WeeklyWorker

18.01.2018
Maurits Escher, ‘Relativity’ (1953). Capitalism has many solutions - but none of them viable

Process of decomposition

How can the ruling class extricate itself from the current impasse? Hillel Ticktin reviews the state of global capital

The immediate period seems to be one of increasing confusion, disintegration and the growth of youth militancy. The elections in Germany have led to the possibility of a new coalition, with Social Democrat leader Martin Schultz talking of full European Union integration, which is closer to the position of president Emmanuel Macron in France. Macron clearly expresses the interests of the bourgeoisie, so there seems a possibility that there will be a Franco-German alliance to integrate the EU on a platform of containing the working class. Meanwhile the depression continues.

In essence the rich have become richer and the poor of this world have become poorer, either subjectively or objectively or both. Outside of South Korea and Japan no ‘underdeveloped’ capitalist country has made the transition to full developed status. Indeed, the ordinary people of the countries of eastern Europe have taken a step backward, in these terms. Their Stalinist-type industry was largely destroyed, and replacement is taking a long time. True, the changes have been beneficial in providing more opportunities or potential for free speech, study, travel and overall freedom of opportunity. However, the point remains that the ruling class of the imperial powers has not only maintained itself, but increased its wealth.

There is, however, a hierarchy of countries or of ruling classes, with the USA being dominant in terms of business, economic power, as well as military, technological and consequently political might. The American ruling class prefers to pretend that it is only the strongest amongst states, not the imperial master. Donald Trump has produced a ludicrous tale of an America being taken advantage of by other countries, like China, Mexico, Canada and Germany. One is tempted to say that he is too stupid to see that a mercantilist stance - ie, protecting native industry to get a surplus of exports over imports - actually entails a loss of wealth, in return for monetary holdings. The deeper argument is that an international division of labour - ignoring the balance of payments if possible - yields higher returns and more developed technology, thus raising everyone’s wealth potentially. That used to be the justification given for an imperial power, whether the old colonial powers or the USA, failing to aid the development of the ‘third world’ countries. The issue becomes more interesting and complex if one pursues this last line of thought, but the intention here is simply to illustrate the folly of the Trump line, and its reversal of the old imperial viewpoint.

One can argue that the reversal of the free trade viewpoint and the concomitant strongly nationalist and even xenophobic outlook is a direct result of the decline of the United States as the dominant capitalist power, at the same time as the crisis of 2007 onwards has allowed the decline of capitalism to take a more open form.

Response of capital

In the first place, the capitalist class took a series of steps in the late 70s to deal with its political and economic problems. The onward and inexorable tendency towards the socialisation of both the means and relations of production was opposed through a series of privatisation measures in many countries. The purpose at the time was to raise the rate of profit and to limit or destroy the power of the unions. The measures were successful in redistributing income from ‘the poor to the rich’. (It is slightly more complicated, in that skilled white-collar workers, as in the professions, have been increasingly proletarianised. The loss of trade-union power has coincided with the proletariat becoming increasingly white-collar.) The ruling class has taken advantage of the superficial appearance of employment and income to declare that it supports the really poor, but that it will not help the better-off, who are not deserving. The cost of paying money to charities, etc for the poor is very much less than redistributing income from the rich to the majority. Thus, the ruling class opposes free university education for all in favour of the odd scholarships for the poor.

The de-nationalisation has been extreme and in places anything but sensible. Thus, privatisation of prisons has caused considerable trouble and certainly acted against the stated purpose of imprisonment itself. In the UK, privatisation of utilities and public transport is highly unpopular and probably less efficient. As Mariana Mazzucato has shown, the development of technology has generally required an important role for government-financed or controlled entities.1

The increasing time required for research and development, combined with the often very large costs of construction, etc, requires considerable sums of capital that are only held by large enterprises, finance capital or the state. In the extreme case, only the latter can sustain the development of a commodity or good which will not make money - such as a new medicine, which in its success destroys its future. As is well known, that is the case with new antibiotics, of which there is a shortage.

In the second place, the ruling class went for ‘austerity’ following the crisis of 2007 onwards, and hence reduced state expenditure as far as it could, particularly on infrastructure and workers’ benefits. The combined effect has been to help perpetuate the downturn, but raise the overall level of discontent.

In effect the downturn combined with the ruling class austerity strategy to produce a devastating blow to the earlier ‘Thatcher-Reagan’ policy. In the UK, the latter relied partly on a series of nonsensical ideas like the so-called Laffer effect, where the redistribution of income to the rich would lead to increased investment, increased employment and higher salaries. The money would ‘trickle down’. It also used real, but time-limited, strategies, as in the privatisation of council houses, at low prices, allowing the new owners to make money. Shares were issued to investors in building societies, etc, and thousands bought shares in denationalised industries, which rose in the initial period after flotation.

The reckoning

Given that the ruling class was afraid to return to the post-war settlement, which brought with it powerful unions and a strong, if social democratic, opposition, the only alternative to the post-1979 line was to go further to the right, which is what happened under successive prime ministers and presidents. This was obvious in the case of the Conservative Party under David Cameron and George Osborne, which under the banner of austerity implemented high student fees and a draconian benefits policy. (It was masked by the liberal social policy towards gays and other groups who had been cruelly discriminated against.) Trump is doing something parallel, even if in a crass and extremist form, by reducing access to medicine, while trying to protect selected US industries and groups in economic terms.

The Brexit policy is a recognition by a section of the ruling class that it needs to provide a sop to the unemployed and vast numbers of underemployed. The fact that EU withdrawal is a reactionary utopia has not yet hit home to the majority of the Brexiteers. It acts as diversion from the struggle against the ruling class itself. This was all the more the case, in that the British government has tied itself in knots trying to find a solution supported by its cabinet and MPs. The spectacle has acted as a long-lasting diversion from a real critique of the crisis and the policies surrounding it.

How do we understand the movement of history? There are several underlying themes and one has recently come to the fore. It is the stress on the subjective in contemporary history. In other words, I have been arguing that the ruling class has become increasingly conscious of its position and historical role in deciding policy. The ruling class does not read Marxism or see itself in such terms, but its members do meet and at times agree on policy. However inchoate that organisation might be, it does result in support for politicians and policies.

However, what is different today is the increasing control over the economy, society and lives of ordinary people by those in political-economic power, whether through the market or the state. This is partly a result of the increasing development of the means of communication and transport, and more generally through the increasing overall integration of the different aspects of the economy and the society itself. It is also a deliberate change, in that human society today is consciously controlled, developed and shaped by a series of political, social and economic institutions through education and newspapers, TV, radio, etc.

This has been driven home by the devastating effect of two world wars and by the numbers wiped out by Stalinism in China and the USSR. There are two issues here. We have come to a point in the development of human society where we can decide our own future to an ever-increasing degree. A planned society, as in socialism, would enshrine equality and the right of all to take part in decision-making. Humanity would increasingly determine its own future in more and more aspects.

The point of this exercise is to understand that, though we are at an early stage in this process, we are within it. Hence the subjective is playing an increasing role in the development of society. This is important because within Marxism there is often a general bias towards looking at objective developments, and downplaying the subjective, which is critical in understanding this or that phenomenon. The ruling class is conscious of the need to defend itself and consequently adopts policies which can be crucial in changing the course of history, at least for a time, through a process of conscious consultation internal to itself. Its interaction with the working class is multi-layered and both objective and subjective.

Brexit

An obvious example is that of Brexit. How can we understand the British ruling class adopting a policy which was called suicidal by the former president of France? In fact, we can only deduce that it did not want it, but went along with it. How is it that the ruling class let it get this far? It is patently clear that the City of London is crucial to the British capitalist economy and indeed plays an important role in the world economy. Of course, it is subordinate to US capital, but it is closely intertwined with the US banks, which are indeed fundamental to the City of London today. It is an integral part of a European division of labour. It has made clear that it does not want to leave the EU. Why then is the process of separation continuing?

Is the tail wagging the dog? Most of the Tory Party is in favour of Brexit, and its membership belongs to the one section of the ruling class - small business - that is in favour of withdrawal. It used to be the case that the leadership of the Tory Party was appointed from above. That only really came to an end with the election of Edward Heath, some 50 years ago. Clearly, big business cannot dispense with the Tory Party itself, whether by refusing to finance it or by using its connections to create trouble. It therefore has to find a different method. There are several possibilities.

The first has been to create pressure through political forums. Two earlier prime ministers have spoken out against Brexit, but the effect has been minimal. Another is to produce a result in leaving the EU which comes near to duplicating the ‘status quo ante’. Such a possibility is outlined by one commentator2 as a real possibility, with the cabinet divided between such a view and others wanting a stronger break. If the UK leaves the EU and strikes out on a separate path, it will have the greatest trouble re-establishing its economy. Worse, it seems that the divisions in the Tory Party will make it dysfunctional and it will need a new prime minister. One commentator says of the current situation: “We have the weakest PM in living memory.” He goes on to argue that she should go to be replaced by a cabinet which will do much more to please finance and London business.3

The chances of an end result totally abhorrent to the bourgeoisie are small. However, the end result is not predetermined, and the different levers that can be pulled by the bourgeoisie may be tried each in turn - from a new prime minister to another referendum.

In fact, the process is reflecting the difficulties that the bourgeoisie has under conditions of a transitional world. It has to recognise that it has to make concessions. It then makes a concession which in the end is more apparent than real. It gives the discontented the joy of winning a referendum and the spectacle of a fight over the issue, but in the end it concedes very little, while pretending to have given up a lot.

Part of the interest and absurdity is not only that the bourgeoisie may well lose nothing, and the apparent gains will be illusory. The idea that patriotism and the shunning of the European Court of Justice, with common economic regulation replacing individual standards, will raise either the standard of living of workers or their degree of freedom is simply absurd. It is unlikely that most people would have voted this way out of conviction but rather as a blind blow at the capitalist system itself. The bourgeoisie knows that and hence wants to make a show of concessions, which are not real. The problem is that it does not have the personnel for the job. In a sense it is too weak itself.

At the end of the first section of the negotiations, it appeared as if the ‘game was over’.4 The surprise was not that the negotiations turned in favour of the expressed wishes of big business, but that the leading Brexiteers accepted the resolution so tamely.5 The EU apparently helped, possibly because it did not want May to fall and be replaced by a leftwing-led Labour Party, as some speculated.

In short, the class struggle was carried out through a process of obfuscation, dire warnings and a tolerance of a long drawn-out, ridiculous negotiation, in which neither the EU nor the UK really understood what they were doing. It was a charade intended to preserve the political economic status quo a bit longer.

Southern Africa

The ruling class conceded nothing in South Africa, when Nelson Mandela became president in 1994. He was essentially a liberal nationalist, supported by the Communist Party. The African National Congress was founded in 1912 as a mild, middle class organisation. It effectively did very little until the mid-50s. The miners’ union was founded by Max Gordon, a Trotskyist, in the early 40s. During World War II he was taken into custody and he handed over the union to the CP, which then led the great black miners’ strike of 1946. One of its top personnel - Jack Simons - was put on trial. When the National Party banned the Communist Party in 1950 it went underground, and a coup d’etat led Michael Harmel to become the de facto leader, representing those in the CP who believed that the struggle was nationalist in form and hence composed of two stages. Jack Simons took a back seat in the CP, which effectively took over the ANC. However, one could argue that the ANC took over the CP, in that the latter never pushed for a socialist solution, unlike even Fidel Castro in Cuba or Hugo Chávez in Venezuela.

The CP’s organisational ability, ties with the USSR and connections with the capitalist world gave nationalist leaders the basis to form a semi-competent leadership. Dissidence was dealt with ruthlessly. The Soviet Union in the late 80s came to a deal with the USA over South Africa and the CP accepted it. Amazingly, the ANC accepted the terms of the International Monetary Fund - not under pressure, but willingly - and from 1994 there was no better borrower.

Far from nationalising or socialising production or society, the ANC privatised. Effectively a black bourgeoisie was created, while the white bourgeoisie could export its capital and externalise itself. The development of industry has stalled. Industries like clothing and shoes lost their protection and could not compete. Real levels of unemployment are much greater than the 25% that appears in official statistics.

The newly elected president of the ANC (and hence the prospective president of South Africa), Cyril Ramaphosa, is a leading exemplar of the new bourgeoisie. His role in the 2012 Marikana massacre, where he took a hawkish line towards the miners, is, of course, very well known. There is no surprise in the welcome accorded to the decision by the Johannesburg stock exchange and South African big business.

The South African economy has been hit by one blow after another. The controls over the export of capital were effectively removed and big business left the country. Anglo-American almost owned the country and quickly moved its headquarters to London - and registration at the London Stock Exchange. Others followed. The upper and middle class did its best to take its capital out of the country. Protection accorded to industry was removed in the face of globalisation. Industry fell relatively behind its comparators, Australia, Canada, etc. Educational standards remained at low levels - or even declined in some instances. Workers’ pay did not rise much, if at all. For the majority of the population, the new regime was an economic failure. The Communist Party claimed just under 300,000 members at its July 2017 congress, and it has been in government throughout the period since 1994. Like the Chinese Communist Party its membership runs across class, and not just among intellectuals.

We live in a world in transition from capitalism, and much of that transition so far has been blind, unrecognised and brutal. The founder of the Trotskyist movement in South Africa had no illusions in a rapid shift to socialism. A new genuinely Marxist party has yet to be formed but the ground is clearly being prepared.

In Zimbabwe there was a different situation, in that the white minority was much smaller and the country less industrialised. There was also no Communist Party or leftwing party of any significance, in spite of the terminology used. However, Robert Mugabe and his Zanu-PF sought assistance from the Chinese - something which is still forthcoming to this day.

It is interesting to note the acceptance of the legitimacy of the anti-colonial struggle in today’s formerly imperial press, when discussing the past of the crucial characters in the succession drama in Harare. Dictatorial or semi-dictatorial rule is a feature of much of Africa. Under conditions where there is a dominant rightwing, private or government-controlled press, limited educational facilities, low incomes and no believable alternative, it is not surprising.

The failure of the electoral scene in Kenya has been played out in 2017. Between the expropriation of the surplus above consumption for export or payment to foreign owners and creditors and the local elite paying themselves exorbitant salaries and fees, a part of which is sent abroad, the majority have insufficient to sustain themselves.

Stalinism of different varieties has played a role in a series of African countries, like Angola and Ethiopia, including Zimbabwe.

China

The role of the Chinese has been crucial since Mugabe sought help from them in the 70s. However,

... writing in the influential state media tabloid Global Times on Friday, Wang Hongyi, an associate research fellow at the Institute of West-Asian and African Studies, said concerns had begun to grow over the long-term safety of Beijing’s investment in its African partner.

“Chinese investment in Zimbabwe has also fallen victim to Mugabe’s policy and some projects were forced to close down or move to other countries in recent years, bringing huge losses,” said Wang. “Bilateral cooperation did not realize its potential under Mugabe’s rule.”6

The Chinese investments are crucial to the Zimbabwean economy, some $450 billion dollars in 2015.7

The head of the army was in China shortly before the de facto coup displacing Mugabe, and the Chinese denied any connection, but quickly congratulated the new president.8

There obviously is a far deeper problem than the immediate question of succession and the economic issue of further investment.

Socialism in one country is impossible, as the USSR amply demonstrated, and Stalinism in one country can only last so long. What exists in Zimbabwe is one thing and what can come to exist is another question. The same applies to South Africa. The overall global strategy is provided by the imperial hegemon, the USA.

The USA has assisted two countries to reach fully industrialised, modern status - South Korea and Japan. In practice, it orchestrated debt relief/war reparation relief for Germany, while continuing to occupy the country and assist its industrial revival. Malaysia was helped by the UK, when British troops fought the insurgency. Outside of these countries there are no other third-world or ruined countries which have reached the level of UK or France in terms of industry or income. The relatively uncompetitive nature of Stalinist-type industry has doomed the eastern European countries to a secondary status within the European Union, given that they have had to upgrade their industry in the context of a world market.

China may prove to be the exception, in that a state-capitalist industry, combined with the Communist Party, has managed high rates of growth, together with the spread of education and skills in the population. It has only done so, however, by being integrated into the world market, with US investment. Its own indigenous industry, as with cars, tends to have lower productivity and be less competitive in critical industrial areas. The giant firm, Hon Hai Foxconn Technology Group, has its head quarters in Taiwan, but has more than a million employees in China, working on Apple and other US firms’ products.

Nonetheless, there are no other countries like China, and its contradictions seem likely to lead to change sooner rather than later. Countries dependent on China like Zimbabwe have not been able to get out of their economic trap.

The fault lies partly with the capitalist class, which through the United States government and US firms enforces a boycott on non-market-based countries. The World Trade Organisation has refused to remove China from the list of non-market economies. New or patented technology is closely guarded. The Chinese have tried to get around the problem by buying up western firms. However, a number of governments have refused to give permission to the Chinese to buy their firms. Germany, Switzerland and the USA are among them. In effect, the Chinese have refused to carry out part of their bargain with global capitalism. They have refused or perhaps delayed the introduction of total privatisation.

The problem also lies with the nature of the regimes which have come into being, in that they are inherently unviable, and their ruling personnel quickly deteriorate into a privileged layer eager to maintain their status and privileges. A dictatorial form then becomes inevitable in the context of failure and massive shortages in all spheres. However, the ultimate source of the failure lies in the need of an imperial form to maintain economic and political control, albeit through intermediaries. Those areas which do not conform are punished through sanctions and military measures, when required.

The so-called liberation movements, led by such as Mugabe, have nothing to do with socialism, even though they proclaim themselves to be Marxist or socialist, usually with some prefix, as in ‘African socialism’. They were (or are) able to found a national bourgeoisie or ruling elite, with a strong party which goes along with it. The absolute poverty of the masses, when combined with the flamboyant living of the ruling group, as exemplified by the Mugabe family, engenders a national cynicism even more intense than what existed under Stalinism. The structure is at one and the same time brittle and strong. It is apparently strong, because there appears no genuine alternative party on the horizon; and brittle, because the vast majority want something better.

Where there is a proletariat, as in South Africa, the failure of the existing Stalinist forms has led to some movement, and we can expect that at some point a new non-sectarian Marxist party will form, but that has yet to happen anywhere, although it may be on the horizon. So the situation looks hopeful, but over a longer term.

Disintegration

The downturn - variously called a recession, crisis or depression - continues in spite of various attempts to declare it at an end. Investment in relation to savings remains low, as is productivity, while real levels of unemployment remain high. In the UK the standard of living continues to fall. Much of the country has lost its employment opportunities, and factories, shops and whole industries have closed in most places north of London. The same is true, up to a point, in other developed countries. The logic of this situation is for the successful parts of countries to pull away from the rest. That is partly expressed through the revival of an older nationalism leading to demands for autonomy or independence. Brexit is a peculiar form of the same phenomenon.

The ruling class has turned to such nationalism, usually expressed through the forms of the dominant nationality. However, the ruling class today has global holdings, so that nationalism does not serve its interests, nor can it be believed. The paradox then is that sections of the working class have taken a chauvinist line, particularly in opposing immigration. Some on the liberal left have become disheartened at the lack of workers’ internationalism. But the truth is somewhat more complicated.

In the first instance, there is no reason to glorify unskilled workers above other workers. Trump has appealed particularly to relatively less skilled workers in Pennsylvania, Michigan and Wisconsin, who like his line on building a wall on the Mexican border and excluding goods that could be made in the USA. This section of workers is something like 5% of those employed in the USA. Over three quarters of those employed are white-collar workers. This proportion is likely to increase with automation.

The conditions under which a substantial proportion of the workforce is unskilled are likely to change in developed countries. At the same time the nature of white-collar work is being transformed into a fully proletarian type. Pay has been held relatively static for a long time in the USA. What needs to change is the form in which the modern working class organises (or rather does not organise). Trump is doing a good job in forcing people to think politically.

At the same time, although the political-economic interest of the ruling class is global, it is forced politically to use division as a mode of support and control, given that it lacks other potentially useful instruments. The resurgence of racism and anti-Semitism and the organisations associated with such forms as the AfD in Germany and KKK in the south of the United States have produced parallel organisations in other countries. Trump’s implicit support in his tweets for such organisations, even as he declares himself even-handed, is a sign of the times l

Notes

1. Professor Mazzucato was awarded the Leontief prize in economics for 2018. Tufts University’s Global Development and Environment Institute (GDAE), makes the awards. GDAE co-director Neva Goodwin said: “The topic of innovation receives a lot of attention these days. What has been insufficiently recognised, before the work of Mariana Mazzucato, is the critical role of governments in innovation. As Mazzucato points out, taxpayers have been the real venture capitalists, funding the riskiest investments in the knowledge economy. It is to be hoped that her work will result in a more equitable sharing of the recognition and the rewards for this important activity undertaken by government for the people.” (www.ucl.ac.uk/bartlett/public-purpose/news/2017/oct/iipp-director-awarded-2018-leontief-economics-prize).

2. L Kuenssberg, ‘Big “end state” Brexit discussion looming for PM’ (www.bbc.co.uk/news/uk-politics-42255840).

3. I Martine: “We have the weakest PM in living memory. The time has come to acknowledge that Theresa May is unsuited to leadership and must be replaced urgently” (The Times December 7 2017).

4. ‘EU divorce deal involves serious concessions’ Financial Times December 8 2017: “This concession will come as a delight to Philip Hammond, the chancellor, and those who want a business-friendly Brexit” (www.ft.com/content/cfacf4ca-dc12-11e7-a039-c64b1c09b482).

5. Ibid. The author gives various reasons for their apparent capitulation.

6. B Westcott and S George, ‘The Chinese connection to the Zimbabwe “coup”’, CNN, November 18 2017 (http://edition.cnn.com/2017/11/17/africa/china-zimbabwe-mugabe-diplomacy/index.html).

7. Ibid . “In 2015 alone, Chinese investment topped $450 million, accounting for more than half of all foreign investment into Zimbabwe.”

8. www.news24.com/Africa/Zimbabwe/china-hails-new-zimbabwe-leader-denies-role-in-transition-20171127.