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This is a very interesting piece from Richard Lachmann in the latest issue of @jacobinmag on the weak capacity of the American state to discipline elites. /1 https://jacobinmag.com/2020/11/the-new-american-exceptionalism
It makes the argument that that capacity has eroded because autarkic elites acting in their short term interests have looted the federal budget, sucking away state resources and weakening the state's regulatory power. This is deemed the new American exceptionalism. /2
He tells a compelling story, but I think that there are ways that the state's capacity to discipline capital has also been significantly enhanced because of the US state's location in the global political economy. Thus a second exceptionalism that cuts the other way. /3
Even if it has been cannibalized by by self-serving fractions of capital, the dollar still stands out as the world currency in a regime of floating exchange rates. /4
This affords the US state tremendous power over what others (who hold significant portions of their assets in dollars) do and what it itself is capable of. /5
That most foreign debt is held in US Treasury bonds and international trade uses the dollar as the monetary standard shields the US from runs on its currency and creates a lot more state capacity to weather investment strikes and flight with targeted spending. /6
It also afford the US state tremendous spending power. The CARES ACT, which resulted in $2.2 trillion in corporate relief, was far more spent than anywhere else. /7
Add to this that the financial sector is dependent on the domestic American market for the bulk of its profits, and we get a picture that emerges that suggests while the US state might have weak institutional capacity its structural location is very powerful. /8
In short, the US has more capacity to determine the value of its own currency. /9
It can borrow more cheaply than it would otherwise, gain real resources in exchange for paper - and run on a perpetual trade deficit, and ultimately it can avoid the heavy burden faced by most states of adjustment to deal with payment imbalances. /10
This dollar autonomy in turn gives the US state greater policy space than we might find in states that are institutionally controlled by socialists (see Mitterrand in France). /11
While the state itself is ineffective and weak because of autarkic looting as Lachmann points out. It's location in the global political economy could give it tremendous leverage to discipline capital. /12
