Critique Notes 84
Published: 07 January 2019
The world is beginning to move
The shift to the far right in parts of Europe and in the USA has posed the question of whether we are entering a particular stage of the post WW2 crisis. The first period was one of concessions to the working class with full employment, extensive house-building, industrial rebuilding and expansion. That came to an end with a confrontation between capital and labour in the seventies, ultimately overtaken by the assumption of power by a faction of the bourgeoisie which rejected Keynesianism and concessions. It moved to rebuild finance capital and apply a ruthless profit ethic. Britain was the archetype, with millions losing their jobs, direct confrontations won by the right and substantial loss of industry, continued even after the Conservative Government fell in 1997. The crash of 2008 took a spectacular form, but it was not entirely unexpected, in spite of de facto bankruptcy of a series of British and American banks. The fact was that the stock exchange crash of October 1987 followed by the downturn of 1989–1993 knocked out Japan in particular and affected Sweden and Canada more severely than other countries. Although the dot-com bubble followed, it was accompanied by the East Asian crisis in 1996–1997, and the Long-Term Capital Management Fund collapse which followed. The downturn of the stock exchange in March 2000 reflected the real crisis that was waiting to happen. It was effectively aborted by 9/11 and the invasion of Iraq.
The overall effect was one of apparently slight ups and downs, with a threat of much worse to come, which was ignored. The crash, as opposed to a hard or soft downturn, followed the mortgage defaults and the problems of Freddie Mac and Fanny Mae in 2006. The real trigger was the massive gambling in things like credit default swaps, which had risen from 1 trillion around 2001–2002 to 64 trillion dollars in 2008 and the dishonesty in so-called ‘packages’ sold. Gordon Brown proved to be spectacularly wrong at that time, anticipating a smooth period of rising prosperity. It was all the more ridiculous as the previous period down to 2006 looked ominous, and any intelligent person could foresee a crash, as we did at the time.
In principle, therefore, the gradual restoration of traditional banking with a functioning economy has brought the global economy to the situation it had been around 2000. That has left an uncertain situation globally. The third world – Brazil, South Africa, Argentina in particular – are in trouble. For the poorest countries, the situation was bad and remains difficult.
The crucial country is China in that it used the period to maintain a high rate of growth, although the tariffs being introduced by Trump will affect it. However, Gordon Brown perhaps to maintain an unbroken record of failed prediction1 now anticipates another massive downturn.2 He is not alone, however. Nuriel Rubini and Brunello Rosa predict a worse downturn than the last and have given 10 reasons why a crash is coming in a couple of years' time. There is no doubt of the very high level of government debt, and of consumer debt as well. At the same time, it is clear that conservatives will prefer to let the economy drop, as some of them thought that would have been the right policy last time. ‘When it comes, the next crisis and recession could be even more severe and prolonged than the last.’3
In previous Critique Notes, I have cited the various predictions of a downturn, though they have not been as dire in their anticipation of the downturn. There have been explorations by, inter alia, JPMorgan Chase4, The Economist5 and the IMF6. It is expected in one to two years' time. At present, (December 2018) stock markets are wobbly. However, the whole period from 2008 has been one of considerable uncertainty, combined with continued large-scale saving by the ruling class, or non-investment in productive assets7 for instance. Whatever that entails, a quick run through holdings of other US banks shows trillions of dollars of holdings. In addition, we have the details of the three controlling US asset management firms, Blackrock, Vanguard and State Street, which have consolidated their real hold on shares on the New York stock exchanges.8 The other side of this situation is a low rate of economic growth, not much altered by Trump's reduction in taxes, like corporation tax.
The European and North American bourgeoisie have to decide two things. First, are they going to continue the policy of austerity, by which the status quo is governed or go for expansion. Secondly, are they prepared to take on the working class as it becomes more confident with, formally, low levels of unemployment. After such a miserable period, it is not clear how workers will now react. In Germany, the discontented East German workers have turned to the far right, which is hardly surprising. It is more likely that workers, once they have some strength in the economy and some militancy will demand important changes. The Labour Party in the UK is now expressing some of these demands. The demonstrations in France, however, seem to be leading the way.
The revolt in France
In France, Macron has a lower and lower polling rating. Before the current confrontation in the streets of Paris and elsewhere in France it seemed clear that his de facto anti-worker policy would probably be halted at some compromise, and ultimately his failure. If the apparent attempt to compromise fails, we may anticipate direct confrontation taking on even more serious forms than the recent so-called riots.
Since the French Revolution in 1789, the French working class has played a crucial role in Europe, even if it was overtaken in 1917 by the Russian working class. However, the French bourgeoisie never recovered from its losses in the First World War, and even now plays second fiddle to Germany however much as it dislikes the situation. The French working class now stands out as of November–December 2018 in winning a victory against Macron. The demands being put forward to make concessions to workers put Macron and hence the French ruling class to a test. They are clearly not prepared for a prolonged direct confrontation with the majority of the French population, who appear to support the protestors. The postponement of the rise in fuel prices and the hint of a restoration of a wealth tax show that the government has learned from French history to combine repression with occasional retreats. It is argued that the base of the demonstrators lay with the 5 million or so lower middle class. As the CGT, the Communist Party controlled inter-trade union body, joined the street opposition on 8th December 2018, and the demonstrators appeared to have widespread support it is clear that the government is isolated from the main body of the population.
The ‘lower middle class’ includes both small businessmen as well as white collar workers. Government concessions to the wealthy and increased direct or indirect taxation of the ordinary people are bound to increase the level of discontent over the society. Earlier action by the unions last year did not move the government but the arrest of some 1700 people with the use of fire-power, albeit with rubber balls, can only seal Macron's rejection.
Whatever transpires in France, this confrontation is the first successful action in what will be a prolonged contest between workers/ordinary people and the government. It is a right-wing government, under the title of centrism, dedicated to turning the labour-capital relationship more in favour of capital. In fact, France is the last of the developed countries to have more remnants of the post-war concessions, although France followed a similar path to Reagan/Thatcher. The de facto coup d'etat of Macron was supported by Bernard Arnault9, the richest man in France10. This is the ‘centrism’ of the global bourgeoisie, pioneered by US capital but rejected by Trump. Both Arnault and Macron have made it clear that they stand clearly against protectionism and for a global outlook. Macron is bidding to revive the EU with a Franco-German axis but has not been able to persuade Merkel to go the whole way to providing the necessary financial underpinning. It is early days yet, but he has taken the first step in this enterprise.11 ‘The proposal is a far cry from Mr Macron's original vision of a powerful and permanent “fiscal capacity” to stabilise countries hit by economic shocks.’ 12 In other words, he does not have the time or money to succeed.
Global relations
It is, of course, possible that the direct threat to the global social order provided by the French marchers might lead the ruling class in Germany and/or USA to assist its class members in France and Europe as a whole, but Trump's reaction has been unhelpful, not to say stupid. There remains the danger that the ruling class, caught between the left and far right, will turn further to the right or as far right as they judge sensible. The massive repression on the 8th of December 2018 was to be expected but it remains relatively limited.
Two things were both unexpected and crucial to the present period, understood as the immediate post-Soviet era. The first is the absence of any powerful socialist/Marxist party and the second is the relative weakness of the central ruling class in its actions. This does not mean that the latter are not playing a critical role, whether in the background or up front. As in Hitler Germany in1933, where Krupp and Thyssen were Nazi supporters, who lost their faith, the bourgeoisie were unable to find a less suicidal mode of action. There is only a socialist path forward, and as society becomes more integrated and wealthier, but economically undemocratic, it is polarising.
It is in the nature of a highly complex society that it is not happening cleanly and evenly. Much of the third world population lives in the direst poverty, even as Europe and particularly the USA receives a flow of interest, dividends and capital from international investment in those countries.
The far right has taken advantage of this situation. It is in government in Italy, Brazil, Hungary and Poland and has considerable support in France. In the third world, the situation is getting more chaotic. It is clear that a number of right-wing financiers and billionaires have been providing support to the far right. The activities of Robert Mercer and his daughter are well known for their support for Trump while Arron Banks has been well publicised by official media as a backer of UKIP and the ‘Leave’ campaign, but a quick computer check shows extensive backing for prominent far right figures by a series of individuals and their fronts in a number of countries.
Direct and indirect force
It is in this context that we need to explore the likely evolution of bourgeois policy. In the first instance, a policy of direct force exists in many countries. It may not be only force, but it is force that is crucial. That is clearly the case in Stalinist or former Stalinist countries, Russia, China, Viet-Nam etc. It is also true of most of Africa and parts of Latin America, where, on the other hand, the decline of the USA permitted social democracy some headway. Dictatorial forms remain in a series of further countries in the Third World, particularly in the Middle East. Unsurprisingly former colonies tend to be unstable with frequent coups. The semi-dictatorial regimes in Hungary and Poland look as if they are the predecessors of full dictatorships. In one sense all capitalist countries are based on force, economic force, but not all countries use direct force.
Secondly, there is an imperial force applied to the parts of the empire, as a subset of the above. America has been using that at least since the end of the Second World War. Its last attempts have been somewhat less successful. Ordinary Americans are less keen on fighting. Its spectacular failure in the Middle East has reduced both its appetite and influence. Trump, of course, has taken this in and proposed to curtail the size or depth of the Empire. Whether he understands what he is doing is another matter.
The third form arises as a by-product of increased economic repression. In many countries, austerity has been the basis and slogan of government economic policy. This has entailed government cutting pensions, child benefits, allowances for disabilities, arising at birth or from injury or disease, subsidies for both students and institutions in education, support for health and hospitals. It has also meant the reduction in support for housing, industries and the economy in general. The effect is to compel people to live more difficult lives and die earlier. As there was no case for austerity in developed countries which had unemployed and unskilled workers and unused resources, the policy amounted to a form of control. The Keynesian argument that investment ultimately pays for itself, provided labour and resources are available is obviously true, and can be extended. In other words, governments have been using repressive controls in order to avoid possible major economic demands, possibly leading to limits being placed on capital itself. The political effects go in more than one direction. One might expect that a proportion of the population could support a dictatorial form to protect their interests.
More than half of people in the UK who were born in the 1990s think that an autocratic leader with absolute power is a ‘very good’ or ‘good’ idea, according to the World Values Survey, compared to barely a quarter of those born in the 1930s. It is a pattern seen in other western democracies such as Canada and the US. And it has got the foreign secretary worried.13
One does not have to follow Jeremy Hunt, the foreign secretary, in his worries. He needs to make a point. However, it is clear that the failure of the Communist Parties and Social Democratic Parties have created a climate of confusion and for some that of despair.
Forms of control/force today
The more important part of the arguments concerns whether the bourgeoisie is prepared to use direct force on its citizens, in developed countries, at the imperial heart, as in Fascism. The latter embraced direct killing of oppositionists, Jews, Roma, the less healthy, the disabled, etc. It would be enough if they imprisoned the left, or left leaders and writers. It might have seemed highly unlikely that they assign a part of the population a role as scapegoats as with the Jews in Poland and Germany. Trump is effectively doing it with immigrants from Mexico, and Moslems. The separation of children from parents at the border comes into the same order of persecution. The apparent heartlessness and open cruelty on the part of Trump and the US government were damning. It has become a more general issue in Europe, where racism is also on the rise. In the case of the USA, the direct murder of 11 Jewish members of a Pittsburgh synagogue by a lone anti-Semite forced Trump to condemn anti-Semitism even though he had been ambiguous in the Charlottesville demonstrations earlier.
(Anti-Semitism is a unique form of discrimination, similar but not identical with racism, which arose in parallel with racism. Anti-Semitism began with the entry of capitalism into the world scene as part of the forced acceptance of the form of capital itself. It involved the direct victimisation, ghettoisation, and murder of many thousands of Jews over the centuries until Capital was victorious. Cromwell invited the Jews to England, but it was Robespierre who urged the acceptance of Jews as citizens in 1790 so marking a change for the better until a new rise of anti-Semitism in Europe in the 1870s. The thousand-year discrimination against the Jews effectively made anti-Semitism a feature of the life of anyone who was, or is, Jewish. It is a form of false anti-capitalism, which has been used to offset discontent and rebellion against the existing market dominated system. It is now rising again as the system is in the later stages of decline, even in countries where there are few, if any, Jews, as we see in Eastern Europe.)
The cruelty to children by the state, negative attitude to all Moslems and the rising anti-Semitism are part of an increasingly vicious attitude to all so-called immigrants or their descendants both in the USA and Europe by parts of the population and by the state. One of the worst examples, of course, was that of the attitude adopted by the British Home Office, particularly under Theresa May, where they adopted an official policy of a ‘hostile environment’. So much was this the case that they arbitrarily removed citizenship and the right to continue living in the UK, deporting some number of people who were, in fact, British citizens by law, and victimised people from the Caribbean, in particular, ‘the Windrush generation’. While no one has been directly killed, many have lost their right of abode, their jobs, their houses, their families and been interned and deported. While the UK government has apologised for its actions, it has a long way to go to repair the damage that it has caused. It is, in fact, part of a more general nationalism and racism being used as a means of dividing the population and distracting the working class from the real causes of their insecurity. In this case, it amounted to a form of racism by the state. The arbitrary behaviour of the British Home Office effectively destroyed the reputation of the UK for being an honest, fair and constitutionally law-abiding entity. The British passport was once regarded as something permanent, possibly the best to he held.
In the UK, negative attitudes are partly a reflection of the declining standard of living of people in parts of England where industry has been closed down and towns are declining. Politically many such workers are voting for Brexit. However, the far-right party, UKIP, has appeared in its true colours and the Labour Party has moved to the left and partly supports Brexit. Unlike the situation in parts of Europe, this has meant that the anti-immigrant attitude has lost some of its momentum.
The point of this argument is that some of the groundwork for further deterioration of the state towards sections of its population is already there.
Capital's failure at the present time
In the first place, there is the reality that governments today play a far greater role than they did a century ago. Their fundamental philosophy shifted to the right in seventies and with-it overall policy, which was based on the concept of the small state. By 1979–1980, they adopted a so-called free-market attitude, taking profits as the leading indicator of the health of society and with it the restoration of the reserve army of labour, and privatisation of nationalised property. Government is used as the instrument to maintain and control this state of affairs. It takes care of overall supervision but outsources or sells off state property.
As the privatised industries malfunction either in making financial losses or providing poor and sometimes dangerous services, they have had to step in. Likewise, when privatised industries make super-profits through their monopoly control of the sector, they may request change. In turn, as utilities cost more, and function less efficiently, while public and private transport become both costlier and more injurious to health, governments have to intervene. Conservatives had dreamed that privatisation would turn the working class to the right, and it did have a limited effect in the early honeymoon period. Today they are blamed for both the cost of the services and their poor quality, and nationalisation is a popular demand. This is not a result of the downturn, but simply the playing out of an opportunist and short-termist policy.
There is no answer to the left on this situation, other than surrender. Indeed, policy on the non- building of council homes has been reversed, in principle. Government is trying to control the rail firms, albeit weakly, it has held down petrol prices, and put pressure on utility firms. The damage done to their ideological purity as purveyors of private enterprise is clear. The far right is not above accepting these concessions as necessary but evidence of weakness.
In the second instance, there is the policy adopted by the ruling class both as independent owners of capital and as advisors and members of influential institutions both of the state and of powerful so-called think-tanks, particularly evident in the USA. In this respect, their main policy has been the one based on austerity. They have called for the total reduction of the government debt, tax reductions on corporations and the rich. The combination of these policies leads to mass poverty. That there is large-scale poverty in the UK was indicated by the report on the UK by the UN Rapporteur recently.14 Prof Alstom, the Rapporteur could not have been more scathing. It is even clearer in the USA, a country without a welfare state. The demand to end austerity is emblazoned on the banner of the majority, above all. The increased taxation for social security in France is a major grievance in the November–December action.
Austerity serves clearly as a means to mass unemployment, low wages, the small state, and expensive services. It is both a means of control and also intended as a form of enrichment for capital, particularly small capital. Today, people demand its termination, but governments have only formally conceded where they have done so at all. The ruling class will not return to the pre-70s period of full employment and strong unions. They prefer to take stronger steps to prevent such a turn of events. This is clearly what Macron was about, in the first instance.
Can capitalism survive if the ruling class, or governments return to the status quo ante 1970? They clearly do not think so, given the hard line that has been taken. The question, therefore, is what alternative is possible. The period of the eighties led to the crash of 2006–2008. While the banking crash itself was avoidable, the reason for the lead-up to the banking mania was not. The turn down of March 2000 followed the East Asia crash, the Long-term Capital Management crash and the dot-com crash was part of the downturn in March 2000. Indeed, the whole twenty-year period was unstable, particularly marked by the Wall Street crash of October 1987, when the government intervened very strongly but accepted the overall downturn of 1989–1993.
Since that time, we have had a further development of monopoly, and finance capital, allowing the continuing enrichment of a few, like Macron's patron, but also ceding influence or control over the economy to an even smaller section of the society. This issue will be discussed in a future issue of Critique.
At the same time, there is the issue of the ups and downs of the so-called business cycle. Earlier I reported the belief that there would be another downturn. If it does occur on top of the continuing flat lining economies and the troubles mentioned, it could exacerbate class relations to a point where the system cracks, but it is not inevitable.
Control under capitalism
In part, this is a discussion of the further degeneration of the semi-democratic forms that now exist. Trump has shown the way, or rather his backers have begun the process. The gerrymandering involved in elections goes beyond the USA even if that country is notorious for it. In addition, elections take place on the basis of poor to very poor information provided by a news media which is overwhelmingly right wing. This corruption of the electoral system is more than a question of information and analysis at the time of the election. The fact is that academia, education and research are systemically biased in that direction.
We can posit that capital will use force to a greater degree when it feels that it is closer to losing power. Individual members of that class may move towards the application of direct force when they feel that loss of hegemony is on the agenda. Dissolution of elected bodies does not have to lead to any direct fighting, unless armed opposition bodies already exist. In fact, there is no scenario of this kind apparent at the present time in the developed world.
We are witnessing a step by step increase in the means of control over the population. Existing laws can be used for purposes beyond initial intention, as in the removal of citizenship and so deportation for political dissidents. Offences can be easily found – as in taking part in protest movements or shouting too loud about, changing the government. Under Thatcher, the means used to control the miners reached extremes. It is not a short step towards criminalizing the replacement of capitalism but it is not impossible.
On the other hand, the way that they usually exercise control within capitalism is relatively subtle in that, apart from the means of production, they own the means of news dissemination, the printing presses, the airwaves, and use and control private education. In most countries, the structure of higher education also ensures its relatively liberal, as opposed to more open ideological basis.
Yet, within those structures, there are often genuinely left-wing theorists. Students have often moved to the left in the past. Indeed, this looks like being one of those periods even if a real shift is yet to begin. Unsurprisingly the Conservative Party seems to have been anxious to appoint ministers with less liberal reputations to posts over education to counter such developments.
In contrast with Europe and North America, there seems to be a movement towards economic chaos in some countries in the third world. Argentina, South Africa and Brazil are cases in point, and it is no coincidence that there are governments capable of using force. They have to deal with the increasing flow of money out of the country to the USA/Europe as well as the same issues as in the developed countries.
The problem, of course, is that a dictatorial form reduces incentive, exploration, quality, efficiency and trust as well as increasing costs of government, not to speak of its effects on the arts and growth overall.
Opinion polls have produced paradoxes. In the USA, we are told that opinion polls have begun to register over 50% of those polled, declaring themselves supporters of socialism15. It is hard to believe that the heart of the imperial power is now socialist, and it is obviously not the case. The support for socialism seems to not exclude support for private enterprise, capitalism etc. This is progress nonetheless in that socialism is now regarded as attractive to substantial numbers of people, particularly the young. The population of the USA is not alone. The previous association of socialism, Marxism etc with repression and Stalinism is losing its hold.
The slogan ‘Socialism or Barbarism’ has never been more appropriate.
Notes on contributor
Hillel Ticktin is Professor Emeritus of Marxist Studies at the University of Glasgow. He has written books and articles on the USSR, South Africa, Trotsky, Finance Capital and the contemporary capitalist economy.
Notes
1. ‘UK Recession: Gordon Brown Admits He Failed to See Economic Crisis Coming’, The Telegraph, 23 January 2009. https://www.telegraph.co.uk/finance/recession/4323549/UK-Recession-Gordon-Brown-admits-he-failed-to-see-economic-crisis-coming.html
3. N. Rubini and B. Rosa: Project Syndicate: September 16th 2018, ‘The Makings of a 2020 Recession and Financial Crisis’
4. https://www.pymnts.com/economy/2018/jpmorgan-financial-crisis-recession-emerging-markets/.
5. The Economist Oct. 13th 2018: The Next Recession, Special Report: The World Economy, pp. 3–12.
7. Bank of New York Mellon's website has been cited in earlier issues as having 28 trillion dollars of assets under custody, and that figure is now some 33 trillion dollars of assets under custody.
9. H. Agnew ‘LVMH's Arnault Joins Macron Chorus of ‘France Is Back’, https://Financial Times, 25 January 2018, www.ft.com/content/898bd1fc-01ef-11e8-9650-9c0ad2d7c5b5, ‘Mr Arnault was an early supporter of Mr Macron, whose tax cuts for investors and the wealthiest have earned him the nickname of president of the rich.’ The article makes clear that the two of them at Davos in 1918 stood up for globalism against protectionism.
10. Bernard Arnault was given a wealth of 87.4 billion dollars by Forbes, and copied into Wikipedia’ list of the French rich, putting him at the top. https://en.wikipedia.org/wiki/List_of_French_people_by_net_worth.
11. G. Chazan: ‘Merkel and Macron Make Eurozone Budget Breakthrough’, Financial Times, 16 November 2018, https://www.ft.com/content/05dcbab0-e8e9-11e8-a34c-663b3f553b35.
12. Chazan, op.cit.
13. M. Chorley, ‘Red Box’, The Times, London, 7 December 2018. https://www.thetimes.co.uk/article/the-red-box-podcast-jeremy-hunt-on-brexit-and-riots-rfrmg3rvx.
14. https://ctbi.org.uk/united-nations-special-rapporteur-report-uk-poverty ‘14 million people, a fifth of the population, live in poverty, with four million of these more than 50% below the poverty line, and 1.5 million destitute and unable to afford basic essentials, according to his report. ‘British compassion for those who are suffering has been replaced by a punitive, mean-spirited, and often callous approach apparently designed to instil discipline where it is least useful, to impose a rigid order on the lives of those least capable of coping with today's world, and elevating the goal of enforcing blind compliance over a genuine concern to improve the well-being of those at the lowest levels of British society’, said Professor Alston.’
15. https://edition.cnn.com/2018/06/28/politics/democratic-socialism-millennial-politics/index.html.