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This is a re-print of an article published by State of Nature.

Atlantic Capitalism: One World or More?

by Ingo Schmidt

"What seems more likely than the formulation of a European imperial project is the economic overstretch of the transatlantic division of labor."


Transatlantic quarrels over the war in Iraq have posed the question whether the partnership between the rich and powerful countries on both sides of the Atlantic is doomed. By exploring post-war history this article traces back the emergence of an Atlantic capitalism. Politically this can be described as collective imperialism under US leadership. The economic underpinnings of this imperialism are to be found in the interplay between American Keynesianism and European Mercantilism. The former spurred the world economy by injections of nominal demand, while the latter held inflation in check. This division of labour remained in place even after the end of the post-war boom. With growth rates slowing down there is the danger of economic and imperial overstretch, however. While the article concludes there is no deliberate strategy to establish an autonomous European imperialism, the transatlantic axis may break apart accidentally. In case of financial crisis, the American and the European central bank might be unable to coordinate their policies to prevent financial meltdown. Since the introduction of the Euro such coordination has became more urgent than ever before, the chances for it to be successful are limited, however.


Apparently American exceptionalism, a core element of right-wing ideology in the US for a long time, has become an almost universal point of reference. Whether adherents of US-capitalism stress its ability to create new products and markets and its political role as the indispensable superpower, or its critics point out that this system generates inequality, insecurity and war – no other country or region attracts as much attention as the US. This notion of Americanisation has important implications for the Left: Fighting US-imperialism must be the top priority in order to open up spaces for autonomous developments in other parts of the world.

This is certainly true, albeit to varying degrees, for the poorer parts of the world. The latest war against Iraq, however, has revealed that a number of politicians and public intellectuals in Europe use Americanisation to justify their own ambitions to form a world power.[1] According to that view, allegedly European values such as multilateral bargaining in international affairs and social compromise within nation-states have to be defended against America’s use of raw power and its unregulated market economy.

While neo-conservatives in the US praise American power and make fun of European weakness,[2] a faction within Europe’s political class is looking for ways to increase the power of the European Union by taking on the challenge of Americanisation. Their strategy, then, is to create a countervailing-power by some sort of Europeanisation. Some on the Left were brought into this strategy. They make the case for a unique European Social Model that has to be defended against the market imperatives, which are exerted by America’s raw form of capitalism.[3]

Contrasting regulated, European-style, and unregulated, American-style, variants of capitalism is analytically flawed, however. For one thing, there is something like a welfare state in the US, limited though its provisions might be. The idea that the US is the incarnation of a totally unregulated market economy is a neo-liberal myth, albeit a politically powerful one. It has been strong enough to shape European integration along the lines of increasing competitiveness by dismantling welfare states all across the EU. Since the lowering of labor and social standards within individual member states have not been replaced by higher standards on the European level, the idea of a European Social Model is as mythical as that of unfettered market competition in the US.[4]

If there is something to be called Europeanisation it is the emergence of an ever more integrated economy across the EU member states that progressively supersedes corporatism and social compromise within individual member states. According to this view, European integration has brought about trade links and supra-national institutions on which the politics of an independent bloc of power could be based. Thus, the European economy would be the basis of a political power. No matter how realistically the chances of such a strategy being successful are assessed, it has to be rejected by the Left. A European imperial project will either offer some privileges for workers in Europe at the expense of workers elsewhere, thus creating a new form of social imperialism, or aim at further shrinkages of labor and social standards inside and outside of Europe.

While there is some potential for Europeanisation, which is less dependent on the degree of market integration but on the political strategies of ruling classes in Europe, the likelihood that this brings about a definite transatlantic divide is quite limited at the moment. It is by no means inevitable that economic linkages and institutions that were brought about in the course of European integration will lead to an imperial bloc that could rival the US.[5]

To see why there are still strong forces keeping Europe and America together the emergence of an Atlantic capitalism after the Second World War has to be understood. In this process the US established a leading role over its European junior partners. While the US favoured European integration to form a strong Western bloc against the perceived communist threat, European countries used it as a means to held American dominance in check. The creation of supranational institutions on the EU-level allowed the conflation of member states’ individual powers to a certain degree.

American leadership on the one side and European integration brought about an, often fragile, distribution of power across the Atlantic. This entailed a transatlantic division of labor in two areas. In the world economy American Keynesianism was, and still is, the main engine of growth. At the same time European Mercantilism provided an oversupply of technologically advanced products that kept inflation as well as workers’ wage claims down. In world politics the US military often paves the way for European diplomats. This alliance between rough and smart guys helped to contain Soviet communism as well as anti-colonial movements. Until now the transatlantic partnership has secured privileged access to natural resources from all over the world and hindered the emergence of rivalling powers outside the Atlantic region.

More important than the transatlantic quarrels that came and went all through the post-war period is that Atlantic capitalism as a whole has entered a phase of imperial overstretch. The promises of catching-up with the rich by integrating into the capitalist world economy, which were given to the world’s poor countries after the Second World War and again after the end of the Cold War, could not be held. No matter that there are a few prosperous regions, especially in South East Asia, world development as a whole has shown a widening gap between the rich and the poor ever since the end of the post-war boom. Therefore, Atlantic capitalism has not only lost parts of its attractiveness but also real capacities in integrating the capitalist world system. With Atlantic capitalism’s hegemony becoming fragile came more tensions, outright wars, and thus increasing costs to maintain its worldwide empire.

These costs will lead to recurrent conflicts over burden sharing among the Atlantic partners. Nevertheless, the likelihood that either an American or European faction will break away from their collective imperialism to establish an independent imperial project is low. Both the notion of American isolationism and European self-assertion against an all-mighty America are constant factors in balancing transatlantic relations ever since the end of World War II and will remain just that into the future. What is more likely than a deliberate split of the Atlantic alliance is a failure to coordinate policies in cases of economic or political crisis. With European integration marching on, Atlantic capitalism has changed from an imperialist cartel under US leadership to some sort of duopoly. As economics textbooks know, this is an unstable constellation that might break apart unintentionally. To understand why imperial overstretch and the possibility of coordination failure are a much bigger threat to Atlantic capitalism than any deliberate strategy to form an independent empire on one side of the Atlantic or the other a short look back into history is intriguing.


Starting in the 16th century, European conquest of the Americas led to the emergence of an Atlantic economy that was based on the trade of slaves, gold, sugar and, somewhat belatedly, cotton.[6] The mercantilist drive of European powers to attain current account surpluses as a way to accumulate wealth and power,[7] thus perpetuating the subordinated position of its American colonies, was stopped by the latter’s anti-colonial struggle. Eventually, independence was achieved just at the time when the industrial revolution started in Britain. Just then, American independence helped to avoid the development of underdevelopment that came to characterise most parts of the world.

By contrast, shielded by tariff barriers against technologically more advanced competitors in Europe, the US developed their own industrial base and internal market. These economic developments did not replace the Atlantic economy that had originated with the colonial empires that European powers had built in the Americas. Rather, this economy changed from the triangle trade with African slave labor, American raw materials and European manufactured goods to a constant flow of European migrant labor and capital into the US, both seeking higher incomes than could be expected in Europe.[8]

The economic ties across the Atlantic notwithstanding, capitalism developed within the institutional framework of nation-states in America and Europe. Also, capitalisms on both sides of the North Atlantic showed similar expansionary tendencies. This did not lead to transatlantic competition over the partition of the world, however. Only in Latin America Spain and Portugal, who were in decline anyway, were replaced as colonial powers by the US. On the other hand Europe’s strong powers respected Latin America as the US’ backyard. Instead of imperial rivalries between Europe and America, the latter intervened on the side of Britain and France against the German-led coalition in World War I.

Even though the war had cut trade links within Europe, transatlantic trade did not come to a standstill until the world economy went into depression in 1929. This paved the way for another world war that exhausted, in Europe, winners and losers. It was only then that the US was strong enough to suppress European rivalries and forge an Atlantic imperial project under its own leadership. To be sure, this project had become top priority with Soviet communism, unexpectedly, moving forward from Stalingrad to Berlin in the course of World War II.[9]

Admittedly, the focus on capitalist countries on both sides of the North Atlantic needs to be explained. With reference to history, economic performance, and political power, one might argue that Japan played a similar role in world capitalism as did Germany. Thus, both or neither of them should be counted as members of world capitalism’s top layer. These two countries’ ruling classes had tried to become hegemonic powers in Europe and Asia, respectively, and had failed in their imperial drives. Also, after the war, Germany and Japan had something in common. Based on ever increasing exports, they became leading industrial countries and centres of regional economic exchanges. In political terms there is a big difference, however. While Japan remained isolated in Asia, Germany became one of the main pillars of Western European integration. The creation of a customs union and a single market, that is market integration, may have been the main concern of this process. Nevertheless it also brought about a set of supranational institutions that helped to bundle economic resources and political power of the participating countries.

Paradoxical as it may seem, the winners and losers of World War II in Western Europe found themselves in similar positions. Financing the war has destroyed or at least weakened monetary systems in both cases, while the first were highly indebted to the US, the latter got monetary reform under supervision of the US. Moreover, while the end of the war had marked a total loss of power for Germany and Italy, the onset of de-colonisation initiated a gradual weakening of the former world powers Britain and France. These losses of power, together with the European economies lagging behind American levels of output capacities and productivity, put the European winners of World War II into a similar position as the losers. Thus, both were ready for integration. The US backed this integration process to create an anti-communist bloc and therefore post-war history witnessed a double process of integration: One in Western Europe and the other across the North Atlantic.


Atlantic capitalism came into being at a time that is often called the American Century. After World War II the US became a role model for other industrialised countries. Based on radical innovations such as mass produced automobiles and consumer electronics, Keynesian policies to stabilise capital accumulation and employment, and finally a social contract between major fractions of labor and capital, the US economy found its way out of the depression of the 1930s.[10] Moreover, with favourable exchange rates and the lowering of tariff barriers promoted by the International Monetary Fund and the General Agreement on Tariffs and Trade, it also opened up its markets to foreign competition. Via these institutions, mainly shaped by the US, American growth disseminates into world markets, and thus helped capitalism to recover from the crises, wars and revolutions that had shaken the system from 1914 to 1945.

As much as the US played the leading role in preparing the ground for post-war prosperity, one should not speak about an emergent American Empire.[11] Such a view takes the self-importance of American elites too seriously on the one hand, and on the other it underestimates the role other countries played in carving out the post-war order. The post-war order is better labelled as Atlantic capitalism due to economic, political and social factors.

First of all, imperialist rivalries had hampered economic development in Western Europe in the first half of the 20th century. Under US-leadership however, it could carry on where its previous trajectory of accumulation got lost during World War I.[12] Thus European economies caught up with the US pretty fast. This process brought about a transatlantic division of labor that, through some ups and downs, remained in place up until now. While it is mainly American Keynesianism that spurs economic growth, Europe’s new mercantile system keeps a check on worker’s claims for higher wages. In doing so it was important that export competition comes from technologically advanced countries. Were American workers the only ones that were producing advanced goods they could have asked for their part of monopoly profits. With foreign producers destroying technological monopolies formerly held by US-corporations this became impossible.

Secondly, Britain and France were seriously weakened by the loss of their former colonial empires.[13] Conversely they became nuclear powers, which gave them some clout in world politics. Also Germany’s role in tying up the Soviet military with its huge land army should not be underestimated. From this angle NATO is the perfect example for the collective, but US-led, imperialism that emerged out of World War II. It must also be said that NATO is the only institution that comprises only the countries which could be ascribed to Atlantic capitalism until the end of the Cold War and subsequent rounds of NATO enlargement. The reach of all the other supra-national institutions that came into being after World War II was either smaller, like in the case of EU, or wider, like the IMF and GATT agreements, than that of Atlantic capitalism.

Finally, transatlantic trade, direct investments and common foreign policies helped to bring about a transatlantic bloc of ruling classes.[14] This process was fostered by cultural industries. Their production of common but differentiated notions of western modernity and civilisation usually claimed to be superior to non-western cultures.

These three processes notwithstanding, the making of an Atlantic capitalism remained invisible to some extent. Two world wars had suggested that the concept of nation states was obsolete, an assumption that seemed to be confirmed by the establishment of a number of supra-national institutions, like IMF, GATT, or the UN. Yet, it was not that such institutions governed the nation states, but that the latter used the former as arenas of competition.

Moreover, the rescue of nation states was not confined to international politics.[15] Atlantic capitalism’s emergence was accompanied by the making of national welfare states. In as much as national regulations of the antagonism between labor and capital shapes working classes the Atlantic bloc of ruling classes was confronted by national opponents only. In many European countries allegiance to the nation state was regained, that then was confirmed and extended by these states’ welfare provisions, rested on the resistance against fascist oppression. This is particularly obvious in France and Italy where resistance took on the form of popular fronts that forced class conflict to the sidelines, at least for some time. Beyond class cleavages Germans were tied together by the notion of collective guilt for war and genocide and also by a widely shared effort to suppress Nazi history.

Post-war prosperity has been the basis of both the amalgamation of national bourgeoisies into an Atlantic ruling bloc and the integration of working classes into national welfare states. Consequently the end of the boom witnessed resurgent inter-state competition and class conflict. By giving up the Bretton Woods system of fixed exchange rates and allowing the Dollar to plunge, the US-government gave the strengthening of the American economy priority over the stabilisation of the capitalist world economy in the early 1970s. On the other hand, independently from each other, a number of European governments were engaged in short-lived attempts of Keynesian pump priming and considered protectionist measures. With the US pursuing extremely expansionary policies under Reagan, Europe turned back to its mercantile policies so that the former division of labor between these two was restored. Albeit growth remained much lower than before, turning back to the interplay of American Keynesianism and European mercantilism, which also implied the restoration of US leadership, helped to bridge the transatlantic rift that had opened up in the 1970s. This continuation in macroeconomic strategies was accompanied by a new class politics.

In the name of globalisation the Atlantic ruling bloc adjusted to lower growth rates by attacking labor and social standards. Dismantling welfare states and disconnecting real wages from productivity growth were meant to raise profit rates. Therefore social cohesion that was, and still is, largely generated by national welfare states, got weaker and the underlying structure of Atlantic capitalism became more visible. By and large European integration was not about social integration but about the creation of a common market.[16] This approach helped to bundle European powers and made them a countervailing power against the US. Without European integration the US would have been the unquestioned hub of the capitalist world. On the other hand, market integration preceding the creation of a European power structure consolidated US leadership.

Thus, there has neither been an American Empire that was surrounded by European satellites nor a transatlantic ultra-imperialism that had levelled out differences in power. Instead of that, the economic division of labor between US-Keynesianism and European Mercantilism was, in terms of power, rounded up by a collective imperialism under US leadership with Europe playing the role of a junior partner. Coordinated policies to maintain its imperial role in the world is the purpose of this project.

This common goal notwithstanding, there are, however, recurrent quarrels, like the trade disputes on genetically modified beef or steel tariffs, and even major crises. Though a break up of the Atlantic axis cannot be ruled out, transatlantic conflicts so far have turned out to balance that axis, eventually.

This was the case in the late 1960s, when some European governments accused the US of using the Bretton Woods system of fixed exchange rates as a means to shift the fiscal burden that came with the Vietnam War onto other countries by producing world-wide inflation. The same holds for the question whether the European policies of détente would be more effective in containing Soviet communism than the military build-up that the Reagan-administration was pushing for in the early 1980s. In the first case the leading role of the Dollar, which had come under pressure within the Bretton Woods system, could be restored on the basis of flexible rates giving Europe room for its mercantilist policies by devaluing their currencies. In the latter case the combination of American hard power with European soft power proved to be quite efficient in bringing the internal contradictions of Soviet communism to a head, and thus contributed to its final breakdown. Since then most adherents and critics alike see the US as the sole superpower, striving to Americanise the whole world. This view either neglects the role Europe has played in creating a collective imperialism during the Cold War, or implies that the collapse of actually existing socialism also brought about a massive decline of European power. The fall of the Berlin wall certainly has been the most important rupture in world politics since the Russian revolution. This does not rule out, however, the continuation of the transatlantic alliance as being the core of the world capitalist system at this moment.

Current Problems

The major challenge the alliance faces is symbolized by the introduction of the Euro, which was planned just shortly after the end of the Cold War. The question raised by the EU’s common currency is this: Will Europe become an independent pole of capitalist development or maintain its role as the US’ junior partner? While some, like American hawks or Europeans who push for rearmament, argue that the EU can not pursue independent world politics, given its limited military capacities, the economic question raised here might be more important than the number of soldiers, tanks and fighter planes an army can mobilize. For one, the military capacities rest on economic performances and, more important in the short run, military intervention as such does not guarantee the attainment of power, as can be seen in Iraq these days. From that angle the EU might become a superpower if it can create an economic model of growth. Since capitalism rests on an inherent imperative to accumulate, a growth model must not only promote accumulation in the centre, but also display chances of growth to a number of surrounding countries. This might establish a bloc of power and at least relative prosperity that is sharply distinguished from the impoverished capitalist periphery. Post war history is one of the US integrating Western Europe, and a small number of other countries, into its model of economic growth.[17] Within Atlantic capitalism, which came out of this project, the question now is whether the Euro stands for an emergent European growth model that might integrate other parts of the world into an imperial project that would be independent from the US.

To come to the point, the chances for such a development are rather small, given the history of the EU as a mercantile trading bloc. This is not because of a lack of economic potential, but because the national ruling classes within Europe have been merged into a transatlantic bloc of ruling classes. That position makes it quite easy to express discontent over American leadership but almost impossible to formulate an autonomous European imperial project.

The reason for this is that economically the EU, and especially the European Monetary Union, is pretty much shaped by Germany’s model of export-oriented growth.[18] While this model allowed the German economy to become a leading supplier on world markets and regional hegemony in Europe, by no means is it suitable to become an engine of growth.

From post-war prosperity to the growth slow down of the 1980s and 1990s the primary goal of economic policies in Germany has been export promotion. To achieve this goal, corporatism between labor and capital, but implicitly also the central bank, kept nominal wage increases and inflation rates low, thus helping German exporters in terms of price competitiveness. Rising exports then could jump start aggregate demand, employment and, with a delay that has become bigger the more growth rates slowed down, real wages. This pattern of export-oriented growth also included recurrent appreciations of the DM that had two implications. Rising DM-values led, immediately, to higher prices for exports from Germany. To keep the economy going, it is a must then to increase domestic demand, which includes more consumption, largely depending on wage incomes. It is a characteristic of German corporatism that trade unions’ claims for higher wages, that were rejected in the first place to boost exports, became an indispensable part of economic recovery on a later stage of the business cycle. At least for a limited time: With currency appreciations and higher wages employers found new reasons to complain about a lack of international competitiveness and, to underscore their claims, to slow down production and employment. What is important here is that this German pattern of growth put enormous pressure on the European economy as a whole. If other countries had not followed the road of increasing competitiveness by means of disinflation and wage restraints, they would have been driven to the sidelines by Germany’s beggar-thy-neighbour policies more and more. As a result Germany’s drive for higher exports turned Europe as a whole into a mercantilist bloc.

Ironically, the European Monetary Union, which is a legal expression of Mercantilism’s priorities of austerity, low inflation, and international competitiveness, might turn out to be a turning point for economic development within Europe and beyond.[19] Under a common currency there is no mechanism that constrains German exports by appreciating the DM, thus creating the need to boost domestic demand. Just by chance, this new economic condition coincides with a political one. Germany’s centre-left government opened up ways to get rid of interference form trade unions that were blocked to the preceding conservative governments all through the 1980s and 1990s. Had they pursued the union bashing policies of their American or British counterparts, they would have been swept out of power by a coalition of then still influential social democrats and unions. Therefore anti-union and welfare policies remained quite modest. With German social democracy following the New Democratic and New Labour ways of Clinton and Blair, respectively, they gave up the political backing of trade unions within German corporatism. Since employers now see a chance to skip that whole system of social regulation for the first time in post-war history, they are pushing through lower nominal wages and longer working hours. These attacks on labor standards hinder domestic demand to contribute to economic recovery, thus prolonging stagnation in Europe’s most important economy.

Under these circumstances there is absolutely no indication that the EU will become an independent centre of growth. Quite to the contrary: No matter how feeble the economic recovery in the US might be, the growth it generates becomes ever more important to prevent the European economy from collapsing. What seems more likely than the formulation of a European imperial project is the economic overstretch of the transatlantic division of labor. While the EU is more dependent on its mercantilist policies than ever before, the growth that is generated by American Keynesianism is weaker than ever before. Taking this and the imperial overstretch, which characterises the external relations of Atlantic capitalism, into account, suggests that the economic foundations of this system are crumbling. While its emergence has seen the formation of an a transnational bloc of ruling classes across the North Atlantic, its demise, and this is the challenge for the Left, might see the workers of the world fighting for a brighter future. •

Ingo Schmidt is a political economist who has held positions at various universities in Germany and Canada; currently he is a Labour Relations professor at Athabasca University. His research interests are labour movements, welfare state development and international political economy. Politically he is affiliated with British Columbia Labour Against War, co-editor of a local labour magazine in Germany, Göttinger Betriebsexpress and a columnist with the monthly newspaper Sozialistische Zeitung.


[1] J. Derrida & J. Habermas, ‘Unsere Erneuerung nach dem Krieg – Die Wiedergeburt Europas’, Frankfurter Allgemeine Zeitung, May 31, 2003.

[2] R. Kagan, ‘Power and Weakness’, Policy Review, June 2002.

[3] M. Albert, Kapitalismus contra Kapitalismus (Frankfurt/M.: New York, 1992); P. A. Hall & D. W. Soskice, Varieties of Capitalism (Oxford University Press, 2001).

[4] I. Schmidt, ‘Europe – On the Rise to Hegemony or Caught in Crisis?’, Monthly Review Vol. 54, February, 2003, 41–54.

[5] I. Schmidt, ‘Transatlantische Beziehungen – Das Ende einer wunderbaren Freundschaft?’, Prokla Vol. 33 No. 4, 2003, 545–564.

[6] K. H. O’Rourke & J. G. Williamson, Globalisation and History (MIT Press, 1999).

[7] G. Stapelfeldt, Der Merkantilismus (Freiburg, 2001), Ch. 1.

[8] O’Rourke & Williamson, Globalisation and History, Ch. 7 & 12.

[9] G. Lundestad, Empire by Integration (Oxford University Press, 1998).

[10] M. Aglietta, A Theory of Capitalist Regulation (London & New York, 1979), Ch. 3; P. A. Baran & P. M. Sweezy, Monopoly Capital (New York, 1966).

[11] S. Gindin & L. Panitch, ‘Global Capitalism and American Empire’, in L. Pantich & C. Leys, eds., Socialist Register 2004, 1–42.

[12] Jánossy, Das Ende der Wirtschaftswunder (Frankfurt/M., 1966).

[13] G. Arrighi, The Long Twentieth Century (London & New York, 1994).

[14] K. van der Pijl, The Making of an Atlantic Ruling Class (London & New York, 1984).

[15] A. S. Milward, The European Rescue of the Nation-State (London & New York, 1992).

[16] J. Grahl, After Maastricht – A Guide to European Monetary Union (London, 1997).

[17] M. Beckmann, H.-J. Bieling & F. Deppe, Euro-Kapitalismus und globale politische Ökonomie (Hamburg, 2003).

[18] J. Esser, Gewerkschaften in der Krise (Frankfurt/M., 1982), Ch. 2; J. Huffschmid, Wem gehört Europa? Wirtschaftspolitik in der EG, Vol. I (Heilbronn, 1994), Ch. 2.

[19] I. Schmidt, Transatlantische Währungskonkurrenz, FEG-Studie: Euro-Imperialismus (Marburg, forthcoming).

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