Critique Notes 73
Published: 04 January 2016
The crisis continues but various commentators or ‘players’ now talk of stages, there being a new stage, according to them. Indeed the IMF and various others, like Murdoch, now speak of a new downturn in 2016. In reality, there is a clear downturn in the Third World, particularly in China, Brazil, South Africa and Russia. Japan has not yet thrown off its long-term deflation, begun in 1989, while India remains mired in extreme poverty for the masses. The situation in Europe remains deflationary and the USA has not managed to overcome the reality of mass unemployment, other than in optimistically designed statistics.
There is no real recovery, in the sense of a return to the real 2006-7 level of employment and a level of wages consonant with the previous real annual wage rise per year added to the 2015 wage/salary. Nor is the global growth rate at the same or higher level than 2006-7. Every country is slightly different but the continued downturn makes it clear that we are in what was called a depression in 1929-40 in the United Kingdom. Larry Elliot makes the essential point in an article in the Guardian, writing about the United Kingdom. He reports three sources.1First:
“Joe Grice, chief economist at the Office for National Statistics, said: “It remains the sharpest downturn and slowest recovery on record.” Secondly he cites Danny Blanch- flower one of the economists on Corbyn’s advisory economics committee who makes the same point “he says the UK has experienced its slowest and worst recovery since the aftermath of the South Sea Bubble in 1720” and thirdly he quotes the TUC saying that the recovery since the trough of the downturn in 2009 has been the “weakest in any similar period since 1842.”
Since the immediate nature of the downturn concerned finance capital, the two countries most immediately affected were the UK and the USA. The government reports in most countries tend to stress the most optimistic re-interpretation of the situation. It is clear that real unemployment and salaries in the USA have not recovered. The best proof of that is the Federal Reserve’s hesitancy in raising interest rates. That, of course, is also affected by the global situation.
Obviously, there is another issue that will be taken up in a forthcoming article. That concerns the nature of the downturn itself. I have implied that the word recession is too weak a word and a comparison with the 1929 depression makes more sense. However, the issue is somewhat more profound, in that one can question whether the crisis is cyclical or predominantly cyclical, as is usually implied. One can go onestep further and question whether, on current trends, there is a way out under capitalism. Marxist theory does not stress the cyclical nature of the crisis, but rather that it is a situation where all the contradiction of capitalism show themselves, to summarize Marx,
The system cannot hold the line for too long. Greece has been the first to challenge the system, in the new crisis of capitalism, even if that was not the full intention of Syriza. When a socio-economic system is in crisis, a reformist challenge can take a revolutionary form. The German government personnel have understood the danger and effectively crushed the Syriza leadership. In the last Critique Notes, I outlined the immediate effects of the 6 months leading up to the surrender. One of them has been the unmasking of the real attitude to democracy of the bourgeoisie. The express wishes of the Greek population have been turned on their head. This has been followed up by the President of Portugal refusing to call on the majority bloc, of the Socialist Party and the two far left formations to form the government, preferring to call on what amounts to a conservative political formation, short of the required seats in the Parliament.2Just as in Greece, the reasoning lies in the ruling class need to keep the left out of meaningful power, and the Portuguese authorities are explicit, it seems.
This can be regarded as a question of no surprise, in that it has happened many times before, as in South America, Chile in particular. However, there is a difference between a period in which Stalinism and the Cold War ensured that the left could not succeed and the present when the ruling class is directly facing its nemesis, without a saviour, like Stalinism. The ruling class has to face two ways. On the one hand, it must appear democratic in order to get mass support, but it also has to build up its defence against being superseded. There has been a questioning of democracy in the UK when Jeremy Corbyn was elected leader of the Labour Party. The issue was explored using Aesopian language in the press, and by implication behind closed doors.
The election of Jeremy Corbyn was first disbelieved and then a cause for worry. It was put about by the media that although he could not be elected his election as Labour leader would change the terms of discourse. When the Russian Revolution succeeded against all the odds, the Western Powers invaded the territory of the former Russian Empire, and extra-ordinary measures were taken to isolate both the nascent Soviet Union and Marxist ideas. In the end, the success of the capitalist powers was embodied in the Stalinisation of the USSR. The Conservative Party in Germany in 1933 preferred to support Hitler, rather than accept a possible socialist alternative. It soon regretted its choice. The Spanish Civil War is the classic case where the democratically elected government was overthrown with the help of the Fascist powers and the so-called neutrality of the West.
The ruling class has to use democracy as its means of control, even though it is only a limited and insufficiently extensive democratic form. Up to now, it has been extraordinarily effective, largely because of Stalinism, and the identification of the left with dictatorial control. The ruling class has outlawed or controlled the far right, even though a section might support it, as in the case of the Koch brothers in the USA. On the other hand, in their governance, the defence of the franchise for the whole population plus civil rights for all stands directly opposed to the two other aspects of what many would regard as the ‘human rights’’ or part of a democratic society. The first is their negation of the right of all to free education, free health and a human standard of living involving a skilled occupation and income sufficient for their needs. In effect, civil rights appears to stand opposed to human rights. That is a necessary consequence of the nature of capital itself, in that it requires to control its workforce, which leads to the panoply of controls within modern firms that are administered by a bureaucratic structure, appointed from above. In other words, democracy necessarily leads to democracy in the workplace and the abolition of the capitalist.
The point is that the nature of the firm, public or private, is dictatorial, centred on profit, which ensures everyone conforms to that imperative. This much is obvious and it is equally clear that the increasing socialisation of the economy makes the overthrow of this real undemocratic underpinning of the society inevitable. The bourgeoisie has shown its real fear that the left will reject austerity, in more than one country and that it will spread more generally. Austerity is the contemporary expression of bourgeois political economic control as it subsumes the formation and continuation of a pliable workforce or the reserve army of labour as well as the ideology and forms of control of the market.
We are in a genuine crisis of capitalism not a technical downturn or some kind of ‘normal’ cyclical long-term recession, and austerity is a classic response of the capitalist class. It is attempting to discipline the working class to the point where it will not resist for a generation. Terms like the Great Recession trivialise the depth and extent of the crisis. Hence, there can be no surprise both that the ruling class should react so violently and viciously to campaigns to end it and that there be a rise of parties opposed to it. When a large percentage of young people cannot find jobs suited to their training, the public sector is being downsized and there is a decline in its salaries in addition to the general decline in standard of living there will be increasing numbers of demonstrations and a growth in the power of the left.
The absurdity of the right wing commentators has been shown by the way that they were exulting at the absence of a left in government from 2007 onwards. Now that it looks as if the left is rising in importance, they both caricature it and attack it vitrio- lically. It is clear that it is early days for the left as a whole and we can expect more Syriza style betrayals, and much bumbling along, as with the British Labour Party. It is interesting to note that newspapers are using words like leftists to distinguish the genuine left from social democrats, whom they might call left-wing. The word leftist may have a slightly lower tone than left, much as Pravda in 1968 used the pejorative levatskii rather than levii for the left of the time. It also called Marcuse a turncoat using a word that translates literally as werewolf.
At the same time, as argued in the last issue of Critique Notes, when the conditions do not permit reformists to succeed other than by ceasing to be reformists, as with Greece, the move towards socialism is propelled by an overwhelming gravitational force. Social democracy really is dead.
The general crisis is propelling the system towards a definite resolution, but the really existing economic forms do not permit a successful market solution. In spite of the propaganda, capitalism remains dependent on large firms and public institutions not small to medium size enterprises, which are of secondary importance. The former, in turn, are dependent on a white-collar workforce, bureaucratically organised, whose situation has worsened in countries like the USA over the past 30 to 40 years. The increasing proletarianisation of the professions has not been altered by the relative success of a tiny percentage in entering the ranks of the very rich. The increasing polarisation of the population when combined with their subjection to ever-tighter controls in the name of efficiency has already led to limited and innovative forms of revolt. Disintegration or independence is now a spreading demand. In the territories of the former Soviet Union, particularly Russia and the Ukraine, it was forcibly held back and in the UK a campaign of fear prevented secession even as it led to a party sweeping the democratic board with an anti-austerity banner, albeit nationalist.
The Decline of Global Hegemony
The manifest decline of the USA as the global hegemon is now generally accepted, some time after it was clear. The United States continues to be the supreme industrial and military power but it has outsourced part of its industry even as the most innovative sectors remain within its boundaries. Its military power is overwhelming both in terms of thermo-nuclear and conventional weapons but the population does not want to sacrifice itself for a dubious cause.
The end of the Cold War removed the need for an over-arching capitalist power uniting the ruling class in its own defence. Even though Stalinism was no real threat but served, on the contrary, as a means of mopping up and dowsing potential revolution the overall Cold War structure served to subordinate the other capitalist powers and build up Japan and South Korea under the aegis of the United States ruling class. One result is that the German ruling class is able to show its strength and act accordingly in the European Union and Eurozone. It is now a crucial power in Eastern Europe and is influential in the territories of the former Soviet Union. The United Kingdom has continued to play the role of the junior partner of the United States but even it has been able to break away and join the budding Chinese constructed Asian Infrastructure Investment Bank, founded in 24 September 2014, and invite the Chinese President to a state visit with a series of financial and nuclear construction deals. The recent battles within the EU over migrants and in the Eurozone over Greece have shown a rise of nationalism, and a possible disintegration of the Eurozone itself, not to speak of the EU.
The rise of social-democratic type governments in Latin-America, critical of the USA, has been a feature of the present era, as opposed to the earlier period of rightwing coups, either engineered by the USA or inspired by them. In spite of the rhetoric, there has been no advance towards socialism, though US companies may have lost assets. For Latin-America it appears as if it cannot shake off its stasis until the USA itself moves to socialism, perhaps assisted by a genuine Latin-American revolution. The US ruling class appears content to accept this situation, expecting to be able to reverse social-democratic governments as the masses become tired of their ultimate failure.
The rise of China as a global if subordinate industrial power and as de facto dominant presence in East Asia if not Asia has been effectively assisted and partially supervised by the USA, in its investments and transfer of production from the USA itself. It remains the case, however, that productivity in the USA is generally superior, partially because the USA has jealously guarded its technological lead. The Chinese, in turn, have tried to get the information and necessary skills from US controlled firms in China, through its students and academics spending time in the West, and through other means. The United States has not been prepared to show the same generosity to the Chinese as it did to the Japanese and South Koreans. It seems unlikely that the Chinese can be held back over time. They seem to have understood the global nature of capitalism, allowing them to invest in other countries, including the USA and UK and the integration will assist their development, allowing them a measure of independence of the USA.
Nevertheless, at the same time, there is a limit to the development of state-capitalism. While they do not have to worry about the nonsense of ‘moral hazard’ and can take care of monetary crises, the task of absorbing the continuing shift from the countryside of almost half the population, raising the overall standard of living by providing freely available health and education sectors, and substantial pensions to the elderly, while continuing with the expansion of transport, housing etc. is considerable. It requires the incentives expressed in democratic control of enterprises and the economy as a whole. Clearly, this will only come with a revolution.
The standard right-wing account talks of a shift to consumer goods. This is seen as more manageable. The implication is that there will be a substantial Chinese ‘middle class’ to stabilize the system, which will buy the goods and use the services provided. This kind of transition is unlikely to happen smoothly or at all. Part of the reason, is that the success of Japan and South Korea was directly assisted by the USA, which accepted and effectively helped the rise of their large firms like Samsung, Hyundai, Sony and Toyota, but is not doing so for China. It is also true that the Chinese have arrived late to the party, in the sense that the world economy is already carved up. The major items in the world economy - automobiles, - Toyota and Volkswagen; Containers - Maersk; White Goods- Bosch, Electrolux; are not Chinese. The one area where they do have a powerful firm is in computers, Lenovo, which bought the IBM laptop brand. The basic point that crucial sectors are effectively tied up by a few global firms is summarised by Martin Wolf, when reviewing a book on China by Philip Nolan. 3
Commentators talk of China being an economic superpower in either the present or future. US capital does not appear to know what to do about it, as with so many other issues ... On the one hand, they have played a critical role in its development but on the other they appear to be afraid of it, building so-called defensive military structures and they are critical of the UK doing deals with China. Even if China moves in the preferred direction of a fully market driven economy, there is no reason to think that it will be either stable or less nationalistic. The Chinese government, in its turn, seems to be well aware of what it is doing, continuing to adopt the tactic attributed to Deng, of operating silently, i.e. under the radar. They do their best to avoid direct confrontation with the US, recognising its authority.
The global crisis began in the USA and went furthest in the USA but it was China that poured money into its economy and so played a crucial role in bailing out the world economy, allowing its own economy to boom
The Question of Decline
The decline in global capitalism must show itself in the first instance in its hegemonic political economic power, the USA and it has done so. The Chinese economy, in its turn, may now be the biggest economy, in real as opposed to dollar terms, but its social relations are in a transitional form such that they cannot remain static for more than a decade or two. There is always the danger that it could go the way of the USSR and break up, a possibility that the Chinese government fears and is doing its best to avoid. The fact is that the so-called transition in the former USSR has failed catastrophically, and it is hard to see anything else happening in China, given the predatory nature of global capital. This is not the view of the ruling class which is pushing China towards a fundamentalist market solution, and as just argued, a disaster for the Chinese, if not the rest of the world.
Decline is now expressing itself in terms of indecision and inability to act. For the ruling class the situation in the Middle East is now of muddle and confusion to the point of caricature. The United States cannot send troops because the population does not want to fight any more. The failure of the Iraq war has cast a cloud over all activities in that area and even on war itself for the ruling class everywhere. The failure, it has to be remembered, is both military and civilian. While technically the West defeated Saddam Hussein and the Baath Party, they antagonized the Sunni minority in Iraq which turned to war and ultimately, it would appear, to Isil, which now commands parts of Syria and Iraq. The war in Afghanistan appears to have failed in that it is expected that the Taliban will reconquer the territory upon the exodus of US troops.
The Western inability to rejuvenate the Iraq economy proved that the market is not self-seeding, self-acting or anything other than an anachronism. The only way that the Iraqi economy could have been built up was through maintaining and expanding the government sector with investment in housing, agriculture, transport, health etc. followed by infrastructure. With full employment, the population could have had a stake in regime-change. The same will be true of the other areas now involved. Since such an approach is ruled out, there is no future for the area other than war followed by a miserable reconstruction. The millions of refugees are right to leave.
The Rise and Rise of Barbarism
It seems that every period has its own barbaric form. The interwar years saw Fascism, Nazism and Stalinism, all of which killed many millions. Today we have Al Qaeda and Isil. Clearly, they have to be exposed and fought. In the end, the right cannot do it, since they offer no solution to ordinary people, other than continued misery. The right has now introduced limits to freedom of speech in order to stop the induction of young people into this murderous other worldly ideology. Since the left has been subject to such censorship in many countries over the last 200 years, it knows how useless such forms of censorship are in preventing people from adopting a proscribed viewpoint. One has to wonder whether the proscriptions are not intended for the left rather than the extreme religious right.
The failure of US policy is clearest in the Ukraine and Russia. Logically, if it were to follow its own best interests it would have left the Ukraine to be a Russian sphere of influence. Instead, it has taken on the Russian elite in a half-hearted way, leading ultimately to an unsatisfactory compromise in which Russia will end up with the Crimea and a partnership over the Eastern Ukraine, at least for a time. The fact is that the Russian elite is on the right, supportive of the market in general with a faction being fundamentalist although they are not in the ruling group. They would make a logical partner for the US ruling class, in combating socialism. However, the US has bumbled into a semi-Cold War.
What ties all the different sectors of discussion together is the failure of the market, of capital and its confusion. The ruling class does not understand how to deal with the Middle East where it has made a very considerable cross for itself, with its invasions. It does not know how to deal with the conflict between Germany and the rest of the Eurozone, and with Greece, and the Mediterranean countries in particular. The EU itself is threatened with dissolution over the migrant crisis. The ruling class is confused over its relationship with China, hoping that the Chinese Communist Party Central Committee will convert itself peacefully into unambiguous capitalists loyal to its brothers the world over. In turn, the US has stumbled into a mini-Cold War with Russia.
In other words, the decline of capitalism has made the hegemonic power shift from its role as securing the global interests of the ruling class as a whole to a more
nationalist position. Under conditions where it cannot make rational decisions, a possible policy of isolationism might be the wisest way out. Germany, China, Russia are increasingly powerful in their areas, with the Eurozone probably splintering.
For the left, the present situation is clearly full of possibilities that will probably open up in different ways.
- 1.Taken from an article by Larry Elliot in the Guardian: ‘Comparing Recessions is Hard but Britain has Coped Better this Time’, http://www.theguardian.com/business/economics-blog/2015/oct/18/comparing-recessions- hard-britain-has-coped-better (accessed 26 October 2015).
- 2.P. Wise, ‘Portugal Faces Months of Political Upheaval ‘, Financial Times, 24-25 October 2015, http://www. ft.com/cms/s/0/d41a28ac-7972-11e5-933d-efcdc3c11c89.html#axzz3phqNnIgC (accessed 26 October 2015).
- 3.M. Wolf, ‘Why China will not Buy the World’, Financial Times, July 9 2013, 7.26pm, London; P. Nolan, Is China Buying the World (Cambridge, 2012).