Journal of Socialist Theory

Critique Notes 63

This is the fiftieth year since Critique first appeared after its first large conference, held at Imperial College, London in May 1973. We intend to do two things: first, publish an account of the development of the journal in the form of an interview with the Editor, conducted by Terry Brotherstone; and second, on the initiative of the Routledge staff, produce a virtual issue of some 12 printed articles, which will be free for around 3 months.

A Turning Point in Global Crisis

The contemporary global crisis has no obvious end, even if orthodox economists argue that we are in a cyclical crisis that by definition reaches a point where the economy turns upwards. However, there are is no empirical evidence of an end to the crisis and no theoretical reasons to assume that it will end.

There is, however, evidence of another kind, of a deepening of the crisis. Modern economies do not operate without conscious human intervention and those in control, the subjective element, appear to have failed. The deliberate decision by a section of the capitalist class to go for cuts in government expenditure combined with deep reductions in welfare benefits was justified on the grounds that it was necessary to free up the private sector to invest and innovate. Every country has followed this recipe in its own way. The UK is a prime example, given its global finance capitalist importance. Although it has run a balance of payments deficit, it has had an influx of capital, sent by the wealthy in order to preserve their wealth in a country that is regarded as safe. Its interest rates are low, even though, like France and the USA it has lost its triple A status, as result of its low to negative growth rate.

The British government argued that private enterprise would invest to the point where the results would be visible within two years. With mass unemployment and low wages, demand is low, while businesses are not prepared to risk their money when there are no prospects for growth. Instead they want the government to lead and take the risks involved. The restoration of the classic economic neo-classical ideology has failed again for the third time: first, in the Great Depression of the 1930s; second in 2007-2008; and finally today, as a rescue model.

As a result, a more pragmatic and more secure section of big capital has decided that enough is enough and the time has come to reverse policy and get governments to invest. The Intenational Monetary Fund (IMF) came out with figures showing a multiplier effect of 1.7 (instead of below unity) when government cuts the public sector. Then bodies representative of big business called for an end to government inaction. In the USA, both the bourgeoisie and the Republican Party have split over the issue. In fact, the policy has changed, even if only marginally as yet, and even if governing parties stick to the rhetoric of austerity.

In fact, the policy of austerity could never have worked, but it has not yet been abandoned. It has to be remembered that the austerity policy, officially adopted by ruling parties in both Europe and North America, is not really a response to the downturn. Rather it is using the opportunity of the downturn to implement a policy that began its postwar life with the throwback in economics in the middle 1970s and the implementation of a low growth, reduced state budget, privatisation and mass unemployment strategy. The physical switch away from industry to finance capital in developed countries was a necessary consequence. The current depression is a reflection of the failure of this policy. Finance capital has imploded and reversal into a growth strategy implies the opposite of what was abandoned earlier.

Capital can ride the tiger of high growth within a market, but it knows that it must inevitably lead back to full employment, powerful unions and demands for concessions not just on wages but in control over capital, and hence it remains where it was but with a need to change. Many people have pointed to the absurdity of the current strategy, and the current ideology. ‘Whom the gods would destroy’ they first make angry, as more than one commentator has said. Bourgeois strategy, particularly in the USA has been anti-union, and we have seen the growth of such laws in that country in the current period. However, there are few on the left who do not criticise the unions. At best they deplore the pusillanimity of the union bureaucracy and at worst their compromises and sell-outs to the employers. Yet the employers appear not to see that the unions are, in the final analysis, preserving the continuation of capital itself. This short-sighted attitude must ultimately speed up the process of the full politicisation of the trade unions under present conditions.

Austerity has Failed and the Bourgeoisie has no Policy

Austerity, as even Keynes noted, is a policy of control. It has worked in the past, particularly during war time or particular natural emergencies. However, it cannot work under conditions where the origin lies in the failure of an outdated and replaceable system. The immediate cause appears to be an implosion of the banking system which caused a large government debt to pay off the bank’s creditors. There is no reduction in natural resources, the supply of food or the raw materials for the construction industry. The rich remain rich but the rest of the population is worse off. Why should anyone accept a policy of austerity as opposed to growth then?

Indeed, today that initial acceptance has worn off and the majority are opposed in countries like the UK. Whatever the policy in France, officially the government, today, does not rely on propaganda about austerity. The tea party in the USA is now looking beleaguered. The question really is why the working class was prepared to accept or at least to listen to such poor arguments based on austerity. Why indeed did that section of the bourgeoisie take it up? Are modern governments not just mad but also stupid? Day after day, in the UK, one has been assailed by the constant repetition of the cry that one cannot borrow money to reduce the national debt. This crass nonsense makes the government look as if it is both elitist and ignorant. They are elitist because they are assuming that ordinary people cannot see through the argument and ignorant because every business worth its salt does exactly that* borrow money to increase the assets with which it can expand its throughput and so its business. Clearly a non-economic unit like the family cannot usually do that, but it was Keynes who called such a comparison one of ‘misplaced concreteness’ in the 1930s.

As indicated above, the IMF and various economic think-tanks are calling for growth,1 but the response has been very limited. There has been talk of investment but it is far too restricted to have much impact. The cry is almost desperate, with the German economy flat-lining and the Southern European economies in negative territory. In the third world, the situation is not much better, with Brazil having had its growth cut to 1.5 per cent, and Chinese growth, although comparatively high, a fraction of its former self.

The implication is that the bourgeoisie does not know what to do. No doubt it can go on repeating its increasingly ineffective slogans for some time yet. As we have argued earlier, there were sound reasons, for the bourgeoisie, as capital, to have switched to finance capital, and equally sound reasons for them going for a policy that attempted to complete the process with an effective reserve army of labour and brutal and cruel cuts in welfare. However, the propaganda no longer works, and the policy itself has either imploded (finance capital) or is in the process of achieving an own goal.


In regard to China, the well-known commentator and economics writer, Martin Wolf,2 recently discussed a Chinese paper given in a conference of the China Development Forum organised by the Development Research Centre of the State Council in China on the future of the Chinese economy. He said that it spoke of the rate of growth declining from 10 per cent, in 2000-2010, to 6.5 per cent by 2018. 2022 owing to a number of factors, such as a slow-down in investment in infrastructure and the supply of labour. It also speaks of decline in return to investment in assets, declining urbanisation and in returns from finance in local government and real estate. The writer rightly calls this a melange of reasons.

Given the dubiousness of Chinese statistics, the importance of the article rests in a recognition of a decline in the rate of growth. It has always been obvious, as previously discussed in these columns, that no economy can continue to invest in unoccupied buildings, towns or unused roads for too long. However, the fundamental reason for such a decline in growth almost certainly rests on the decline in the supply of labour. It is not just a question of fewer workers coming onto the labour market. A large number of unskilled, or possibly educated but not highly skilled, workers can be deployed over a wide series of tasks over the country, and there are ways of helping direct that labour. Effectively, it is a low-paid flexible labour force. Over time, it must become increasingly skilled and hence less flexible as well as better paid and less pliable. The Soviet Union went through a similar process, ending up importing labour. Clearly, China does not have the same Stalinist economy as the USSR, but it has similar elements.

There is, therefore, every reason to accept the view that Chinese growth rates have peaked. Exactly what they are is open to question. Today, of course, China no longer has a balance of payments surplus because of the relative lack of demand from Europe and the USA. Until fairly recently it was quite common to read economic commentators talking of China pulling the West out of its depressive doldrums. Clearly that is not going to happen. Indeed, Martin Wolf makes a powerful case that the Chinese economy will suffer a series of severe downturns as it attempts to shift away from what amounts to overinvestment to middle class consumption. In fact, the decline in growth rates is unlikely to take the form predicted precisely because the dangers are foreseeable and worse than an ever-escalating growth of riots, protests and demonstrations.


Capitalism as a system is in decline, and it cannot invest to the extent required by the system itself without endangering the system’s stability. It has spent 150 years of its decline exhausting the alternatives of imperialism, war, the Cold War and the welfare state. It has come to the end of the line in political economic terms. It knows it, whether consciously or unconsciously, and that it is why it has been emphatic in its attempt to return to its foundations, its essence, in the reserve army of labour and commodity fetishism. However, it is a utopian project by any standards, even if it is its only apparent alternative. The economy is no longer a classical capitalist economy and the working class cannot be controlled in the old way. The immediate result is long-term stagnation with periodic upturns and downturns, punctuated by attempts to break out, and odd uprisings in different parts of the world.

The Eurozone is a particular case in that it incorporates much of Europe today. Yet every crisis resolution is followed by yet another crisis. The latest, that of Cyprus, followed the same pattern of all other crisis settlements in being a medium-to long term failure but an immediate resolution. The settlement was dictated as before by the German bourgeoisie, through the German government. As before, the attempted settlement caused global alarm -this time by threatening all depositors’ accounts in banks, through the de facto confiscation of high proportions of relevant Cypriot depositors’ accounts. Since there is nowhere else to keep deposits, other than under a mattress, the very foundations of the system are threatened. Money itself is threatened as money. Those with large holdings are compelled to find real investments, whatever they may be, usually in property in a stable capitalist country. The USA must be the prime beneficiary.

The left cannot take the view that Cyprus was a tax haven or money-laundering entity and therefore should be cleaned up. After all, there are any number of countries, or entities, in the capitalist world that serve the same purpose. The latest scandal reported in the British Guardian concerns the British Windward Islands, where any number of well-known figures from around the world have salted their money away. Since Britain is the colonial master of a series of such island countries, one does not have to ask what is going on. Indeed the City of London has performed the job for many years. Any theory of modern capitalism that does not incorporate the use of tax havens and money laundering as part of its political economy is simply not discussing the real world. Whether it is the enormous sums originating from drugs production, distribution and sales or the leaders, generals and business men of dubious regimes, common in Africa, but not only existing in Africa, the flow is enormous. The Guardian report of the British Windward Islands spoke of some US$21 trillion being involved.3 This total is clearly mind-bending and is part of a crisis where money piles up and cannot be spent the world over, not just in the USA or Europe. There is no way to alter this aspect of modern capitalism other than by the total abolition of capital itself. Nor, indeed, would it make sense for those who oppose capitalism to argue for a cleaned up capitalism, as it were, even if it could exist. The lot of the ordinary worker would not necessarily be improved.

Ordinary Cypriots are now part of the growing number of direct victims of the attempt to control the crisis. Pensioners, welfare recipients, the so-called middle class of white collar workers and small businessmen and women are especially hard hit.

In the end, the USA remains the imperial capitalist power. Even though finance capital has suffered an irreversible blow, it remains intact and continues to play its former role. The IMF continues to demand privatisation, balanced budgets and overall austerity, even if combined with some growth. Republican policy along those lines stops any further extension of fiscal expansionism. The deadlock at the heart of the US economy is part of global bourgeois indecision. An interesting sidelight has been shown on what is being requested of all political sides in Egypt.

The Economist, a right-wing liberal journal, published an editorial in which it points out that Egypt is in dire financial and economic straits. The ruling party, a right-wing Islamic formation, the Moslem Brotherhood, is losing support and will probably be reduced to a rump if it carries out the usual instructions of the IMF. The Economist, therefore, calls on all sides to enforce the IMF’s conditions so as to avoid collapse.4 If the left, such as it is, in Egypt joins this coalition, it will commit suicide. The market is not efficient and cannot function to save the population at this time. In Greece, Syriza has rightly refused to join the ruling coalition, but it does not exclude all compromise. The history of such formations, ultimately deriving from Stalinism, is not all that hopeful. Socialism in one country is impossible, but with more and countries falling into economic difficulties or even chaos, as in Egypt, the time for synchronous action is not far off. Even if a number of countries made the leap and failed, because of outside pressure, the threat would shock the bourgeoisie rigid, and a new era would open up.

It is high time that the left put forward its alternative transitional programme. That could involve the election of committees of control over all enterprises, the establishment of a national planning committee, nationalisation of all utilities, a decree on welfare that should ensure no-one goes hungry, etc. Regular democratic assemblies would have to be set up to discuss the nature of shortages and the solutions. This is a crude statement that would no doubt be refined, but without an alternative to a programme of IMF/EU/ECB dictatorship as in Greece, the left may only talk of morality.

The Political Struggle

It is the latter issue over which political battles are being fought today, both in parliament and in extra-parliamentary struggles. A new generation is being educated in the reality of global capitalism, but it is one in which the struggle is becoming deadly serious. The relatively light-headed student demonstrations, and mindless riots which followed months later, in the UK, began the process that escalated in the rest of Europe, most particularly in Greece, Italy, Spain and Portugal. Clearly the most powerful movements and growth in political education have been in Greece.

The level of perception of politics by bourgeois commentators is illustrated by the writing of the Financial Times columnist Philip Stephens,5 who argues that only Bleariest parties can be voted into parliamentary power in Western Europe. His viewpoint is a good taking off point in order to understand the nature of the probable development of politics in the West.

It looks as though the massive cuts in welfare have left the UK ruling class feeling that it has conducted a successful coup. When the welfare minister can suggest that he could live on 53 pounds a week, and over half a million sign a petition requesting that he do so in record time, the question is whether the government and its associates and supporters live in the real world. They claim that opinion polls support them. The sheer cruelty and brutality involved does not seem to have got through. They actually believe that the non-welfare-recipient working class supports and likes them punishing the rest.

While there may be aspects of such competitive behaviour, it will not take long before the new conditions for the ordinary worker compel a higher degree of solidarity than hitherto in the recent UK.