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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63

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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