Critique Notes 89
Published: 09 July 2020
Just when the far right succeeded in winning a general election in the UK, along came covid-19; and the imperial countries of the USA, UK, and the wealthier EU countries were forced to concede mass unemployment payments courtesy of their governments. The German government has accepted its role as the financier of a huge subsidy to the EU budget to allow a civilised exit from the pandemic in the EU countries. At one stroke, the immediate threat of disintegration has been relegated to the past, albeit the future is more uncertain than ever.
It is far from clear what will come after the pandemic is over. The USA, UK and Europe were on a downturn before the pandemic. It was a downturn, moving from slow growth to 1–2 per cent, at the same time as the Chinese have shifted to much lower growth compared to their huge burst after 2002. The latter is only partly an internally caused decline, as Trump had declared economic war on the Chinese before they were hit by the pandemic. The ruling class has been forced to save major companies like Lufthansa, by taking a share of their equity or by providing long term loans. They are planning the progress of the economy over the next year or two. Jay Powell, in charge of the US Federal Reserve Bank is providing trillions with a two or three year term outlook. The UK and USA have provided money with a short-term outlook. They anticipate a ‘recession’.
The terms used are intended to confuse. The covid-19 virus downturn is called a recession, even though it differs substantially from previous ‘recessions’. The downturn of the present time is not caused by overproduction, underconsumption, disproportionality or a declining rate of profit. The supermarkets have never had it so good. In so far as a government or series of governments want to deal with the virus they have to ensure that people stay out of direct contact with each other. That excludes collective forms of human action such as transport, restaurants, hotels, travel, collective forms of production such as construction but not automated forms. In principle, a planned economy could probably work out a way of the economy working with the least level of contact. They could test and trace the population and gradually employ more people who were either immune and without the virus or did not have the virus. More advanced governments have gone that way as in Kerala etc.1
At the present time, the continued failure of the right or far right to deal with the pandemic has forced the ruling parties into a retreat. The governments of the UK, the USA and Brazil are getting less and less popular support. At the same time, the official opposition parties are likely to force a series of limited concessions. The virus has highlighted the poor conditions of the both the patients and the carers of elderly people in the UK. No doubt this is true of most countries but it is particularly acute in the UK, where a substantial proportion of both carers and cared have died as a result of the failure of governments to recognise reality.
In reality, the global economy was already in a retreat. A recession was predicted, of course, by various liberal economists.2 They have been doing so for some time. However, the downturn that actually occurred or was about to occur was one of a loss of 1 or two per cent of GDP, in contrast with the loss of 20 per cent in April 2020 in the UK, (18 per cent for Germany) and an expected 6–7 per cent expected for the year for the UK.
However, it makes little sense to consider a downturn caused by mass physical illness the same as a downturn caused by the faulty nature of the system itself. It is, of course, true that the depth of the illness and the destruction caused by the disease was in large part the fault of the particular governments, as well as by a failure of all governments to co-operate in pooling knowledge, facilities and manpower. The contrast between the number and percentage of deaths in the countries with far right governments and those with centrist or social democratic ones will be a lesson drummed home in many lectures of the future. It is clear that if the pandemic had occurred in a period when the USA was still building or expanding its globalist control of the planet, without competition, there would have been an agreed plan which would have limited the depth of the disease over the world. It would have been inadequate and designed to preserve the social order but there would not have been the same anarchy among the countries of the globe.
As it stands, the ruling class can congratulate itself that it has got the worst of all worlds. The epidemic is worse than it needed to be, the cost is considerably higher and the concessions to the working class more extensive, even if inadequate. Contrary to the everyday rules of private enterprise the state has had to play a very considerable role in maintaining the society and economy.
That state itself is under attack from the population as shown by the success of the ‘black lives matter’ movement. Discontent was high among the population, given the criminally stupid policy of ‘austerity’ pursued throughout the world, from 2008 to 2010, by conservatively minded governments. While the suffering of the blacks is undoubted, most ordinary workers live difficult lives. The expectation of life for ordinary workers can be a decade plus less than for those with higher incomes depending on the country.
Discrimination against those who do not have European ancestors has been a feature of capitalism for hundreds of years. Opinion polls seem to show that the ideology has largely evaporated.3 If that were the case, one might have expected substantial reforms, had the reason for the discrimination been purely ideological. Companies are open to removing discrimination if it raises profits or does not disturb them. In fact, political economic discrimination has a long history, and is not redundant to the process of control in the capitalist order to this day. The reality is that there is a hierarchical order within capitalism based on a complex series of criteria. Skin colour, religion or non-religion, sex, social class and wealth are all critical in dividing the population. Nor are the divisions accidental. They enforce a hierarchy of ownership, income and control both in the economy and in society at large. Income, ownership, and political leadership are closely linked, even if under challenge for over a century. This much has been obvious for a long time. It is buttressed by an ideology taught in educational institutions and re-inforced by the large circulation newspapers. Official religions have played their part and continue to do so, though it is no longer unknown for a leftward turn in one or other officially sanctioned religion. The overall point, however, remains: Capital rules, using a multitude of secondary and tertiary forms. Concessions have to be made as the population becomes more educated, less religious, more skilled, more involved with work of whatever kind, and emancipated politically.
The transitional period
We live in a process of emancipation from earlier oppression: sexual, religious, tribal, etc ultimately leading to more limited control over labour to the point where there is only socially planned self-control. The Russian Revolution of 1917 opened the door even though the succeeding attempts at revolutions failed together with the Stalinist strangling of the original Revolution itself. The process of defeating attempted and potential socialist revolutions has remained part of the bedrock of the period since 1917. It involves both concession to and suppression of the demands of a future socialist order. The skill in understanding the present transition is one which is able to interpret the stage through which we are passing.
The USSR ceased to exist in 1991 but from the twenties downwards its form was hierarchical, secretive and violent. It could not have been more dictatorial, elitist and anti-working class. It imprisoned and executed the left, all done in the name of socialism, Marxism and the working class. At the same time, it saw itself as in mortal combat with capitalist powers, particularly the USA, and Western Europe, while the ruling class in the latter retaliated with the same but opposite looking view. The equal but opposite enmity ensured that the capitalist powers and its hegemon, the United States, had a permanent enemy justifying both mass production of military goods with a suitable global army and an ideology justifying the punishment of both Soviet spies and the left, whether they supported the USSR or not. Cut off from global trade, the USSR had little chance of more than slow development of its own resources. Given the inequity and dictatorial nature of the system the incentive system was poor to negative.
The Soviet Union was not socialist or on the path to socialism but it was not capitalist either. It had forms which give a hint as to what a socialist society could look like, in a planned democratic form. It is also true of a highly developed capitalist country that it has forms which would benefit from control from below and an egalitarian ethos.
During the last years of the century the USSR had come to an end and with it the associated Stalinist/Communist Parties and most of the influence of the ideology. Between the economic crises and the uncertain nature of the successor to Stalinism’s demise confusion reigned. The ruling class in the USA with Clinton as their instrument made it clear that they ruled alone, refusing to incorporate a rising and possible junior partner in Moscow.
Stalinist Russia had effectively allowed the USA to establish itself as the enduring and necessary hegemonic power during the Cold War. Given that both Communism and the Communist countries appeared to constitute a real danger to the social order outside of the ‘Communist’ countries, the ruling class in the USA quickly found itself accepted, after 1945, as dominant over the global class. France did kick over the traces but was effectively brought to heel. In reality, the USSR was always much weaker than the USA and could have been found a deal after Stalin’s death. The fact that it took 46 years for the deal to take place was partly a reflection of the relative instability of the European capitalist countries after the war but also an advantage for the ruling class in the USA in being able to subordinate the ruling class in Western Europe. Both historians and politicians seemed to accept the automatic necessity of Nato and a divided Europe. The ideology in the USSR was not Marxist, genuine Marxists were either killed by the regime or in hiding. Russian nationalism played a greater role.
The removal of the veil of US control with the end of the USSR has made its continuation more difficult. On the one hand, the ideology of US supremacy has to incorporate its subordination of other nationalisms and on the other it has to incorporate all nationalism in its global domination. The predominant EU countries, France and Germany, are being compelled to move towards an independent policy towards China and more state economic intervention. There is a direct conflict. In the pre-1991 period, the European countries would have been subordinated. As late as 2011–12 President Obama took the chair at the meeting to resolve the post-2008 European crisis. Trump’s nationalist trade policy has led to the evolution of a European independence which might have either taken longer or perhaps never evolved.
The question of the nature of the collision between US nationalism and US globalism is a paradoxical and complex issue which was not expected to arise, but President Trump has shown otherwise. It would not, however, have been possible in the context of either the Cold War or a genuine threat to capitalism itself. The issue has been discussed in the regular Critique seminars.4
Cov-19
The physical emergence of Cov-19 has been turned into a political issue by Trump but his claims are ridiculous. It is clear that those countries which applied strict controls as soon as possible have suffered least. Since China is a bureaucratically controlled state it was relatively easy to establish enforcible rules of control which reduced the spread of the virus. Unfortunately it was done later than necessary precisely because it is dictatorial/bureaucratic. At the other extreme, the UK and USA have led in their own way within their own context as it were. They applied controlling rules of lockdown late to very late. Given the far right nature of their governments, defending private enterprise in a nationalist context, it accords with their programme. However, the governments will clearly pay a price. It seems unlikely that Trump will be re-elected, while the future of the British Government may be very different from what it had expected.
The fact that EU governments as well as the UK/USA have agreed to subsidise unemployed workers on a considerable scale is a major concession by the bourgeoisie. The European Union has gone further by agreeing to a subsidy of 750 billion Euros. Germany has gone further on several counts. ‘The €130bn programme, announced last week, combines tax cuts, direct payments to households and spending measures spread over the next two years amounting to more than 3 per cent of Germany’s annual gross domestic product.’5 The author of the article argues that the ‘surprising Keynesian conversion’ is only such at first sight because Germany has been Keynesian before, as during the aftermath of the 2008 downturn. During that period as the author points out, Germany was very hard on other EU countries such as Greece. However, Germany is in a new international relations period in its close interaction with China and break with Trump in the USA, not to speak of the secession of the UK from the EU itself. In addition, the CDU is in coalition with the Social Democrats and is somewhat to the left of the British Conservative Party. In short it makes sense for Germany to make use of its considerable savings, not least to ensure a lower drop in national income than otherwise could be the case. The German economy is expected to drop by 6 per cent this year6 though the title of the article describing the economy in April, in the footnote below, is somewhat more frightening.
The EU has decided to raise 750 billion Euros of which 440 billion Euros is to go in grants, 60 billion Euros in guarantees and 250 billion in loans. As important as the help to be accorded to countries is the de facto decision to establish a precedent to borrow on its own account as well, and finance it by taxes on carbon emissions and on financial and digital transactions.7 The EU has effectively ended the doubts over the continuation of the EU itself, by finding a new source of revenue, which it is going to use to underwrite the body of the EU itself, and thereby achieve a more permanent status, which it has lacked up till now. The decision is backed by Germany and France. Clearly the decision is not one of charity but of necessity in bolstering the position of France and Germany, or rather the ruling class in each country.
If the covid-19 goes as expected with the discovery of one or more vaccines as well as antibodies the recovery of Europe with the necessary internal source of money may well create a powerful competitor and/or partner for the USA and China. The issue, however, will rest on the internal class relations within each country. It is in this respect that Angela Merkel and her advisors have been insightful.
As one example, Chancellor Angela Merkel of Germany turned down a Group of 7 meeting spearheaded by Mr. Trump, citing the threat of the coronavirus. But a German official said the decision had also been made because of Mr. Trump’s unilateral decision to pull out of the World Health Organization, among others.8
They must hope to be able to both raise the level of employment and the standard of living, both of which have been suffering over the last decades. Clearly as the NY Times says the Europeans are taking their opportunity.9 It is likely that the EU will establish itself as a more independent force, Trump or no Trump. They are right to do so as the revolt of the black population is the first blow in a disintegrative process which is likely to show itself whether step by step or explosively.
The combination of the corona virus plague and the black lives matter demonstrations/ peaceful uprisings has set up a dynamic which requires a response from the ruling class. As indicated, the ruling class has accepted that it has to provide a minimal financing procedure and practice for the period of the plague, which indicates its weakness. The question, however, is what follows. In the EU, it looks as if they have an answer. It amounts to concessions on employment and wages/salaries. The question is how far they will go. The USA and the UK have no rational alternative but it does not follow that they will take that same way out, and effectively lower profits and capital, at least for a time.
Where is history going?
In the last Critique, I drew out the succession of stages by which we have reached the present cross roads. The argument was more pessimistic as there was no indication when the left would rally its forces. However, the far right appears to have torpedoed itself in the UK, USA and Brazil, helped by the coronavirus. At the same time, the ‘Black lives matter’ forces have received mass support in a large part of the world forcing a right wing retreat. As argued in the last Critique Notes we can say that Capitalism in the post world war 2 era went through 3 stages and is now entering a fourth. In the period 1945 to 1979–80 Capital conceded economically albeit with an anti-socialist ethos. In Western Europe, the rate of growth was relatively high, with the building of ‘council housing’, ie wholly or partially government financed housing, introduction of a national health service, the development and expansion of education up to and including universities. The government also nationalised large scale consumer industry, power (electricity, gas, atomic), mass transport as with bus and railways, and air transport as well. This was less of true of the United States, although aspects existed even there. There was full employment. The range of payment between those in charge and those working was nearer 12 times, as opposed to the hundreds of times that evolved after 1980. By the seventies it reached a cross-roads, in which the left was effectively defeated.
The Reagan-Thatcher revolution privatised what it could, introduced mass unemployment, playing down the figures. Tertiary education was expanded but it was made fee-paying. Privatisation of housing, in the UK, led to a housing crisis. At the same time, industry in the UK, and in a number of countries globally, was privatised and loss making industries wound up or moved to other countries. The effect was to create or expand a jobless unskilled and semi-skilled layer of workers. The rate of growth was low to negative depending on the years involved. Those in charge had a very considerable increase in their salaries and profits of which they could only have dreamed of before.
At the same time, this was also a period of crises -1987, 1989–93 and March 2000, with the East Asian Crisis in 1997 and that of the Long-term Capital Management Fund in 1998 The latter threatened ‘the financial system’ itself.10
Hence, the period of concessions had been s succeeded by the reactionary Reagan-Thatcher restoration of finance capital, which imploded in 2008 without a successful replacement. The 12 years which succeeded that downturn have been dominated by the policy of austerity. De facto mass unemployment combined with lower incomes were hidden in statistics through an acceptance of a lower age of retirement or counting a proportion of the unemployed as self-employed, as well as other useful ploys. Wages did not rise at the real rate of inflation leading to lower real wages. Pensions were downgraded further in this third period. On the other hand, there has been a considerable shift to finance capital in different forms. As pointed out in earlier Critique Notes, the companies, BlackRock, Vanguard and State Street now own a substantial proportion of the centrally traded shares on the New York Stock Exchanges. BlackRock has somewhere around 7 trillion dollars worth under its control. There are two separate points to be made when bringing out the holdings of shares by companies or banks. The first is the narrow nature of those who play with their investment or non-investment. The second is the limited nature of investment or re-investment. In other words, investment in the crucially deprived areas of the economy allowing repair, restructuring and re-invention is far below what is necessary. Productivity is hardly rising as a result. Official figures of growth are consequently low. Trump’s concessions on taxation to the capitalist class have not had a significant effect on growth.
The victory of the far right in the USA, under Trump, was complemented in the UK, with that of Boris Johnson. He effectively accepted the Labour Party demand for an end to austerity and so broke the bourgeoisies world-wide policy of controlling wages. In a sense that was implicit in Trump’s policy except that it had little meaning without powerful unions or working-class opposition. Trump appeared to be instead relying on a reduction in immigration or even an expulsion of immigrants. Whether it was real or not, it was a policy intended to attract support. Whatever the exact policy of the far right, it has abandoned its previous forms of control.
The Reagan-Thatcher settlement had also relied on global just in time chains of goods produced in part in the less developed countries. Its replacement by the restoration of production in the developed countries, as in the North of England, is a major commitment which now looks dubious, at least in the next few years. In fact, it is hard to see how industry is to be restored in the UK or USA.
The coronavirus emergency state funding has changed the overall approach to the economy, albeit only for the period of the covid-19 dominance over health. State intervention will clearly remain for a period of years, under all governments. Governments which perform poorly in this period are likely to remembered in future elections, if not before. The right is well aware of their own failure in this regard and are clearly trying to offset their own poor showing on other targets like China.
China and the EU
One aspect of the austerity period has been the rise of China, and its increasingly important role in the global economy, to which the USA has reacted under Trump. The USA is organising a boycott because it is afraid that China will ultimately become a competitor of equal standing. Germany, too, has made it clear that it does not want China competing with it on the same level, so undercutting it but it is adopting a more emollient policy.
Germany and Italy are doing deals with China and are likely to continue that policy if Trump is not elected. Hungary has done a loan deal for construction of a railway with China which has to do with connecting with the Athens port of Piraus.11 Italy appears to be getting closer to China. The Italian Foreign Minister had this to say recently: ‘we have strengthened our relationships with a strategic commercial partner such as China, but this will not change our geostrategic alliances.’12 The German relationship is critical of China but the main European partner with China, though second to the UK in investment in China. ‘Merkel’s government has shown that it is not prepared to lead Europe toward a more robust, collective approach toward China, especially if that means Germany must pay an economic price.’ This appears to mean that Germany is critical of China both because it does not want the Chinese to obtain the companies or resources from Germany, which would establish them as a German competitor, and, more vaguely, for political reasons.13 This seems to mean that China continues to be isolated but only up to a point. It is hard to believe that the USA or UK would boycott China for limited political differences.
The importance of China in this respect lies in the question as to whether it will facilitate the development of the global economy, particularly of those countries which are trying to raise their overall standard of living as fast as possible in the ‘Third World’. It is highly unlikely that the USA will succeed in its present endeavours to hold China back. It is clear that China has adopted a form of test and tracing for the corona virus and has put considerable resources into research towards vaccines and antibodies. Where the break through will come in the world will be an historical event yet to be seen.
However, it is unlikely that the Stalinist system in China will hold out beyond a certain point after the overcoming of the virus, if the economy continues to develop or not develop. The economy itself appears to be run partly or to a large extent on the basis of ‘value’ as opposed to planning. One specialist on the subject takes the view that China will end up with a crisis. He says that
its core manufacturing sectors remain deeply embedded in global production networks (GPNs), under the command and control functions of global lead firms. In these sectors, depressed demand and intense market pressure have severely limited growth potential. Without a return to sustained and generalised profitability in these highly globalised productive sectors, an economic crisis is ultimately likely14
This sounds not unlike the USSR, but the latter was not based on profit so could last until the elite abandoned it.
If the USA adopts a form of boycott it will retard its development but reinforce its Stalinist leaders. Since the Chinese have not carried out their agreement to completely commodify the system, the USA is technically in the right in demanding change. However, for the Chinese to do so would be an act of suicide, if one is to judge either by looking at the resulting effect on the USSR after 1991 or by the global competitiveness of China as against the rest of the world. China cannot continue with its existing form indefinitely and it remains true that it will ultimately have to choose between a genuine transition to socialism and capitalism. In the meantime, it is playing an independent and intermediate role in the world economy, as shown by its action on the virus.
In reality, the overall situation in the global economy was already looking troubled before the Coronavirus hit. This is what one of the major Financial Times commentators Gillian Tett had to say:15
We are starting a new decade with a financial system and investor base that is hooked on central bank support to a greater degree than we have ever seen before. Few expected this a decade ago. But even fewer expect it to end this year.
The third world
The Third World is in a crisis at present which is likely to deteriorate. The standard of living is low, and health provision is often very limited. Those with bureaucratic governments like Viet Nam etc will clearly be better off since they are socially organised. Otherwise, as in Brazil there is and will be an awful disaster. There is likely to be a shift to the left whether it is official or not. It will be increasingly difficult for third world countries like South Africa to send profits/dividends/interest overseas, given the difficulties being experienced in African countries. The IMF will try to ameliorate the position by providing loans but it may not be enough and the relevant countries may ultimately default on their debts as Argentina is being forced to do.
What is to be done?
In general, the last period, that of the 2008 shadow, has been one of left retreat. Only in the USA has there been a movement to the left. That has been a welcome surprise. In the UK, Jeremy Corbyn’s ascent to power in the Labour Party was a major change even if it was only reformist and bound to become less than wanted. However, the vicious attack on him and the invention of ‘anti-semitism’ among people who were life-long opponents of anti-semitism, by the right showed how worried was the ruling class. They effectively turned Jeremy Corbyn into a martyr as I argued in a previous editorial. The poor showing of the Boris Johnson government, polling down at 30 per cent support in mid June 2020, may show what is to come.
The demand for an expanded economy, with genuine full employment and salaries at levels sufficient for a decent education and standard of living for all is the minimum demand, while socialism is on the cards.
Notes on Contributor
Hillel Ticktin is Professor Emeritus of Marxist Studies at the University of Glasgow. Scotland, UK. He is the author of books and articles on Marxist Political Economy. Crisis Theory, Finance Capital, the USSR, Trotsky and South Africa. Email: hhticktin@gmail.com
Notes
1. Laura Spinney, ‘The Coronavirus Slayer! How Kerala's Rock Star Health Minister Helped Save it from Covid-19’, The Guardian, Thu 14 May 2020 08.00 BST. KK Shailaja has been hailed as the reason a state of 35 million people has only lost four to the virus. Here’s how the former teacher did it https://www.theguardian.com/world/2020/may/14/the-coronavirus-slayer-how-keralas-rock-star-health-minister-helped-save-it-from-covid-19
2. “Well before coronavirus began to spread, government bonds and gold benefited from doubts over an ageing global economic cycle, stubbornly low inflation and lacklustre earnings growth at a time of rising leverage in many corporate balance sheets. All of that contrasted sharply with exceedingly high valuations in equity and credit.” Michael Mackenzie, ‘The Long View’, Financial Times, https://www.ft.com/content/e753ab3a-58a9-11ea-abe5-8e03987b7b20
3. Gillian Tett, ‘Reasons to Worry about our Loose Money Addiction’, Financial Times, 31st January 2020, p.11
4. Critique Webinar no. 3. Critique has been holding regular fortnightly Webinars at 6pm on Wednesday evenings.
5. Martin Sandbu, ‘Germany’s ‘ka-boom’ Stimulus Marks a Surprising Change’, Financial Times, 9 June 2020. https://www.ft.com/content/29ddcad4-aa2c-11ea-a766-7c300513fe47.
6. Martin Arnold, ‘German Industry Records Historic 18% Tumble in Output’, 8 June 2020.
7. Martin Wolf, ‘The EU Rises to Meet the Covid-19 Crisis’, Financial Times, 2 June 2020 https://www.ft.com/content/788d4582-a3fc-11ea-81ac-4854aed294e5.
8. Isabella Kwai, ‘U.S. Protests over George Floyd’s Death Enter Second Week’, New York Times, 3 June 2020.
9. Ibid.
10. Kimberket Amadeo, ‘Long-Term Capital Management Hedge Fund Crisis’, 8 January 2020.“The Fed started lowering the fed funds rate. It reassured investors that the Fed would do whatever was needed to support the U.S. economy. Without such direct intervention, the entire financial system was threatened with collapse.” https://www.thebalance.com/long-term-capital-crisis-3306240.
12. Luigi di Miao, Italian Foreign Minister made the statement in the context of pressure to have a closer relationship with China. https://www.ecfr.eu/article/commentary_italys_industrial_geopolitics_torn_between_europe_and_china.
13. Germany’s Strategic Gray Zone With China, NOAH BARKIN, MARCH 25, 2020, Carnegie Endowment for International Peace.
14. L. S. Talani, R. Roccu (eds.), The Dark Side of Globalisation, CHAPTER 3. Steve Rolf, The Dark Side of Globalised Production: Economic ‘Rebalancing’ in Contemporary China’, International Political Economy Series, https://doi.org/10.1007/978-3-030-05117-4_3.
15. Gillian Tett, ‘Reasons to Worry About Our Loose Money Addiction’, Financial Times, 31 January 2020, p. 11.