation from Japan, American military and economic aid to Korea played an important role in the newly independent country’s economic development. From 1946 to 1973, Korea received a total of 12.6 billion U.S. dollars, the world’s third largest receipt of American aid (Woo 2006). This aid enabled Korea to overcome difficulties caused by the break of economic connections with North Korea and Japan and to overcome the threat of a North Korea backed by the Soviet Union. Based on the U.S. armed forces’ engagement in the Korean War (1950–1953), Korea could protect itself against all-out North Korean attack. Large-scale U.S. support after the Korean War helped the country swiftly reconstruct its economy and other social structures. Under the security umbrella offered by the ROK-U.S. Mutual Defense Agreement of 1953, Korea was able to concentrate its efforts on economic development. In 1962, President Park began promoting a plan for social and economic development to strengthen Korea over a fifteen-year period (MacDonald 2002, 456). The United States offered Korea a preference in trade because it fit into the American economic and security policy of the 1960s and 1970s. Thus, this allowed Korea to export goods into the U.S. market while protecting Korea’s own domestic market that was developing industries in Korea (Cho 2005, 503). American support for institutional reforms also helped Korean economic and social developments. Further, U.S. support for land reform helped to secure the stability of rural areas. The U.S. military government strongly advised the Rhee government to fully carry out land reform by redistributing to farmers land seized by the Japanese. Redistribution of rural lands to farmers made them more conservative and resistant to North Korean socialist propaganda. The curtailment of landowning also became a favorable social basis for Korean industrialization (Lee Hunchang 1998, 376; Kim 2005, 321, 339). The United States assisted

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the Korean government in establishing the KIST (Korea Institute of Science and Technology), KDI (Korea Development Institute), and KEDI (Korea Educational Development Institute). These research organizations played an important role in drafting economic, scientific, technological, and educational policies for economic development. The United States also helped establish American-style educational institutions, which in turn trained professionals to run the government and leading industries. Whereas large-scale U.S. aid to Korea was helpful for Korean social and economic development, the United States was reluctant to patronize the Korean government’s independent economic development efforts, because the purpose of its Korean aid was to protect its own strategic security in East Asia. The independent economic development of Korea was not a U.S. interest at that time. In the 1950s and 1960s, U.S. economic policy in Northeast Asia was to subordinate Korea’s economy to that of Japan. This policy appears in secret U.S. security documents NSC 5506 and NSC 5702/2. According to NSC 5506 (1955), the United States wanted Japan to increase trade with other liberal Asian countries as a means of reducing financial burdens to itself (Woo 2006, 508). From NSC 5702/2 it appears that the United States asked the Korean government to resume normal relations with Japan to permit the United States to reduce its aid to Korea (Woo 2006, 535). The United States did not welcome the Park government’s policy of independent economic development. In the early 1960s, the U.S. government asked the Park government to restrain its efforts toward an independent economy and refused to provide assistance for the construction of the Ulsan Industrial Complex, a fertilizer plant and an automobile assembly plant (MacDonald 2002, 445). Failing to gain financial aid from the United States, the Park government could not secure sufficient economic development investment capital for the first Five-Year Plan (1962– 1966); investment (gross fixed) was only 15.1% of GDP, less than 22.6% of what had been expected (Lee Kijun 2005, 131). The Park government felt compelled to participate in the Vietnam War in 1964 and to resume normal relations with Japan in 1965 in order to supplement the shortage of investment capital. Japanese capital and technology transfer as well as money from the Vietnam War played a important role in Korea’s early rapid economic development (Cha 2005, 134; Reifer and Sudler 1998, 26). State-Led Economic Growth To fully understand Korea’s remarkable accomplishments in comparison to other developing countries aided by the United States, we need to examine other internal factors. State-led economic growth was one of the principal factors in development. Land reform, with its redistribution of

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92% to 93% of all lands to independent farmers, contributed to the formation of a strong Korean state (Jang 2005, 357). With the Japanese defeat and the fall of traditional landowners, the early Korean government was easily able to control society. The government could also carry out the rapid transformation of Korea into an industrialized country without great resistance from former ruling classes (Kim 2005, 341). The government’s role in redistributing lands and allotting large-scale U.S. economic aid was decisive in making Korean capitalists dependent on the government. Moreover, the decreased disparity between rich and poor that resulted from land redistribution also favored the emergence of a strong state. This favorable situation enabled the government to lead Korea’s economic development. In the 1950s, the Rhee government seized control of Korea’s central bank contrary to U.S. recommendations that favored privatization and could strengthen the import substitution industry against Japan despite a huge financial deficit (Woo 2006, 503, 509). The Park government positively promoted the five-year economic plan that had been in preparation since the late 1950s (MacDonald 2002, 445). As a means of achieving high economic growth, it established the EPB (Economic Planning Board) for planning economic development, KDI for research on economic policy, and KIST for scientific education and research (Lee Kijun 2005, 118–121). The Korean government’s quick response and appropriate decision making in the structural transformation phase of the post-WWII WorldSystem also contributed to Korea’s economic development. The Park government’s export-oriented economic policy of the 1960s was more successful than those of other developing countries seeking to foster an import substitution industry to boost domestic markets. Fortunately, the Park government’s 1973 decision to foster the chemical and heavy industries coincided with the advanced countries’ international rearrangement of industrial structure. The government sought to transfer internationally labor-intensive heavy and chemical industries from core areas to semiperipheral or peripheral areas in order to reduce labor costs and overcome the worst economic stagnation since the end of WWII (Baek 2006, 266; Wallerstein 1998a, 212–213). Therefore, Korea could easily import technology from developed countries and build the infrastructure for such industries as steel, chemical, machinery, shipbuilding, automobile, and electronics. The development of the chemical and heavy industries facilitated the Korean economic boom of the late 1980s. Korea was able to overcome the IMF financial crisis through the government’s new liberal restructuring of financial agencies and large enterprises. The government also permitted large-scale capital investment in

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China and promoted the increase of exports to that country. This policy contributed to rapid economic recovery from the IMF financial crisis. In 2006, Korea invested $4.6 billion in China, with the total coming to $35 billion, making Korea China’s single largest foreign investor. Since 2003, China has been Korea’s largest export market. The huge profit from this trade has helped Korea’s rapid economic recovery from the IMF financial crisis. The Democratic Movement of the Korean People The state-led economic policy has made significant contributions to Korea’s economic development. While we acknowledge this we also need to solve several puzzles about the success of the state-led economy. Why did the Park and the Chun regimes devote so much energy to economic development? What pressed them toward rapid economic development? Why did Korea’s economy grow despite the collapse of the military governments? How can we explain fast economic recovery and continuous growth under democratic governments like those of Kim Dae Jung and Noh Moo Hyun? In answering we must focus on the Korean people’s social and democratic movements from below. Pressure from Korean social and democratic movements motivated military governments to develop Korea’s economy. To have failed to achieve rapid economic growth would have endangered governments established through military coups. The social and democratic movements also checked political and official corruption and inefficiency, led to reducing the negative results of rapid economic development, and made it possible to sustain the Korean economy. We will examine here the question of how the land reform around 1950, the state-led economic growth in the 1960s and 1970s, and the transition to a high-tech industrialized society since the 1980s are closely related to the demands of the social and democratic movements from below. The land reform of the late 1940s and early 1950s also secured the formation of a strong state and capitalist development. With the disintegration of the traditional landlord class system, early Korean governments could easily undertake new industrial policies without strong resistance from existing classes (Kim 2005, 341). The U.S. military and Rhee governments carried out the land reforms to appease the powerful left-wing resistance and stabilize the newly established Rhee government (Lee Hunchang 1998, 376). The collapse of the landlord system could not have happened without popular demand from below. The planning and promotion of the 1962 five-year economic program was a very important turning point in developing Korea economically. The Chang government, founded by the 4.19 Revolution, had already

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prepared most of the plan, designed to satisfy popular demand from below to build an economically advanced society. The United States became involved in preparing the Five-Year Plan to show its interest in the economic development of Third World countries, thereby responding to the upsurge of Third World movements beginning in the 1950s (Kim et al. 1998, 260). The Park military government, which crashed in the 4.19 Revolution, used anticommunism as a slogan to gain the support of the United States. It also used rapid economic development as a slogan to promote the development plan and thereby obtain the Korean people’s support (Baek 2006, 271) for striving to build a robust industrialized economy within a short period of time. In the 1972 presidential election, Park Chung Hee won against Kim Dae Jung by only one million votes. The Nixon Doctrine of 1969, North Korea’s adoption of Juche ideology, and the rise of spontaneous resistance by industrial workers led the Park government to foster the development of the chemical and heavy industries in January 1973. In the early 1970s, before the October Revitalizing Reform in 1972, there were the riot of Hanjin Company workers dispatched to Vietnam, the struggle of 20,000 Hyundae Shipbuilding Company workers, and Chun Taeil’s self-immolation by fire. In order to deal with these situations, the Park government suppressed the workers’ struggle and the democratic movements with the October Revitalizing Reform and tried to mitigate social discontent and democratic demands by instigating the chemical and heavy industries as a new, dynamic force for growth. The democratization of Korea and the advance of the labor movement after the Democratic Resistance in 1987 have contributed to raising the efficiency of big government organizations and the transparency of the Jaebul (industrial conglomerates). In the mid-1990s, the Kim Yong Sam government made a series of economic reforms, and with popular support the Kim Dae Jung government restructured and rearranged the Jaebul. These reforms helped make the economy of Korea more sustainable. In the July–August 1987 great struggle of the Korean workers, the power of democratic trade unions increased along with the real wages of workers. Concurrently, labor productivity increased faster than real wages and contributed to Korea’s economic growth. The rapid increase in real wages led to domestic market expansion and decreased dependence by Korea’s economy on foreign markets. The increase in workers’ wages enabled the Jaebul to switch from labor-intensive industries to the capital-intensive high-tech IT industry.

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The Inheritance of an Advanced Traditional Korea In 1945 no Westerner could have predicted the remarkable growth of Korea. The country seemed to lack bustling commerce, empirical science, a stable middle class, and a spirit of enterprise and innovative techniques. Bruce Cumings insists that the West was unable to forecast the possibility of Korea’s rapid development because of overlooking the Korean peninsula’s long history (2005, 11). Korea was a society with an advanced civilization like China’s. Thus, the Chosŏn dynasty (1392–1910) was not a stagnant and isolated society on the periphery of East Asia. Until the late eighteenth century, the Chosŏn had developed continuously in spite of two great wars with Japan and China between the late sixteenth and the middle seventeenth centuries. The Chosŏn’s agricultural productivity had progressed (Kim Yongseop 1998), and the population had more than doubled between 1400 and 1800 (Lee Hocheol 1992). In the eighteenth century, the Chosŏn had developed a nationwide domestic market, based on a population increase and higher agricultural productivity, and traded actively with China and Japan (Chung 2000, 141). Korea’s rapid economic development is closely related to its advanced traditional society with highly bureaucratized state institutions and high agricultural productivity. Recently, several Western scholars have begun to recognize the importance of Korean history. A. G. Frank has acknowledged that Korea had been dismissed despite being as important as China and Japan in East Asian history. He noted that Korean monetary and economic history, as well as that of China and Japan, has been ignored in relation to Korea’s neighbors and the world economy (Frank 1998, 237). Citing Parker’s description of guns in East Asia (1991), Frank acknowledged that, like China and Japan, Korea before the sixteenth century possessed excellent military resources such as “firearms, fortresses, standing armies, and warships” (1998, 196). He also noted that “movable metal type came from Korea and was soon introduced elsewhere” (Frank 1998, 200). Hobson insisted that the movable metal type invented in the Chosŏn in 1403 might have directly influenced Gutenberg’s movable metal-type printing press. Menzies argued that in 1421 the Chinese fleet, led by Zheng He, discovered America. One of his main proofs is the Korean Kangnido of 1402, a world map that correctly depicts the coasts of East, South, and West Africa (Menzies 2002, 96–97). Frank thinks that Korea’s great historical background enabled the country to develop rapidly. Satoshi Ikeda also argues that, considering the long historical relationship between East-and-Southeast Asia and Europe since the seventeenth century, the so-called East Asian miracle, the remarkable growth

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of Japan, Korea, and Taiwan since the 1960s, was no miracle at all (Ikeda 1996, 67–71). Confucian tradition has had a positive effect on state-led economic development. The Chosŏn was founded on Confucian ideology, and after Manchus conquered Ming China and founded the Qing dynasty in 1644, Korea’s version of Neo-Confucianism became the most advanced in East Asia. Korean intellectuals’ self-recognition that Chosŏn was the center of Confucianism in Asia expressed pride in Korea’s higher civilization and the nationalistic resistance to the Manchus, who had invaded Chosŏn even before attacking Ming China (Chung 2005, 89–90). After liberation from Japan in 1945, the inheritance of advanced Confucianism became the solid basis for the formation of the Korean nation-state and for the strong nationalism from which the Rhee and Park governments derived their support. Understanding the national pride of Korean political leaders and people is essential in realizing why Rhee’s government defied U.S. policy in his attempt to foster an independent import substitution industry that subordinated the Korean economy to Japan and why the Park government tried to catch up with Japan by fortifying the independent chemical and heavy industries. The Korean government and people’s investment in education have trained many workers for the country’s rapid economic growth over a short period of time. The long tradition of civilian government in Korea that, except for a short period, lasted for a thousand years can help explain the social and psychological basis for the student and popular resistance to military government (Baek 2006, 271). Conclusion In this chapter we explored characteristics such as the process of change in the Korea-U.S. relationship in the post-WWII World-System. Korea simultaneously industrialized and democratized during the last sixty years. Basing on a strategy to contain communism and secure U.S. interests in the East, the United States was engaged in the Korean peninsula and defended Korea against socialist countries. In general, the Korea-U.S. relationship has been moving from dependency to interdependency because of the rapid growth of Korea since 1945. The rapid development of Korea is the result of not a single factor but of complicated interactions of various factors from inside and outside Korea. Internal factors have become more important in the rapid and sustainable development of Korea, especially since 1987. Recent differing views on North Korea’s nuclear bomb test and wartime operation control have brought about some conflicts in Korea-U.S. relations, but after the passing of the KORUS Bill (Korea-U.S. FTA) in April 2007, that relationship has been refortified. The Korean government’s

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efforts to maintain peaceful coexistence on the Korean peninsula and in East Asia have played a significant role in preventing war in Korea (Lee Suhun 2004, 138) but were unable to prevent North Korea’s nuclear experiments. In opposition to the Bush Doctrine, the Kim Dae Jung government promoted its Sunshine Policy. The Noh government has also tried to maintain “the balance of Northeast Asia” among Korea, the United States, Japan, North Korea, China, and Russia. New approaches of the two Korean governments have contributed to promoting the peaceful coexistence of East Asian countries. However, the new Lee Myung Bak government has shown strong dissatisfaction with the Sunshine Policy’s performance over the past ten years. President Lee has insisted on a “Denuclearization, Opening, 3000” policy, which means that if North Korea undertakes denuclearization and opens the country, Korea will support North Korea to reach the income level of “$3,000 per head” within ten years. Thereafter, inter-Korean ties have been strained because North Korea has protested his insistence on linking inter-Korean ties with denuclearization. While United States and China lead the six-party dialogue, the Lee government may lose leverage toward North Korea. In order to escape from this difficult situation, President Lee proposed resuming “full dialogue” with North Korea and announced that the Korea government will implement the previous inter-Korean summit accords on 11 July 2008. Korea, Japan, and China have worked to develop peaceful international relations in Northeast Asia over the years since the Korean War. Looking further back, we must also recognize that Northeast Asian societies and cultures have developed along diverse historical traditions (Wong 2003, 41; Wang 2003, 34). Based on this recognition, countries of Northeast Asia should strive to maintain peaceful relations among their multidimensional international societies.

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References Armitage, Richard, and Joseph S. Nye. 2007. “The U.S.-Japan Alliance: Getting Asia Right through 2020.” CSIS Report, February. Baek Nakcheong. 2006. Hanbandosik Tongil, Hyeonjaejinhaenghyeong. Seoul: Changbi. Cha Sangcheol. 2005. Hanmidongmaeng 50nyeon. Seoul: Saenkakui Namu. Cho Ije. 2005. “Hankuk Kyeongjebaljeongwa Mikukui Yeokhal.” In Hankukgeundaehwa, Kijeokuikwajeong. Seoul: Weolkanjosunsa. ______ et al. 2005. Hankukkeundaehwa, Kijeokuikwajeong. Seoul: Weolkanjosunsa. Chun Chanhwan et al. 2004. Wigiui Hangukjabonjuui. Seoul: Pulbi. Chung Seongil. 2000. Chosunhugi Daeilmuyeok. Seoul: Sinseowon. Chung Yonghwa. 2005. “Jubyeoneseo Bon Jogongcheje-Josunui Jogongcheje Insikgwa Hwalyong.” In Donasiaui Jiyeokjilseo. Seoul: Changbi. Chung Yonguk. 1996. 1942–1947Nyeon Migukui Daehanjeonchaekgwa Gwadojeongbuhyeongtaegusang. Seoul: Seouldaehakgyo daehakwon Baksahakwinonmun. Cumings, Bruce. 2005. Korea’s Place in the Sun: A Modern History. New York: W. W. Norton. Eckert, Carter. 2005. “5.16 Kunsahyeokmyeong, keuyeoksajeokmaeklak.” In Hankukkeundaehwa, Kijeokuikwajeong. Seoul: Weolkanjosunsa. Frank, A. G. 1998. Reorient. Berkeley: University of California Press. Grosfoguel, Ramón. 2003. Colonial Subjects: Puerto Ricans in a Global Perspective. Berkeley: University of California Press. Hobson, John M. 2004. The Eastern Origin of Western Civilization. Cambridge: Cambridge University. Ikeda, Satoshi. 1996. “The History of the Capitalist World-System vs. the History of East-Southeast Asia.” Review 19.1. ______. 2002. “Twentieth-Century Antisystemic Historical Processes and U.S. Hegemony: Free Trade Imperialism, National Economic Development, and Free Enterprise Imperialism.” In The Modern/ Colonial Capitalist World-System in the Twentieth Century. Westport, Conn.: Preager Publishers. Jang Siweon. 2005. “Nogjigaehyeok-Jijuje Haechewa Jajaknongchejeui Seongrib.” In Haebang Jeonhusaui Jaeinsik, vol. 2. Seoul: Chaeksesang. Kang Mangil. 1994. Gochyeosseun Hangukhyeondaesa. Seoul: Chanjakgwa Bipyeongsa.

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FOUR

Patronage, Partnership, Contested Solidarity: The United States and West Germany after World War II BERND SCHAEFER

Introduction Since Nazi Germany’s unconditional surrender in May 1945, the United States has played a central role in the development of the Federal Republic of Germany (FRG), of unified Germany after 1990, and of the entire course of transatlantic ties. Unlike other post-1945 American partners or “client states,” however, until 1949 Germany was under international occupation status by the four victorious Allies. That year saw the creation of the FRG in the Western zones of occupation and the German Democratic Republic (GDR) in the Soviet zone with Allied encouragement. Neither German state was given full sovereignty by its foreign patrons until 1955, and in military terms both were placed under formal and informal supervision when the NATO and Warsaw Pact alliances integrated German armed forces in 1955 and 1956, respectively. West Germany, in parallel to its relationship with the United States, developed special ties with France over time (Hitchcock 1998), and from 1957 with the emerging European Economic Community (Dinan 2006). For the FRG to accommodate and reconcile with the French and their painful memories of recent German occupation, it was essential to foster any reintegration with the framework of a continental Europe heavily battered as a result of Germany’s formerly hyperaggressive hegemonic policies. There was something to “America’s Germany” (see Schwartz 1991), but increasing Western European integration complemented and sometimes mitigated transatlantic relations of the German state. The European component of “Western integration” and Western Europe’s overall strong

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embrace of American consumerism more easily reconciled West Germans to these concepts and helped to overcome residual anti-American cultural stereotypes (Stephan 2005). In general, both transatlantic ties and Western European integration served as parallel pillars to domesticate Germany’s soon-to-be-returning economic weight, to avoid its translation into political dominance, and to transform and solidly embed it into bi- and multilateral frameworks. With prior German war crimes and genocide before the eyes of the world, the new West German state emerging in the Western occupation zones needed the United States—by far the most potent political and economic power among the victors of World War II—more than any other country to regain respectability, facilitate reconstruction, and reestablish sovereignty. Thus, although the new Germany depended on the United States, in geo-strategic respects the latter soon heavily relied on the former in the emerging contest of the European Cold War. Washington’s vision of a rearmed and economically solid West Germany as an antiSoviet bulwark along the very frontline between “the free world” and “communism” had become the order of the day after the 1948 “Berlin blockade” (Steege 2007), if not before. Sections of the German elite, especially those with former activities and expertise in the fight against the Soviet Union during the Nazi period, were expert in exploiting this mutual dependency to turn their compromising past into an American asset, inducing the latter to abandon its initial approach to a thorough denazification of Germany (Breitman et al. 2005). The formal turnover of denazification procedures to the Germans spelled out the latter’s foreseeable development into a farce ultimately to be abandoned (Frei 2002). Initial patronage, subsequent partnership, and ultimately contested solidarity became the main features of U.S.-German relations from 1945 to the present. During the Cold War such relations grew in remarkable width and depth to permeate German society and to affect American elites across the board.1 In light of a perceived Soviet threat and in order to feature the FRG as a reliable junior partner of the United States—and notwithstanding periods of visible anti-Americanism and contested mutual solidarity in German society during the late 1960s and especially the early 1980s—it remained a doctrine for all West German governments and business elites, conservative and social-democratic alike, to preserve smooth transatlantic relations and minimize conflicts with Washington at almost any cost. Temporary irritations between statespeople at the top remained mostly internal and did not affect overall relations. Thus, U.S.-FRG For a comprehensive account focusing on politics, security, economics, culture, and society in no less than 146 essays by 132 American and German scholars, see Junker 2004. 1 

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bilateral relations did not suffer although John F. Kennedy and Konrad Adenauer, Richard Nixon and Willy Brandt, and in particular Jimmy Carter and Helmut Schmidt neither established personal relationships nor overcame mutual mistrust. Political, military, cultural, and economic networks and ties had grown considerably since the 1950s and guaranteed a permanent underpinning of stable bilateral relations. Military cooperation was always close, and mutual cultural affinities remained high while economic relations were solid but of lesser importance. Institutional Framework After 1945, the four victorious Allied powers maintained a permanent presence in the country. By 23 May 1949, the United States, Britain, and France had allowed a constitutional assembly of the West German zones to promulgate the fledgling Federal Republic, whereas on 7 October 1949 the Soviet Union had given a green light to the establishment of the communist party–ruled GDR. In the Federal Republic the so-called Basic Law, meticulously crafted in a period of two years under Allied supervision between 1947 and 1949, superseded and transformed the constitution of the pre-Nazi Weimar Republic (1919–1933). It was this tradition of previous democratic experience that distinguished the Federal Republic from other post–World War II U.S. client states. Together with the subsequent FRG economic success and political stability, the return to parliamentary democracy, an independent judiciary, and freedom of the press laid the groundwork for the modest German assertiveness in bilateral relations that the Federal Republic governments increasingly displayed during the later half of the Cold War, which mostly met Washington’s tolerance, if not acceptance. During the 1950s, however, the United States had fostered a rather general and formal notion of democracy in Germany, that is, free elections, the rule of law, and the separation of powers. Yet, it kept mum over the broad return of tainted Nazi elites into the higher echelons of public service, business, and even the media. Initially, the United States had propagated first the “reeducation” and then the “reorientation” of the German people. Ultimately, it gave in to the passive, almost nationalist resistance to these concepts by both former Nazi elites and many Nazi opponents in Germany alike (Frei 2002), when the conflict with the Soviet Union and its new satellite states in Europe seemed to demand a loyal West German ally firmly in the Western camp, capable of contributing to American-defined security interests in political, military, and economic terms. During the Second World War, the United States had discussed the dismantling of the German economy to such an extent that the country might be thrown back to an agrarian state. However, this so-called

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Morgenthau Plan, named after U.S. Secretary of the Treasury Henry Morgenthau Jr., never became the Roosevelt administration’s official policy and was rejected for its radical and destructive approach (Beschloss 2002). Instead, after Germany’s unconditional surrender in May 1945, the United States, like the other victorious Allies, followed a course of targeted industrial demolitions and reparations for inflicted war damages. Whereas the Soviet Union, hardest hit by the German war machine, acted excessively in its eastern zone, the Western powers were more restrained in this regard. Nonetheless, the shock occasioned by the outbreak of the Korean War and the subsequent scare in Europe were what was ultimately needed to induce the Western Allies to abandon these policies in West Germany. By then, a more constructive strategic approach had gained most of the traction: the “European Recovery Program,” better know as the “Marshall Plan,” helped to jump-start the German economy. Yet as its name suggests, this was an economic project to support all the countries of Western Europe. Over the next decades the program enabled Western European countries to move toward a common market and thereby to become markets and trading partners of the United States. However, the stunning economic ascendance of the Federal Republic was due less to American or other foreign investments than to macroeconomic discipline and the export successes of German products (Van Hook 2004). West German businesses benefited disproportionately from open European markets and globalized their import, export, and investment activities on a large scale across continents. Until the end of the Cold War, the Federal Republic was able to combine a prosperous market economy with an extensive welfare state. In 1949, the military occupation regime in the Federal Republic was replaced by three appointed Allied high commissioners. By 1955, the Western Allies had granted the Federal Republic sovereignty except for military matters. After contentious debates in Europe spearheaded by France over a remilitarized Germany, and intensive domestic debates over whether West German rearmament might thwart prospects for German unification, the proponents of arming the FRG prevailed on all fronts. The Federal Republic became a member of NATO, firmly integrated into its institutional framework, and, like no other member of the Western military alliance, signed up to forego any “out-of-area” military activities and to accept subordination to Brussels’ joint military command in order to alleviate any remaining European concerns over German military assertiveness after the devastating experiences of World War II. The FRG rearmed itself to become the largest armed force in continental Europe. By the end of the Cold War in Europe, the Federal Republic had 495,000 men under arms. Within the framework of the bilateral statute of forces

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agreements that regulated German funding and the extraterritoriality of American military bases, the United States maintained 325,000 troops in the Federal Republic alone as its major European military hub along the border with the Warsaw Pact states. The Symbol of “Berlin” In the wake of wartime Allied agreements, as of late 1945 the former German capital of Berlin became subject to quadripartite military occupation and remained under Allied political authority until 1990. From 1948 the United States, Great Britain, France, and the Soviet Union had ceased to uphold the city’s formal joint administration. The three western sectors were divided de facto from the eastern Soviet sector. Uninhibited mutual access lasted until August 1961, when the East German authorities, with Soviet consent, built a wall that encircled the western sectors and physically divided the city. The continuous American military presence in landlocked West Berlin, surrounded by the German Democratic Republic and superior Soviet troops, created a powerful American symbol for the Cold War in Europe. In the wake of a perceived Soviet threat, and despite formal distance between authorities in the city, West Berliners established a special bond with the United States. This well-known story cannot be sufficiently emphasized. The late-1960s generational changes that led to anti-American protests in West Berlin could not affect the city’s symbolic significance in the American mind-set. If there was ever an “America’s Germany” it was the city of West Berlin, in which the majority of inhabitants viewed their place in terms of the U.S.-FRG relationship. President Kennedy’s visit to the city in 1963 epitomized this relationship, testified to by the million citizens who turned out for the largest political rally in the Federal Republic’s history (Daum 2007). In the light of Soviet threats and bluster, Berlin also defined the range and limits of American commitment to the Federal Republic. Unwilling to risk the security of the American continent for Berlin, the Eisenhower administration and its successors preferred stability and détente in Europe to the risky rollback of Soviet influence. In 1961 and 1962, the United States was obliged to face the scenario of potential nuclear war with the Soviet Union over their antagonistic positions regarding the status of West Berlin. When Washington prevailed in securing its continuous military presence and guaranteeing the sovereignty of West Berlin, it considered its “Allied rights” in the city more inalienable than ever. Besides settling other issues, the 1971 Quadripartite Agreement sealed the status quo of Western presence and granted the access of West Berliners to the Federal Republic and the outside world.

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Cold War Formation in Germany: The Impact of the Korean War The Korean War was of paramount importance for the Federal Republic’s rearmament and military integration within Western Europe and NATO, as well as for the formation of the Cold War in Europe. It served as an early example of the impact of East Asian revolutionary communism and its actions upon European events. The war also exemplified one of Stalin’s gravest miscalculations when, heeding North Korean leader Kim Il Sung, he calculated that military action in Korea would be a cakewalk and that the communists would be greeted as liberators in the South. The Soviet leader foresaw neither American military reintervention in Korea nor its impact on the militarization and division of Germany and the ultimate formation of Cold War structures in Europe. The North Korean invasion of South Korea on 25 June 1950 inspired real fear in the Federal Republic and Western Europe of a communist surprise attack in the European theater. By contrast, “the Korean shock” was skillfully exploited by FRG Chancellor Adenauer to accelerate FRG rearmament, military integration, respectability, and sovereignty for the Federal Republic (Steininger 2006). Adenauer was able to accomplish these goals only by encouraging lobbying support in the United States, especially the efforts of Secretary of State Dean Acheson, in order to overcome French reservations over German resurgence in Europe. By December 1950, the road to German rearmament was paved in principle, which also represented a major step toward FRG sovereignty. Only then did NATO become a military alliance, and the United States was able to establish a permanent military presence in Europe when reservations of domestic critics waned in light of the events in Korea. The Korean War was probably more effective in stimulating the FRG and Japanese economic booms than were the previous American efforts to induce European economic recovery. Because of the economic stimulus provided by the war, the Federal Republic benefited from the lifting of remaining Allied economic sanctions earlier than had been anticipated. The last remnants of industrial dismantling were ultimately curtailed, and rising production in response to increased foreign demands created new markets for German exports. Before long, military-related production and the military and economic integration of Western Europe proved to be very beneficial to German industry and businesses. Modest FRG Assertiveness: Ostpolitik and Détente The Cold War in Europe reached a stalemate when the GDR erected, with Soviet consent, the wall in Berlin on 13 August 1961. The wall finally demarcated the respective American and Soviet spheres of influence in Europe and physically discarded any notions harbored in Washington or

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Moscow of rolling back the other side’s gains or expanding its own. After additional scares and tussles following the Berlin events of summer 1961, the building of the wall relieved the two big nuclear superpowers by 1962 of the danger of engaging in a war over Berlin. The erection of the wall seemingly sealed the division of the city of Berlin, of Germany, and of Europe forever. Political actors in the West ran out of imagination when thinking of how this could ever change. Whereas members of the European community, especially Great Britain and France, were willing to adapt to current political reality and were shedding few tears over the division of Germany into two states, the United States paid constant public lip service to the prospect of a desirable future German unification. Such FRG political actors as the West Berlin mayor Willy Brandt and his adviser Egon Bahr, that is, the architects of West German Ostpolitik a few years down the road, later referred to August 1961 as the beginning of thinking about détente between the antagonistic blocs to ease the burdens of division (Brandt 1992). Whereas owing to the blockade by the ruling conservative parties in the Bonn government FRG domestic politics did not allow for truly bold moves to overcome the European stalemate until their electoral ouster in late 1969, liberal FRG elites nonetheless searched during the 1960s for more innovative ways to deal with the communist East in order to change a petrified status quo in Europe. The Johnson administration (Schwartz 2003), as well as the Nixon administration, encouraged German efforts in principle to seek rapprochement with the East through dialogue and peaceful means. When Chancellor Willy Brandt, however, started from late 1969 his so-called new Ostpolitik that formally recognized the status quo in Europe vis-à-vis the Soviet Union, Poland, and East Germany in order to overcome it in some distant future (Fink and Schaefer 2008), the White House feared for Germany’s domestic stability and foreign allegiances. Brandt’s bold new initiatives had led to fierce debates within the FRG and had nearly toppled his government in 1972. Unprecedented West German assertiveness in its information policy toward the United States, and its zooming ahead in negotiations with the Soviet leadership before Washington was ready to do so, created fears in the American establishment that needed some years down the road before being alleviated (Schaefer and Geyer 2004). Alternatively, a major segment of American public opinion, and many within Nixon’s administration itself, viewed the Federal Republic’s policy quite favorably. The Brandt government and its successor administrations under Chancellor Helmut Schmidt never really tested the limits of mutual American-German solidarity but introduced a more assertive style of partnership that matured relations. American patronage and patronizing

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was willy-nilly on the retreat. The Federal Republic’s economic success and subsequent weight also induced German elites to act more independently. Yet, when Chancellor Schmidt intervened with his own proposals in the business of nuclear proliferation sales, superpower nuclear armament, and disarmament policies, he ultimately had to pay the price with his government’s downfall for domestic reasons. The reemergence of American nuclear leadership put the Federal Republic back in its place. The “Missile Crisis,” Gorbachev, and the Cold War’s End in Europe After NATO’s December 1979 “double-track decision” to open negotiations over the removal of Soviet intermediate nuclear missiles or otherwise deploy American missiles in Western Europe, foremost in the Federal Republic, the Soviet Union decided to hold out and place its hopes on domestic opposition in Western Europe to block the intended American deployments. West German governments under Schmidt until October 1982 and then conservative Chancellor Helmut Kohl consequently supported American positions, but FRG public opinion was sharply divided. In particular, the younger generation turned out overwhelmingly against the deployment in public manifestations. The “missile crisis” of the early 1980s created for the first time a strong generational pro- and antiAmerican divide in the Federal Republic. Although deployment went ultimately along with the support of the FRG parliament in September 1983, anti-American sentiments remained a constant feature of the 1980s Federal Republic. In particular, President Ronald Reagan served as a lightning rod to many in the Federal Republic’s population, a development that was only to be gradually superseded by the advance of Mikhail Gorbachev in the Soviet Union from 1986. Reagan’s 1987 visit to Berlin, where he appealed to Gorbachev to “tear down this wall,” still required unprecedented efforts to shield the American president from protesters and provide him with a favorable audience for his speech in front of the Brandenburg Gate. The Soviet Union’s foreign relations shift, armament policy, and military strategy, and its positive reception by the Western alliance, led to the subsequent demise of the Cold War in Europe. Soviet-tolerated revolutions or peaceful regime transitions in all Eastern and Central European Warsaw Pact member states ended the division of Europe. The administration of Reagan in the later years of his second presidential term, and also of his successor George H. W. Bush, pursued constructive policies to accompany and encourage these processes. The American executive, congress, and public opinion were ready to cash in on their constant lip service to German reunification. West German governments under Kohl, as well as German society at large, positively acknowledged this

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American role. Yet, “Gorbimania” credited the Soviet leader for the sea change in Europe. Nonetheless, during the actual process of German unification from 1989 to 1990, the United States played an important and consequent role vis-à-vis Moscow (Zelikow and Rice 1995). Given the symbolic importance of Berlin, the fall of its wall and German unification was also perceived in the United States as a major triumph and as “our victory.” Hardly any other country was overall so favorable toward German unification than the United States, much more so than, for obvious historical reasons, the states of continental Europe and Great Britain.

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References Beschloss, Michael. 2002. The Conquerors: Roosevelt, Truman, and the Destruction of Hitler’s Germany, 1941–1945. New York: Simon and Schuster. Brandt, Willy. 1992. My Life in Politics. London and New York: Hamish Hamilton. Breitman, Richard, Norman J. W. Goda, Timothy Naftali, and Robert Wolfe. 2005. U.S. Intelligence and the Nazis. New York: Cambridge University Press. Daum, Andreas W. 2007. Kennedy in Berlin. New York: Cambridge University Press. Dinan, Desmond, ed. 2006. Origins and Evolution of the European Union. New York: Oxford University Press. Fink, Carol, and Bernd Schaefer, eds. 2008. Ostpolitik and the World, 1969–1974. New York and London: Cambridge University Press. Frei, Norbert. 2002. Adenauer’s Germany and the Nazi Past. Translated by Joel Golb. New York: Columbia University Press. Hitchcock, William I. 1998. France Restored: Cold War Diplomacy and the Quest for Leadership in Europe, 1944–1954. Chapel Hill: University of North Carolina Press. Junker, Detlef, ed. 2004. The United States and Germany in the Era of the Cold War: A Handbook. Vol. 1, 1945–1968, and vol. 2, 1968–1990. New York and London: Cambridge University Press. Schaefer, Bernd, and David Geyer, eds. 2004. American Détente and German Ostpolitik, 1969–1972. Washington, D.C.: German Historical Institute. Schwartz, Thomas A. 1991. America’s Germany: John J. McCloy and the Federal Republic of Germany. Cambridge, Mass.: Harvard University Press. ______ . 2003. Lyndon Johnson and Europe: In the Shadow of Vietnam. Cambridge, Mass.: Harvard University Press, 2003. Steege, Paul. 2007. Black Market, Cold War: Everyday Life in Berlin, 1946– 1949. New York: Cambridge University Press. Steininger, Rold. 2006. Der vergessene Krieg: Korea, 1950–53 [The forgotten war: Korea, 1950–53]. Munich: Olzog. Stephan, Alexander, ed. 2005. The Americanization of Europe: Culture, Diplomacy, and Anti-Americanization after 1945. Boston: Berghahn Books. Van Hook, James C. 2004. Rebuilding Germany: The Creation of the Social Market Economy, 1945–1957. New York and London: Cambridge University Press. Zelikow, Philip, and Condoleezza Rice. 1995. Germany Unified and Europe Transformed: A Study in Statecraft. Cambridge, Mass.: Harvard University Press.

FIVE

Puerto Rico: A Cold War Showcase in Rapid Decline RAMÓN GROSFOGUEL

Introduction This chapter is about Puerto Rico’s economic development in the twentieth century and specifically its role as an important U.S. military location and showcase during the Cold War. I propose that the United States has made political and economic concessions to popular sectors in Puerto Rico (that have rarely been made to any other colonial or postcolonial peoples) due primarily to the military and symbolic strategic importance of the island. Here, I attempt to address these questions in a comparative perspective. Puerto Rico’s Modes of Incorporation, 1898–1991 The colonization of Puerto Rico by the United States has had three dominant interests, namely, economic, military, and symbolic. Despite the simultaneity of these three interests throughout the century, one interest could acquire priority over the others, depending on the different historical contexts. It is important to note that these interests can either reinforce or contradict one another. Contrary to the economism of some dependency/mode of production approaches, the economic interests did not always dominate the core/periphery relationship between Puerto Rico and the United States. Instead, state geopolitical considerations such as symbolic or military interests dominated U.S.-Puerto Rican relations over extensive periods during the twentieth century (Grosfoguel 1992). The importance of these geopolitical interests was such that in some instances they actually contradicted the corporate economic interests of the United States in Puerto Rico.

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The actors representing the economic, military, and symbolic interests articulating Puerto Rico’s colonial relationships with the United States during this century are as follows: 1. Economic interests are embodied by U.S. corporations. The dominant industries have shifted throughout time. From 1898 through 1940, U.S. sugar corporations were the dominant economic actors. During the 1947– 1970 period, labor-intensive light industries (apparel, textile, shoe, etc.) became dominant. As of 1973, U.S. capital-intensive high-tech transnational industries (that is, pharmaceutical and electronic) have controlled the production sphere. 2. Military interests are represented by the Pentagon. Puerto Rico has served as a beachhead for U.S. invasions and military operations in the Caribbean region. The island has been a naval training ground for joint exercises of NATO and Latin American vessels. Due to Puerto Rico’s tropical weather, it has served as a training ground for counterinsurgency operations deployed in countries such as Vietnam. American military interests in Puerto Rico ruled from 1898 through 1945. 3. Symbolic interests are inscribed in the actions taken by the U.S. State Department and Department of the Interior. For instance, Puerto Rico became a symbolic showcase of the capitalist model of development the United States presented to the Third World vis-à-vis the competing Soviet model. Puerto Rico thereby became an international training ground for President Truman’s Point Four Program. Through this program, thousands of members of peripheral countries’ elites visited Puerto Rico to receive technical training and learn firsthand the lessons of the first experiment in capital-import-export-oriented industrialization. This development was based on attracting foreign capital through cheap labor, development of industrial infrastructure, and tax-free incentives for corporations. Billions of dollars in federal aid were transferred from the core state to the colonial administration in order to make of Puerto Rico a “success story” (Grosfoguel 1992). The dialectical dynamics among the interests outlined previously are crucial in understanding the specific U.S. relationship with Puerto Rico. For example, political concessions to the Puerto Rican population as a result of military or symbolic considerations became contradictory to U.S. corporations’ economic interests during certain historical periods. This relationship cannot be accurately understood from a traditional dependency perspective. Dependency theorists in Latin America distinguish a “colonial situation” from a “dependency situation” (Cardoso and Faletto 1979; Marini 1973). This distinction is premised upon the formation of a nation-state, in which the degrees of metropolitan control are significantly reduced vis-à-vis a colony. The dependentistas’ theoretical work and

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empirical research is based not upon colonial situations but on situations of dependency in nation-states. As Cardoso and Faletto said in their preface to the English edition of Dependency and Development in Latin America: We have not intended to discuss colonial types of contemporary situations of dependency in Latin America, such as, in the purest example, Puerto Rico. Considerable intellectual work has to be done to specify and render understandable, in the context of a more general view about dependency, the particularities of colonial or almost colonial situations. This book has not the pretension to exhaust or even to deal with all the forms of dependency that occur even in Latin America. (Cardoso and Faletto 1979, xxiv–xxv)

Nation-states in today’s global economy wield ever-diminishing power to regulate their local economies. Even core states have lost control over transnational capital flows. Thus, dependency theory’s distinction between peripheral nation-states and colonies has weakened over time. Moreover, I believe that, overall, dependency approaches are too economistic to properly conceptualize core-periphery relations. The dependentista distinction between an enclave economy and a nationally controlled export economy does not account for the complexity of the different peripheral modes of incorporation. Following this, I prefer to conceptualize Puerto Rico’s modes of incorporation as the hierarchical articulation (harmonious and/or contradictory) between the economic, military, and symbolic interests of the United States spanning various historical contexts. The consequent periodization of Puerto Rican history during the twentieth century would be, then, as follows: a period of agrarian capitalism in which U.S. military interests predominated (1898–1940); a labor-intensive export-oriented industrialization period in which the U.S. State Department’s symbolic interests were dominant (1950–1970); a capital-intensive export-oriented industrialization period in which both the transnational corporations and military interests shared the dominant position (1973–1990);1 and an era of overtly economic interests dominating over all geopolitical interests, thus significantly reducing the island’s strategic importance (1991–?). Despite the predominance of one or two actors’ interests (Pentagon, U.S. corporations, State Department) at a specific historical period, the three have been simultaneously present throughout these periods. However, the peculiar manifestations of each interest and the articulations among them have changed historically.

The “936 Law” enabled transnational corporations in Puerto Rico to repatriate their profits to the mainland without paying U.S. federal taxes. 1 

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The Debates of Puerto Rican History in the Early Twentieth Century The literature on Puerto Rican history during the early twentieth century is split between those who emphasize the economic importance of the island for U.S. capital (Dietz 1986; Muñiz Varela 1981; Santiago 1984a, 1984b; Mattos Cintrón 1980; Quintero Rivera 1976) and those who emphasize Puerto Rico’s military importance for U.S. strategic interests (Estades Font 1988; Rodríguez-Beruff 1988). Although the “economic research school” did excellent work concerning Puerto Rico’s economic transition from Spanish to American rule, it also underestimated the importance of the strategic military interests of the U.S. invasion. In turn, the “military research school,” despite correctly emphasizing the U.S. military’s interest in Puerto Rico, has underestimated how these military interests articulate economic interests. The limitations of the economic research school underscore the deficiencies of the development theories structuring its studies. When attempting to analyze Caribbean countries, the economism of the traditional political economic approaches (for example, the dependency school, articulationist mode of production school, internationalization of capital approach, regulationist school) has precluded the conceptual incorporation of two other fundamental features. First, most of the region is composed of islands with relatively small populations. Thus, its markets are relatively limited and of secondary importance. Second, the strategic military location of the Caribbean is both crucial and underestimated. The geopolitical importance of the region lies not only in the commercial routes ships use to reach markets in South America but also in its strategic position in relation to the Panama Canal. The region is a crucial focus of U.S. mainland defense strategies against possible foreign aggressions. These Caribbean features explain why the region has been a battlefield for different core states of the evolving World-System throughout the past five centuries. The studies of the military research school have rightly emphasized geopolitical factors. Yet, such studies have not articulated the relation of geopolitical interests with economic interests of the core. I will address this gap in more detail presently. My alternative to the economic and geopolitical reductionism of the economic and military approaches has been to analyze Puerto Rico within the following framework. I conceptualize the World-System as a single multidimensional system with multiple structuring logics,2 such By “logics” I refer to strategies used by different actors to structure or restructure the World-System according to their interests. Such logics differ contingent upon actors and historical conditions. They might reproduce or transform existing structures in ways not necessarily foreseen by the actors themselves. 2 

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as capitalist accumulation, state military security, symbolic strategies of prestige and honor, and struggles of antisystemic social movements. Contingent upon each historical period, a single logic may predominate over the others in a relationship of contradiction and/or reinforcement. The relationships between these logics are semiautonomous. This means that they are neither fully autonomous (as the liberal state autonomy position would have it) nor fully reducible to any given logic (as proposed by the Marxist instrumentalist position). Thus, rather than equate the plurality of systemic structuring logics to an ontological plurality, the economic, political, and ideological-symbolic relations mutually interface in a single capitalist World-System. However, in the long run, the modern World-System is a capitalist world economy because capitalist accumulation logic has dominated, transformed, and significantly influenced other logics. It has also been the primary articulator of the connections and relationships within the system. The predominance of the capitalist accumulation logic is not due to a teleological or a priori movement of history but to the historical-political success of those social forces that have benefited from the capitalist accumulation process. The theoretical framework outlined here will be used to understand the different modes of incorporation of twentieth-century Puerto Rico into the United States. The Interstate System By the end of the nineteenth century, an interimperialist rivalry over the possession of colonial territories characterized the interstate system (Cox 1987). The end of the Pax Britannica marked the beginning of an anarchic period in which no core state held hegemonic power over the system. From 1884 through 1914, more colonial incorporations occurred than during any other prior historical period. During this period, most core countries reached a phase of monopoly capitalism. These core countries were in economic need of colonial territories, cheap raw materials for their industries, cheap agricultural products to reduce the cost of reproduction of the core’s labor force, capital exports for primary-good production in the periphery, and new markets for their surplus production. Any increase of colonial possessions by an imperialist state represented a political threat to competing imperialist states. State security and political stability were important determinants during this expansionist period. The geopolitical strategies of core countries in the world interstate system have been crucial determinants of the peripheral incorporation of Caribbean societies. The interest of the United States in seizing Cuba and Puerto Rico from Spain responded mainly to state security interests. Several years prior to the Spanish-American War of 1898, American naval strategist Alfred T. Mahan stressed the strategic importance of building a

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canal in Central America in order to solve a major problem of U.S. mainland defense: the forced division of its naval fleet between the Atlantic and Pacific Coasts. A U.S.-controlled canal in Central America would enable fleet unity. The fleet would move with greater speed and security from one ocean to the other by way of a canal, thus making unnecessary the detour through the Strait of Magellan. Otherwise, 13,000 miles had to be navigated between San Francisco and Florida, which took more than sixty days (Estades Font 1988, 27–28). Besides building and controlling a canal, Mahan added that it would be necessary to control the canal’s eastern and western strategic maritime routes prior to construction. Mahan foresaw that the construction of a canal would attract the interest of other imperial powers, forcing the United States to enter international conflicts. According to Mahan, foreign control of the canal could be used as a beachhead to attack the United States. This foreign control would destroy the major U.S. asset against a foreign aggression, namely, its geopolitical isolation (Estades Font 1988, 27–28). As a means to achieve geopolitical control, he recommended the acquisition of Hawaii and the naval control of four Caribbean maritime routes before building the canal. The four routes included Paso de Yucatán (between Mexico and Cuba); Paso de los Vientos (the principal U.S. access route to the canal between Cuba and Haiti); Paso de Anegada (near St. Thomas, an island off Puerto Rico’s eastern coast); and Paso de la Mona (between Puerto Rico and the Dominican Republic) (Estades Font 1988, 29). Mahan advised that naval bases be established in each of these zones. His strategic project outlined the steps necessary for the United States to become a superpower. Mahan’s influence was strongly felt among key political elites headed by Theodore Roosevelt and Henry Cabot Lodge (Estades Font 1988, 31; Rodriguez-Beruff 1988, 149). The only islands with access to the four maritime routes mentioned by Mahan were Cuba and Puerto Rico. Moreover, when compared to Haiti and the Dominican Republic, which had already become nation-states, the former were more amenable to foreign control. Cuba and Puerto Rico were still colonies of Spain, a weak and declining imperial state. These islands became targets because the United States feared that other imperial countries would take advantage of Spain’s weakness by seizing its last two colonies in the Western hemisphere (Estades Font 1988, 40). Another strategic consideration at the time was to intervene before Cuban nationalist rebels defeated Spain in their war of independence. A sovereign nation-state could make the negotiation process difficult for the United States (Mattos Cintrón 1980, 58). In sum, U.S. elites considered the seizure of Cuba or Puerto Rico by a foreign state to be a security threat, given that those islands could be used to attack the United States.

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This belief was not farfetched at the time, since the Germans already possessed a military plan to attack the United States in which the first step was to seize Puerto Rico (Helwig 1976, 61–65, 86–87). Thus, by the mid1890s, the United States had planned its conflict with Spain (Estades Font 1988, 40–41). In 1898, it seized Puerto Rico and Cuba from Spain during the Spanish-American War. The United States estimated that any European naval attack to the canal would enter through the northeastern region of the Caribbean, close to Puerto Rico’s eastern coast. Puerto Rico, a vital point for the canal’s defense, had a major strategic location. After the Spanish-American War, Mahan put it as follows: This estimate of the military importance of Puerto Rico should never be lost sight of by us as long as we have any responsibility, direct or indirect, for the safety or independence of Cuba. Puerto Rico, considered militarily, is to Cuba, to the future Isthmian canal, and to our Pacific Coast, what Malta is, or may be, to Egypt and the beyond; and there is for us the like necessity to hold and strengthen the one, in its entirety and in its immediate surroundings, that there is for Great Britain to hold the other for the security of her position in Egypt, for her use of the Suez Canal, and for the control of the route to India. It would be extremely difficult for a European state to sustain operations in the eastern Mediterranean with a British fleet at Malta. Similarly, it would be very difficult for a transatlantic state to maintain operations in the western Caribbean with a United States fleet based upon Puerto Rico and the adjacent islands. (Mahan 1899, 28–29)

The U.S. military accordingly prescribed that Puerto Rico should remain a colonial possession and that a naval base be built off the northeastern cost of Puerto Rico in Culebra (see Estades Font 1988, 36). The geopolitical interests of the United States and the local relations with forces of Puerto Rico and Cuba conditioned the different modes of incorporation of the two islands. The United States encountered important local differences between Cuba and Puerto Rico. Whereas Puerto Rico had a weak nationalist agenda, Cuba had a strong nationalist movement able to pressure the Americans to depart. The negotiations between the United States and Cuba established a protectorate treaty as well as the American right to build a naval base in Guantánamo. The agreement, named the Platt Amendment, referring to postoccupation Cuban-American relations, “pledged the republic to maintain a low public debt, to refrain from signing any treaty impairing its obligation to the United States; to grant to the United States the right of intervention to protect the life, liberty, and property; to validate the acts of the military government; and, if requested, to provide long term

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naval leases” (Langsley 1985, 21). This treaty became the model of U.S. policy in the region for the next decades. Internal Power Relations Two salient features of the internal power relations in Puerto Rico affected its mode of incorporation to the United States. First, all political parties supported the annexation of Puerto Rico to the mainland immediately after the 1898 invasion (Mattos Cintrón 1980). Shortly after the landing of U.S. troops in Puerto Rico, General Miles proclaimed that the war against Spain occurred for humanitarian reasons, including justice and freedom. According to Estades Font, Miles’s proclamation fell on fertile ground. The repressive regime of Spain . . . in Puerto Rico throughout most of the nineteenth century stimulated pro-independence and autonomist struggles and provoked the progressive discontent of the Puerto Rican society. It is also true that the United States enjoyed great economic and political prestige. The landowners, specially the sugar planters, wanted to recuperate their access to the U.S. market which they had lost as a result of the tariff war with Spain during the last years. The workers were confident they would obtain the union rights that Spain had denied them. In all, the liberal and autonomist political parties hoped for the implementation of a regime which would guarantee the same civil rights and liberty that U.S. citizens enjoyed. (Estades Font 1988, 89–90)

Second, Puerto Rico did not have a nationalist movement at the time of the U.S. invasion. This allowed the United States to make Puerto Rico a colonial possession without difficulties, thus providing the best conditions to safeguard the military strategic use of the island. Following this, the United States established an authoritarian military government between 1898 and 1900. Puerto Ricans were drafted into the U.S. Army, and a local police force was organized under the command of American officials. Simultaneously, U.S. military authorities favored the local sugar landowners by facilitating access to U.S. markets and by enabling the direct investment of U.S. sugar corporations in Puerto Rico. This state of affairs contrasted heavily with the situation of the coffee hacendados who were not protected against Brazilian coffee imports to the U.S. market and for whom the European market was closed. It is important to note that the military’s interest in promoting U.S. capital penetration was primarily political. Its aims included finding allies with U.S. capital for its military adventures abroad, reorienting the local economy from Spanish to American dependency to preclude European justification for intervention, structuring an economic project that could subsidize the militarycolonial administration, and weakening the social basis of the coffee

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hacendado sectors, given their potential for becoming the major social force of an organized nationalist movement in the future (Mattos-Cintrón 1980; Langsley 1985; Berbusse 1966). During this period, the logic of accumulation was subordinated to military-annexionist logic. The interrelation of these semiautonomous strategic-military and economic logics defined the incorporation of Puerto Rico. Both logics coincided, however, in their desire to keep the island as a colonial possession. After the U.S. invasion, the Orthodox Party and Liberal Party exchanged political programs (Mattos-Cintrón 1980). Linked to the sugar landowners who were radical autonomists under Spain, the former became an annexionist force under U.S. domination. This transition was marked by a name change from the Orthodox Party to the Puerto Rican Republican Party. Linked to the coffee hacendados who were moderate autonomists under Spain, the Liberal Party initially assumed an annexionist position with autonomistic tendencies but later became a radical autonomist party, ultimately flirting with pro-independence positions. These transitions were marked by name changes from the Liberal Party to the Federal Party and subsequently to the Union Party. The Union Party represented those social forces with the greatest potential for building a pro-independence movement (Mattos-Cintrón 1980). However, the local hacendados were never supported by the popular classes. Due to the hacendados’ alliance with the Spanish colonial administration’s authoritarian-repressive measures against the rights of peasants and workers, many among these sectors perceived the hacendados as their class enemies. Workers and peasants associated the hacendados’ pro-independence positions with a romantic nostalgia for the forms of labor coercion and authoritarianism of the Spanish regime under which the hacendados’ social and economic position had not been threatened. Alternately, under U.S. domination, many workers saw an opportunity to establish civil and labor rights by pressuring the U.S. government to extend their legislative laws to the island. These sectors adopted the Americanization discourse promoted by the new imperial power as a strategy to politically weaken the power of the local hacendados and gain democratic rights recognized by the metropolitan constitution. The United States extended labor rights to Puerto Rico despite its negative effects on U.S. sugar corporations. It did so for several reasons. One, it wanted to gain popular support for the island’s colonial incorporation. By extending labor rights to Puerto Rican workers, the pro-annexionist position of the labor movement was strengthened. This encouraged the formation of a pro-colonial bloc that impeded pro-independence alliances. The U.S. government’s extension of individual democratic rights to Puerto Rico

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proved to be an important deterrent to the development of a collective national demand for self-determination. Again, once the United States incorporated Puerto Rico as a colony, the state developed a cultural “Americanization” strategy that promoted the inculcation of “American values and customs.” Labor union rights were a key component in the success of this strategy. Two specific elements of this program were the imposition of English-speaking public schools and the proliferation of the Protestant Church on the island (Negrón de Montilla 1975). The cooptation strategy toward the Puerto Rican working classes marks a distinctive feature of Puerto Rico’s incorporation. The U.S. military occupations of such Caribbean countries as Cuba, the Dominican Republic, and Haiti had relied on authoritarian alliances with landowners and/or the political and military elites to protect U.S. interests. Cooptation in Puerto Rico, however, relied on a populist-democratic alliance with the island’s working and progressive-liberal middle class sectors at the expense of the coffee landowners. Such extensions of democratic rights precluded the island’s working classes from sympathizing with a nationalist solution to the colonial question. The weakening of the hacendados’ power base also debilitated Puerto Rican pro-autonomy forces and accelerated wage-labor relations. By contrast, the U.S. invasion of a country like Haiti relied on a class alliance with the local commercial elites and the coffee landowners that strengthened noncapitalist forms of labor coercion (Castor 1971). In sum, the evidence suggests that Puerto Rico’s re-peripheralization from a Spanish possession to a U.S. colony was predominantly due to the American government’s security interests. Puerto Rico’s geopolitical location was strategically important for the U.S. government’s defense against possible European aggression toward the Panama Canal and the United States. Contrary to the peripheral incorporation of other countries in which mining and agricultural interests predominated, Puerto Rico’s incorporation into the United States in the early twentieth century was geopolitically motivated. The secondary status of the U.S. government’s economic interests was such that state policies such as the extension of civil and labor rights worked against the financial interests of U.S. corporations investing in the island. The 1930s and Early 1940s in Puerto Rico During the Great Depression, the United States developed the “Good Neighbor” foreign policy toward Latin America. The spread of poverty, unemployment, and hunger throughout Puerto Rico, along with the emerging popularity of pro-independence ideas among many sectors, had become a shameful example of U.S. foreign policy in the region. The

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United States, in order to counteract the impact of Puerto Rico’s situation upon its international reputation, extended to Puerto Rico certain New Deal reforms and also supported an industrialization program (that is, the Chardón Plan). This change of policy was marked by the transfer of the U.S. colonial administration in Puerto Rico from the War Department to the Department of the Interior. However, the local power bloc hegemonized by U.S. sugar plantations presented many obstacles for the extension of these reforms. This period in U.S.-Puerto Rico relations (when U.S. symbolic interests dominated Puerto Rico’s incorporation) was short lived due to the imminent threat of war. Thus, military interests again became preeminent. During the late 1930s and early 1940s, the U.S. government supported a local populist power bloc at the expense of U.S. sugar corporations. The mortal blow was the implementation of the Five Hundred Acre Law in 1941 (Mattos-Cintrón 1980). This law forced U.S. corporations to sell all land in excess of 500 acres to the colonial government. These lands were used to enforce the agrarian reform that eradicated the agregados (peasants forced to pay in rent, kind, or labor for living on landowners’ property) and mitigated the housing needs of thousands of peasants. State military considerations during the Second World War fundamentally structured these policies. The state understood that a local population angry at the exploitation and abuses of U.S. sugar corporations was completely undesirable since it could represent a security problem for the military use of the island in times of war. The new governor of Puerto Rico in 1941, the reformist liberal Rexford Tugwell, confirms the military priority of Puerto Rico in his memoirs: “My duty as a representative of my country in Puerto Rico was to shape civil affairs, if I could, so that military bases, which might soon (before they were ready) have to stand the shock of attack, were not isolated in a generally hostile environment” (1947, 148). In short, U.S. strategy in Puerto Rico was one of exchanging basic democratic rights to Puerto Ricans for the military exploitation of the island. Core States’ Symbolic Strategies to Showcase Peripheral Countries during the Cold War Following the Second World War, symbolic geopolitical strategies became an important structuring logic of the core-periphery relationships in the World-System, whose geopolitical configuration had been redrawn by the defeat of the Nazis. The bipolar world division between the Soviet Union and the United States and the emergence of newly independent countries in the periphery were two crucial features that transformed the interstate system. The decline of colonial relations as the dominant

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means of core control over the periphery increased the instability in the system. Both superpowers were afraid that the elites in the newly independent countries might go with “the other side.” It is within this context that strategies of symbolic capital (Bourdieu 1977) to gain “profits” of prestige and honor vis-à-vis an adversary emerged as a contemporary feature of the capitalist World-System. For instance, core states develop strategies of symbolic capital by showcasing a peripheral country or an ethnic group as opposed to challenging a peripheral country or ethnic group. These strategies are economically expensive because they entail the investment of capital in different forms such as credits, aid, and assistance programs. Nevertheless, in the long run symbolic profits could translate into economic profits. Showcasing a symbolic ethnic group within a region or a peripheral country within the World-System is an important ideological-symbolic strategy. Since the 1950s, the United States has showcased several peripheral countries in different regions of the World-System where communist regimes represented a challenge, such as Greece vis-à-vis Eastern Europe, Taiwan vis-à-vis China, South Korea vis-à-vis North Korea; in the 1960s, Nigeria vis-à-vis Tanzania, Puerto Rico vis-à-vis Cuba; and in the 1980s, Jamaica vis-à-vis Grenada and Costa Rica vis-à-vis Nicaragua. Other showcases in the region include Brazil in the 1960s (the so-called Brazilian miracle) and, more recently, Mexico and Chile in the 1990s as post–Cold War neoliberal showcases. Compared to other countries, all these showcases received disproportionately large sums of U.S. foreign aid, favorable conditions for development such as flexible terms to pay their debts, special tariff agreements that made commodities produced in these areas accessible to the core’s market, technological transfers, or any combination of these. Most of these showcase successes lasted for a few decades, subsequently failing. However, they were crucial to ideologically “conquer the minds and hearts” of Third World peoples in favor of a pro-U.S. developmentalist program. Without factoring in symbolic geopolitical strategies, it would be difficult to say why in the early 1950s U.S. officials implemented, financed, supported, and encouraged a radical agrarian reform in Taiwan while in Guatemala they answered a much milder agrarian reform by the Arbenz administration with a CIA-backed coup d’état. It is not as simple as saying that in Guatemala the aggrieved party was the (American) United Fruit Company while in Taiwan it was local (Taiwanese) landlords. During the 1940s, the United States supported an agrarian reform in Puerto Rico that forced U.S. corporations to sell all land in excess of 500 acres and struck a mortal blow against the island’s plantation system (Dietz 1986). Why was the U.S. government willing to sacrifice the economic

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interests of the U.S. sugar corporations in Puerto Rico, but not the interests of the United Fruit Company in Guatemala? The answer takes us to the heart of the World-System approach. The World-System is structured upon a world division of labor and an interstate system. Core states’ geopolitical strategies can sometimes sacrifice short-term capitalist interests for the long-term interests of capitalism as a World-System. The countries that serve as symbolic showcases for the capitalist World-System exemplify this mechanism. They were geopolitical and military strategic locations and geopolitical symbolic battlegrounds within a region. Their so-called development is really an upward mobility from a peripheral to a semiperipheral position in the World-System. They form part of what Immanuel Wallerstein identifies as semiperipheral states that play not only an economic function but probably more importantly a political function in the World-System. It is in the interest of the core players in a polarized system such as the capitalist world economy to create semiperipheral ‘middle’ sectors, which tend to think of themselves primarily as better off than the lower sector rather than as worse off than the upper sector” (Wallerstein 1979, 69). I would add that certain semiperipheral states also played an ideological role in an unstable context such as the end of the colonial means of political control over the periphery and the beginning of the Cold War. Developmentalist ideology was reinstated through the “success” of symbolic showcases over a challenging peripheral state. The West increased its symbolic capital through the economic success of strategically located countries. This political mechanism can be seen at different levels of the WorldSystem. Cubans in Miami have become a successful “symbolic ethnic group,” created and financed by the U.S. government to ideologically “prove” the superiority of capitalism over the Soviet model of development in Cuba (Grosfoguel 1994). Cuban exiles, approximately 600,000 by 1975, received in fifteen years (1960–1974) 1.3 billion dollars. As we can see, countries and ethnic groups that serve as symbolic showcases received large amounts of U.S. foreign aid. The developmentalist illusion is to think that symbolic showcase countries such as Taiwan and South Korea and symbolic ethnic groups such as Cubans developed primarily due to their hard-working people, the correct public policies of their elites, the astute maneuvering of their developmentalist state, or a combination of these. This “Munchausen” effect is one of the key liberal ideological tenets of the capitalist world economy. “State-centered” approaches have done a great job in demystifying the IMF and the World Bank’s mythical understanding of the success of Taiwan and South Korea as due to “free market” policies. However, they

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fall into the developmentalist trap by centering the success of these countries in the nation-state, that is, in the existence of an autonomous developmentalist state that promotes the proper or correct public policies. As British geographer Peter Taylor once suggested, if India rather than China had had a “socialist” revolution, Sri Lanka, not Taiwan, would have been the “economic miracle.” The United States has recently declassified many secret documents of the Cold War. Some of the newly declassified documents are revealing of the situation under discussion here. In Taiwan and South Korea, the United States organized a secret committee composed of U.S. officials and local elites that met on a weekly basis for more than a decade to monitor the economy of each country and design policies to ensure their “successful development.” The core state paid for industrial machinery and transferred advanced technology (U.S. State Department 1957a). Contrary to the “state-centered” approach (Evans 1989; Amsden 1979; White 1988), the developmentalist state was formed with the direct intervention and assistance of the United States as part of geopolitical strategies within a bipolar interstate system (U.S. State Department 1957b). The shift from import-substitution industrialization to export-oriented industrialization was not the result of “astute maneuvering” by the local elites, but was imposed by the United States against their will. American elites pressured Chinese political elites in Taiwan to renounce their military goal of conquering China and to play a more ideological role in the region through “successful development policies.” In a meeting with Chiang Kai-shek during the 1958 Taiwan Straits crisis, U.S. Secretary of State John Foster Dulles, insisting that the Kuomintang give up its aggressive strategy to reconquer China through forceful means, said: Thus, the GRC can better thwart the materialistic efforts of the CPR on the mainland; it can be a symbol which the mainland will observe and envy; attract more lasting support on Taiwan; can better hold loyalty of overseas Chinese; and can make itself into something which not only the United States but the free peoples everywhere will want to stand for and cherish. (U.S. State Department 1958)

One year later, a confidential report signed by Joseph A. Yeager, chargé d’affaires ad interim in the U.S. embassy at Taipei, to the U.S. secretary of state about the recent formation of an Accelerated Development Program for Taiwan, read: The proposal to embark on an accelerated development program for Taiwan rests fundamentally upon heightened recognition of both the high costs of failure of the United States economic efforts on Taiwan and the high rewards of success. On the one hand, if economic growth is

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Ramón Grosfoguel not speeded up to provide food and jobs for a rapidly growing population, a major prop of political stability will be undermined and with it prospects for maintaining Taiwan and the GRC armed forces as key elements in the defenses of the United States in the Western Pacific. On the other hand, the United States has in Taiwan an almost unparalleled opportunity to demonstrate what a free Asian society can achieve, in stark contrast to the dismal picture presented to the world by the oppressive and inhumane methods of economic expansion pursued by the Chinese Communists. The fact that the “showcase” to be built on Taiwan will be a Chinese one will of course add greatly to the impact of the political lesson involved. (U.S. State Department 1960)

Capitalist exploitation through direct foreign investments was not the main U.S. goal in Taiwan, but rather the development of a solid local capitalist class able to subsidize military efforts to contain the advance of communism and serve as a showcase of capitalism in the region. In Latin America, the exploitation of raw materials as well as market penetration through direct foreign investments were the primary U.S. goals. Whereas the United States subsidized the budget deficits created by the import-substitution industrialization in Taiwan and South Korea, Latin America did not receive the same assistance in core-state transfers. The Latin American deficits from the import-substitution industrialization were subsidized through international loans supplied by the financial centers of the world economy. This was a factor that later contributed to the dramatic increase in foreign debts in the region during the 1970s. This differential geopolitical incorporation in the capitalist world economy can help us understand the further decline of Latin America vis-à-vis Southeast Asia. Even during this post–Cold War era, the core states continue to require showcases to fulfill ideological roles. Mexico and Chile are the region’s new economic “miracles.” They were not as deliberately manufactured as were their Cold War counterparts but have been assisted through diverse mechanisms. For example, using Mexico’s oil exports as collateral, the Clinton administration intervened in the Mexican crisis of 1994 with billions of the U.S. Treasury’s Exchange Stability Fund dollars (money usually intended to stabilize the dollar generally) to save Wall Street investors and the neoliberal developmental model simultaneously. Yet during Mexico’s 1982 foreign debt crisis, the United States had not intervened. The difference is that today Mexico plays a role as a “showcase” for U.S. regional policies. Any disturbance in Mexico will have a direct effect on capital investments and the credibility of the neoliberal model in the entire region. The importance of the core’s symbolic showcase strategy in the WorldSystem is the ideological effect over the economic and political elites of

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the region. The system needs a few successful semiperipheral cases to gain credibility. The reemergence of neoliberal developmentalist ideologies in the region is partly tied to this process. Postwar Puerto Rico American symbolic interests in Puerto Rico regained dominance immediately after the Second World War. Puerto Rico became a token in the symbolic battleground between the Soviet Union and the United States, particularly in the United Nations. The Soviets claimed that Puerto Rico symbolized U.S. colonialist and imperialist aims in the world. Concerned about the image of the United States in the eyes of the newly independent Third World countries, the State Department put pressure on making concessions to Puerto Rico. These concessions developed into a strategy to make Puerto Rico a showcase of democracy and capitalism during the 1950s and 1960s (see Grosfoguel 1992). The first concession was the appointment of a Puerto Rican as governor in 1946. The right to elect a local governor was established shortly after, in 1948. Following this, the metropolis fostered the creation in 1952 of a new status called Estado Libre Asociado (Commonwealth). Lastly, a program of industrialization through massive foreign capital investments (that is, the model of industrialization by invitation) was implemented, thus radically improving the island’s infrastructure. These transformations allowed the U.S. State Department to designate Puerto Rico in 1950 as the Point Four Program’s international training ground for technical development of Third World elites. This program was more ideological than technical, to the extent that these elites learned firsthand about the American model of development for Third World countries as opposed to the competing Soviet model. Puerto Rico’s important symbolic role during the Cold War explains the massive U.S. federal assistance given to Puerto Rico in areas such as housing, health, and education (Grosfoguel 1992). Puerto Rico was treated like any other state in need of federal assistance. The main difference between Puerto Rico and other states was that Puerto Rico’s residents did not have to pay federal taxes. It is important to note that this privileged status was not granted to any other U.S. colonial territories. In order to fulfill Puerto Rico’s symbolic role and foster a successful economic program, the U.S. government cooperated with local elites to initiate a massive labor migration of the marginalized Puerto Rican labor force. The creation of the institutional framework to facilitate migration through the availability of cheap airfares between Puerto Rico and the United States, as well as an advertisement campaign for jobs in the United States, provided the framework for the process of mass migration.

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One of the most desired goals of this migration was the stabilization of the local labor market characterized by high unemployment rates. The Crisis Years: 1970–1990 Puerto Rico experienced a major economic restructuring after the 1973 oil crisis. Although the colonial administration wanted to change the industrialization strategy from labor intensive to capital intensive during the mid-1960s, the transformation only occurred after 1973. At the time, Puerto Rico was the most important producer of apparel products for the U.S. market. By 1979, however, it represented an insignificant portion of the market (Dietz 1986). The cost of living increases due to the 1970s stagflation and labor unrest also brought about wage increases that made Puerto Rico unattractive to labor-intensive industries, further worsening the situation. In addition to these structural shifts, the U.S. federal minimum wage was extended to Puerto Rico during the late 1970s. By 1980, the average salary per hour was $3.84, and the minimum salary per hour was $3.10. The wage per hour of a Dominican worker represented 34% of a Puerto Rican manufacturing worker’s at the end of the 1970s (Informe Económico al Gobernador 1988, 84). Thus, many labor-intensive industries moved to the Dominican Republic, Haiti, Mexico, and Southeast Asia; this increased unemployment in Puerto Rico from 11% in 1970 to 20% in 1977. This trend toward deindustrialization begun in the late 1960s, accelerated during the 1970s, and continued to dominate during the 1980s, during which the Caribbean Basin Initiative opened U.S. markets to exports from other countries in the region. Given Puerto Rico’s importance as a symbolic showcase and a strategic military location, the United States responded to the 1974 economic crisis with two measures aimed to guarantee political stability and the survival of the “industrialization by invitation” model of development. The first measure was the increase of federal transfers by extending the food stamp program to Puerto Rico. Federal transfers to individuals increased from $517 million in 1973 to $2.5 billion in 1980 and $4 billion in 1989. Federal aid represented 8% of the GNP and federal transfers to individuals 10% of personal income in 1973, 23% and 22% in 1980, and 21% and 21% in 1989. Whereas approximately 60% of Puerto Rican families qualified for food stamps, only 11% of families in the United States qualified for the same program. This countercyclical “shock absorber” is crucial to understanding how the Puerto Rican lower classes survived the crisis. The second measure implemented by the U.S. government was the approval of the “936 Law” in 1976. This law exempts subsidiaries in Puerto

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Rico from paying federal taxes on the profit remittances to their matrix corporations. It was intended as a new breath for the industrialization program. As a result, capital-intensive industries such as the pharmaceutical and electronic industries moved their operations to Puerto Rico. The law enabled corporations to avoid federal taxation on their profits in the United States through an accounting game that transferred their profits to their Puerto Rican subsidiaries. This form of handling profits stimulated the growth of high-tech manufacturing industries and financial institutions on the island. During this period, many international banks opened subsidiaries on the island to compete for 936 funds. Puerto Rico, in stark contrast to its recent past, became a service and high-tech manufacturing economy. In 1950, the extractive and transformative sectors (for example, agriculture, home needlework, and sugar manufacturing) represented 55% of total employment while the service sector constituted only 45%. The 1950–1970 period marked the decline of agriculture and an increase in light manufacturing jobs. In 1970, the extractive and transformative sector decreased to 40% of total employment. By 1987, however, the manufacturing and extractive sectors had decreased to 27% of total employment while services had increased to 73%. This growth of the service sector was felt most in the public sector. Social services (that is, government service jobs) increased from 23.2% of total employment in 1970 to 35.2% in 1987. Thus, the decline of jobs in the extractive and transformative sectors was balanced by the growth of the public sector, which created more than 100,000 jobs between 1970 and 1989 (see Junta de Planificación 1988). In this manner, the drastic growth of public administration jobs became the third countercyclical mechanism to address the post-1970s economic crisis. Farewell to the Showcase: The Post–Cold War Period, 1991–? The disappearance of the Soviet Union has changed the priorities of the core powers and the articulation among the different global logics. Today, U.S. economic interests prevail over geopolitical considerations, and domestic economic concerns over foreign policy. As Anthony P. Maingot states in an excellent article about the post–Cold War Caribbean, “geopolitics have given way to geoeconomics” (1994, 12). Therefore, the symbolic and military importance of Puerto Rico for the United States has become a secondary concern. In this sense, Puerto Rico is perceived by U.S. political elites more as an expense to the state than as an important military bastion or symbolic showcase. Such economic crises in the United States as the huge U.S. public debt have created the context for the U.S. Congress to cut 936 Law benefits for U.S. corporations in Puerto Rico, freeze federal transfers, and (among several factions of U.S. political

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elites) articulate a sympathetic position toward a more autonomous status for the island. These trends suggest that a change in Puerto Rico’s colonial status could result in the formation of a neocolonial relationship with the United States. If Puerto Rico became a neocolony, the United States would be relieved from the expenses of a modern colony and create a “colony without any benefits.” Particularly affected by this redefinition would be Puerto Rican popular sectors.

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______. 1958. “The Role of the Republic of China in the Free World.” Memorandum of a Conversation. Signed by John Foster Dulles. American Embassy at Taipei. Secret Document (22 October). ______. 1960. “Accelerated Development Program to Taiwan.” Report from the American Embassy at Taipei to the Secretary of State. Signed by Joseph A. Yeager. Confidential Document (12 January). Wallerstein, Immanuel. 1979. “Dependence in an Interdependent World: The Limited Possibilities of Transformation within the Capitalist World Economy.” In The Capitalist World Economy, by Immanuel Wallerstein. Cambridge and Paris: Cambridge University Press and Editions de la Maison des Sciences de l’Homme. White, Gordon, ed. 1988. Developmental States in East Asia. London: Macmillan.

UNIVERSITY OF CALIFORNIA, BERKELEY INSTITUTE OF EAST ASIAN STUDIES The Institute of East Asian Studies was established at the University of California, Berkeley, in the fall of 1978 to promote research and teaching on the cultures and societies of China, Japan, and Korea. The institute unites several research centers and programs, including the Center for Buddhist Studies, the Center for Chinese Studies, the Center for Japanese Studies, the Center for Korean Studies, the Group in Asian Studies, the East Asia National Resource Center, and the Inter-University Program for Chinese Language Studies. Director: Associate Director: Executive Committee:

Wen-hsin Yeh Martin Backstrom Martin Backstrom, Patricia Berger, John Connelly, Penelope Edwards, Thomas B. Gold, Andrew Jones, Hong Yung Lee, John Lie, Kevin O’Brien, Kaiping Peng, Robert Sharf, Alan Tansman, Steven Vogel, Bonnie Wade, Duncan Williams, Wen-hsin Yeh

CENTER FOR BUDDHIST STUDIES Chair: Robert Sharf CENTER FOR CHINESE STUDIES Chair: Andrew Jones CENTER FOR JAPANESE STUDIES Chair: Duncan Williams CENTER FOR KOREAN STUDIES Chair: John Lie GROUP IN ASIAN STUDIES Chair: Bonnie Wade EAST ASIA NATIONAL RESOURCE CENTER Director: Wen-hsin Yeh INTER-UNIVERSITY PROGRAM FOR CHINESE LANGUAGE STUDIES Executive Director: Thomas B. Gold

INSTITUTE OF EAST ASIAN STUDIES UNIVERSITY OF CALIFORNIA ● BERKELEY