Journal of Socialist Theory

Critique Notes 50

This issue is something of a landmark in that Critique has produced 50 issues, of which 13 have come out under the Routledge/Taylor and Francis aegis, since it first came out in 1973. We have celebrated the occasion by producing the issue in gold and we intend to hold a conference to mark the occasion.

Critique 50

In this issue of Critique, the authors have tried to understand and analyse the nature of freedom of expression in the contemporary framework. Two authors, Alexander Belyakov and Iwona Lepka, have taken the examples of formerly Stalinist controlled countries and shown the limitations of freedom of expression induced by the market controlled form of society, without necessarily theorising it in those terms. The term 'freedom of expression', itself, is open to a series of interpretations and each author has understood it in their own way. As Mike Macnair rightly points out it is possible to understand freedom of expression as widely as freedom itself, but this does not necessarily destroy the utility of the phrase. There are, for instance, a series of 'rights', a term much discussed by Chris Boyd, which do not fall under the phrases freedom of speech or communication, some of which are mentioned in the article by Iwona Lepka. In the extreme case of the Armenian genocide in Turkey, the denial of the right to life is combined with the refusal to accept responsibility for the episode. Nazan Maksudyan discusses the banning of discussion in Turkey. The overall discussion ranges from a political-legal-historical account by Mike Macnair to the question of the capitalist corruption of art by Rebecca Gordon-Nesbitt, where she illustrates her thesis with a concrete example. Jack Rasmus has written an interesting comment on the way in which economic terms and ideas have been 'inverted' in meaning using Marx and Wittgenstein, using the present economic crisis as an illustration, while Geraldine Thorpe gets to the heart of the subject by discussing the problems of academic freedom in a capitalist environment. The article by Hillel Ticktin is both an introduction and an attempt to come to grips with crucial issues.

The Continued Political Economy of the Downturn

The newspapers' discovery of green shoots and the optimism of the official commentators are clearly belied by the reality of rising unemployment, declining incomes and continuing difficulties in industry. However, the very steep loss in production in the six months from October 2008 to March 2009 was unlikely to continue unless the world economy was to go into free fall and chaos. It should be no surprise that the point of inflection was passed, inventories were exhausted, the Government stimulus had its effects and there was a limit to the downturn.

The statistics on private wealth under management provide a much better indication of the causation and course of the downturn/depression. A private research firm, much quoted by the press has come up with the figure of US$14.5 trillion held in banks or bank like entities for 'high net worth' individuals in 2008.[1] This is not very different from the total GDP of the United States, and is close to the figure of the underlying assets involved in the total of US$683,726 trillion of over the counter derivatives as of June 2008, of US$ 20,353. UBS of Switzerland has lost its position at the top of this table to be replaced by the Bank of America.[2] Since this figure is a 16.7 per cent decline on the previous year, we get a figure of around US$18 trillion of assets under management held by banks alone. This is something like one-third of world GDP. One does not have to be a genius to work out that this figure alone provides a reason for banking employees and banks to compete to get the highest returns. To this can be added a more general figure of around 110 trillion dollars, in 1967, for all assets under management, including pension funds, hedge funds, sovereign wealth funds, mutual funds, insurance funds, and those of wealthy individuals etc. [3] Given the limited possibilities, it was inevitable that there be 'innovative forms' of making money, leading to the evolution of large quantities of over the counter derivatives and the subsequent denouement.

The figures themselves are no more than indicative of a vast and increasing disparity of incomes, reflecting the rise of finance capital, roughly beginning with Thatcher-Reagan. In past Critique Notes, we have referred to the 3.2 trillion Swiss Francs held by UBS, as some indication of the amounts involved. In fact, that figure has now been halved, given the flight of capital from UBS, consequent on its financial difficulties, ultimately, having been saved by the Swiss state. It also shows the nature of modern capital, with substantial sections of the class keeping at least a substantial part of their wealth in liquid form, rather than investing in industry. It is in part a result of a change of composition of the capitalist class in that to managers have been enfranchised in the last 30 years, receiving colossal incomes, running into millions and in a few cases even into billions. Without ownership, or investing in ownership, the logical choice for such people is to get someone else to take care of their wealth.

Given that the real rate of growth has been low over the past 30 years, opportunities for investment were, therefore, limited. Asset inflation of various kinds has resulted. The idea that the reason for the present downturn was simply the pricking of one more bubble is simply inane. In principle, the situation cannot change until this disparity between the returns to the capitalist class and the wages/salaries of the majority is considerably reduced. However, that is unlikely to happen because the emphasis today is on increasing efficiency in the firm by cutting employees and their wages. Finance capital, too, seems to have mounted an effective rearguard action to protect itself, continuing to its pay members at similar rates to the status quo ante and lobbying successfully to reduce legal safeguards over the 'industry'. There are a series of crucial questions that remain unresolved. One article argues that every major crisis has led to a new social form of accumulation:

The long-term cycles of the stock market, no matter how stylised and regular they seem, are not self-generating. They do not just happen on their own. Each cycle has a reason, and that reason is deeply social and historically unique.

Note that, during the twentieth century, every oscillation from a bear to a bull market was accompanied by a systemic societal transformation.[4]

The overall point, in my view, is correct as long as one does not assume any automaticity in the movement of the economy or that a cycle is the same thing as a crisis. These safeguards imply that there are some differences with the authors of the article quoted but they are secondary to the argument that we are at a socio-economic turning point. Whereas they expect a real solution to evolve, I am not so sure that there is one, within the system itself.

This argument is re-inforced by recent recalculations of growth rates in the period 1998-2007 lowering the growth rate to take account of the real financial growth rate. It is obvious that if finance and housing were taken out for that period, then the growth rate would be lower. In other words, the supposed rise in growth rates after 1995 is largely removed and we are left with a generally lower expansion of the US economy since the switch to finance capital.


There remains a widespread view that China will ride to the rescue, together with the BRIC countries, and so raise the rate of growth to levels securing high levels of employment, and a high standard of living. It is worth quoting one observer:

Stephen Roach: Things were pretty bad in late 2008 and 2009-much worse inside of China than the official year-over-year GDP comparisons might have alluded to. If you recalculate the GDP on a sequential quarter-to-quarter basis, the way we do it in the West, the growth rate had slowed pretty close to zero late last year.

There were massive layoffs in export-dependent Guangdong province; the government admitted at least 20 million migrant workers had lost their jobs. So once again, China needed growth and they needed it now. And so what they ended up doing was, first they enacted a massive 4 trillion renminbi stimulus, 72 percent of which was infrastructure. And then they opened up the spigots of bank lending. And they created the biggest six-month lending binge on record: about 7 trillion renminbi in the January-through-June period.

So what I wrote about in the FT was that it seemed to me that because the growth imperatives were so urgent, the authorities just opted to get as much growth out the door in as short a period of time as they possibly could. And they ended up stimulating perhaps the most unbalanced sector in the Chinese economy: fixed asset investment, which at the end of last year was 40 percent of the GDP. Now it's probably more than 45 percent of the GDP. We've never seen numbers like that for any major economy in the modern post-World War II era.[5]

It would appear that China has turned the question of increasing consumption on its head. Indeed, it is odd that the issue has become so extensively discussed when it is inherently obvious that workers with low salaries have a limited potential to buy the kind of mass consumer goods common in the USA. The recent McKinsey Report on China makes a number of points. As might be expected of a 'business orientated institution' it lays stress on the importance of a middle class and small and medium size enterprises for reasons of stability.[6] It points out that for the Chinese the consumption pattern is similar to that of other industrialising countries both historically and at the present time. At the same time it is more extreme. As it is talking about a group of 'wealthy people' with an annual household income of around US$30,000 and of a middle class group with between one-sixth and one third of that figure, it is clear that incomes are low.[7] It is hard to understand how there could be a pattern in which there could be a similar demand for automobiles and houses as in the USA. In fact, the idea that such people, and the workers and peasants ought to go out and spend money on consumer durables rather than food sounds like a form of colonial paternalism, for the benefit of US industry. Even if consumer durables are played down in favour of more money being spent on services, the point is not substantially altered. It is clear that the major reason for the relatively low consumption is a combination of high profits/low wages with low overall expenditure on consumption (35 per cent of GDP) relative to investment.[8] The need to save for health and pension provision appears to be secondary.

It seems clear that the revival in China is limited, possibly leading to a downturn when the money is spent.[9] It would appear that is for three reasons. In the first instance, something like half the money injected into the economy is going into property and equity speculation. Secondly, the state and its enterprises are spending much of its resources on infrastructure-largely roads, railways and airports. Infrastructure makes sense, unless it goes beyond what is reasonable and that appears to be the case, according to the article in the Financial Times.[10] The reason lies partly in the fact that the roads and airports will be underused and in part because the employment uptake of such construction is limited. Unemployment is rising and salaries declining.

The point, of course, is that the idea that China will pull the world out of its long run downturn is absurd. Fortunately or unfortunately, the hope remains both among sections of the capitalist class and among the usual suspects on the left that China will act as an engine for revival. That capitalism should need to look to a semi-Stalinist state for help is a commentary on the nature of capitalism itself. In fact, the low wages and high level of producer goods in total output was typical of classical Stalinism. This was not a result of conscious 'planning' but a reflection of both the need to build up the infrastructure and engineering sectors combined with extraordinary levels of waste. The latter was due to the atomisation of the population and consequent low levels of productivity together with the consequent organisational inefficiency. China has a higher level of productivity and less 'planning' but it still has some of the imperatives of Stalinism, leading to problems in productivity particularly in the state sector, and a degree of chaos in its organisation of the economy.

In more general theoretical terms, the argument is that the crisis is a symptom of a declining capitalism that has exhausted possible mediations, or strategies. One such strategy might have been to rely on the transitional nature of the epoch and use the countries with wholly or partially nationalised means of production as a source of demand. While China is playing some role in that direction, it is very limited.

The Crisis Again

We can, therefore, conclude that the banking crisis is stabilised though not solved, and that the economic downturn has reached a temporary floor. However, the continuing increase in unemployment, even if the rate of increase has declined, cuts in wages and conditions at work, together with attempts to reduce expenditure on the public sector, can only mean that the upturn will be formal, even if technically real.[11] As we have argued, there are two battles being waged within the ruling class over the situation. The first concerns the role of finance capital. The latter is fighting a rearguard action to maintain its ante-bellum role. It has been weakened financially, politically and geographically and is unlikely to continue to dominate the economy, but the process of removing its tentacles and so its policies will take some years. At the same time, the bourgeoisie has no alternative strategy other than muddling through as we maintained in the last Critique Notes, and it may be tempted to try to find some form of compromise. The other conflict, over the public sector is closely connected with the first issue.

History will record the irrationality if not the stupidity of the right in trying to cut down the public sector. Clearly, it will intensify and extend the downturn/depression if implemented but it will also throw down a gauntlet to the working class, which the latter will have to pick up, especially if previous anti-welfare state policies are continued and so-called efficient but short-termist strategies at workplaces are enforced in order to raise profits. From the time of De Tocqueville onwards, revolutionaries have argued that the exploited and oppressed do not rise in the downturn, when they are usually demoralised, but on the upturn. The issue will play out differently in the various regions and countries of the globe.

The Political Situation

The downturn in the world economy has indeed changed the political situation. The former Stalinist countries of Eastern Europe are in considerable trouble, most particularly those of the Baltic countries. As the population will no longer be able to borrow at cheap rates from abroad, the artificial boost to their economies has come to an end. Throughout Eastern Europe the market has lost its shine but no alternative presents itself. Whereas the countries now in the EU are stabilised by their membership of the European Union, the same is not true of the Former Soviet Union (FSU). The Ukraine and Russia are the two countries of most significance. Ukrainian nationalism has patently failed and the politicians are holding out the hope of entry into the EU. As that is not likely to materialise for a long time if ever, the country will be unstable, with a real possibility over time, of a shift to the left, even if that looks utopian at present. There is no other way out, other than disintegration.

The fact that dissident journalists in Russia continue to be shot and critical foreign journalists are unable to get visas is some indication of the anxiety levels in the Russian ruling group, given the outflow of capital, decline in output and reduction in raw material prices. The editor of the Socialist Register, Leo Panitch, a well-known left wing Professor of Politics at York University, Toronto, was invited to go to Moscow by the Russian President in order to attend the Russian equivalent of the Davos Conference. The conference literature talked of the advantage of state-capitalist regimes over liberal capitalism.[12] Clearly, the Russian ruling group is trying to develop an ideology in justification of its internal policy, and it hopes to get a degree of support from both third worldists and the left.

Their ruling ideas are not so much state-capitalist as a defensive nationalism, which requires the maintenance of aspects of state-control in order to avoid becoming a semi-colony of the imperial powers. The alternative is obliteration as an independent or relatively independent ruling elite or class. Worse still, the official policy of market fundamentalism threatened the break-up or overthrow of the post-Soviet regime. The Obama administration has taken a more sensible line, though it still does not seem to understand the reality of the situation. On the one hand, the West wants the FSU to make a successful transition to capitalism but on the other, it objects to the formation of capital investment that might build up indigenous industry. It does talk of the importance of the latter, though not of the way it can be done. Furthermore, Russian capital will inevitably be imperial since all capital is of that ilk, and it necessarily seeks to dominate what it regards as its space. (The question is not one of supporting one or the other side, the left must oppose both, but of understanding the contradictions and conflicts involved.) The ruling class failure to understand the damage done to their own transition project can only mean that such transition as has occurred will be frozen.

From the point of view of working class Russians, the conflict is all to the good in that it makes the position of Putin, Medvedev, their backers and the Russian ruling group more insecure. For Ukrainians, Georgians etc. their economic position is worse, given the limited potentialities of their economies under capitalism. A recent report on Ukrainian farming brings out an aspect of the problem. Western capital is buying up large tracts of land in the Ukraine in order to export the food produced. The usual colonial template of the flow of surplus out of the country will mean that the country will receive only a limited benefit, particularly as the farming is highly efficient industrialised agriculture, with relatively few employed. In principle, Russian capital would be no different. [13]

South Africa is another exemplar of the crisis wrought by the downturn. Manufacturing industry has declined by some 16.4 per cent in the second quarter, while exports are down by 13 per cent and imports by 9 per cent. Mining and quarrying has gone down by 10 per cent in the same period.[14] Given that the standard of living of the majority has been static or declining ever since the post-apartheid government took power, the situation for the majority is desperate. Government measures have been limited and political action in the form of strikes and immediate forms have been widespread. The new president, Zuma, has not put forward any workable alternative. He has assured the powers that be that he is business friendly while the Communist Party, which has always been crucial to the post-apartheid governments, does not appear to be any different, whatever its rhetoric.

The government, given its nature, has an unenviable choice of impossible solutions: moving towards a social democratic policy of rapid industrialisation, taking Africa as its market, or trying to emulate a Venezuela type regime. The first two are unlikely to work for more than a few years, but that may be enough to take the edge off a possible uprising for some time. The socialist solution is not on the cards, given that there is no socialist party of any significance to influence the government.

Under these conditions, without a revolutionary party to provide a socialist alternative, South Africa is marching towards disintegration. Those in the 'middle class' who can leave are leaving, while there is an increasing stress on tribal identity. The xenophobic attacks on immigrants last year may be a harbinger of what is to come.

The two countries that have had spontaneous uprisings, however limited, are Greece and Iran. Critique will carry an article by Savas Matsas in its next issue.

Yassmine Mather reports on Iran

This summer's protests in Iran have been interpreted by many as a political conflict between the two dominant factions of the Islamic government. However, it should be pointed out that irreconcilable differences amongst Shia factions in the clerical elite in Iran are themselves a consequence of revolt from below. For more than a decade opposition was growing against political repression and religious interference in the private lives of young Iranians who constitute over 75 per cent of the population, what was different in 2009 was the looming economic crisis. The unprecedented protests of June 2009 were triggered by rigged elections, following a period of relative political freedoms during presidential 'elections'. However, it is opposition to the devastating economic situation, inflation of 26 per cent, mass unemployment, systematic non payment of wages etc. that have given the protests their dimensions. In the last 50 years, Iran has seen major demographic changes. Approximately 67 per cent of Iran's population lives in urban areas, up from 27 per cent in 1950.[15] The rate of literacy is around 75 per cent, yet the country remains a single product exporter. The economy is dominated by oil and gas export (80 per cent of export earnings between 2006 and 2008 came from oil and gas). In the winter of 2009, the sharp downward spiral of oil prices prompted economists to predict that Tehran was facing severe financial hardship. Not only is the global economic crisis being felt far worse in countries on the periphery, but the effects in Iran are compounded by a government that based its 2008-2009 budget on the price of oil remaining at US$140 a barrel; a government that aimed to privatise 80 per cent of Iran's industries by 2010, thus creating mass unemployment; a government that printed money while pursuing neo liberal economic policies; a government whose policies resulted in hyperinflation while the growing gap between rich and poor made a mockery of its populist claims to be helping the common people. In fact, the economy dominated the presidential 'election' campaigns and remains important in the continuing protests.

Iran faces a growing problem regarding balance of payments: it does not have enough in reserves to finance its way out of the crisis. 'Reformist' candidates were talking of lowering the exchange rate in order to fight inflation; however, Ahmadinejad's new government is likely to continue the policy of printing money with its own disastrous consequences. After four years of cheap money, Iran is bracing itself for a kind of credit crunch. Non-performing loans have increased by 75 per cent in the past three years: there is simply no incentive for people to pay them back at such a low rate of interest. Now that oil revenues have plummeted from US$147 to US$48 a barrel, the government has no cash to sustain the credit supply. The prospects for Iran's economy look grim. Irrespective of what happens on the political scene, the economic crisis will ensure a continuation of workers protests that are becoming a regular feature of anti government protests in Iran.


  1., accessed 28/08/2009
  2. 'The global private banking industry now manages a total of USD14.5 trillion in wealth investor assets. Industry assets under management declined a median of -15.7% in 2008. Private banking profits for the industry fell a median of -32.9% in 2008. Many private banks continued to add headcount in 2008 - the median growth rate in new staff was 6% in spite of market conditions - but the return on the investment is not overwhelming. However, cost-income ratios worsened to 72.4%, from 3.7% in 2007 - effectively a 13.7% dip in industry efficiency. Meanwhile, net interest income increases to 31.2% of total income, versus 26.1% in 2007,' The Scorpio Partnership, The Scorpio Partnership Global Private Banking Benchmark 2009 Press Release (London: The Scorpio Partnership, 2009), p.3. accessed 28th August 2009
  3. Wikipedia, 'Investment Management'
  4. Shimshon Bichler and Jonathan Nitzan, 'Contours of Crisis: Plus ça change, plus c'est pareil? First in a series of articles on the current crisis,' Dollars and Sense, 2008,
  5. McKinsey, 'Unlocking the Power of Chinese Consumers: An Interview with Stephen Roach,' August 2009,
  6. McKinsey Global Institute, If You have Got it Spend it: Unleashing China's Consumption, (McKinsey and Company),
  7. McKinsey Global Institute, The Coming of Age: China's New Class of Wealthy Consumers, Executive Summary, (McKinsey and Company), p.7.
  8. 'The problem is more that the mix of domestic demand between consumption and investment is unbalanced, and becoming even more so. In 2008 private consumption accounted for only 35% of GDP, down from 49% in 1990 (see chart 2). By contrast, investment had risen from 35% to 44% of GDP. This year the bulk of the government's stimulus is going into infrastructure, further swelling investment's share. Chinese capital spending could exceed that in America for the first time, while its consumer spending will be only one-sixth as large. This is China's most glaring economic imbalance.' The Economist, 'Rebalancing the World Economy: China: The Spend is Nigh,' The Economist, 30 July 2009,, accessed 23-08-2009.
  9. This paragraph derives its data from an article by Jamil Anderlini, 'Rule of the Iron Rooster,' Financial Times, 25 August 2009, p.7. It concludes by quoting Professor Wang of Cheung Kong Business school: 'There are many people who truly believe the economy will face another big slide and the recovery will look more like a 'W.'
  10. Ibid
  11. Prof. Nuriel Rubini who has turned the empirical study of the crisis into a fine art, argues that there are 7 reasons why the crisis will have a weak upturn and three reasons why there could be a W shaped downturn. Nouriel Rubini, 'The Risk of a Double-dip Recession is Rising,' Financial Times, 24 August 2009. p.9.
  12. 'To top all that, last week Prof. Panitch lit out for Moscow to take part in Russia's version of the Davos forum on global economics. He was invited by none other than Dmitry Medvedev, Russia's President, to discuss whether the financial crisis could reinvigorate socialism as much as the fall of the Berlin Wall collapsed it. "Political systems with state capitalist elements seem to have advantages over countries with a pure liberal model," the conference's literature points out, before concluding that "liberal capitalism ... obviously heads towards its historical end"... "They're flying me business class at a cost of $4,000 because I have a PhD defence Monday morning in Toronto," Prof. Panitch says. "It's ridiculous. Marxism seems to be the flavour of the month."' The Globe and Mail, 'The 18th Brumaire of Barack Obama,' The Globe and Mail, 2009,
  13. BBC News, 'A Storm Brews over Food, Water and Power,' BBC News, 24 August 2009,, accessed 24 August 2009. In the example given in the article the capital is British.
  14. South African Reserve Bank, 'Economic and Financial Data for South Africa,', accessed 25 August 2009.
  15. Migration Policy Institute, 'Iran: A Vast Diaspora Abroad and Millions of Refugees at Home,' Migration Information Source,