WeeklyWorker

20.12.2018
The liberal ideal of mutual benefit comes with gross inequality built in

Working class trade policy

Mike Macnair concludes his series on ‘free trade’ by looking at the positive alternative

This is the third and last article in my series on ‘free trade’. In the first article (‘Free trade tailism,’ November 22) I argued that citation-grazing in Marx and Engels could not provide a solid basis for independent working class trade policy, even if the quotations were not mutilated, as the Alliance for Workers’ Liberty had done.

This was because what Marx and Engels wrote about free trade was poisoned by the idea that impoverishing the working class would bring on radicalisation and revolution. It was also disoriented by the image that “The country that is more developed industrially only shows, to the less developed, the image of its own future”1 - hence that British 19th century free-tradism was the future for Germany, and so on.

In the second article (‘Free trade illusions,’ December 13) I developed this point further, by looking at the history of free-trade ideas before their ‘triumph’ in mid-19th century Britain, and at the subsequent rise of protectionism, followed by the ‘golden age’ of managed trade (1950s-70s) and the extent to which these developments could be explained by the theory of imperialism and monopoly capital as forms of capitalist decline (it could not).

Moreover, the history showed a geopolitical aspect, in which free trade could be a policy by which a dominant country held down a subordinate country or countries. Conversely, countries which were ‘developed’ could have strong geopolitical reasons for protecting strategically significant, but declining, industries.

I argued that these aspects of the history were not explicable in terms either of Ricardian ‘comparative advantage’ theory or of any of its modern marginalist interpretations; or of the idea that there was a natural tendency in capitalism towards free trade. Rather, I suggested that if we abandoned the idea that capitalist markets tend towards equilibrium, both phenomena could find a place in the analysis.

States

On the one hand, there could be no stateless capitalism, since, given that free markets do not attain equilibrium, the market itself could not secure its own infrastructure. To secure credit money, states need to discriminate against ‘free-rider’ non-payers. Hence - unless capital actually attained a world state - states were bound to attempt to discriminate against ‘non-national’ capitals: that is, to act in a ‘mercantilist’ way.

It is worth turning aside here to a point which I did not make in the December 13 article. This is that capital inherits the ‘nation’ form of the state, via its victory in England in the 17th century. But it begins with sub-national states (the late medieval Italian city-states, and also the Dutch Republic, which was a politically created fragment of the Dutch and Flemish-speaking low countries). The victory in England created a supra-national state (the Great Britain of England, its Scots junior partner and its Welsh incorporated dependency), albeit one which began to be imagined as a nation-state. And from its outset capital aspires to a world state. This was reflected in the late medieval Italian cities in parties: Guelph (papalist) and Ghibelline (imperialist, in the old sense of imagining the Holy Roman Emperor as a potential universal ruler). It was reflected in Venice’s small-scale maritime empire, in the Dutch Republic’s much more far-flung maritime empire, in the British empire and in today’s global US empire.2

However, capital cannot actually attain a world state without a mutation in state form, which is pretty unlikely. The reason is that the forms which make the state dependent on capital (state debt and the institutional market in it, bribery, the ‘rule of law’, the fear of capital flight) operate by making the state dependent on a group of particular capitals -the predominant lenders, bribers, etc. The result is that an entity which approaches the character of being a world state, like Britain in the 19th century or the US after the fall of the Soviet Union, is inevitably pulled by its dominant capitals to discriminate against capitals outside the favoured group - and, as a result, to raise up state rivals to itself, as the victims of this discrimination seek a means of resisting the world-dominant state.

The second aspect of the geopolitical issue was that, if one gets rid of the assumptions of theories of market equilibrium, business scale itself could be recognised as a barrier to new firms entering the market, so that promoting free trade could be a mercantilist defence of dominant industrial and financial sectors - as it could be for the Netherlands in the 17th century, Britain in the late 19th century and the USA in the late 20th.

Cycles

Secondly, capitalism does not tend towards equilibrium, but rather cycles between phases of growth/boom and bust/recession. Boom phases, even if they take place under the aegis of a ‘managed’ economy (as in the 1950s-70s), produce the appearance of a tendency of markets towards virtuous equilibrium growth, and hence the growth of liberal ideology - including its particular variant, free-tradism.

But the boom can never last, and any actual steps taken towards liberalising the economy accentuate its instability and - as Marx actually diagnosed - tend to relatively impoverish the working class. The result is a necessary swing towards anti-liberal forms of collectivism. If socialist forms of collectivism are suppressed, or suppress themselves for the sake of people’s frontism3 (as is true of the modern left pretty generally), collectivism must find expression as religious collectivism/communalism (political Islamism, Hindutva, US Christian ‘conservatism’, and so on) or more secular rightist nationalism (Putin; Koizumi and Abe; French Front National; German Alternative für Deutschland; Italian Lega; Brexiteers; Trump; and so on).

Underlying this is a necessary logic of capitalism. In boom phases asset prices are bid up, shifting from boom into bubble. At the crisis - the moment of transition into recession or depression - the illusory quality of these prices is exposed. Capitalism itself requires in this situation that the losses should fall disproportionately on creditors/rentiers/landowners/savers/‘strivers’; because it is these actors who have bid up asset prices in the boom-bubble phase and, as long as their inflated holding values are not deflated, their persisting claims on income proportional to these inflated capital values act as a drag on actual productive investment.

If these interests are ‘bailed out’ by state action, rather than forced to accept capital losses, this overhang of inflated claims persists until the losses are made to fall on creditors, and so on, by full-scale great-power war. But refusal to bail them out would run up against the institutional forms which make states dependent on capital (above). Hence, the shift into nationalism and communalism, while irrational in itself, is the only available route towards the bloodletting that capitalism objectively needs to restore it to ‘health’ (to allow a return to vigorous growth).

It should be emphasised that this is not a conscious process, until the very last moment at which politicians faced with intractable problems decide that war is the better option (as, for example, in summer 1914). Rather, the point is simply that the business cycle, in a hierarchical world of competing capitalist states, produces right-populist nationalism, and hence tendencies towards war.

In sum, we live in a world of a hierarchy of competing states, and of business cycles, in which there is not an inherent long-term tendency towards free trade, and the working class movement cannot simply ‘promote free trade’ on the ground that this is the most advanced form of capitalism, or the form in which the contradictions of capital play out most fully.

Rather, the workers’ movement needs to think through its own needs and long-term goals; and what it can and cannot do for itself under capitalist rule - in order, in turn, to analyse concrete free-trader and protectionist proposals.

Inequality

Capitalism is unavoidably linked to inter-state competition; liberalism naturally produces its right-populist negation; and capitalism will in the medium term require escalating nationalism leading to great-power war, as the only means of clearing off the inflated claims of creditors (and so on). These are pretty good reasons to seek an alternative to capitalism. But thinking about what sort of alternative to capitalism requires us also to think briefly about some of the other reasons for seeking that alternative.

The first, which has attracted quite a lot of media attention in the context of the right-populist ‘revolt’ against liberalism, is the tendency of free markets to produce systemic and widening economic inequalities. It is pretty clear that, in spite of the fact that the right-populists are not real egalitarians, the tendency fuels right-populism - because the latter asserts that ‘we’ (whether the umma or the nation) are all in it together, rich and poor, against ‘cosmopolitan’, ‘globaliser’ or otherwise foreign forces, and hence equally done down by them.

The liberals have endeavoured and continue to endeavour to distract attention from the issue of liberalism increasing economic inequality by focussing on ‘diversity’ and ‘non-economic’ forms of inequality - racism, sexism, and so on - and much of the left has fallen into this trap.4

However, it is illusory to offer as an alternative to rising inequality a return to the ‘managed economy’ of the 1950s-70s. In the first place, this regime was, in fact, a system of concessions both to the industrial workers in the ‘west’ and to ‘national bourgeoisies’ in the ‘south’, faced with the massive extension of the Soviet bloc as a result of World War II. To get anything like it back would need a stick on the scale of the old Soviet bloc and communist parties, not merely carrots in the form of the common point made by Keynesians that economic growth was actually higher (in both ‘west’ and ‘south’) under this regime than under the liberal regime of 1978-2018.

Secondly, the 1950s-70s ‘golden age’ was the product of World War II. By finally imposing the accumulated losses of successive economic downturns on British investors, the war set free the conditions for a new prolonged phase of growth.

Thirdly, and most important for present purposes, the liberals are not wrong that the regime of the 1950s-70s, while flatter in economic hierarchies, was characterised by powerful bureaucratic hierarchies (in the ‘west’ and ‘south’, as well as in the ‘east’); by explicit race, gender and so on, discrimination and oppression which the liberals at least formally oppose; and by violent inequalities between countries.

Liberalism was not merely imposed by US capital turning to it in the late 1970s-80s. Rather, there was a wave of mass support for liberalism resulting from Brezhnevite ‘stagnation’ in the ‘east’, from bureaucratic management of housing and welfare, and ‘stagflation’, in the ‘west’; and from the commitment of the labour movements across the world to nationalism and to the subordination of women (and all the other things that went along with this).

Hence, even if we were to get the overthrow of the USA in war (without a generalised nuclear exchange leading to human extinction) and a renewed Stalinism to serve as the stick, a new 1950s-70s ‘golden age’ would lead merely to a new 1980s-2000s ‘neo-neoliberalism’.

The consequence is that the socialism we aim for has to be a socialism of universal emancipation - not a ‘socialism’ of bureaucratic, gender, race and national hierarchies.

That does not mean a socialism of ‘intersectionalism’. The latter is an idea which accepts hierarchy (whether market or bureaucratic), merely seeking to reallocate positions at the top of the economic, or party, hierarchy, in favour of members of groups which have been oppressed in the past. By leaving a large, subordinated class in existence, the result is merely to hitch the feminists’, anti-racists’, etc, wagons to the liberals - and thereby guarantee the victory of the overtly racist, sexist, and so on, right-populists.

The goal of overthrowing inequality, then, has to be a goal of overthrowing the permanent subordination of individuals to others; and, hence, the goal of overthrowing the ‘political career’ and the ‘managerial career’, as well as the ‘entrepreneurial career’.5

It is for this reason, too, that it has to be a socialism based on the workers’ movement. It is not that the workers are most oppressed. It is not that class ‘explains’ or underpins all other oppressions. It is that we cannot overcome the other oppressions without aspiring to universal emancipation; and we cannot do so without aspiring to the overthrow of the wages system and the class order.

‘Growth’

Liberalism’s ‘offer’ in relation to inequality is sometimes that in markets we are all treated as equal - my money is as good as yours. But this idea has fairly limited purchase, because it turns out that the quantity of money affects its substantive value: the rich can buy freedom from discrimination in a way which the relatively poor cannot and, conversely, can buy the right to discriminate.

More commonly, the liberal economists’ argument is that at the end of the day, even if there is radical inequality, free markets make us all better off in the long term, because they maximise economic growth. That is, after all, the implicit meaning of ‘allocative efficiency’ in economics: where any change from the adopted allocation would make someone worse off; hence, change must take the form of growth.

The point has been argued at length by David Harvey that capitalism inherently requires, for its own stability, 3% annual growth; if there is no growth someone will be worse off, and even between 0% and 3% annual growth frictional effects entail someone being made relatively worse off, and hence a crisis of the political acceptance of capitalism (‘legitimacy’ in Max Weber’s terminology).6

But then the problem (also pointed out by Harvey) is that random economic growth, which is what is generated by capitalism, and required to generate political acceptance for capitalism, runs up against the limits of the planetary biosphere. We objectively need reductions in carbon emissions and, for that matter, reductions in plastic waste output. But even regulatory steps towards either are proving astonishingly difficult, because of geopolitical conflicts and fears of suppressing growth. Witness the weakness of last week’s Katowice agreement - to which, even so, neither the US nor Russia is party.

The point is not to set zero growth as an alternative target or, for that matter, ‘sustainable growth’ as a target. It is that capitalism, because it is generalised commodity production, because it is humans coordinating our diverse productive activities through monetary exchanges, entails the tendency to inequality and hence to loss of political acceptance, and the tendency to cycles, with the same effect - and hence requires that there must be regular random growth to maintain public political acceptance.

It follows that we may not regulate, because, if we do, we risk destroying growth: this is the ‘No return to the 1970s’ message repeated ad nauseam by the liberal economists. It is this mantra which we have to reject if we are to address the problems of pressure on the biosphere.

To address these problems, we have to begin to go beyond coordinating our productive activities through money exchanges. And, conversely, we cannot set ‘growth’ as a target at all. We have to set human development as our social target - and we have to address questions of inequality, and of the allocation of material resources, directly rather than trying to dodge out from under with the promise that growth ‘will provide’ in the future.

Both points mean that we have to collectively plan ‘in natura’: that is, in relation to use-values rather than money values; because it is the production of certain specific use-values (carbon-emitting fuels, plastic packaging, etc) which is the problem - not merely a monetary problem.

Production is international

The strategic alternative to capitalism, then, is to take a large chunk of production out of the regime of the world market. I repeat, necessarily, a point I have made, and we in CPGB have made repeatedly: socialist construction (in this sense) is not feasible on the basis of the resources of a single country.

The crisis in Venezuela and the liberalising turn in Cuba are examples of this. Production is now too much internationally integrated to be carried on at any level beyond the marginal without access to trade. Through the control of finance, and the elaboration of sanctions against the supply of ‘strategic’ capital goods, the US can effectively choke the economy of any single nation-state. In Europe, the Greek tragedy shows the ability of the EU and its controllers to do the same to any single country. The inability of the Tory Brexiteers to offer a realistic alternative to May’s agreement is yet another symptom of the same thing - eg, Dominic Raab’s failure before he became Brexit minister to appreciate the dependence of UK production on the port of Dover.

On the other hand, the perspective of action on a continental scale is perfectly realistic - if the left could bring itself to overcome the illusions of ‘socialism in one country’ and ‘national roads to socialism’. The point is not merely the existence of continental institutions which could be exploited for workers’ common political action, but so far have not (thanks to people’s frontism tying one part of the left to the nationalists, another part to the liberals). It is also that revolutionary crises - crises that seriously call into the question the authority of the state, as opposed to mere episodes of mass unrest - come in relatively short clusters running across countries: 1916-20, 1944-49 and, much feebler, 1968-76.

The point of this rather extended discussion is that, as far as Europe is concerned, our policy is not free trade. It is that the workers’ movement should take power across the continent; and on this basis move what is now large-scale capitalist production into direct democratic planning of the production of use-values, while what remains market-governed should be small capitalist production - subject to tight regulation of minimum wages, maximum working hours, and so on.

What would socialism on a European scale imply in relation to trade with the rest of the world? The first point is to recognise soberly that, if the major remaining capitalist regimes in the USA, and so on, were not brought down at the same time (within months), a socialist Europe would immediately face a ‘sanctions’ regime like those which have been applied to so-called ‘rogue states’ or to the Soviet bloc before its fall.7

In this context, the structural form of a socialist Europe’s trade with the rest of the world would unavoidably consist of covert sanctions-busting operations, and forms of state-to-state barter (goods for goods, goods for services, and so on); like aspects of Soviet-bloc trade with some countries of the global south before the fall of the regimes. But it would have to be without the nationalism and bureaucratic manipulations of those operations, since we cannot get close to political power in Europe without breaking with the bureaucratic-nationalist conception. And it would have more to offer trading partners, thanks to Europe’s productive forces being stronger than those of the old USSR.

Inthis context ‘free trade’ would be merely code for the restoration of capitalism in Europe. ‘Protectionism’ on the other hand would be plainly irrational. Our goal in world trade would not be to strengthen European industry for geopolitical competition - though, obviously, we would unavoidably have substantial military production commitments. It would be to raise the overall possibilities of human development, and to transfer technology to countries which did not already have it, not to hoard it.

Under capitalism

We are, of course, not in a situation where taking power on a European scale is presently posed.

To say ‘of course’ is to deny that the gilets jaunes protests in France (demonstrations at the weekends only, notice) amount to the beginning of an insurrection; or that the entry of Syriza into government in Greece was the beginning of a European-wide revolt against austerity; or that Occupy Wall Street (and its imitators) were the new Bolshevism (Pham Binh); or that the 1999 ‘Battle of Seattle’ and the ensuing anti-globalisation movement showed a new future for the left; or that any of the other false dawns which have preoccupied the left in the last 30 years, in the hope of “it all kicking off everywhere” (Paul Mason), could lead directly into revolutionary crisis.

The capitalist order is in increasing difficulty. It is not at a stage where the rulers really cannot carry on in the old way, as opposed to their being forced to increasingly nonsensical expedients. Meanwhile, while broad masses are increasingly disillusioned with the existing order, to the extent that they see an alternative, it is - as mentioned above - right-nationalist populism.

The reason is that the only real alternative to capitalism would be the beginning of democratically planned, cooperative production - socialism. And for socialism to appear as an alternative, it requires, first, that the left should actually promote it as an alternative, rather than promoting nationalism or liberalism. And, second, that people should experience democratic cooperation in practice as something which can exist beyond the momentary high of a strike or occupation - in trade unions, in cooperatives, in mutuals, in collectivist political parties. It therefore requires building the organised workers’ movement under capitalism up to a point at which this movement itself can pose the imagination of a better way of doing things. And that requires abandoning the methods of centralised spin control, top-table-dominated rallies marketed as ‘conferences’, and so on, and so on.

We are not there yet either. But it is more probable that the left could break with its voluntary choices to sterilise itself by bureaucratic control, by liberalism and by nationalism, than that spontaneous or semi-spontaneous street protests could lead directly to an alternative to capitalism.

Suppose, then, that we had a mass workers’ movement under capitalism which was not (unlike the Labour Party and its European equivalents) committed to constitutional loyalism and nationalism; or even that we had substantial minority communist parties. What policy should such a movement adopt in relation to the capitalist regimes’ various manoeuvres over free trade and protection?

The point of all our policy in this situation is to build up the forces of the organised workers’ movement, and to project political democracy and socialist planning as a possible alternative to capitalist rule. We do not forswear strikes, street demonstrations and so on, but we recognise that in general these can achieve only limited gains, unless the question of power - ie, the soldiers beginning to refuse orders - is immediately posed. Limited gains can be won and defended most effectively if the workers’ political party seeks constantly to delegitimise the capitalists’ paid-for state, political and judicial institutions and mass media.

The underlying principle is to fight for political democracy, and for basic standards of protection of labour’s interests to be applied across the board; on the same principle as the Factories Acts and the Ten-Hour Day Act, and some of the subsequent regulatory legislation which has been won (not all; some ‘protective’ legislation has contained ‘poison pills’ for the labour movement, as in the Trade Union and Labour Relations, and Employment Protection (Consolidation) Acts of 1974).

From this point of view, we would also favour international conventions to lay down basic labour standards; and, analogously, European Union regulations (so far as they maintained or improved on standards existing in the individual member-states; not so far as they ‘harmonised downwards’, as UK governments have usually sought).

But, on the other hand, we would oppose any form of international or EU standard-setting tribunal which involved secret procedures (as in the World Trade Organisation and related operations); or where the judicial decision was not reviewable by some directly or indirectly elected body. This is the fundamental vice of the European Court of Justice: by way of judicial supremacy, justice is commonly sold to the party which can pay most for lawyers, and there is no means to reverse the decisions.

Tariffs and non-tariff barriers

In relation to more specific issues, we should prima facie be for low customs tariffs. Customs tariffs are a form of indirect taxation, which is unambiguously regressive (places the tax burden more on the poor than the rich).

Prima facie:that is, not to exclude in principle the use of retaliatory tariffs. Britain’s (incomplete) unilateral free-trade policy in the later 19th century reflected the interests of the dominant British shipping sector and the related financial sector; it was not generally ‘progressive’.

Non-tariff barriers are a great deal more ambiguous. It is certainly true that capitalists lobby states to introduce non-tariff barriers with a view to disadvantaging their competitors. But ‘non-tariff barriers’, as they are currently understood, include all sorts of regulation and public provision, as well as (according to the ECJ’s Viking and Laval decisions) trade union action demanding more than the legal minimum wage, and so on.

If Britain ends up revoking article 50 and abandoning Brexit, we could fight for upgrading labour, environmental, and so on, protection through EU legislation. Our aim is a levelling-up.

There are three problems. The first is that these would still be ‘non-tariff barriers’ under the WTO treaties. The second problem is that the ECJ has the power to strike down directives and regulations adopted by the EU’s legislative bodies (commission, council of ministers and parliament, acting together). The third is the very opaque character of these legislative bodies themselves.

We in the CPGB argue for power to be concentrated in the hands of the EU parliament as an alternative to both the roles of the commission and council, and the power of judicial review in the ECJ.8 But it is important to recognise that these are revolutionary proposals (to overthrow the EU’s constitutional architecture), not reform proposals.

Beyond this point - and it is also true of politics within the EU - there can be no across-the-board demand for protectionism and ‘British jobs for British workers’. As long as capital is free to move in its monetary form, this policy is illusory, and ends up merely pouring money into the pockets of the shareholders of companies which are objectively insolvent, in order to stave off job losses for a few years (as happened with British Leyland and several other companies in the 1970s).

Equally, we cannot stand for immigration controls for the benefit of wages and conditions in one country. The point is not that immigration does not increase competition in the labour market and hence exert downwards pressure on wages and conditions. That idea is silly and merely liberal. Rather, it is that immigration controls will not actually stop migration: they will, by illegalising the immigrants, and thereby making them more dependent on their employers, put more downwards pressure on wages and conditions.9

But neither can we stand generally for ‘free trade’ against all forms of ‘non-tariff barriers’. That is to commit to the neoliberal regime and to reject political democracy altogether.

What a communist party with significant electoral representation would need to fight for in this field would not be either free trade or protection as such. It would primarily be transparency of decision-making: the wholesale abolition of commercial secrecy; the demand that payments to commercial lobbyists who have private access to government should be treated as bribes; the prohibition of systems of ‘holding’ and ‘subsidiary’ companies; and so on.

The point of this approach is to enable the elected representatives to take real decisions about whether a regulation proposed is genuinely in the interests of the working class, the environment, and so on; or whether is it merely a device to disadvantage competitor firms.10

The result is messy, and I have got nowhere near explaining how messy it would actually be. It requires specific assessment of individual initiatives, not the grand sweep of ‘national roads to socialism’ as supporting protectionism or, on the other hand, of two options: the illusions of ‘free tradism’ as ‘progressive’ or the natural condition of capitalism. It requires, as Lenin put it, “a concrete analysis of each specific historical situation”.11 But then that is true of politics generally.

mike.macnair@weeklyworker.co.uk

Notes

1. www.marxists.org/archive/marx/works/1867-c1/p1.htm.

2. For more detail, see my ‘Nation state and nationalism’ (pdf) Weekly Worker July 16 2015.

3. And its various intersectionalist, and so on, variants.

4. I discussed this at length in my series on ‘intersectionality’ earlier this year: ‘Intersectionality is a dead end’, June 7; ‘Race and class’, June 21; ‘Mistaken versions of Maoism’, June 28; ‘Getting beyond capitalism’, July 5; also at less length, but with more precision and references, in ‘Intersectionalism, the highest stage of western Stalinism’ Critique Vol 46, pp541-58 (2018).

5. I argued this point more elaborately in my 2015 article, ‘Socialism will not require industrialisation’ (Weekly Worker May 14 2015).

6. D Harvey The enigma of capital and the crises of capitalism New York 2010.

7. There are, of course, surviving aspects of this latter technology transfer control regime still applied against Russia and China, with a view to securing the subordination of these countries to the USA.

8. https://cpgb.org.uk/pages/programme/3-immediate-demands/, No. 3.1.6.

9. DL Wilson, ‘Marx on immigration’ (https://monthlyreview.org/2017/02/01/marx-on-immigration); M Macnair, ‘Origins of fortress west’ Weekly Worker June 13 2007, ‘Floodtide of capital’ Weekly Worker June 27 2007.

10. As, for example, the EU vacuum cleaner labelling regulations recently overthrown by the ECJ: ‘Dyson wins five-year legal battle over EU energy labelling laws’ The Independent November 8 2018.

11. www.marxists.org/archive/lenin/works/1916/jul/junius-pamphlet.htm.