27.08.2003

Iraq and the myths of oil determinism

Hillel Ticktin, editor of Critique, argues that the invasion and occupation of Iraq is rooted in capitalism's historic decline. Those on the left who explain every modern war and conflict with reference to oil are wrong

Many of those campaigning against the war emphasised the question of oil as being of central importance. I think that is entirely wrong, and based on the theory of imperialism as applied before 1914 - as if great powers were trying to annex a state in order to acquire its resources. That entirely fails to understand the present stage of capitalism. It fails to understand the politics of the situation.

If one was to argue that imperialism went in for oil, one has to argue that the United States does not already control world oil - that somehow it is divided up among great powers or alternatively it is owned by individual states. In reality we know that a few giant oil companies control world distribution. Yes, Saudi Arabia has nationalised its oil, but nobody believes that Saudi Arabia is a great power or is really independent. The Saudi bourgeoisie, if you can call it that, is more American than it is Saudi. Clearly, they nationalised the oil as a manoeuvre.

Oil is basically managed and distributed by American companies - Exxon and Mobil are by far the biggest. Of the two British companies, BP and Shell, most of the shareholders are American. Even the one French company has at least 30% of US shareholders. To all intents and purposes, the United States effectively controls world oil as far as it actually needs to. If it had needed to ‘gain control’ over Iraqi oil, all it had to do was bribe Saddam Hussein. Since he was their client until 1991, it is difficult to see why he would not have agreed.

Nor is there a shortage of oil in the world - it is very unlikely there will be any such shortage in the next 20 years or so. Nor it is a question of the price of oil. If oil companies raise the price, then other companies lose money. So you cannot say the US bourgeoisie as a whole wants either high oil prices or low oil prices. That cannot be the issue.

With this in mind, one has to criticise much of the left for their method, in reducing Marxism to economism. For them there has to be an immediate, technical-economic reason (as opposed to a political-economic reason) for the invasion of Iraq - or, for that matter, for whatever else is happening in the world. It does reflect to a degree, I think, the further degeneration of the left. At the same time, while some of the left’s slogans certainly made me cringe, one has to agree that imperialism would not have invaded, had oil not been important in the region. Clearly American and British troops are not going to be sent to Zimbabwe or to North Korea, even though they are both ‘rogue states’.

The second argument I would like to get out of the way is that somehow the United States has to re-establish itself as a great world power. It is a world power - throughout the entire period from 1945 until now, it has been the single world power. There is a huge degree of financial integration, as well as a fair degree of industrial integration, between the imperialists. It is not clear what competition between these powers means any longer. The kind of inter-imperialist rivalry that there was in 1914 or later is now much more muted.

The Soviet Union was never the equal of the United States. I once met someone who had been in the CIA, and had been involved in analysing the results of the 1960 spy flights over the USSR. He concluded the USSR did not have the capacity to damage the USA militarily, so he went to his superiors and reported there was nothing to worry about. They told him to shut up. In 1976 the CIA came out with figures to show that the power of the Soviet economy was a fraction of what had been thought, and consequently their military ability was much less. The Pentagon insisted that the figures should be upped.

The point is that the powers that counted, within the US administration, understood the relative weakness of the USSR. They knew the USA was the sole great power. Therefore I disagree with the whole idea that, once the cold war came to an end, there was only one great power and that this represented an enormous change. The Soviet Union was never really a competitor. It is true that the existence of the Soviet Union, with its supply of arms and equipment, allowed various states to at least nominally and sometimes in reality stand up to the United States - a situation that does not exist today. But that is another question. The essential point is that it cannot have been the case that the United States wanted to reassert its power over other imperialist states. It is true that the world has changed because the Soviet Union no longer exists, but it cannot be argued that the USA is therefore transformed. To me the argument that the United States needs somehow to reassert itself does not add up. It is already in control.

In fact it is the capitalist crisis that is crucial in trying to understand why imperialism went into Iraq. It has much more to do with the present stage of capitalism, and the position of the United States within that. Capitalism’s decline requires a method of stabilisation and, to put it in the starkest form, the existence of Stalinism stabilised capitalism. Empirically, the cold war was absolutely essential to capitalism from the 1940s onwards. Keynesianism is only possible under conditions where there is a war or cold war - both for its military and economic effect, and for purposes of political and economic control.

Modern capitalism requires war as a form of mediation, in order to stabilise itself. But for the past 50 years or so, the form of capitalism has been one in which there has been no great war - but a cold war, or a war which was not a war. So the point of going into Iraq, and of any subsequent invasion, would be to buttress that form. You cannot go on talking about war without eventually engaging in one.

Saddam Hussein had the misfortune of heading a country that was weak in military terms, whose regime was detested throughout the world, a regime whose defeat might stabilise the region for US control. He was in the wrong place at the wrong time. It so happens that Iraq was an easy country to deal with, and that is why the US went in. One can add that there happened to be a particular kind of administration in the United States that was receptive to this action, and of course there was 9/11. But 9/11 represented an acceleration of already existing features, not an independent feature in itself.

It was president Clinton who began the warlike posturing, not George W Bush. It was under Clinton that increased expenditure on arms began. Bush merely continued this trend. Similarly it was Clinton who did not want the Kyoto protocol, although it was repudiated by Bush. There is a clear continuity and the idea that Bush represents a sudden change is simply untrue. The invasion itself provided a relatively low cost for a relatively large return. The return is mainly internal, of course.

In the light of world history, from the point of view of the bourgeoisie as a whole, what has happened is actually irrational. War is irrational in itself, if looked at in terms of the immediate extraction of surplus value, or for that matter of political support. The risks were enormous, but we are in an irrational period which goes back to the 1930s. Reflecting the fact that the period of cold war has come to an end, we are returning now to a period of classic capitalist crisis.

As with any formation, capitalism has gone through three stages. That is, a coming into being, a maturing and a period where it declines. The classical viewpoint of Lenin and Trotsky is that we have been in the period of decline. I do not see any reason to disagree. I would go further and say that each of the three stages has its own sub-stages of coming into being, maturity and decline. In fact I would argue that we are in the period of the decline of the decline.

The law of value is being reduced in depth and in extent. This has seen the expansion in the economic role of the state, of governments, and the rise of giant firms, operating on a bureaucratic basis internally while fixing prices externally. Interestingly, John Galbraith’s son, James, has written an article which argues that the US economy is only able to operate because of the role of the US state. He details all the various aspects of the economy that are funded or controlled by the state. Despite all the ‘never buck the market’ propaganda and all that rubbish, in reality the administration, the government and the public sector are crucial for the economy of the United States.

Instead of the law of value we have administration, which is sometimes called planning - a term I reject. What we have is bureaucratic control and the rise and rise of the bureaucratic apparatus - not just in the public sector, but in the private sector as well. This relates to the question of profit.

The argument was that the United States had gone into a new paradigm, where profits were rising. But this argument is undermined because we do not really know what profits are. You cannot simply accept bourgeois statistics, for two reasons. Firstly, it is not clear what bourgeois statistics are actually describing. A Marxist looks at surplus value, which is more than just profit. To collate all the different aspects of this would be an enormous job, requiring the apparatus of the state itself.

Secondly, we know that the profits that have been estimated are extremely dubious. Take, for instance, pension funds. That was the scam to end all scams. Companies stopped contributing to pension funds, allowing profits to rise, and, because profits rose, so did shares. With share prices rising, pension funds could generate income from investments. In turn companies could continue withholding contributions and it all became a virtuous circle in which shares rose and pensions were paid. What this meant was that profits were artificially made.

Today of course we have exactly the reverse process. In the United States trillions of dollars have to be put back into pension funds, which means profits are effectively negative. It will take a very long time before this situation is resolved - if it can be resolved - unless the stock exchange improves once more, which is extremely unlikely.

It was even worse in the case of Enron, when pension funds were invested in shares of the company itself, which of course meant that when Enron ceased to exist the employees had no pension. One of the things Enron did was to include future profits in present-day returns. What I do not understand is how any accountant on earth would accept that, but apparently it is acceptable. In fact we know that companies no longer work purely on the basis of total result, which is of course what matters in the final analysis. Standard Life, which is the biggest mutual fund in Europe, is doing exactly the same thing, in order to increase its present-day return. What that means for mutual funds, who knows? So it is not clear what US profits were, and we could even argue that they had not increased at all.

Another device, as in the case of Microsoft, is simply to give the workers shares in lieu of wages. Again, profits would then automatically rise, because of the reduced salary bill. And, like Enron, companies can put all their loss-making sections in offshore hideaways, increasing profits even further. What I think is really wonderful is the way that Enron et al simply agreed to buy electricity each from the other, so they could show that the amount they were selling had increased. Another obvious way to achieve the same result is simply to drive the competitor to the wall, and then raise prices.

I have given five different ways - and I am sure there are many others - whereby profits were arbitrarily increased in the 1990s. What this implies is that in reality there was no additional extraction of surplus value. Of course there was a transfer occurring, but there was no new paradigm - except that of creative accounting. There was no question of profits having gone up or, if there was, you really have to dig to establish that was the case.

The third aspect of the present decline is an obvious one - the distance between the potential and actual growth of GDP. Productivity is rising, but it is not very likely that there will be a boom, given the increasing gap between productivity and sales. There is rising unemployment and underemployment, the dumbing down of education and the production of use-values of no human importance. It is clear that the gap between human potential and the reality of human misery is growing, most obviously in the third world. At the same time - and again James Galbraith makes this point - if one looks at expenditure, say, on mobile phones and what it could have been spent on - health, say - that gap is fantastically big. People love mobile phones, and there are millions in this country, but the fact is that we do not really need them. It is clear that no rational society would choose to produce mobile phones rather than the essentials it was actually lacking.

The fourth aspect is that crisis becomes the normal mode of existence of capital. And the solution, in the last 50 years or so, has been war, whether cold or hot. And fifthly, not simply the growth of forms alternative to value, but also decay, as the switch from industrial to finance capital is then reflected in the nature of employment. Finally capitalism is entering a new barbaric phase of irrationality.

What I am arguing, then, is that in this complex situation, capitalism needs to stabilise itself, given the end of the cold war. There are two sides to that.

Firstly, military production. In 1986 arms expenditure in the USA was $300 billion - eight percent of GDP. After that it decreased slightly, until 1997, when it was less than three percent. In 2007 it is predicted to be 450 billion dollars. These are nominal figures. This increase comes at a time of a very considerable budget deficit for the United States - the International Monetary Fund has said this cannot be maintained. In 1981, in a previous period of downturn, Reagan reversed the previous policy and went for a straightforward Keynesian boom by putting huge amounts into the arms sector, arguing that he needed to do so in order to squeeze the USSR. In fact he did it not because of the USSR, but because of capitalism in the United States.

The point is, looking at those figures, increased arms expenditure is unlikely to have much of an impact. In principle of course it could be increased to something like $800 or $900 billion. But it is highly unlikely that that would be accepted by the bourgeoisie or would get through Congress. That means the arms sector cannot be used in the way it was used in the past, when it acted as a crucial lever on the economy though state expenditure.

One could ask, what does it matter if a section of the bourgeoisie does not like it? To control the considerable level of real unemployment and stabilise the United States, one could argue, they have to do it. But they are not going to go back to the period before 1970, simply because they are afraid of the result. Fully employed, the working class would be able to resist the ruling class, more able to demand concessions. The real levels of unemployment are very high by post-war standards. Logically therefore they have to take action, but they are afraid to do so.

If the current budget deficit of around four percent were, say, to be doubled, employment would rise considerably. Any policy of raising public expenditure to the level where the downturn could be halted would mean strengthening the working class immeasurably. They would end the economic crisis, only to be plunged into a completely new, working class versus bourgeoisie, crisis. That is why they will not do it.

The United States is therefore in very considerable trouble, and it cannot get out of it in the way it has done all through the cold war. In these circumstances we have the declaration that there are rogue states that have to be fought.

Secondly, of course, the controls provided by the cold war were crucial. The anti-communist ideology that existed in the United States had a great deal of truth in it. The fact is that the Soviet Union was awful: the standard of living was low and the Stalinist system was not something that anybody would actually want. There was a form of war against the Soviet Union, and a great number of the US population accepted it was necessary, along with the sacrifices that went with it. At the end of the cold war they accept no such thing. Behind that, and running in tandem with it, were Stalinism and social democracy.

Through cold war ideology, social democracy and Stalinism, the working class was effectively controlled, but now all three have more or less ceased to exist. The United States has tried to replace the cold war with terrorism. This is working to a degree - we can cite the various strikes that have been brought to an end, the Patriot Act, the infringements on civil liberties introduced in the United States, as in this country. But this cannot work for very long - it cannot be pursued indefinitely when it is basically a myth. They have conquered Iraq, but they have not succeeded in defeating terrorism.

Going into Iraq was therefore driven by capitalism in decline, when the decline itself has gone so far that what is demanded is the propping up of the system itself. It was necessary to find a country to fight as an excuse to maintain the forms of control and the military expenditure. It is the system itself which demands such action, which actually demands war. Not necessarily to fight a war, but to maintain a war footing. The cold war was the most advantageous type, when they did not often have to actually fight.

So there was no United States conspiracy to seize Iraqi oil. There is a classic economic crisis, of a type that there has not been since 1940. It is an investment crisis, a situation where there is disproportionality between departments one and two, where there is underconsumption - that is to say, a difference between purchase and sale - a huge surplus of capital. The banks are replete with money, but where are they going to invest it? Telecommunications, shipping, the car industry - in all cases there is overcapacity on the one hand and huge surpluses of capital on the other. And of course a drop in the rate of profit. I have already pointed out that the real rate of profit is not very clear, but when there are large-scale bankruptcies it is obvious that things are not going too well.

At the point where the crisis is about to break out, finance plays a crucial role: in other words, lending increases and interest rates go up and then fall. For a long period now we have had low interest rates, in order to prevent a crisis. But this cannot continue forever. The problem is overlending, not just that total debt is too high. It cannot continue.

Crisis occurs when the poles of the system’s contradiction cannot interpenetrate. They hold apart, so that instead of interacting they oppose one another. Opposition moves towards becoming absolute. As a result crisis only becomes manifest when these mediations break down. That means that the causation of crisis has to be seen as a totality, rather than as single events. A single event may trigger a crisis, but that is because the other parts of the causation come into play at that point. In other words the three basic forms - underconsumption, disproportionality and the declining rate of profit - are all operative, although it may be only one of them that appears as the immediate cause.

One could argue that capitalism has been in crisis since 1917; one could argue that the post-war settlement came to an end in the 1970s with the reintroduction of finance capital, and that itself was a crisis; one could argue that the present downturn is a new crisis - it depends on how you want to define it. But in the last period, since March 2000 or so, these different aspects have all come into play.

The crucial mediation at the present time is war: previously cold war; now an attempt at war, and the war against so-called terrorists.

Every capitalist crisis is a crisis of the capitalist system. It can only come to an end when one or the other side wins: either the working class or the capitalist class. If neither wins, the crisis continues. At the moment, it is highly unlikely that the bourgeoisie will be completely successful in driving down working class conditions, which it is quite evidently trying to do in various countries in various forms. But it is equally unlikely at the present time that the working class will take power.

That is not purely an objective matter: it is also subjective. I agree with the CPGB on the party question: one does need a party. In its absence an outcome favourable to the working class will not be achieved. We have seen numerous examples of breakdowns in society - Albania, Ecuador, Argentina, or wherever - even the declaration of soviets. Clearly, a working class goal is needed, and a party that is going to direct things towards that goal.

So I think it is extremely unlikely that the working class will be able to take power in the short term. The logic therefore of this crisis is that it will simply continue, although probably in different forms. There will be a stalemate - in a sense an historic stalemate which has existed since 1917.

The capitalist class cannot solve this crisis though imperialism. Imperialism’s current form does not compare to what existed before 1914 and later, when the Bolsheviks were writing. It does not compare in terms of the extraction of surplus value. The actual cost of the war and occupation of Iraq is not that great, because the United States needs to replace its weapons in any case: it has to renew and improve them all the time and that costs money anyway. The fact that it is actually shooting them off is just a bonus. Therefore such ventures do not play the enormous role that imperialism fulfilled in earlier periods.

Imperialism is not the solution. Social democracy is effectively dead. Stalinism is dying or dead. Neither is there a basis for fascism in the shape of the petty bourgeoisie. An authoritarian state is clearly coming into being and 9/11 is being used for the purpose. If anyone believes the new measures will only be used against so-called terrorists and asylum-seekers, then they are daydreaming. At some point they will be used to attack the left, when that becomes necessary. But that is not quite the same thing as saying there will be a state like Hitler’s Germany, for example.

To conclude, the measures that are being taken to counter the crisis are irrational - they cannot achieve the intended objective and, if anything, they are doing the reverse. The invasion of Iraq has unsettled the Middle East, which gives greater opportunities to anti-American forces and has caused increased divisions in the ruling class. Neither can military expenditure stabilise the system, and the various measures taken against the working class, and the population in general, are not going to work either.

That is not to say that there is going to be permanent stagnation. I think there will be an upturn, but it will be mild - there have been four already since March 2000 and the next one may be a more significant. But since 1989 there has in general been a very low rate of growth. Considering that we do not really know the true situation with regard to profit in the US, it is dubious whether there really was an upturn. And there certainly cannot be a new US boom. Finance capital can only remain at a distance from industrial capital, from which it parasitically extracts surplus value, for a limited period. If industrial capital continues to be run down, there can be no such extraction.

The United States balance of payments deficit is now catastrophic. It is not going to come down. If it is allowed to go on for another four years the US will be in incredible trouble. At the moment there is a net debt of three trillion dollars. That is four percent of gross domestic product, and is set to increase to eight percent, at which point it will become unsustainable. Logically the only way out is through devaluing the currency and stepping up protection, which in turn implies further downturn for the rest of the world.

Given the increasingly irrational form of capitalism at the present time, it is highly unlikely that the capitalist class will succeed in ending its current crisis.