Critique Notes 83
Published: 21 November 2018
The annual Critique Conference was held this year at the London School of Economics on 13 October 2018. Michael Cox and Hillel Ticktin discussed current global political economy in the morning. Peter Nolan provided a clear account of the history and development of China, while Savas Matsas discussed the current global forces at work in a theoretical context.
Crisis and depression
Jerome Powell, the chairman of the Federal Reserve, highlighted slow wage growth in recent decades in a speech at a meeting on 22 August. America seems stuck in a ‘low-productivity mode’, he said.1 Others pointed to sluggish investment, despite cheap capital, and a fall in workers’ share of national income. Could these ills share some common causes, namely rising market concentration and crimped competition?
As evidence, ‘Alan Krueger of Princeton University pointed to nominal wage growth that is 1–1.5 percentage points lower than would normally be expected with inflation and unemployment as low as they are now. He laid some blame on employers’ growing power, as no-poaching agreements and non-compete restrictions proliferate, on sickly union membership and on the falling real value of the federal minimum wage’. This was at the annual meeting of the USA Federal Reserve Bank at Jackson Hole, 22 August 2018.
Obviously we do not expect them to say that real unemployment is high, but if they could admit some of the above, then it is extraordinary and we should analyse it as such. Real long-term growth is low, investment is low, and wages are static in face of inflation. Clearly that is what might have been called a depression. There has been no real recovery from the downturn. The situation in the third world is worse and worsening as money which had gone to the third world is being withdrawn, and more is going from the bourgeoisie etc. of the third world to the developed countries, particularly the USA.
We are in a long-term downturn. What we call it is secondary. Bourgeois economists are having a tough time admitting the fact that the world remains mired in the apparent aftermath of the 2007–2008 crash. We have discussed this in these columns nearly every issue.
We are now told that we should expect a downturn. The Economist has a special article on the subject.2 Various others, right and left, are making the same point. There have been a number of alarms of this type over the past decade, since the official downturn date of 2008. It is clear that the global economy and society as a whole is in trouble, but the fact that central banks are moving out of printing money seems to be regarded as a return to the status quo ante. Interest rates are rising, so things are stabilizing, it is implied. Yet, the world is becoming more chaotic and the process of disintegration is increasingly showing itself the world over. The actions of Trump, and the elections of the far right in Italy and Brazil do not come out of nowhere. In fact, money invested in the third world has been returning to the West for some time, leaving the former countries in trouble.
When there is a depression, it is hard to get excited over a potential downturn. It is hard even to understand its meaning. We can expect upturns and downturns on a limited scale and within the context of a permanent capitalist crisis for a long time, perhaps until the system ends.
In short, we should be discussing the real forces at work in our society resulting from the long-term decline. After waiting for many years for another depression, and watching a rapid rate of growth, with full employment in major developed countries, much of the left gave up on the theory of capitalist decline by 1960. In purely technical terms, of amounts produced, GDP per annum etc., there are limited upturns and downturns, but the real questions today are more complex and involve questions of the evolution of capitalism and hence its decline and replacement.
They involve the history of the real class relations between capital and labour, working class and ruling class, and they have become complex, even if the concept of exploitation itself is clear.
We have to understand the present period as involving both the almost technical questions of underconsumption plus overproduction of producer goods in relation to consumer goods as well as the evolution of the processes of the socialization of production combined with the increasing weakening of the forces of Capital.
The question of decline and the economy at the present time.
I have discussed the concept of decline in earlier issues of Critique. Neither Marx nor Hilferding used the word decline in regard to capitalism. It was Lenin who gave the term, decline of capitalism, to Marxism. Since Marx talked of coming into being, maturing and decline of social formations, the concept of the decline of a system, like capitalism, automatically follows. Lenin saw the decline in terms of the turn to imperialism as a way out of the limits of capital after 1870. The term does not imply lower production levels, but rather an increasing difference between what could be produced both qualitatively and quantitatively. It involves lower levels of productivity than could be achieved in a superior system. Increasingly, there are times when the system seizes up partially or wholly leading to conflict rather than interpenetration. The use of direct force, war, or deadlock have been some of the results. If society is subject to evolution, as it must be, then all social systems must be subject to evolutionary processes.
In fact, we live in a society which has undergone considerable social change since the time of Marx. Education, health, inter-city transport, utilities and housing have been nationalized, at one time or another, to a greater or lesser degree in many countries, while governments in developed countries take responsibility for ‘planning’, pensions, and income support for those who cannot get jobs. Something like half the gross domestic product is managed by national and local governments. Forms of privatization, as in the UK, have not been more efficient.
On the other hand, the crucial large or medium size companies that rule the global economy are largely governed by boards of individuals specializing in the government of such enterprises. The technical ownership of the companies rests with the shareholders. The shares, in their turn, are largely owned, even if not entirely, by financial companies. In the USA, Blackrock, Vanguard and Stateside, between them own a considerable proportion of the shares quoted on the New York Stock Exchange, as mentioned in an earlier Critique Notes. We have a picture of finance capital returned to its former pre-World War 1 role but even more so. On the one hand, a picture of powerful companies being effectively ‘planned’ by a considerable contingent of its white collar staff and on the other manager/owners of finance capital pushing for high dividends. They, in turn, get much of their investments from a combination of pension and other collective type funds together with other sectors.
Even at this relatively limited level it is evident that this is a society in change towards more collective direction. On the other hand, most of those in power are doing their best to privatize, in spite of the doubtful results.
In other words, we have a world which is necessarily moving in the direction of socialism but in which the capitalist class is doing its best to hold it back. The result is a muddle, a mess and in places a disaster.
The changing form and relations of production are demanding socialization, while the ruling class is doing its best to avoid and stop it. Without returning to the eighteenth to nineteenth century, it is impossible. On the other hand, threats to Capital appear to be random, dependent partly on wars. Even nationalists opposing the imperial control in the Middle East have been overcome by Islamic fundamentalists, originally supported by the USA as an alternative to Stalinism. The impossibility of socialism in one country, or even non-capitalism and Stalinist or social democratic forms has left the remnants of such attempts in dire straits, an uninspiring example to others.
The overall result, given the Russian Revolution of 1917, and its Stalinization, without any subsequent Socialist Revolution is that the world is left in a state of transition. Both the attempts at Socialist Revolution and the reality of a world in gradual change away from capitalism have meant that the twenty-first-century world cannot be fully understood without concepts of a transitional epoch. It applies to all countries but differently to each part, depending on their history.
The above obviously applies to China but it also applies to the USA and Europe. Their institutions are in a process of change away from mature capitalism. Hence the description above of a modern capitalism where self-expanding capital is increasingly bureaucratized or administered, or even to some extent ‘planned’. Analyses based purely on the laws of capitalism are necessarily limited.
In particular, crises themselves are subject to control. On the one hand, the bourgeoisie has given limited independence to the national banks, but on the other it appoints the governor of the bank. In the period down to 1980 after the war, the economy was effectively subject to government control. Thereafter there was a measure of decentralization and the right invented the ridiculous concept of moral hazard to avoid intervention. Nonetheless in 1987 and 2008 the government stepped in to avoid a full crash. In the whole period down to the present governments have been involved in preventing possible catastrophes. Quantitative easing will be ended in the EU and it has ended in the USA, but the fact is that it was used down to very recent times.
In the period of the switch from Keynesian controls to more limited intervention, money played an increasing, if limited role. Finance capital was resuscitated and there was a revival of large financial companies, leading to the formation of the ones cited above. Given the limits on industrial expansion the potential for industrial investment was more limited. Monopolistic competition ensured that firms could save their surpluses, rather than invest. This is a large part of the reason why productivity increases remain low.
In other words, although there is today potentially a considerable surplus of goods from the producer goods sector – department 1 – in relation to the consumer goods sector – department 2 – and for the latter in relation to potential consumers, it is not showing itself. Instead we see a colossal level of savings. Governments in co-ordination with big capital are effectively controlling the rate of growth. The general line is that of austerity, so ensuring de facto mass unemployment, without it appearing in the usual government statistics.
Put differently, the bourgeoisie is ensuring that there is limited employment, weak unions, and more compliant workers. Officially there is a high level of employment, and the low rises in wages over the past two or so years is inexplicable. This line is generally applicable in the developed world, but it is much worse in the underdeveloped world. In South Africa, for instance, the real levels of unemployment are certainly over 40% and probably higher still.
Chaos, disintegration and nationalism
The mass discontent which is now very visible has not reinforced the far left. Part of the answer as to why the far left remains in stasis lies in the relatively successful measures taken by the bourgeoisie in offsetting discontent on to immigrants. This is discussed below. The second reason lies in the collapse of social democracy and Stalinism. The third is the awful heritage of Stalinism itself.
Today, in fact, the world looks as if it is not going to socialism or making a success of capitalism so much as towards chaos and disintegration. The latter is not just a question of Catalonia and Scotland becoming independent. Disintegration is political, economic and social. We have parts of countries demanding independence, but we also have the breaking of economic bonds, and the pulling apart of social groups. Classes are pulling apart, albeit unconsciously. Peoples are separating, white against black, men against women, etc. These differences have existed for centuries, but they are coming to the fore at the present time in a complex dialectical way in which both the antagonism and its replacement by a class struggle incorporating a fusion of differences within the class are present.
Existing differences will inevitably be used by the ruling class as a mode of rule, and those differences have in fact been built up by the system and its ruling class over long periods. Capital itself needs an efficient, hard-working, co-operating force, not one which is constantly in battle within itself and hence the paradoxical possibility of the formation of the working class as a class. Employers have used methods of dividing and superexploiting the workforce from early on. As is well known, Marx discusses the super-exploitation of the Irish workforce in the first volume of Capital. So, the deliberate fostering of an antagonism against immigrants has been a policy used by the system for a long time. However, today, it does not appear only in quite that form. Rather employers, the capitalist class, want to import more labour to take the jobs that the existing labour force avoid or do not undertake, as well as a means of undercutting sections of the labour force. This makes possible a mass movement of people from poorer to richer countries and has been exploited by right wing movements and governments as in Eastern Europe, Italy, etc. The resultant growth in racism and nationalism is part of the process of disintegration occurring at the present time. Clearly the left has to stand against racism, nationalism and all forms of arbitrary exclusion of peoples from jobs and countries – for open borders and support for immigrants. However, the point here is that the vast mass movements of people to richer countries is itself part of the process of economic and political disintegration at the present time. In this case, it has to do with the continued poverty of the populations of much of the world, the young of which can take drastic measures to get a better life.
We have at present both an antagonism to immigrants and immigrant workers and a movement which is opposed to it. Both the central bourgeoisie and sections of the working class in the dominant capitalist countries, white collar and blue collar, stand for the acceptance of immigration. Other sections of the bourgeoisie want to take advantage of the differences as a means to establish full control over the working class, i.e. the whole population. The divide exists within the EU in that the dominant Eastern European political power rests increasingly with those who are far right nationalists, while the EU Commission and France/Germany stand for freedom of movement within the EU and acceptance of some level of immigration. In the USA, Trump and the Republican party now stand against immigration in an extreme form in order to bolster American nationalism and support for the capitalist order. The paradox is that open American nationalism is contrary to the interests of America as the global hegemon or imperialist, where the USA has to appear as the benign super-power assisting its associated states to develop.
The logic of nationalism leads inevitably to economic failure within the contemporary form of capitalism unless the regimes can find a means of expansion. Historically the bourgeoisie has found it in war – the establishment of an enemy preferably both within and without. It is this combination of the hatred of both an internal enemy and an external foe that distinguishes the far right from the less far right. Today, neither the internal enemy nor the enemy without is as obvious as in the 1930s. Nonetheless, immigrants are the internal enemy for the far right and Russia and China are becoming regarded as the external threat.
While there is no doubt that the Russian regime is behaving like a rogue power both internally and externally, it is more of nuisance than anything else, however appalling. Both Russia and China are unstable regimes which cannot succeed in changing the global balance of power. How long those regimes can last is open to question. The point is that attempts to use them as an immediately dangerous enemy – as opposed to a competitor or a rogue regime looking for a favourable deal of some kind – lack credibility.
That leaves the nationalist forces without the external enemy. The enforcement of strict admission rules for immigrants is a time limited policy, unless the regime turns also to discrimination against a section of the population. That effectively already exists but could be extended. Unless it can be shown that the immigrants or other internal group are disadvantaging the rest of the population or part of it, the national-racist policy will quickly fail, as it cannot deliver tangible economic results. The example of anti-Semitism cannot be replicated either by repeating the exercise or replacing the Jewish population with another ethnic group.
Indeed, a shift to a pure nationalist policy by standing for independence, will likely succeed for a limited time, depending on the new country's resources and relationship with its new environment. Thus, Scotland may become independent and join the EU, which in turn may subsidize it as it is subsidizing Poland, though at a lower level. However, this is only open to relatively small countries or potential countries.
The question of the ‘middle class’
A second method of control has rested on the building up of a so-called ‘middle-class’ or an aristocracy of labour. Historically, the ‘revisionist’ tendency in German social democracy propounded by Edward Bernstein rested on this understanding of the evolution of capitalism. Bernstein's overall thesis proved wrong in that there has been an increasing proletarianization of the workforce over the long term. This is increasingly evident today in that the workforce is mainly white collar in developed countries. However, it is less true of less developed countries and it is not so long ago that the professions have begun to be proletarianized.
As a result, there remains an undefined layer of the population which sees its future in promotion into the less uncomfortable sector of the workforce, depending on the country. However, the situation for the majority is now frequently outlined in commentaries on the political state of the country and it is very different. One such article on the UK in a ‘conservative supporting newspaper’,3 went through the chances of people under 44, showing that, inter alia, they often do not have house or car ownership. The author concludes: ‘When the young rise up, it will be for Corbyn’.
Whatever the overall analysis, the point is clear and not just for the United Kingdom. The trend outlined is more general, even if more extreme in the UK, capitalism is developing in a direction in which housing is not socially provided and the state is less involved in helping the less well-off, while the forces of production are moving towards increasing automation of all activities. From self-driving cars to automated factories of all kinds there is a logic of dispossession in favour of social control and distribution. The logic is not the same as implementation.
Why has the British ruling class taken so long to act in its own interests?
One example both of transitional forms and of disintegration is that of the United Kingdom, with the absurd negotiations around British exit from the EU. While much of what has transpired is clear, most people do not understand why the ruling class has not acted to ensure its interests were taken care of. Big Business has been making very clear that it is unhappy with the British proposals to the EU, and the way negotiations are going. Goods have often to go back and forth across the British Channel something like five times. The economies, in other words, are largely integrated. Finance, centred in London, is crucial to the British economy and is second only to New York in its global importance – but it is part of the EU division of labour. Japanese car firms have made their worries clear, as has Jaguar-Land-Rover, owned by Tata. About 50% of British trade with other countries is with the EU, although the US is the single biggest importer of British goods. The UK has a substantial negative balance of payments, largely with the EU, so it does look as if business would want to stay in the EU, as it has been making clear. (Statistics are towards the end of the article.)
Why then does the Conservative Party want to leave the EU? It is above all the party of British Business. It is surely the party of the ruling class, not of discontented small farm owners in the South West of England, or of the unemployed North of England workers, close to UKIP. The answer is still to be made clear, but it is possible to discuss the dilemmas of the ruling class at this time. As argued above, we are now living in a transitional period even if not quite in a transitional regime.
While it might not be difficult technically for the ruling class to find a way to alter the direction of the ruling party, it does not want to make things worse for itself. The working class is discontented with permanent austerity. While the Conservative Party won the 2015 election, the Labour Party made it very easy for them, by failing to mount a strong anti-austerity policy. The shift of the youth and everyone under 44 or so towards the left is clear. A similar process is happening in the USA. If the Labour Party comes to power, it will technically be at its most left wing since the 1930s. It is not a revolutionary Marxist party, so they do not need to panic but they do not want to take a chance on it helping such a party to come into existence. The ruling class wants to conserve and extend their own support not lose it. They did not expect the Conservative Party to so degenerate that it would be reduced to a tiny fraction of the numbers that it had in 1945. Most of them are likely to be small businessmen and farmers. The party is itself split or more correctly the Parliamentary party is split, while most of the Conservative Party support Brexit very strongly as one might expect, given the majority of the population outside the major towns supported Brexit. As a result, the British bourgeoisie has preferred to play a long game. That could mean they are pushing now for the UK to be in the single market and customs union or perhaps one of them or some form of them.
It may be that the British ruling class has miscalculated, or that its US oriented section is sufficiently strong to weaken its overall drive. The amounts invested in each country by the other are the same $1trillion4
(‘The UK is also the single largest investor in the US’. British companies annually invest over $570 billion in the US, ‘contributing nearly 20% of all foreign-direct investment into the US’.5 In 2017, the US exported $123 billion of goods and services to the UK, making it the UK's 2nd largest source of imports, and imported US $111 billion in goods and services from the UK6 Three industries in which there is substantial trade are aerospace, automobile, and defence. Finance has a trade surplus of $13 billion while bilateral trade with the US in chemicals and pharmaceuticals in 2016 was £14.3 billion.7)
The UK has a substantial trade and investment relationship with the USA, but it is subordinate to that with the EU overall.8 Given the global dominance of the dollar the USA finance relationship is clearly critical to the UK. It may be that it is this tail that is wagging the dog. The section of the Tory party supporting Brexit has open links with the USA, so no one doubts their position. The newspaper and media owner, Murdoch, supports Trump and Brexit, Boris Johnson, the possible contender for Prime Minister and Cabinet Minister Michael Gove also support Trump.
The British bourgeois position has been weakened by the declining nature of British capitalism, by its connection with the USA at this time and by the weakness of the Conservative Party itself. Given its international nature, and international holdings, it may have a wider perspective. It may also have a longer-term perspective, hoping that things will right themselves within the foreseeable future.
Nonetheless it might still take relevant action, late as it might be. If it fails to have any influence, then both the right and the left will have some reason to conclude that capitalism in the UK, and not just the UK, is in considerable trouble.
Notes on contributor
Hillel Ticktin, Emeritus professor of Marxist Studies, the University of Glasgow, Scotland, UK. Author of books and articles on the USSR, South Africa, Finance Capital, Crisis etc.
1. ‘I would also note briefly that the U.S. economy faces a number of longer-term structural challenges that are mostly beyond the reach of monetary policy. For example, real wages, particularly for medium- and low-income workers, have grown quite slowly in recent decades. Economic mobility in the United States has declined and is now lower than in most other advanced economies. Addressing the federal budget deficit, which has long been on an unsustainable path, becomes increasingly important as a larger share of the population retires. Finally, it is difficult to say when or whether the economy will break out of its low-productivity mode of the past decade or more, as it must if incomes are to rise meaningfully over time’. ‘Free Exchange – Made from Concentrate’, Economist, 1 September 2018, p. 63.
2. Economist: 13 October 2018: The Next Recession, Special Report: The World Economy, pp. 3–12.
3. Janice Turner, ‘Millennials Have Few Material Possessions But Are Rich in Ideals’, The Times, 6 October 2018, p. 27.
4. House of Commons International Trade Committee UK-US Trade Relations Second Report of Session 2017–19 Report, together with formal minutes relating to the report Ordered by the House of Commons to be printed 25 April 2018, p. 15 https://publications.parliament.uk/pa/cm201719/cmselect/cmintrade/481/481.pdf.
5. Ibid., p. 15.
8. ‘The EU, taken as a whole is the UK's largest trading partner. In 2017, UK exports to the EU were £274 billion (44% of all UK exports). UK imports from the EU were £341 billion (53% of all UK imports)’ https://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7851.