Critique Notes 69
Published: 26 November 2014
The Continuing Crisis
Newspapers, such as the Financial Times, have headlined the fall in global stocks in October 2014 and thus have stimulated the fear and uncertainty stalking the bourgeoisie.1Share prices have oscillated and the fall in the second and third weeks of October may have recalled the collapse in October 1987, stopped by the determination of the US government and Federal Reserve Bank. The low point from the peak was just a few percentage points above 10. The rise of shares on the stock exchanges in the USA and Europe from the lows reached during the initial period of the current depression could not continue as long as the global economy remains in ‘secular stagnation’. The rise itself had much to do with the absence of alternative investment outlets. As there still is nothing else, we may expect the stock exchanges to oscillate for some time.
Commentators talk risibly about the need for ‘animal spirits’.2It is a reflection of the superficiality of bourgeois economics that the term, coined by Keynes, continues to be used. The concept of an economy based on the entrepreneurial genius of a few individuals, who happen to have access to capital for their ideas, can only be accepted by those who have a stake in not seeing reality. Fear is a recognised means of control and, between the economic crisis and Ebola, it is becoming a real force.
The International Monetary Fund (IMF) report of October 20143is a gloomy apology for having been too hopeful. The report shows that the whole world has lower growth than expected. The UK has relatively high growth but that is obviously an attempt by the Conservative Party to win the coming election, not that the IMF would say such a thing. It concludes that the world can go for infrastructure expansion, something that Larry Summers took up, naturally, in his article in the Financial Times, where he spent his word allowance showing that it costs nothing.4Although the USA has positive growth, it is less than expected. Germany on the other hand has very low growth.5Its problems with infrastructure are well known.6The crucial statistics, however, are those showing how limited investment in industry in. ‘Gersemann, a journalist for the centre-right daily Die Welt, points out that official statistics show negative net investment in seven of the eight largest manufacturing industries since 2000, with the car industry the only exception’.7It is curious that the IMF, a somewhat imperious body, headed by a French Conservative former minister, should come out against the austerity line to argue for the state to raise economic growth. It shows, of course, that there is a split in the bourgeois ranks, but also that things are perceived as sufficiently dire for that august body to make a strong case for the a rise in the rate of growth.
The report has not been received with open arms. The usual suspects have indicated their support. In addition to Summers, Martin Wolf has argued the case.8The USA and the UK could have high-speed trains, something already discussed in the last Critique Notes. Obama, having raised the issue, has left it alone. In the UK, the idea has become absurd. It is expected to take another 20 years or so to be completed. Clearly, at that rate its effect on the economy will be minimal. The obvious fact that the UK, like many countries, needs a massive investment in social housing immediately is not likely to impress itself on governments. Still less is the absolute need to spend trillions dealing with climate change. The response to the Ebola epidemic has been too little too late. All this is to be expected. One commentary cites a series of reasons for the relative collapse in shares running from Ebola to ongoing weakness in various parts of the world, such as Europe and the third world, and the continued conflict in the Middle East and Ukraine.There is also some fear regarding Greece. It is worth exploring some of these issues. The rise in the dollar, the downturn in commodity prices, the deflationary statistics in Europe and elsewhere and the rise in bond prices can also be invoked.10
The one piece that has touched on reality without going further is the article by Wolfgang Munchau arguing that the reason for the stock exchange shock lies in the reality of European stagnation. He argues that Europe is in a depression, with deflation likely, and the alternatives are either a political union or a break-up of the Eurozone.
‘Financial markets have woken up to the possibility of Eurozone-wide economic depression with very low inflation over the next 10 to 20 years’.11The point about Europe being the cause of the share downturn is more widely shared than his clear analysis. Larry Elliot in the Observer takes a similar view. He writes that the stasis in Europe is the basis of the pessimism in the markets, arguing that Europe is the world’s greatest market and it could be ‘condemned to years of nugatory growth’.12
Paul Krugman13has spoken his piece on the issue by condemning austerity again and calling for more deficit finance. He has rightly made fun of the conservative and orthodox economist viewpoint that calls for fiscal rectitude, predicting dire inflationary consequences as a result of quantitative easing and deficits. It is a real question as to whether all such people really believe what they are saying. They were wrong during the Great Depression of the 1930s and have been wrong again. On the other hand, they have had a real impact. Furthermore, the austerity policy can be looked at as a more profound policy for the (utopian) restoration of the principles of pre-1914 capitalism. Krugman and other liberals do not raise this issue, even though it is hard to believe that austerity believers are as primitive as they might seem. The US$28.5 billion lying idle in the vaults of BNY-Mellon are destined to remain as money, not capital.14The underlying issue remains. Capitalism is in a real crisis as opposed to a cyclical downturn, although cyclical downturns will exacerbate the crisis itself. For those who support ‘the market’ there is no such possibility. Capitalism is simply malfunctioning and it will eventually recuperate, according to them.
At the moment, people like Krugman and Munchau are outliers, although it is becoming clear that the concept of secular stagnation is becoming accepted rather than depression. The fact that these two also use the word ‘depression’ shows that it is on its way. It is not a question of using particular words but of accepting the fact that austerity is not going to work for the utopians among those supporting the policy. The cynics and hardened right-wing economists, capitalists and politicians will defend their right to squeeze the population. At some point, they will lose traction and the Keynesians will take control. It is not clear, however, how they can change reality without moving to the far left. Since that is unlikely, they will support investment in infrastructure and the world will limp along.
The Russia-Ukraine Debacle
One of the issues hanging over the global economy is that of the relationship of the West to Russia. Already, the British firm Rolls Royce, makers of engines, has declared that profits will be lower owing to the problems with Russia. Sanctions have hit Germany and others as well.
It is clear that nationalism is playing a major role in Russia, and it is being utilised as a means of stabilising both the ramshackle transition-to-capitalism system existing there and the particular group occupying the central controlling apparatus. This is partly a result of the continuing interaction with Ukraine but more importantly also with the ‘West’. It looks as if the latter has fallen into a trap of their own making. In an important article, the liberal-republican writer John Mearsheimer15has argued that the USA ought to have left the Russia--Ukraine relationship to itself. He documents in some detail the degree to which the USA has interfered with the political process in the Ukraine in order to replace one administration with another. In effect, he is arguing that Great Power politics would dictate that the USA would keep out of that area, leaving it to Russia. Looked at from the point of view of a liberal right-wing theorist, this makes sense. It would allow some space for the Russian elite, partly composed of a rising capitalist class, to develop itself, whatever injustices it causes. Instead, the USA is insisting on its right to control the world and so effectively install a Ukrainian government in close alliance with itself.
Mearsheimer’s remedy is right, from his viewpoint, even if his analysis is partly flawed. Leaving Russia alone or helping the existing regime will help that regime move faster into a viable capitalism, if that is at all possible. As we argued in a previous issue of Critique, the problem is that the US goal is unachievable. The transition from Stalinism to capitalism is not complete, if it ever will be, and that necessarily makes the social structure unstable. Attempts to impose liberal market reforms have not worked in the past and will not work in the future. The elite/ oligarchs of Russia are comparable to the national bourgeoisies of underdeveloped countries, which supported independence not just from the colonial power but also from the finance capitalist hegemon. They want their own freedom to exploit workers to make and build up business empires of their own, which are not subordinate to US companies.
The local populations of the Ukraine, on the other hand, are hoping to receive aid from the EU and IMF. The problem is that the EU, mired in a profound crisis, does not have the resources. The IMF programme in turn is doing little more than pay interest and some of the capital of existing capital. Given the demands on its funds, it is surprising that it has been able to go as far as it has. The future for the Ukrainian population is bleak under these circumstances. Between the cost of the recent civil war and the imposition of IMF-dictated fiscal measures, the standard of living can only fall for the majority of the population. Given the power of the oligarchs and the far right, without any substantial left-wing party, the right and far right prevail. Clearly, the situation in the former Soviet countries cannot continue without fundamental change, which now looks likely to be inspired from Western Europe as it changes under the impact of the permanent crisis.
History does not Move in Straight Lines
The last editorial brought out the dangers of nationalism as well as the practical issue of voting on a non-socialist question, that of independence. The nationalists in Scotland appealed on the ground that they were social democratic, unlike the British government. Part of the effect was to induce most of those who were socialists and, in the end, much of the working class to vote ‘yes’. The very high turn-out—87 per cent— itself showed that the working class had voted. In Glasgow, the largest city, the turnout was 79 per cent, which did show some level of abstention. The aftermath has been considerable. There has been a perceptible shift to the left. Large left-wing meetings were held during the referendum campaign; they have also been held since and left parties have grown. The Scottish National Party, itself not left wing, has trebled in size, with commentators talking of the majority of new members being on the left. The potential for this left to go further is not clear. Linked to nationalism, it is clearly limited and the fervour can easily dissipate within a few months or years. However, the major currents among the left are on the far-left and it is possible to imagine that they will force the mass movement that has developed further to the left, as the crisis continues to pursue its path. Unlike in many other countries, socialism is not a dirty word in Scotland and, in a world where despair is widespread, at least a torch might be lit, even if socialism in one country is impossible.
Until the last month or two, the referendum appeared to be of little importance. After all, the proposed independence was largely formal, with Scottish money being determined by the Bank of England, and with it fiscal policy, and Scotland accepting the Queen as head of state and applying to join both Nato and the EU. However, the establishment made it clear that it was alarmed and worried by the idea. Towards the end, as polls showed a possible ‘yes’ victory, it actually panicked in the UK and beyond. With heads of state indicating their support for a ‘no’ vote, it became clear that the global ruling class were concerned at the idea of an independent Scotland. It was on this basis that this column supported a ‘yes’ vote.
Why were the British and the international ruling class against the concept of an independent capitalist Scotland? The strong ruling class opposition was not anticipated, nor was the growth of a left movement. In general, the ruling class prefers to deal with larger entities for the obvious reason that it is easier and more efficient to control a single formation than multiple smaller units. Apart from that general rule, there were many provinces and regions in various countries who were watching the referendum in Scotland, hoping that it would act as a precedent for them, like Catalonia, the Basque Country, Quebec and a series of others. Various delegations from these areas came to Glasgow and Edinburgh to observe the referendum. Clearly, the referendum in itself was disturbing, but a victory for independence could have been dangerous. In addition, the establishment was also worried that Scottish independence would diminish the power of the UK as a reactionary international presence at the side of the USA. The UK had been the hegemonic imperial power before 1914 and, although much weakened, continued with its Empire, albeit by agreement with the USA, until the end of the Second World War. International ties with the UK remain both historical and financial. The break-up of the UK symbolises that the process of the breaking up of the British Empire is reaching its ultimate limit with the splintering of the homeland.
Why was there such a left-wing revival? For some this was simply a degeneration of the left into petite-bourgeois nationalism. No doubt it was true of some people, but the majority of those involved had never belonged to anything and they were drawn to the left by the evolution of the campaign and such slogans as equality and a fairer society. The actual appeal was on that basis but it was argued that the only way to go forward was to jettison the control from London. Modern nationalism, it is true, has to hide its nature, of uniting the capitalist and worker, rich with poor, exploiter with exploited in its struggle to throw off the yoke of the overlord. While this is true, in this instance they, the Scottish nationalists, used left slogans that they cannot retract, even if they do not implement them. The result has been the radicalisation of a whole new layer of Scottish society. It was significant that in one televised discussion the BBC interviewer asked if there were any nationalists in the audience and no one put up their hand.
The second aspect of the campaign that helped to radicalise the campaign was the deliberate reliance on fear by the ‘no’ campaign. Effectively they were arguing that the economic forces of modern capitalism would crush an independent Scotland. The banks and big business would leave the country, and there would have to be a new currency, which would quickly be devalued. If one looks at what happened to Montreal in Quebec, Canada, where finance capital did leave the city and indeed Quebec was worse off, these warnings were not without foundation. If, indeed, Scotland had moved to the left, then they would quickly prove to be correct. Since in Scotland the banks and businesses did proclaim the fact that they would move out, urged by the British prime minister, the appeal to fear did have its effect on the voting. However, it also led to people calling for boycotts and questioning the role of capital itself. It was a dangerous strategy, which worked but at a cost.
Thirdly, there were two particular factors. The public sector has a considerably greater weight in Scotland and hence to win elections there has to be an appeal to such workers. The contrast was clear in October when the NHS nurses struck in England for a rise of 1 per cent in their wages. The Scottish NHS nurses, on the other hand, had been paid 1 per cent. The NHS is a devolved issue. An important issue throughout the campaign was the Conservative Party policy towards Scotland in the 1980s, when Scotland was de-industrialised and a de facto poll tax was tried out in Scotland. People who were involved in protest in that period are still around, with anti-capitalist platforms. The prime minister apologised for the policy of those years. Since such policy remains integral to contemporary Conservative thinking, the apology itself helped to politicise the population.
Someone from Workers’ Liberty criticised my last editorial. He argued that the Scottish National Party was not to the left of the Labour Party. I referred to the policy of free care for the elderly as something that the Scottish National Party supported. The Labour Party did introduce it. However, the First Minister who introduced it was heavily criticised in the Labour Party for so doing and one might conclude that he lost his job as a result. Furthermore, one might doubt whether the Labour Party would do it today. It is also true that the Scottish National Party is not a socialist party, and is not a left-wing party. It claims to be social democratic. However, the Labour Party in Scotland has been so far to the right that it has easily been outmanoeuvred on the left by the SNP, whatever their intrinsic standpoint. The sorry condition of the Scottish Labour Party today would also argue against the writer. The Labour Party is a party of the status quo; it does not proclaim the need for a new society, socialism or greater equality as fundamental principles, even if these basic demands were once part of its theoretical equipment. It accepts capitalism and sees its mission, if it has one at all, as one that ameliorates the situation of the worker within capitalism. If one concluded that they have a policy only marginally different from the Conservative Party, most people would almost certainly agree.
The Shift to the Left
At the time of the full implosion in 2008, as opposed to the initial downturn in 20062007, elections did not lead to centre-left and left-wing parties doing any better than before, a point made much of by the establishment press. In the Critique Notes, I argued that we had to wait for a year or two for social democratic parties to perform their usual bow to authority, after winning or partly winning elections. We now have had such parties in France and Italy and they have duly introduced anti-labour policies. At the same time, they have proclaimed their opposition to the hardline austerity policy of conservatives like those in power in Germany. In Sweden, the so- called left parties are now in government. Syriza is widely expected to win the next election in Greece. In Germany, the social democrats are in coalition with the Christian democrats.
It follows from the first part of these notes that the tweedledum and tweedledee of European politics have reached a dead end. Neither party is able to provide either for its voters or for its backers. Historically, this has been of less importance as the standard of living rose. In the last issue of Critique I argued that the usual means of democratic control under capitalism, through commodity fetishism and the reserve army of labour, have been broken and the alternatives used to divide the class are less available today. Instead, the bourgeoisie has ended up by trial and error with a mix of confusion and despair to control the population. They themselves are confused, although they have no reason to despair.
This is not the usual analysis, which concentrates on various forms of division and false consciousness that hold the working class in place. One example of this type of analysis looks at the divisions in consciousness in the working class. It argues, for instance, that one section of the working class despises another for abusing the state benefit system. However, it turns out that the actual numbers of such cheats are not large and that most people on benefits are actually working. A second example, which is particularly acute at the moment, is that of immigration, where immigrants are regarded as taking jobs, housing, etc., from the native inhabitants of the area. In fact, the issue is one of low pay and insufficient low-cost housing. In other words, in both cases we are talking of a false consciousness, which amounts to saying that parts of the manual working class, particularly, are controlled by a series of conspiracies to feed them with reasons for envy. Historically, such conspiracies have played central roles in histories of various groups and peoples. Such is also the history of antiSemitism. They have been part of the rise of right-wing parties in the present as well as the past. These forms are effectively played up for election purposes but are not likely to play any crucial role as the crisis continues.
The nature of finance capital and the crisis has led to deteriorating conditions for the work force as a whole, with the skilled white collar workers also subjected to increasing taxation combined with limited-time contracts such as zero-hour contracts. Formerly social democratic or ‘communist’ parties have felt compelled to ‘liberalise’ labour laws. The ultimate aim has been to re-create the historic reserve army of labour, for both ‘middle class’ and working class, which would be subject to the kind of false consciousness referred to above. This project is ultimately a reactionary utopia but the question is how long it will take for a new socialist labour movement to establish itself under these conditions. It looks as if history does not travel along straight lines. Just as the beginnings of a revival of socialism in Scotland were fuelled by the idea of independence, so the break-up of the two-party system is showing itself in the rise of far-right parties attracting working class voters, both lumpen and non-lumpen. Historical shifts go through unheard of and wholly unexpected deviations and we may expect many surprises. However, capitalism is changing its form as the future socialist society beckons and renders the capitalist defence ever more brittle.
The contemporary issue is frequently put in terms of the stubbornness of Merkel, the CDU or similar conservatives. However, they are stubborn for good reasons. As Margaret Thatcher might have put it, there really is no alternative to capitalism. With the rich still getting richer, finance capital still in the driving seat and ‘secular stagnation’ the norm, the capitalist class will not invest and high real levels of unemployment, underemployment and employment failure will continue. The failure to invest precedes the crisis, as in Germany,16as discussed above. There clearly is a limit to this ‘investment strike’ as some have called it. Bridges have to be replaced, rather than allowed to fail. The IMF call to spend on infrastructure does not look like being heeded, whether by centre left or centre right. Japan is the exception and it is going for the military solution. Militarism is built into capitalism but no war is possible when the end result is that the victorious country is permanently destroyed by thermo nuclear weapons. We have seen the standoff with Russia and its relatively low-key outcome. There is no basis for another Cold War, and it should be noted that the Bush increase in arms expenditure did not stop the 2007 crash. It was too little too late.
In theoretical terms we may conclude that the ‘overaccumulation’ can only be dealt with through massive government expenditure, but the capitalist class is not prepared to take that road for fear of giving power to the working class. Today, reformists cannot be reformists because they would be branded revolutionaries by the bourgeoisie and jettisoned. The day is coming when even members of the centre- left parties will realise the increasingly utopian nature of their role, unable to move left but also unable to move further right because there is no space for them.
- 1.The Financial Times headline was: ‘Fear Returns to Stalk Markets’, Financial Times, 16 October 2014, p. 1.
- 2.Martin Wolf, ‘Fiscal Policy should not to be Decided by Simplistic Rules’, Financial Times, 16 October 2014, 5:28 p.m.
- 3.World Economic Outlook, ‘Legacies, Clouds, Uncertainties’, October 2014, http://www.imf.org/external/ pubs/ft/weo/2014/02/ (accessed 16 October 2014).
- 4.Lawrence Summers, ‘Why Public Investment Really is a Free Lunch’, Financial Times, 6 October 2014, 2:12 p.m.
- 5.‘One of the biggest misconceptions about the Eurozone has been a belief in the innate strength of Germany— the idea that competitiveness reforms have transformed a laggard into a leader. This is nonsense. The German model relies on the presence of an unsustainable investment boom in other parts of the world.’ Wolfgang Munchau, ‘Germany’s Weakpoint is its Reliance on Exports’, Financial Times, 12 October 2014, 5.14 p.m.
- 6.Philip Oltermann, ‘As Cracks in its Economy Widen, is Germany’s Miracle about to Fade?’, The Observer, 19 October 2014, pp. 28-29.
- 8.Wolf, op. cit.
- The Guardian, 17 October 2014.
- 10.Neil Irwin, ‘The Depressing Signals the Market are Sending about the Global Economy’, New York Times, 15 October 2014, New York, http://www.nytimes.com/2014/10/16/upshot/the-depressing-signals-the-markets- are-sending-about-the-global-economy.html?rref=upshot&module=Ribbon&version=context®ion=Header& action=click&contentCollection=The%20Upshot&pgtype=article&abt=0002&abg=0 (accessed October 19 October 2014).
- 11.Wolfgang Munchau, ‘Eurozone Stagnation is a Greater Threat than Debt’, Financial Times, 19 October 2014, 2:33 p.m.
- 12.Larry Elliot, ‘Why the Eurozone’s woes have become the world’s problem’, Observer, London, 19 October 2014, p. 29.
- 13.Paul Krugman, ‘What Markets Will’, New York Times, 16 October New York, http://www.nytimes.com/ 2014/10/17/opinion/paul-krugman-what-markets-will.html
- 14.BNY Company Profile, https://www.bnymeUon.com/us/en/who-we-are/index.jsp; https://www.bnymellon. com/us/en/_locale-assets/pdf/news/at-a-glance-corporate-fact-sheet-2q-2014.pdf (accessed 14 September 2014).
- 15.John J. Mearsheimer, ‘Why the Ukraine Crisis Is the West’s Fault; The Liberal Delusions That Provoked Putin’, Portside, 2 September 2014, http://portside.org/2014-09-02/why-ukraine-crisis-west%E2%80%99s-fault- liberal-delusions-provoked-putin
- 16.Olterman, op. cit.