Charles W. King

Recent years have seen increasing support for populism all across the industrialized world. Many analysts have correctly diagnosed populism’s increasing popularity as a symptom of increasing economic inequality and stratification. The increased clout of populist politicians and parties in the United States and Europe should not be considered domestic issues for each to address individually. Rather is has become clear that economic inequality has broader strategic ramifications. The economic wellbeing of nation’s directly affect their political stability and politically unstable nations are dangerous and unpredictable actors on the world stage.

 The greatest global conflict prior to the twentieth century was a direct result of the political upheaval caused by the failure of France to enact political and economic reforms in the eighteenth century. The Napoleonic Wars were not simply the ambition of a single artillery officer. Napoleon Bonaparte would never had the opportunity to become Emperor if the revolutionary government of France was not forced to turn to conquest by the domestic political unrest in revolutionary France. The chaotic state of France during the reign of terror and the Directorate were themselves only possible because the Bourbon dynasty had failed to address the political and economic concerns of the French middle and lower classes. Failure to recognize and remedy economic suffering in France led directly to revolution and a war that was waged all across Europe and upon every ocean.

Saber rattling and wars of aggression are frequently used by politicians as a remedy for domestic political instability. The Austro-Prussian and Franco-Prussian Wars of 1866 and 1870 helped turn domestic strife in multiple independent German states into a single unified Germany. The poor German economy in the interwar period was a major factor in the rise of the Nazi party and popular support for their aggressive policies. The Chinese Communist Party continues to rely on current economic growth and the Century of Humiliation to help it maintain political control of the People’s Republic of China. Cuba, Iran, and Venezuela vilify the United States as a way to pass responsibility for domestic poverty onto a foreign oppressor. History demonstrates that nations that are economically scared are politically unstable and potentially aggressive. At the very least they tend to be isolationist and hostile.

Economics directly affects the domestic politics and foreign relations of every nation. For decades the United States has recognized that political instability abroad in not in its strategic interest. Policy makers must now also realize that economic inequality and exploitation will damage American interests as alliances and trade pacts fissure, and angry populations promote saber rattling and the return of wars of aggression.

Charles W. King

The recent ban on Initial Coin Offerings (ICOs) of new cryptocurrencies by the People’s Republic of China and the possible closure of all cryptocurrency exchanges in the country are being heralded as a success by some cryptocurrency advocates. They believe that the ban demonstrates how crypto-currencies like BitCoin disrupt traditional government issued currencies like the Yuan and Dollar. For a portion of the cryptocurrency community the most important feature of these new mediums of exchange is not their security, but their inability to be observed or regulated. The nature of the technology that underpins all cryptocurrencies, the blockchain, makes important kinds of government intervention difficult or impossible: taxation, seigniorage, and monetary control.

The distributed nature of the block chain and fact that cryptocurrencies are only observable during digital transfer makes it difficult for the IRS or any other tax collecting agency to know whom has what for the purposes of taxation. In addition the fact that cryptocurrencies can also be transferred physically on something as innocuous as a keychain make them similar in the eyes of governments to Bearer Bonds and Krugerrands, two now defunct mediums of exchanged deeply associated with terrorism, money laundering, tax fraud, and Apartheid.

Cryptocurrencies by their nature make government seigniorage and monetary control impossible. The minting of new units of crypto-currency is controlled by an algorithm and the ability of users to perform complex mathematical computations. When a new unit is created it is owned by the computer that completed the computation, a profit for the user, at the cost of computing power. Traditional seigniorage means the issuing government makes a profit of the difference between the cost of minting and the face value, for cryptocurrencies ‘miners’ receive the seignorage. This also means that governments have no control over the number of units in circulation, and are therefore unable to increase or decrease the monetary supply. This is a key feature of some cryptocurrency advocates who oppose on principle the very existence of Central Banks and their role in regulating economies. The rate of inflation in cryptocurrencies is controlled solely by the mining algorithm, how much computer power is dedicated to mining a given currency, and how much users are willing to pay for a unit. This obviates methods of economic intervention that have been key for government's recovery efforts from the Great Depression, the Stagflation of the 1970s, and the 2008 Financial Crisis.

The Chinese is government is understandably concerned about the increasing prevalence of mediums of exchange beyond its control, like BitCoin and other cryptocurrencies. That the strict regulation of the Yuan incentivizes their use is another important issue. In the case of cryptocurrencies, the Chinese government and the Chinese Communist Party is remembering the events that began what is known as the “Century of Humiliation”. In 1839 the British Empire had not yet successfully smuggled a live tea plant out of China and was paying of millions of tons of silver to China annually for exported tea. To alleviate this trade imbalance the British sought to sell opium from the British Raj in China, where it was illegal. The British and Chinese fought two wars, 1839 to 1842 and 1856 to 1860, that transferred control of Hong Kong to the British, legalized opium, and gave the British and others the access to Chinese markets and exemption from internal tariffs. With the loss of these wars the Qing Dynasty was weakened in many ways, including the fact that the reversion of the balance of trade up-ended the Chinese economy, and foreign trader’s protections from imperial regulation would continue to extract wealth from the country. The inability to intervene in their own economy devastated the Qing.

Cryptocurrency advocates are correct to believe in the potential disruptive power of crypto-currency technology. The People’s Republic of China has made a decisive move against this disruption, but this should be understandable given some crypto-currency advocated see their invention as a method to dismantle the state and the history of China.

Charles W. King

The success of The Marshall Plan rebuilding Europe after World War Two and correcting the mistakes of the Treaty of Versailles is one of the most well known facts about World War Two amongst the American. Named for George C. Marshall, the US Army Chief of Staff during the war and Secretary of State and Defense after the war, the Marshall Plan provided more than $13 billion (in 1940s dollars) to Western Europe to help rebuilding. This largess is contrasted with the punitive measures imposed on Germany after World War One.

The Treaty of Versailles required not only German admission of guilt for World War One but the acceptance of responsibility for not only their own war debt, but millions in reparations to the victorious Entente powers. The predominant historical narrative is that the burdens of the Treaty of Versailles led to the collapse of the Weimar Republic’s economy, the rise of Adolph Hitler, and World War Two, and that the Marshall Plan averted a repeat of this cycle. Contemporary historians and economists are skeptical of whether the Treaty of Versailles actually contributed to the hyperinflation that plagued Germany in the interwar period. This raises the question; if the Treaty of Versailles is not responsible for World War Two, then what was the purpose of the Marshall Plan?

First and foremost the Marshall Plan, along with the Cooperative for American Remittances to Europe (CARE), saved countless lives in Western Europe in the years after World War Two. Additionally, like many of the other post-war efforts by the United States and its Allies, the Marshall Plan was designed to create a post-war order that was good for the United States. As it transitioned from a war-time economy to a consumer one the United States would need markets for its goods. A struggling Europe or a Europe that had turned to communism would not be able or willing to purchase American consumer goods. Like many of the American aid programs that would follow in the twentieth century the Marshall Plan had requirements. States receiving aid had to lower interstate barriers to trade and other regulations. The Marshall Plan also facilitated economic growth through labor union participation, increased productivity, modern American business practices and above all capitalism.

Recognizing the purpose economic and political objectives of the Marshall Plan illuminates the fact that while bold and on a scale not seen before, it was not unprecedented. Economic growth through productivity and access to markets goes back to colonial resistance to British mercantilism and monopolies. Westward expansion and the acquisition of overseas territory at the end of the nineteenth century represent the second phase of this effort. The Marshall Plan was the third. It ushered in decades of active American foreign policy where aid was a political tool used to gain market access for the United States and to prevent foreign states from falling to communism by allowing them to participate in the economic growth experienced by the US and its trading partners. The Marshall Plan for all of its expense and obvious moral character was essential to preventing the collapse of the American economy and a return to the Great Depression after World War Two. George Marshall and President Truman recognized that for the United States to continue to prosper it needed to invest in the wider world.

Charles W. King

Many American policy-makers, in the in Congress and the White House, are increasingly critical of spending on foreign aid. The criticism of cuts to foreign aid as a method of balancing the national budget is legitimate, but beyond the scope of this article. Instead it will discuss what kinds of aid the United States provides, why it does so, and what the benefits and drawbacks of such aid are. The United States, through the State Department and USAID, provide not only monetary aid, but also food, medical aid, and defense aid. While ‘Soft Power’ has been a focus of the State Department in recent decades, the United States has engaged in foreign aid for much longer than that. It did so, and continues to provide foreign aid for a multitude of reasons.

Food and medical aid are perhaps the most visible form of foreign aid that the United States provides; white sacks of grain with red and blue “USA” on them have become a staple of reporting on USAID programs. The reputation as a good samaritan that the United States gains from disaster relief is not irrelevant, but the impact that such aid has in the US and abroad has more concrete effects. In states receiving aid there can be significant distortions in the economy, and local politics. The presence of free or cheap food can cause a drop in food prices, leading local farmers to cease farming, exacerbating food shortages. There are also repeated accounts of warlords and others seizing food and medical aid and using it to strengthen their political standing. The flip side of the coin is that food aid is intended to distort the United States economy. The vast majority of foodstuffs provided are purchased as part of the US’s agricultural subsidy program to boost the market price of the products of American farms. US food aid also introduces American staple grains like corn and wheat to markets where they were not previous popular, creating new markets for American goods. Starvation and epidemics also increase instability, providing aid ensures stability to regions of vital national interest to the US.

Monetary aid is also a mixed blessing. President Carter began providing aid to Egypt in exchange for Egyptian recognition of Israel. This achieved a minor policy objective. The Egyptian government fulfilled its commitment with lip service, and the money sustained the repressive Egyptian state without the need to develop the Egyptian economy. This resulted in a loss of American prestige in Egypt at a steep monetary cost for little gain. Not all monetary aid is money down the drain. The Marshall Plan provided a tremendous amount of monetary aid to Europe after World War Two, which was then used to purchase American goods. This sustained the American economy as it transitioned from war materiel to consumer goods, and increased the access of American businesses to foreign markets.

Similarly defense aid to foreign allies, in the form of arms as well as cash or financing for arms purchases, serve as a subsidy for the American economy. Israel continues to be the largest recipient of American foreign aid, and much of that money returns to the US as payment to American defense contractors and manufacturers. While it is true that this money could be spent on other domestic projects or purchases for the US military, it is in US interests to ensure that both the manufacturing and research and development fields of the American defense industry are healthy. Foreign aid for defense spending does this effectively.

The United States does not provide foreign aid out of the goodness of its heart, nor simply to stake a claim on the moral high ground in international affairs.  Foreign aid does have some negative side effects, but the benefits to the US are concrete and substantial. Foreign aid subsidizes American agriculture, industry & science, ensures market access, preserves regional stability, and facilitates foreign cooperation with policy objectives. Cutting the foreign aid budget would not simply be a sacrifice of nebulous American ‘Soft Power’; it would be a serious blow to the United States’ economy and national security.

Further Reading

William Appleman Williams, The Tragedy of American Diplomacy, (New York, NY: W. W. Norton & Company, 2009).

Michael E. Latham, The Right Kind of Revolution: Moderinzation, Development, and U.S. Foreign Policy from the Cold War to the Present, (Ithaca, NY: Cornell University Press, 2011).

Eric Hobsbawm, The Age of Extremes: A History of the World, 1914-1991, (New York, NY: Vintage Books, 1994).

Charles W. King

The last two centuries have seen tens of millions of people die of famine across the world. Few things make government seem more impotent than their people slowly dying of hunger as they sit by unable to anything about the lack of ample food. These deaths, probably more than a hundred million, are tragic, and doubly so because of an insidious lie; there has always been enough food. Despite the consternations of Thomas Malthus, increases in the productivity of agriculture have consistently outpaced the growth of the population. This raises the question as to why the nineteenth and twentieth centuries experienced horrific death rates from famine, unprecedented in the history of mankind.

The most straightforward answer is that these deaths are the responsibility of natural disasters, droughts and other natural phenomenon that destroyed crops and lives. This fails to recognize that drought, locusts, blights, and the like are not a new occurrence.  Since the advent of agriculture droughts and other natural disasters have occurred, and societies have found ways to mitigate their effects. The droughts that preceded some of the deadliest famines were equally devastating to crops. Research has shown that the famines in British ruled India in 1876-1879 and 1896-1902 were of a severity that had happened dozens of times in the previous centuries. Why then did millions Indians die of starvation between 1876 and 1879, many orders of magnitude more than died as a result of droughts of similar size only decades before? It is also important to understand that two of the most well-known crop disasters of the last two hundred years are man-made in their origin. Both the Irish Potato Famine and the American Dustbowl were caused by the unsustainable agricultural methods of the Irish and American farmers.

It is the Irish Potato Famine that best illuminates the true cause of famine deaths in recent centuries. Legend has it that upon hearing of the plight of the Irish the Sultan of the Ottoman Empire declared that he would be sending food aid to the Irish and money in the amount of ten thousand pounds sterling. This caused a minor diplomatic incident as the Queen of England had only donated two thousand pounds. More important than the wrangling over charitable donations was the fact that for the duration of the famine Ireland remained a net exporter of foodstuffs, primarily wheat. This is not unique to the Irish Potato Famine. India remained an exporter of food during both the famine of 1876-1879 (6.1 to 10.3 million deaths), and the famine of 1896-1902 (6.1 to 19 million deaths). China and Brazil experienced famines the same years (a consequence of global climate phenomenon) with death tolls proportional to their populations. Both continued to export food. This is not unique to the nineteenth century. Ethiopia experienced a devastating famine between 1989 and 1990, prompting an outpouring of support from the developed world. Throughout the famine Ethiopia was a net exporter of food.

It is not that the world has not possessed enough food to feed those who have died of starvation in the past two centuries, research shows that it is unlikely that food would have had to been imported to relieve most famine stricken areas.  Whether Indian, African, South American, Chinese or otherwise, those who have died of starvation have been unable to afford the food that was in their own countries. The purchasing power of the growing metropolises of the developed world has been too much for them to overcome. This is not unique to the colonial and developing world. In the late eighteenth century there were riots across England—in cities and rural towns—as the price of wheat on the newly open markets grew to be unaffordable for peasant farmers and urban laborers alike. Like the colonial and developing world, the English peasantry had utilized systems of famine and risk mitigation for hundreds of years, it was only with the introduction of new market systems that the English began to stave and riot.

Societies in Europe, Asia, Africa, and the Middle East have been successfully dealing with natural disasters for thousands of years, and yet in the last three centuries there has been a devastating increase in famine deaths. Mankind has had a measurable impact upon the global climate, but even that is not yet extensive enough to be responsible for the millions of deaths from starvation. It is also not fair to place the blame for these deaths entirely on the merchants who exported food from famine stricken areas. That they were responding to market incentives does not absolve them of responsibility, but also highlights that a policy that may be good for some is not necessarily good for all. This also cannot be a blanket incitement of global free trade, which has saved millions and raised the quality of life of billions. It is essential that policy-makers understand that in the twenty-first century famine is not a natural disaster or even the result of agricultural practices. Famine is a political failure, and it has dire consequences for security and stability.

Further Reading

Mike Davis, Late Victorian Holocausts: El Nino Famines and the Making of the Third World, (New York, NY: Verso: 2002).

E. P. Thomson, "The Moral Economy of the English Crowd in the Eighteenth Century." Past & Present No. 50 (February, 1971).