Preliminary (incomplete) Draft of Work in ProgressComments Welcome
Do U.S. Workers Gain from U.S. Imperialism?
Gerald Epstein*
First Draft: May 9, 2003
*Professor of Economics and Co-Director of the Political Economy Research Institute (PERI), University of Massachusetts, Amherst. I thank Anita Dancs, Carol Heim, Michael Klare, William Hartung, Stanley Malinowitz, Seymour Melman, Dorothy Power and Michael Remer for providing important materials and/or helpful discussion on
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aspects of this project. I also thank Dorothy Power for excellent research assistance. Unfortunately, I can't blame them for any remaining errors.
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Abstract
This paper attempts to answer the following question: Do U.S. workers currently gain
from U.S. imperialism? The tentative conclusion is that U.S. workers do not, on balance,
gain from U.S. imperialism, at least since 1985. Though they gain from more stable and
(probably) lower oil prices and the prices of other commodities, the tax system which
shifts the cost burden of U.S. imperialism onto US workers, and cheap imports from
abroad which are facilitated by US backed globalization that hurt U.S. workers’ wages
and employment, on balance, U.S. workers loose substantially. On top of that, of course,
are the costs to US workers, who make up most of the military, in blood.
The situation was probably different in the 1950', '60's and '70's. At that time,
U.S. workers had much more power to extract rents from U.S. capitalists, and
globalization tended to work to the benefit of U.S. workers. Therefore they had much
more power to get a piece of the imperialist pie. Oil prices were extremely low and very
stable. Taxes, which paid for U.S. imperialism were more progressive, so workers had to
pay a lower share.
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I. Introduction
This paper attempts to answer the following question: Do U.S. workers gain from
U.S. imperialism? In writing this paper, I immediately ran up against a slight problem:
this appears to be an almost unanswerable question.
For one thing, virtually every term in the question is ambiguous, and even
contentious. First on the list, of course, is the term "U.S. imperialism". Many would
vehemently deny that the U.S. engages in imperialism. Others would argue just as
strongly on the other side. This debate is made much more difficult by a second central
problem: what do we mean by the term imperialism? There is a huge literature on
imperialism, but uses of the term are far more numerous than attempts to define it. And,
to make matters worse, even when people do define the term, they do so in many
different ways.1 For example, should we define imperialism simply to mean colonial
occupations? Should it refer only to military interventions, such as the U.S. interventions
in Vietnam, Central America and Iraq? Or should we include the whole set of political
and economic interventions used by the United States to promote the "Washington
Consenus" of neo-liberalism?
In addition, there is the matter of the term "U.S. workers"? Is it all U.S. workers,
including lawyers, doctors, etc. or is it the "working class" classically defined?
Then there is the word "gain". In some ways, this may be the most difficult
problem of all. The problems here are many. First, do we mean only economic gains? Or
do we also mean political, psychic, and security gains? Second, what "run" are we talking
about: short-run, medium-run, long-run, long, long, long-run? Related to this is a third, 1 For example, the author of an excellent, two-hundred and eighty-four page book entitled Marxist Theories of Imperialism, states at the outset: "I shall not attempt to 'define' imperialism at this stage; indeed, I shall not present a final definition at any stage. Different writers used the term differently…" (Brewer, 1990, p. 3)
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and extremely difficult problem: what is the counter-factual? That is, what would the
world look like if the U.S. did not engage in imperialism? Some classic theorists, Lenin,
for example, argued that the cost of imperialism was war and the alternative would be
socialism. Depending on what you think about socialism, this is a pretty easy call. Marx,
on the other hand, who never used the word "imperialism", argued that colonialism was
not inevitable or necessary, but that once it occurred, there was no going back. What is
the counter-factual here? In a teleological approach to history, what does it even mean to
talk about "counter-factuals"? (Brewer, 1990: chs, 2,3, and 6).
Perhaps the counterfactual we should assume is a more cooperative and peaceful,
social democratic world. Or, perhaps it is just things more or less as they are, with less
military intervention and a smaller defense budget (the closest thing to a "partial
equilibrium" approach).
After having seen so many problems inherent in this exercise (and there are
more), the reader might reasonably ask: why bother? There are least three reasons. First
of all, many people think they already know the answer. When I proposed this paper, one
of my colleagues sent me an email and said, "What's the answer? I assume it's no." And
when I went to discuss these issues with another colleague he said, "Well, I assume the
answer is yes." Faced with this, I thought it might be a good idea to try to move a bit
beyond assumptions, but just how far beyond we can get remains to be seen.
Second, for someone, myself included, who believes that some form of political
economy and class analysis is necessary for understanding the world, analyzing the
distributional consequences of policies is critically important. In fact, this is my main
motivation for writing this paper. What can explain U.S. workers' attitudes toward U.S.
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government policies such as the invasion of Iraq? Of course, there are many elements
involved. But to what extent is this invasion and the whole set of international
interventions of which it is a part in the "material interests" of U.S. workers? I somehow
believe that making progress on answering this question will help us understand the
forces driving such policies and, more importantly, the actions that could possibly change
them.
For example, the U.S. population's attitudes toward the Iraq war have evolved
from indifference, to concern and opposition, to -- it seems – wild enthusiasm. Does this
support have an economic basis? If so, it might be more difficult to get workers on the
side of an anti-imperialist political movement. On the other hand, whereas the AFL-CIO
strongly supported the Viet Nam war and other U.S. military interventions in the 1950's,
60's and 70's, they opposed the U.S. invasion of Iraq in 2003. Does this evolution have a
material basis? Does it make it more likely that the majority of workers could support an
anti-imperialist policy? It would be nice to know the answer to these questions, and if not
the answer, at least some range of likely answers.
In the next section, I very briefly discuss classical writers of imperialism and
describe their views of the impact of imperialism on the well being of workers in the
imperalist countries. We will see that the variety of answers they come to have to
implicate this set of problems I have identified. Then I turn to empirical work, first
looking at the existing studies which have tried to asses the impact of imperialism on
workers. We will see, however, that that there is very little literature on the costs and
benefits of imperialism in the United States to draw on. In fact, I could only find two
papers, and neither of them explicitly studied the impact of U.S. imperialism on U.S.
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workers (Zevin, 1972; Lebergott, 1980). However, there is a vast economics literature on
the costs and benefits of the British Empire. But even this literature includes relatively
little discussion of the distributional impacts of British imperialism in Britain itself.2
In section four I briefly survey this literature because it will be helpful in
developing a framework for studying U.S. imperialism. The section following, defines
the term imperialism, in the ways for purposes of use this paper. It also describes the
framework I use to assess if U.S. workers benefit from U.S. imperialism. In section V, I
present the estimates. Section VI summarizes the conclusions and make suggestions for
future research.
It is important to make clear at the outset what this paper is NOT about. This
paper is not about what most of the literature on imperialism has concerned itself with.
This paper is not about the causes of imperialism, for example, whether it is an inevitable
part of capitalism, whether it is due to the export of capital, or underconsumption, or the
search for raw materials, the interests of some narrow business interests, or a vestige of
some previous class formation. (See Brewer, 1990 and Owen and Sutcliffe, 1972, for
excellent discussions of many of these issues). It is also not about the impact of
imperialism on groups other than U.S. workers. That is, itt is not about the impact of
imperialism on profits, or, on the beneficiaries and victims of U.S. imperialism elsewhere
in the world. Of course, these issues are all very important. And they inevitably interact
with the issues discussed here at various points; indeed, at some points, I will not be able
to avoid referring to them. But, however important these issues are, I am not writing
about them in this paper because I am afraid I may have bitten off more than I can chew
as it is.
2 I thank Carol Heim for generously introducing me to this literature.
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II. Theories of Imperialism and Its Economic Impact on Workers in the Imperialist
Countries3
Classical Theory
Of course, over the years, there has been an enormous amount of theoretical
discussion about the distributional impact of empire and imperialism.4 The classical
authors in the Marxist tradition had something to say about this, but not a lot.
Writing about British imperialism in India, Marx notes:
"As to the working classes, it is still a much debated question whether their condition has been ameliorated at all…But perhaps also, in speaking of amelioration, the economists may have wished to refer to the millions of workers condemned to perish, in the East Indies, in order to procure for the million and a half of working people employed in England in the same industry, three years of prosperity out of ten (italics added). (Marx, Poverty of Philosophy, 1847, cited in Brewer, 1990, p. 52)
Evidently, Marx thought some workers might have gained financially from imperialism, but only in the very short run and only episodically.
According to Brewer, furthermore, "The quotations from Engels (not Marx)
which Lenin used to link the idea of a 'labour aristocracy' to the possession of colonies…
are very ambiguous, referring to the bourgeois ideas of some English workers rather than
to any material benefit to them." (Brewer, 1990, p. 52).
By the time Lenin and Bukharin wrote, they were grappling with the virulent
nationalism among the working classes in Europe which had helped to propel the first
world war. Writing before the war, Hilferding, argued that imperialism was directly 3 This section does not pretend to give a comprehensive review, but tries only to make a few points that will be important later in the paper. There are many excellent reviews of the literature on imperialism including Owen and Sutcliffe, 1972; Griffin and Gurley, 1985; and Brewer, 1990. For an excellent developing country perspective on theoretical aspects of imperialism consult the writtings of Patnaik (eg. Patnaik, 1995; 2003)4 For those interested in my working definition of imperialism, please see section III below. For now, the following definition, due to Michael W. Doyle, will give flavor of what I have in mind: "Empires are relationships of political control imposed by some political societies over the effective sovereignty of other political societies. They include more than just formally annexed territories, but they encompass less than the sum of all forms of international inequality. Imperialism is the process of establishing and maintaining an empire." (Doyle, 1986: p. 19.)
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opposed to working class interests. However, it was harder to sustain this view when the
war was taking place and working classes of Europe were slaughtering each other on the
battlefields. Lenin and Bukharin argued that sections of the working classes in the
dominant countries benefited from the dominant positions that monopoly industries had
in the world market; but they both argued that wokers would do better under socialism.
Whereas Bukharin tended to argue that workers in the dominant countries gained because
the country did better as result of imperialism, Lenin insisted that the so-called "labour
aristocracy", and more specifically, "skilled labor", especially those in specific industries
linked to the colonies, that benefited the most. (Brewer, p. 125). Lenin argued that the
capitalist class used these gains as a "bribe" to win labor's political acquiescence.
(Brewer, p. 126). Still, Lenin strongly argued that since imperialism led to war, any short
term economic benefits that workers received were overwhelmed by the horrendous costs
of war. (Brewer, 1990, p. 124).
Luxembourg argued that, not only was imperialism inevitable under capitalism
but that it was necessary to keep the economy functioning. Without it, the capitalist
economy would sink into an under-consumptionist depression. (Brewer, 1990). Hence
imperialism, by creating foreign markets and absorbing surplus, kept the capitalist
economies growing. It is therefore hard to escape the conclusion that workers therefore
benefit from imperialism, relative to being in a depressed and crisis-ridden economy. Of
course, to the extent that imperialism forestalls the crisis and the day of reckoning
for capitalism that ushers in socialism, then workers are worse off relative to that
scenario. But what if a world of sustained stagnation and crisis is a possible long-run
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scenario. Might not imperialism which sustains economic growth make workers better off
relative to that outcome?
Hobson's view presents an interesting contrast to Luxembourg's. Hobson, one of
the intellectual fathers of Lenin's analysis of imperialism and a strong critic of British
imperialism, believed that imperialism was both necessitated by and allowed British
income inequality. Inequality constrained domestic demand of workers, requiring the
British economy to expand abroad in search of markets. By this token, imperialism made
British workers worse off (at least in a relative sense) by helping to maintain inequality5.
Hobson argued that there was a better alternaive for workers within capitalism: a more
equal distribution of income would lead to a domestic based economic growth, in modern
parlance, "wage-led growth" and eliminate the need for imperialism. In short, even
though imperialism helped to keep the economy growing it hurt workers because it
maintained inequality, relative to an alternative, egalitarian development path within
capitalism. (See Brewer, 1990; Cain, 1998; O'Brien, 1999).
More recent economists have grappled with these issues, at least implicitly. In his
Political Economy of Growth, Paul Baran argued that imperialism and militarism was a
mechanism for absorbing the economic surplus. According to this view, the "costs" of
imperialism are in fact benefits since they keep the economy growing. Workers in the
imperialist country therefore benefit to the extent that there is no alternative to the
system. Otherwise, without imperialism and military spending, the economy would
stagnate, harming workers in the process.6
5 Of course, by propping up the British economy, imperialism might have improved their standard of living in an absolute sense.6 Hobson, also an "under-consumptionist" theorist argued that the alternative to imperialism was a redistribution of income to workers who would spend the income, thereby keeping the economy afloat. As a result, for him, the counterfactual was a more equal income distribution without imperialism.
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Dependency theorists, such as Frank, Wallerstein, and others identified a center
and periphery, in which the center thrived and developed at the expense of the periphery.
The degree to which workers in the center benefited from this depended on the nature and
degree of worker organization in the imperialist countries. (See Griffin and Gurley,
1985). In most cases, though, the implicit assumption was that actors in the imperial
countries, including workers, did gain from this dependency. It is instructive to look at
the channels of these gains. One is through profit remittances by multinational
corporations (MNC's). Presumably, center country workers gain nothing from these, and
indeed, might lose as a result of lost jobs or lower pay associated with the MNC's
expansion abroad. The second main channel is through terms of trade. To the extent that
dependency is associated with cheaper raw materials and, more generally, improvements
in the center countries' terms of trade, then, center country workers might gain.
Hence, all these authors (with the exception of Hobson) argued that, since
workers would be better-off under socialism, compared to that counterfactual, workers
lose from imperialism. But, when it comes to the short and medium run, there is
significantly more disagreement about how to assess the impact of imperialism on the
economic well being of workers in the imperialist countries. Marx believed that whatever
economic gains workers received were small and ephemeral. Lenin and Bukharin,
believed that such benefits did accrue to some, primarily skilled workers, the so-called
labour aristocracy, but that these would be swamped by the costs of war to which
imperialism inevitably led. Luxembourg implicitly believed that since imperialism was
inevitable for capitalism, workers, like capitalists could not do well without it (until the
rise of socialism, of course). Hobson, on the other hand, believed there was a viable
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alternative path within capitalism that was better for workers, and that, therefore, even
within capitalism, it was clear that workers in the imperialist countries were harmed by
imperialism. In short, for most of these authors, workers' gains from imperialism are
highly problemenatic: they are either tied to being trapped in a capitalist economy which
requires imperialism for its survival (Luxembourg), spotty and ephemeral (Marx)
overwhelmed by other costs such as war (Lenin) or easily outdone by a non-imperialist
restructuring within capitalism (Hobson).
Only the dependency theorists have argued that imperialism provides significant,
and sustained benefits for workers in the imperialist economies. In this case, the size of
the benefits achieved by the working class depends on the size of the surplus transferred
from the peripheral countries to the center and the center country worker's their political
and economic power vis a vis the capitalists in the center countries.
III. Historical Evidence on the Impact of Imperialism on Workers in the U.S. and
Great Britain
United States
Very little economics literature has considered the costs and benefits of U.S.
imperialism to the United States, much less the distributional consequences of that
imperialism. Lebergott (1980) and Zevin (1972) focus on the motivations of particular
businesses and financiers and their interests in U.S. military intervention abroad,
particularly in Central and Latin America. Lebergott focused on imperialism at the turn of
the century; Zevin's paper covers a larger sweep of history. They both conclude that
imperialism is neither necessary for the prosperity of the U.S. economy as a whole, nor,
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indeed, is it necessarily good for the U.S. economy. They do not consider explicitly the
effect on U.S. workers.
However, there is an implicit message in these papers. If imperialism costs
workers anything, for example, if they have to pay taxes to finance the military, then,
since they receive no benefits, workers are necessarily harmed by imperialism. And, in
any case, they do not benefit. Even if this argument is accepted, it refers primarily to the
late 19th century or early 20th century.
The Impact of British Imperialism on British Workers
A voluminous literature has been written on the impact of the British Empire on
the British economy. This literature has appeared in waves, going back at least as far
back as Adam Smith who argued that colonies cost Britain dearly. During the high points
of British imperialism in the 19th century, a long-running debate took place within
England as to whether Empire was good for the home country or not. Hobson was not
alone in claiming that Empire cost more than it was worth. (See, Cain, 1999; O'brien,
1988, 1999 and the many references therein.). Many others waxed just as eloquently
about the benefits of empire.
In the 1980's and 1990's, there was a revival of this debate among economists,
partly inspired by the revisionist book by Davis, Huttenback, and Davis (1986). This
volume presented substantial amounts of new data, and argued that the bulk of British
citizens lost economically from the British Empire. Since that time, a tidal wave of work
by economists, has debated the issue with positions being taken on both sides (See, for
example, Edelstein, 1994; Offer, 1993; O'Brien, 1999). Much can be learned from this
literature about the methods – and pitfalls- involved in assessing the costs and benefits of
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empire.7 Note, however, that, with a few notable exceptions, little of this literature looks
explicitly at the domestic distributional impacts of Empire.
Most of this literature concerns "imperial accounting": it tries to assess the net
cost to Britain of Empire. There are two major problems which this literature grapples
with and which mostly account for the varying answers it gives to the question: "Was the
Empire Worth it?"8 The first asks what is the "counterfactual"? What would have
happened had there been no empire? The second problem is: how many different factos
should be included in the accounting? This literature contains fairly narrow calculations
based on returns to trade and investment (Edelstein, 1994); it contains broader and
somewhat more speculative analyses, for example, asking if finance's focus on the empire
harmed domestic investment (Kennedy, 1974); and it contains extremely broad and
highly speculative discussions of whether the military focus on empire made England ill-
prepared to fight Germany in World War I, or, on the other hand, whether troops from the
Empire saved Britain in the war (O'brien, 1988; Offer, 1993). When one enters the world
of "what could have been" there are few rules and even fewer limits.
This literature also grapples with the question of how to define "empire" and
imperialism. Should it include only Britain's "formal" colonial empire; or should Britain's
"informal" empire of relations, its "imperialism of free trade" be included as well?
(Gallagher and Robinson, 1953.)
Still, for all its vastness, the literature considers only in the most narrow way
possible the impact on British Labor. Davis, Huttenback and Davis, consider the
7 Of course, there is also a huge literature on the impact of empire on those countries and people subjected to imperialism.8 Of course, there is something inherently abhorrent about this whole question, as Marx indicated in the quote repeated above: how can one compare economic benefits gained in Britain measured against the enormous violence and injustice of imperialism and empire?
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distribution of tax liabilities for military expenditures in defense of the empire, and shows
that primarily low income tax payers foot most of the bill for the empire. But there is very
little systematic analysis of the distribution of the benefits to workers beyond this.
Interestingly, in an otherwise fairly contentious literature, authors on all sides appear to
agree that an elite of military, financiers, politicians an traders received most of the
benefits of empire, but there is very little in the way of hard evidence. (O'Brien, 1988,
1999; Cain, 1998).
It will be useful to go briefly into some of the British calculations in preparation
for our analysis of U.S. Imperialism.
Edelstein's Imperial Accounting (1994)
Edelstein's paper, "Imperialism: Cost and Benefit" provides a simple but useful
framework for assessing the net costs of the British empire, but has little to say about its
distributional impacts. Davis, et. al., discussed next adds an important distributional
component.
Edelstein first makes a distinction between "formal" and "informal" empire, the
former being those countries under actual colonial control, and the latter, being countries
like Argentina, where Britain had strong influence, but not direct control. Edelstein
presents estimates only for the formal empire, though he recognizes that a full accounting
should also include estimates for both.
Edelstein then confronts the question of the counterfactual. To make this
manageable he identifies two standards of "non-imperialism": the "marginal non-
imperialism standard" and the "strong non-imperialist standard". Taking the case of
Britain's relationship with India as the example, the marginal standard assumes that if
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England had NOT had a colonial relationship with India, its relationship would have been
similar to its relationship to a country such as Germany or the United States, countries
with which it did not have an imperialist relationship.
This, of course, assumes that, had colonialism not existed, India's relationship to
the world economy would have been similar to that of Germany's and Britain's. But what
if British imperialism toward India had NEVER existed. What would India's economy in
general, and its connection to the world economy in particular looked like? What if, for
example, as Edelstein and many others in this literature surmise, India had instead closed
itself off from the world economy entirely. Britain, in that case, would have had no
interaction with India. Then what would the net benefits of imperialism to Britain had
been RELATIVE to that situation? Presumably, these two different alternative "histories"
could deliver rather different estimates of net benefits.9
Table 1 presents Edelstein's summary of his estimates of the net benefits to Britain from
its Empire.
Table 1 Edelstein's Estimates on the British Gains from Imperialism, 1870 and 1913(% of GNP)
Standard of 'non-imperialism'
9 Edelstein defines these standards this way: "The 'marginal non imperialist standard' assumes that the empire had the actual economic development that it underwent in the 19th and early twentieth century, bt that at the moment of measurement of the gains it acquired the political independence and power of the US, Germany or France in its economic and political relations with Britain….The 'strong non-imperialist' standard will assume that the countries of the empire were independent from British rule throughout modern economic history with consequent effects on their involvement in the world economy and their political power vis-à-vis Britain.
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Marginal Standard: Strong Standard:1870 1913 1870 1913
Exports of Commodities and Services
+1.6 +3.8 +4.3 +6.5
Overseas Investment
-.2 -.94 +.31 +.45
a. direct assistance
-.06 +.11 -.06 +.11
b. defense -.04 to –1.01 -.23 to –1.4 -.04 to –1.01 -.23 to -1.4
total +.33 to 1.3 +1.57 to 2.74 + 3.54 to 4.51 + 5.66 to 6.83
The first row depicts the benefits for Britain resulting from empire exports. With respect
to the marginal standard, the Empire countries had lower tariffs on British products than
did U.S., Germany and France. Edelstein estimated the benefits to the British economy
from these lower tariffs. They grow between 1870 and 1913 because a higher share of
British exports went to the empire during that period.
The estimate from the strong standard of non-imperialism are much higher. He
arbitrarily assumes that in the case of the colonies, exports would have been 75% less.
With respect to the non-dominion countries, he uses the model of Argentina as a standard
and assumes that British exports would have been on the same order of magnitude as to
Argentina.
With respect to investment, Edelstein and others such as Davis and Huttenback
argued that colonies received lower interest rates on debt borrowed from Britain because
the colonial status was perceived to reduce the risk to investment. They argue, that this
represents a subsidy to the colonies. This is rather odd on the face of it, since, presumably
the realized rates of return for the British banks would have been at least as high as for
other categories of borrowers. It accounts, however for the negative entry in the table.
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Edelstein suggests that there were likely to be other effects on the British
economy not taken into account here. For example, domestic borrowers might have been
"crowded out" because of the subsidy given to colonial borrowers. This would increase
the domestic cost of imperialism. On the other hand, the quantitity borrowed abroad
might have increased. Using the strong non-imperialist standard, Edelstein tries to
estimate how much lending would have taken place by looking at other, less developed
countries having fewer colonial ties, as models. By doing that he suggests, for example
that "non-white settler colonies woul dhave had British investments one-fifth their actual
levels, while the required rate of return would have doubled from 4% to 8%. (Edelstein,
p. 209). This reasoning leads to the investment gains to imperialism identified in the
second row of table 8.1.
I draw your attention to the next to last row, labeled "defense". Here Edelstein
gives a range of numbers for each cell. Davis, et. al. had presented evidence, comparing
colonies defense expenditures with those of unoccupied developing countries, showing
that none of the colonies paid for "reasonable" defense establishments themselves. This
implied that virtually all the cost of "defense" (or, more accurately, "occupation") of the
empire rested on the British people in England. Moreover, Davis et. al showed that
British defense spending per capita was double that of Germany and France, implying
that Britain was paying for two military forces: one to defend Britain and one to maintain
the empire.
These figures have been subjected to many technical criticisms, but many authors
have accepted the principle of their approach. Others (Offer, 1993) however, argued that
the British defence expenditures related to empire were really to keep shipping and
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transport lanes open to ensure that Britain could receive necessary food and raw
materials; hence, they were really for defending England, and not for maintaining the
empire. These types of considerations explain, then, the range of estimates on the costs of
defense that Edelstein presents.
In summarizing his results, Edelstein notes that, by the marginal standard, the net
gains to Britain from imperialism were not large, though they grew from 1870 to 1913 as
Britain became more dependent on the empire.10 By the strong non-imperialist standard,
they are larger. Note that implicit in this is the idea that, without British imperialism, the
colonies would have been both more developed and more integrated into the world
economy. Certainly, the first point has been the subject of enormous controversy (see for
eample, Amin, 1977; Warren, 1980)
While Edelstein has paid careful attention to the counterfactual issues associated
with empire, he pays less attention to varying assumptions about the state of the British
economy. Interestingly Edelstein assumes that the British economy was thoroughly
Keynesian during this period: output was completely demand determined. Hence, the size
of exports could measure the benefit accruing to England. Presumably, many of these
benefits would flow to workers, relative to the alternative of being unemployed.
However, if one assumed a neo-classical world in which all the workers (and other
resources) would have been fully and efficiently employed, then the benefits from
Empire, as measured by Edelstein, would have been small or non-existent. (Edelstein, p.
214).
10 Of course, the assessment depends on what you take into account and how long a view you take. Hobsbawm argued that British reliance on the empire in the later part of the 19th
and early part of the 20th empire hurt Britain because its industry was not forced to modernize. (Hobsbawm, 1969).
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This last point suggests a paradox which looms quite large in this literature: It
makes it much more likely that center country workers benefit from imperialism if the
economy operates in a non-neoclassical way: that is, if it is saddled with Keynesian
unemployment problems, or Marxian contradictions, or some combination of the two (eg.
Luxembourg, Baran and Sweezy, 1966). In that case, imperialism can play a significant
role in expanding jobs and economic growth. At the same time, those who view the
economy this way would tend to be unenthusiastic about the notion that workers gain
from imperialism.
Similarly, many of the revisionist works which argued that British Empire did
NOT benefit Britain, argued that, by neo-classical assumptions, Britain could have done
just as well or better if it had simply engaged in trade without incurring the expenses of
colonies. Indeed, this was Adam Smith's view. (O'Brien, 1999). In short, economists who
are hold a heterodox view of the economy and who often align themselves politically
with workers, are more likely to find that imperialism benefits workers than are neo-
classical economists who, arguably, are more likely to align themselves politically
against workers.
Davis, Huttenback and Davis' Distributional Accounting
Whereas Edelstein is primarily concerned with identifying counterfactuals, Davis,
et. al. placed a great deal of emphasis on estimating the distribution of the net benefits
from the British Empire (Davis, et. al., 1986). Their main conclusion is that the net
benefits to Britain as a whole were low or even negative; but that these benefits and costs
were not distributed equally among various groups within and outside England. While
they discuss to a slight extent the impact on the British working class, their main
20
emphasis is on distributing the benefits among who they call the colonial 'settlers', the
British "elites" and the British "businessmen". Their conclusion is that while the former
two may have benefited from the empire, the latter as a group did not (though
businessmen in specific industries may have.)
It is striking that in this copiously researched and massive book, how little
attention is paid to the impact of empire on the British working class. Nevertheless, on
the basis of data presented in Davis, et. al. (1986) and Edelstein (1994) we can construct
some relevant estimates.
Table 2 presents some relevant data. These are rough estimates and should be
taken with more than one grain of salt.
Table 2
Tax, Income and Wealth Shares in Great Britton
Late 19th CenturyPopulation Share1
(%)
Income Share2
(%)
Tax Share3
(%)Share of Empire Assets4
(%)
Share of Wealth5
(%)
Elites(upper class)
..4
12.0 10.0 49.4 61.1
Businessmen (middle Class)
22.6
50.0 52.0 38.4 23 - ?
Working Class
77.0
36-43 35-45 1.0 ---
1. Davis, et. al. p. 2482. The main sources for these data are based on the work of Baxter and Levy as reported in Davis, et. al. (1986) and Lindert (200). Working class, Davis. et. al., p 360. fn. 47. Elites and middle class, based on Davis et. al, Table 8.5., p. 251. The line between upper and middle class is drawn at 1000 pounds. Levy, cited by Davis, et. al., suggested that a 2,000 dividing line would be more accurate. Lindert, 2000, reports estimates that in the
21
late 19th century, the top 5% of households received 41.1 percent of the pre-tax income and the top 20% received 57.7 percent of the pre-tax income.3. Davis, et. al. pp. 250-251.4. Davis, et. al., p. 251.5. Elites/upper class estimated by top 1% of wealth holders. Middle class refers here to top 5% of wealth holders. The estimates are from Lindert (2000) p. 181.
According to the estimates presented in Table 2, in the late 19th century, the working class
in Britain constituted about 77% of the population, earned between 36 and 43% of the
income, paid roughly the same share in federal taxes, and owned no more than 1% of the
assets invested in the empire. We can apply these data to Edelstein's estimates of the net
gains to imperialism reported in Table 1 to estimate the net benefits (losses) to the British
working class from the British Empire.
Table 3 presents the resulting estimates of working class gains (losses) from
Empire as a share of GNP. The table presents two estimates of the total net benefits for
each of the two dates and each of the non-imperialist standards used by Edelstein. The
first assumes that the working class received benefits from exports equal to their share of
national income. This implicitly assumes that if it had not been for these net exports,
these workers would have received no incomes. The second estimate assumes that
workers received no benefits from these exports. This assumes that the workers could
have found equally remunerative employment elsewhere in the economy (or they would
have migrated and found remunerative employment in one of the colonies or other
countries of settlement, for example, the United States. The "truth" probably lies
somewhere in between these two estimates.
The estimates in the table also use the figure from Davis, et. al, that workers
owned only 1 per cent of the financial shares of companies in the empire and therefore,
22
only received 1 per cent of the net benefits (costs) associated with those investments.
This is probably an over-estimate. In terms of share of empire costs (subsidies), I use the
figures from Davis et. al., which show that the working class paid somewhere between 35
and 45% of central government taxes. (I took the average: .40).
Table 3 British Working Classes Net (Annual) Gains (losses) from British Imperialism: Late 19th Century(% of GNP)1
Standard of 'non-imperialism'Marginal Standard: Strong Standard:1870 1913 1870 1913National Impacts
Working Class Impacts
National Working Class
National Working Class
National Working Class
Exports of Commodities and Services2
+1.6 +.632 +3.8 +1.5 +4.3 +1.69 +6.5 +2.5
Overseas Investment3
-.2 -.002 -.94 -.0094 +.31 +.0031 +.45 +.0045
Net Government Transfers4
a. direct assistance
-.06 -.024 +.11 +.04 -.06 -.024 +.11 +.04
b. defense5 -.04 to –1.01
-.404 -.23 to –1.4
-.56 -.04 to –1.01
-1.01 -.23 to -1.4
-.56
total, including exports
+.33 to 1.3
+.20 +1.57 to 2.74
+.97 + 3.54 to 4.51
+1.26 + 5.66 to 6.83
+1.97
total, excluding exports
-.43 -.52 -.425 -.52
Memo: share of working class
+.5 +2.42 +3.15 4.92%
23
incomes (assuming full exports effect)6
Memo: share of working class incomes (assuming no export impact)6
-1.075 -1.3 -1.06 -1.3
Source: See Table 1: based on Edelstein (1994); and Table 2, largely based on Davis, et. al., (1986).1. From table 2, I used the following estimates to calculate the working class shares: working class share of income: .395; working class tax share: .40; working class share of empire assets: .01. (see table 2 and the sources cited there).2. Multiply the total by working class share of national income: .395 (average of range of estimates from table 2).3. Multiply the total by working class ownership of empire shares: .014. Multiply the total by working class share of taxes: .40 (average of range of estimates).5. For the defense estimates, I used the top of the range to calculate working class costs: partly because they bore a disproportionate share of the burden of fighting in the colonial wars.6. Since workers' share of income is approximately 40%, then these shares of GNP must be multiplied by 2.5 to reflect the share of working class incomes.
The estimates show that, at most, British workers received an annual benefit of under 1%
of GNP in the case of the "marginal non-imperialism". In the case of the "strong non-
imperialism" counter factual, with the much larger estimated gains from exports, the
British working class gained substantially more: up to 2 % of British GNP on an annual
basis. On the other hand, if the benefits from exports are discounted, the British working
class lost as much as half a percentage point of GNP on an annual basis throughout this
period.
As a percentage of working class incomes, these numbers translate into more
substantial sums. Since the working class share of income is 40%, then the affect ofn
working class incomes as a proportion of their incomes is 2.5 times the number as a share
24
of overall GNP. As shown in the last two rows of table 3, the working class losses are as
much as 1.3 percent of their incomes on an annual basis; and the gains are as large as
5% of their incomes on an annual basis. This is a large range.
Clearly, three factors in this analysis make a big difference to the outcomes. One
is the counterfactual with respect to the impact of imperialism on the gains to the British
economy as a whole from trade. Second is the affect of trade on British workers: what
alternatives would have they had if British exports had declined? And third, what were
the actual military costs of maintaining the empire, as opposed to simply maintaining
national security?
Cain's Informal Accounting
The exercise above suggests that the British working class as a whole could have
gained as much as 5% or lost as much as 1% of their incomes annually from Empire.
These estimates do not include many other factors, including the loss of working class
lives fighting imperial wars. On the other hand, some working class British had the
opportunity to migrate to the colonies and establish new and sometimes lucrative lives
there.
In addition, Cain (1998) entertains another important counterfactual: by helping to
keep the economy afloat, empire helped to stave off economic and social reforms that
would have reduced the gross inequalities that characterized British society in the 19th
century, a point made by Lenin in reference to the "bribes" associated with empire. By
this reasoning, whatever gains the working class achieved should be measured against
another, structurally disjoint counter-factual: a much more egalitarian Britain.
25
IV. A Framework for Assessing the Impact of U.S. Imperialism on U.S. Workers
Our discussion of the British Empire provides many lessons and cautionary tales
regarding "imperial accounting". First I must define what I mean by imperialism. Even in
the case of Britain, where a definition might have seemed fairly straight-forward, we saw
that there was a large degree of ambiguity and debate about the nature of the "formal"
versus the "informal" empire, with the estimates of benefits and costs only referring to the
formal empire. In the case of the United States, this obviously will not due since in the
latter part of the 20th century, the time period of our study, the United States has had very
little or no "formal empire".
First for a definition of imperialism: "Empires are relationships of political control
imposed by some political societies over the effective sovereignty of other political
societies. They include more than just formally annexed territories, but they encompass
less than the sum of all forms of international inequality. Imperialism is the process of
establishing and maintaining an empire." (Doyle, 1986: p. 19.) While there are many
definitions available, this captures pretty well what I have in mind.
Next we must distinguish between two types of imperialism. To do this I recall
the old saying that capitalism works not like an invisible hand, but like an "iron fist in a
velvet glove." So here I distinguish between these two:
Illiberal or iron fist imperialism: the imperialism that makes use of military
force or explicit threats of force
Neo-Liberal or velvet glove imperialism: by this I mean all of the policies
associated with neo-liberalism and the Washington Consensus. I will take each of these in
26
turn. But first, I need to develop an estimating or accounting framework. This I do in the
next section.
An Estimating Framework
The following simple accounting framework will be used to organize my
estimates of the impact of imperialism on the well-being of American workers. I will
initially define well-being, in a highly simplistic manner, as worker's real consumption.
The accounting framework is represented in equation (1).
(1) Cw/Pw = W/Y x WAT/W x Cw/WAT x P/Pw x Y/P
where:
Cw = worker's nominal consumption
Pw = price index for worker's consumption which reflects the price of imports (among
other factors)
Cw/Pw = cw = workers' real consumption
W = workers' total nominal income (primarily wages + compensation)
Y = nominal GNP
W/Y = w = wage share in national income
WAT = workers' after-tax nominal income (after tax nominal wages)
WAT/W = tf = tax factor (higher ratio means lower tax rate for workers)
Cw/WAT = c = workers' nominal consumption relative to after tax wages.
P = price deflator for GNP
P/Pw = ρ = terms of trade
Y/P = y = real GNP
27
According to equation (1), workers real consumption can be de-composed into the
following factors: the wage share in national income, the taxes paid by workers, workers'
consumption relative to their after-tax incomes, the terms of trade, and the level of real
GNP.
We can get further insight into some key factors by further decomposing the third
term, Cw/WAT, workers' nominal consumption relative to their after tax nominal income.
How can workers' consumption differ from their after-tax income? There are two main
ways: first they can borrow and spend more than their incomes and they can save, thereby
spending less. The second is that their consumption can consist of other components,
most importantly for our purposes, public services and goods provided by government,
including national defense, education and infrastructure.
It is well known that American workers' as a whole save relatively little. They do,
however, borrow a lot. Most relevant for our purposes is the amount that they borrow
from abroad, an amount that can be represented by the current account deficit. Implicitly
I assume that internal borrowing is from other members of the working class so that they
net out. This is obviously a simplification but not an important one for the purposes of
this paper. Using functional notation we have:
(2) Cw/WAT = c= c ( Sw/ WAT, CAD/ WAT, PS/ WAT )
where:
Sw= workers' savings
CAD = current account deficit
28
PS = public services, such as public spending on education, national security,
infrastructure used by the working class
Sw/ WAT = s
CAD/ WAT = cad
PS/ WAT = ps
One can partially differentiate (2) to get the impacts of these factors on workers' nominal
consumption relative to their after-tax consumption where the signs of the partial
derivatives are given by:
cs < 0, ccad > 0, cps > 0
Note that this framework differs radically from that provided by the currently
fashionable inter-temporal macroeconomics (eg. Obstfeld and Rogoff, 1999). In that
framework, all agents must abide by inter-temporal budget constraints, whereas this
framework looks at year to year consumption of workers without restricting their
consumption to be equal to some inter-temporal budget constraint given by their incomes.
Of course, budget constraints, in some sense, do matter. But, in my paper, the
purpose of this framework is not to explain the consumption behavior of workers but to
account for the impacts of various factors linked to imperialism. In that sense, workers'
income is well represented in the framework above.11
11 Equally important, and more generally, however, the "run" in which the fashionable inter-temporal budget constraints are binding is not at all well determined. The short to medium-run factors that allow workers and other agents to be off their budget constraints – capital gains, borrowing from abroad, etc. – are so numerous, and the future so uncertain, that the short to medium run impacts of these constraints are virtually meaningless, as are the complex mathematical manipulations that economists working in this area are fond of displaying.
29
We can see how workers' real consumption changes depending on changes in
these factors by taking natural logs and totally differentiating (1), taking (2) into account:
where proportional rate of change of x
note that, from (2), the proportional change in nominal consumption relative to after tax
income is given by:
(4) = cs + ccad + cps
assuming =0, then (4) reduces to:
(4)' = ccad + cps
so that the change in nominal consumption relative to after tax income depends positively
on the change in the current account deficit and change in public services provided to
workers. Substituting (4)' into (3) yields:
+ ccad + cps
Equation (5) states that the change in worker's real consumption depends on the change
in the wage share, tax rates, terms of trade, economy-wide real income (i.e., economic
growth), current account deficit weighted by the workers' share of current account
borrowing and change in public services weighted by workers' consumption of these
services.
Equation (5) is very useful but leaves out some important Keynesian effects on
employment and wages. To incorporate those impacts, on occasion it will be useful to
decompose the wage share W/Y in the following way:
(6) W/Y = W/L x L/L* x L*/Y* x Y*/Y
30
where:
W/Y = labor share
L=employed labor force
W/L = the wage rate
L* =available labor force
L/L* = employment rate (under assumptions of this paper, a measure of the
unemployment rate)
Y* = full capacity rate of nominal output
L*/Y* = the inverse of the output-labor ratio at full capacity utilization (a measure of
technical labor-intensity of production)
Y*/Y = the inverse of the capacity utilization rate
As equation (6) indicates, changes in the wage share can be decomposed into changes in
the wage rate, unemployment factor, capacity utilization rate and technical relations of
production (see Weisskopf and Glyn who have developed useful frameworks such as
this).
The Impact of Imperialism on Workers' Welfare
The next step is to conjecture on the impacts of imperialism on worker's welfare
as represented by equations (1), (2), (5) and (6). Here it is crucial to distinguish between
what we have called Illiberal Imperialism (the fist) and Neo-liberal Imperialism (the
velvet glove).
Illiberal Imperialism
(1) Cw/Pw = W/Y x WAT/W x Cw/WAT x P/Pw x Y/P
31
(2) Cw/WAT = c= c ( Sw/ WAT, CAD/ WAT, PS/ WAT )
+ ccad + cps
(6) W/Y = W/L x L/L* x L*/Y* x Y*/Y
Illiberal imperialism is that aspect of US foreign economic policy most directly
connected to U.S. foreign military action, threatened and actual. What are the economic
channels through which this type of imperialism affects workers? Using the framework of
equations (1) – (6) and as we describe in more detail below, the main hypothesized
channels are the following: on the "positive side", U.S. military might protects the
availability of raw materials, and especially oil, thereby improving the terms of trade (ρ);
U.S. military might also helps to underpin the reserve currency role of the U.S. dollar,
and, as a related matter, strengthens the political security of U.S. financial markets; it
thereby helps the US run a large current account deficit (CAD); military expenditure for
domestic use and export also expands aggregate demand, and through equation (6) may
increase employment and capacity utilization (though some have argued that it makes
production less labor intensive).
On the negative side, military spending costs tax money and therefore either
raises the taxes that workers must pay (reducing tf in equation (5)) or reducing
expenditures on public services of use to workers (reduce ps in equation (5) above)) or
both.
32
Neo-Liberal Imperialism
However difficult it is to assess the impacts of illiberal imperialism doing the
"imperial accounting" for neo-liberal imperialism is even more difficult.12 But undaunted,
I press ahead. On the possible benefits side, neo-liberalism might lead to more exports for
U.S. firms, thereby increasing aggregate demand and leading to more employment (the
other side of this coin might be less borrowing, so a lower current account deficit); neo-
liberal imperialism, by increasing the supply of inexpensive exports to the U.S. might
improve the U.S. terms of trade. On the negative side, making the world safe for U.S.
foreign investment might increase outsourcing, jobs costing foreign investment, and
threat effects (Burke and Epstein, 2002; Choi, 2001; Bronfenbrenner, 2001); this might
reduce the wage rate, employment rate and, therefore, labor share accruing to workers.
Moreover, there are additional expenditures in terms of military spending, foreign aid tied
to th neo-liberal project that add costs to workers to the extend that it leads to higher
taxes or cut-backs in social spending. In making an overall estimate of the impacts of
imperialism on U.S. workers, I will try to take each of these factors into account.
A major problem, as noted above, is determining the appropriate counter factual. I
discuss that below. This, like many other decisions along the path of imperial accounting
will be somewhat arbitary. They will be, however, the most useful counter-factuals I can
think of, data and imagination permitting.
A. Illiberal Imperialism: The net benefits of the iron fist
1. The costs of military Power
12 Note that in the accounting exercises for the British Empire, no one attempted to calculate the net benefits of informal imperialism.
33
It has become a cliché to say that the U.S. is now the world's only super-power,
but even clichés can be true. According to the new foreign policy doctrine, the Bush
Administration wants it to stay that way. A few numbers make it clear just how superior
the U.S. is, at least in terms of its military expenditures. The U.S. military budget request
for 2002 was 343.1 billion dollars. The total military expenditures of so-called rogue
states for around the same period is roughly 14.4 billion dollars.13 Russia, China, India,
Taiwan, Pakistan all add to another $115 billion dollars or so. So U.S. expenditures in
2002 are roughly three times those of all the potential enemies combined. If one adds the
expenditures of U.S. "allies" in NATO and the far east, the U.S. plus allies expenditures
are $555.8 billion or so, meaning that the U.S. and its "allies" spend more than 5 times as
much as all likely enemies combined.
Figure 1
Real Military Spending in the
U.S.
(Billions of 2002 Dollars)
13 All these numbers are taken from the invaluable 2001-2002 Military Almanac, published by the Center for Defense Information, www.cdi.org. The rogues include Iran, Syria, Iraq, North Korea, Libya, Cuba and Sudan.
34
0
100
200
300
400
500
600
1950 1960 1970 1980 1990 2000
U.S. Military Spending
Source: Center for Defense Information, 2001.
There have, of course, been ups and downs in U.S. military expenditures. Figure 1
shows the trend of U.S. military expenditures since the end of the Second World War.
The ups and downs are obvious: the build-up during the Vietnam War of the late 60's, the
decline thereafter, the Reagan build-up in the 1980's and then the decline in the 1990's.
We are now witnessing another expansion.
But what is equally obvious is that, despite the fluctuations, the average level has
stayed remarkably high, war or no war. Even though there was a decline after the fall of
the Berlin Wall, the huge disarmament and peace dividend that many predicted never
materialized. And now, once again, a build-up in military strength is taking shape, despite
the absence of any well-armed enemy anywhere in the world. Why?
Moroever, these data are actually "under-estimates" of the true military budget.
Table x presents data on military expenditures that are often hidden in other categories.
Table 4 presents data on Military and Military-Related Spending in Fiscal Years
2001 and 2002. They show the number of categories left out; more importantly they show
that when more of the costs are included, the real military budget goes up by almost 60%.
Table 4
Military and Military Related Expenditure, 2001 and 2002, Billions of Dollars
35
Military Expenditures
2001 Budget 2002 Budget
Department of Defense 284.9 313.0
Department of Energy
(Military)
13.4 14.3
misc. 3.1 1.4
Total National Defense $299.1 328.7
Military-Related
Foreign Military Aid 7.1 7.1
International Peace Keeping 1.1 .9
Space (Military) 2.6 2.7
Military Retirement Pay 34.2 35.3
Veterans' Benefits 45.4 51.6
Subtotal 90.4 97.6
Interest Attributable to Past
Military Spending
94.8 92.6
Military and Military-
Related Grand Total
484.3 518.9
Source: Center for Defense Information, 2001, p. 34.
This may be an understimate because it almost certainly leaves out the various
intelligence services. On the other, adding in interest may appear controversial. If these
data are roughly accurate, they suggest that the normally recognized military expenditure
36
is an underestimate. The 518.9 billion dollar figure is not trivial. It represents about 5% of
GDP.
The difficult, but crucially important question is this: how much of this spending
is used to support "illiberal imperialism"? This is of course, virtually impossible to know,
but like the analysis of British Imperialism, we must come up with a way of allocating
expenditures to defense and other "legitimate" uses, on the one hand, and to
"imperialism" on the other.
Scholars more expert than me on military strategy could undoubtedly undertake a
more nuanced approach. But here I will basically follow three crude strategies:
In strategy one, I compare the U.S. expenditure with countries that most would agree are
non-imperialist. Then the difference between what the U.S. spends and what the other
countries spend will constitute the "iron fist budget". In strategy two, I consider in a very
crude fashion, what part of the military budget might be for imperialistic purposes,
focusing on controlling oil in the middle east (see below), In strategy three I will consult
experts who have attempted to develop non-imperialist military budgets. Many of these
were done many years ago, but they still might be relevant today, assuming they are
upgraded to today's prices. Then the imperialist military expense budget will be the
difference between what the U.S. spends and what a purely defensive military budget
would cost.
Method One: If the United States were Sweden
Table 5 presents data on military expenditure as a share of GDP for a sample of countries
from 1986 – 2000.
37
Table 5
Military Expenditure in a Sample of Countries, 1985-2000Share of GNP
(%)
Australia Canada Denmark France1985 2.73% 2.10% NA 3.95%1986 2.67% 2.19% NA 3.88%1987 2.69% 2.10% NA 3.89%1988 2.35% 2.00% 2.05% 3.79%1989 2.19% 1.99% 2.04% 3.68%1990 2.21% 1.99% 1.94% 3.57%1991 2.43% 1.90% 2.04% 3.56%1992 2.47% 1.89% 1.95% 3.38%1993 2.58% 1.80% 1.96% 3.39%1994 2.47% 1.70% 1.77% 3.38%1995 2.41% 1.51% 1.68% 3.08%1996 2.28% 1.42% 1.68% 3.00%1997 2.20% 1.23% 1.67% 3.00%1998 2.19% 1.29% 1.66% 0.28%1999 2.04% 1.27% 1.62% 2.76%2000 1.95% 1.16% 1.52% 2.64%
Sweden United Kingdom United States1985 2.93% NA. 6.06%1986 2.84% NA 6.20%1987 2.74% 4.56% 6.06%1988 2.73% 4.07% 5.72%1989 2.51% 4.05% 5.45%1990 2.60% 4.03% 5.15%1991 2.71% 4.23% 4.66%1992 2.50% 3.75% 4.74%1993 2.68% 3.56% 4.43%1994 2.63% 3.40% 4.04%1995 2.53% 3.08% 3.76%1996 2.34% 2.99% 3.47%1997 2.33% 2.71% 3.27%1998 2.30% 2.66% 3.08%1999 2.29% 2.54% 2.98%2000 2.25% 2.51% 3.02%
Source: See Appendix
38
There may be some surprises here:" peace loving" Sweden has a share of military
expenditures comparable to that of United Kingdom; and, for some years, France's
expenditures, as a share of their GDP, are comparable to the figures for the United States
in the recent period. During the 1980's however, the U.S. spent far more as a share of
GDP than did any of the other countries.
When comparing these data, it is important to remember the hidden U.S. military
expenditures noted above. The true military expenditures of the U.S. then are likely to be
as much as 60% higher than those listed here.14
On the other hand, some would argue that the other countries are able to spend so
"little" because they "free ride" on the U.S. By this reasoning, some of the U.S.
expenditure is not for imperialism, but to help "protect" its allies.
While this argument might have had some plausibility during the "cold war",
there is very little justification for it now. It therefore seems plausible to assume that the
U.S. defensive (i.e., non-imperialist) share should be something closer to the figures for
Canada, Sweden, Denmark and Norway, than what it currently spends. So let's assume
that the non-imperialist expenditure is the average of those countries' shares, and that the
real expenditure of the U.S. is 60% higher than shown in these figures. Table 6 below
calculates these numbers:
Table 614 Hartung (2000) estimates that expenditures on intelligence agencies plus other agencies doing military work throughout the government in 1998 cost more than 27 billion dollars. On top of that, he argues, the military gives large subsidies to defense contractors, adding up to almost 8 billion dollars during the same period. Hence the numbers in
39
Average Military Expenditure Shares and the Military Cost of U.S. Imperialism
1985-2000
(Share of GDP and Billions of 1996 U.S. dollars)
Australia Canada Denmark France Sweden UK US (lower estimate)
US(higher estimate)
AverageMilitary Share1985-2000
2.3 1.5 1.9 3.4 2.5 3.8 4.5 7.2
Memo: Non-U.S. average: 2.6 percent of GDPU.S. average: standard estimate: 4.5 percent of GDPU.S. average: higher estimate: 7.2 percent of GDP (60% higher) Difference: U.S. standard estimate – non-U.S. Share: 1.9% of GDP (military cost as GDP share)Difference: U.S. high estimate – non-U.S. share: 4.6% of GDP (military cost as GDP share)Military (economic) cost of imperialism, 1985-2000: low estimate: 2193.63 billions of 1996 dollars
Military (economic) cost of imperialism, 1985-2000: higher estimate: 5310.89 billions of 1996 dollars
Source: Appendix, and Economic Report of the President, 2003, tables, B-1,B-3, B-25 (and earlier years).
The non-U.S. average share between 1985 and 2000, including Britain and France which
are still (very small) imperial powers, is 2.6 percent of GDP. (See Table 6 above). This
compares with a low estimate of 4.5% share for the U.S. and a high estimate of 7.2%,
based on the higher figures in table 4 above.
What do these differences translate into in terms of U.S. dollar costs of imperialist
military expenditures? As calculated at the bottom of Table 6, these number imply the
following low and high estimates of the accumulated U.S. military expenditures in
40
support of imperialism between the period 1985 and 2000: a low estimate of 2193.63
billions of 1996 dollars and a high estimate of 5310.89 billions of 1996 dollars.
Method Two: How much does it cost to protect the supply of oil and other obvious
imperialist adventures?
Another method to estimate the military costs of imperialism would be to calculate how
much of the military budget is used to engage in "obviously" imperialist activities, such
as protecting the supply of oil (see below). Table 7 below presents expert's view of the
rough distribution of U.S. military expenditure.
Table 7
Approximate Distribution of U.S. Military Budget
Function/Area Percent of Budget
Nuclear arms, and general
global defense
25%
Small wars and activities,
including Latin America
10%
Europe 25%
Asia and the Pacific 25%
Middle East 15%
Source: Michael Klare
According to Michael Klare, experts generally estimate that for the last several decades,
the military spends about 15% of its budget in the Middle East and 25% in Asia and the
41
Pacific. One could make a very low estimate of the military budget attributed to
imperialism and estimate that it is about 15%. One could also add other categories as
ones analysis dictated. However, such estimates are bound to be rather arbitrary.
Method Three: The Cost of a Non-Imperialist U.S. Military
TO COME
2. How Much Taxes does the Working Class Pay? 15
How much of these military costs does the working class pay? Here I must
decide whether to use an estimate of the share of taxes paid out of labor income, or the
share paid by income groups that we would normally think of as "working class". Since
there is no consensus on precisely how this concept maps into the income distribution,
any decision we make here will be somewhat arbitrary.
There have been a number of studies done on the distributional characteristics of
the U.S. Federal, state and local taxes, at least since the mid-1960's. (Pechman and Okner,
1973; Pechman, 1985). Other authors have attempted to bring this earlier work up to date.
(Kasten, et. al., 1994). Some studies, notably Pechman and Pechman and Okner use
micro-simulation models and various assumptions about the incidence of various taxes to
assess the distribution of tax burdens. Others simply estimate on the basis of initial
payments of taxes and make no further estimates of tax incidence. Whereas the Pechman
and Okner studies asses the impacts by take of income (labor versus capital) their
calculations stop in 1985 and therefore cannot be used here.
Table 8 below shows the most recent data available (CBO, 2001).
15 This section draws heavily on Pechman and Okner (1973); Pechman, (1985; 1989); Kasten, Sammartino and Toder, (1994); Slemrod and Bakija, (1996); and research from Citizens for Tax Justice www.ctj.org and the joint Brookings Institution-Urban Institute Tax Center, http://www.taxpolicycenter.org/, CBO (2001), Center on Budget Priorities www.cbp.org
42
Table 8
Share of Total Income and Total Federal Taxes
by income quintiles of households
1979, 1985, 1997
1979 1985 1997Bottom 60 %
income share 32.2 29.6 26.9tax share 21.7 22.1 17.2
Bottom 80 %income share 54.3 51.4 47.1tax share 42.7 43.4 35.3
Top 5%income share 20.8 23.6 28.9tax share 30.0 28.5 39.1
Top 1 %income share 9.3 11.3 15.8tax share 15.5 14.2 23.0
As the table shows, the share of Federal taxes paid by the bottom 60 and 80% of
households is slightly less than their share of income, whereas the shares paid by the top
5 and 1% are somewhat higher than their shares of income. The table also shows that
while the tax shares of the bottom groups went up between 1979 and 1985, it went down
between 1985 and 1997. Of course, as the table shows, inequality of income went up
dramatically during this period.
So, how should we define the working class for purposes of this paper? The
bottom 80%? The bottom 60%? For purposes of the paper we will look at it both ways.
Using these data, and averaging the tax shares between 1985 and 1997, table 9 gives the
amount of the military expenditure paid by the working class.
43
Table 9
Tax Costs to "Working Class" of U.S. Imperialist Military Expenditure
1985 -2000
Billions of 1996 dollars
Low Estimate of Costs:$2193.63 billion
High Estimate of Costs:5310.99
Bottom 60%
tax share: 19.65%
$431.05 billion $1043.61billion
Bottom 80%
tax share: 39.35
$863.19 billion $2089.9 billion
Tax shares are averages of 1985 and 1997 rates, as shown in Table 8.Source: See tables 6 and 8.
Table 9 shows that the low estimate of the military cost to the bottom 60% is between
431 billion and 1 trillion dollars, and for the bottom 80% the military budget cost is
between 863 billion and 2 trillion dollars between 1985 and 2000.
U.S. Working Class Benefits from iron fist imperialism:
What possible benefits could the "working class" receive from this rather large
expenditure of funds? Remember that we are using only a portion of the military
expenditures during this period (1985 – 2000), the portion that we are estimating to be the
military costs of imperialism; so by construction, workers are not getting "national
defense" from these expenditures.
Many authors have suggested that one of the major reasons for U.S. imperialism
is to protect access to raw materials, including oil, and to keep their prices low. Hence,
according to this view, not only will oil companies and other large multinational
44
corporations receive access to commodities that they can sell at large profits, but working
class Americans can also receive cheaper commodities.16
Military power might play yet a further role in supporting the consumption of
working class Americans: it might underpin the international key currency role of the
dollar (Bergsten, 1981; Prem, 1997). The international role of the dollar, in turn, may be a
key factor underpinning both the high valuation of the dollar, which helps support a high
terms of trade, as well as the ability of the United States to run a large current account
deficit, thereby augmenting the consumption of U.S. workers.
Below, we consider these possible benefits to U.S. workers.
Military Power, the dollar and the Current Account Deficit
In the run-up to the recent Iraq war, stories circulated around the internet that the
REAL reason for the US invasion of Iraq was that Iraq was pricing its oil in Euro's and
that this threatened the reserve (or key) currency role of the dollar which, in turn, was
crucial to the ability of the U.S. to run a large current account deficit. While clearly
ludicrous as THE explanation for the Bush administrations invasion, the claims
nonetheless, may have had a kernel of truth in the following sense: the reserve currency
role of the dollar is probably an important determinant of the ability of the U.S. to run a
current account deficit and, furthermore, U.S. military power might be an important
determinant of the reserve currency role. Finally, there is some evidence that, in the past
at least, in particular during the OPEC price increases of the 1970's, the U.S. went to
some effort to make sure that oil continued to be priced in dollars, rather than special
drawing rights SDR's. (Spiro, 1999, p. 124.)
16 Many have written about the role of oil in U.S. foreign policy, including Klare (2001), Painter (1986), Yergin (1991), Spiro (1999), McNaugher (1985).
45
Economists have hypothesized the importance of military power for maintaining
the reserve currency role of currencies (See Bergsten, 1975 for a comprehensive survey;
also see Epstein, 1981). But there have been very few serious theoretical and econometric
investigation of the role of military power in the determinants of reserve currency status.
in an excellent paper by Roohi Prem undertakes a time series and cross sectional
econometric analysis of the reserve currency roles of various currencies.(Prem, 1997).
She shows that the standard determinants such as inflation, interest rates and other
monetary variables are unimportant. What IS important are what Prem calls the
"enforcement" variables, and in particular, military expenditure: the greater the military
expenditure, the larger the reserve currency role. (Prem, 1977).
Of course, one has to go several further steps to establish the relationship between
reserve currency role and ability to run current account deficits, but this connection is
fairly widely accepted (see Spiro, 1999; Bergsten, 1975, Triffin, 1964).
U.S. Current Account Deficits
The U.S. has certainly taken advantage of its ability to run current account
deficits. It's current negative net international investment position is over 20% of GDP,
quite large by historical standards. (Epstein, 1985) But how much of the U.S. current
account deficit can be explained by U.S. military expenditure? Again we need a standard
of comparison. One way is to look at other countries that do not have a reserve currency
or large military.
Table 10 presents data on the U.S. current account balance as a share of gnp compared
with those of other countries.
46
Table 10
Current Account Balance as Share of GDP, Average, 1970-2000
and minimum over the period
Aust Can. Den France Germ Italy Japan Swed UK US
Current AccountBalanceas Share of GDP
-3.7 -2.2 -.88 .27 .72 -.11 1.56 -.34 -.59 -1.2
Minimum -7.3 -4.8 -5.3 -2.1 -2.4 -4.4 -1.0 -3.4 -4.5 -5.4
The striking thing about these data, is that the United States does not seem off the scale,
relative to other developed countries, in its ability to run current account deficits.
Moreover, even its large –20% net investment position is not without precedent.
According to Lane and Milesi-Ferretti, (2001) nine develop countries had negative net
foreign asset positions of 20% or greater.
What are we to surmise from this? Perhaps the impact of the US military role on
the ability to run a larger current account balance has not been exploited. Perhaps the
subsidy works in another way, through lower real interest rates, for example. Still what if
we did assume that the total cumulative dollar costs of the current account deficit were a
"benefit" of imperialism. The total between 1986 and 2000 is –1918.5 Billion in 1996
dollars. 1985-2000 = -1918.5 Billion in 1996 dollars. Let's say the bottom 80% benefited
from this according to their share of income, which, from table 8 above was an average of
49.2% between 1987 and 1997. Then, their benefit from the current account deficit would
be roughly 944 billion dollars. This would cover the low estimate of the bottom 80
47
percents tax cost of military expenditure, but is far below the high estimate of over 2
trillion dollars. Moreover, it seems rather unlikely that all of the current account deficit,
or even much of it, can be attributed to the U.S. imperialistic military expenditure.
Military Power, Oil and the terms of trade
Another mechanism through which military spending might help workers is
though its impact on the terms of trade. Riddell, 1988, and Bowles, Gordon and
Weisskopf () all find that military spending improves the terms of trade. But they look at
the impact on the profit rate and not on workers' consumption.
Morever, there is evidence that the major factor driving U.S. terms of trade are oil
prices. Partly for that reason, we focus on oil prices here.
At one level, the role of oil in U.S. foreign and military policy in the Persian Gulf
is undisputable. The Carter doctrine, for example, is an explicit Presidential statement
that speaks for itself: "An attempt by any outside force to gain control of the Persian Gulf
region will be regarded as an assault on the vital interest of the United States of America
and such an assault will be repelled by any means necessary, including military force".
(McNaugher, 1985, p. 3, fn. 3). The role of oil in U.S. military strategy as far back as the
early 20th century and during world war II, up to the present time has been well
documented (Painter, 1986; Yergin, 1991; Klare, 2001). The motivations for this key role
of oil are myriad: economic, business profits and campaign contributions from the oil
companies, and geo- strategic interests as well. The control of oil is undoubtedly one of
the fundamental pillars of empire.
At another level, however, it is very difficult to assess the returns that the U.S.
economy as a whole, and the workers in it, get from this focus on controlling oil. Do U.S.
48
workers get a lower price of oil? Do they get a more stable price of oil around, with the
same average price as they would get were there no US military control of the Persian
Gulf? Or do they get nothing at all, with the rents going entirely to the big oil companies?
All of these hypotheses have been suggested somewhere in the voluminous literature on
oil and the economy.17
The economics literature is quite scattered in its understanding of the
determinants of oil prices. (see Salehi-Isfahani, (1995) for a recent review). The
challenge for the literature is to explain the low, stable price of oil in the 1950's and
1960's, the sharp increase in the real price of oil in the 1970's, and the large slow decline
in real oil prices since that time, in a period nonetheless marked by some instability in
prices. Three main theories have been promoted, with none of them gaining widespread
acceptance: a competitive model based on exhaustible resources, a cartel model, and a
Stackleberg or Cornout leader model, with Saudi Arabia being the market leader.
Where is the role for politics and military force in all of this? Certainly in the last
case, political factors come into play in an important way. How Saudi Arabia chooses to
set the price of oil undoubtedly is strongly affected by the Saudi family's military and
political relationship with the United States. (Painter, 1986; Yergin, 1991; Klare, 2001.)
Experts seem to agree that both the low level and the stability of oil prices in the
1950's and 1960's had everything to do with the role of the major oil companies, and,
therefore, with the military and political role of the U.S. and Great Britain.18 Most experts
also agree that the oil price increases of the 1970's were unsustainably large, but,
nonetheless, were partly a correction of the early low price of oil. What there seems to be
17 See for example, Schneider (1983), Adelman (1995), Tanzer and Zorn (1985), Salehi-Isfahani (1995) and the references cited in footnote 16.18 Personal communication with oil expert Michael Renner.
49
much less agreement about is whether the current real price of oil is due to competition,
or U.S. military and political influence, through its influence over the Saudi government.
In other words, little seems known about what the average real price of oil would be if
this U.S. influence no longer were in play.
However, there does seem to be a consensus that without U.S. military power
projections in the perisan gulf, there may be more instability in oil production and prices.
(eg. Schneider, 1983). Indeed, the U.S. Cheney oil plan says as much as well.
There has been a great deal of economics analysis, some of it quite recent, on the
impact of oil price "shocks" on the U.S. economy.19 Most of this literature suggests that
these oil price spikes have a significant effect on U.S. output and employment. In view of
the lack of agreement about the impact of U.S. policy on the average price of oil, at least
after the 1960's, I will focus here on the relationship between U.S. military power, the
stability of oil prices, and U.S. workers.
Figure 2
Spot Price of Oil
19 Bruno and Sachs (1985); Hamilton (2000)
50
0
4
8
12
16
20
24
28
32
36
1975 1980 1985 1990 1995 2000
spot price of oil
Source: Appendix
Figure 3 shows, by contrast, the real price of oil.
Figure 3
The real price of oil
51
0
10
20
30
40
50
60
70
1975 1980 1985 1990 1995 2000
REALOIL
Source: Appendix
Clearly, these trends are volatile and due, at least in part, to political events. Table 11
below lists some important political events and their estimated impacts on the quantity of
oil produced.
Table 11
Disruptions in World Petroleum Supply
Date Event Drop In World
Production
Percentage increse in oil prices
November 1956 Suez Crisis 10.1% NA
November 1973 Arab-Israeli War 7.8 400%
Dec. 1978 Iranian Revolution 8.9% 200%
October 1980 Iran-Iraq War 7.2% 20%
52
August 1990 Persian Gulf War 8.8% 33 %
Memo: Average Price increase
major disruption
300%
minor disruption 26.5
Source: Hamilton (2000), p. 39.
Such events, and the prospects of more, are what I have in mind when I suggest that U.S.
military power might reduce the incidence of severity of shocks in oil prices. If this is
true, what might be the impact on the U.S. economy in general and U.S. workers in
particular?
Table 12 presents several estimates of the impact of increases in oil prices on
output, wages and employment in the U.S.
Table 12
The Effect of Oil Price Increases on Output, Wages and Employment in the U.S.
Some Estimated Effects
Impact on Output Real Wages Employment
1 percent increase in price of oil leads to:
.25 % decline after 5-7 quarters
-.10 % in second year; average of -.5% for 10 quarters
1 standard deviation increase in oil price
loss of 260,000 production worker jobs in first two years
Source: output and real wages, Rotemberg and Woodford, 1996, based on data for 1947 - 1980 Employment, Davis and Haltiwanger, 1999, based on data for 1972-1988.
53
There is, furthermore, evidence of asymmetry in these relationships: that oil price
increases have much larger impacts than oil price declines (Hamilton, 2000.)
Table 11 shows that these disruptions have significant impacts on oil prices. The average
percentage increase from major disruptions is 300% and from minor disruptions, 26.5 %.
Table 12
Cost of Oil Price Hikes due to Political Disruption
GNP
(%)
Annual CostBillions of 1996 Dollars
Workers' Share Real Wages
Annual Billions of 1996 Dollars
Major Disruption(300% increase)
7.5 % 586 Bottom 60%115.15 billion
Bottom 80%230.billion
264
Minor Disruption(26.5% increase)
.66 51 Bottom 60%
10 billion
Bottom 80%20 billion
23.2
Source: Tables above.
Over the fifteen year period we are dealing with, how much disruption would there have
been had the U.S. not exerted military control over the Persian Gulf? Of course, this is
impossible to answer. Table 13 gives several scenariost
54
Table 13
Counter Factual Cost to worker of No US military Action in Persian Gulf, 1985-2000,
Based on GNP Estimates
Billions of 1996 Dollars
Bottom
60%
Bottom
80%
one large
disruption and
two small
155.15 310
two large
disruptions and
two small
270.30 540
. These estimated gains to U.S. workers of U.S. imperialism in the Persian Gulf are, of
course, highly speculative. They amount to somewhere between 155 to 540 billion
dollars.
Military Expenditure, Employment and Growth
There is a large literature on the impacts of military expenditure on employment and
growth. There are a number of issues involved: what is the impact in the short run on
employment? What is the impact in the long run on growth? Again, the results depend on
55
the counterfactual.20 Spending surely has myriad effects on the economy. Large amounts
of spending can increase output through traditional multiplier effects, and inflation, as it
did during the Vietnam War. There is a large debate, going back at least as far as Baran
and Sweezy as to whether military spending is necessary to full employment. There
seems to be little economic reason why this should be so.
Political reasons are more complex. George Orwell argued in 1984 that military
spending and perpetual war is necessary so that the government doesn't have to spend
money on the population that would educate them and provide them with the tools to
overthrow their leaders.21
As for the literature on economic growth and military spending, there is a pretty
large consensus that military spending does not lead to higher economic growth
(Aizenman and Glick, 2003). This is made worse by corruption. On the other side, they
argue, that when countries face "threats" military spending DOES lead to more economic
growth.
In terms of our calculation, we have already assumed that our military budget
includes money to protect the United States from threats. So there are no added benefits
to be accounted for.
As for short run benefits of large military benefits, they are undeniable. But, as for
counterfactuals, there must be a better to generate employment.
20 This section draws on DeGrasse (1983), Pollin and Zhart, Riddell.21 Thanks to Eli Epstein-Deutsch for this point.
56
Summary: benefits and costs
So, what is the bottom line. Do U.S. workers benefit from the iron fist?
Table 14
Do U.S. Workers Gain from the Iron Fist?
1985 -2000
Billions of 1996 dollars
Low Estimate of Costs:$2193.63 billion
Benefits from Oil Price Stability
High Estimate of Costs:5310.99
Benefits from Oil Price Stability
small disrupt
large disrupt
small disrupt
large disrupt
Bottom
60%
tax share: 19.65%
$431.05 155.1 310 $1043.61 155.1 310
net costs 275.95 121.05 888.5 733.61
Bottom
80%
tax share: 39.35
$863.19 270.3 540 $2089.9 270.3 540
net costs 592.9 323.19 1819.6 1549.9
Tax shares are averages of 1985 and 1997 rates, as shown in Table 8.Source: See tables 6 and 8.
Table 14 presents our first tentative "bottom line" answer to the question posed by the
paper. The answer for the period 1985-2000 is NO, the US working class does not gain
from the iron fist of U.S. imperialism. It loses anywhere from 121 billion over that 15
57
year period to 1.8 trillion dollars. This, on top, of course, of loss of life in military
adventures.
Neo-Liberal Imperialism: Do U.S. workers gain from the velvet glove?
Still to come.
IV. Conclusion
Obviously, there is much remaining to be done to fully answer this question. The
tentative conclusion is that U.S. workers do not, on balance, gain from U.S. imperialism,
at least since 1985. One does wonder whether the situation might have been different in
the 1950', '60's and '70's. At that time, U.S. workers had much more power to extract
rents from U.S. capitalists. Therefore they had much more power to get a piece of the pie.
Oil prices were extremely low and very stable. Taxes were more progressive. It might
just be that once we add that period to our analysis, we will have a different conclusion:
U.S. workers used to gain from imperialism, but they don't anymore. But we will have to
wait and see.
58
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Appendix: Data Sources and Methods
Main Series
Output is defined as GDP from the IMF World Economic Outlook (WEO) Database April 2003 http://www.imf.org/external/pubs/ft/weo/2003/01/data/index.htm World output is defined as the sum of GDP over all countries. These data were available in current US$ and were converted to constant 2000 US$ using the CPI22.
Current Account Balance data were taken from the World Bank World Development Indicators 2001 (1960-1999) and from WRI Earthtrends online database http://earthtrends.wri.org (2000-2001). These data were available in current US$ and were converted to constant 2000 US$ using the CPI.
Military Expenditures data were taken from the World Bank World Development Indicators 2001 (1985-1999) and the SIPRI Military Expenditure Online Database23 (2000-2001). These data were available in current LCU and were converted to constant 2000 US$ using historical exchange rate data24 and the CPI.
Official Development Assistance/Official Assistance (ODA/OA) data were taken from the British Government Department for International Development (DFID)25 tables (1996-2000) and from the OECD Development Assistance Committee (DAC)26 (2001). ODA is defined by the OECD DAC as “flows to developing countries and multilateral institutions provided by official agencies … [with the intention to promote] economic development … [that contain] a grant element of at least 25%.”27 Official Assistance is defined as flows of the same nature going to countries not defined as developing, such as the “former centrally planned economies”28. These data were available in current LCU and converted to constant 2000 US$ using historical exchange rate data and the CPI.
Contributions to International Organizations data were taken from Birdsall and Roodman29. These contributions are defined as financial contributions to U.N. peacekeeping operations plus a dollar value “equivalent” of personnel contributions to U.N. and non-U.N. operations. Data are taken directly from Table 12; see source for
22 See the section on CPI.23 www.sipri.com24 See the section on exchange rates.25 International Comparison Table 17: World Aid Flows: Net Official Development Assistance to Developing Countries and Official Aid to Other Countries <http://www.dfid.gov.uk/SID/index.htm>26 OECD DAC, “Net Official Development Assistance Flows in 2001,” http://www.oecd.org/pdf/M00037000/M00037871.pdf27 Helmut Fuhrer, “The Story of Official Development Assistance,” (Paris: OECD, 1996) <http://www.oecd.org/pdf/M00003000/M00003431.pdf> p.24.28 Tatyana P. Soubbotina and Katherine Sheram, Beyond Economic Growth: Meeting the Challenges of Global Development, (Washington D.C.: World Bank, 2000) Chapter 13. http://www.worldbank.org/depweb/beyond/global/chapter13.html29 Nancy Birdsall and David Roodman, “The Commitment to Development Index: A Scorecard of Rich-Country Policies,” Center For Global Development, April 2003. <www.foreignpolicy.com>
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detailed explanation. These data were available in current US$ and converted to constant 2000 US$ using historical exchange rate data.
Terms of Trade Adjustment data were taken from the World Bank World Development Indicators 2001. The terms of trade adjustment is a dollar-value adjustment based on the terms of trade, rather than a ratio of price indices. These data were available in constant 1995 US$ and not converted.
United States Assistance Abroad data were taken from US Overseas Grants and Loans Online database30. Data on Economic Assistance, Military Assistance, and their sum, Total Assistance were taken from this database. Economic Assistance includes all contributions to international organizations. Military Assistance includes all sales and gifts of weapons and other machinery, costs of training, etc. These data include loans and grants. These data were available in current US$ and converted to constant 2000 US$ using historical exchange rate data.
Conversion Series
Historical Exchange Rate Data were taken from the World Bank World Development Indicators 2001 (1960-1999) and the Antweiler Exchange Rate dataset31 (2000-2003).
Consumer Price Index data were taken from the Bureau of Labor Statistics32.
Population data were taken from the IMF International Financial Statistics 2002.33
30 USAID, “US Overseas Grants and Loans Online[Greenbook],” 2000. http://qesdb.cdie.org/gbk/overview.html31 Werner Antweiler, University of British Columbia, Vancouver BC, Canada, 2003. http://pacific.commerce.ubc.ca/xr/data.html32 Bureau of Labor Statistics (All Urban Consumers) Series No. CUUR0000SA0. http://data.bls.gov/cgi-bin/surveymost?cu33 IMF IFS Series No. 99Z..ZF...
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