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Critique Notes 71

Published: 01 April 2015

Critique will be holding its annual conference on 11 April at the London School of Economics. There will be two sessions, the first on the Ukraine at 11 a.m. with Vladimir Ischenko and Marko Bojcun, the second with Raquel Varela at 2.30 p.m., ‘From anti-colonial revolutions to the revolution in the metropole’, and with Hillel Ticktin on ‘Decline and the Crisis of Capitalism’.

Capital and its Controls

The last Notes, written in December 2014, raised the question of what could happen if Syriza won the election in Greece on 25 January. It argued that left social democratic formations like Syriza and Podemos would go the way they have always gone—coming to ‘power’ with great hope and quickly failing or betraying because socialism in one country is impossible and even social democracy in one country cannot survive today. However, the editorial also argued that the process of the decline of capitalism might have reached a point where the bourgeoisie could not restore more than a semi-moribund capitalism. It is a capitalism where much profit is not re-invested, where inequality gets steadily more extreme, where real levels of unemployment, in the form of underemployment or total exit from the labour market, may raise the level of productivity year by year but the gap between real and potential continues to grow. Where profits are turned into hoards of money rather than capital and workers cannot labour, it is a capitalism that is only partially functioning. It is a capitalism so weakened that it may not be able to do more than neutralise, threaten and frighten the opposition and in the end delay, rather than stop, its own overthrow.

The contemporary ruling class strategy has failed. They are trying to restore commodity fetishism and the reserve army of labour, but the 19th century forms cannot be revived. The anti-austerity platform is now common to all oppositions. The trickle-down ideology of the Reagan-Thatcher era, never believable by more than a few in particular countries, has expired. At the same time social democracy and Stalinism have largely, though not entirely, lost any traction.

The ruling class does not have a policy other than austerity, which they are continuing to enforce even though it has less traction. It is clear that Syriza has the support of the vast majority of the population in calling a halt to the imposition of austerity. In the past, when faced with demands of the majority of the population that they were not prepared to accept, the bourgeoisie were able to call on the military and conduct a coup. That is what happened in the past in Greece, but not only in Greece and not only in the less developed world either. In the past, covert use of the army has played an important role in bringing in a right-wing government. That may happen again, but the ruling class is reluctant to resort to such measures, because they have banked the system on formal democracy. They know that a coup will not only drive the left underground but also act as the proverbial recruiting sergeant. Furthermore, to use the army to prevent the replacement of capitalism in Europe again, 100 years after the uprisings in 1917-19, would be truly the end of ideology. The ruling class is itself split and confused.

Under these circumstances, we are talking about a long drawn-out process of bargaining, followed by ostensible agreement that is superseded by further bargaining and breakdowns. The process will probably jump from country to country, from agreement to agreement, breakdown to breakdown, until the left manages to establish itself as a viable force.

The trade unions have played a defensive role in the class struggle and as such have acted both as a means of survival for workers and as a barrier to political overthrow of the system. That remains true today, but their weakness removes a prop for the system. One can ask whether the bourgeoisie knows what it is doing at the present time in both weakening the unions and forcing them to the left. This process has some way to run, but it is not difficult to foresee a time when some unions will become semi-agents of the capitalist class while others will forsake their defensive role as forlorn and take a revolutionary road. In effect, trade unions will cease to be trade unions and so cease to act as intermediaries in the class struggle. The present-day attack on the unions by the bourgeoisie is of a piece with the superficiality of their overall policy.


The Suicide of the Bourgeoisie

On the day of the German Parliament agreeing to the extension of the bailout of Greece for a further 4 months, Bild, the German tabloid newspaper,1which has been agitating against German money being wasted on lazy Greeks, carried the debate and the vote, virtually live, as it happened. They had been very successful in their campaign, much like British tabloids complaining about immigration. Remarkably, however, the opinion poll they printed in the internet edition of the paper showed that only 43 per cent of the population were against giving (more) money to Greece, as opposed to 65% earlier. (Germany has lent 50 billion euros.) Clearly, this is not a small percentage of the population but if we allow for the bias of the question and the constant anti-Greek propaganda, it is surprising that it is so low.

This was supported by the actual vote in the Lower House of the Parliament, where Schauble,2the Christian Democrat finance minister, announced, ‘we find it incredibly difficult’. The left of centre, that is, Die Linke, Greens and Social Democrats, had a technical majority and in general terms could have passed a motion of support for the settlement alone. In fact, the number voting against was the smallest number of the four votes held since 2010 (542 for, 32 against and 13 abstentions).3In spite of the hard line adopted by the German Christian Democrats, it does look as if they, or the German Bourgeoisie, realise the folly of their ways. Gregor Gysi, the leader of Die Linke, actually made the point in the Parliamentary Discussion when he said that Merkel and Schauble had created the situation with their hard line. He called their line suicidal (Kamikaze).4A former member of the GDR CP, he has consistently taken a reformist line, although he can see the obvious, looked at from a ruling class viewpoint. Indeed, the question is why has the CDU taken such a relatively hard line, which is bound to produce such a reaction? Why has the Conservative majority in the EU and the IMF enforced austerity on southern Europe? Has the German bourgeoisie lost its sense? It used to have intelligent members of the ruling class, even if they seemed to have been overruled in the past. Interestingly the same edition of Bild carries the banner that the paper says ‘No to the extension of the loan’, effectively an expression of the view of the owners.

The nonsense that the Greeks caused the problem themselves does seem to be believed by a percentage of the population of Germany and many other countries. The fact is that Greece is an underdeveloped country with a large military burden, effectively enforced by NATO and accepted by the Greek ruling class, whose initial problems have been greatly magnified by the stupidity of the austerity programme. Clearly if the public sector is cut both in terms of investment programmes and through cutting departments and dismissing workers, plus a major cut in the incomes of pensioners, welfare recipients, etc., there will be a major slump. That has happened in the UK, and the present upturn in Britain is more of a mirage than anything else, induced by a temporary let-up in the austerity programme in order to get the government re-elected. The result in Greece has been a massive fall in incomes, pensions and output, and consequent growth in premature deaths and overall misery. Inevitably, the debt to GDP ratio has increased considerably, even though the budget deficit has been replaced by a surplus, when ignoring the interest owed on the debt.

Had Greece been allowed to continue as it was, but given money for investment for growth, the situation could have been very different. Therefore, the present situation is the fault of the Troika itself. Having said all that, it is clear that the Greek capitalist class has externalised its assets, avoided and evaded tax. Since all capitalist classes do this, one has to argue that somehow they have been worse. Indeed, as I understand it, that is an argument that the left endorses. Of course, it is true of any Third World country that both the ‘middle class’ and the bourgeoisie will tend to export their savings and their capital, given the instability of their own countries. That is true of China, India, South Africa, Brazil, etc., and we would expect it to be true of industrially and financially weaker European countries. The overall tendency within capitalism is for money to flow to the USA, the UK, and Switzerland. The more unstable, therefore, Greece appears, the greater and the quicker the outflow through legal and illegal channels, licit and illicit means. This is the nature of modern capitalism. The problems have nothing to do with ordinary people, whether they work hard or do not work hard.

Why the Hard Line?

So why has the capitalist class, most clearly expressed through Conservative parties, the world over decided to make Greece such an example? To state the conclusion first: because their backs are to the wall they have decided to take the strongest line possible, whether it is sensible or not. Although I do not agree with Gregor Gysi, being well to his left, I have to say that he is correct: they are committing suicide, even if he did not mean the bourgeoisie, but the Greeks or the Greek bourgeoisie. One answer that I have argued in previous issues of Critique is that the bourgeoisie is both divided and confused. Their policy is one that can only force the population as a whole, working class and middle class, petite bourgeois and unemployed worker, to join in a common front against first austerity and then capitalism. Why?

The 2007 implosion, which is the form of the present capitalist crisis, dealt a mortal blow to finance capital as the future of contemporary capitalism. The fact is that capital switched to finance capital in the late 1970s, and with it went its various forms, usually called neo-liberalism:

  1. large-scale unemployment, increased numbers of part-time employees down to the zero-hours contracts of the present day

  2. controls over the workforce at work that were lean and mean, and the opposite for management—stratospheric salaries and increased power;

  3. a large white-collar workforce enmeshed in an interminable bureaucratic apparatus with an impenetrable localised and adapted ideology;

  4. the export of factories to the third world, while keeping research and development and overall management in the imperial country.

All these forms were held together with finance capital, which could slice and dice the industrial components as required for profitability or personal gain. The problem is that finance capital itself cannot hold the system or itself together, hence its division and confusion. Given its short-termist nature, that is no surprise. Above all, it is because it represents unproductive capital and the locus of power rests in the productive sector.

Germany and the Hard Line

In this mess, German industrial capital is stands as a throwback in the history of capital. Although its banks were affected by the crisis, as everyone notes, Germany as whole was much less involved than the USA and the UK. The global banks are primarily American. The global British banks have been either downsized, like RBS, or allowed to continue under licence as it were, like HSBC. Volkswagen is second only to Toyota and not always second in number of cars produced, while the three German car-makers Volkswagen, Daimler-Benz and BMW have effectively out­gunned the US firms in their profitability and their technical expertise. What is true of cars is also true up to a point about other sectors of industry, from custom-made machine tools to consumer durables.

In effect, Germany is holding the torch for productive industry, with a powerful, if relatively contained, working class. At the same time, it has weakened the unions legally, used the situation of its incorporated East Germany and Eastern Europe to keep wages relatively low and exported its goods to China and the rest of Europe. It can only succeed as long as it keeps its own workers’ wages relatively low. On the other hand, by exporting such a high percentage of their GDP (44%), they do not have to worry about sales to their own workforce.

However, the whole show does depend on control over the working class in Germany and increasing demand in the countries buying the goods. The appalling attack on Greeks as lazy can be understood in this context. However, it is more difficult and complex for the bourgeoisie precisely because capitalism as a whole is in crisis. However even at this level, it does seem that the attitude to the Greeks has changed and only 41 per cent of Germans do not want the Greeks in the Eurozone.5

The crisis for Germany, therefore, is a question of control over a very different labour force and somewhat different capital form than that in the imperial heartland, the USA. The labour force is different partly because of the large component of immigrant labour but much more because of the influx of German labour from the territories that were lost to Germany. Some 12 million Germans came to Germany after the war and then of course there was an influx of East Germans to the West German factories. This all makes for workers who are both vulnerable and less liable to fall for the demand for traditional loyalty. The surface is necessarily brittle. When the crisis broke, the country with the highest percentage of the population that supported socialism as an alternative was Germany. They have agreed to a wage rise in one sector of 3.4%, but this is only because of the extreme situation, with even the Central Bank calling for wage rises.6

Wolfgang Munchau the regular German columnist for the Financial Times on Europe and Germany, states in one of his columns in October 2014 that the idea of the innate strength of Germany is ‘one of the biggest misconceptions about the Eurozone’. He goes on to argue that it is exports to other countries that provide its success, and now that the export boom is over, its growth rate is low and will remain low.7

In this situation, Germany itself has adopted a policy of austerity, leading to its infrastructure suffering from lack of investment and its private industry, if not suffering to the same degree, having negative investment in seven of its eight largest manufacturing industries since 2000.8State policy has effectively been austere from before the downturn, which in any case did not affect Germany to anywhere near the same degree as the Anglo-American countries.

At one level, it is, in my view, understandable that the bourgeoisie and the German bourgeoisie in particular would take an uncompromising line. Looking at capitalism in the long term, however, for a ruling class trying to maintain itself on the historical stage for as long as possible, they are driving the population to revolt if not today then tomorrow.

We are in a revival of global class struggle and the Greek scenario is the first serious challenge to the ruling class. If Syriza continues to play the game basing itself on its mandate and calls a referendum or new election, it will cut the political ground from under the feet of the bourgeoisie in that the world will perceive the Troika as the rich attacking the poor yet again. Socialism has to win the hearts and minds of the majority before it can claim its heritage and this may be yet one more step in the right direction, after so many in the wrong direction.

The Question of War and the Ukraine

At the present time, there is much talk of war. A recent editorial in the Economist9projected the possibility of Putin threatening not only the Ukraine but also the Baltic Republics and beyond. There is no question but that the regime in Russia is engaged in a war with the Ukraine, and that it has engaged in acts of restrained belligerence with its air and naval forces. It is also clear that the Russian regime, whatever its rhetoric, is unlikely to engage in direct and meaningful nuclear threats. The Russian elite is using 19th-century nationalism in order to bolster its support, but the same elite that is employing this strategy is internationally integrated into the global economy. Apart from certain defeat at the hands of the USA, in the event of a war, the Russian elite would probably be wiped out both financially and physically and they know it. The post-Soviet elite, made up mostly of the old elite or their descendants, are not comforted like the so-called ‘Moslem extremists’ by an afterlife where they will be rewarded. Whatever the formal provocation, the West is not proposing to go to war, and it has stuck to the use of sanctions, a stance endorsed by such as Soros, even though he takes a highly critical line towards Russia.His is the prevailing ruling class view.

The Economist, however, extends the issue to all non-Western countries holding nuclear weapons. It is quite clear to any third-world country that if it wants to make sure that another country does not invade, it does best holding thermo-nuclear weapons. The national bourgeoisies of the third world who want to maintain their own political economic advancement, therefore, prefer to have nuclear weapons. This is the direct result of a system of global international relations in which one country, the USA, is hegemonic in maintaining finance capital and the overall system of trade in the interests of its own ruling class. From the point of view of US capital, national capital in much of the world is competition that they do not like. It is in the nature of economic competition that it tries to limit or eliminate the competitors and in an age of monopoly or ‘oligopoly’ that entails using the national or supra-national state in subtle and less subtle ways. The interaction between Russia and the West is a question of spheres of influence, where the former Soviet countries have not been able to emerge out of the late Stalinist chrysalis and consequently need to hang on to the old relations, unless they can integrate into an alternative, as the Baltic republics have done. The fuller reason is discussed below. The point, here, however, is the asymmetry between the desperation of the countries of the former USSR and the needs of US-European capital.

Russia today is a capitalist country in its international economic relations, which competes like any national bourgeoisie in the existing world market dominated by the global economic power. The problem, however, is that it remains crippled by its failure to develop fully out of its Stalinist form. Grigori Yavlinsky,10whatever his liberal politics, has correctly pointed to the fact that present-day Russian policy was developed from the early days of post-Soviet Russia. He talks of ‘fraudulent privatisation’, ‘crony capitalism’ and the absence of ‘secure property rights’. He lays the blame in part on the EU and USA. Within a liberal viewpoint, he is correct and he has effectively made public a glaring failure in contemporary capitalism. The EU cannot do anything given its bitter internal struggles and its own crisis. The USA cannot extend the aid needed to build up and bring together the disparate parts of the former USSR and the EU, which Yavlinsky calls for. It is a commentary on modern capitalism that it cannot absorb a part of the world that has jettisoned Stalinism. Yavlinsky, being a liberal, cannot see either the problem for capitalism or that capitalism itself is in decline and with it the USA and the EU.

Anders Aslund has added his voice to those calling for a Marshal Plan for the Ukraine, providing detailed statistics.11Since Anders Aslund took a hard line on the

move to the market in the initial transition period to capitalism, to the point where liberals regarded him as an ideologist, his intervention is interesting. He has acted as an advisor in the formerly Stalinist area, including the Ukraine, during the post 1990 period. He points out that there was a call for a Marshall plan in the early period, which, of course, links up with Yavlinsky’s complaints of the political economic failure of that period. Aslund, being one of those involved in that immediate transition, does not make that point however.

Had a Marshall plan been introduced, it would have required also a liberal tariff regime on the part of the West together with a policy comparable with that towards the rebuilding of Japan or South Korea. In other words, it needed to re-fashion existing Soviet enterprises into contemporary large corporations creating Russian and Ukrainian autogiants with indigenous suppliers and expand former Soviet airplane manufacturers into global competitors with Boeing, Airbus and Rolls Royce. There would have had to be a similar drive in the electronic and computer scene, perhaps a Russian ‘Intel’. There would have had to be a historically short period during which Russia/Ukraine would develop its monopolies behind tariff walls, while the Europe and the USA would give most favoured nation treatment. It did not happen, and far from money being provided by the West, there was a massive efflux of currency from the former Soviet countries, something that is continuing today. The result was not just the picture provided by Yavlinsky but a tragic de-industrialisation, in which Russia and the Ukraine were reduced to largely agricultural or raw material suppliers. The Soviet Union had not been defeated, nor had it collapsed economically, but the transition after 1991 has had the effect both of a defeat and a collapse.

In effect there was a negative Marshall Plan, where the wealth of the country was transferred to the West, symbolised by the way oligarchs bought British football clubs. The term ‘crony capitalism’ tells one very little, other than the fact than direct contacts or relations are important in the process of promotion or lending money. Since it is customary for firms owned by families in the West, like Miele or BMW, to hand ownership over to the next generation and for crucial shareholdings in quoted companies to be given to the heir in the family, as in the case of the media mogul, Murdoch, this does not seem to be much of a difference from traditional capitalism. The fact is that the former ruling group handed the property over to itself. That is why it changed the system. As capitalism is a system where income and power rest with capital, and capital is owned or controlled by individuals or families who bequeath their position to their offspring, so ensuring security not just for the offspring but also for the holders of the original property, the form of the change was inevitable. The ability to fulfil the role of an investor or capitalist does not necessitate either an MBA or any other degree. One might conclude that anyone in or near the elite with sufficient common sense and a degree of ruthlessness could be successful in the climate of the time. The point, however, was that the elite wanted security of tenure for themselves and their families. That is why they changed the system, and not in order to benefit either the Soviet population or the world in general.

Unfortunately for them, there was and is no formula to change from a non­capitalist form, Stalinism in this case, to capitalism, particularly not when it involved a massive direct transfer of wealth to a newly formed ruling class away from ordinary blue-collar and white-collar workers, especially away from women workers and pensioners. There was and there is no way to move from the old system to the new, when the new was itself in decline, without severe dislocation. Neither a slow nor a fast move away from public ownership of property to private ownership was likely to be satisfactory. With the benefit of hindsight, we can see that the actual form used, which was distinguished by its chaos, massive growth of unemployment, collapse in wages, when they were paid, and undemocratic forms, acted as a screen behind which the transfer of property could take place.

It was inevitable that such an unfair, unjust and opaque transfer of property would not be generally accepted. Yavlinsky complains of a looseness in property rights, and indeed famously Greenspan in 1998 saw little prospect for reform where there was no respect for the rule of law in the former Soviet Union countries. When he was President of Russia, Medvedev made the same point.12In spite of the 13 years between the statements of two different people, the situation had not changed. Putin’s present actions concerning the Ukraine can be regarded in the same light.

It is hardly surprising that a population that had overthrown capital and the rights of private property in 1917 would not receive a decree reinstating them with alacrity. The Soviet Union itself as an entity was in constant flux and the law itself, whatever it was, was not regarded with the awe that serves to inspire its regard in the West. While the rule of law was crucial in overthrowing the feudal system and establishing capitalism, it depends on the rule of the commodity, as Pashukanis correctly argued. In the USSR it is arguable that the law of value and the commodity did not exist. Even if one rejects this view of Stalinist economy, it should be noted that Soviet citizens tended to regard laws as something to evade, ignore or find ways around. Once such a view is held, in a system that is inherently exploitative, it is hard to change. We may conclude that there is no way that the social and political relationship in Russia and the Ukraine can be changed short of socialism. From this point of view, Putin’s arbitrariness, oppression and control over the system of justice is a reaction to the structure of a society that he cannot control. In this, he represents the inability of the elite to assert themselves fully as a class.

The immediate issue is indeed that of the Ukraine. George Soros, among others, has also supported a Marshall Plan for the Ukraine of some US$50 billion.13One immediate reply in Forbes14was that the money would have to be supplied by

Germany and the Chancellor, Merkel, is not going to pay. Indeed, how will Germany pay over US$50 billion when it will not relax its conditions for its loan to Greece, or its loans to other southern European countries? In any case, US$50 billion is far from enough, given Ukraine’s existing debts of US$70 billion and the devastation wrought on eastern Ukraine plus the continuing economic failure to which it is subject.

There is no real way out for the Ukrainian population in this global social system. The Eurozone either does not have the money or cannot provide it without a storm of protest from the other countries like Greece, Portugal, Spain, Ireland and Cyprus. At the same time, they have lost the Crimea and the Russian-speaking population of the East is effectively separated at least for some years. At the same time, the rest of the Ukraine has effectively become a Western dependency. Unless the USA provides the money for the Ukraine, the future can only be tough. Unfortunately, there is no left of any size and still more unfortunately, there are strong Fascist forces. The latter are not as substantial as claimed but they are nonetheless important. While that is the case, with statues erected all over the country to a Ukrainian nationalist leader who collaborated with the Nazis, and a right-wing government, the Ukrainian plight appears much less appealing than it might.


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