comments_image Comments

Shocking Scenarios: Rapid Economic Contraction May Lead to New Wars and Radicalized Politics

Economic contraction could provoke: confrontation between U.S. and China or an unraveling of the European Union.

Continued from previous page


As for Latin America, its 2.2 percent GDP growth from 2002 to 2006, the highest level since the 1960s, was fueled by exports, mainly commodities, and remittances, which accounted for $59 billion or 2 percent of the continent’s GDP by 2006. With the contracting U.S. economy and plunging commodity prices, remittances and exports are falling quickly.

The difference in Latin America is the ascension of leftist governments in Venezuela, Bolivia and Ecuador that are forging new economic relations by “nationalizing natural resources and redistributing the subsequent wealth to social programs to benefit the countries’ poor majorities,” writes Benjamin Dangl, founder of the website

Venezuela is promoting the “Bolivarian Alternative for the Americas” (in opposition to the neoliberal Free Trade Area of the Americas) as a regional economic pact based on “cooperation and solidarity,” and which encompasses related agreements on energy, finance and media. It’s mostly been limited to technical cooperation, subsidized oil supplies and barter agreements, particularly in healthcare, which have proven effective and popular, but are a long way from creating a regional economy.


Washington may look to Latin America as an outlet for capital expansion, such as with the Plan Puebla Panama, which has been in the works for a decade. Public funds and money from international institutions would be used to create an export-oriented industrial zone from southern Mexico through all of Central America.

These types of projects provide a “spatial fix” for capitalism by reorganizing new spaces that serve as sites where surplus capital (and labor) can be deployed as a way to alleviate crises of overproduction.

More ominously, Washington may seek to renew its imperial project in Latin America. Greg Grandin writes in Empire’s Workshop that the United States used Latin America historically as a “staging ground” for the “early push towards empire,” then as a school to study how to “execute imperial violence through proxies,” and most recently as a site for a resurgent “nationalist militarism” that began with the Central America wars of the Reagan presidency and culminated in the post-Sept. 11 wars.

Thus, given a declining economy and the need for domestic capital to find new markets, the United States may be tempted to use the Pentagon to launch adventurist wars in Latin America as a solution to its economic woes.

While many people fondly talk of a return to New Deal economics, it was World War II that pulled the U.S. economy out of the Great Depression. The solution to the global crisis requires restructuring economies to stimulate widespread demand while not feeding production and speculative bubbles, which means a redistribution of resources. Absent such measures, authoritarianism and militarism will have growing appeal. Just like the 1930s.

Arun Gupta is a founding editor of The Indypendent newspaper. He is writing a book on the decline of American Empire for Haymarket Books.

See more stories tagged with: