Critique Notes 82
Published: 27 August 2018
The Critique Conference will be held at the London School of Economics on 13th of October 2018 from 10 am to 5pm. Apart from the usual speakers it will have Peter Nolan from Cambridge University, in the afternoon, speaking on: ‘China and the West: Crossroads of Civilisation’.
Failure and Chaos?
We have always argued in Critique that we live in a transition period between capitalism and socialism, and that we can learn from earlier transitions periods. At first sight, we see decay and breakdown of the old before the new forms can establish themselves and use their superiority in extracting and using the surplus product to provide a greater command over the resources of the society.
Future generations will be able to explain why it has taken so long for the working class to take power. In other words, how it is that humanity has been unable to restructure its highly exploitative, unequal society towards one which could be described as truly democratic, or better still- the society in which work becomes humanity’s prime want. From 2007 onwards the globe appears to be bound in stasis, at best, and misery at worst.
On the other hand, we have Martin Wolf of the Financial Times arguing that the standard of living in the last 30 years has risen globally.1 On that basis he is optimistic for the present and future.
In the past half century, humanity has made extraordinary progress. This is unquestionable. This consists of more than higher incomes. It consists also of longer and better lives. We know this has happened. We also know why … . But powerful countries in relative global decline resent their change in position. Countries that contain substantial populations in relative domestic decline are consumed by the politics of rage.
He is arguing that the standard of living has risen globally, and there is even progress on inequality, but the leading capitalist countries are losing their dominant role and the working class resent their diminished situation. Nonetheless, the fact is the standard of living of the majority in the USA, for instance, rose little from the seventies onwards. Indeed, the switch away from Keynesianism towards finance capital and a reduction in the role of the state led to a period of stasis. It is perfectly rational that the working class look for an alternative. That they have not chosen the left or far left is our question.
For the third world, the change in the standard of living is complex. Most people remain desperately poor. At the same time, it is clear that global production has gone up, particularly in China. The only thing that can be said with certainty is that it is clear that the world could produce enough for all to have a comfortable living, but it is not doing so, through the inefficiency and inequality of the capitalist system and , through lack of incentives within that exploitative system. South Africa is not untypical in that there was a period of hope when the ANC took over, but it proved to be a false dawn. Yet, the ordinary worker has not turned to the left for rational reasons. The left appears to have failed, and it is present programme appears utopian.
Martin Wolf is right in one respect in that the experience of the last half century has shown that we could reduce income inequality and provide enough for everyone. He is wrong in not attributing blame to the capitalist system for the failure to get to that goal.
Obstacles to Change
In most countries the election of a far-right President or prime minister is far more likely than that of a genuinely left-wing candidate. The far right relies, inter alia, on nationalism, racism, discrimination on the basis of race, religion, and on political allegiance. At a time of mass unemployment in many countries and mass underemployment in developed countries, with little hope for the future, it is not surprising that people are desperate.
The almost trivially true fact is that the press, the news, the broadcasting organisations, and the educational institutions are all biased towards supporting the ruling class, and hence the status quo. Whether social media can help the left win an election is yet to be discovered. In fact, it looks as if it has been more important in assisting the far right, judging by the Cambridge Analytica scandal. It is the nature of the current bourgeois democratic system. It is hardly surprising, but it is not even conducive to the efficient operation of the capitalist system itself, as we are now experiencing.
The left remains overwhelmed by the appalling history of Stalinism, and the failure of social democracy. We have witnessed vain attempts in South America to break out of the stranglehold of a declining but powerful global capitalism. South Africa is a crucial case in that a Stalinist party, closely allied to the USSR, was the leading component of the coalition taking power in 1994. It remains powerful and is de facto responsible for the failure of the South African economy, and for the continued maldistribution of income and power in that country. The idiocy of liberals and social democrats who idolised Mandela has yet to be exposed.
Martin Wolf is making a broader point. He is arguing that the shift to the far right has to be attributed to the rage of the North American and West European masses at losing their commanding role in the American Empire. It is not clear whether he refers to their loss of jobs and income or the growth in immigration from third world countries or both. This is dubious. It may be true that some proportion of those who voted for Trump had grievances of this kind but that was not the underlying reason for change.
President Trump is supported by a number of well-known multi-billionaires. He has passed a budget which has redistributed income to the very rich in the United States. He is supported, for instance, by the Murdoch news outlets, in particular Fox News. In fact, Rupert Murdoch, its owner, is a personal friend. Robert Mercer, another multi-billionaire on the far right, has been crucial in helping Trump politically and organisationally, together with his daughter.2
“Mercer’s fortune and Bannon’s media instincts combined with a shared ideology to produce the anti-liberal, anti-Clinton ecosystem that includes Breitbart, the conservative non-profit Citizens United, the book Clinton Cash and much more. Together, they oversaw the data analysis company Cambridge Analytica, whose impact on the UK’s Brexit referendum and the 2016 U.S. election remain troublesomely murky.”3
The real question, here, is not the rage of a small section of the working class, but the nature of the division in the ruling class. In short, the political rulers have the backing of a section of the ruling class. This remains generally true throughout the world. It follows also that a section of the ruling class is opposed to Trump. The present obviously reminds many of the period before the second world war.
(Unfortunately, it is also true that the left has yet to take a decisive step forward; yet Marxism commands more respect than ever, judging by the remarks on the recent anniversary of Marx’s birth. The danger is not that the left will not come to power, but the relatively small chance that the means used to prevent it coming to power could be of an inhuman kind, as between the two world wars.)
The point is not to discuss Trump but the political evolution of the capitalist system at this point. It is clear that a section of the capitalist class is very worried at the Trump shift towards protectionism. Mercantilism was indeed part of the evolution of the capitalist system in an earlier phase, but it was exposed and criticised by the economists, Ricardo in particular, of the dominant capitalist power of the 19th century, a point endlessly made. It is usually in the interests of the dominant capitalist country to have free trade, when it is in the ascendant. Although economics textbooks make the point that it is always advantageous for all sides in international trade, that ignores the real political, geographical and historical forms of inequality often enforced on subordinate countries. If one argues that there is little difference in potential intellectual capability among humans and the cost of transport of raw materials can be ignored then there is no reason to assume any country would be better at making anything than any other, unless there be a common agreement to specialise, freely entered into. Under conditions of inequality, since the USA is the wealthiest country, with the greatest opportunities for education, and research, it will have the most discoveries. If they are patented it will then have monopoly rents over the rest of the world, simply by using patenting rights. That apparently is part of Trump’s goal.
In reality, capitalism develops unevenly, though not without bounds, partly because capital cannot police itself. Tax avoidance has led to firms parking their profits outside the US, after shifting production to Europe or China, where the price of labour is lower. Competition between individual capitalist countries to obtain industrial investment from more advanced firms leads to low costs of transfer. This is inevitable as long as there is a global economy. The US market is obviously limited, even if it has been the global hegemon and leader.
It is only to be expected that countries locked out of the existing series of patents would encourage their firms to find ways of copying them. Trump accuses China of such ‘stealing’. The fact is, however, that the USA in the nineteenth century did the same thing and the European countries in their turn took what they could from the rest of the world in an earlier period. The point is not to advocate anything under capitalism; what will be, will be. It is that Trump’s attempt to rectify US decline will almost certainly achieve something else. Capitalism in one country is impossible, which means that it is not possible to lock in a particular industrial structure within one country, without raising costs to the point where it becomes uncompetitive.
The clear condemnation of Trump’s protectionist trade measures by liberals and leading democrats reflects the overwhelming view among orthodox economists and centre -right politicians. They are right that there will be rise in the cost of living and dubious economic expansion based on protectionism.4 This is not because protectionism cannot succeed in preventing the import of better or cheaper competitive products. It is clearly doing so the world over.
The reason lies in the overall nature of the US economy. It is not just an ordinary developed capitalist economy like those of Western Europe. It is the hegemonic capitalist power governing global capitalism. That requires a structure and mode of operation suited to the conditions of a global military, political and economic power. In turn, it needs an overarching strategy at any one time. It is also helpful to have lieutenants who can help formulate and ensure the success of that strategy. 5
Fundamental, however, to the overall structure was the so-called Western Alliance -Nato etc. which were Cold War institutions or as one commentator has put it, ‘alliances and security guarantees’.6 The forms in which the USSR was subject to economic sanctions and a political and military cordon were archetypal. The United Nations also helped but in a more complex way given the presence of the USSR and China on the Security Council. Countries like Japan, the UK and Germany assisted through various institutions and forms. The end of the Cold War, however, left these institutions in limbo. They were nominally collective institutions, serving the particular interests of US capital. US capital, however, claimed to represent the interests of all. Trump has rejected that view so turning everyone concerned against the ruling class in the USA. The curious result of Trump’s strategy is that he is undoing both the structure and ideology of Empire built up over the last century. As the collaborating ruling classes – the UK in particular--find themselves in trouble they are forced to find a way out.
Where is the Compass?
Without an enemy, it is not clear what is in US interests, and who supports them. This is not an academic point. Because the US cannot formulate exactly how it maintains its hegemony, it made the mistake of turning a newly Christian, proto-capitalist Russia into an enemy. When there is no socialist/communist or Stalinist enemy, who is the enemy? Can another capitalist country which threatens the interests of a particular US firm with one of its own firms be considered an enemy? If there is no enemy, there is no need for weapons or bases. It seems that the problem with Putin is not that he is ideologically different, since he is not, but that he has acted in the interests of a local elite, who felt compelled to declare independence of the global hegemon. He can, therefore, be considered a danger, however dedicated to capitalism and to God. This is even more contradictory since the United States has consistently intervened throughout the world claiming to be a liberal democracy, crusading against authoritarianism, while overthrowing various democracies in Latin America, and supporting authoritarian governments. The Russian government is authoritarian with a strong anti-trade union and anti-left bias, similar indeed to such regimes.
The US effectively helped Japan and Germany to recover to the point of becoming crucial developed countries under US protection, with troops still stationed there. After the Korean War the same applied to South Korea. Those three countries became critical to the further development of the global economy. The UK lost its industrial position in the sixties-seventies; Germany, Japan and South Korea were near the top of the table in automobile production with Volkswagen, and Toyota vying for top place in car production until recently. Today China is at the top of the table but only in selling to itself.
The US saw to it that its close allies or dependencies were able to develop but China has begun to rival it in limited ways. The US is therefore taking steps to maintain its overall dominance. Various measures to contain China both under Obama and Trump indicate the changing nature of US policy to maintain its global dominance. Indeed, China is seen as a threat not just to US enterprises but to the USA as a whole precisely because it is increasingly economically and technologically competitive. This is not a Trumpian turn, but one taken earlier when the US, Swiss and German governments would not allow the takeover of local firms by Chinese enterprises. The threat to economic dominance required direct preventative measures.
Chinese success is seen through two sets of glasses. The first regards the Chinese economy as competitive and hence, where it is important or successful, possibly undermining US control of markets world-wide.
The other is a more general question of protection of the capitalist order. The capitalist hegemon has a duty to ensure the continuation of capitalism and the increasing success of a country based on nationalisation of the means of production might threaten it. China is not a socialist country and its firms and industries are not themselves socialist, but nationalisation of the means of production or ultimate state control of the economy does threaten capitalism. It is seen today as unfairly undercutting firms operating under private enterprise, not to speak more generally of possibly undermining capitalism itself.
The argument is that China has evolved to the point where it has reached beyond underdeveloped status into a level comparable in certain respects to that of Europe in production and overall economic terms. The Economist argues that the 7 IT IS the world’s most titanic commercial fight. Facing off are the towering giants of American and Chinese tech, led by the FAANGs (Facebook, Amazon, Apple, Netflix and Google’s parent, Alphabet) on one side and the BATs (Baidu, Alibaba and Tencent) on the other. These are some of the planet’s biggest firms, with a combined stockmarket capitalisation of more than $4trn.”View all notes two countries are now competing in third countries, particularly India, Indonesia etc. America competes directly, in the form of Amazon, Netflix, Apple etc, the so-called Faangs, while the Chinese buy up or take stakes in local firms. This involves companies like Baidu, Ali Baba, and Tencent. China had bought up firms in Sweden (Volvo) and Germany a few years ago. Germany is a special case, as it is at the other end of the ‘Silk road’ – the overland route from China to Europe – and to Germany in particular.
The crucial point in all this is that the USA has been in relative decline for some time. The shift away from the gold standard was the clearest marker. The dollar then replaced gold as the ultimate form of money under modern capitalism. All other currencies relate to it. The Chinese are trying to break away but have not succeeded. Although the shift itself was an indication that the US could no longer sustain the gold exchange standard, the elevation of the dollar as the only replacement made the US the governor of global currency. That gives it special responsibility to avoid inflation and deflation or use either or both in its own interests. At the present time, the US has a considerable deficit on its balance of trade. This is something Trump is trying to change. Although his methods are dubious, any US government would ultimately have to deal with it at some point. At the present time, US investment returns per annum are greater than foreign returns on investments in the USA. At this point they appear to be stable. This is in spite of the fact that such foreign investment is now greater than US investment outside the USA. It is very clear that over the last 70 years the US economy is less predominant. This is most obvious in cars, and aircraft production. Even if, the USA is no longer what it was, it is still dominant, but under challenge.
Chinese Expansion has Germany on the Defensive
“The German economy has grown dependent on China in a development that is now coming back to haunt it. With a global trade war brewing, it will be impossible for the government in Berlin to please both Beijing and Washington. It's time for a new strategy. By DER SPIEGEL Staff” 8
In effect Germany and China have now formed a limited partnership in which one element is that of China acquiring technological know-how and the elements of more developed commercial operation from Germany in part by buying up companies in Germany. It buys a considerable percentage of Volkswagen production and a signification part of that of BMW and Daimler (Mercedes).
Trump cannot reverse this situation, but he can fight over it. Whether the leadership of the global economy will move wholly or partially away from the United States is not clear, but the US is in decline and the chances are that research and development in a series of crucial industries will no longer be headed by the United States. It is obviously the case that South Korea has outshone the United States in the production of the Smart phone, both with the Samsung Galaxy and in the parts required for such phones. The Chinese are clearly going in the same direction not least because they are actually assembling the iphone in China. Germany and so the EU is now closely integrated with China.
As mentioned above, South Korea and Japan were the only countries in the world to move into developed status outside of Europe and North America. After World War II, South Korea and Japan did so but only with US help and de facto integration into a US controlled economic sphere , in a subordinate semi-colonial status. That China should be a country which is Stalinized albeit with a statized market economy is clearly important. The role of the state is crucial, even though there is extensive privatisation. It is able to avoid or control crises and crashes, and direct the economy. It is highly imperfect, but it has enabled the economic development of China, whereas India which does not have this form of control continues to wallow in extreme poverty and industrial backwardness. It is not a model which socialists can either support or cease to criticise. It has nothing to do with socialism, but it is a particular socio-economic form which has come into existence in the elongated transition period between capitalism and socialism. It is clear that the Chinese elite learned from the dire fate of the post-Soviet regimes and sought an alternative.
The rise of what amounts to a form of transitional state-capitalism is regarded with dismay by right wing ideologists and politicians in the United States.
“the underlying motivation of the new protectionist mood is American anxiety about China’s rapidly growing technological prowess.”9
Nor is this accidental, as the Chinese economy has switched from being export dependent to a more consumer led economy. 10 Exports have gone down from 35 per cent of GDP in 2007 to 19 per cent in 2016 and the tertiary economy now accounts for 52 per cent of GDP. 11
In reality, the Chinese government is well aware of the negative attitudes to China’s development and consequently plays it down.12 It seems that China imports more than 95 per cent of its high-end computer/server chips. One of its ministers of industry announced that his country was ‘still decades behind developed countries’ and it would take them a long time to catch up. 13
On the other hand, Adair Turner14 regards China’s evolution as inevitable. Although an establishment figure he takes a more left liberal stance. He thinks that had the USA wanted, it could have held China back in the earlier period when it, in fact, pushed for entry into China, and effectively helped it develop. However, it would only have been a question of time before China evolved. 15 He reduces the restrictions provided through patenting and other legal barriers in the flow of inventions to impediments inevitably overcome over time. More important is the scale of production and the size of the market. In this context, China, India, the EU and the USA have clear advantages. Like other bourgeois economists he does not choose to see the real hierarchy within global capitalism, and within individual territorial entities. The global hegemon has a series of weapons to prevent China developing. He is not unaware of this fact but expects the Chinese and other entities to win out in the end. Turner is not alone in seeing the possible strength of China16 This, of course, ignores the nature of the Chinese political-economic regime, and its real instability.
The important question is not whether it will be the global hegemon, which it clearly is not, at this point but its ongoing role in global capitalism.
One can argue that Germany has established a close economic relationship with China, which helps to buttress German prosperity and its leading role in the European Union. The ruling class in Germany has not forgotten that until the Schroeder reforms, at the end of the last century, Germany was in economic and political trouble. The successful attack on workers’ rights led to a split in the SPD, relatively lower wages and greater control and profits for the capitalist class. The close relationship with China, where China acts both as a major market for German industrial goods and an emerging partner is critical to global capitalism. And yet, Western governments are not prepared to accept China in that role and have refused to allow China to buy several important industrial companies.
The Trumpian line is one consequence of the situation outlined above, in that his advisors recognise reality and are trying to halt the tendencies outlined, by a species of retreat. It is in the nature of American imperial activity that it has to cope with challenges to its authority. One answer to its relative decline is withdrawal. The problem is that it is not realistic for the guardian of capitalism to do anything but defend capital and its expansionary drives. The slogan ‘America First’ appears aggressive and in relation to the individual capitalist country it is aggressive but in relation to capitalism as a whole it is defensive and ultimately self-defeating. Capitalism has been global for a very long time and one can argue about the exact period but that is its nature and Trump cannot do much about it. He cannot either retreat into the United States or alter the features of decline.
Russia and the Post-Soviet Regimes
At the same time, the post-Soviet regimes have been forced to recognise their failure to enter the US hegemony as anything but supplicants who lack the skills, resources and social relations to act independently of the hegemon. Their response has been gradually emerging, as they have continued to experience their own difficulties in coping with a crisis-riven hierarchical but declining capitalist system. In effect, the capitalist class is not prepared to accept China or Russia in anything but subordinate form. As argued above, it is possible that China may find its own way over time assuming nothing else changes. Russia, however, is too weak to do so. It is obviously significant that China and Russia often form a bloc with a few other countries who stand in a similar or intermediate position. In this context, the support for Syria and Iran is not accidental.
However, that seems to leave the post-Soviet elite in a closed box with the lid firmly closed. In principle it could invest heavily in modern industry and try to compete on the world market. The legacy of the Soviet Union leaves it with a workforce which has a long history of low productivity. Without substantial assistance to obtain up to date technology and consultants who would help to retrain the workforce they cannot succeed. The regime, however, is one in which workers’ organisation and mass dissent are effectively forbidden. In other words, its existing mode of operation appears to be the only one possible under the present political-economic set-up. Only, an opening to the West, as in the case of China, where European or US investment served to re-establish industry and agriculture in the presence of a free, well paid workforce would work. However, the West will not do it, as shown in Eastern Europe, and the market for such goods is not yet present internally.
The underdevelopment of both agriculture and manufacturing industry has been bemoaned by the IMF among others but the Russian elite may not want to take the risk of re-charging the Russian working-class.
The upshot is that Russia itself has not been able to convert itself from Stalinism into a developed modern if declining capitalism. Instead it has lost much of its industry, and its workforce retains the reasons for the USSR’s low level of labour productivity. Pay remains low and opportunities limited. In addition, the privatisation that has taken place has also produced a layer of discontented middle class owners and managers. The ‘middle class professions like academics, doctors and other health workers, and teachers have very low incomes and remain discontented even if quiet.
The new elite effectively seized on Russian nationalism, and have used it very effectively to receive mass support, given the consistent blindness of the West in not incorporating the Russian elite. Indeed, the sanctions on the elite itself will likely turn them further against the West and they will look to work more closely with China, Iran, and other third world countries plus some members of the EU.
At the present time, in the USA the CAATSA law (Countering America’s Adversaries through Sanctions Act) passed in Congress 2017 places sanctions on Russia. At the same time, a ‘Kremlin list’ of 200 Russian billionaires and senior officials is circulating as being readied for sanctions. 17
It has to be said that as a means of control sanctions have been effective, and these new sanctions will tend to be still more effective in limiting the Russian elite. It is not clear who exactly controls Russia. Putin is almost certainly reliant on a series of influential officials and oligarchs. Khodorkovsky on TV in the UK mentioned some 150 individuals. The Duma obviously plays a secondary or tertiary role. Indeed, since Putin himself was selected by a particular section of the elite, he is almost certainly either the first among equals or perhaps subordinate to them. Hence the sanctions have worked and will probably have a considerable effect if fully tested.
Russia cannot remain in this intermediate state for very long, but there is no immediate successor. It seems that it might have to wait for change in the West.
It is in this context that we can observe the early stages of a reaction against private enterprise as an economic entity. There have been two such periods before, after each World War. In the UK today, there is a clear reaction against the privatisation of utilities like water, gas, electricity etc. The service is poor, prices are high, and delivery is questionable. The same is true of transport, where the railways and bus services were privatised. Bus services have been disappearing, where they are perceived to be unprofitable, particularly outside the cities, and the railways appear to be a shambles: expensive, often late, often on strike, and less frequent than needed. This picture is not unique to the UK, of course.
It is, however, also true that nationalised services under capitalism do not run as socialist supporters would want. The nationalised firm is structured and incentivized as under capitalism, with all its disadvantages, while the context itself is capitalist. Inevitably, nationalised forms are suboptimal compared to the socialist intentions or dreams. That does not mean that socialists are wrong, for a socialist society would not have those limitations, but modern programmes are beginning to take steps to make things more propitious for a transitional solution. Such a solution could only have a limited life.
Today austerity is global. That is the policy of US capital, with or without Trump. It is also the case that the proportion of the gross national product spent on defence is around half of what it was in the period of peak Reagan expenditure. In other words, government expenditure on state projects in the US and UK as well as many other countries is well down. The German government has considerable surpluses in its budgets, while the French under Macron are determined to reduce government expenditure. Trump has taken defence of the rich to a new level, by cutting taxes on business and the rich.18
The present period is one in which the reaction to privatisation, Thatcherization or finance capital is also faced with a third force- the extreme right. The attempt to return to a pristine capitalism, with a finance capital which holds sway over the share market in the crucial surplus creating areas while value creating capital is subject to strict ecological standards is not easy. The social democratic capitalist entity that existed after the war is ruled out. The real alternatives appear to be either a genuine transition period to socialism or a return to a period of ruthless capitalism with the population divided by race, colour or ethnic groups, whose allegiance is based on the needs of a perpetually warring state.
The election of Trump, the rise of far-right parties, and Brexit are closely connected. The so-called Centre parties which are responsible for the currently dominant policy are losing support. The usual language of the Bourgeois press is one in which they refer to more critical popular parties as populist. That allows them to avoid the fact that there is widespread discontent with the dominant parties, and that the grievances are justified. Populism is assumed to be irrational and forever associated with Fascist or semi-Fascist parties. In fact, we have the rise of the far right, which has often had very rich backers as in the USA. In the UK, UKIP also has its millionaire supporters. The ruling class as a whole does not support them as is clear from both the press and its representatives. The left, however, is not irrational and does not have rich supporters but does put forward popular demands. The term populism can be considered a word used to deliberately confuse the nature of the opposition to the present state of affairs.
The connection of the three items mentioned above lies in the fact there is a high level of discontent which governments and parties are trying to assuage by fobbing the population off with right wing nostrums. Brexit is such a case, associated as it is with control over immigration and its anti-immigrant, indeed racist, ethos. The rise and rise of racism and more general anti-ethnic antagonism is a feature of the present. It is clearly being used in Italy, Germany, France, the Netherlands, the USA and the UK, and a series of other countries.
In the case of Brexit, the issue has been extensively discussed in these notes. The fight over withdrawal from the EU is a proxy for the real battle over the political economy of the UK. The right-wing leaders of the campaign want a customs union with the USA, and with it a shift to a stronger Austerity, Private Enterprise policy. The section of the left which supports Brexit has no plan or perspective on how to achieve their socialist objective. The likelihood is that the bourgeoisie will succeed in having a so-called soft Brexit, in which the UK is closely allied with the EU in trade terms, however it is eventually worked out. Immigration will be tightened up for the EU, though skilled workers or professionals will have special provision.
The internecine fighting in the Tory party looks like leaving it severely damaged. It is clear that the ruling class had had enough of dalliance over the issue and brought its supporters to heel. The Conservative Party is damaged, and the logical evolution ought to be one in which the left wing of the Conservative Party joins with the right wing of the Labour Party. That will make it difficult for the rump of the Tory party to claim that it represents workers. Such a new Centre party is unlikely to succeed either, being neither fish nor fowl.
In this context, it may be that the ruling class will prefer to let the economy continue its uneven stagnationary path. In spite of constant talk of an upturn, there has not been much of an expansion. Indeed, one economist Nouriel Roubini, argues:
Yet for the first time in a decade, the biggest risks are now stagflationary (slower growth and higher inflation). These risks include the negative supply shock that could come from a trade war; higher oil prices, owing to politically motivated supply constraints; and inflationary domestic policies in the US.19
The IMF do not differ: ‘The balance of risks has shifted further to the downside, including in the short term.’20
One does not have to agree with all the reasons Roubini gives to realise that there are powerful forces ensuring continued stagnation. In reality, Brexit is a distorted opposition response to the central ruling class, used by a discontented section of that class.
No potential conflict of interest was reported by the author.
1. Martin Wolf, ‘The World’s Progress Brings New Challenges’, Financial Times, 29 May 2018, https://www.ft.com/content/435acbd4-629d-11e8-a39d-4df188287fff.
2. Money Man. By Keith Boag, http://www.cbc.ca/news2/interactives/sh/wex94ODaUs/trump-robert-mercer-billionaire/.
4. Interview with U.S. Economist Larry Summers'The Very People Who Voted for Trump Will Suffer. ' Der Spiegel on Line http://www.spiegel.de/international/business/interview-with-larry-summers-on-trump-s-economic-policies-a-1214908.html.
5. For a penetrating and crucially important earlier article on the Cold War and the United States see Michael Cox, ‘The Cold War and Stalinism in the Age of Capitalist Decline’, Critique 17, A Journal of Soviet Studies and Socialist Theory (1986), pp. 17–82.
6. “Since the end of the second world war, there has been a remarkable consensus within the US establishment about foreign policy. Republicans and Democrats alike have supported a global network of American-led alliances and security guarantees.” Gideon Rachman, ‘The Trump Doctrine: Coherent, Radical and Wrong’, Financial Times, 16 July 2017, https://www.ft.com/content/6c9db010-88d1-11e8-b18d-0181731a0340?emailId=5b4dcd58e1614c00040d59ba&segmentId=13b7e341-ed02-2b53-e8.
7. “ The Economist, 5th July, 2018, https://www.economist.com/leaders/2018/07/05/americas-tech-giants-vie-with-chinas-in-third-countries.” IT IS the world’s most titanic commercial fight. Facing off are the towering giants of American and Chinese tech, led by the FAANGs (Facebook, Amazon, Apple, Netflix and Google’s parent, Alphabet) on one side and the BATs (Baidu, Alibaba and Tencent) on the other. These are some of the planet’s biggest firms, with a combined stockmarket capitalisation of more than $4trn.”
9. Shawn Donnan, ‘The AI Arms Race: The Tech Fear Behind Donald Trump’s Trade War with China’, Financial Times, 5 November 2018, https://www.ft.com/content/40304bea-7eb9-11e8-bc55-50daf11b720d#myft:my-news:grid.
10. Ching Kwan Lee, ‘Labor Politics Under China’s New Normal’, Catalyst, A journal of Theory and Strategy, 1:3 (2017):114.
12. ‘“China should act cautiously in building the confidence of the people at this moment” the Global Times, a state newspaper, wrote in an editorial in late June. If the wrong method is used, negative effects will easily surface at home and abroad.’ Yuan Yang and Lucy Hornby, ‘China Admits Almost all its Computer Chips are Imported,’ Financial Times, 20th July 2018, p.6.
13. ‘“We are still decades behind developed countries and the road to becoming a great manufacturing power remains long” Xin Guobin, deputy directory of industry and information technology, told a forum of academics and industry experts in Beijing.’ibid.
14. Lord Turner is Chairman of the Institute for New Economic Thinking. Prior to joining the Institute in 2013, he chaired the UK Financial Services Authority. He was Director-General of the Confederation of British Industry(CBI) from 1995–9.
15. Adair Turner, ‘Trade Barriers will not Stop China’s Rise’, Project Syndicate, 9 July 2018, https://www.project-syndicate.org/commentary/protectionism-can-no-longer-stop-china-by-adair-turner-2018-07.
16. Keyu Jin, ‘China Presses on America’s Pain Points in the Trade War’, Financial Times, 12 July 2018, makes the point that the Chinese will act subtly and ‘make concessions in the interests of harmony’ but it will not compromise on ‘its development model’. He then concludes: “The trade war may just be a larger strategic trial of strength between it and the US. Tough battles lie ahead.”
17. Katherin Hille and Henry Foy, ‘Putin-Trump Idea for Bilateral Business Forum Hits Early Trouble, Deep scepticism in Russia that Plan Hatched at Helsinki Summit can get off the Ground’, Financial Times, 22 July 2018, https://www.ft.com/content/c4464790-8d9b-11e8-b639-7680cedcc421.
18. For a fuller discussion of ruling class economic strategy see my article: Hillel Ticktin, ‘The Permanent Crisis, Decline and Transition of Capitalism’,: Critique 78:, August 2017.
19. Project Syndicate: Nouriel Roubini, https://www.project-syndicate.org/commentary/trump-trade-war-and-the-global-economy-by-nouriel-roubini-2018-07.
20. WORLD ECONOMIC OUTLOOK, World Economic Outlook Update, July 2018. “Less Even Expansion, Rising Trade Tensions,” http://www.imf.org/en/Publications/WEO/Issues/2018/07/02/world-economic-outlook-update-july-2018.