It has been said that the hegemony of the US within the international
financial system amounts to an arrangement in which the US makes the
dollars while the rest of the world makes the things they can buy. The
comment is an exaggeration of course, but given the increasing
indebtedness of the US as its balance of payments deficit climbs to
over $500 billion per year it does contain more than an element of
truth.

The US rose to global pre-eminence in the twentieth century on the
basis of the vast growth of its manufacturing industries. Today,
however, major US corporations are becoming increasingly dependent on
profits derived from the provision of financial services.

Recent results from General Motors-the world's largest
manufacturing company-are a case in point. In the second quarter of
this year, despite a weak economy and falling car sales, the company is
losing money.

BusinessWeek recently commented: "These days, GM looks more like a
financial institution that happens to sell cars and trucks than a
successful automaker."

It does not seem likely that profits from car and truck making are
going to increase in the near future. Faced with over-capacity and with
inventories running 21 percent above normal, GM will cut production in
the third quarter and expects to lose heavily million on its auto
business.

The GM result raises questions about how secure are profit figures from
other major corporations. As a recent Reuters report noted, despite the
predictions of an economic rebound, "revenue growth remains
elusive" and there are concerns that companies are "cutting
corners" to reach profit forecasts.

Besides the GM result, the report noted that much of Coca-Cola's jump
in profit was due to the impact of a lower tax rate and a weaker US
dollar. IBM matched Wall Street forecasts but relied on acquisitions
and foreign exchange gains to generate a increase in revenue. Microsoft
reported a gain in its investments of which most came from interest
income. United Technologies, which makes elevators, jet engines and
helicopters, reported an increased profit due to cost-cutting and
increased global sales. But it later disclosed that half of the profit
growth came as a result of changes in foreign exchange operations.

The increasing dependence of US corporations on financial operations to
boost profits and the continued decline of US manufacturing
industry-more than two million manufacturing jobs have been lost in
the past two years-have drawn attention to comments by US Federal
Reserve Board chairman Alan Greenspan. Speaking at the House Financial
Services Committee last month, Greenspan questioned whether the US
needed a manufacturing industry at all.

"Is it important for an economy to have manufacturing?" he asked.
"There is a big dispute on this issue. What is important is that
economies create value, and whether value is created by taking raw
materials and fabricating them into something consumers want, or value
is created by various different services which consumers want,
presumably should not make any significant difference so far as
standards of living are concerned because the income, the capability to
purchase the goods is there."

In other words, so long as it is possible to "make the dollars"
through financial operations, it does not matter how the commodities
and services they are used to purchase are created.

are true. But the situation changes when the issue is examined from the
standpoint of the economy as a whole. Here the crucial question is
whether a particular type of economic activity involves the extraction
of additional surplus value from the workforce or whether its profits
come from the appropriation of a share of surplus value that has been
created elsewhere in the economy.

If, for example, a bank lends money to a corporation to manufacture
commodities or to a high-tech firm to provide computer software, the
bank will make a profit from the interest it charges on its loans. But
that interest does not represent additional wealth. It is a portion of
the surplus value obtained by the corporation from the employment of
its workforce but which it is forced to hand over to the bank.

While financial institutions play a crucial role in the functioning of
the modern capitalist economy the profits they obtain for their
"services" do not represent an addition to the overall mass of
surplus value but are an appropriation of already created surplus
value.

In other words, the profits obtained by these institutions are the
result of essentially parasitic activity. As can sometimes occur in
Nature, this parasitism performs a necessary function-no modern
economy, and certainly not manufacturing industry, would be able to
operate without the provision of financial services. But when the
profits derived from what are essentially parasitic financial
operations start to assume ever increasing importance-even to the
extent that manufacturing corporations such as General Motors become
dependent on them-it is a sure sign of a crisis in the very heart of
the capitalist economy itself.

The major manufacturing companies are bound to go under and be gone in
a few months or years if they continue on this route. As it looks now
the management in these companies do not seem to be in touch with
reality and think that because they have been big in the past and
always been able to borrow money that this is just a bubble that will
pass. The reality will catch them by surprise soon and even if the debt
is huge and it will rock the foundation of the USA someone will be
coming to point at the naked men and wonder why they think they have
everything in order.