Navigating the treacherous journey from Western domination to de-dollarization presents a complex challenge for Global South countries. As described by political economists Michael Hudson and Radhika Desai, several significant issues plague these nations. They are burdened with substantial dollar-denominated debts, and Western corporations assert ownership over their resources. Moreover, the international legal framework tends to favor Western interests, often siding with American corporations and vulture funds. The covert network controlled by the United States retains the capability to instigate wars and coups against those who defy Western rules, particularly in financial matters. These problems are pervasive, affecting a large portion of the world’s countries.
The global landscape does not neatly divide into supporters and opponents of Western dominance. While a few countries in Europe unwaveringly align with the US-led West, only a handful of states, such as Russia, China, and Iran, have the audacity to outright reject Western demands, even on financial matters. Most nations find themselves in the middle, facing a delicate balance in charting their future course.
Argentina stands out among these in-between countries, with its unique role. Argentina has a history that spans two centuries of British and American experiments in debt-driven subjugation. The country has experienced cycles where developmentalist governments aimed to rescue it from crises, only to be followed by right-wing administrations that plunged it back into turmoil.
Among the in-between countries, Argentina’s situation is distinctive. The nation appears on the list of new invitees to the BRICS group. Its financial situation is chaotic, and a leading presidential candidate, who humorously takes economic advice from his four dogs, advocates closing down most of the government and adopting the US dollar as the national currency. This candidate’s electoral brand, like many right-wing Western politicians, seems unaffected by unrealistic economic plans or clownish antics.
However, these economic plans are indeed infeasible. The Economist points out that the candidate in question promises cuts equal to 15 percent of GDP, targeting a public sector that accounts for 38 percent of GDP. Unfortunately, he struggles to specify where these cuts will originate. Moreover, there is uncertainty about how this candidate’s government would secure the estimated US$40 billion required for the currency switch. Argentina currently struggles to repay its US$44 billion debt to the International Monetary Fund (IMF) and is left with no American currency, resorting to using yuan borrowed from China. The candidate has proposed selling state-owned firms and government debt in an offshore fund to raise the necessary capital, but finding buyers for such an endeavor may prove challenging.
Argentina’s fate has been entwined with imperial debt since the British Empire’s early financial manipulations in the 19th century. The first of Argentina’s nine defaults occurred in 1827, just three years after the British attempted an unsuccessful colonization of the country. Subsequently, Argentina alternated between elected governments and military dictatorships, shifting between developmentalist and neoliberal economic approaches. During neoliberal periods, Argentina became a hub for innovative schemes to exploit the country’s resources, such as the “financial bicycle” enabled by pegging the peso to the US dollar. Billionaire speculators leveraged this arrangement, causing the state to borrow dollars from US private banks or the IMF, incurring interest payments. These speculators then moved the dollars out of the country, leaving the debt to the state.
In 2001, Argentina defaulted on its debt and abandoned the currency peg, later fully repaying its US$9.5 billion IMF debt in 2005 and renegotiating 92 percent of the remaining national debt until 2010. However, the remaining 8 percent became a case study in the rigged international legal structure, favoring the US plunder of Global South economies. Vulture funds led by American billionaire Paul Singer and others held this debt and successfully pressed US courts to demand full repayment. The subsequent government under Mauricio Macri increased Argentina’s debt-to-GDP ratio, worsened poverty levels, and facilitated capital flight, resulting in another default.
Alberto Fernández, Macri’s successor, turned to China for financial assistance and joined the Belt and Road Initiative and applied for BRICS membership. However, this collaboration with China primarily revolved around obtaining additional loans to pay off the IMF, far from the win-win infrastructure investments that China seeks with Global South countries.
If the aforementioned presidential candidate is elected, Argentina may withdraw its BRICS application, potentially aligning with the US to drain both Argentina and China, among other emergency lenders. With each new debt plunge, Argentina’s right-wing seeks to sink the state deeper into financial turmoil, making it increasingly difficult to recover.
Pakistan, similar to Argentina, has endured centuries of imperial debt regimes, initially under British rule and later under the US What is now Pakistan once comprised prosperous provinces within British India, each saddled with debt. After partition, Pakistan and India emerged, with Pakistan becoming a significant US ally. However, the economic relationship between the US and Pakistan revolves largely around military affairs. The intervention in Afghanistan, spanning decades, led to immense covert expenses, significant casualties, and an illicit, parallel economy that disrupted Pakistan’s formal economy.
When Pakistan ended its support for the US effort in Afghanistan, the US occupation faced logistical challenges, as Pakistan’s ports and airfields had been vital supply lines. The covert relationship between the two nations, entwined by a web of secret leverage, had far-reaching consequences. During this period, the US spent an astronomical sum on the Afghan occupation, and Pakistan’s major trading partner, Afghanistan, was thrust into turmoil following the Taliban takeover.
In recent times, the IMF has pressured Pakistan for austerity measures, demanding higher taxes and reduced spending. However, Pakistan’s post-coup government has been hesitant to comply fully, aware of the precarious US relationship. The US has tools at its disposal, including credit rating downgrades and financial action task forces, to force compliance.
Ultimately, many countries face complex dilemmas in their efforts to escape the dollar-dominated financial system. Their experiences vary, but most are neither the world’s largest economy nor a military peer to the United States. Extricating themselves from Western influence will be challenging and painful, but it no longer seems impossible. The world is witnessing the emergence of alternative paths, and the journey toward de-dollarization continues to evolve.