Critique Notes 66
Published: 18 March 2014
The Critique Conference and the First World War
The next Critique Conference is advertised in this issue as being on the First World War and the various questions involved. Unlike the British Secretary of State for Education, Michael Gove, who takes a British chauvinist viewpoint, supporting the British Empire, the left in general sees the war as an imperialist one, in which the contending national capitalist forces stumbled into a war to preserve or extend their empires. The result, however, was very different from what was expected. The monarchies of Europe were undermined or destroyed and with them the remnants of an aristocracy that had long outlived its origins in Feudalism. Above all, revolution broke out in Europe 1917–1919, most particularly in Russia, Germany and Hungary, and there were various forms of anti-capitalist protest almost everywhere in Europe. Universal suffrage came to be established and to be regarded as the sine qua non of modern bourgeois government, even if it took time to establish itself. At the time of the war itself, Germany was more democratic than the UK in having universal male suffrage, although not universal suffrage, even though the UK declared that it was fighting for democracy.
It is clear that the political–economic force of competing imperialisms was leading step by step to war, long anticipated by right and left,not least by the 2nd International. At the same time, in the last few years before the war itself, the working class had roused itself from a period of relative inaction and the stability of Europe was clearly threatened. War appeared an excellent antidote and for the first couple of years it bound populations together under a nationalist and chauvinist banner. The October Revolution was a direct result of the war, and threatened the end of capitalism. From then onwards the bourgeoisie used both repression and concessions to contain the working class. They progressively gave the vote to all citizens but controlled the means of communication as well as education to a greater or lesser degree, depending on the country. Michael Gove is only the latest would-be censor.
The world entered not just a revolutionary era but a capitalism in subjective as well as objective decline. Orwellian language has become normal. Today it is so blatant that few citizens trust politicians. Today austerity is declared necessary even though economies could work at full tilt to produce more than the particular country needs. Workers must be paid trivial sums and their government grants removed to ensure there is an incentive to work, while executives get paid millions topped up by further millions to ensure that they work hard. When this argument is provided, the defenders of the status quo say that the rich will leave the country unless they continue to be paid well. These arguments and similar absurd justifications have been trotted out for many decades under modern capitalism, but most particularly from the time when it looked as if capitalism could be overthrown not just in one country but globally.
The Second World War was a direct result of the threat to capital itself in that the rise of Fascism was a radical right-wing response under conditions of Stalinism and the Great Depression. History seldom goes in straight lines and both World Wars did not go the way the sides expected. The bourgeoisie did not want a protracted war in either case, but got stuck with it. As capitalist decline deepens, the loss of control becomes more evident and more widespread.
Today we see the way in which the conquests of Iraq, Afghanistan and Libya have failed to resolve the problems which the perpetrators set themselves. The market has not been restored. Anti-Western nationalism has been intensified and bound to a crazy religious fundamentalism. The situation in Syria appears hopeless. At the same time, most of the citizens of the countries of the former Soviet Union and Eastern Europe remain mired in a socio-economic entity that is going nowhere.
As a socio-economic system goes into decline and change, there is a period when the old laws function less and less well while the new ones have yet to come into being, although proto-forms operate. In parts of the world this means that people enter a void where it becomes difficult to make a living or find a future. During and after the First World War, the first of the forms of this void came into being. Politicians talk in Orwellian terms and invent an ideology with no depth but deadly consequences, while others invent a new religion.
Mandela, South Africa and the World
The elevation of Nelson Mandela into a latter-day saint says a lot about the epoch itself. His role, his history and that of the ANC/CP was very different from that produced for official consumption. The history now being taught in South Africa over the period since 1948 has little to do with the truth. The history of the previous period has also been written to justify the present regime, but the distortion is less.
The myth propagated and supported by the bourgeoisie globally is that of a man who wanted to overthrow the system of racial discrimination and changed from someone wanting to do it by force to someone who became reconciled with his oppressors, after universal suffrage was granted and a black government came to power.
In the present stage of capitalism where the Orwellian dispensation dictates a radical break between formal political power and economic control, this myth seems to have some meaning. The fact that the majority in South Africa are not much better off, while the formerly privileged are still privileged cannot be written off. After all, it is true of any capitalist country that a few are well off while the rest scrape by. So Mandela made South Africa a ‘normal’ capitalist country.
This myth has more resonance than it ought because of the particular role of Stalinism in South Africa. Although there were members of the South African Communist Party who held other views, the dominant line, after the Communist Party was banned in 1950, was that the struggle in South Africa had to take a nationalist form, rather than a struggle for socialism. Nominally the Stalinist Parties were socialist but in reality they were all bound in a re-interpretation that took them from Marxism into a simplistic ideology, justifying Stalinism itself, as in the USSR, and a multistage process of taking power. In the first instance there had to be a struggle for national independence and so a nationalist struggle. This was the national-democratic struggle. Harold Wolpe had developed a particular adaptation for South Africa under the term ‘internal colonialism’. Clearly South Africa was no longer a colony, even if it was in a subordinate position within the imperialist framework. Hence internal colonialism allowed the argument that the struggle was to overthrow the control of whites, who owned companies exploiting blacks in which they made extraordinary profits.1 As with other stages for other countries, this would be followed by still more stages, effectively negating the idea that there ever would be a socialist outcome.
The problem was that the companies paid white skilled workers wages which ranged from 10 to 20 times the wages of unskilled black workers. In addition, a system of this kind was inefficient reducing the incentives of the featherbedded white workers and the super-exploited black workers. The result was that profits of the mining companies, for example, were not that high, and it clearly paid them to end this system. Indeed they had tried to end it in 1922, which led to the white workers rebelling and fighting the government with arms. The city of Johannesburg was bombed and the leaders of the strike and rebellion were hanged. The Russian Revolution had taken place only a few years earlier and the Afrikaner workers’ organisations had supported it. The logic of the situation would have led to revolution if it had been pressed further, with white and black workers joining together. Hence the British bourgeoisie, which in the end owned the mines, accepted a legal ruling followed by the Parliamentary victory of Afrikaner nationalists plus the South African Labour Party. Racial discrimination was extended and enshrined in industrial law. Profits were reduced but there was no political threat to capital.
Today the South African capitalist class has been able to raise its profits and externalise itself. The new dispensation in 1994 was exactly what the capitalist class had wanted. In the Mandela myth apartheid came about in 1948 when the Afrikaner nationalists came to power and introduced the forms of racial discrimination. In reality, the pass laws were introduced in 1890s and the discriminatory laws were gradually formulated, most particularly after 1924. The 1948 government tightened them up and introduced more stringent forms of political control.
The ending of ‘apartheid’ was a result of the struggles of the majority of the South African population in which non-ANC and non-Communist Party organisations played a crucial role. The end came after US capital, in the person of David Rockefeller, then head of Chase Manhattan Bank, announced in 1985 that there would be no more loans for South Africa. Negotiations between the USSR and the USA were followed by further negotiations with the ANC/CP and South African big capital and South African governmental organisations. The end result was that the ANC/CP agreed to the conditions usually attached to IMF loans—balancing the budget, privatisation, and so on—which were faithfully carried out. The concessions to the previous regime were also adhered to—payment of pensions to (Afrikaner) civil servants, gradual phasing out of their jobs and relaxation of capital controls. The result was that profits rose and the big companies externalised themselves. There could not have been a better deal for capital and for its profits.
It took almost 20 years for the working class to begin to understand that they had been sold out as a class. The shooting of 34 miners at Marikana was unexpected but its brutality showed quite clearly the class nature of South Africa under the ANC/CP as inaugurated by Mandela.
It is not clear whether Mandela fully understood his own role. He was the front man for the Communist Party which itself played the crucial role within the ANC. Whether he changed his mind at some point in moving from a more militant position to that of a market liberal is not clear. The fact was that the ANC/CP held the latter position in any case, as its first stage. With the end of the Soviet Union they would have been intellectually lost in any case.
At the moment (end of January 2014), the World Economic Forum is holding its annual meeting of the rich and powerful under a general banner but with mentions of ‘inequality’. The bourgeoisie knows that the extension of this period of growing inequality is politically dangerous. It needs a number of tokenistic gestures to lessen the resentment in order to deal with the backlash to come. Mandela, the man who forgave the gaolers and torturers of his people, is the ideal modern successor to Ghandi, the passive resistance ideologist and practitioner. Unfortunately, much of the left also regards Mandela as their hero, not understanding his real role. Workers in South Africa have no choice if they and their families are to survive. They have to destroy the myth and the Stalinist ideology that underpins it in the course of fighting for their economic rights. It is highly unlikely that the South African government will be able to hold back the force of the South African working class once it understands its own exploitation and sees that a socialist alternative is possible, as originally promised. In that sense, the longer that the bourgeoisie can sustain the Mandela myth, the better it is for them.
Following the tradition of 1930s depression reporting that regularly proclaimed the end of the depression, newspapers today argue that a boom is in the making. There is, of course, no question but that there is a cyclical upturn of rather limited dimensions.
However, the banks in Europe remain in debt from Ireland across Europe. Individual debt remains high. “Across advanced economies debts stand at post-war highs, according to … figures presented by Carmen Reinhart and Kenneth Rogoff of Harvard University. These debts, they say, appear to be constraining recovery, blunting monetary expansion and limiting the political appeal of fiscal stimulus.”2 Big companies and rich individuals have large savings that are not being invested.
Yet in the USA the 180 billion dollar debt of the insurer AIG to the US government has been paid off. In general, banks, in the USA, have been dealt with. Nonetheless unemployment remains high and investment remains low, in relation either to savings or to national need. In Europe, Wolfgang Munchau notes that Mario Draghi is saying that the Eurozone economy is weak and fragile and the crisis is not over.3 The recipes for dealing with the economy presented by the Economist report of the annual meeting of the American Economics Association in Philadelphia at the beginning of January 2014 included moderate inflation, constraints on the flow of capital as well as the writing down of debt. Inflationary policy seemed to be generally accepted among the economists. Larry Summers, however, went further and argued for a programme of public investment.4
The tone of the article is one of surprise that the previous monetarism is giving way to a more Keynesian type analysis, something which is regarded as radical. Larry Summers has argued that the world economy is in for a period of stagnation,5 something which one might regard as obvious, given the last 6 years, the continued high levels of unemployment and the absence of some kind of major investment drive. In general, while discussions mention high unemployment, they tend to downplay the real levels, which are very high. As is very well known, the statistics of unemployment assume that those who have stopped looking for jobs, usually because there are no jobs available for them, are not unemployed.6 The result of including those who do not look for jobs, part-timers, odd jobbers, and so on, is much higher figures. The articles quoted below are in fact conservative.
Until capital returns to its job of acting as capital rather than languishing in the form of money there can be only be stagnation. Governments continue to impose austerity programmes either openly or covertly. Even the institutions and meetings dedicated to ameliorating the crisis are avoiding the question. The example of the so- called Eurozone banking union is instructive. At a recent meeting, instead of agreeing to mutualise their debt, they postponed the issue for a decade, leaving national governments to solve the issue of their banks’ debt. As one commentator put it, the Eurozone meeting of finance ministers on 19–20 December 2013 was an exercise in prolonging a banking credit crunch.7 Nevertheless, fiscal austerity is compulsory even in countries like the USA and France, which nominally, have another policy. When Angela Merkel met with her fellow Eurozone leaders, they told her that they could not risk even greater unpopularity, and she remained alone in proposing further austerity.
The German election was effectively a defeat for the ruling Christian Democrat Party, which the world’s press successfully presented as a wonderful victory, even though a combination of the Die Linke, the Greens and the Social Democrats had a majority in the Parliament’s lower house. Merkel did not have the backing even to try to force her line through against the other Eurozone ministers.
The inevitable result is the continuing disintegration of the global polity. Brazil maintains forms of protectionism that developed countries are trying to reverse by going to the World Trade Organization. Japan has devalued its currency, hoping to increase its exports as part of its attempts to revive its economy. It has also embarked on a strongly nationalist and warlike stance to justify the build-up of its arms sector and so economy through a state sector. This is the culmination of 24 years of downturn, where it followed the presently failing policies in the West.
The Investment Failure
Why is the capitalist class not investing? One answer is that there are a limited number of investment outlets. Why? Because the global economy is controlled by a limited number of firms, which each try to maximise their profits by not producing more than the market can hold. It goes further than that. They do not invest in unprofitable new producer or consumer goods, however much they may be needed by the population. In relation to consumer goods they rely on advertising in order to manufacture wants, rather than meeting needs. Each want is then branded and constitutes its own monopoly. The iphone has competition but it also has its dedicated followers. In fact it has a cult for whom there is no competition for Apple products. Advertising has created an enormous economic sector that absorbs a substantial part of the surplus product. Official figures put the percentage of gross domestic product at 2 per cent, which is important but not enormous. In fact, the role of advertising is played down. Its incorporation and integration into production itself is ignored. This point has been well made by Sweezy and Baran8 and lately by Skidelsky and Skidelsky.9 The effect is to multiply the costs of producing anything, so distorting what is produced or not produced. Recently, the Sweezy and Baran viewpoint has been updated in a Monthly Review book by John Bellamy Foster and Robert McChesney10. A review will shortly appear in Critique.
Bourgeois economists treat investment as ideas emerging from the minds of inventors who are then financed by banks or the equivalent of what is today private equity and who have the foresight to risk their money on an unknown enterprise. The emphasis is on the financier or entrepreneur, rather than the inventor, and so on the great man who risks his money, in competition with others who have similarly backed interesting ideas.
This fairy tale does have the merit of bringing the role of profit into the picture. The financier, whether a firm or rich individual, will back a concept that will produce profits and not otherwise. Pharmacological firms refuse to produce antibiotics on the ground that they will not make money on them, however much they are needed by humanity. Clearly a drug that liquidates the reason why it is bought is ultimately unprofitable. Logically, medicine ought to have the long-term aim of reducing its reason for existence. That cannot, however, be the aim of privately owned companies. The question of why capital is invested in the first place is a murky issue for bourgeois economics.
The ultimate justification for capital lies in its ability to raise productivity to the level where all humanity will have a high standard of living. It has done so through competitive investment followed by investment with less competition. The investment was not an abstract issue, however. It involved a series of social forces that are well known but seldom discussed in economics, which has achieved its goal of being a social science without discussing or theorizing the role of social relations. It then claims to be value-free, so adding to the body of Orwellian ideology.
Bourgeois economists take Adam Smith’s emphasis on the eternal hidden hand of the market as their starting and end points. However, Smith’s writing on the division of labour is wrongly put on the back-burner. The fact is that the rise in productivity resulting from the division of labour and the machinery that extended that division of labour required a labour-force, which was compelled to work. That compulsion was a form of economic force, as Marx put it. It was inhuman and it remains inhuman most obviously when we look at the conditions in Bangladesh or China, South Africa or Brazil. It is, however, also true that work on the production line in the USA or Europe has been and continues to be inhumane. The simple point is that capitalism has raised productivity but only because it has been able to organise humanity into an inhuman structure. The division of labour is a form of human co-operation subjected to authoritarian control. The subjective intent of the capitalist is to use that structure to extract surplus value or profit. He does not see or want to see that the removal of the authoritarian control could release an enormous development of that division of labour. Instead, workers are brutally and rigorously disciplined to work to rules determined by a machine based division of labour in the interests of capital.
The capitalist’s control over labour rested on his right to dismiss, demote and worsen the position of the worker, in a context where there was no alternative and any change appeared hopeless. Given the power of the capitalist, brutality was common. The cruelty, brutality and relative short life of the worker were the sacrifice humanity paid to reach a level of productivity which made socialism possible.
An organisation of labour which was humane, where work became mankind’s prime want, would be far more efficient, less time wasting and not harmful to humanity. The goals of production, the nature of the work involved and the form of the work are all capable of being re-organised in the interest of humanity. Because this is obvious, the population and the population at work make demands to that effect and are able to enforce their will. Conditions of work, pay and forms of control have all had to adapt, even if there has been no fundamental concession. In other words, the progress of science and the increasing power of the working class have themselves changed the nature of the firm. It has become a bureaucratic entity embedded in a complex division of labour.
The result, however, is that capital cannot act in the immediate and brutal way that it did in the past and its profits are the more unpredictable the longer the term that the investment needs to return the profits needed. However, relatively short-term investment can be made most of the time and, in the present context, it clearly does go on, particularly in large companies.
The problem is that substantial change, like the shift to electric cars, requires large- scale, long-term investment across firms and across countries. At the present time the shift is very slow, although it is gradually taking place. It is being assisted by governments through various kinds of guarantees and subsidies. In fact, however, it would require a long-term government-type commitment to establish recharging points all over the cities and the countryside. The electricity companies would need subsidies to begin the process. At the same time, the government would have to establish and fund research centres in the universities on a substantial scale over the long term. Then too the automobile companies would have to be subsidised to coordinate their research and manufacturing with the research centres and other bodies. It is the long-term nature of large-scale investment that is too risky to undertake unless government provides both subsidies or loans and guarantees. Given climate change, these changes are pressing and may move towards more than formal enactment.
Today both industry and services are increasingly concentrated and centralised. Governments have tried to fund and support the small and medium-sized enterprise, but they are usually dependent on the large enterprises and when operating independently they are less efficient. The illusion of the independent entrepreneur introducing the new highly productive innovation by him or herself is an important Orwellian instrument of ideological control.
There have been a number of attempts to argue that we are now in a period of less innovation than earlier periods. Robert Gordon argues that there have been three periods of innovation and the last was that of the computer, which has largely done its job.11 The point is not that there is no innovation but that there is less fundamental activity of that kind. This argument seems to have gained some traction but the question is not one of fact so much as what the nature of the socio-economic cause behind it is. At the present time, the corporation with most money to spend— Apple—is fundamentally a toy manufacturer, as I have argued above.
After the Second World War there was considerable development but there were two factors that are absent today. The first was the Cold War and a series of hot wars, and the consequent demand and state finance for innovation across the board from psychology to aeronautics and computers. The second was the need to finance and build a higher standard of living for the population. This was a consequence of the destruction of the war itself but also of the competition coming from an imagined future society, socialism, which appeared as the alternative.
Neither is present today. The capitalist class today is not worried about competing with a superior alternative but it is concerned that the working class will ultimately act either to reduce its profits or even to threaten to overthrow its society in the long term. Hence long-term and very-long-term investment is speculative, even if the object of investment looks highly attractive.
There are, therefore, three fundamental reasons hindering investment. Medium- term investment is not taking place because competition is limited and finance capital prefers the short term. Long-term investment is hindered because finance capital and large firms need government guarantees and finance. Overall, the social environment is not conducive to major societal investment, as it was after the war. Furthermore, even though the Cold War has ended, few really believe that capitalism is eternal.
- 1. For a discussion of the Political Economy of South Africa before 1994 see Hillel Ticktin, ‘The Politics of Race Discrimination in South Africa’, Critique, 24, 1991. This was also published by Pluto Press, London, in 1991 under the same title. The book essentially predicted the present outcome.
- 2. ‘“Free exchange”: This Time is Worse: Leading Economists Argue that Desperate Times call for Desperate Measures’, The Economist, 11 January 2014, p. 64.
- 3. Wolfgang Munchau, ‘The Eurozone Economy needs Nurture not Neglect’, Financial Times, 12 January 2014. Available at: http://www.ft.com/cms/s/0/c0820a86-7928-11e3-b381-00144feabdc0.html#axzz2t3prMSJ9, accessed 11th February 2014.
- 4. ‘“Free exchange”’, op. cit. p. 64.
- 5. Larry Summers, ‘Why Stagnation Might Prove to be the New Normal’, Financial Times, 15 December 2013, available at: http://www.ft.com/cms/s/2/87cb15ea-5d1a-11e3-a558-00144feabdc0.html#axzz2t3prMSJ9, accessed 11th February 2014. ; and ‘IMF Fourteenth Annual Research Conference in Honor of Stanley Fischer, Washington, DC’, 8 November 2013, Financial Times, http://larrysummers.com/imf-fourteenth-annualresearch- conference-in-honor-of-stanley-fischer/
- 6. Forbes, ‘The Real Unemployment Rate is Higher than you Think’, 5 July 2003, http://www.forbes.com/sites/ dandiamond/2013/07/05/why-the-real-unemployment-rate-is-higher-than-you-think/; John Cassidy, ‘The Real Unemployment Rate is 9.7 Per Cent’, The New Yorker, 6 September 2013, http://www.newyorker.com/online/ blogs/johncassidy/2013/09/why-the-real-unemployment-rate-is-nine-or-ten-per-cent.html; CNBC, ‘Chart of the Day: The Real Unemployment Rate?’, www.cnbc.com/id/101326426
- 7. Wolfgang Munchau, ‘An Exercise in Prolonging a Banking Credit Crunch’, Financial Times, 22 December 2013, http://www.ft.com/cms/s/0/efd07cc2-68cb-11e3-996a-00144feabdc0.html#axzz2oc1HD6EG
- 8. Paul A. Baran and Paul M. Sweezy, Monopoly Capital. New York: Monthly Review Press, 1966.
- 9. Robert Skidelsky and Edward Skidelsky How Much is Enough? London: Penguin, 2012.
- 10. John Bellamy Foster and Robert W. McChesney, The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China. New York: Monthly Review Press, 2012.
- 11. Robert J. Gordon, ‘Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds,’ NBER Working Papers 18315, National Bureau of Economic Research, 2012.