[Marxism] The state of the US Empire: 2006

Juan Carlos juancarloscruz at hotmail.com
Wed Jan 11 12:07:56 MST 2006

The state of the US Empire: 2006

James Petras

The most difficult prediction for the year 2006 is the direction and 
trajectory of the US economy. In 2005 the US economy defied all the known 
tenets of economic theory: In the face of record high trade deficits, 
monstrous budget deficits, a failed war and major political scandals 
involving presidential aides, the dollar strengthened against the Euro and 
the Yen, the economy grew at 3.4% and all the major investment houses had 
record profits. It seems the US economy defied the laws of gravity, floating 
above the political turmoil and structural vulnerabilities. But the point of 
‘prophesy’ is not to specify the day and hour of sharp decline and recession 
but to identify the deep structural vulnerabilities and the possible trigger 
events, which could detonate a crises.

The US economy will continue to diverge in a double sense. The financial 
sector will expand overseas, especially the major investment houses like 
Goldman Sachs, JP Morgan, Citibank while the manufacturing sector led by the 
‘Big Three’ automobile sector will decline even further, with a good chance 
that General Motors will go into bankruptcy. The US multi-nationals will 
expand on a world scale, buying into major banks and industries, especially 
in China, extending the economic reach of the empire, while the domestic 
economy will suffer as the housing and real estate speculative bubble 
collapses, high energy prices undermine export competitiveness, resulting in 
sharp decline in consumer spending. The US empire will increasingly become 
identified with its economic giants as its failed wars will lead to a 
withdrawal of combat troops and a reliance on airpower, sepoy military 
forces, economic sanctions and accommodating to social liberal regimes.

The domestic social crisis will deepen as overseas profit opportunities 
expand. In 2006, over 90% of US workers will be paying for their costly 
individual health and pension plans or, if they cannot pay, they will lose 
coverage. Precarious work contracts are the norm for all but a small sector 
of public employees. Real inflation (including increased health, education, 
energy and pension costs) will rise to about two times the consumer price 
index and contribute to the further decline in actual living standards. The 
bursting of the housing bubble will reduce the “paper value” of homeowners 
by half and force many who are heavily indebted into bankruptcy. 
Nevertheless, as happened in recent decades (after the Savings and Loan, 
Dotcom, Enron and other speculative failures), while millions of small 
speculators and investors in real estate will lose billions of dollars, 
their discontent will not find any political expression. The greater the 
inequalities in income, property and wealth between the financial and 
imperial economic elites, on the one hand, and the domestic wage and 
salaried classes, on the other, the lower the level of organized political 
and social opposition. In 2006 the US will become the developed country with 
the greatest inequalities, with the most sustained decline in living 
standards and the nation least able to organize a defense of social rights – 
let alone an alternative - against the empire-centered model of capitalist 
accumulation. In a word, the domestic crisis of living standards will 
finance further economic empire building rather than challenge it.

US global expansion is sustainable because of fundamental changes taking 
place in India, China, Indo-China and the oil kingdoms of the Middle East. 
These countries have lowered many barriers to foreign investment, joint 
ventures and even majority ownership of high growth industries, banks and 
energy sources. US , European and Japanese MNCs and banks will accelerate 
their entry beyond initial beachheads and move across all sectors of the 
economy, with greater depth: 2006 will mark China’s transition from 
“national capitalist” to a model of imperial and national led capitalist 

The US will continue to substitute an air war for a ground war in Iraq: For 
every 10,000 troops withdrawn, there will be hundreds of added air attacks. 
The US policy toward Iraq is a classic case of “rule or ruin” of Biblical 
proportions. Since the US or its puppet regimes cannot rule, Washington’s 
policy is to regress the country into an “Afghanistan” of warring clerical 
and ethnic warlords and tribal chieftains based on min-fiefdoms. The debate 
over a new war against Iran is still not resolved because of the deep 
divisions in Washington, Israeli military threats and the Federal spy trial 
of 2 leaders of the major pro-Israel lobby (AIPAC – American Israel Public 
Affairs Committee). Washington can be expected to push for Security Council 
economic sanctions, which will likely fail because of a China/Russia veto. 
Subsequently it is likely, especially if Netanyahu is elected Prime 
Minister, that Israel will attack Iranian experimental nuclear energy sites, 
with the complicity of their partners in the White House and Congress. 
Israeli aggression will likely unleash a series of proxy wars in Lebanon, 
Iraq (including “Kurdish” Iraq) and beyond, leading to an escalation of US 
casualties and weakening Washington’s client regimes (Saudi Arabia, Jordan, 
Egypt etc) Petrol prices will skyrocket beyond the $100 dollar a barrel if 
the Straits of Hormuz are blocked by the Iranians. If the Israeli attack 
leads to a subsequent world economic recession, the economic shock may 
neutralize the influence of Zionists in policy circles in Europe and 
perhaps, even in the United States.

While there are many contingencies leading to a world economic recession and 
an anti-Israeli backlash, it is prudent to ponder the worst. While Israeli 
military extremism can undermine any reduction in the US military forces in 
the Middle East, the weakening of the pro-Israeli lobbies could allow 
Washington to rely on its support of a proxy Iraqi and Kurdish military and 
police force.

It is highly unlikely that the US-trained Iraqi military and police will 
hold up against the insurgents and mass opposition. Very probably the 
military will fragment and disintegrate and the pro-US political officials 
will flee the devastated and pillaged country, emptying the treasury on 
their way back to the US and Europe. A likely outcome will be a 
heterogeneous clerical-nationalist regime on a wartime footing faced with an 
Israeli-backed Kurdish ministate intent on secession and ethnic cleansing of 

In Washington, Congress and both political parties will be further 
discredited as Jack Abramoff, a self-confessed lobbyist-swindler will 
implicate dozens of Congress members, party leaders and government officials 
in an enormous bribery scandal. The trial and prosecution of Congressional 
leaders, especially Republican heads of Congress, may prevent any new 
regressive and repressive legislation from being enacted, but may spur the 
President to engage in an overseas military adventure(bombing Iran) to paper 
over the crisis.

On the other hand, another failed military intervention by the White House 
in the context of a discredited Congress led by felonious Party leaders 
could ignite a grass roots movement for impeachment.

A weakened US military, the decline of orthodox neo-liberal clients, and 
failed diplomatic initiatives in regional forums, is forcing the US toward 
“accommodating” center-left politicians in Latin America. Washington’s 
greater flexibility will find expression in the continuing good working 
relations with the Presidents of Brazil, Uruguay, Argentina and probably 
Bolivia. The State Department’s hostility toward Venezuela’s President 
Chavez will be tempered by its loss of internal levers of power, and the 
close working relations between the US and Venezuelan oil companies. The US 
will likely not intervene in the elections in Colombia, Chile, Mexico or 
Brazil, because each of the major candidates are well within the US 
neo-liberal orbit.

The improbable outcome in Peru, where a ‘nationalist’ former military 
officer close to Chavez is a major contender, will likely result in heavy 
backing for the conservative candidate. Washington will probably engage in 
some rear-guard ‘dirty tricks’ in the Venezuelan Presidential elections, 
knowing in advance that Chavez is likely to win by a substantial majority.

In other words, Washington will lose its automatic voting majority in Latin 
America and be forced to shelve some of its most blatant attempts to impose 
economic dominion,. Nevertheless none of its strategic military bases, 
extensive financial and resource holdings and lucrative debt payments will 
be threatened by the election of ‘center-left’ Presidents. The major caveat 
to this potential ‘co-habitation’ outcome is a successful popular uprising 
if the center-left fails: In that case Washington will likely intervene with 
local proxies, detonating regional opposition.

In summary, 2006 will certainly be an extremely volatile and uncertain year 
for the Empire. The military defeats, internal crises , a big decline in the 
dollar and a general weakening of domestic economic fundamentals are 
juxtaposed to growing overseas economic expansion, high rates of financial 
profits, extremely weak internal opposition and accommodating elites in Asia 
and South America. The greatest threat to empire building is not domestic 
nor in the competitive marketplace but in the pending war against Iran – 
either a US or Israeli attack could set in motion a series of severe 
economic political and military shocks which would radically change all 
previous predictions and outcomes regarding the state of the Empire for 

The second big shock in the making is the growing popular revolt against the 
monstrous inequalities and horrendous working conditions imposed by the 
Chinese ruling class in alliance with foreign capital. A further shock could 
emerge beyond 2006 if and when the current commodity boom collapses and 
undermines the export strategy of the center-left regimes in Latin and 
Central America,.In that context it is likely that there will be a new wave 
of extra-parliamentary, anti-imperialist movements that could send tremors 
throughout the Empire.

January 5, 2006

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