04.07.2013

World economy: Unforseen consequences

The market has failed and cannot but fail. Yet there are small intimations of fundamental change, argues Critique editor Hillel Ticktin

We are currently witnessing many results of the downturn (or depression) that were, in many ways, predictable, such as declining standards of living and a further increase in social inequality: that is the overall background. Such things were also occurring before the downturn, but now they have become worse and this has led to a series of demonstrations, strikes and riots all over the world.

We have seen rioting as a form of demonstration, where looting takes place, in Britain and we have seen various types of protest in other countries, including more organised forms in the Arab countries. Yet we have also seen more important demonstrations and strikes occurring in a number of states. This is particularly true of South Africa in the last six months, with important strikes in the mines and in other parts of the economy, including agriculture. Very recently in Brazil, there have been mass demonstrations, almost of a new kind. It is very interesting to take a look at events in these two countries, because they are crucial to understanding what is happening in the world and crucial in acting as a catalyst for a change.

Separating off

Of course, the failure of the market rests in the downturn. The fact is that we remain in the depression that began in 2007. Even though we have been through ups and downs, the main tendency has been downwards. For the overwhelming majority of the world’s population, it has been a troublesome time and - for some - an absolute disaster. Looking at the platinum mines in South Africa - we find a situation where, given inflation, the miners are being paid hardly any more than they were when the new post-apartheid government came in, illustrating very clearly the nature of capitalism and the fact that the issue is capitalism and not simply race. While race was obviously crucial to the previous regime, the fact is that even after the abolition of the various forms of discrimination, the lot of the ordinary worker has not changed very much.

So it is clear that the market has not worked. The International Monetary Fund’s proscriptions for South Africa have not worked and discontent in South Africa is rising and rising. The South African government has not really proposed anything in response. South Africa is one of the most unequal societies in the world and there are no proposals to change that. This does not simply apply to the mines, but throughout the economy. The interesting thing about the miners’ strikes is how the workers separated themselves off from the Congress of South African Trade Unions, which is controlled by the South African Communist Party.

The SACP is in a coalition government alongside nationalists and is, in fact, an integral part of the African National Congress - it was crucial to the ANC’s reconstruction in the 1950s. We are thus witnessing workers separating themselves off from what claims to be a leftwing government, but in reality maintains the market, in close collaboration with the International Monetary Fund. With workers striking throughout the economy, things are obviously changing.

But we have to ask why: why is this occurring? In part, it is because of the downturn itself, because the sale of minerals and metals has gone down (at least in price) and therefore reflects a change in total sales. The market has therefore precipitated something that was going to happen anyway: ie, the formation of a union against a government that is not leftwing, but rightwing. In fact, this government is very much part of the Stalinist culture that existed at one time and remains in some parts of the world.

In Brazil the overall situation is different, but the government there also claims to be leftwing. Nonetheless, given the downturn, the rapid economic growth that the country has seen of late has simply come to an end. Growth figures are down to about 1.5% over the last period and the consequence is, of course, that the government cannot fulfil its promises. Indeed, it is always under question whether any government can fulfil its promises under capitalism, especially when it comes to raising the standard of living. We have seen protestors demanding better education and healthcare, something that we would expect any leftwing government to undertake. Yet the market simply does not support public enterprise or the public sector. Health and education are needs-based sectors, not market-type sectors, and in fact they do not flourish in private enterprise, whatever self-serving arguments that have been produced.

Middle class and youth

These protests come against the backdrop of an increasing proletarianisation of the so-called ‘middle class’ that has also been occurring throughout the world.

In a sense, this class has never been a fully separate ‘middle class’. The vast majority of people in that category are white-collar workers. Some are routine white-collar workers that are very similar to the lower levels of manual workers. A considerable number of them are also highly skilled. Yet they are, nonetheless, white-collar workers. They are workers who sell their labour-power to employers and are dependent on these employers hiring and firing them.

Up to a point, there had been a certain ambiguity about the position of this category of workers: sometimes they had been provided with guaranteed employment; sometimes there was a patriarchal form of control; and so on. Yet today this group has been increasingly proletarianised both in terms of its wages and its conditions. Previously often having a relatively relaxed attitude to their work, today white-collar workers are expected to work fixed hours and take fixed holidays. They are also subject to regular checks, as in a factory. Secondly, their pay has changed: whereas formerly it was relatively high in relation to manual workers, today it is considerably less and can even be lower than that of skilled manual workers.

This increasing proletarianisation is significant, because the majority of students enter this group of workers: that is their future. It is therefore not surprising that, when students look at what lies ahead of them, they are worried and want to act - quite independently of other movement in society. However, when this combines with a change in the overall capitalist economy, where the possibilities of employment - even under the conditions described above - are reduced, it is not surprising that they will act or consider acting. We have to see the events in Brazil, Turkey and other countries in this context.

There is also another aspect. Irrespective of this proletarianisation, there is the fact that young people who are not yet subject to controls at work, who have not experienced the forced adaptation, discipline and punishment involved, have not become either cynical or despairing, as many older people do. It is also the case that young people, who have not been through these experiences, do not feel the same need to kow-tow to authority and consequently, when observing the harshness of the market climate, they feel that they have to act. Their parents basically agree with them, but fail to do anything. That is very common today. So one expects students to stand up for the world, to stand up for a better future, to stand for the future that their parents actually desire as well, but cannot act to obtain.

Historically, this has also been the case. There is the very famous example of the Narodniks in Russia in the 1860s-70s, where groups of students would go out to the peasantry. They often did not understand the situation on the land and were often not accepted. However, the fact is that a very large percentage of the students, not just a small minority, sympathised with the oppressed and went to help them. From that point on, a precedent had been set.

Of course, for many the events of May 1968 are in living memory, when young people moved into struggle in Paris and beyond. We may expect further demonstrations and riots along the lines of those that have taken place across the world. Ultimately we can expect the whole population to move, with parents struggling alongside the youth as well.

Porous BRICs

It has been fashionable in economic circles to speak of the Brics (Brazil, Russia, India, China) as economies that would save the world. Somehow, the ruling class in these countries was going to lift the economy so that the standards of living for all would increase, growth would be considerable and the world would be a better place.

In reality, there never was a hope that such a thing would happen. It is amazing that anybody bought the idea. Yet it was not just propaganda. If one reads the Financial Times and other newspapers, it was genuinely believed that China would pull the world out of the depression. It was believed that India would join China and that Russia would also be part of this group (South Africa was sometimes included, sometimes not). It never made any sense. In the case of Russia, of course, there is a crippled economy, which has seen the export of capital rather than incoming investment.

It is really sad to see how much of a rustbelt Russia has become. However uncompetitive it was on the world market, it once had an industry that could supply, up to a point, the needs of the population. Of course, the quality of its products was very low, but it could at least meet that demand. This industry has been allowed to fall into disuse. There is an arms industry and other limited forms, but the Russian elite has not reinvested and has not attempted to build up production. Nor has it tried to protect industry in order to make it competitive on the world market or to raise the domestic population’s standard of living. Under these conditions, what we find in Russia is an economy which is not growing in any real sense, but which is supplying much of the world with minerals, timber, furs, oil, diamonds and gold. There is a supply of raw materials, but only limited industry beyond the military.

There is no hope whatsoever of Russia developing an emerging economic lifeline. If anything, it will contribute to pulling the world economy down. This situation reflects the fact that the shift from the Stalinist economic system to capitalism is still in progress and it is doubtful whether it will be completed at all. It remains an aborted state that could be called a particular form of capitalism or simply a disintegrating Stalinism. In other words, the market has failed. It did little else than produce a series of oligarchs, who own many of these minerals and much of Russia’s gas.

The situation in China is different. There is no question that the system was able to grow. Yet the growth itself had to reach some kind of peak. It has now done so. Just like in the former Soviet Union, where there was a relatively high rate of growth for a period of time that peaked and went down by the mid-1970s and 1980s, so in China we find that, once all the labour that it was possible to absorb had been drawn in, and demands for more skilled labour for the factories could not be met, growth necessarily declined. It was no longer possible to easily direct workers from one point to another. It was no longer possible to exploit workers to the degree to which they were exploited before in terms of hours of work, conditions and pay.

Consequently, the growth rate, while still relatively high compared to the west, is declining. Now this was an inevitable result that we could have predicted right from the beginning of the industrialisation period. What has made it worse for China, of course, is that the downturn has had a debilitating effect on its export-driven industry. In other words, the malfunctioning market has limited growth in China. The actual success in China is to a considerable extent due to the fact that the state itself could direct the economy and could provide the necessary incentives. Some people argue, indeed, that the Chinese growth rate had much to do with the subsidies (land and utilities, for example) provided by the state at a very low rate, or even for free.

Yet this makes no difference to the argument. There was no possibility of China pulling the world out of the overall depression or leading the world to the promised land. That is not China’s fault, but simply due to the fact that the market cannot do such things. It was the inevitable result. In order to maintain the surplus and in order to expand, China had to invest in motorways and towns - but the motorways had few cars and the towns had few occupants. The fact that they had to opt for such overinvestment in infrastructure is a symbol of failure, of course. There was no hope that India could play this role either, especially in light of the overall poverty there.

Control from below

One should point out not only that the market cannot save the world (which it clearly is not doing), but also that the various Stalinist remnants - as embodied in the Communist Party of China or the SACP - as well as the various social democratic forms that exist, as in Brazil, cannot do the job either.

We thus have to conclude on a more optimistic note. It does look as if, with the growth of the various movements and the spontaneous eruption of young people onto the streets in order to demand change, we can hear, albeit in the far distance for now, the drumbeat of revolution. It is there.

The youth are beginning the process. It may take some time, and some of us may not be around when the march comes, but it is definitely there. The despair that some people held at a time when there was no hope for change, no hope for socialism, is no longer justified. We can see that change is in the air.

We should not think that these protests cannot get very far or that they will not result in any change because they are not led by a party or parties. It is true that the situation has not really altered in the Arab countries. However, these are the beginnings, and even in those countries we can see that the attempt to hold back history will not last that long. The backwardness of religion cannot last as a means of holding back people.

In the case of countries like South Africa and Brazil, we can expect the authorities to take note - they are clearly no doubt worried and somewhat frightened. They will have to choose between repression and concessions. We do not yet know which way they are going to go. So far they have not retreated much. However, they know that this process will not stop and that it is not possible to hold back the population forever. If they do go along the route of repression, then the result will be all the worse for them. We know that from history.

So we can expect a change to come. We can expect the movements to gradually evolve - future parties will be very different from what exists today. Part of the hope provided by the demands of the protestors in Brazil is that they revolve around control from below - one of the central demands of socialism. That is what they are calling for: direct democracy. This stands in total contrast to the authoritarian forms that lie behind the formal democracy that exists in many countries today.