Michael Hudson – Germany’s position in America’s New World Order

US policy is geared to one goal and one goal only: political and financial world hegemony, and military dominance.

Michael Hudson is President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City. He is the author of Killing the Host (published in e-format by CounterPunch Books and in print by Islet). His new book is J is For Junk Economics

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Photo: U.S. Air Force photo by Tech. Sgt. Robert J. Horstman

Germany has become an economic satellite of America’s New Cold War with Russia, China and the rest of Eurasia. Germany and other NATO countries have been told to impose trade and investment sanctions upon themselves that will outlast today’s proxy war in Ukraine. U.S. President Biden and his State Department spokesmen have explained that Ukraine is just the opening arena in a much broader dynamic that is splitting the world into two opposing sets of economic alliances. This global fracture promises to be a ten- or twenty-year struggle to determine whether the world economy will be a unipolar U.S.-centered dollarized economy, or a multipolar, multi-currency world centered on the Eurasian heartland with mixed public/private economies.

President Biden has characterized this split as being between democracies and autocracies. The terminology is typical Orwellian double-speak. By “democracies” he means the U.S. and allied Western financial oligarchies. Their aim is to shift economic planning out of the hands of elected governments to Wall Street and other financial centers under U.S. control. U.S. diplomats use the International Monetary Fund and World Bank to demand privatization of the world’s infrastructure and dependency on U.S. technology, oil and food exports.

By “autocracy,” Biden means countries resisting this financialization and privatization takeover. In practice, U.S. rhetoric means promoting its own economic growth and living standards, keeping finance and banking as public utilities. What basically is a issue is whether economies will be planned by banking centers to create financial wealth – by privatizing basic infrastructure, public utilities and social services such as health care into monopolies – or by raising living standards and prosperity by keeping banking and money creation, public health, education, transportation and communications in public hands.

The country suffering the most “collateral damage” in this global fracture is Germany. As Europe’s most advanced industrial economy, Germany steel, chemicals, machinery, automotives and other consumer goods are the most highly dependent on imports of Russian gas, oil and metals from aluminum to titanium and palladium. Yet despite two Nord Stream pipelines built to provide Germany with low-priced energy, Germany has been told to cut itself off from Russian gas and de-industrialize. This means the end of its economic preeminence. The key to GDP growth in Germany, as in other countries, is energy consumption per worker.

These anti-Russian sanctions make today’s New Cold War inherently anti-German. U.S. Secretary of State Anthony Blinken has said that Germany should replace low-priced Russian pipeline gas with high-priced U.S. LNG gas. To import this gas, Germany will have to spend over $5 billion quickly to build port capacity to handle LNG tankers. The effect will be to make German industry uncompetitive. Bankruptcies will spread, employment will decline, and Germany’s pro-NATO leaders will impose a chronic depression and falling living standards.

Most political theory assumes that nations will act in their own self-interest. Otherwise they are satellite countries, not in control of their own fate. Germany is subordinating its industry and living standards to the dictates of U.S. diplomacy and the self-interest of America’s oil and gas sector. It is doing this voluntarily – not because of military force but out of an ideological belief that the world economy should be run by U.S. Cold War planners.

Sometimes it is easier to understand today’s dynamics by stepping away from one’s own immediate situation to look at historical examples of the kind of political diplomacy that one sees splitting today’s world. The closest parallel that I can find is medieval Europe’s fight by the Roman papacy against German kings – the Holy Roman Emperors – in the 13th century. That conflict split Europe along lines much like those of today. A series of popes excommunicated Frederick II and other German kings and mobilized allies to fight against Germany and its control of southern Italy and Sicily.

Western antagonism against the East was incited by the Crusades (1095-1291), just as today’s Cold War is a crusade against economies threatening U.S. dominance of the world. The medieval war against Germany was over who should control Christian Europe: the papacy, with the popes becoming worldly emperors, or secular rulers of individual kingdoms by claiming the power to morally legitimize and accept them.

Medieval Europe’s analogue to America’s New Cold War against China and Russia was the Great Schism in 1054. Demanding unipolar control over Christendom, Leo IX excommunicated the Orthodox Church centered in Constantinople and the entire Christian population that belonged to it. A single bishopric, Rome, cut itself off from the entire Christian world of the time, including the ancient Patriarchates of Alexandria, Antioch, Constantinople and Jerusalem.

This break-away created a political problem for Roman diplomacy: How to hold all the Western European kingdoms under its control and claim the right for financial subsidy from them. That aim required subordinating secular kings to papal religious authority. In 1074, Gregory VII, Hildebrand, announced 27 Papal Dictates outlining the administrative strategy for Rome to lock in its power over Europe.

These papal demands are strikingly parallel to today’s U.S. diplomacy. In both cases military and worldly interests require a sublimation in the form of an ideological crusading spirit to cement the sense of solidarity that any system of imperial domination requires. The logic is timeless and universal.

The Papal Dictates were radical in two major ways. First of all, they elevated the bishop of Rome above all other bishoprics, creating the modern papacy. Clause 3 ruled that the pope alone had the power of investiture to appoint bishops or to depose or reinstate them. Reinforcing this, Clause 25 gave the right of appointing (or deposing) bishops to the pope, not to local rulers. And Clause 12 gave the pope the right to depose emperors, following Clause 9, obliging “all princes to kiss the feet of the Pope alone” in order to be deemed legitimate rulers.

Likewise today, U.S. diplomats claim the right to name who should be recognized as a nation’s head of state. In 1953 they overthrew Iran’s elected leader and replaced him with the Shah’s military dictatorship. That principle gives U.S. diplomats the right to sponsor “color revolutions” for regime-change, such as their sponsorship of Latin American military dictatorships creating client oligarchies to serve U.S. corporate and financial interests. The 2014 coup in Ukraine and selection is just the latest exercise of this U.S. right to appoint and depose leaders.

More recently, U.S. diplomats have appointed Juan Guaidó as Venezuela’s head of state instead of its elected president, and turned over that country’s gold reserves to him. President Biden has insisted that Russia must remove Putin and put a more pro-U.S. leader in his place. This “right” to select heads of state has been a constant in U.S. policy spanning its long history of political meddling in European political affairs since World War II.

The second radical feature of the Papal Dictates was their exclusion of all ideology and policy that diverged from papal authority. Clause 2 stated that only the Pope could be called “Universal.” Any disagreement was, by definition, heretical. Clause 17 stated that no chapter or book could be considered canonical without papal authority.

A similar demand as is being made by today’s U.S.-sponsored ideology of financialized and privatized “free markets,” meaning deregulation of government power to shape economies in interests other than those of U.S.-centered financial and corporate elites.

The demand for universality in today’s New Cold War is cloaked in the language of “democracy.” But the definition of democracy in today’s New Cold War is simply “pro-U.S.,” and specifically neoliberal privatization as the U.S.-sponsored new economic religion. This ethic is deemed to be “science,” as in the quasi-Nobel Memorial Prize in the Economic Sciences. That is the modern euphemism for neoliberal Chicago-School junk economics, IMF austerity programs and tax favoritism for the wealthy.

The Papal Dictates spelt out a strategy for locking in unipolar control over secular realms. They asserted papal precedence over worldly kings, above all over Germany’s Holy Roman Emperors. Clause 26 gave popes authority to excommunicate whomever was “not at peace with the Roman Church.” That principle implied the concluding Claus 27, enabling the pope to “absolve subjects from their fealty to wicked men.” This encouraged the medieval version of “color revolutions” to bring about regime change.

What united countries in this solidarity was an antagonism to societies not subject to centralized papal control – the Moslem Infidels who held Jerusalem, and also the French Cathars and anyone else deemed to be a heretic. Above all there was hostility toward regions strong enough to resist papal demands for financial tribute.

Today’s counterpart to such ideological power to excommunicate heretics resisting demands for obedience and tribute would be the World Trade Organization, World Bank and IMF dictating economic practices and setting “conditionalities” for all member governments to follow, on pain of U.S. sanctions – the modern version of excommunication of countries not accepting U.S. suzerainty. Clause 19 of the Dictates ruled that the pope could be judged by no one – just as today, the United States refuses to subject its actions to rulings by the World Court. Likewise today, U.S. dictates via NATO and other arms (such as the IMF and World Bank) are expected to be followed by U.S. satellites without question. As Margaret Thatcher said of her neoliberal privatization that destroyed Britain’s public sector, There Is No Alternative (TINA).

My point is to emphasize the analogy with today’s U.S. sanctions against all countries not following its own diplomatic demands. Trade sanctions are a form of excommunication. They reverse the 1648 Treaty of Westphalia’s principle that made each country and its rulers independent from foreign meddling. President Biden characterizes U.S. interference as ensuring his new antithesis between “democracy” and “autocracy.” By democracy he means a client oligarchy under U.S. control, creating financial wealth by reducing living standards for labor, as opposed to mixed public/private economies aiming at promoting living standards and social solidarity.

As I have mentioned, by excommunicating the Orthodox Church centered in Constantinople and its Christian population, the Great Schism created the fateful religious dividing line that has split “the West” from the East for the past millennium. That split was so important that Vladimir Putin cited it as part of his September 30, 2022 speech describing today’s break away from the U.S. and NATO centered Western economies.

The 12th and 13th centuries saw Norman conquerors of England, France and other countries, along with German kings, protest repeatedly, be excommunicated repeatedly, yet ultimately succumb to papal demands. It took until the 16th century for Martin Luther, Zwingli and Henry VIII finally to create a Protestant alternative to Rome, making Western Christianity multi-polar.

Why did it take so long? The answer is that the Crusades provided an organizing ideological gravity. That was the medieval analogy to today’s New Cold War between East and West. The Crusades created a spiritual focus of “moral reform” by mobilizing hatred against “the other” – the Moslem East, and increasingly Jews and European Christian dissenters from Roman control. That was the medieval analogy to today’s neoliberal “free market” doctrines of America’s financial oligarchy and its hostility to China, Russia and other nations not following that ideology. In today’s New Cold War, the West’s neoliberal ideology is mobilizing fear and hatred of “the other,” demonizing nations that follow an independent path as “autocratic regimes.” Outright racism is fostered toward entire peoples, as evident in the Russophobia and Cancel Culture currently sweeping the West.

Just as Western Christianity’s multi-polar transition required the 16th century’s Protestant alternative, the Eurasian heartland’s break from the bank-centered NATO West must be consolidated by an alternative ideology regarding how to organize mixed public/private economies and their financial infrastructure.

Medieval churches in the West were drained of their alms and endowments to contribute Peter’s Pence and other subsidy to the papacy for the wars it was fighting against rulers who resisted papal demands. England played the role of major victim that Germany plays today. Enormous English taxes were levied ostensibly to finance the Crusades were diverted to fight Frederick II, Conrad and Manfred in Sicily. That diversion was financed by papal bankers from northern Italy (Lombards and Cahorsins), and became royal debts passed down throughout the economy. England’s barons waged a civil war against Henry II in the 1260s, ending his complicity in sacrificing the economy to papal demands.

What ended the papacy’s power over other countries was the ending of its war against the East. When the Crusaders lost Acre, the capital of Jerusalem in 1291, the papacy lost its control over Christendom. There was no more “evil” to fight, and the “good” had lost its center of gravity and coherence. In 1307, France’s Philip IV (“the Fair”) seized the Church’s great military banking order’s wealth, that of the Templars in the Paris Temple. Other rulers also nationalized the Templars, and monetary systems were taken out of the hands of the Church. Without a common enemy defined and mobilized by Rome, the papacy lost its unipolar ideological power over Western Europe.

The modern equivalent to the rejection of the Templars and papal finance would be for countries to withdraw from America’s New Cold War. They would reject the dollar standard and the U.S. banking and financial system. that is happening as more and more countries see Russia and China not as adversaries but as presenting great opportunities for mutual economic advantage.

The broken promise of mutual gain between Germany and Russia

The dissolution of the Soviet Union in 1991 promised an end to the Cold War. The Warsaw Pact was disbanded, Germany was reunified, and American diplomats promised an end to NATO, because a Soviet military threat no longer existed. Russian leaders indulged in the hope that, as President Putin expressed it, a new pan-European economy would be created from Lisbon to Vladivostok. Germany in particular was expected to take the lead in investing in Russia and restructuring its industry along more efficient lines. Russia would pay for this technology transfer by supplying gas and oil, along with nickel, aluminum, titanium and palladium.

There was no anticipation that NATO would be expanded to threaten a New Cold War, much less that it would back Ukraine, recognized as the most corrupt kleptocracy in Europe, into being led by extremist parties identifying themselves by German Nazi insignia.

How do we explain why the seemingly logical potential of mutual gain between Western Europe and the former Soviet economies turned into a sponsorship of oligarchic kleptocracies. The Nord Stream pipeline’s destruction capsulizes the dynamics in a nutshell. For almost a decade a constant U.S. demand has been for Germany to reject its reliance on Russian energy. These demands were opposed by Gerhardt Schroeder, Angela Merkel and German business leaders. They pointed to the obvious economic logic of mutual trade of German manufactures for Russian raw materials.

The U.S. problem was how to stop Germany from approving the Nord Stream 2 pipeline. Victoria Nuland, President Biden and other U.S. diplomats demonstrated that the way to do that was to incite a hatred of Russia. The New Cold War was framed as a new Crusade. That was how George W. Bush had described America’s attack on Iraq to seize its oil wells. The U.S.-sponsored 2014 coup created a puppet Ukrainian regime that has spent eight years bombing of the Russian-speaking Eastern provinces. NATO thus incited a Russian military response. The incitement was successful, and the desired Russian response was duly labeled an unprovoked atrocity. Its protection of civilians was depicted in the NATO-sponsored media as being so offensive as to deserve the trade and investment sanctions that have been imposed since February. That is what a Crusade means.

The result is that the world is splitting in two camps: the U.S.-centered NATO, and the emerging Eurasian coalition. One byproduct of this dynamic has been to leave Germany unable to pursue the economic policy of mutually advantageous trade and investment relations with Russia (and perhaps also China). German Chancellor Olaf Sholz is going to China this week to demand that it dismantle is public sector and stops subsidizing its economy, or else Germany and Europe will impose sanctions on trade with China. There is no way that China could meet this ridiculous demand, any more than the United States or any other industrial economy would stop subsidizing their own computer-chip and other key sectors.1 The German Council on Foreign Relations is a neoliberal “libertarian” arm of NATO demanding German de-industrialization and dependency on the United States for its trade, not China, Russia or their allies. This promises to be the final nail in Germany’s economic coffin.

Another byproduct o America’s New Cold War has been to end any international plan to stem global warming. A keystone of U.S. economic diplomacy is for its oil companies and those of its NATO allies to control the world’s oil and gas supply – that is, to reduce dependence on carbon-based fuels. That is what the NATO war in Iraq, Libya, Syria, Afghanistan and Ukraine was about. It is not as abstract as “Democracies vs. Autocracies.” It is about the U.S. ability to harm other countries by disrupting their access to energy and other basic needs.

Without the New Cold War’s “good vs. evil” narrative, U.S. sanctions will lose their raison d’etre in this U.S. attack on environmental protection, and on mutual trade between Western Europe and Russia and China. That is the context for today’s fight in Ukraine, which is to be merely the first step in the anticipated 20 year fight by the US to prevent the world from becoming multipolar. This process, will lock Germany and Europe into dependence on the U.S. supplies of LNG.

The trick is to try and convince Germany that it is dependent on the United States for its military security. What Germany really needs protection from is the U.S. war against China and Russia that is marginalizing and “Ukrainianizing” Europe.

There have been no calls by Western governments for a negotiated end to this war, because no war has been declared in Ukraine. The United States does not declare war anywhere, because that would require a Congressional declaration under the U.S. Constitution. So U.S. and NATO armies bomb, organize color revolutions, meddle in domestic politics (rendering the 1648 Westphalia agreements obsolete), and impose the sanctions that are tearing Germany and its European neighbors apart.

How can negotiations “end” a war that either has no declaration of war, and is a long-term strategy of total unipolar world domination?

The answer is that no ending can come until an alternative to the present U.S.-centered set of international institutions is replaced. That requires the creation of new institutions reflecting an alternative to the neoliberal bank-centered view that economies should be privatized with central planning by financial centers. Rosa Luxemburg characterized the choice as being between socialism and barbarism. I have sketched out the political dynamics of an alternative in my recent book, The Destiny of Civilization.

1 See Guntram Wolff, “Sholz should send an explicit message on his visit to Beijing,” Financial Times, October 31, 2022. Wolff is the director and CE of the German Council on Foreign Relations.

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13 Comments

  1. While Dr. Hudson’s economic understanding is very deep, and while he has many insights into the practical effect of banking on the economy and into Marxist economic theory, his Church history is a bit garbled.

    The Great Schism of 1054 was a distinct event from the first schism, which was in 451. “A single bishopric, Rome” did indeed “cut itself off from” “the ancient Patriarchates of Alexandria, Antioch, Constantinople and Jerusalem,” but it did not all happen at once in 1054.

    Jerusalem was the chief bishopric of them all until Pagan Rome destroyed it in 135. The city regained a bishop sometime later, but before 451 the bishop of Jerusalem ranked lower than a metropolitan bishop. In 451, Rome and Constantinople cut themselves off from Alexandria and Antioch and, therefore, from Jerusalem as well. Rome and Constantinople split from each other in 1054. Never has Rome cut itself off from a majority of the faithful, let alone from “the entire Christian world,” although Pope Francis seems to be endeavoring mightily to do so.

    The 27 Papal Dictates of 1074 are not as significant as the article suggests. They are the opinion of a Vatican official of the time. They certainly are not the basis of the papal authority of Rome. The first three ecumenical councils are what canonically empower the papacy of Rome, not the 27 Papal Dictates.

    The first ecumenical council of 325 made the metropolitan see of each of a hundred-and-some-odd Roman provinces the chief bishopric of the province and also elevated the metropolitan sees of Alexandria, Antioch and Rome above the rest. The second ecumenical council of 381 elevated the metropolitan sees of Caesarea, Ephesus and Heraclea so as to make them equal the metropolitan sees of Alexandria and Antioch, assigning each of these five a fifteenth part of the Roman Empire. This council also recognized the universal authority of the metropolitan see of Rome and made the bishopric of Constantinople second only to Rome. The third ecumenical council of 435 permanently repealed all the elevations of the second ecumenical council, leaving only the see of Rome with universal authority, while keeping the sees of Alexandria and Antioch limited to regional authority within the Roman Empire. The fourth ecumenical council of 451 restored the permanently abolished exarchical authority of the bishopric of Constantinople, but the pope of Rome did a line-item veto on this provision, while accepting the rest of the canons of the council. Canon law gives the see of Rome universal authority. The sees of Antioch and Alexandria have regional authority (which arguably could be universal too, because their authority is limited only within the Roman Empire, which no longer exists). The legitimate succession of bishops of Antioch may have come to an end in the Crusades, or it may have continued, only to rejoin Rome later. The bishops of Constantinople and Jerusalem have no legitimate authority outside their own province.

    To say, “It took until the 16th century for Martin Luther, Zwingli and Henry VIII finally to create a Protestant alternative to Rome, making Western Christianity multi-polar,” glosses over the Western Schism of 1378-1417.

    • “Never has Rome cut itself off from a majority of the faithful, let alone from “the entire Christian world,””

      See: The Sack of Constantinople in 1204, where Crusaders attack a Christian city, resulting in one of the greatest single transfers of wealth in the history of the world. The Western Schism was an internal battle. The perpetual one of Rome against everyone else, including Christians not explicitly under Rome, is the one that matters.

  2. I echo Mr. Appelqvist: this is a brilliant and mind-opening analysis. Perhaps there are some additional lessons to be extracted. Does the end of US-dominated unipolar dominance come after a new alternative is developed? Or does the US-dominated system fail in its effort to subdue Russia and China, and after that a new alternative arises? Of course, it isn’t strictly either/or; the development of both can be overlapping in time. But which is more dependent on the development of the other?

  3. The author is correct. The coming war (world war) is not a struggle between “democracy and autocracy”, just as it was not in the first two world wars. It was about interests and power then: as it is today. The warnings from history are clear: mankind looks doomed to face the conflict it seeks to avoid – Armageddon.
    https://patternofhistory.wordpress.com/

  4. According to George Modelski & William Thompson: Leading sectors and world powers, which follows this from the Song in China to about 1990, in addition to controlling the economically leading sector, to be hegemonic a country must be able to offer other countries something they need.

    But it seems that the US can’t. They even ditch an important ally, Germany, for selfish reasons.

    And the leading sector – microelectronics – has so far I can understand been played over to the Chinese under the label of “outsourcing” and “financialization”. Intel has lost its leadership in microelectronics because it seemed it more profitable to play the money game.

    So I wonder how they imagine their “hegemony” to develop.

  5. “German Chancellor Olaf Sholz is going to China this week to demand that it dismantle is public sector and stops subsidizing its economy, or else Germany and Europe will impose sanctions on trade with China.” I agree with most of Michaels analysis, but I find it hard to believe that even Olaf Sholz would make such a ridiculous demand, what is he hoping to get out of his visit to China, because to me it looks like he and Germany don’t have a lot to offer them now?

    • The quote regarding the purpose of Olaf Shotz visit to China is pure speculation (propaganda). No one knows the real reason. What we know is German Industrialists are also travelling to China. So, what can Germany offer? Move key German manufacturing to China since China has reliable human and energy resources thus keeping German exports relevant in the upcoming “multi-polar” world. The Hegemon was hoping Germany would move it’s manufacturing to America (and revive it’s dead manufacturing sector for free) but something tells me German Industrialists have finally figured out that Kissinger was right all along; “To be an enemy of America can be dangerous, but to be a friend is fatal.”

    • Correct Sir!..Nothing to offer anymore. Most of german technologies in plenty mportant fields are already transferred to China. This was done in an easy way called “outsourcing of production” because producing certain products ready for use..it’s to expensive in Germany. So..what was done? All plans and drawings went over to China and they just copied it..easy does it!

  6. Chancellor Scholz’ short visit to China intended to keep the doors open. Scholz is effectively acting as a moderate – inside his “hot” tripartite coalition, with one “capitalist neo” (FDP) and a totally schizophrenic and emotionalized Green party, dominated by a US-Schwab-believing foreign minister – and seconded by the same “religious” head of EU administration, von der Leyen. Those elements are neo-cruzadors not believing in God but in their US-definced “Werte-Bubble” – only Western values and our definition of “Human Rights” are correct for the world.
    Believe me or not, as a retired German ambassador and former speaker I know them all – as well as our promise to Russia/SU decades ago, never to extend NATO presence eastwards. I don’t like Scholz but he is the only cool leading element in German self-destructing politics. Hence, his short handshake with Chinas leadership was only an insurance not to consider us the same enemies as our “friend”, the US wants it to be.

    • Gerry, Thank you very much for mentioning this. As you know BRAVE NEW EUROPE is egregiously underfunded. Occurences like this are the result. We are currently conducting our fundraiser for the coming year to overcome just such problems. You have not yet gotten round to donating. It is simple. Just go to https://braveneweurope.com/donate Thanks.

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