Critique Notes 55
Published: 13 January 2011
As indicated in the last issue, the next Critique Conference will be on the Saturday 26th February 2011 at the London School of Economics. The title is Stalinism and its Destructive Legacy. For further details see the Critique website, www.critiquejournal.net. The last but one issue of Critique, on the Crisis, will be published as a hardback book in April 2011, by Routledge. Readers are urged to get their libraries to buy it.
The Crisis and the Years Ahead
People have argued as to whether the current crisis is a recession or a depression, whether it has ended or will continue, whether there will be a double dip or whether the global economy is on an upturn. Orthodox economics defines its terms in order to justify or rationalise the evolution of capitalism. As a result, the statements of official bodies declare that we are in an upturn. If we define an economic cycle in terms of quarterly gdp figures then there is no question but that there is a technical upturn, however limited. Figures differ according to country, with some third world countries, and Germany, showing considerable growth. This is largely due to the upturn in China. This was the partly result of the decisions of the Chinese administration, controlled by the Communist Party, which expanded the money supply and encouraged state controlled firms to invest. It was also helped by the pick up in Chinese exports after its crash in 2008-9.
Remarkably, some appear to think that China will continue to expand and so pull the world out of its slump. Whatever technical rates of growth in the developed world, outside of Germany, unemployment is not falling. In fact, the rate of utilisation of plant and equipment remains relatively low. Wages are static or declining. On the other hand, profits have risen considerably and corporations have high absolute profit figures. That results in part from the low wages, dismissals, and consequent rise in productivity. It is also a result of the ability of firms to maintain their prices or at least prevent their prices sliding too far out of their control, assisted by a series of measures taken by the state, as in the case of automobiles.
On the one hand there is mass unemployment; on the other hand there are high profits and stocks of money, which are not being invested. Most of the money is not being put into long-term use. It is being held for the time being on a short term basis. Before the downturn, capital had the same problem and it went through a series of failures, ranging from the East Asian crisis, the dot-com bust etc before it produced ‘the big one’. How do we discuss the continued failure of capital to act as capital, rather than as money?
Some see this as a form of capital ‘strike’.[1] From this point of view, Capital does not want to invest unless it obtains the terms it requires. However, it is investing money in the global economy but just not long term in industry in the developed world. If it is a strike it has lasted longer than any other, as the switch to finance capital first took place in the 1870s. A strike is a tactic, whereas a policy adopted one and half centuries ago, partially abandoned after 1940 and then re-adopted at the end of the seventies is better described as a strategy.
We can look at the modern capitalist economy as a combination of individual corporate or small and medium size capital market movements together with a more general strategy maintained and carried out by the capitalist class together with governments and the state. This point was briefly put in the Critique issue on the crisis, (no 53) by the present author. The ‘strategy’ adopted from the late seventies was one of finance capital. This involved a policy of investment in finance itself and its associated activities combined with a short-termist and predatory approach to industry. It meant that firms were expected to produce maximum profit in as short a time as possible in the name of efficiency. Investment in research and development was carefully limited and salaries kept to the minimum, while extracting the maximum effort from the workers involved. Taxation was generally opposed and expected to be reduced to the minimum, by spending less on welfare, education, health and the state apparatus, thereby allowing the rich to get rich and the poorer.
Whether it was planned or not is not important here, the point is that it represents a particular way of running capitalism. As a strategy for controlling the third world, it has clearly failed, not so much through mass revolts, though discontent with Western policy is endemic, as through the continuing disintegration of a whole series of countries. The present crisis exemplifies the implosion of finance capitalist strategy, and hence it requires to be replaced.
As the crisis unfolded it was difficult to see that there could be another policy. The common attitude adopted by conservative parties in Europe and the North America appeared so wild that it looked more like an immediate reaction rather than a strategy. Two years later, their demand for cuts in government spending, taking a huge further step in cutting welfare and social spending, amounts to a return to nineteenth century capitalism. Some see it as simply an extension of so-called ‘neo-liberalism’ but it goes so much further that it is hard to regard it as the same policy. It is the difference between a containment of welfare and its abolition. It is much rather the restoration of the reserve army of labour together with control through the commodity- commodity fetishism.
The contradictory nature of the policy
The curious nature of the present policy is that it is reining in finance capital, subjecting it to a series of controls, while nonetheless maintaining a compromise. There is talk of restoring industrial capitalism in the UK and USA but the actual proposals are very limited. It would not be difficult for governments to embark on massive infrastructure development, given the run down nature of the railways, sewerage systems, water supply etc but the measures adopted are miniscule in comparison with what is needed. Capital wants the least possible government intervention. At the same time, Capital itself is not prepared to engage in the necessary long term investment. Indeed it is refusing to act as capital. It prefers to hold money, while objecting to governments taxing that money to turn it into real investment or into capital.
Looked at objectively, this looks like a policy of absolute misery, which can only lead to a declining standard of living and continued crisis. The right argue that they need a period of ‘creative destruction’ to clear the way for an upturn. It is hard to see how they can succeed, even apart from the subjective action of the working class. Modern capitalism is based on ‘planned’ long term investment, with its accompanying research and development, assisted by governments, whether through the arms sector or through other economic forms, together with mass consumption. The proposals would reject both these aspects, assuming that ‘private enterprise’ would regenerate earlier pre-1914 style capitalism. Whereas finance capital enjoyed a brief period of success, this strategy will never get anywhere because it is utopian. Its heyday passed over a century ago.
Disintegration and the Eurozone
There is, obviously, a second reason why it appears to be impossible. Governments have assumed responsibility for the overall bank failure, with the result that in those cases where Governments do not control their interest rates or currencies, as in the Eurozone, they have been compelled to depend on the stronger countries, with predictable political consequences. Where a crisis cannot be resolved one consequence is revolution but where that is unlikely disintegration is possible.
The Eurozone predicament has been extensively discussed. The dominant viewpoint seems to say that the Eurozone is a political entity in the first instance but it has not gone far enough and produced a federal constitution, allowing centralised fiscal control. In other words, only by direct bureaucratic control over the whole area can the Eurozone become a success. This would necessarily mean that France and Germany would be dominant. Since this is politically unlikely, it is argued that it will either break up or Germany will eventually modify its criticism and finance the Eurozone. Either way, the conservative fiscal dream will not be realised.
Three consequences have been predicted depending on the course of events. The first is that governments, like Greece and Ireland default on their bonds, which Merkel seems to have demanded. The second is inflation as a less painful way of devaluing government debt and the third is currency re-alignments, which will serve in part as competitive devaluations. In all three cases, the ordinary worker will have to pay.
The actual evolution of the Eurozone from its foundation is not just a political tale as some would have it. The forces of production have gone beyond the nation-state, which means that industrial companies, like computer firms, car companies and aeroplane manufacturers are effectively spread over a number of countries and their markets are similarly scattered. Tariffs, changing currency values, national subsidies and preferences create problems which the capitalist class would rather avoid. The German capitalist class needs a genuine common market to make its money. The break-up of the Eurozone would be a major problem for it, whatever the racism and German nationalism prevalent among certain sections of the population. To a degree the same argument, mutatis mutandis, applies to other countries in the Eurozone. Hence disintegration would be a major step backward, even if it becomes politically necessary.
It looks, increasingly, the case that the original social-democratic dream of a capitalist United States of Europe will be impossible. Instead, we will witness a series of crises, in which temporary resolutions are found.
The Political Results
The fact that it cannot produce a viable capitalism does not mean that measures will not be passed and misery visited on the population. We have the clear examples of Greece and Ireland before us.
Already we have seen massive demonstrations in many countries, most particularly those two countries. Why is the ruling class prepared to risk these confrontations? What kind of reaction can we expect? What are the effects on the political system? What are the likely long term results?
It should be noted that we are talking of a total onslaught. Governments are directly attacking the standard of living of pensioners, students, public sector workers, welfare beneficiaries and ordinary taxpayers. Because the private sector is also hit, most workers will also find their wages static or declining if they are still employed. This applies across Europe.
Why Confrontation?
At first sight, this appears to be contrary to any rules of Machiavellian government. Why are they not dividing the population? Not only are they putting all workers together in a community of pain but they are doing the same thing to workers across a series of countries. For a century liberals have told Marxists that they are utopian even if they are right about the reality of exploitation and oppression. The ruling class, we are told, divides the population by building up a ‘middle class’ who side with the system, and it bribes skilled workers with higher wages, better housing and promotion to administrative, middle class positions. It provides consumer goods and a consumer society in order to build a hedonistic society. What is more it finds a series of other divisions, which makes a working class as a class impossible. Now, all of a sudden, the rich have got richer and the poor are getting even poorer, while the middle class is being wiped out. Students are not demonstrating for a better society but for their rights.
When this question is posed we get several answers.
In the first instance, it has been argued that this is Naomi Klein’s shock doctrine in action, as in Eastern* Europe or the third world. The population receives a massive blow on the head after which they accept what is to come, which cannot be as bad. This view is dubious in any case. In the case of the former USSR, what happened was unplanned and indeed an unholy muddle, wiping out the very section of the population which supported the change. The hole into which the economy and the population descended was a consequence of the extreme difficulty of changing the Stalinist system into a capitalist system, the transition into which even now is in question. The fantastic level of uncertainty, combined with elite manipulation produced carnage in areas of Eastern Europe as well as starvation. There is no comparison with the present, whatever the ultimate result and the issue is not one of moving to ‘neo-liberalism’ but a return to pristine capitalism, which would be worse if it were not utopian.
A second answer is that the ruling class and so the government are caught by their own ideology. They believe that both social democracy and the potential for socialism have been defeated. It is epitomised for them in the end of the USSR and the continued evolution of social democratic parties. As a result, they think that the time is ripe to turn the clock back to the period before the end of the Second World War. The current crop of country political leaders does appear to be particularly lacking in depth of historical understanding. The gaffes perpetrated by the British Prime Minister, Cameron, on the history of the Second World War and the British-American roles in it exemplify this situation.
The ruling class may no longer see socialism as force capable of attracting substantial support and consequently not regard it as a serious opponent. They may, therefore, consider that they need to take the opportunity to deliver a serious blow to working class morale and so organisation. Apart from the absence of politicians of intellectual worth, bourgeois theoreticians are also limited in their understanding. Economics as a discipline has little to do with reality while political science has more to do with psephology or justification of the status quo.
Although it may be true that the ruling class may be deceived by its own false consciousness, there are enough thinkers among them who have had a history on the left to have some limited understanding of reality. Early in the crisis Critique Notes referred to the JP Morgan-Chase’s letter to investors in which it talked of the possibility that Marxism might prove correct.2 Although the reference is more tongue in cheek than real, it did reflect real fear that the system could go down.
It is, therefore, possible that the present policy is a compound of ideology, real fears and a brutal re-assessment of the situation. In other words, there are only a limited number of possibilities for capitalism at this stage, as argued above. The slogan that ‘there is no alternative’ (Tina), used by Thatcher, is basically correct today. The Cold War is no more, finance capital has imploded, the exploitation of the Third World is limited- colonialism is no more, and a new and substantial war is unlikely. Confrontation is, therefore, a rational policy.
A New War?
Some argue that war remains a real possibility. The implication is that it is an alternative to the present political economic policy of confrontation, creative destruction, mass unemployment and the removal of the welfare state. The Cold War was an ideal form of war where there was no loss of life but weapons were made and rapidly destroyed, all on a large scale. It is, however, not repeatable, while atomic war is too dangerous to use. Wars of so-called national liberation have ended. It is hard to see where a new war of some size could start. Small wars like Iraq and Afghanistan do not serve the purpose. Wars within NATO are unlikely, which leaves only countries like Russia and China. However, they are nuclear powers and in any case are not really enemies, but spheres of global investment. Furthermore, they are too big for this purpose. The US population learned its lesson at the time of Viet-Nam, and it is not keen to fight even the present limited wars in Iraq and Afghanistan.
The Political Reaction
One would expect the population to be angry and act spontaneously in a number of ways. The usual verbiage used by authorities is that of mob rule, anarchism and violence. Such has been the terms employed for the latest demonstration to date, that in London on 9th December 2010. The demonstration in Ireland a few days earlier appears timid even if bigger proportionate to the size of Ireland’s population. The Greek demonstrations have been of a different order. However, right wing commentators take the demonstrations in London as a form of defeat for the government. The necessary bills have been passed in the House of Commons, as expected, but the evident discontent in the population and its anger cannot be passed over, however much the government deplores the demonstration itself.
It is interesting that there has been an implicit call to the government to be careful as it proceeds. The police have already warned of further action to take place in 2011 as workers react to unemployment, lower wages, lower pensions etc. The truth is that the combination of the absence of restraining political bodies, total onslaught and genuine, population wide, anger makes the situation in the UK spontaneously explosive. As the elements of the explosive mixture are present in most countries of Europe, we can expect a series of eruptions.
At the moment, there are no substantial political organisations able to express and channel the discontent, anger and demands of the working class, as a class. The trade union bureaucrats, one-time social democratic parties and organisations and the remnants of Stalinist parties have been unable to control the demonstrations up till now. The recent student demonstrations showed this quite clearly, where the National Union of Students and the Universities and College Union were effectively ignored and heavily criticised. The ‘opposition’ parties, like the Labour Party in the UK, are forced to take a more left wing line, but they are so pusillanimous that their future has to be in doubt.
Although some concessions are likely, as we have argued above, there is little alternative for the ruling class. They are more likely to opt, therefore, for increasing repression proceeding step by step in time honoured fashion. First they will use intelligence to intimidate and indict activists. Then they will take out an increasing number of people on demonstrations. If the movement grows, activists will be arrested in their homes, early in the morning. Already demonstrators are wearing masks to avoid recognition by the police and finding ways of avoiding ‘kettling’, increasing the level of opposition organisation. The problem with such victimisation is that it hardens the opposition, forcing it underground, ultimately leading to an underground party.
Although this process has some way to go in the UK and Ireland, the situation is Greece is quite different where there is a substantial if variegated left, and where individuals have been directly injured by the right, with the police accused of collaboration, through bombing, poisoning etc. Descent into that kind of disorder in the UK, would strike at the heart of a modern finance capitalist economy which demands safety and certainty for its businessmen.
Conclusion: The New Political Situation
The political situation has changed with the crisis in the Eurozone and the growth of protest movements and demonstrations over Western Europe. While there is still no substantial left wing party, there is no immediate prospect of political change. However, the demonstrations, the biased reporting, the police action, the teach ins, the sit ins etc. have all began the process of building up a new movement, with new activists and new leaders. We asked whether the ruling class knew what it is doing in going for confrontation and we have tried to answer the question by saying that they do not fully understand what they are doing but they have to press ahead. As they encounter increasing resistance and the cost of battering the population over the head mounts, they will split, even as a genuine left forms. It is possible that these initial attempts in 2010 and 2011 do not stop the measures from taking effect but the resistance can only build. The parliamentary system is patently cracking. Where politicians are generally regarded as cynics and liars the world over, and in the UK the new Coalition government has almost made a profession of doing U turns on the professed policy of its constituent parties, people are demanding genuine control from below.
We have argued that the ruling class does not really understand that it cannot turn capitalism back to its basic concept but we are also saying that they cannot succeed politically either. If the left cannot take power over the next few decades, we may be talking of a period of disintegration.
Wikileaks
It was the Bolsheviks who revealed the secret diplomatic cables and correspondence during the First World War and it has always been a principle of the left that governments must conduct their politics openly, so that the majority can express their viewpoint on decisions made. The fact that Stalinism and social democracy maintained a high level of secrecy only indicates that they were not on the left. Today it is argued that private conversations of diplomats and government officials ought to remain secret, just as hidden as family conversations might be. The latter argument is absurd since there is no comparison between a diplomatic or other bureaucrat pursuing his office and the relationships between wife/husband/child. Official bureaucratic business is not personal. It affects the population as a whole and ought to be known to the whole population so that it can judge and vote on the issue.
It is clear that some of the Wikileaks documents are merely embarrassing and probably most confirm what most people suspected. Nonetheless confirmation of official or business influence and possible bribery over this or that event helps to provide a better picture of contemporary capitalism. To be told that diplomats have always prevaricated for hundreds of years so there is nothing new, does not alter the fact that such a system runs contrary to the needs of humanity.
Above we referred to the fact that politicians are not trusted. Wikileaks reinforces that view and further brings out the lack of democracy in a system which claims to be democratic. It is effectively helping to bring out the way the capitalist system is controlled and run by a ruling class. Obviously, it is still far better to have formal/bourgeois democracy than a dictatorship or a Stalinist system, but those are not the only alternatives today.
Notes
- Some in the British Socialist Party look at it in this light. It came out at a recent Marxist conference in Limerick