Technofeudalism: What Killed Capitalism

by Yanis Varoufakis

People often ask when the dollar’s reign will end – and whether it might even be replaced by the Chinese yuan as the world’s reserve currency. But this question neglects a crucial fact: the dollar’s reign has suited most countries, including China, just fine. It has allowed countries with large trade surpluses, like China and Germany, to convert their excess production – their net exports – into property and rents in the United States: real estate, US government bonds, and any companies that Washington allowed them to own. Without the dollar’s global role, Chinese, Japanese, Korean or German capitalists would never have been able to extract such colossal surplus value from their workers and then stash it away somewhere safe. Michael Pettis, an economist who has been working and teaching in Beijing for many years, put it brilliantly: While the US dollar may create an exorbitant privilege for certain American constituencies, this status creates an exorbitant burden for the US economy overall, especially for the vast majority of Americans who must pay for the corresponding trade deficits either with higher unemployment, more household debt, or greater fiscal deficits.