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Lenin Versus Kautsky in China: A Case Study of the Chinese Insertion into the Global Soybean Commodity Chain – Tomaz Mefano Fares

1. Kautsky’s Concept of Imperialism

Since the second half of the 19th century, advanced capitalist economies have unleashed unprecedented expansion that culminated in colonial empires in Africa, Asia and Central America. The reasons why such expansion took place and its implications for the global relations of power were the object of analysis of authors such as Hobson, Lenin, Hilferding, Rosa Luxemburg, Bukharin, and Kautsky.

For most of these authors, such international expansionism had a direct relation to domestic social and economic transformations. Rather than reflecting purely a tendency towards the military conquest of foreign lands, they identified new dynamics of capitalist development that have propelled these countries to go global. Therefore, although the former colonial system has perished, imperialism is still alive. This is essentially because central economies are still reproducing most of the expansive dynamics described by the authors above.

However, China has recently emerged as a new economic power, and its investments in global commodity chains have recently been among the world top investors. For instance, in the soybean commodity chain, Chinese enterprises have merged and acquired agri-food transnationals, becoming one of the leading world players in different segments of the downstream and upstream production. This article verifies whether the development trajectory of China’s soybean complex has followed the same premises of other imperialist countries, or whether it has followed different dynamics.

Before addressing this question, we need to take into account the different interpretations of imperialism in the related literature. Among the authors cited above, Lenin and Kautsky, who were prominent leaders of the international workers’ movement, had contrasting views on this matter. This article will examine both authors’ analyses and will relate them to China’s internationalisation path. Through a theoretical contrast, this article suggests that Kautsky’s notion of imperialism is relevant to understand China’s industrial expansion and its inclination to seek resource control overseas. However, the development trajectory of enterprises like China National Cereals, Oils and Foodstuffs Corporation (COFCO) goes beyond Kautsky’s theoretical approach. It is only through Lenin’s lens on what he calls the upper phase of capitalism that we can find a parallel to COFCO’s growth and international expansion.

2. Kautsky in China

Starting with Kautsky’s theory, he saw imperialism as a political strategy that corresponded ultimately to the industrial expansion of the central capitalist countries. In order to realise surplus value, industrial capital has sought control of agrarian resources and new markets in non-capitalist countries (Kautsky, 1914). In his work The Agrarian Question (Volume 1 and 2), Kautsky argued that resource control had a mutual effect on the advanced capitalist economies: on the one hand, agricultural imports would lower production costs, serving as cheap industrial inputs and, on the other hand, would foster the scaling-up of agricultural production throughout European industrial development. Regarding the latter phenomenon, low-value food crops from the regions of “oriental despotism” (Russia, Turkey and India) and the “free colonies” (USA and Australia) – who enjoyed abundance of available land and low wages – would put pressure on domestic production, contributing eventually to intensifying the agrarian differentiation in favour of large petty commodity producers and agro-industrial capital (Kautsky, 1988: 236-297).

Kautsky’s formulations regarding the domestic changes and international expansion of imperialist countries correspond, to a certain extent, to China’s economic development and its recent internationalisation path. Just like the European countries in Kautsky’s day, China has demanded large amounts of natural resources and agricultural products to facilitate its industrial growth for exports and increasing domestic food consumption. Therefore, China’s investment overseas follows the same industrial needs to control resources and secure expanding consumer markets through products from overseas (Lopes Ribeiro, 2017; McKay et al., 2016).

The reproduction of such a model of expansion has been enabled by an historical configuration where the Chinese Communist Party has preserved a strong state ownership while promoting economic reforms. This has placed the state in an advantageous position to guide industrial modernisation throughout China’s integration into the capitalist world. As Belesky and Lawrence (2019) notice, this type of political and economic formation, which they classify as state capitalism, has developed through a neomercantilist relation to world markets. That is to say, China’s industrial development has relied, on the one hand, on export-led economic growth under state support and, on the other hand, on increasing reliance on raw materials and agricultural products from abroad (Belesky and Lawrence, 2019).

The development trajectory of China’s soybean complex up until the Xi Jinping era reproduces this form of economic growth. Accordingly, China’s rapid urbanization, rising incomes and improvements in living standards have transformed its consuming habits towards diets high in protein, fats and sugar. Although cereals are still the foundation of the diet in China, there has been a consistent increase in meat and fish consumption in recent years, as it is shown in the graphic below.

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The “meatification” of the diet in China has been followed by the boom of its livestock and feed industry. McKay et al. (2016), Oliveira and Schneider (2014), and Sharma (2014) attribute such an industrial boom to state efforts to locate China’s economy in the most relevant activities in terms of added value within the food industry. Accordingly, since the 1990s, the Chinese government took clear steps to increase the provision of feed crops from world suppliers, linked to an industrialisation effort in the livestock and feed sectors.

Between 1995 and 1999, the Chinese government has gradually cut off soybean import tariffs and eliminated its import quotas (Gale, 2015: 5). Soybean and maize are considered the two primary crops for feed purposes (Weis, 2007: 17). After the soybean oil is pressed, its hardened mass – the soybean cake or soybean meal (SBM)– provides protein-intensive feedstock. The SBM is responsible for an average of 75% of protein meal, as it is one of the key components of animal feed (Sharma, 2014: 16).

At the same time, the Chinese government has put great effort into protecting the national ownership of its feed and livestock industry. It has imposed taxes on processed soybean imports and provided massive state investments to Chinese enterprises, particularly after the international price peaks that affected this sector in the mid-2000s (Oliveira and Schneider, 2014; Sharma, 2014; Yan et al., 2016). Earmarked loans, subsidies and public offerings have stimulated the domestic soybean processing industry to compete and surpass the North Atlantic-based transnationals, as is shown in the figure below.

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Source: Data compiled by the author on bases of “Qichacha – Enterprises Investigation” (2019), and “Sublime China Information (SCI) – Database” (2018).1

On the other hand, the overflow of imported soybeans has changed significatively China’s agricultural production by introducing capitalist imperatives of growth. Accordingly, after the market liberalisation, China’s soy farmers switched to corn plantation or engaged in other economic activities – if not becoming idle (Yan et al., 2016). Similar to the transformations described by Kautsky of the European rural economy, the devaluation of profits and stagnation of China’s soybean production was followed by the integration of agri-food enterprises into the national and international supply chain.

Thus, the economic growth guided by the Chinese state has consolidated a domestic processing infrastructure with strong national ownership. At the same time, the activities with less value addition, such as greenfield production, have come into the control of agribusiness and have mostly been relegated to agricultural exporting countries like Brazil, as shown in the table below (extracted from USDA, 2017). Thus, in order to obtain value-addition at the domestic processing segment, Chinese companies have sought control over price and supply through better access to food-producing resources overseas.

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3. China goes Global with the Soybean Commodity Chain

Following China’s development trajectory in the soybean commodity chain, its earlier investment projects overseas were directly linked to China’s domestic processing industry. However, in recent years, Chinese companies have diversified their investment strategies and transferred a considerable portion of their industrial assets and trading infrastructure to leading exporting countries. This shift has revealed the limits of Kautsky’s theoretical approach to understanding China’s international expansion.

From the beginning of the 2000s to 2012, Chinese enterprises have concentrated great effort in purchasing farmland abroad. They mainly sought benefits from geographical advantages and more favourable land prices in Brazil and other exporting countries (Escher et al., 2018; Myers and Guo, 2015; Oliveira and Schneider, 2014).2 Nevertheless, this type of investment has not been as successful as expected. China’s direct engagement in agricultural production was particularly sensitive worldwide. It encountered a disproportionate negative media coverage, along with other political obstacles related to environmental and sovereignty issues (Oliveira, 2015: 18-24). For this reason, a significant number of farmland purchases and other related investments that were previously announced had to be cancelled, while transnationals from Europe, U.S., Argentina and Japan acquired 750.000 hectares in Brazil for soybean production for export (Oliveira, 2015).3

According to Oliveira (2015), Myers and Guo (2015), and Escher et al. (2018), this has contributed to a diversification of investments from 2012 onwards. Since then, Chinese enterprises engaged in a wide range of activities abroad, such as production and commercialisation of agrichemicals, construction of ports and logistics infrastructure, holding of shares, mergers and acquisitions of multinational companies, and loans and financial services.

At the downstream level, the most prominent enterprise to invest in the global soybean commodity chain has been COFCO. This is a SOE member of the state-owned Assets Supervision and Administration Committee (SASAC), an administrative agency of China’s State Council. COFCO’s engagement in the global soybean commodity chain has been accomplished mainly through mergers and acquisitions of multinationals that already operate in this field. In 2014, COFCO acquired the Dutch company Nidera (for USD 1.2 billion) and the Asian company Noble Agri (for USD 1.5 billion).

The integration of Nidera and Noble provided a direct entry “into the procurement and marketing of soy in the whole of the Southern Cone” (Myers and Guo, 2015; Oliveira, 2015). In 2018, COFCO controlled over 11 percent of the Brazilian grain exports, becoming the fourth largest trader in the country, ahead of Dreyfus. It also became the second largest trader in Argentina, only behind Cargill, and it claims to be the leading grain exporter of Paraguay, and Uruguay (Escher et al., 2018; Saul et al., 2018; “Zhongliang jituan zai agenting dazao shijie daliangshang [COFCO builds the largest international grain merchant in Argentina],” 2018).

However, COFCO’s investment strategy has set the company in a position that goes beyond the needs of guaranteeing supply control for China’s industrial growth. COFCO has inaugurated and intensified capitalist dynamics of accumulation abroad and has operated and sought profit from sectors that are not directly linked to the Chinese soybean complex. COFCO has integrated into different segments of the commodity chain with the claim of optimising “resources and assets to create and apply different profit models aiming to maximise revenues” (“Our strategy,” 2018). Only in Brazil, it operates two main port terminals in Santos that import and export agricultural and processed products to and from Asian and European countries,4 along with 12 silos with 1.18 million tons of storage capacity, one transfer centre, two soybean crushers, four sugar mills as well as their associated farmland, estimated at around 120,000 ha of both owned and leased sugarcane fields (Oliveira, 2017: 9; “Zhongliang jituan kaikuo baxi shichang chujian chengxiao [COFCO’s success in opening up Brazil market],” 2015).5

Therefore, COFCO became a wholly internationalised enterprise. Its businesses have reached over 140 countries and regions in the world, where it obtains 50 per cent of all its earnings (“About COFCO” 2018). Regarding the soybean processing sector, one third of COFCO’s soybean crushing capacity is currently located abroad – 30 million out of 90 million tons (“About COFCO” 2018).

COFCO’s international constitution and its integration into all segments of the soybean commodity chain reveal a scenario that goes against Kautsky’s description of imperialism. China’s international expansion with COFCO, although it meets its industrial needs by securing resources abroad, is not based purely on a form of industrial capital neither on an exclusive neomercantilist trading relation. In order to understand COFCO’s prominence in the soybean commodity chain, we need to review Lenin’s concept of imperialism and its distinction from Kautsky’s.

4. Lenin’s Concept of Imperialism

Lenin, in his work “Imperialism, the highest stage of capitalism”, interpreted the international expansion of advanced economies as more than a political aspiration of industrial capitalism. He identified a series of changes in the capitalist class that culminated in what Hilferding had earlier called financial capital. This is the junction between industrial and banking capital in its concentrated form. For Lenin, financial capital contrasts with the early period of “free competition” as monopolistic enterprises dominate large shares of market and production (Lenin, 2015).

The surplus capital generated by financial monopolies has propelled the shift from simple forms of commodity export to the export of capital. Through processes of capital accumulation beyond a given national territory, the capitalists from central countries were able to obtain huge amounts of profit and repatriate them to their home countries. This would not be possible, though, without a political and military effort to seize the world into areas of influence (Lenin, 2015).

The following sections will review each aspect of the economic transformations described by Lenin and will verify their applicability to the actual insertion of China into the global soybean commodity chain.

5. The Concentration of Capital in China’s Soybean Complex

A common feature of capitalist economies in Lenin’s analysis is the tendency towards concentration of capital. Concentration can be accomplished either by a combination of different production processes and/or by scaling-up (Lenin, 2015: 17). The former occurs through the integration of a single enterprise into consecutive stages of production or into branches that are auxiliary to one another, while the latter is accomplished through technical improvements and an increase of the volume of production.

The scaling-up and combination of agricultural production in China has been accomplished through the penetration of capital in commodity chains and the integration of different sectors, such as processing, farming, and trading by agri-food enterprises. Taking the processing sector as an example, it has undergone rapid expansion over the last two decades. Chinese soybean crushers – that produce animal feed and edible oil – have been able to build large and modern plants with state support, expanding rapidly the scale and geographic scope of their activities (Gale, 2015: 9; see also Oliveira and Schneider, 2014, and Sharma, 2014). At the same time, soybean crushers have grown by forward-integrating into livestock production (Fang, 2011, in Gale, 2015), as well as, in the case of the largest ones, integrating into crop farm production (China Securities News, 2015, in Gale, 2015: 10) – through direct engagement in farming and/or by selling services and providing credit to farmers (Yan and Chen, 2015; Zhang and Donaldson, 2008).6 In addition, some companies have also started to supply branded meat products to self-operated supermarkets and specialty shops in an attempt to convert themselves from “feed companies” to “food companies” (China Feed Industry Association, 2014; in Gale, 2015).

The modernisation and vertical integration of Chinese processing plants have shaped and have been shaped by a powerful domestic constituency of companies vested in the entire supply chain and with a huge production capacity even by international standards (Sharma 2014). According to Feed International, among the world’s top 101 companies in the feed processing sector, 23 were Chinese (Roembke, 2015, in Gale, 2015).

Among these companies, COFCO has the leading position. This achievement has also been accomplished through a strong concentration of capital integrated into consecutive stages of the production chain. Besides processing, COFCO extends its operations to all activities of the upstream and downstream levels of production. The former entail seeds, technological development and distribution of inputs, while the latter involve engagement in agricultural production through sales platforms, technical support, financial services, storage services (“Marching onto the Global Scene,” 2018), distribution, and online food retailing (Ma, 2017). COFCO is also strongly engaged in livestock production. It holds leading industries, such as Wuhan COFCO Meat and COFCO Meat (Jiangsu). In addition, COFCO owns one of China’s largest food and drink brands, delivers rebranded food products,7 and owns 65% of shares in Coca-Cola Beverage in China. Moreover, COFCO has horizontally integrated into branches beyond the foodstuff business.8

6. The Financialisation of China’s Agriculture

From an historical perspective, the formation of financial capital in advanced capitalist countries has been accomplished by the increasing merger of banking into industrial activities, enabling its direct or indirect control over production. This includes the purchase of shares and the presence of bank representatives on the boards of directors, as well as the establishment of holding companies, concerns and ‘influence groups’ (Lenin, 2015). At times, the accumulation of enormous profits has enabled corporations to expand primarily by self-financing, freeing themselves of bank tutelage (Mandel and Germain, 1966).

Regarding China’s agricultural and processing sectors, existing literature shows that Chinese agri-food corporations have increasingly relied on financial mechanisms to grow and specialise in financial services at the production level. For instance, Yang et al. (2016) argue that national players have obtained most of their earnings through the provision of farming loans. They “mobilize and pool the savings of producers and use it for reinvestment in the supply chain” (Yang et al., 2016: 18). Gale (2015) notices that agricultural enterprises have seen their borrowings soar – mostly from financial firms and investment funds. As the figure below shows, the weight of liabilities in the sources of corporate financing have become more and more significant among China’s feed enterprises (Gale, 2015).

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In COFCO’s case, its level of indebtedness has propelled the creation of financial instruments to raise funds. Since 2000 it has accelerated a finance reform that culminated in the creation of China Agri-Industries Holdings Limited, a subsidiary listed in Hong Kong that has been in charge of most of the financial operations of the entire group (Escher et al., 2018b: 311; Ma, 2017: 11). At the same time, COFCO has expanded its financial activities by investing in banking, securities, futures9 and insurance in China and abroad – in partnership with many foreign financial companies (“COFCO Capital,” 2018).

7. The Formation of Monopoly Capitalism in China

As it has been seen previously, Lenin noticed the formation of great capitalist monopolies derived from the processes of concentration and financialisation of capital. These are classified as huge capitalist enterprises or unions of capitalist enterprises that gather the most important part of the production or sale of a given product (Lenin, 2015). As Marx has underlined in Capital Volume 3 (chap. 23), the rapid growth of these corporations represented a new form of expropriation by a small handful of big capitalists. Accordingly, the mechanism which enables this process is an increase of the amount of capital from the accumulation of surplus value. After reinvesting part of the surplus value appropriated in the production, capitalist enterprises become the owner of an ever-increasing capital and, throughout market competition, are able to ruin and absorb small and medium capitalist enterprises.

This process opens up possibilities for the concentration of capital in the hands of a few large enterprises with the capacity of limiting competition and setting high monopoly prices for goods. The competition between monopolistic enterprises, though, does not overcome competition. Monopoly capitalism merely raises the competition to a higher level that encompasses new and bigger competitors (Mandel and Germain, 1966).

Monopolistic formations can be verified throughout all sectors of China’ agri-industry. Taking the feed sector as an example, although small and medium enterprises are still numerous, a small number of leading companies have increased their control over a significant part of this sector. By 2010, 16 companies were producing 33 percent of total output in China – each with an individual output greater than one million tons annually (Sharma 2014: 21, see also Reuters, 2010, in Sharma 2014: 18). Only three years later, this portion had changed to 10 companies accounting for 36 percent of the total feed output. Still, the Chinese central government has publicised its will to reduce the number of small firms with inefficient facilities, striving to transform China from a “big feed country” to a “strong feed country” (2011-15 Five-Year Plan for the feed industry, in Gale, 2015).

However, unlike most actual capitalist economies, the Chinese state has played a major role in the concentration and formation of monopolies in the soybean complex, as well as in other industrial sectors. Although this is an historical process with particular characteristics, the state’s role as the main sponsor of capitalist monopolies has had innumerable historical precedents.10

In China, this process has been the result of constant corporate reforms of the state sector. Accordingly, since the 1980s, China’s economic reforms allowed through various phases the opening-up of markets, privatisation of small and medium urban state and collective enterprises, as well as township and village enterprises, along with attracting foreign investments in various areas of the economy (Andreas, 2008; Gallagher, 2005: 131).

Under this scenario, the Chinese leadership announced the policy “hold the large, let go the small” (zhuada fangxiao), which approved the merger and acquisition of public firms, while adapting them to a technologically advanced and competitive constitution (Gallagher, 2005: 140; Naughton, 2010). This effort was formalised at the Fifteenth Party Congress in 1997 when Jiang Zemin announced China would “establish highly competitive large enterprise groups with transregional, inter-trade, cross-ownership, and transnational operations” (Jiang Zemin, 1999: 194, in Gallagher, 2005: 140).

Afterwards, during premier Wen Jiabao’s term in office, the Chinese government continued promoting the formation of bigger and stronger state-owned conglomerates by providing abundant stimulus packages (Shen et al., 2017). As a result, the average asset size of SOEs has grown faster than for non-SOEs, as can be seen in the graphic below.

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Source: CEIC, in Gao, 2010.

The corporate reform of the Chinese state sector also resulted in the creation of a competitive environment that has permeated China’s SOEs (Gallagher, 2005; Naughton, 2010). This was marked by losses of labour rights and a culture of rivalry between workers, as well as increasing competition in all the sectors in which state ownership was prominent. For instance, only within the tiny group of companies under SASAC, besides COFCO, there are three other agricultural companies that dispute the same markets. They are China Grain Reserves Corporation, ChemChina (which in February 2016 purchased the Swiss seeds and pesticides group Syngenta), and China National Agricultural Development Group.

Therefore, the reform of state-owned enterprises has shifted their mission of delivering public services to becoming “corporatised” profit-seeking companies and vehicles for the speedy accumulation of great fortunes (Andreas, 2008; Au, 2012; Morais, 2017; Shen et al., 2017). A considerable number of SOEs are listed on the stock exchange, boosted by the establishment of new investment funds and financial holdings (Wang, 2015, in Morais, 2017: 13).

The transformation of China’s state sector allowed SOEs to lead in the concentration and financialisation of production. Therefore, COFCO became a prominent monopoly in China’s soybean complex. Since the 2000s, COFCO has expanded rapidly through more and more frequent mergers and acquisitions of auxiliary companies. For instance, from 2004 to 2016, it merged and acquired 14 national and international corporations from different segments of the food production and supply chain (see the graphic below), and it spread its scope to 2.3 million terminal sale points all over China’s cities, counties, and villages (“About COFCO,” 2018).

Year

Merges

Acquisitions

2004

China Native Produce & Animal By-Products Import & Export Corporation (TUHSU).

2005

Xinjiang Tunhe Investment Co., Ltd.

2005

Xinjiang Sifang Sugar (Group) Co., Ltd.

2005

37.03% of the equity in China Resources Biochemical (600893)

2005

100% of the equity in China Resources Alcohol

2005

20% of the equity in Jilin Fuel Ethanol

2006

BBCA Biochemical

2006

China Grains & Oils Group

2011

Completed its acquisition of the Australian sugar refinery Tully Sugar

2013

China Grains & Logistics Corporation.

2014

Noble Agri (completed in 2016)

2014

Nidera (completed in 2016)

2015

China Huafu Trade & Development Group Corporation

2016

Chinatex Corporation

Source: Data compiled by the author on bases of COFCO’s official website http://www.cofco.com (“COFCO, Histoy and Honor,” 2018).

8. Overcapacity in China and the Tendency for Exporting Capital

In Marxist terms, the finality of capitalist accumulation is, besides obtaining profits, to provide the necessary conditions for more efficient forms of further accumulation. However, the development of capitalism in advanced economies has faced the common problem of “maturing too much”, consequently finding a less and less “lucrative position” for further capital accumulation. This scenario is attributed to the increasing surplus of capital through gains of productivity with the aid of technological innovations, as well as the decreasing purchasing power of the working class due to unemployment (the saving of ‘labour-time’ at production). As a result, profit rates decrease, and surpluses of capital are unable to be entirely absorbed within a given territorial system (described in Capital, Volume III, chap.14).

This tendency is manifested particularly in the recent phase of China’s economic reforms when the forms of capital accumulation have shown signs of saturation. Accordingly, China’s high economic growth in the first three decades of reform relied on two main factors: (1) the state’s ability to mobilise resources in order to increase the country’s capital stock (the total value of equipment, buildings and other forms of physical capital); and (2) productivity gains, followed by the gradual and increasing transfer of those resources into private hands (Kroeber, 2016: 214, 219). In other words, China’s state policy has committed to boosting the country’s capital stock by adding more capital into the system while increasing its efficiency.11

However, the shrinking of export markets and the over-production in China after the world financial economic crisis imposed obstacles for absorbing greater amounts of capital surplus in production. Consequently, a further mobilisation of resources came with continuously lower returns (Kroeber, 2016: 214). As a recent OECD report shows, between 2007 and 2014, the average return on capital in China fell from 17 percent to 9 percent (OECD, Economic Survey in China 2015, 26, fig. 12, in Kroeber, 2016: 219).

In the agri-food sector, Chinese investments have surpassed the capacity for absorbing surplus capital for expanded reproduction. As a result, the feed and other related industries have faced severe over-capacities. According to the government agency China National Grains and Oil Information Centre (CNGOIC), in 2012, soybean crushing plants were already on average running at half of their capacity, although they were still expanding (in Sharma 2014: 16), which means that investments in processing infrastructure have resulted in less profitable returns.

Returning to Lenin’s theory on imperialism, the decreasing rate of profit in advanced capitalist economies is the main propelling force for the export of capital. The surplus capital from production, in order not to devaluate, must be allocated to find room for its profitable realisation elsewhere (Lenin, 2015). New processes of capital accumulation are set in motion where there are advantages like low wages, cheap raw materials, and relatively low land prices; and it can be accomplished by different means, such as by granting loans to institutions abroad, by setting up industrial, commercial and banking enterprises and concessions abroad, by building infrastructure and by purchasing companies abroad.

From this perspective, COFCO’s inclination to expand internationally follows the same premise of expanding capitalism as in the case of advanced economies as described by Lenin. COFCO has turned its surplus into production in other areas by building processing and trading infrastructures in the Southern Cone, and by integrating into all segments of the global soybean commodity chain. Just like other capitalist agri-food transnationals, COFCO overcomes the tendency for decreasing rates of profits through continuing capital accumulation abroad. It escapes from the over-capacity in the domestic soybean complex by exporting capital to places and segments where further surplus value is obtained from production and trading.

9. Conclusion

Kautsky’s theoretical approach to capitalist development and the international expansion of advanced economies is useful in understanding China’s early tendency of investment overseas. The efforts made by Chinese enterprises to acquire foreign land for agriculture corresponded to the demands of its domestic soybean processing industry. The state has played an active role in guaranteeing the national ownership in the high value-added activities of the global soybean commodity chain, supporting industrial modernisation and a strategy for resource control.

However, COFCO’s internationalisation path has gone beyond Kautsky’s premises. Its increasing transfer of assets overseas and expansion into all segments of the commodity chain can only draw parallels with Lenin’s analyses on imperialism. Accordingly, the concentration and fusion between banking and industrial capital in China’s soybean complex has consolidated huge financial monopolies. With state support, national conglomerates have emerged and dominated large shares of market and production. The excess of capital stock – that derives from productivity gains and huge mobilisation of resources – has propelled Chinese conglomerates like COFCO to invest abroad. Therefore, the surplus capital in China’s soybean complex has found room for profitable realisation elsewhere.

This article has only explored the economic aspects of Lenin’s analysis. Hence, further investigation is required regarding the political determinations of imperialism. We still need to answer what the class fractions behind China’s financial monopolies are, how these fractions have expressed their class interests through state institutions and policies, and whether these policies are responsible for China’s political domination over other countries – the consolidation of spheres of influence.

Nonetheless, the transformations in China’s soybean complex and the international expansion of some of its enterprises give evidence of an imperialist form of capitalist development. This new economic base sheds light on the prominent role of China’s transnationals in global commodity chains and China’s central position within world power relations.

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1 This table took into account the Chinese SOEs COFCO, Jiusan, Sinograin, and Chinatex; the Chinese private enterprises Bohai, Hopefull, and China Sea; and the transnationals Wilmar International, Cargill, Bunge, Louis Dreyfus, and Noble Agri (a Hong Kong-based transnational that now belongs to COFCO).

2 In 2007, the Hong Kong company Pacific Century Group acquired 27.397 hectares in a minor transition led by the Argentinean CalyxAgro. A partnership between the private firm, Fudi Agriculture Co from Zhejiang Province, and the SOE Beidahuang, from Heilongjiang Province, acquired 600 hectares in the Southern Province of Rio Grande do Sul and 16.000 hectares in Tocantins, and in 2011, sold it to Universo Verde, a subsidiary of another Chinese SOE, the Chongqing Grain Group (CGG) (Escher et al., 2018b: 306). In the same year, CGG bought 52.000 hectares on the east of Bahia State for soybean production.

3 The most important companies are Cresud/Brasilagro, Adecoagro, El Tejar, TIAA-CREF, Multigrain/Xingu Agro, and V-Agro (Oliveira, 2015).

4 The two terminals are T12A and Cereal Sul. The former has an annual transit capacity of over 3 million tons. It is not only specialised in exporting agricultural products such as soybeans and sugar to China but also soybean oil and soybean meal intended for Asian and European markets (Escher et al., 2018, and Oliveira, 2017). The latter has an annual transit capacity of 500,000 tons. It is specialised in importing wheat for different purposes (“Zhongliang jituan kaikuo baxi shichang chujian chengxiao [COFCO’s success in opening up Brazil market],” 2015).

5 COFCO also extended its activities to the upstream level, controlling 14 percent of the Brazilian corn seed market (“Zhongliang jituan kaikuo baxi shichang chujian chengxiao [COFCO’s success in opening up Brazil market],” 2015).

6 A more accurate picture has been provided by Zhang and Donaldson (2008). From findings extracted from an empirical study, they notice at least five levels of vertical integration of agribusiness agricultural production: (1) companies purchasing part of the production and providing technical support to independent commercial farmers; (2) establishing formal contracts with farmers also for purchasing and providing services; (3) renting collective land from villages and hiring the local producers, managing the production although preserving the worker’s land-use rights in the village; (4) establishing production bases in leased farmland or ‘wasteland’ and hiring migrant farmers as waged labour, although preserving their land-use rights elsewhere or (5) hiring landless workers as waged labour (Zhang and Donaldson, 2008: 32).

7 Such as Great Wall wines, Mengniu Diary, China Tea.

8 It has also diversified into bioenergy development, real estate and hotel management (Ma, 2017: 9).

9 A financial instrument agreed between parties unknown to each other to buy or sell a product at a predetermined price and at a specified time in the future.

10 One of the most well-known cases is the U.S government right after World War II providing credit and other financial support, as well as enforcing a protective jurisdiction in favour of state monopolies.

11 This includes promoting industrial technology and modern management techniques, developing infrastructure at all levels, such as electricity and telecoms for running “modern business”, building ports and airports for integrating the national industry into global markets, providing transportation for moving workers to their jobs, as well as granting roads, railways, and housing to knit together the domestic market (Kroeber, 2016: 211; Naughton, 2010: 248-252).

Work and Unionism in Mexico: Challenges for MORENA and the Fourth Transformation Government – Enrique de la Garza Toledo and Gerardo Otero

Andrés Manuel López Obrador’s (AMLO) landslide electoral triumph as Mexico’s president in 2018 has provoked wrathful criticisms by the groups and classes that see their privileges in danger. On the other hand, this win by AMLO and his Movement for National Regeneration (MORENA) party has raised huge expectations for the left about his promised fourth historical transformation (4T) of Mexico. AMLO compares such transformation with the three great historical transformations that have taken place in Mexico, each of which necessitated violent means for power ascension: the 1821 revolution of independence from Spain, the liberal reform expressed in the 1857 Constitution and, finally, the Mexican Revolution that yielded the 1917 Constitution. The vast contrast of the 4T pledged by AMLO and MORENA is that these actors reached power through an overwhelming, legal and legitimate electoral triumph with over 53% of the vote for the presidency and absolute majority control of both chambers of Congress. In this national-level election, MORENA won in all but one of the states in the federation of 32 states, although it did not win majorities in a few state legislatures. The 4T government thus unleashes both strong fears and hopes depending on the point of view. In this article we will only discuss the prospects for workers and unions. We start, first, by discussing the labour insurgency and strikes in the first few months of 2019 and their results. Next we briefly discuss the principal changes to the labour legislation approved, meaningfully, on May 1st of the same year. Finally, we offer a preliminary assessment of real wages and labour conditions in Mexico during the first six-to-nine months of 2019 compared with earlier years. We then outline some questions for future research, highlight the absence of an explicit labour policy of the 4T government and outline some challenges for the labour movement.

Labour Insurgency and Unions in 2019

Mexico’s labour movement was in effervescence at the start of 2019. The country saw one of the greatest mobilizations in history, especially along the northern border. Bordering with the eastern United States, Matamoros, Tamaulipas is one of the maquiladora cities par excellence of the northern border. About 80,000 workers are employed in the assembly of goods that are mostly exported to the United States, such as auto parts. At the start of 2019, over 40,000 workers from 48 maquiladora plants, mostly subsidiaries or subcontractors to large North American multinationals, started a wildcat (non-legal) strike. They jumped all the legal obstacles that compel them to launch a strike movement via their unions and the government’s Conciliation Councils (Juntas de Conciliación y Arbitraje) (Covarrubias 2014, 2016). These workers are affiliated to two unions that, for their part, are affiliated to the Central de Trabajadores de México (CTM, Workers Central of Mexico), Sindicato de Jornaleros y Obreros Industriales de la Industria Maquiladora (Farm and Industrial Workers of the Maquiladora Industry Union) and Sindicato Industrial de Trabajadores de Plantas Maquiladoras y Ensambladoras (Assembly and Maquiladora Plants Industrial Workers Union). The wildcat strikes of these workers outflanked their leaders, demanding wage increases and the disclosure of their collective agreements’ contents. They also demanded the replacement of their leaders.

Several factors played out in this spontaneous insurgency, starting with the poor labour conditions in the maquiladora industry, especially their low wages, arbitrary firings and high union fees (De la Garza, 2016). The second factor was that the Minimum Wages National Commission decreed a wage hike of 100% in the northern border region, which does not apply to workers in the maquiladora industry as their wages exceed the minimum. The workers responded by demanding a 20% wage increase and a single bonus payment of Mx$32,000 (about US$1,600). The latter demand was based on a clause in their contract stipulating that they would receive yearly wage increases at the same rate as those for the minimum wage. This rule had not caused unrest in the past because increases to the minimum wage had become the parameter for increases in wages higher than the minimum. The third factor was likely that workers had voted for López Obrador in 2018 and he had indicated that he would not protect corporatist unions (i.e., those like CTM, historically linked to the formerly ruling Partido Revolucionario Institucional, or Party of the Institutionalized Revolution, PRI). Workers were thus encouraged by the left’s electoral triumph.

Upon the start of the insurgency, the CTM official union leaders opposed the strikes and tried to stop the movement. Workers, however, did not yield in spite of threats of being fired. While there had been a few strikes in the maquiladora sector since the 1970s, the 2019 mobilization had no precedents.

Fearing that the movement could be redirected to the dismissal of leaders or the formation of independent unions, the CTM confederations finally launched a legal strike call on 25 January, although wildcat strikes had started on the 12th; that is to say, nearly two weeks after the protest broke out. The consequences of this process were: in most of the 44 firms that were on strike, workers won their wage and single-payment bonus that they had demanded while side-lining their leaders. Yet, 1,500 of 40,000 striking workers were fired. The local Conciliation and Arbitration Council, dominated by the PRI, declared the strikes as non-existent (i.e., without legal grounds) – only 13 plants had federal contracts, dependent on the new federal council associated to the new administration; the rest had contracts under the jurisdiction of local councils. In spite of the declaration of non-existence of the strikes, workers refused to go back to work, so the movement – legal or not – lasted for about 15 days. The maquiladora strikes were then extended to Coca Cola, supermarkets and steel mills of the cities of Altamira and Veracruz, and to other maquiladoras in Ciudad Victoria, capital of the north-eastern state of Tamaulipas. What the Matamoros work stoppage showed was the deep workers’ dissatisfaction with their labour conditions and their leaders, and the loss of fear with the government change.

Viewed from a broader national perspective, the maquiladora strikes and those in other private-sector firms were especially encouraged by an international factor. The government of the United States had made it clear that a central reason why it started the re-negotiation of the North American Free Trade Agreement (NAFTA) was the protracted wage differential with Mexico. In place since 1994, that country’s president had labelled the agreement as “terrible.” Such international conjuncture, therefore, also presented a good opportunity to mitigate such concern, even for employers.

Several other organizations were faced with strikes in the first few months of 2019, including the critical sector of the teachers’ union, the Coordinadora Nacional de Trabajadores de la Educación (National Education Workers Coordinator, CNTE). Likewise, the third-largest university in Mexico, Universidad Autónoma Metropolitana (Autonomous Metropolitan University, UAM), ended the longest strike in its history that lasted three months. These strikes’ results were mixed. Many workers achieved wage raises, including elementary and high school teachers, but not the UAM workers or professors. Other universities also had strikes: Chapingo (the National Agriculture University), El Colegio de Posgraduados (the Graduate College), The Antonio Narro Autonomous Agricultural University, the University of Mexico City, the University of Oaxaca and the University of Chiapas – all of these were strikes besides the work stoppages done by the CNTE to push for an education reform. For all the workers of these public universities, however, the new government had a rigid policy of wage increases: a mere 3.45% for all, in spite of the fact that inflation in 2018 was 4.6%. That is to say, in these cases wage increases barely compensated for inflation, although workers did receive payment for wages that would have been earned during their strikes (salarios caídos). The government’s reasoning to decline giving the universities a larger subsidy to improve wages was straightforward: University workers and professors are already among the better paid wage workers, so they must subject themselves to “Franciscan austerity,” as it has been labeled by President López Obrador.

Another conflict in the first few months of 2019 was led by Wal Mart workers. In this case, the old union called Central Regional de Obreros y Campesinos (Workers and Peasants Regional Confederation, CROC) launched a strike movement for March 20 demanding a 20% wage rise – the highest wage earned by a worker here is Mx$150, i.e. about US$7.50 per day – and profit sharing with workers of 4% of the firm’s sales. Wal Mart is Mexico’s largest employer with 200,000 workers fractured into 1946 collective agreements and 45 unions. CROC has title to only 170 such collective agreements. Besides the two main demands, workers also required to have access to the Instituto Mexicano del Seguro Social (Mexican Institute of Social Insurance, IMSS), demanded respect for the 8-hour working day, overtime pay, an end to unjustified firings and to labour and sexual harassment. CROC launched a strike threat in 121 stores in ten states, and this became extensive to SAM’s Club and Bodegas Aurrerá, also owned by Wal Mart. The strike did not materialize but there were illegal store blockages for a few hours. Workers got a 5.5% wage raise and a 30-days Christmas bonus (something standard in all formal employment and stipulated in labour law with a minimum of two-weeks bonus).

The 2019 law for the reform of education, although it was not intended to include labour issues, did reaffirm that education workers ought to be considered public servants and are therefore subject to the new Austerity Law which limits wage increases and benefits. Furthermore, it reaffirms that labour relations for such workers are ruled by “Apartado B” (Section B) of the Constitution, which differentiates labour relations for state workers from those working in the private sector. This legislation imposes plenty of restrictions on the right to strike and does not allow for collective bargaining. In Mexico, there are thus two main legal regimes for labour defined in Sections A and B of Constitutional Article 123. Benefits for public servants are contained in the regulatory law for Section B and the Law for State Service Workers. Discussion for the secondary legislation for the education reform began in early October 2019. The main advancements indicated that teachers’ evaluations will not necessarily result in them getting fired, as with the previous law, that the union will be one of the parties participating in new hiring processes, and that graduates from government normal or teachers’ schools will automatically pass into new positions. All of these were key demands from CNTE, the critical section of the teachers’ union.

The symbolic display around the president at National Palace on the May 1st parade in Mexico City left no doubts about the reconfiguration of the main representatives of organized labour. The main place was held by Napoleón Gómez Urrutia, elected senator for MORENA in 2018, and still the elected leader of the Miners’ Union. Gómez Urrutia had been persecuted during the Vicente Fox administration (2000-2006) on fraud charges that turned out to be groundless and were dismissed in 2018. Through all his legal struggle, the leader had to take refuge in Canada. Besides having been re-elected by miners, Gómez Urrutia started a new labour organization called Confederación Internacional de Trabajadores (International Workers Confederation, CTI). CTM representatives were also seated close to the president on May 1st, but in a clearly diminished position, given that CTM had been the official union organization both in the PRI and PAN era. PRI governed from 1929 to 2000, and again from 2012 to 2018, and the National Action Party (Partido Acción Nacional, PAN) governed from 2000 to 2012. CTM stood out for the political control it exercised over workers and for selling out their economic interests for the benefit of its leaders, generally corrupt, and popularly referred to as “charros.”

The New Labour Law

Historically, Mexico’s unionism has been submitted to corporatism, the political system by which the main labour organizations followed a pact set up with the government, at least since the 1930s, in support of its policies. During the good times of corporatism, the unions’ political loyalty to the ruling PRI meant better wages, benefits and social security, at least for the most organized section of the working class. But this pact was left without a content in the neoliberal, market-led period that started in the late 1980s (Otero 1996), which has been marked by huge reductions in real wages, a lowering of benefits, the rise of sub-contracting, etc. On the other hand, the internal life of unions has been conspicuous for decades of patrimonialism, authoritarianism and lack of democracy. The Mexican labour law and the government’s and capitalists’ policies underpinned this authoritarian corporatist system, which filtered into union culture during several generations of the working class. The latter does not mean that there were no democratic irruptions, as during the decade of the 1970s. In general, however, most of the workers’ struggles ended up in defeat by the concerted action of the state, the firms and labour leaders.

In this grim context, a major and fitting institutional event took place on May 1st: the publication of the new labour reform law in the Diario Oficial de la Federación (DOF 2019), the Official Newspaper of the Federation. The new labour law is officially known as Ley de Justicia Laboral, Libertad Sindical y Negociación Colectiva (Maccise 2019) or the Law for Labour Justice, Union Freedom and Collective Bargaining. This was the first time in over one hundred years that Article 123 of the 1917 Constitution, along with 535 other articles, was modified. It should be highlighted that Article 123, along with the Agrarian Reform Article 27, is what made Mexico’s the world’s most progressive constitution of its time (Gilly, 1974; Otero 2018).

The initial draft of the new labour law was written by a group of over 100 independent lawyers, and not by MORENA or the new president. Yet, one of the leading lawyers is Arturo Alcalde, who happens to be the father of the new Labour Secretary, Luisa María Alcalde who, at 31, is the youngest member of cabinet. Her own background is in labour law and as a legislator in the lower chamber of Congress. Her father’s influence in drafting the new law has been regarded as so crucial that the law is also dubbed “la ley Alcalde.” Union freedom, democracy and transparency are thus the most central issues considered in the new law.

The new law involves changing almost half of past related contents and lays the ground for labour justice in Mexico. Remarkably, the constitutional change mandating the new labour law was approved unanimously by Congress on February 27, 2019. This change responded in part to international trade agreements signed by Mexico, including Chapter 19 of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, formerly known as the TPP; and Annex 23 of the new NAFTA or United States-Mexico-Canada Agreement (USMCA) which, by October 2019, had yet to be passed by the U.S. Congress and the Canadian Parliament.

Gone in the new legislation are the Juntas de Conciliación y Arbitraje or Councils for Arbitration and Conciliation. These were made up of representatives from three parties: the government, the private sector, and labour unions. Workers thought they could hardly win disputes as the first two usually formed a common front against them. Their place will now be taken by the Centro Federal de Conciliación y Registro Laboral (Federal Centre for Labour Conciliation and Registry), which will register unions and their internal statutes among other functions. Labour Tribunals will be set up to resolve contentious issues regarding labour. Importantly, the conciliatory function will rest with the administrative bodies, separate from the judicial function which will be handled by the new tribunals via oral trials. As part of the Federal Centre for Conciliation and Registry, an agency will be created for conciliation between firms and workers in a pre-trial stage. These institutional changes transfer labour issues from the executive to the judiciary branch, which will help depoliticize them. The Juntas de Conciliación y Arbitraje could take between three and five years to resolve cases of individual worker disputes with firms, which are by far the largest number.

Union democracy, representativity and transparency are no doubt the central features promoted by the law. To be recognized, unions will have to garner the support of at least 30 percent of a company’s workforce. This kind of changes has been made a condition by U.S. Democratic representatives for them to pass the USMCA. We can highlight two central axes in the new labour law. The first is geared to reform the way union leaders control their organizations with the intent of democratizing them. Elections will be “personal, direct, and secret” (Article 245 Bis), and the vote will be in an accessible place so it can be “free, pacific, agile and secure,” so that workers cannot be coerced in any way (Article 390. III.b). These new election mechanisms are a sharp contrast with former haphazard procedures that included, for instance, voting by acclamation in public meetings. Accountability of union funds will also be achieved through transparency in their use to avoid leader corruption. The “clausula de exclusion” or closed-shop clause will be eliminated but remains optional for future workers, and employees will decide whether they wish to pay union fees or not. Paradoxically, this particular issue has worked in the opposite way in Mexico than it has in the United States. In Mexico, eliminating the closed-shop clause was a demand of the Left, as it was used by leaders to intimidate and control workers: if they were kicked out of the union, the firm could fire them without further consequences. In the United States, by contrast, unionized corporations in states of the union that have adopted “Right to Work” legislation have used it to undermine union finances. This has contributed to lowering union density (Ellwood and Fine 1987).

The second significant change regards domestic workers, 95 percent of whom are informally hired and they make up 2.3 million workers (Serrano Herrera 2019). It will now be mandatory that they be registered in the Instituto Mexicano del Seguro Social (Mexican Institute of Social Insurance, IMSS), so they will enjoy health benefits and the right to unionize. These workers will now have standardized, six-hour working days or 36 hours per week as a minimum. This will guarantee access to health services, childcare, paid vacations and Christmas pay, plus the explicit prohibition to hire minors under 15 years of age (Xantomila 2019). Similarly for another group of workers that are largely informal – farm workers – they are now included into the ambit of thisbe considered under the law. Given that most of them are seasonal, temporary workers, the law mandates that their working time be added to accumulate seniority in their work.

This labour reform caused a lot of resistance both among the entrepreneurial class and los charros, the corrupt labour leaders loyal to the PRI or PAN governments in the past, and highly functional to corporations rather than workers. The following slogan in workers’ mobilizations made the point very clearly: “Charro, Gobierno y Patrón son el mismo Cabrón” (Charro, government and employer are the same asshole).

MORENA’s Labour Performance in its First Few Months of Government

By October 2019, it has only been a few months since the new government took office. It is thus little time to do a thorough assessment of its performance. However, we will address two conceptions on work that can be derived from two basic documents from MORENA and the Plan Nacional de Desarrollo (National Development Plan). We also address the first basic indicators of the labour market’s performance.

The 4T’s Conceptions of Work and Unions

MORENA’s two main programmatic documents are the Government Programme and the Plan Nacional de Desarrollo (National Development Plan). Mentions of labour issues in both are short and do not constitute central lines of transformation. The Government Programme (p. 5) properly records the fall in real wages through the neoliberal period, while the National Development Plan sets out to reach dignified work and gradual wage recovery (p. 125). It is in the former document where one finds the most complete conception about how these goals will be attained: through wage raises – although it is not clear how they will be achieved in the private sector, in contrast to the public sector and beyond minimum wages that saw a 20% increase nationally and by 100% at the northern border. Added to this is the domestic-market impact of the large social-assistance programs, such as the universalization of old-age pension, and “Youth Building the Future”, a government grant to become apprentices or interns in private or public firms or institutions. Job creation is to be expected once the large infrastructure works get started, including the expansion of Mexico City’s airport, a new oil refinery in the state of Tabasco, the trans-isthmic corridor to join the Atlantic and Pacific oceans at Tehuantepec, and the Maya Train, and the productive re-activation of Pemex (the state’s oil company) and the Federal Electricity Commission.

Regarding conceptions of work, the new government program is confined to the generation of jobs and raising wages. No mention is made, however, about productivity, the dominant productive models – the maquiladora, export-oriented model which is predicated on low wages –, or the process of innovation. The large program mentioned above, Youth Building the Future, for instance, involves government grants for a year during which beneficiaries are trained in firms or institutions. But some initial studies show that the program has huge deficiencies, especially that the youths’ future insertion in the job market is not guaranteed in an economy with a rate of zero growth in 2019. There is mention without elaboration of the creation of internal productive links for which no specific public policies exist as yet. The official documents do not even mention the reform of the labour law or the relation between union activity and jobs improvement. As we discuss below, the labour question seems to be subsumed under the issue of poverty reduction, for which there are public policies of great breadth.

The process of implementing the labour reform, however, is advancing very slowly. The Secretariat of Labour has issued a single protocol to implement it. Corporatist organizations, for their part, are launching “amparo” lawsuits (i.e., suits to stop the law’s implementation) in a process that has been labeled the “judicialization of politics.” Their cynical argument is that the state is interfering with internal union affairs. Corporatist organizations have also signed strike contention contracts with their counterpart firms, with the novelty that they are not involving the government nor are they national in scale

By October of 2019, the generalized strike movement that some observers had anticipated in the maquiladora sector has not materialized after illegal wildcat strikes in Matamoros in February. The latter took place in spite of the fact that some maquiladora managements along the northern border, without strike movements, raised wages by 9% in 2019, a higher rate than the average of wage raises by other firms in the country, at 6.3%. During the first three months of 2019, there were only seven legal federal strikes and zero during the second quarter. In view of poor labour conditions, this passivity shows that the corporatist apparatus has been threatened by the labour reform. But it still maintains practically the same level of control as it did during the old regime, something that has been highlighted by a correspondent of the New York Times (Malkin 2019a).

Not all labour-capital conflicts follow legal channels, however. In fact, the historically-recorded strikes are fewer than such conflicts, including illegal stoppages, marches, demonstrations, and other protests. This side of reality may be observed in Chart 1, generated from newspaper sources, coming from the main national dailies in Mexico for the first six months of 2019. The most conflictive sectors have been education, health, transportation, and state secretariats. Many of these conflicts are linked to austerity budget reductions by the new government.

Chart 1. Labour-Capital Conflicts, January-July 2019

Otero Chart 1

Source: Elaborated by Jessika Mora based on major national dailies.

Reconfiguring Union Organizations

In the context of some workers side-stepping old unionism, although this is still limited to highly localized sectors, the relations of corporatist unions with the new government have followed two trajectories. The first involves acting as if there has been no change of labour regime and showing signs of supporting the new government. This is the case for CROC, FSTSE (workers of IMSS, the social insurance institute), and the workers of Mexico City’s government. A second type of response is that of ex-official unions and confederations that have moved to open opposition and hostility to the new regime, as shown during the May 1st parade with attacks on the government, especially the 2019 labour law. These are the cases of CTM, the union of Pemex – oil workers – and the railroad workers. Yet, by October 16, 2019, Carlos Romero Deschamps, the notorious leader of the oil workers union since 1993, resigned to attend criminal investigations for unexplained wealth (Malkin 2019b). Thus, overt opposition may yet backfire, as most charros have long tails to hide.

There are new union federations and confederations, on the other hand. Prior to the 2019 labour mobilizations, a group of unions in the auto parts and aerospace industries founded the Independent Federation of the Car Industry with 25,000 workers in 2018. As mentioned, Napoleón Gómez Urrutia founded the Confederación Internacional de Trabajadores in February of 2019, which has attracted unions that detached themselves from CTM and CROC. Furthermore, Pedro Haces, a leader of petty importance, has just founded the Autonomous Confederation of Workers and Employees, also attracting unions separating from CTM and CROC. A new union called PETROMEX has been formed in Petroleos Mexicanos, the state oil company, and is expected to dispute the title of the collective agreement from the corporatist union. Furthermore, CTM in the northwestern state of Sonora has threatened to launch a general strike movement in the firms in which it has contracts. The new labour law has not started to operate, especially with respect to the union’s obligation to hold elections to demonstrate their representativeness. But it should not be long before we know if this new provision will detonate a new labour insurgency against the antiquated corporatist union apparatus. During the first few months of 2019, the unionization rate increased during the first quarter (12.3%) compared with 2018 (12%), prior to the new labour law, which will take at least two years to become fully implemented

Initial Assessment of Labour Conditions in the 4T Government

The growth rate of formal employment has declined by September 2019, as measured by the number of workers affiliated to the Mexican Institute of Social Security (IMSS), the usual measure of formal employment. Only 488,000 jobs were created since January, compared with 774,00 for the same period in 2018 – a 37% deficit (Cervantes Arenillas 2019). Such decline is due to the slowing down of economic growth, which is a common occurrence at the start of each new presidency in Mexico, given the uncertainty that firms perceive in the new government.

Average real wages in July 2019 were Mx$4,173 or about US$218 per month, according to CONEVAL, the National Council for Public Policy Assessment. This government council measures poverty, not in relation to the general price inflation index but according to prices of the basic basket of goods (canasta básica). With this in mind, monetary income in real terms on the second trimester of 2019 was 1.4% higher than the same trimester in 2018 and had grown 2.3% by July of 2019. “Labour poverty” diminished during the same period, perhaps largely due to the 20% increase in minimum wages. Although contractual salaries did not worsen, they are not at satisfactory levels. Contractual salaries or wages are those received by unionized workers with a collective agreement, who are presumably the better off. By September of 2019, contractual salaries in private firms increased at twice the pace for those in the public sector. This is due to the fact that the government is implementing a policy of capping wages that barely compensates for inflation, in line with the orthodoxy that searches a balanced public budget while keeping inflation under control and also being able to fund the large social programs of the new administration. The lowest paid workers for the state, however, which do not include workers in public universities or in decentralized institutions like the National Electoral Institute, did receive a 3.5% wage increase at the start of 2019 and another 3% increase in June, placing them on the same level of wage increases as workers in the private sector.

Conclusions

From a unionized workers’ perspective, the 4T has had positive effects, at least on the legislative realm. Its main goal is to implement a labour reform that pressures unions toward democratization and the regulation of work for domestic workers, both in terms of labour rights and inclusion in the Social Insurance

The new government, however, has shown little sensitivity to workers’ protests – such as in the case of the wildcat strikes in Matamoros. It seems more preoccupied to not clash with private firms than addressing issues of labour conditions. Yet, it did legislate a 20% increase for minimum wages in 2019, and 100% increases in the northern border. This pattern did not hold for workers in state enterprises or public institutions for which the government implemented salary caps that barely compensate for inflation in 2019.

New forms of union organizations have emerged with affinity to the new government. Until October of 2019, however, they had shown very little activity to dispute the titles of collective agreements held by corporatist unions. Furthermore, the great workers’ insurgency of Matamoros has not been followed up by similar movements in other sectors.

Formal job growth has been negatively impacted, first by firings in the public sector in search for austerity, and second because the government has delayed productive investment. The latter is expressed in the fact that the government has spent less than the budget approved by Congress: fixed public capital investments had fallen by -7.3%, and current expenses by -5.2% by September 2019, compared with the same period of 2018. It is possible that such a decline is due to the fact that the government is preparing itself for the global economy’s imminent slowdown, so it can exercise fiscal policy then. But, in the meantime, lowering government expenditures has contributed to a virtually stagnant growth in the gross domestic product, also due to lower rates of domestic private investment (although foreign direct investment has increased). Nevertheless, the negative trend in job creation that started in September 2018 was reversed in September 2019, with a positive annual rate growth of 1.9% (Cervantes Arenillas 2019).

Looking at other specific trends on labour conditions, we can say that they have been mostly stable from 2018 to 2019. These trends include the rate of waged workers (slightly increased), total employed population in industry (stable), unemployment rate (increased marginally), the rate of jobs in the informal economy (increased marginally), the index of remunerations in manufacturing (increased), access to health institutions (stable), rate of workers with full time jobs (stable). Each of these rates have had small variations, up or down (ENOE, INEGI, 2019). We can thus conclude that, by the first few months of the López Obrador government, the balance for workers is not negative.

We can also say that the main contradictions of the 4T’s labour economic model reside in its neostructuralism, the school of thought of the UN’s Economic Commission for Latin America (CEPAL for its Spanish acronym) of the 1980s. Neostructuralism combines the neoliberal orthodoxy of balanced public accounts with large infrastructural works and broad programs of social support for poverty alleviation. This approach has led the government to avoid indebtedness (which has declined), avoid raising taxes and to impose draconian austerity in public expenditure, which has affected employment, wages and benefits for workers in the traditional public service jobs in health, higher education and culture (Ruiz Durán 2016; Peña Nieto 2016).

Because Work and Labour do not have a privileged status in the 4T, there is no clarity on what policy will be followed regarding the maquiladora sector, which has been the main axis of the neoliberal model based on low wages and trickeries in labour conditions (De la Garza 2012; Otero 2011). We therefore do not see a clear productive policy for the economy, beyond some stimulus for private capital investment resulting from large public works. In other words, we cannot identify any model or thinking meant to transcend the export-manufacturing paradigm that predominates in Mexico (De la Garza, 2005, 2013). Looking for signs of a transformative labour model in the 4T should be a task for future research.

In the meantime, an independent and democratic labour movement could pressure the government to promote the growth of the domestic market based on living wages and dignified working conditions. It is especially indispensable that new, left union forces, whether they have affinities to Morena or not, rethink a new union strategy for the twenty-first century: not only how to achieve democratic unions but what will be the main field of collective action for unions and their relation with the state. Choosing to interact with the state as the privileged interlocutor runs the risk of re-editing a left corporatism or faded social democratic alternatives to neoliberalism. Business unionism, on the other hand, has shown it colossal limitations in the United States. Union struggles will need to explore experiences unedited in Mexico that have been successful elsewhere, such as workers councils and the definition of labour as a space for workers to participate in productive decision making.

Enrique de la Garza Toledo and Gerardo Otero are Sociologists at the Autonomous Metropolitan University in Mexico City and Simon Fraser University in Vancouver, respectively. Direct correspondence to egt57@hotmail.com or otero@sfu.ca. Enrique’s website is: http://sgpwe.izt.uam.mx/pages/egt, and Gerardo’s is: http://www.sfu.ca/people/otero.html.

References

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Strike Wave? A Preliminary Assessment of US Labour Militancy in 2018 and 2019 – Dave Kamper

This paper provides an overview of the labour militancy in the United States in 2018 and 2019. Beginning with educator strikes in parts of the country not known for strong labour unions, the previous two years have seen more workers on strike than at any time in the past thirty years. This paper argues that the strikes are, at least in part, a manifestation of the “Bargaining for the Common Good” strategy that first bore fruit in Chicago in 2012, as well as the strong economy and the particular political realities of the Donald Trump era. Whether this miniature strike wave betokens a more militant future for US unions is not clear, but there are indications that, with due respect to ancient totems that warn against such thinking, this time might be different.

Introduction

2018 saw more workers on strike in the United States than in any year since the mid-1980s, and 2019 looks set to reach similar heights (Dirnbach, 2018, 2019). It was led by teacher strikes in some of the country’s most politically conservative states, but the last two years have also seen strikes by hotel workers in Chicago, telecommunications workers in New England, and the largest and longest strike by US autoworkers in decades.

With the caveat that only a fool would claim to understand exactly what has happened and what it means, this essay will nevertheless attempt an initial assessment of the past two years of American labour militancy. We are not simply witnessing a random clustering of strikes. The successes of the initial actions in 2018, especially the powerful strike of West Virginia educators, almost certainly made subsequent strikes more likely.

At the same time, we ought to take account of the varieties of militancy on display here. While we lack a useful typology of strikes, they are not all created equal. What is perhaps lost, in the American Left’s desire to see these actions as the start of a sea change in American labour relations, is the reality that the strikes of 2018-19 took very different forms, against very different targets, with myriad results. Balancing the universal and the particular in examining these strikes is perhaps the most significant challenge of all.

The strikes

Pride of place rightfully belongs to West Virginia. Though it has become a bastion of political conservatism, the state has a rich history of labour action. The largest armed conflict within the confines of the continental United States after the Civil War was the Battle of Blair Mountain in 1919, when an army of strikers fought US Army soldiers in a running battle that even involved aerial bombardment (Loomis, 2018). Especially in the coal mines of the Appalachian Mountains, unions and strikes are embedded in the region’s culture.

It was petty slights as much as the overall conditions of employment that drove West Virginia educators to strike in February of 2018. As a group of strike leaders explained to the biennial Labor Notes conference in April, 2018, teachers had been willing to accept poor pay in order to do the job they loved. However, when they were required to answer questions on health surveys regarding the frequency and vigor of their sexual activity (among other indignities), their patience ran thin.

Industrial relations in the United States are the product of a patchwork of different laws, meaning that different workers have different rights depending on where they live and what kind of work they do. Unions in West Virginia do not have the right to negotiate with public schools in any formal capacity. Indeed, wages and benefits of school employees are largely determined not by local school districts (the prevailing practice in the United States) but by the state legislature.

Accordingly, membership by West Virginians in the nation’s two large teacher unions – the National Education Association (NEA) and the American Federation of Teachers (AFT) – was small, and the formal structures of the two unions were not the catalysts of action. Independent groups of teachers, connecting via professional networks and social media, began preparing for action. As it became clear that the West Virginia Legislature was going to ask school employees to accept cuts to health insurance and yet another wage freeze, the momentum to strike accelerated.

The senior administrators of most of the 55 county school districts in West Virginia helped enable the strikes – some reluctantly, some with enthusiasm – by closing public schools across the state when it became clear the teachers would strike (Catte, et al., 2018). Some 35,000 school employees – not just teachers, but all school staff – struck beginning February 22nd, the first such strike in West Virginia since 1990.

In political negotiations with the legislature and the governor, the West Virginia affiliates of the AFT and NEA announced a settlement on February 27th, but the conflicting statements by politicians and the lack of trust in the unions’ leadership meant that the strikes continued for several more days1, until the legislature approved a 5% pay raise for all state public employees. Schools re-opened on March 7th.

Over the next three months, educators in several other states – Oklahoma, Kentucky, North Carolina, Colorado, and Arizona – took statewide strike action, while more localized strikes in Tacoma, Washington, and Jersey City, New Jersey, and elsewhere kept up the pattern. There was also a significant strike by graduate employees at the University of Illinois. One in twenty educators in the United States went on strike in 2018, by far the largest number in American history (Kerrissey, 2018). 2019 began with a six-day strike by teachers in Los Angeles, and short strikes in Denver, West Virginia, Kentucky, South Carolina, and elsewhere. There were also significant strikes among university employees in California and Illinois.

Education strikes in the United States are rare in the summer months when school is out of session, but on October 17th the 25,000 members of the Chicago Teachers Union (CTU), along with 7,000 school support staff belonging to Service Employees International Union Local 73, began their third strike in seven years. CTU was out for 11 days before settling the contract on terms largely favorable to the union.

Meanwhile, in the private sector, 2018 and 2019 saw strike activity as well, although the scale and scope of it was, until the second half of 2019, not too much greater than in most years. Healthcare providers, especially hospital chains in California, saw several short strikes, and there was a large strike of grocery workers in New England. Telecommunications workers also engaged in work stoppages. In Harlan County, Kentucky, site of infamous battles between coal miners and workers in the 1930s, laid-off miners and their families blockaded coal transports beginning in July, 2019, fighting to be paid for the wages they had earned from mining the coal (Winslow, 2019).

The private sector has caught up with the public sector though, with the United Auto Workers’ (UAW) strike against General Motors (GM) which began on September 16th. The 45,000 workers on strike is the largest walkout since the last UAW/GM strike in 2007, and that strike lasted just three days. For size and scale, one has to go back to the grocery strikes in the western United States of 2003-04 to find one that has involved so many workers on strike for such a long time (BLS, 2019). The strike ended after forty days in a deal that gave significant financial concessions to the workers but did less to change the multi-tiered nature of the workforce (Brooks and Slaughter, 2019).

Two other actions demand extra attention – one a strike that happened, and one that (perhaps) didn’t. In Puerto Rico, a twelve-day national general strike in July, 2019, led to the resignation of the scandal-plagued governor, who had been under intense criticism ever since a 2017 hurricane devastated the island. According to some reports, nearly a million workers participated, and the governor resigned (Laughland, 2019).

The other action was the call for a national general strike by Sara Nelson, President of the Association of Flight Attendants (AFA). In January, 2019, the federal government shut down in a budget impasse between President Trump and his Democratic Party opponents. Nelson, who already had a reputation as a militant labour leader, called on workers to force an end to the shutdown with mass labour action. Just a few days later, the shutdown ended after air traffic controllers didn’t turn up for work, leading to a cascade of airport delays and the real possibility that the nation’s air infrastructure would be fatally compromised. While it’s not entirely clear whether the controllers’ actions were inspired by Nelson, she received much of the credit, and has emerged as the biggest beneficiary of labour’s newfound militancy (Kitroeff, 2019).

While the scale of the labour militancy of the past two years is undeniably a change from recent decades, it’s not so clear that the outcomes of these strikes are substantially better, on aggregate, than other years. In Arizona, for example, teachers won broad promises of salary increases, but no funding to support those increases, and a ballot initiative to raise the state’s income tax was struck down by the state’s Supreme Court under what seemed like politically-motivated circumstances (Cano, 2018). The 5% raise won by the teachers in West Virginia, while higher than what they have received in recent years, is hardly a windfall, and the strikers did not succeed in changing the state revenue system to guarantee funding in the future. However, the success or lack of success of a strike is often more a matter of perception than anything else, and it is too soon to be sure how those perceptions will develop. Stan Karp and Adam Sanchez (2018), damning with faint praise, put it thusly: “[s]ome of these protests won significant, even if modest, gains in teachers’ salaries and funding for schools. Others won political promises that have yet to redeemed.”

While all these labour actions are noteworthy, it is the educator strikes that stand out as the most surprising. What began in West Virginia and spread elsewhere looks very much like a strike wave, and it seems fair to use that term.

Why 2018?

A strong argument can be made that the educators’ strike wave of 2018 was made possible by the 2012 strike of the Chicago teachers. The largest educator strike in decades, the CTU strike was the product of years of internal agitation and political education, and was the most visible exemplar of the emerging concept of “Bargaining for the Common Good” (Kamper, 2018). Bargaining for the Common Good involves a deliberate decision by a union to negotiate a contract that goes far beyond standard issues of wages and benefits, and specifically aims to address the needs of broader communities, not just the workers.

Teachers are, of course, well-suited for the Bargaining for the Common Good concept, because the most committed of them have a deeply-vested interest in the success of their students. Among other victories in 2012, for example, CTU won contract language guaranteeing students the right to textbooks at the beginning of the school year; this victory did nothing to improve the financial condition of the striking teachers, but sent a powerful message that the union was willing to put its weight behind the needs of the community. The message was heard far and wide. As Jaffe (2019) puts it, CTU “wrote the playbook that has been successfully used by teachers around the country.”

Such a victory would have seemed almost foreign to labour leaders even a few years before 2012. US labour relations in the decades following the Second World War were to a large extent defined and limited by the “Treaty of Detroit” (Lichtenstein, 2002). The product of negotiations between 2019 strike opponents General Motors and the United Auto Workers, the Treaty referred to the 1950 contract for autoworkers, which guaranteed cost-of-living raises, pensions, and insurance. In return, the union agreed to cede management rights to the employer, and to refrain from challenging the basic structures of the capitalist system. Along with a purge of dedicated Communists from the ranks of organised labour at the safe time, the Treaty of Detroit set the model of American labour relations for decades to come: the union pushes for financial gains for its members, while leaving the broader directions of the economy to government and corporations.

The educator strikes of 2018 and 2019 were not prepared to do this. In West Virginia, one of the strike demands was for the state to raise taxes on coal companies, who had historically been granted considerable tax exemptions. In Arizona, the demand for raises was conditioned by a demand that none of the funds for the teacher salaries should come at the expense of low-income schools (Blanc, 2019:198 et seq.).

In St Paul, Minnesota, where teachers voted to strike in January, 2018 but managed to reach a contract settlement, the union accepted management’s lower-than-desired wage offer in order to guarantee more resources for English-learner students. This is an example of Bargaining for the Common Good in action – a choice to accept lower wages to improve student outcomes (E. Schatzlein, interview with author, May 17, 2018). The UAW strike against GM, while of course not an educator strike, was motivated in large part by a desire to fight the management practice of hiring temporary workers at lower wages and benefits, a practice that the UAW had studiously ignored in previous contracts in order to preserve the positions of the majority of their members. The CTU strike of 2019 continued that union’s previous actions, with affordable housing one of the key points at issue – a subject that is not considered a usual subject of union bargaining (and one that CTU was legally forbidden to use as a strike issue) (Provenzano, 2019).

These are all cases where union behavior could not easily be categorized as selfish or greedy, because again and again workers were choosing to pursue goals far beyond the “wages and benefits” negotiated in the Treaty of Detroit. The CTU strike of 2012 arguably served as the proof-of-concept exercise for Bargaining for the Common Good, and therefore CTU’s actions ought be credited with helping create the frame around which the educator strikes of 2018-19 took place.

But if Bargaining for the Common Good helped frame the strikes of 2018 and 2019, to some extent, it is not a sufficient explanation why these particular strikes happened where and when they did. Four possible factors seem to bear closer examination.

The first was the election of Donald Trump and the general ascendancy of the Republican Party’s right wing in the wake of the 2016 elections. At the national level, the most significant impact of Trump’s election has been the US Supreme Court’s decision in the landmark case Janus v AFSCME, which greatly limits public-sector unions’ ability to collect fees from nonmembers. However, in the short term, politics at the state level may be more important.

While West Virginia has long been a reliable state for Republican presidential candidates, the Democratic Party had held its own in state-level races. In 2016, however, the state legislature became Republican-run, and the governor switched parties from Democratic to Republican. Kentucky, Arizona, Oklahoma, and North Carolina also have seen shifts to the Republicans in recent years.

Moreover, the virtual disappearance of the moderate wing of the Republican Party meant that in states controlled by that party, there was little resistance to conservative mantras of tax cuts and reductions in government spending (Kabaservice, 2011). Strong Republican rhetoric about cuts to state government spending had in the past masked a fair amount of pragmatism, but in recent years, led by Kansas, Republican-dominated states truly have made cuts the top priority.

As such, there is a case to be made that in states like West Virginia and Arizona, educators had simply been pushed to the breaking point. Facing salary freezes and cuts to pensions and health benefits, it may very well be that they felt they had nothing to lose. It is also seemingly the case that nascent activist networks amongst educators (often through social media) were coalescing into place in the years immediately preceding the strikes. These networks might have proven to be ephemeral in other political conditions, but in West Virginia, Kentucky, and elsewhere, they provided space for protest to grow (Dyke and Muckian-Bates, 2019).

Given the growing racial and gender gap in American politics, it is also perhaps noteworthy that three-quarters of public school teachers in the US are female (NCES, 2019). Females are now far more likely to support the Democratic Party than the Republicans, especially those with a college degree, like teachers (Sparks, 2018). An aversion to the political party in power, along with low pay and benefits, is a potent formula for labour action in any setting.

A second key reason must surely be the combination of strong economic growth and poor wage growth in recent years. While rumblings of a recession can be heard over the distant horizon, the economy has on paper been strong for many years. This strength, however, has done little to raise living standards of workers – corporate profits are up thirty percent since before the Great Recession, while household wages have only increased, on average, by four percent (Scheiber, 2019).

This may account for why so many of the strikes of the past two years have been offensive rather than defensive. As noted above, we lack a useful and universal means of classifying strike activity, and this deficiency makes it hard to compare and contrast. However, it seems reasonable to distinguish between strikes that seek to preserve workers’ economic positions, and those who seek to better them. The former could be thought of as defensive strikes, and the latter offensive.

Again, there is little data clarifying this, but the experience of this author, a longtime labour organiser, is that at least for the last two decades strikes have primarily been defensive – an attempt to hold on to what workers had. Protecting pensions, job security, and health benefits have been at the core of most of the big strikes in the US in the twenty-first century.

There are certainly elements of defensiveness in the 2018-19 strikes; the threatened cut to health benefits was as important an issue to the strikers in West Virginia as were salary increases. But in Arizona, Chicago, and Los Angeles, among other places, workers were seeking real gains in their economic position. As Sen (2019) puts it, as “long as tight labor markets persist, work stoppages and pockets of labor shortages are going to continue.”

A question worth asking is whether offensive strikes are more contagious than defensive strikes, and whether this contributed to the development of a strike wave.

A third reason (related to the first two) is that public sector worksites, especially in education, are sites where the strike is still a particularly effective labour tactic. In a globalized, highly-competitive, highly-contingent economy, there are many jobs where strikes are not a particularly effective tool of labour militancy. The five-month strike of nearly 60,000 grocery workers in California in 2003-04 is a good example of where the strike did not achieve its goals (Dixon and Martin, 2007). The unionized grocery workers involved in that strike worked in an environment where an equal – or even larger – number of people worked at non-unionized supermarkets and did not strike with them. The contention by management that the wages and benefits of the unionized grocery workers made their businesses uncompetitive with non-unionized rivals was not without some merit. The strike was unsuccessful in most respects because the strike itself was not one that could likely have been won.

Education, on the other hand, is potentially a welcome venue for strike activity. In most of the teachers’ strikes of 2018 and 2019, school districts and states made no effort to replace the teachers with strikebreakers. Online education remains a very small share of the education universe, and while there are private schools and other educational institutions that fell outside the scope of the 2018-19 strikes, they had nowhere near the capacity and showed no inclination to try to replace the work done by strikers.

All American states have stringent rules (which vary greatly but are always present) that govern the learning conditions of public schools. It is rarely even an option for a school district to import unlicensed personnel to take over from teachers on strike, and even were it possible it is a powerful logistical and financial challenge.

For the foreseeable future, a large body of educators choosing to strike will retain the ability to shut down their worksite as long as they remain on the picket lines. This is not to say that a small teacher strike in a large metropolitan area would always be successful, but on the scale of Chicago, Jersey City (nearly 4,000 workers), or whole states like West Virginia and Arizona, should the workers remain united and decide to strike, they will be able to close schools until they are ready to return.2

Moreover, unlike strikes against private corporations, the stakes are almost purely political, rather than economic. A strike against a school district isn’t trying to cut the district’s profit to force the employer to the table. It’s not directly a strike against capital. Instead, the goal is to induce the political forces in the community to intervene.

This is why the concept of Bargaining for the Common Good is so important, because a key factor holding back educators from striking is their sense of mission. This author has long experience with educator unions across the United States. Many educators are horrified at the idea of striking because they worry such an action will harm their students. Even if educators understand and accept the premise that they are undercompensated, many will knowingly sacrifice their own financial stability to provide for their students.

Bargaining for the Common Good allows educators to employ a rhetoric of labour militancy centered on the needs of the community rather than the worker. If striking is reframed as an attempt to improve educational outcomes and the lives of students, it will be easier for educators to strike.

A final possible reason for this incredibly-rare outburst of US strike activity is, strangely enough, familiarity with striking. West Virginia educators do not have the legal right to strike, let alone the legal right to collective bargaining. This is not uncommon, especially across the southern United States. What is uncommon is that the West Virginia teachers nevertheless have a history of striking. There was a near-statewide walkout of teachers (forty-seven of fifty-five counties) in West Virginia for eleven days in 1990 (Charleston Gazette-Mail, 2018). It was equally extralegal, and yet they did it. They won raises averaging $5,000 spread out over three years – a sum close to what they won in 2018 (even without adjusting for inflation).

Chronologically, the first three large public-sector strikes of 2018 were West Virginia, Jersey City, New Jersey, and the Graduate Employees’ Organization (GEO) at the University of Illinois at Urbana-Champaign. All three of these groups had been on strike in the previous thirty years. The Jersey City educators had walked out 1998 for five days, winning a 12.5% raise for teachers and a 15% raise for other school personnel (Orlando Sentinel, 1998). They had also been on strike for three days in 1976 and 30 days in 1970 (Westfeldt, 1998). The GEO at the University of Illinois had previously been on strike in 2009, and, though this is not recorded in federal data, also held a two-day recognition strike in 2001 of which the present author was a proud participant.

This can hardly be a coincidence. Over the years 1981 – 2018, the total number of American workers (unionized or not) who engaged in large work stoppages was under nine million. The entire American workforce in 2019 is just over 164 million (BLS, 2019), and vast the majority of that number were not in the workforce in 1981 or even 1991. This averages out to well under two-tenths of one percent of the working population in any given year

The simple fact is most American workers go their whole work lives without taking part in a strike or working in a workplace where a strike has ever taken place. It cannot be pure coincidence that the first three public-sector strikes of 2018 happened in workplaces with a history of past strikes. Similarly, the two large strikes at the tail end of this two-year period – the UAW strike against GM and the CTU strike – involve unionized workforces with a considerable history of labour militancy.

As this essay moves from why the strikes of 2018-19 happened to what may happen next, an important fact to remember is that there are, compared to two years ago, 500,000 more workers who have firsthand experience with a strike, and who might therefore find it easier to strike again, and that these strikers are concentrated. The West Virginia strikers made up almost two percent of the entire state’s entire population (not just those in work), and in Chicago (where Burns [2019] notes teachers are required to live within city limits) a full one percent of the city was on strike. As E. Tammy Kim (2019) notes, writing about the UAW strike but speaking to the whole biennium, “a key measure of the strike’s success will be the extent to which [union] members build on the memory of this organizing.”

Quo vadis?

Was this a strike wave? Has it crested? Are we on the verge of a new moment of militancy for US organised labour?

In his influential and much-debated 2013 essay, “Fortress Unionism,” Rich Yeselson urges unions to wait for moments like these. Unions, he contends, are too weak to bring back the power of labour on their own. Instead, their importance will come if/when they are able to channel and direct the power of stochastic mass action:

Wait for the workers to say they’ve had enough. When they demand in vast numbers collective solutions to their problems, seize upon that energy and institutionalize it.

That is how massive union growth occurs—workers take matters into their own hands and then unions capture that energy like lightning in a bottle. The workers risk their jobs, and sometimes even their lives, to form a union. It has happened this way all over the world. The workers will signal—loudly—when they want to organize.

In short, union growth occurs when working-class activism overwhelms the quotidian strictures of civil society, forcing political and economic elites to accept unionization as the price of civil peace. During episodes of massive union growth, the workers don’t confine themselves to the careful strategies of union staff—they disregard them, and force the union to play catch up. Conflict spreads quickly from worksite to worksite.

It is difficult not to see West Virginia, Arizona, Oklahoma, and the other states in this description. None of the actions in the spring of 2018 were decisions driven by institutional union leadership; at best, those leaders were reacting to energy from workers themselves. Notably, in West Virginia, as we have discussed, the unions’ leadership tried to call off the strikes, only to be ignored by workers on the ground who stayed out for several more days.

The workers are willful when they want unions,” writes Yeselson. “Keep your eye on them. The unions will follow.” Have the unions followed? Especially with the public sector strikes in the South and West, there are reasons to think the answer is yes, and also reasons to think the answer is no.

On the yes side of the ledger, West Virginia, North Carolina, and Kentucky all saw educator strikes again in the spring of 2019 (Dirnbach, 2019). This time, though, they were deliberately short strikes of one or two days, more demonstrations of intent than pure displays of power. It’s not at all clear, from this distance, if this was an instance of union leadership stifling rank-and-file energy, or if the unions were in harmony with the workers.

Another sign of increasing harmony between educators and educator unions is in membership numbers. In Arizona, Oklahoma, Kentucky, West Virginia, and North Carolina, with few to no formal collective bargaining rights, union membership is entirely voluntary, and we can safely regard a significant change in union membership numbers to be connected to an increase in worker affinity with institutional unions.

The US Department of Labor’s Office of Labor-Management and Standards (OLMS) maintains a database of every union’s annual report (called an LM-2) filed under the requirements of federal law. LM-2 reports include a line for unions to report membership numbers. However, only unions that represent private-sector workers must fill out an LM-2. Of the above, only the AFT in West Virginia files a LM-2, but the results are impressive – from 931 reported members in 2016, the latest report shows 9,997 members, more than a 1000% increase and a number representing a quarter of all educators in the state.

In the opposite direction, there was mixed evidence that educator militancy led to power at the ballot box in the legislative and gubernatorial elections in November of 2018. West Virginia, Arizona, Oklahoma, and Kentucky all saw the incumbent Republicans maintain power (Reilly, 2018). Pro-union politicians won in more Democratic-friendly states like Wisconsin and Michigan, but there is little evidence that those wins were related to strikes in other states.

Moreover, while 2019 has certainly seen very large and significant strikes, they are of a more traditional kind than the upsurge we saw in West Virginia and elsewhere. The Los Angeles teacher strike, the CTU strike, and the UAW strike are legal strikes launched through the formal processes of collective bargaining. The other public-sector strikes we have seen in 2019 have been smaller and of shorter duration, often by design.

This of course means nothing. It could simply be a brief pause before a strike wave resumes. Where, when, and how it might re-emerge is a question too speculative for this author.

The approach of the 2020 US presidential election is a factor to consider. Most established unions will shift energy and resources into politics in an election year, leaving less for militancy, perhaps. On the other hand, strikes during an election year can often force the hand of a politician seen as vulnerable. Certainly, the education platforms of the various candidates seeking the Democratic nomination for President have shifted more in the direction desired by educator unions (Cohen, 2019).

It will also be interesting to see how malleable the concept of Bargaining for the Common Good is in non-educational settings. To the extent that this concept played a role in making the strikes of 2018-19 possible, the degree to which other groups of workers, public or private sector, can use the same ideas will give us a clue as to the power of the current wave of militancy.

The connection between a teacher and the students they serve is direct and immediate. The story the union can tell its members and the public about the link between their contract and the public good is a relatively simple one to tell.

The most obvious place where Bargaining for the Common Good could be deployed to equal effect is healthcare. Union density in healthcare is increasing rapidly, and there are potent connections between the working conditions of nurses, technicians, and other caregivers, and the people for whom they care.

The barrier is that labour militancy in healthcare is governed by different laws than those affecting other workplaces. A minimum notice of ten days is required before any labour action can be held at any healthcare facility, including nursing homes, hospitals, and clinics. It is broadly accepted by unions in the healthcare industry that strikes are not intended to shut down work at a facility, and that strikers will not interfere with operations that are involved in patient care (Tillett, 2016). As such, the strike is a limited weapon in healthcare.

Where will we see the concept of Bargaining for the Common Good expand to next? Will workers installing wind turbines for carbon-free energy generation strike over environmental issues? Or will it be pollution control scientists in the federal government or the states, striking over climate change? Public defenders striking over a criminal justice system rife with institutional racism and inadequate protections for poor defendants? The evolution of Common Good bargaining will be a subject worth watching intently.

We might also see an expansion, or even an explosion, of strike activity among marginalized groups of employees. In the past few years, waves of short strikes among fast-food workers, mostly people of color, have jolted the industry and led to an increase in wages, but as yet the strike action has not found critical mass. Similarly, labour militancy is on the rise among employees of Amazon, including Somali-Americans and Somali immigrants in huge Minnesota fulfillment centers which are strategically vital for the company’s mode of business (Kamper, 2019). Amazon workers might work far away from the customers they serve, but their ability to shut down nodes of distribution gives them as much power over the economy as any other group of workers in the country.

Last, but not least, it will be interesting to see how or if the increased militancy of 2018, 2019, and perhaps beyond will shape the 2021 contest for the presidency of the American Federation of Labor – Congress of Industrial Organizations (AFL-CIO). The AFL-CIO is an umbrella organisation comprising the majority of American unions. The incumbent president, Richard Trumka, will not seek re-election. Many voices in labour and on the Left are encouraging the charismatic Sara Nelson, President of the Association of Flight Attendants, to run (Greenhouse, 2019). Nelson has been a vocal and visible supporter of nearly every major strike action in the last year, and were she to be elected it would certainly be interpreted as an endorsement of increased labour militancy.

The United States has seen false dawns before. The large and successful Teamsters strike against UPS in 1997, followed closely by the large-scale protests against the World Trade Organisation (WTO) in 1999, were seen by many observers at the time as heralding a new spirit of militancy and direct action in labour (Minchin, 2017: 254-55). It was not to be.

Is this time different?

This author is by nature a skeptic, but notes three things that might make this strike wave have more lasting impact. First is the growth of organised, institutional left wing political formations in the US, most notably the Democratic Socialists of America (DSA). DSA’s membership has expanded dramatically in the past five years to a membership of 60,000, perhaps ten times where it was a decade ago (Sernatinger, 2019). While still a small number on the scale of the country, it represents a foundation of support for labour militancy that might prove crucial in difficult contests.

Second, there is strong evidence that the political winds are shifting in labour’s favor. Public opinion in favor of labour unions is at a fifty-year high (Jones, 2019). The political platforms of all the leading candidates for the Democratic presidential nomination are far more overtly pro-labour than in recent election cycles (Richman, 2019). Far from devastating unions, the year that has followed the Supreme Court’s Janus decision has seen public sector unions retain their financial viability, meaning they still have the resources to support militant action (Rainey and Kullgren, 2019). A recent study by Hertel-Fernandez, Naidu, and Reich (2019), suggests that teacher strikes tend to influence parents in a pro-union, rather than anti-union direction, suggesting that educator strikes might create a positive feedback loop that encourages more labour militancy.

Third, and finally, it is worth highlighting something that has been mentioned a few times already in this paper: this was the most demographically-diverse strike wave the country has ever seen. Strikes, and labour militancy more broadly, have long been rhetorically coded as male and Caucasian. The 2018-19 strike wave was led by unions with majority female memberships, and Common Good goals were frequently (Los Angeles, Chicago) expressed in terms of racial justice. Immigrants in Minnesota are leading the strikes against Amazon.

This is perhaps the most novel development of the 2018-19 strike wave. If labour militancy continues to become more diverse, and therefore more closely reflects the true character of the American working class, then we may very well look upon these two years as the turning of a corner.

Biographical Note

Dave Kamper is a labour organiser and writer living in Minnesota and a member of UAW Local 1981. He has a PhD in History from the University of Illinois and an MS in Labour Studies from the University of Massachusetts.

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1 Because the leaders of the AFT and NEA unions had encouraged educators to go back to work, after February 27th the strike became what is known as a “wildcat” strike; when workers strike in defiance of union leadership. In truth, though, the AFT and NEA were reacting rather than leading from the very beginning of the action.

2 An unwarranted and potentially dangerous assumption underlying this author’s conclusion is that the present nature of US politics and culture makes it unlikely authorities will attempt to break strikes with the use of force. If that changes, then the calculus of workers must be drastically revised.

Haiti’s Second Social Revolution – Kim Ives

Unfolding over twelve and a half years beginning in August 1791, history’s first and last successful slave revolution culminated in the founding of Haiti on Jan. 1, 1804.

Like those of France (1789), Russia (1917), China (1949), and Cuba (1959), Haiti’s first social revolution was one of humanity’s most important, influential, and dramatic. Acting as an inspiration, model, and touchstone for other liberation wars, its success marked the beginning of the end of early capitalism’s chattel slavery system and of European colonial domination in South America. It also resulted in the redrawing of the map of North America, when, following his defeat, French Emperor Napoleon Bonaparte was forced to sell to the fledgling United States of America, to the great delight of President Thomas Jefferson, the vast Louisiana Territory.

As this analysis is written in January 2020, Haiti has been engulfed for months in weekly, if not daily demonstrations. Regularly, roads have been widely barricaded for weeks on end, paralyzing businesses, schools, and government offices. Police and pro-government paramilitaries have killed hundreds in clashes and executions, with many hundreds more wounded and disappeared. The President has dissolved the Parliament and is ruling by decree. With inflation, unemployment, and shortages raging, the government dysfunctional, and emigration bottled up, the situation remains very explosive.

Haiti appears to be on the brink – in the next few months or years – of its second social revolution, which occurs when a nation’s economic system and property relations fundamentally change. It will be the culmination of over three decades of fierce class war fought, since the Duvalier regime’s collapse in 1986, between the Haitian peasantry and working class, accompanied by an unflagging revolutionary intelligentsia, against the country’s international and local ruling classes, which mostly work in concert.

To understand why Haiti’s revolutionary potential is so great today and who the actors are, it is essential to have a notion of the struggle over these past 34 years, and some Haitian history.

Aristide Emerges

Haiti has had no shortage of inter-ruling class coups d’état, often self-proclaimed as “political revolutions.” But there was a genuine political revolution on Dec. 16, 1990, when former liberation theologian Salesian priest Jean-Bertrand Aristide was elected president. Other than the 20-day coup-ended presidency of Daniel Fignolé in 1957, Aristide’s sweeping victory, with 67.5% of the vote out of a field of 11 candidates, was the first time that a champion of Haiti’s peasant and worker masses had acceded to the presidential chair.

But the victory, as could be expected, was short-lived: merely eight months after his Feb. 7, 1991 inauguration, the Armed Forces of Haiti (FAd’H), with the support of Haiti’s two ruling classes and Washington (albeit tacitly), ousted Aristide in a bloody putsch (which he barely survived) on Sep. 30, 1991 and sent him into a three year exile, first in Carlos Andres Perez’s Venezuela and then in Washington, DC.

Ironically, that coup, much more than Aristide’s electoral victory, set the stage for the “system change” that Haiti’s masses are today universally demanding.

The Perils of Accommodation

Although he declared in his inauguration speech that his arrival in power marked Haiti’s “second independence,” Aristide’s approach to Haiti’s dire state after five years of political and economic dysfunction following dictator Jean-Claude “Baby Doc” Duvalier’s flight from Haiti on Feb. 7, 1986, was merely social democratic: asking that the rich pay taxes (which they hadn’t before) to lift the Haitian masses out of their wretched impoverishment.

Also, Aristide was a student and apostle of Toussaint L’Ouverture, the first undisputed leader of the Haitian revolution. He led the armed rebellion which forced the abolition of slavery in the French colony of Saint Domingue in 1793.

But Toussaint did not envision Haiti as an independent nation. He was simply trying to convince the French Assembly, and later Napoleon, that he could manage and protect the affairs of St. Domingue, Europe’s richest and most productive colony in the Western Hemisphere, more effectively than any governor from France. And as Governor-General of the colony in 1801, he did.

However, the early 19th century was the age of European colonialism, not of neo-colonialism, which would not fully emerge until a century and a half later. Furthermore, France had to rationalize and justify the enslavement of Africans, who replaced European indentured servants during the 17th century. Thus, France’s King Louis XIV promulgated the “Code Noir” (Black Code) in 1685 to codify, legalize, and enforce the racism necessary for the smooth functioning of African slavery.

Racist ideology, which is not genetic to humans, became dominant among Europeans following the Code Noir’s implementation, mightily infecting First Consul Bonaparte, who declared: “I am for the whites because I am white. I have no other reason, and that one is good.” In response to Toussaint addressing him in letters as “the first of the blacks to the first of the whites,” Napoleon instructed his Colonel Vincent to “rip the epaulettes from the shoulders of the ‘gilded Africans’ of St. Domingue,” who, under Toussaint’s command, had served as French officers in defeating attempted colony-snatching by England and Spain.1

On Aug. 25, 1802, Napoleon’s officers tricked and captured Toussaint and shipped him to France, where he was imprisoned in the brutally cold Fort-de-Joux, high in France’s eastern mountains. Toussaint died there from the cold on Apr. 7, 1803. Until the end, he wrote letters trying to convince Napoleon that he would be the ideal governor to run France’s prize colony, “The Pearl of the Antilles.”

Similarly, Aristide thought that he could strike a deal with the late 20th century’s superpower: the U.S.. He did not take the defiant, denunciatory approach that Fidel Castro had in neighboring Cuba, or which Venezuela’s Hugo Chavez would a decade later. He sought to find accommodation with Washington, just as Toussaint had tried with Napoleon.

As he said after his 2000 re-election in an interview published in The Progressive in 2001: “If the international community [code for the U.S. and its allies] is not for us, one thing is sure. We will fail.”2

So Aristide did not envisage a rupture from the empire or expropriation of the land, factories, and ports of Haiti’s ruling class. He simply tried to wield his vast appeal and authority with the masses as a way to pressure the bourgeoisie to ante up for social programs and Haiti’s development and to convince Washington that only he could bridle and control the Haitian popular movement’s radical aspirations. In the process, he calculated, he could win some modest improvements for Haiti’s impoverished masses, moving them, as he wrote in one book, from “abject misery to dignified poverty.”

But even this timid program was too much for U.S. imperialism and Haiti’s ruling class. Hence the coups d’état against him on Sep. 30, 1991 and Feb. 29, 2004. In each case, like Toussaint, Aristide was captured and sent into exile, the second time for seven years in Africa.

The Earthquake

During Aristide’s second exile, a 7.0 magnitude earthquake struck Haiti on January 12, 2010, killing as many as 85,000 people. Individuals and governments funneled some $13 billion to the country, but the money was mostly intercepted by humanitarian organizations. The promised “Build Back Better” overhaul of Haiti’s agriculture, infrastructure, and housing never materialized. The signature achievements of the relief effort directed by the Interim Haiti Recovery Commission (IHRC), effectively led by former U.S. President Bill Clinton, were the Caracol sweatshop complex near the northern city of Cap Haïtien (far from the earthquake zone around Port-au-Prince and built on some of Haiti’s most fertile farmland), and two luxury hotels – the Royal Oasis and Best Western – in the capital (both are now failing).

Emblematically, the Red Cross took in half a billion dollars in disaster relief donations and ended up building only six houses, a Pro-Publica and National Public Radio investigation found.

Washington also used the disaster to essentially take over the Haitian government and introduce a new pro-Washington neo-Duvalierist president, former vulgar konpa singer Michel Martelly, via November 2010 and March 2011 first and second round elections. U.S. Secretary of State Hillary Clinton even flew to Haiti in January 2011 to force President René Préval to remove his candidate, Jude Célestin, from the run-off and replace him with Martelly.

Moïse Jean-Charles Emerges

After his return to Haiti from South Africa on Mar. 18, 2011, Aristide assumed a very low profile, never publicly leaving his home in Tabarre or criticizing Martelly, who had won the record low-turnout election three days later, on Mar. 21, 2011. Martelly, who founded the Haitian Bald Headed Party (PHTK), was inaugurated on May 14, 2011.

Nonetheless, the base of Aristide’s party, the Lavalas Family (Fanmi Lavalas Political Organization or FL), was re-energized by Aristide’s mere presence in the country. Martelly’s flagrant corruption, scattershot repression, arbitrary arrests, brazen lawlessness, and refusal to hold elections provoked larger and larger demonstrations, in which the FL’s masses marched.

On May 8, 2013, Aristide was summoned to appear in court to be questioned for his alleged involvement in the murder of journalist Jean Dominique in April 2000. The masses saw this as an attempt by the Martelly regime to arrest and capture Aristide. In one of the largest and most militant Haitian marches ever, tens of thousands accompanied his car to the court and back.

Prominent in the entourage was outspoken Sen. Moïse Jean-Charles, who had come on the national stage between 2011 and 2013 after starting his rise as a Lavalas mayor in the northern town of Milot in the early 2000s. Articulate, charismatic, and leading the charge against Martelly, Jean-Charles appeared to be poised to assume the mantle for leadership of the Lavalas Family shortly after that historic outing and claims that Aristide promised him as much that very day after successfully returning home.

But instead, the next day, May 9, Aristide held a press conference anointing Dr. Maryse Narcisse, a long-time loyal but uninspiring lieutenant, to be the party’s leader.

Narcisse, under Aristide’s direction, mapped a very cautious (and, in retrospect, deluded) strategy. She and others in the party’s leadership (which in typical Aristide fashion had bourgeois and even “Macoute” figures in it) had a simple and conservative game-plan: wait until the end of Martelly’s term in 2016 to then win the election, as Aristide had done in 1990 and 2000.

But Jean-Charles and the Lavalas base were taking a more confrontational approach. Even before Aristide snubbed him, Jean-Charles had begun to deal with Haiti’s more radical left, in particular the spin-offs and remnants of the National Popular Party (PPN), which had been headed by Haiti’s most prominent communist, Ben Dupuy. In 2011, with the arrival of Martelly, there had been a split within the PPN, and Dupuy, who’d been its principal ideologue, face, and voice since its founding in 1999, was expelled. The various PPN bases across Haiti were rent, some maintaining allegiance to Dupuy, others with the renegade faction. Both PPNs became politically weak, their bases neutralized by confusion.

As a young man in the late 1980s, Jean-Charles had been politically formed by the PPN’s precursor, the National Popular Assembly (APN), a structured and disciplined mass organization which had been founded in then-Father Aristide’s St. Jean Bosco church in the capital’s La Saline slum in April 1987. A leader of the APN’s youth wing in Cap Haïtien, the National Youth Assembly (AJN), Jean-Charles had gone on to head the APN’s branch in Milot, his hometown. He later left APN as his political ambitions grew to become Milot’s mayor.

Those roots were rekindled as Jean-Charles used his national stature and podium as one of the North’s Senators since 2011, elected under the banner of President René Préval’s Espwa (Hope) party, to become the leading critic of not only Martelly but, more importantly, the United Nation’s military occupation of Haiti (MINUSTAH), set in place after Aristide’s 2004 ouster. He joined forces with a collection of APN and PPN veterans, alumni, and associates, as well as new recruits, to wage a campaign for the withdrawal of UN troops from Haiti. The weekly newspaper Haïti Liberté, founded by PPN alumni, with offices in Port-au-Prince and Brooklyn, NY, also played a central role in this emergent coalition.

Working with a dissident current of Brazil’s Workers Party, Jean-Charles and his allies organized several high-profile delegations to Brazil, Argentina, Chile, and Uruguay (nations whose troops made up most of the 10,000-soldier MINUSTAH) as well as to UN headquarters in New York to lobby and speak out for the immediate withdrawal of occupation troops.

A First Try with KOD

Seeing Aristide’s party’s inertia, limitations, and delusions, during 2013, the APN/PPN-descended leaders, joined by Jean-Charles, began meeting to discuss and plan a new party which could take the struggle to the next level. After his capture, Toussaint L’Ouverture had been succeeded by his principal and more radical lieutenant, Gen. Jean-Jacques Dessalines, who led the French colony’s former slaves to fight for, win, and then declare independence from France. Therefore, fittingly, Jean-Charles and his reconnected comrades called their embryonic party the Dessalines Coordination or, its Kreyòl acronym, KOD.

“It’s a great name,” Moïse said in one of the meetings. “We can have slogans like ‘Mare Martelly ak kòd’” (Tie up Martelly with rope).”

Two of KOD’s key planks hammered out by the seasoned militants were that the party would not participate in elections held 1) under Martelly or 2) under MINUSTAH. They presciently saw that either scenario would make a fair election impossible.

On Sep. 29, 2013, the eve of a national march in Port-au-Prince marking the 22nd anniversary of the 1991 coup, KOD organized at the Fany Villa in Port-au-Prince a meeting of over 100 delegates, largely from former PPN bases around the country. But a number of other popular organizations and militants linked to Aristide’s FL also attended, as well as outspoken lawyer André Michel (who is one of the principal leaders of today’s uprising).

KOD’s proposal, which was reviewed, edited, and then adopted by the assembly, was for the formation of a 13 member Council of State which would lead the country with a judge drawn from Haiti’s Supreme Court (a formula similar to the provisional government which ran Haiti from March 1990 to February 1991 and under which Aristide was first elected). The Council of State’s members would be drawn from key sectors of Haitian society: peasant organizations, popular organizations, political parties, non-aligned parties, women’s organizations, unions, the business sector, vodou, Protestant, and Catholic sectors, students, young people, and civil society.

“The Council of State would sit down with the Supreme Court judge to find a democratic formula to name a government,” the KOD proposal read. “That government would put in place a democratic Provisional Electoral Council which would hold a general election in the country for all the empty posts in a time frame of no more than six months.”

The huge march that surged through the capital’s streets the next day highlighted KOD’s two principal demands: “Martelly must go! MINUSTAH must go!”

“We are clear about it: the international community has an agenda for Haiti,” said Jean-Charles in his speech at the Forum. “In 1990, we disrupted their plans and elected our own government. Seven months later, they carried out a bloody coup d’état. Since then, it is they who have imposed what they want in Haiti. This cannot continue. They imposed President Martelly on us. They imposed [Prime Minister] Laurent Lamothe on us…. It is we, the Haitian people, who have to take our destiny in hand. And that is what we are beginning to do here today.”

Cracks Begin

It was a heady moment, full of promise, but danger signs soon emerged. Jean-Charles did not yet want to make known his change of party to KOD. When questioned by his comrades, he claimed he didn’t want to alienate the Fanmi Lavalas base which still revered him and was waiting for the right moment to make his new allegiance clear.

But the Lavalas leadership was not as waiting. Things were coming to a head. Jean-Charles was increasing his calls through radio programs, meetings, and demonstrations for Martelly’s resignation. But in mid-2013, Narcisse and the FL’s leadership issued a statement saying the FL was opposed to Martelly stepping down before the end of his term. She called only for elections, and during the summer, the party began to organize electoral campaign rallies in towns around Haiti.

But tensions grew when – in towns like Mirebalais, Miragoâne, Port-de-Paix, St. Marc, and Aux Cayes – Jean-Charles would convert FL electoral rallies into anti-Martelly mobilizations. He articulated KOD’s message: no free, fair, and sovereign elections are possible under Martelly and foreign military occupation. The rallies usually ended with the crowds carrying Moïse away on their shoulders to shouts of “Martelly out, MINUSTAH out,” leaving Narcisse and the Executive Committee fuming.

After huge anti-Martelly demonstrations on Sep. 30, Oct. 17, Nov. 7, and Nov. 18, 2013 in Port-au-Prince, Cap Haïtien, and other provincial cities, Jean-Charles announced a march on the U.S. Embassy in the Port-au-Prince suburb of Tabarre for Nov. 29, the anniversary of a 1987 election massacre.

Two days later, the FL announced that, also on Nov. 29, it would hold a march to lay flowers at the Argentine School at Ruelle Vaillant, the site of the worst bloodshed during the 1987 election-day massacre.

The two rival currents now stood face-to-face. Whose call would the Lavalas popular organizations and the masses heed?

On the morning of Nov. 29, Venel Remarais of the FL-aligned Radio Solidarité and Haitian Press Agency (AHP) issued a bitter editorial against the march on the U.S. embassy, in which he accused Jean-Charles (without naming him) of being a “Rambo,” an “individual, a revolutionary with great political ambition,” of suffering from “vertigo from having a swollen head,” and of thinking “he is the center of everything.”

“It is in respecting the rules of the game that all victory is possible, not in rebellion, hot-headedness, and charging ahead,” Remarais said.

He even suggested that a “rarely seen personality,” an apparent reference to Aristide, might be at the Ruelle Vaillant flower-laying.

In the end, only a few hundred people turned out to the Executive Committee’s Ruelle Vaillant demonstration, while many, many thousands marched on the U.S. Embassy, although Haitian police dispersed the demonstration with teargas and gunshots in the air before demonstrators reached the building. The people’s inclinations and allegiance were clear. The last straw came two days later during a Dec. 1 FL rally in St. Marc. Jean-Charles again electrified the event, with a passionate speech calling on the people to beware of “traitors who are in the National Palace, who are in this crowd, who are everywhere… Veye yo, veye yo, veye yo!” Keep an eye on them!

“We demonstrated and marched on the National Palace [Sep. 30 & Oct. 17]. Then we went to see Pétion in Pétionville [Nov. 7]. Then we decided to go visit Uncle Sam, but a few of them didn’t want to come with us… For their personal interests, they’re afraid of Uncle Sam. But since we are the children of Dessalines, we are not afraid to look [the Americans] in the eye. [The Americans] bombarded us with their gunshots. But we’re going back there.”

Warned by other FL officials at the St. Marc event about Jean-Charles’ fiery speech, Narcisse and other Executive Committee members decided not to even show up. The next day, Dec. 2, 2013, for the first time in the party’s history, the FL leadership publicly cast out a member, in this case Jean-Charles, saying: “The Fanmi Lavalas Political Organization protests with all its might against any public declaration which comes from some people who present themselves as Fanmi Lavalas members…”

Sen. Moïse Jean-Charles responded immediately on radio stations, saying the FL had been taken over by a “macouto-bourgeois group,” referring to Executive Committee members like businessman Joel Edouard “Pasha” Vorbe and former pro-coup right-wing politician Claude Roumain.

“I have spoken with [former] President [Jean-Bertrand] Aristide about it,” he said. “I told him it is destroying the party. I told him that unless he made a public declaration about it, I regret to say that the Fanmi Lavalas will cease being a party which defends the masses’ demands. The bourgeoisie will simply take it over completely and finish with it.”

The Revolution Betrayed

If it appeared that the moment had come for Jean-Charles to make his switch to KOD public, that was not to be. He continued to argue that the moment was not yet ripe. He headed a KOD delegation that toured Brazil and Argentina in May and June 2014, trying to win their governments’ withdrawal from MINUSTAH. Giant demonstrations continued to buffet the Martelly regime during 2014, again with the slogan that Martelly and MINUSTAH had to go, and the regime’s survival appeared to be in doubt.

Again the FL leadership tried to tamp down the rebellion by saying that it opposed Martelly’s ouster but thought that PM Lamothe should go. At the same time, the Martelly government, with pressure from the Obama administration, finally began to organize elections.

“Will the prospect of elections break the mobilization to uproot Martelly?” Haiti Liberté asked in late 2014. “Will the FL leadership enter into an agreement with the Martelly regime to take part in elections, from which the party has been excluded for the past decade?”

In December 2014, Martelly sacrificed Lamothe, replacing him with Evans “K-Plim” Paul, a politician who had helped orchestrate Aristide’s first presidential campaign. Jean-Charles, who several times publicly denied his membership in KOD, parleyed with the FL, trying to convince them to boycott Martelly’s elections with him. FL’s response, he said, was: “N ap antre tet bese” (We diving into them head first.)

As a result, Jean-Charles broke with his KOD comrades, taking KOD’s blueprints to found his own party named Platfòm Pitit Desalin (Dessalines’ Children Platform or PPD), and plunged into the electoral fray. Another more social democratic formation called the Patriotic Movement of the Democratic Opposition (MOPOD), changed the D-word in its name to Dessalinien, and also announced it would field a candidate. Everybody wanted to be Dessalinien now, but not follow his lessons.

“We witness the pusillanimity of the so-called opposition under the leadership of MOPOD…, the Lavalas Family Political Organization, and the Dessalines’ Children Platform, three rather inconsistent formations which are now prepared to play the game of electoral lottery concocted by the government,” said a bitter Haiti Liberté editorial. “Despite its record of lawless behavior and of association with people accused of rape, murder, drug trafficking, and kidnapping, this government is still moving towards elections that will no doubt deliver a society which is even more unjust and corrupt, with the encouragement of those who should but don’t see anything wrong with that.”

Honey-Trap Elections

The prediction would come to pass. Elections for president and parliament were held on Oct. 25, 2015, and, despite KOD’s and Haïti Liberté’s warnings, the results stunned the two Lavalas currents. The election was a mess — marred by fraud, violence, and intimidation — with voter turn-out less than 30%. Martelly’s anointed PHTK successor, a former banana growing businessman – nèg banann – Jovenel Moïse, led the field of 70 presidential candidates with 32.81% of the vote and Préval’s candidate, Jude Célestin of LAPEH, came in second with 25.27%. Moïse Jean-Charles came in third with only 14.27% of the vote, and the Lavalas Family’s Narcisse came in fourth with a mere 7.05% of the vote.

Huge demonstrations greeted the results, thwarting a run-off. Martelly was forced to step down on Feb. 7, 2016, handing over power to Jocelerme Privert, who was selected by the Parliament to be interim president.

Because Privert had been Aristide’s former Interior Minister (he spent two years in jail after the 2004 coup), the Lavalas masses were assuaged. On Apr. 5, 2016, Haiti’s Provisional Electoral Council (CEP) said the presidential elections had to be rerun from scratch. (Many of the Parliamentary races were allowed to stand.)

The new presidential election was reheld on Nov. 20, 2016 with a winnowed field of 27 candidates, and the results were even more shocking. With less than 20% of the electorate voting, Moïse won in the first round with 55.6% of the vote, trailed by Célestin with 19.57%, Jean-Charles with 11.04%, and Narcisse with 9.01%.

Despite vociferous protests over falsified and missing voter tallies, ballot stuffing, transport violations, and other irregularities, the CEP and international overseers remained unmoved, and Jovenel Moïse was sworn in as Haiti’s 42nd president on Feb. 7, 2017.

The election had been hopelessly rigged, not just through widespread fraud, but systemically, like elections in the United States. The candidates with the biggest coffers garnered the most votes, and the convoluted voting system Washington had set in place since Aristide’s 1990 victory, combined with help from United Nations “peacekeepers,” had effectively suppressed the votes of over 80% of Haiti’s electorate.

The PetroCaribe Factor

Ironically, the country which may have most guaranteed Jovenel Moïse’s victory was not the U.S., but, inadvertently, Venezuela. Since 2008, it had been providing Haiti with all of its petroleum needs – about 20,000 barrels a day – under it PetroCaribe program, which since 2005 had been extended to 16 other Caribbean and Central American nations.

Haiti had a particularly sweet deal, due to the solidarity Dessalines and his successor Alexandre Pétion had extended to Sìmon Bolivar, Hugo Chavez explained. Haiti had been instrumental in providing refuge, military advice, printing presses, boats, arms, and soldiers to the continent’s “Great Liberator” in the early 19th century.

Under its special PetroCaribe arrangement, the Haitian state (through which the oil was funneled) only had to pay Venezuela for 60% of its petroleum sales, with the remaining 40% stashed as a loan for 25 years at 1% interest in the PetroCaribe Fund, which was established to pay for schools, hospitals, roads, and any other social projects which might benefit the Haitian people. Chavez’s idea was to create goodwill by extending this solidarity fund which would free Haiti from having to turn to the strings-attached loans of the World Bank and International Monetary Fund (IMF) to keep its economy afloat.

Close to $2 billion ended up in the PetroCaribe Fund, but the Martelly government burned through almost three-quarters of it. Millions of it, we suspected before but now know after a government report in May 2019, went to Jovenel Moïse. This is one of the reasons his campaign was able to so vastly outspend his competitors.

The Revolutionary Stage Set Again

Unfortunately for Moïse, he came to power at roughly the same time as Donald Trump. One of Trump’s first moves was to dramatically increase economic sanctions against Venezuela, which made it impossible for Haiti, and other PetroCaribe beneficiaries, to make their oil bill payments. As a result, the flow of PetroCaribe oil to Haiti – which consumed about $4.3 billion of it over the course of a decade – came to an end in March 2018.

Now Moïse didn’t have a magic pot from which to draw money to realize all the fantastic promises he had made, like providing electricity 24/7 around the country within 18 months. On the contrary, he had to turn back to the IMF, which agreed in early 2018 to provide Haiti a $96 million loan, but on the condition that Haiti raise fuel prices, in some cases up to 51%.

The attempted price hike took place on July 6, 2018, and that, not coincidentally, marks the beginning of the current uprising. (The government had to rescind the hike, and the Prime Minister resigned.) It has become a perfect storm of Haiti’s enduring anti-imperialism mixed with anti-austerity, anti-corruption, anti-occupation rage, which all appear to be stoking a profound social revolution. “System change” has become the movement’s watch-word, and, with a little luck, it might even be possible. Here is the political lay of the land at this writing.

There are basically four sectors trying to follow and lead the still-flaring uprising of the masses.

The Traditional “Political Class”

Since the complete humiliation and defeat of the Lavalas Family and Dessalines’ Children Platform in the elections, the “Lavalas masses” have been like a headless body, charging somewhat blindly at the PHTK regime. A shifting assortment of traditional and “nouveaux arrivés” Haitian politicians and at least five opposition coalitions have battled to assume leadership of the anti-Jovenel movement.

The most prominent figure has been André Michel, an outspoken lawyer who heads the Consensual Alternative for Haiti’s Refounding, today’s principal opposition coalition. He is seconded by a right-wing, allegedly corrupt and death-squad-leading former-PHTK-ally, Sen. Youri Latortue. A Lavalas leader, Dr. Schiller Louidor, is also a Consensual Alternative spokesman. The coalition has also worked closely with a number of elected officials from the FL, PPD, and the late René Préval’s party (Sens. Nénel Cassy, Evalière Beauplan, Antonio “Don Kato” Chéramy, etc.)

Meanwhile, Moïse Jean-Charles had his credibility severely damaged during the two elections by making alliances with patent reactionaries, all of whom betrayed him. He continues to alternately work with and then denounce different opposition coalitions, further cementing his growing reputation as a mercurial, unreliable, and opportunistic politician.

However, his sense of strategic showmanship is very keen. He scored a great coup in late 2019 when he spoke at a public rally and posed for a photo-op with Nicolas Maduro in Venezuela, during which he apologized for Haiti’s betrayal of Venezuela at the OAS on Jan. 10, 2019.

That was the date of an OAS General Assembly during which Haiti flipped and voted with Washington that Maduro’s 2018 election was “illegitimate.” Outrage over that diplomatic treachery helped fuel the uprising during 2019.

The Lavalas Family continues to remain formally insular and aloof from the opposition (despite FL leaders and spokespeople working in and with opposition coalitions). Citing tactical differences, the party refused to sign onto a joint project of Haiti’s five opposition coalitions in November 2019. It may have been just as well, since the coalition of coalitions crashed and burned.

Amy Wilentz wrote in The Nation in January: “Aristide seems to have retired from political life after the presidential candidate he backed lost the contested election that Moïse eventually won.” This may explain the FL’s clear lethargy.

However, the political situation remains highly combustible. September through November 2019 saw almost non-stop demonstrations with the regime playing pure defense. But in December (when, historically, popular mobilizations slow down for the holidays), Jovenel, the U.S. Embassy, the OAS, UN, and Vatican ramped up their diplomatic and public relations counter-offensive of pushing for “dialogue” and “compromise,” calls they eschew in Venezuela and Bolivia.

By January 2020, Haiti’s masses felt that the traditional opposition has capitulated. The Consensual Alternative’s latest proposal was that demonstrations take place after school from 6 p.m. to midnight. People saw this proposal as so shameful and ridiculous that the Consensual Alternative would have been better off proposing nothing at all.

The PetroChallengers

Following the July 2018 uprising, young, educated professionals began to take to the streets.

Well-versed in social media, competent in messaging and making well-designed banners, posters, and T-shirts, these mostly 20-to-40-something petty bourgeois activists began a campaign against corruption with the slogan: “Kote kòb PetroCaribe a?” (Where is the PetroCaribe money?).

Although their movement began with a demand only for a trial of those responsible for the embezzlement of the PetroCaribe billions, the “PetroChallengers” gradually also joined the larger mass movement demanding Jovenel’s resignation.

The PetroChallengers are in fact a constellation of different, independent committees with similar sounding names: Nou Pap Konplis (We’re not complicit), Nou Pap Dòmi (We keep our eyes open), Ayiti Nou Vle A (The Haiti we want), The Coalition of Petro-Challenger Organizations, etc..

There is a mutual distrust between the PetroChallengers and the traditional “political class,” while the Haitian masses are wary of both groups.

In July 2019, Nou Pap Dòmi presented a 13 point program called the 4Rs: in French, “Rupture, Redressement, Réorientation et Rigueur” (Rupture, Straightening Out, Reorientation, and Rigor), which was in response to the Consensual Alternative’s plan unveiled a month earlier.

In a year-end interview, Nou Pap Dòmi’s Gilbert Mirambeau, Jr. (whose viral August 2018 Tweet helped spark the movement) said in a recent interview: “This is not a struggle against a government. It is a struggle against a system.”

But the PetroChallenger groups are far from politically homogenous. Nou Pap Konplis provoked widespread outrage by meeting to dialogue with Jovenel Moïse in January. This is also seen as complete capitulation – “Nou Konplis” is the new derisive moniker for that current.

The Other World-ists

There is an ultra-left constellation of student, intellectual, and activist groups found in and around the Democratic People’s Patriotic Movement (MPDP), a pseudo-party whose guiding lights are economist Camille Chalmers and, by extension, peasant leader Chavannes Jean-Baptiste. This sector has traditionally been well-represented at international leftist conferences and on international news shows because its leaders are well-educated, articulate, and worldly.

However, the sector has little traction in the Haitian masses, largely because many of its components were extremely hostile to Jean-Bertrand Aristide’s governments.

Similar to the Socialist Revolutionaries in Russia a century ago and other ultra-left currents worldwide, the MPDP groups usually don’t have a Bolshevik goal of seizing state power, but rather see themselves as a “permanent opposition,” pressuring governments through their autonomous “social movements” and unions.

In their most extreme form, they seek to establish “another world,” like the Zapatistas in southern Mexico’s state of Chiapas, or Chavannes Jean-Baptiste’s Papaye Peasant Movement (MPP) on Haiti’s Central Plateau.

Like many ultra-lefts throughout history, this sector’s leaders sometimes ally with right-wing forces, as Chavannes Jean-Baptiste did with bourgeois assembly industry magnate and presidential candidate Charles Henri Baker, Jr. in past elections. Baker was a leader of the Washington -backed “civil society” Group of 184 coalition that helped oust Aristide in 2004. Today, Baker is one of Jovenel Moïse’s most stalwart supporters.

This “other world-ist” sector formed an opposition coalition called the Patriotic Forum in August 2019.

The Independent Haitian Workers Party (PETA)

The fourth sector is the most embryonic and cash-strapped, but at the same time, the most promising.

This current has a Leninist project of forming a disciplined and reliable “fighting organization” of professional revolutionaries, not a mere electoral party.

It is essentially a reboot of the KOD initiative, but built patiently this time, not on a rushed basis. It brings together former PPN bases as well as militants from the Democratic Popular Movement (MODEP) who became alienated with the MPDP and left it. There are many new recruits as well.

These comrades have taken care not to get caught up again in the struggle’s emotional fervor and the beautiful oratory and promises of untrustworthy politicians, as they did with Moïse Jean-Charles. They have painstakingly worked to write and review a founding manifesto and bylaws, devise a program, vet militants, and establish means and methods of communication between comrades in different parts of the country and the diaspora.

This is all being done with minimal funds but lots of discussion and coordination. Their approach is to go slowly but surely. They plan to have the PETA’s founding congress at some point in the middle of 2020.

If the party is successfully launched, it could possibly gain rapid popular acceptance, support, and adherence. Many of its militants are well-known and trusted. Herein lies the promise of a project like PETA.

Factors Favoring Revolution

While PETA’s challenges are still daunting, and initiatives from the other sectors cannot be discounted, there are several objective conditions favorable to revolution in Haiti.

First, revolutionary prospects are improved by the divisions rending the bourgeoisies of North America and Europe, where “nationalist” insurgencies are challenging the hegemony of globalist establishments. The bankruptcy and austerity of the globalists’ neoliberal order has fueled the rise of Trump in the U.S., Johnson in England, LePen in France, as well as Washington-aided spin-offs in “emerging” nations like Bolsonaro in Brazil and Piñera in Chile.

Just as Third-world nationalists like Mosaddegh in Iran, Arbenz in Guatemala, Peron in Argentina, and Vargas in Brazil emerged in the wake of the inter-imperialist conflicts of the Second World War, today we see progressive popular rebellions breaking out across the world’s neo-colonies, from Chile to Lebanon, Algeria to Ecuador, Iraq to Colombia, and, above all, Haiti.

Secondly, the threat that 2019’s general strikes and “lock-down” mobilizations presented to the capitalist system in Haiti, where factories and businesses were shuttered for weeks on end, has motivated many leading figures of Haiti’s comprador bourgeoisie – like Reginald Boulos, Dimitri Vorbe, and Bernard Craan – to fund and posture in support of the revolt in an attempt to salvage the system. The intransigent Jovenel, with his backing from an equally pig-headed Donald Trump, is threatening to bring everything down, they fear.

Therefore, the Haitian bourgeoisie, likely with tacit backing from the U.S. Embassy, has funded groups and conferences to ensure an “orderly transition” from Jovenel to a provisional government so “the system” can be preserved.

But rather than short-circuit the masses’ revolutionary output, this may increase it as the deals that are cut (or even dialogue held) with Jovenel will be seen by the masses as a sell-out or provocation.

Thirdly, Jan. 12, 2020 marked the earthquake’s 10th anniversary. Like the plundering of the PetroCaribe fund, the earthquake relief campaign’s Clinton-directed failure has stoked a very deep anger and resentment in the Haitian people, as did the subsequent U.S. election meddling which brought Martelly, Moïse, and the PHTK to power.

Finally, because the government has not held Constitutionally required elections, the Haitian Parliament expires on Jan. 13, 2020. The U.S. Embassy may see this as advantageous, because Jovenel Moïse will be able to rule by decree and impose any kind of Prime Minister and government that he chooses. Parliamentary ratification will be moot. The two PM candidates he has proposed since Jean Henry Céant’s ouster in March 2019 – Jean Michel Lapin and Fritz William Michel – were never ratified.

But, as the Haitian proverb says, this may be a case of “byen konte, mal kalkile” – counting well but calculating poorly. By removing all brakes on Jovenel Moïse and any buffer between him and the enraged Haitian masses, U.S. strategists may only make the situation worse. Already, Jovenel had to cancel plans to speak, as tradition dictates, at the Jan. 1 independence ceremonies in Gonaïves out of fear for his security and large demonstrations.

Today’s revolutionary conjoncture is therefore the culmination of three decades of false starts, dress rehearsals, and political lessons since 1986.

The high hopes of 1990 and 2000 were dashed by the 1991 and 2004 coups, and then again by the Lavalas Family and Dessalines Children leading their followers into rigged elections in 2015 and 2016. Many illusions about those parties have been shed, and revolutionaries learned not to substitute and concentrate their faith and strategy in a charismatic leader in place of patient building of political structures from the base up.

Finally, and foremost, the Haitian masses have become explicitly fed up with the capitalist system, whose corruption robbed them of the solidarity wind-falls which came after the 2010 earthquake and the decade-long PetroCaribe deal.

“The barricade is one of the most remarkable and constant modes of expression of revolutionary insurrections,” wrote Mark Traugott, the author of “The Insurgent Barricade.” (University of California Press, 2010).

So, Haiti’s burning tire barricades, which brought “peyilòk” (Locked down Haiti) for most of 2019, will likely continue in 2020. Other even more active forms of struggle will also surely emerge.

Haiti’s first revolution in 1804 took 13 tumultuous years to run its course. The uprising that started in July 2018 is now 18 months old. Whatever lulls, surprises, and detours the future holds, it is very clear that the subjective and objective conditions are presently in place for the Haitian people to achieve the “system change” they are universally demanding, inching ever closer to Haiti’s second great social revolution.

1Joan Dayan, Haiti, History, and the Gods, page 149.

2Catherine Orenstein, “Aristide Again,” The Progressive, January 22, 2001.

Political Regime and Workers’ Struggles in Contemporary Mexico – Adrián Sotelo Valencia

Introduction: Unionism in Mexico

Historically, three currents of unionism have developed in Mexico: The first one can be termed official and corporate, the second one is yellow, employer-oriented, managerial unionism. They are both in contrast with a third current: independent unionism which, albeit minoritarian, is at least the most critical towards the political system, coming with some alternative militancy with regard to the first two manifestations. This latter, alternative current has historically appeared at the main political junctures of the class struggle and the union movement of the country. In the last few years, some struggles and mobilizations stand out, namely by electricians, united in the SME (Mexican Electricians Union); teachers in the CNTE (National Coordination of Education Workers); education students from Ayotzinapa; and of workers from other sectors like health, higher education, agriculture and in the Maquiladora industry in northern Mexico, close to the US border.1

Neoliberalism, State and Unionism

Traditionally, bourgeois ideology has considered any working-class organization as an “obstacle” for the free development of the capitalist system. Unions should – from being instruments of workers’ defense and advocacy – transform to actual organs of domination aligned with business interests and with the prerogatives that characterise the production of surplus value and profit, which are the true devices that rule the trajectory of the system. In this way, unions should have maximum limits that, while fulfilling these tasks, do not exceed the margins set by the system and should confine themselves within and for the order established by the system in order not to fissure or break neither its class cohesion nor its power bloc. Conservative anti-union ideological currents demand that if unions cannot disappear—which would be the best possible scenario for capital and its dominant class—they should at least play a positive role – support for the capitalist and business system.

The Mexican State as a corporate, oligarchic presidential State—for some, ” a failed State” (cf. Sotelo, 2014; 2016)—remains committed to undermine the material and political foundations of trade unions and to advance the institutionalization and fragmentation of social movements with the ultimate goal of imposing neoliberal politics. In this way, the path would be completely cleared for the government of the rich and of capital to impose its structural reforms without any barriers or insurmountable restrictions, as was the case under the government of Peña Nieto.

Hence, the State fostered the process of transformation of the world of work into flexible, multipurpose, precarious work in order to adjust it to the conditions of valorisation and profitability of capital (Sotelo, 2015). Between today and the 2000s, the State (with its economic policy and specific laws such as the labor reform) together with capital (with its managerial policies and Toyotist methods of labor organization) imposed flexible work with the unrestrained support by yellow and corporate unionism, as it had formed during the neoliberal period (1982-2018). This has involved a profound process of social and political disintegation of unionism in Mexico by hand of the neoliberal State and organized capital, by way of deregulation of social relations and individual and collective labour contracts in order to substitute them with laws and regulations in line with informality and outsourcing. The climax of this whole onslaught was the neoliberal labor reform implemented by Peña Nieto and his PpM (“Pact for Mexico”) in the context of the so-called structural reforms (Sotelo, 2014a). The constitutionality of the country was thus altered for the benefit of neoliberal interests. Parliament which should propose, discuss, and issue the appropriate laws of the Republic, was in fact replaced by PpM which drafted the bills and submitted them to Congress for approval by parliamentary majorities, domesticated and controlled by the leaders of each of the registered political parties. Once the bills became laws, they were obviously incorporated into the Constitution with a mandatory, generally applicable character, despite of opposition by sectors of the population.

During more than two decades a certain type of unionism emerged, result of both the economic crisis of the country and of global capitalism and its contradictions, as well as of the macroeconomic results of the economic policies of the successive neoliberal governments, both by the PRI (1982-2000) and the PAN—with Fox and Calderón (2000-2012)—and then the PRI again with Peña Nieto (2012-2018).

During that period, quantitative and qualitative changes took place concerning important aspects of structures of capital accumulation, in the political regime, and in the class structure of Mexican society. At a structural level, one of the most important changes affected the pattern of the reproduction of capital, from one based on industrial diversification for the domestic market (1950-1982) to a different pattern based on manufacturing exports dominated by the preeminent transnational maquila industry—liberal, dependent, underdeveloped, and driven by the global market (Sotelo, 1993, 2004, and 2017).

At a political level, there were remarkable changes in government, moving from a post-revolutionary welfarist model to an upfront neoliberal, minimalist and business model. A new structural systemic configuration of the dependent neoliberal Mexican pattern of capital accumulation emerged, based on a collaborationist, supra-parliamentary partnership between the bureaucracies of the main political parties and the unions, the State, and capital, whose strategic mission is to give new momentum to neoliberalism, in a context in which this global capitalist system is suffering a crisis practically all over the planet, particularly in the most developed cores of advanced capitalism: the United States, Western Europe, and Japan. And it are exactly political parties, that act as true State apparatuses, which come in support of the PRI government and place themselves unconditionally at its service in order to promote neoliberal policies that, among other reasons, result from strong pressures by the US government, big business, and monetary, financial and commercial agencies: the IMF, the World Bank, the International Development Bank, and the OECD.

Finally, the class structure of Mexican post-revolutionary society became more diverse and complex. It moved from “class collaboration” within the revolutionary pact to a classist, post-revolutionary, polarized, diversified structure. This structure imposed, through force and manipulation, the cross-class economic and political “pacts” from the top down, from the power of the State and its correlate, capital, which now exerts hegemony at the top of national political power under the leadership and coverage of fictitious capital and its dynamics of an easy production of fictitious profits (on this topic: Carcanholo, 2011 and 2013, and Gomes, 2015).

From these developments results a certain macro-historical synchrony that Marx metaphorically called “correspondence” between basis and superstructure. This is a non-linear, dialectical relation, with mediations and interchangeable elements, which alters reality in one way or another according to the class struggle and the correlation of forces. Thus, at some point the structure (economy) can prevail, and at another moments the superstructure (politics, class regime, law) can prevail and reaffirm or change paths.

The history of twenty years of global and vernacular neoliberalism is the history of such synchrony (or lack thereof), its contradictions between the old way that is reluctant to perish and the allegedly new way that wants to become established. For example, it is true that neoliberalism substantially privatized the economic system and formed the Mexican economy and society after the preferences of the International Monetary Fund—a task entrusted by the governments of Miguel de la Madrid, Salinas de Gortari, and Zedillo. Nevertheless, there are still outstanding issues for the entrepreneurial Mexican State and the bastions of domestic capital (the oligarchic dependent “bourgeoisie”), as well as foreign capital, which dominates: implementing the “structural reforms” that privatized oil and electricity, and the other reforms, such as the labor reform which is flexible, regressive, and neoliberal; the education reform, the telecommunications reform, among others. The realisation of such reforms will depend on the advances made by the opposition of the popular and social movement. In this regard, the Congress of the Union, i.e. the Mexican federal legislature, will discuss the possibility to override the inappropriately named “education reform” imposed by Peña Nieto’s earlier administration.

These unfinished tasks of the neoliberal compendium in Mexico do not only involve government authorities and their institutional promoters like the media which are at their service, but also workers and their unions, particularly with regard to the effects of the labor reform on the world of work, imposed by the federal government through the Ministry of Labor and Social Welfare (STYPS)i.

Unionism, corporatism, and corruption

So far, Mexican trade unionism, especially the official and managerial unionism, approved the neoliberal reforms, along with the political parties. Thus, the officials of those unions played the role of a consenting accomplice to those reforms at different moments before union members and society as a whole. In this way, generally speaking, post-revolutionary unionism assumed the role of a new corporatism akin to the hegemonic interests of the ruling classes and the dependent neoliberal pattern of capital accumulation maintained in the maquiladora companies.

A huge dose of corruption, repression, and shady deals among the main union leaderships permeates to maintain cohesion and loyalty facing the constituted corporate power that operates on the fringes of the democratic system and in open or disguised collaboration with the real powers of the economic and political system, as well as with the hegemonic media. Without this configuration of dominant unionism, the operationability of capitalism would be unthinkable—and this holds even more so in the case of dependent unionism, requiring unrestricted and unconditional support and subordination to foreign capital and its transnational companies, while it ensures a smooth operation of the regime of superexploitation of labour.

In the context of an anarchic system rife with contradictions, such as capitalism, these contradictions also affect the bourgeois and oligarchic factions and the government and the trade union mafias as well. We will highlight three paradigmatic, albeit not unique, cases of great significance. The famous “quinazo”, which at the time shook up the political system, was an act committed upon orders of then-president Carlos Salinas de Gortari. He thus put an end to the power and influence of the leader of the petrochemical workers’ union Joaquín Hernández Galicia, aka La Quina, on January 10th, 1989. He was the General Secretary of the Mexican petrochemical workers’ union, Sindicato de Petroleos Mexicanos, affiliated to the anti-labor CTM (Confederation of Mexican Workers). This blow sent out signals of the power of the president. At the same time, it tried to clean up his image and the image of his party, the PRI, accused of having committed a massive electoral fraud that put him in office. Another case is that of Carlos Jonguitud Barrios. He was a trade union magnate from the teachers’ union (SNTE), a historical ally of the PRI governments, president of Vanguardia Revolucionaria and “leader for life” of that organization. In 1989, when he no longer served the interests of the president, he was removed from the SNTE Executive Committee leadership by Salinas de Gortari himself, who took advantage of a mobilization by dissenting teachers from the same union and made him resign and hand over his power to another former bigwig, Elba Esther Gordillo, “la Maestra” (“the Teacher”). Up until February 26th, 2013, Gordillo had led that union, later to be arrested and imprisoned for illicit enrichment, organized crime, money laundering, and misappropriation of SNTE funds, upon the orders of then presidnet Peña Nieto, as she was critical of the education reform. Apparently, she had arrangements under the table with López Obrador, then member of the PRD.ii

Only because he is a faithful servant of the privatization of oil and energy companies the multimillionaire leader “charro” [a government-appointed union boss] Romero Deschamps stayed at the top of the Sindicato Nacional de Trabajadores Petroleros de la República Mexicana (SNTPRM) —petrochemical union of Mexico—, closely aligned to the PRI regime since 1996. So far, his workers have not expressed opposition against the Congress-approved privatization of petroleum, even as part of the agreements with big transnational companies that took over the energy sector includes substantial changes to labor conditions and collective bargaining agreements that imply layoffs (administrative and organizational reengineering), labour flexibility, outsourcing, and the reduction of benefits and wage scales. Charged with corruption and other indictable offenses such as illicit enrichment, he has been able to evade justice thanks to “constitutional immunity”.

These are the crown jewels, whose patterns are replicated in practically all trade unions, as well as in confederations such as the ancient CTM and Confederación Regional Obrera Mexicana (CROM), without excluding others such as the union of Mexican telephone operators, directed since 1976 by a PRI—now PRD—leader, and the UNAM university union, also controlled by an ancient leader for the past 20 years. These men have enjoyed impunity provided by the corrupt Mexican system, as well as all kinds of perks such as seats in Congress, senatorships, influence peddling, and other gifts that ensure their loyalty to the regime of corruption, exploitation, and domination. The legal and political basis of this corporate system has been ensured by the regime by means of Conciliation and Arbitration Boards controlled by the State, and by way of “tripartism” in labor proceedings, “protection contracts”, and the “closed shop contract” that secures unions their hiring monopoly.iii

Currying favor with the PRI regime and with the dependent capitalist system that supports it, this is the hegemonic unionism that maintains the system of domination and super-exploitation of labour with the aim of crushing labour protest and its alternative organization. At the same time, it is a cornerstone in order to preserve extremely low wages for the benefit of domestic and foreign capital and the dependent neoliberal mode of accumulation and reproduction based on manufacturing exports.

Lack of organicity of unionism and the labor movement

This behavior of parts of Mexican society (workers, unions, peasant movement) emerges from a striking fact: the iron grip of state power channeled through unions and, extremely importantly, the media at its service which are disseminating the ideologies of capitalism, neoliberalism, and the market as the best of all “possible worlds”. As Marx used to say, the working class is the most exploited class of societz, and the fact of remaining at the workplace for hours, days, and years severely prevents the working class from engaging in reflection, analysis, and meetings with other collectives in order to achieve its organization and to plan its struggles and demands.

In the absence of a party or proletarian class organization, this should be one of the union’s roles: contribute to these tasks of organization and discussion, disseminate class consciousness, and to promote the interests and demands against the employers’ association and the Sate.

Workers’ struggles during the new López Obrador administration: the case of maquiladora companies in Tamaulipas, Mexico

The announcement of an increase in the minimum wage in Mexico, decreed by the new López Obrador government as of January 1, 2019, was one of the triggers of the outbreak of significant strike movements in several parts of the country, particularly the northern region where most of the maquiladora companies are located. Indeed, on December 17, 2018, the López Obrador administration announced from the National Palace the increase in the nominal minimum wage (nmw) in Mexico as of January 1, 2019. Therefore, the general minimum wage was increased by 16.21% (to $102,68 Pesos per day), and the current minimum wage in the border area doubled to $176,2.728 Pesos per day, as can be seen below in Table 1:

Table 1Source: Comisión Nacional de los Salarios Mínimos, Resolución del H. Consejo de Representantes de la Comisión Nacional de los Salarios Mínimos que fija los salarios mínimos general y profesionales vigentes a partir del 1 de enero de 2019, Official Journal of the Federation, December 26th, 2018, available at: https://www.dof.gob.mx/SMGM, 2019.

In this regard, it is necessary to note that the real minimum wage (rmw) has systematically declined from the mid-1970s and practically until now. The UNAM Center for Multidisciplinary Analysis (CAM)iv points out that the highest point was reached in 1982 (which we define here with the value=100) before it kept on falling until the 1994-2006 period when it stabilized quite below this highest point. It then kept on declining systematically again until 2018 due to the impact of the brutal application of social policies of austerity and the wage cuts of the neoliberal capitalist regime in Mexico. This has turned Mexico into one of the countries in the world—even the underdeveloped world—with the lowest wages, below countries such as Haiti and Central American nations like Honduras, where the nmw in 2018 is higher than in Mexico. While in the latter the nominal minimum wage equals 132 US Dollars per month, in Honduras it amounts to 366 US Dollars, i.e. about 275% higher.

However, these are only nominal amounts provided officially by the federal government. According to Table 2 below, we will be able to have some insighty into the real purchasing power of wages, both in monetary terms and in terms of the time workers have to spend on a daily basis as part of a given working day to purchase the Recommended Food Basket (known in Spanish as CAR)v.

Table 2

At this point, a clarification has to be made. The Recommended Food Basket (CAR) in Table 2 includes staples directly linked to the consumption of workers and the popular masses, which reflects the consumption of the majority of the population. However, it does not include other components—not only basic but essential components for the life and reproduction of the workforce—such as housing, transportation, health, education, and recreation, among the most important ones. In this regard, INEGI,vi in its National Survey on Household Incomes and Expenditures, states that, out of the total expenditure in 2016, families spent 35.2% on food, beverages, and tobacco; 19.3% on transportation; 12.4% on education; 9.5% on housing, and 7.5% on personal care. This amounts to 84%. If this were the case, then the price of the Recommended Food Basket (CAR) would obviously increase significantly and, therefore, the wage, both nominal and real, that the worker would have to earn. But this is not the case. As can be seen in Table 2, the price of the Recommended Food Basket (CAR) as of October 26th, 2018, is $264,84 Pesos per day (or $33,10 Pesos per hour). The daily nmw is $88.36 Pesos, and the rmw is $33.36 Pesos per day (or $4.17 Pesos per hour). Considering the same ratios, even with no changes to the price of the Recommended Food Basket (CAR), with the new government-decreed nmw at $102.68 Pesos (or $12.83 Pesos per hour), we get the following results: the rmw is increased from $33.36 Pesos per work day to $38.77 Pesos. With this amount, it is possible to get a little more of the Recommended Food Basket (CAR): 14.64%, as can be seen in Table 3 below:

Table 3

In the first case, the deficit reaches -87.4%, while in the second case it reaches -85.36%.

On the other hand, according to Table 2 (last row), the socially necessary working time (nwt) that workers have to complete to purchase the Recommended Food Basket with the rmw ($21.7) amounts to 23 hours and 58 minutes (in other words, almost three 8-hour working days). In contrast, in January 1982, the Recommended Food Basket could be acquired with 4 working hours (half a working day). Thus, while the price of the Recommended Food Basket (CAR) increased by around 2.153% since the entry of savage neoliberalism to Mexico in 1982 until October 2018, the daily nominal minimum wage (dnmw) only increased by 245% during the same period. This reflects the high loss of hope experienced by Mexican workers over the last few decades and, so far, no improvement of this harsh reality is at the horizon.

The maquiladora movement in Tamaulipas, Mexico

This provides the context to understand that, according to the Ministry of Labor and Social Welfare (STPS) at the beginning of the year 2019 Mexico saw 15 strikes at federal level, of which three began between January and February 2019. Also, no less than 384 strike notices were accounted for (i.e. the legal notice from the union to the labor authority to exercise this right if the union’s demands are not agreed to). 37 conflicts were also accounted for without notices by unions belonging to the Confederation of Mexican Workers (CTM), the Revolutionary Confederation of Workers and Peasants (CROC), and the Regional Confederation of Mexican Workers (CROM), according to information disseminated by that government department.

Only he strike notices given by workers of Walmart stores and of Teléfonos de México (the latter with over 60.000 workplaces) amount to 150.000 employees involved, in parallel with an ongoing strike at the Universidad Autónoma Metropolitana (UAM) in Mexico City. It is reported that, since the beginning of 2019, 28 work stoppages and 8 local strikes took place in 14 states of the country. In Matamoros, Tamaulipas, it were eight conflicts, involving 2000 workers.

Some of the company unions involved in the labor conflicts in Matamoros are affiliated to the CTM and Napoleón Gómez Urrutia’s mining organization: Metal, Avances Científicos de México, Castlight, TPI, Fluxmetal, Arca-Coca-Cola, and Siderúrgica del Golfo. The Ministry of Labor and Social Welfare states that blockades of employees and total or partial strikes have taken place. Likewise, it states that all access roads of the Coca-Cola soft drinks plant were completely blocked by the trade union of the plant, and the same goes for the Siderúrgica del Golfo steel plant.

It is in this context of a social and labour-related crisis that seriously affects the status of the working class, that on January 25, 2019 45 maquiladora companies located in the city of Matamoros, in the state of Tamaulipas, staged a strike demanding a 20 % wage increase and a bonus of 32.000 Pesos. In this manner, the 20/32 Movement developed as a result of workers’ mobilizations and struggles.

In a Message by the Matamoros Workers’ Movement 20/32vii, the workers take stock of their movement, emphasizing that “Matamoros workers have taught the country a great lesson and are a national example of a worthy, successful struggle”. They highlight that, fed up with oppression by their union leaders, workers in the maquiladora industry in Matamoros forced the General Secretary of their union—a member of CTM—Juan Villafuerte to call for a strike demanding a 20% wage increase and the payment of one bonus of $32,251.40 Pesos for one year. That is why, in a historical act of unprecedented struggle in the country, on January 25, 2019, at 2 pm, the strike movement started. The red-and-black flags were raised in 45 maquila companies in Matamoros. Due to the success of the workers, who won a 20% wage increase and the payment of the one time bonus of $32,251.40 Pesos in the 45 companies on strike, new uprisings took place in other unionized and non-unionized companies, where similar benefits were demanded. The result was that the Matamoros working class benefited 70 thousand workers and their families with the 20/32 Movement. This was a historical struggle that generated economic resources of about 200 million dollars for the city of Matamoros.

According to the workers, this movement has been threatened and abused by employers and union leaders since January 2019, particularly by yellow pro-employer unions affiliated to the CTM, CROM, and CROC. The only “crime” of the workers is to fight for the exercise of their rights.

In this regard, perhaps the outcome of this experience of workers’ struggle is that workers have decided to pursue the struggle and start a second stage of the 20/32 movement. Their goal is to create and register an independent union to compete for the bargaining agent status for collective bargaining agreements in Tamaulipas and, later on, in other states of Mexico, should the movement expand in tune with their interests and demands. 

The aforementioned Message informs that these demands have united different groups of activists, young revolutionaries and independent unions in the country, showing that the workers of Matamoros workers are not alone and that no struggle in the country is isolated. They call for a complete rejection of the death threats that some workers and the labor adviser, Susana Prieto Terrazas, have received because of their struggle and trade union activities.

Finally, three strikes at federal level started in this year in the education sector in the following universities: Universidad Autónoma Metropolitana (UAM), Universidad Autónoma de Chapingo (UACH), and Universidad Agraria Antonio Narro, in Coahuila.

Preliminary conclusion

This is merely a brief, preliminary account of the situation of the workers’ movement and its dynamics in light of the re-emergence of important struggles and strikes in the context of the new government led by López Obrador and the inaction during the neoliberal governments that predated it. Nevertheless, it is too soon to assess and analyze the relation of the workers’ and unions’ movements, both in the country and in the northern region where big transnational companies operate, with the new López Obrador administration which, for some, represents a center-left power due to the type of social policies the new president has announced since he was running for and also once he took office. However, so far, the neoliberal structures and institutions built by former administrations prevail. Also, so far, the current government has stated that it is going to respect and not amend particularly the so-called energy reform that privatized oil resources in Mexico.

As long as the working class does not shake off that paternalism and that corporate control, it will remain difficult for a truly independent and combative union to emerge, one that would be able to make a qualitative leap into a superior political organization, which would not only be able to overcome the existing bourgeois unionism, but also to embed itself firmly in a horizon of anti-capitalist alternatives tending towards shaping a new society.

In contrast to anti-labor and pro-employer forces, a line of development for Mexican unionism and, similarly, global unionism of the workers movement, would lie in the necessary democratic reorganization of the workers’ movement based on the formation of national unions per sector and per industry, structured in sections with relative autonomy both from the State and political parties which are part of the system of domination and exploitation in Mexico. This would allow for the recovery of class identity and consciousness. At the same time, it would allow to overcome the fragmentation and isolation of unions in which the dominant and corporate political regime has plunged them, fragmented them, and isolated them from the rest of the social and popular movement of the country.

References

  • CARCANHOLO, Reinaldo (org.), Capital, essência e aparência, vol. 1, Expressão Popular, São Paulo, 2011.

  • CARCANHOLO, Reinaldo, Capital, essência e aparência, vol.2, Expressão Popular, São Paulo, 2013.

  • GOMES, Helder (organizador), Especulação e lucros fictícios. formas parasitárias de acumulação contemporânea, Outras Expressões, SP, 2015.

  • LEY FEDERAL DEL TRABAJO, Cámara de Diputados, LXII Legislatura, 01 de septiembre de 2012, disponible en: http://es.scribd.com/doc/104880954/Ley-Federal-del-Trabajo

  • SOTELO, Valencia, Adrián, “La reforma laboral consagra la precariedad social”, en: http://www.rebelion.org/noticia.php?id=157018, 3 de octubre de 2012.

  • SOTELO, Valencia, Adrián, “México, ¿un Estado fallido?”, rebelión/org., 18 de diciembre de 2014, en: http://www.rebelion.org/noticia.php?id=193355.

  • SOTELO, Valencia, Adrián, Desindustrialización y crisis del neoliberalismo: maquiladoras y telecomunicaciones, coedición Editorial Plaza y Valdés, UOM-ENAT, México, 2004.

  • SOTELO, Valencia, Adrián, The Future of Work: Superexploitation&Social Precariousness in the 21st Century, Brill, Boston, USA, Brill, Boston, USA, 2015.

  • SOTELO, Valencia, Adrián, México (re)cargadoNeoliberalismo, dependencia y crisis, Migue Ángel Porrúa-FCPyS, México, 2014a.

  • SOTELO, Valencia, Adrián, México desahuciadoDependencia, régimen político y luchas populares, Itaca, México, 2017.

  • SOTELO, Valencia, Adrián, México: dependencia y modernización, Ediciones El Caballito, México, 1993.

  • VERGARA, Rosalía, “Se alebresta el sindicalismo ‘charro”, Proceso no 2083, 6 de octubre de 2016.

1Maquiladora companies are foreign companies set up in another country. They benefit from the exemption of tariff regimes ensured by national laws to manufacture goods or products which they re-export to their country of origin—mainly to the United States, in the case of Mexico. The key factor here is workforce abundance and super-exploitation.

i Full version of this Bill: Ley Federal del Trabajo, September 1st, 2012, available at: http://es.scribd.com/doc/104880954/Ley Federal del Trabajo. For an analysis of this reform: Sotelo, October 3rd, 2012.

ii Despite her corruption record and the serious offenses she was charged with, Gordillo was released by the Mexican legal system on August 8th, 2018.

iii Due to US-government pressure, the Mexican government has been forced to promote, within the framework of its adhesion to the Trans-Pacific Partnership, a reform to the labor justice system that has bothered the interests of government-appointed union bosses inasmuch as it intends to make changes to protection contracts and tripartism, and to get rid of corporate, pro-employer Conciliation and Arbitration Boards. Cf. Rosalía Vergara, “Se alebresta el sindicalismo ‘charro'”, October 6th, 2016.

iv Centro de Análisis Multidisciplinario de la Facultad de Economía de la UNAM, “La depredación de las clases trabajadoras durante el desgobierno de Enrique Peña Nieto. La desigualdad salarial en México es producto de la explotación capitalista”, Reporte de Investigación#130, Mexico, December 18th, 2018, available at: https://cam.economia.unam.mx/reporte-deinvestigacion-130-la-depredacion-de-las-clases-trabajadoras-durante-el-desgobierno-de-enrique-pena-nieto-la-desigualdadsalarial-en-mexico-es-producto-de-la-explotacion-capitalista/.

v The Recommended Food Basket (CAR) is made up of 40 staples, according to the UNAM Center for Multidisciplinary Analysis: Apples (1 kg); Avocado (1 kg); Bananas (1 kg); Beef liver (1 kg); Beefsteak (1 kg); Carrots (1 kg); Corn tortillas (1 kg); Cucumber (1 kg); Fish (sierra) (1 kg); Green beans (1 kg); Green tomatoes (1 kg); Lentils (1 kg); Lime (1 kg); Nopales (bunch); Onion (1 kg); Orange (1 kg); Papaya (1 kg); Pasta soup (200 grams); Pastries (1 piece); Peas (1 kg); Pineapple (1 kg); Poblano pepper (1 kg); Potatoes (white) (1 kg); Queso blanco (white cheese) (1 kg); Raw beans (1 kg); Refined salt (1 kg); Rice (1 kg); Romaine lettuce (1 piece); Safflower oil (1 kg); Sardines in tomato (470 grams); Serrano pepper (¼ kg); Standard sugar (1 kg); Tomatoes (1 kg); Tuna, canned in oil (170 grams); Water bottle (19 L); White bread (1 piece); White eggs (1 kg); Whole chicken (1 kg); Whole milk (1 L); Zucchini (1 kg). The Center for Multidisciplinary Analysis points out that the Recommended Food Basket (CAR) was designed by Dr. Abelardo Ávila Curiel, from the National Institute for Nutrition Salvador Zubirán. It is made up of 40 staples. Nonetheless, it does not contemplate the expenditure required to prepare the food, rent, transportation, clothes, shoes, personal hygiene, and many other goods and services that a family needs. It is only related to the cost of basic food. Also, it is a weighted basked, for the daily consumption of a 4-member (2 adults, a young person, and a child) family, where nutritional, dietary, traditional, and cultural aspects are taken into consideration.

vi INEGI, Encuesta Nacional de Ingresos y Gastos de los Hogares (ENIGH) 2016, available at: https://www.inegi.org.mx/contenidos/programas/enigh/nc/2016/doc/presentacion_resultados_enigh2016.pdf.

vii Frecuencia Laboral, Comunicado del Movimiento Obrero Matamorense 20/32, March 23rd, 2019, at: http://www.frecuencialaboral.com/Matamorensesdemandasqueganan2019.html.

2020: Depression of Repression? – Rupture

Certain years in history — 1848, 1917, 1968, 1989 — conjure up images of street protests, mass demonstrations and revolutionary turmoil. When historians put 2019 in perspective, they may also declare it a vintage year for popular unrest. In terms of sheer geographical spread, it is hard to think of a year to rival this one. Protests large enough to disrupt daily life and cause panic in government have broken out in Hong Kong, India, Chile, Bolivia, Ecuador, Colombia, Spain, France, the Czech Republic, Russia, Malta, Algeria, Iraq, Iran, Lebanon and Sudan — and that list is not comprehensive.

Gideon Rachman, Financial Times, December 23, 2019

The last time similar statements were made was in 2011, a year that was quickly compared to 1968 by many observers, due to the simultaneity of the Arab Spring, the Occupy movement, and large protests in places like Spain and Greece. In hindsight, the protests in 2011, an immediate response to the crisis that began in 2007/2008, seem to represent the immature and infantile stage of a more profound change that was taking forms during 2019. Some of the current insurgent movements already started to take shape in 2018 — like in Haiti, Iran, France and Sudan. The crucial difference of today’s rebellions in contrast to 2011 seems to be a much more determinate stance – protesters are much less ingenuous about “democracy” and are coming to stay, not ready to give up their positions after a few months or weeks of protests. What is also distinguishing the 2019 insurgencies is an existential and deep-seated disgust towards the political-economic systems and their elites – which is the fuel driving the attacks against the system, but not the motor. The spark that caused the uprisings were often price rises in transport, like in Chile, France, Iran, and Haiti, but the spark that caused the fire should not be quickly mistaken for the characteristic of this cycle of struggles, as some commentators did who quickly came up with a term as “circulation struggles”. We can, at this point, only begin to analyse the dynamics, actors and trajectories of those new forms of mass struggle – as we did in the last issue for France and Hungary, and continue to do so in the current issue with contributions on strikes in Mexico, the US, and the rebellions in Haiti. This list already displays one important characteristic of the current cycle of struggles: Despite the contagion from country to country, those conflicts are all led on a national terrain, and while protesters in Algeria for example continue to make references to their fellow comrades in Sudan for example, and Sudanese activists did a thorough analysis of what happened in Egypt since 2010, there a few transnational coordinations between them. This probably means simply that those insurgencies have to build their own national basis to stand on solid ground before they will be able to reach out and create solid international links.

The economic context of the current uprisings is the long depression after the global financial crisis, coming with a global stagnation of productivity, a drop in global trade and various rounds of mass dismissals and mergers in multinationals like BayerMonsanto, Deutsche Bank, PSA. Corporate debt is at an all-time high, and financial experts are currently rather waiting for this bubble to burst. Politically, right-wing authoritarianism in its various shades is dominating the scene, blending perfectly with free market liberalism. Scattered examples of left-reformist governments in Mexico, Argentina, South Korea or Spain do not seem to have much space for manoeuvre or a long-term strategy, except for preventing the worst. What could potentially unite the various initiatives of the disgruntled and angry on a global scene is the movement against climate change since it is something that affects everyone and is deeply connected to questions of poverty, land grabbing, agrobusiness and global supply chains – but it is currently more a movement led by middle classes in imperialist countries, and still has to prove if it is really willing and able to shake the foundations of power. 2020 will probably show how far the current wave of insurgencies can get – but it can already claim much bigger achievements than what we saw in 2011 and 2012.

The structural trap of labour politics in Hungary – Gábor Scheiring & Kristóf Szombati

Introduction

At the end of 2018, Hungary again made international headlines. On 12 December, amid chaotic scenes in the parliament, where opposition MPs sought to obstruct the voting procedure, representatives of the ruling Fidesz party modified the labour code. The new regulation raised the maximum amount of overtime employees can work from 300 to 400 hours per year and gave employers the right to delay payment for overtime work by up to three years. In response, trade unions organised street protests, mobilising significant numbers in the capital and a few provincial towns. The unexpectedly large turnout was due in part to union leaders’ willingness to put political differences aside and their unprecedented ability to come up with a robust frame of critique, labelling the government’s initiative as ‘slave law’. The street movement played a crucial role in uniting and emboldening the fragmented parliamentary opposition. On 16 December, 13 MPs led protesters to the building of the public news corporation, demanding that they are allowed to voice their demands. However, security guards prevented them from doing so, thereby underpinning the critique that the regime flounders fundamental democratic rights.

While the protests drew some energy from parallel yellow vest demonstrations in France, the arrival of Christmas put the protest movement on hold. Trade union leaders made an effort to revive protests in January by organising a general strike, and the parliamentary opposition attempted to broaden their demands to transform them into a general anti-systemic movement. Both efforts failed. At the same time, the coming EP election pushed public discourse in new directions, allowing Fidesz to refocus attention on its favourite theme: the threat of immigration. These dynamics lessened the pressure on the ruling party, allowing it to maintain the contentious new regulations in place. Thus, while the French movement achieved its immediate goal (forcing Macron to backtrack on the planned diesel tax), the Hungarian protests failed to force the ruling party to grant significant concessions. Moreover, while the yellow vests inflicted a significant blow on Macron’s legitimacy, Fidesz’s carefully crafted populist image only suffered a temporary blow. The movement, it appears, was not much more than a flash in the pan (for further details on the movement see Gagyi and Gerőcs 2019; Szombati 2018).

One of the most obvious indications of the movement’s lack of profound impact was the outcome of the most recent EP elections. While Fidesz’s large-scale victory was widely expected, the dismal performance of the Left-wing alliance formed by the Hungarian Socialist and Dialogue for Hungary parties (who together received 7% of votes) and the wipe-out of the alternative-green Politics Can Be Different Party (2%) came as a shock. Barely four months after the dissipation of a movement displaying apparent Left-wing features and messages, two liberal parties – former Prime Minister Gyurcsány’s social-liberal Democratic Coalition (16%) and the newly formed conservative-liberal Momentum party (10%) – took more than half of opposition votes, thus catapulting themselves to the forefront of opposition politics. Thus, while do not yet see a full repeat of the ‘Polish scenario’ (i.e. opposition forces coalescing around the old liberal establishment), neoliberal politics are definitely back, while the Left finds itself in a major impasse. So does the trade union movement, which has been dealt a symbolic blow failing to prevent the passing of the ‘slave law’, and is likely to find itself even more marginalised politically in the future.

In this article, we will seek to shed light on the decline of labour politics, which has been laid bare in a particularly stark manner by the failure of the ‘slave law’ protests and the Left’s dismal electoral performance. Since this decline was gradual, we focus on political-economic processes that played out over a longer period of time: the generation of working-class discontents under the auspices of a neoliberal Left, the gradual fragmentation of labour in a dualised dependent economy, the rearticulation of working-class solidarities in the idiom of the nation and the subsequent incorporation of some popular demands into ‘illiberal’ politics.

In our endeavour to theorise the demise of labour – and more broadly: class politics – we rely on the work of the great Hungarian political economist Karl Polanyi (2001[1944]) and more particularly his conceptualisation of the ‘double movement’ through which he sought to grasp the process whereby society reacts to the vicissitudes of marketisation. On Polanyi’s reading, the ‘disembedding’ of the economy (the erosion or dismantlement of rules and institutions designed to prevent the totalization of the market logic) triggers defensive responses on behalf of ‘society’. Such a ‘countermovement’ aims to protect people’s livelihoods and may take various forms such as fascism, socialist planning or Keynesian managed capitalism (in Polanyi’s lifetime) or Right-wing populist nationalism and social democracy (in contemporary Europe). Elsewhere, we have demonstrated that Polanyi’s theory can be adapted to the context of contemporary financialised capitalism on Europe’s Eastern periphery and its usefulness for highlighting the tensions of postsocialist capitalist democracies (see Scheiring 2016b; Szombati 2018).

In what follows, we combine Polanyi’s framework with neo-Gramscian political economy and power structure theory to describe the power blocs that compete to take control of the state and their strategies vis-à-vis capital and labour. To substantiate our theoretical narrative, we rely on empirical research we carried out over the last five years, as well as the existing literature. First, we outline the process whereby labour relations became disembedded during Hungary’s re-integration into the global capitalist economy under neoliberal governments. We then describe Fidesz’s strategy of authoritarian re-embedding, which combines pre-emptive repression with authoritarian populism, allowing the hegemonic ruling party to incorporate workers while neutralising discontents. We end by arguing that these processes have created a structural trap for labour politics.

Neoliberal disembedding

Having witnessed the exhaustion of the strategy of state-socialist import-substitution, policymakers in Central and Eastern Europe turned to economic liberalism (Amsden et al. 1994). Advocates of rapid liberalisation and privatisation were aware that this would lead to deindustrialisation but thought that by rapidly creating the conditions for private markets to function, new and more efficient enterprises would quickly emerge (Sachs 1994). Inspired by this agenda, Central and Eastern European countries competed fiercely to attract foreign direct investment (FDI) (Bandelj 2009; Bohle and Greskovits 2012; Böröcz 1999; King 2007; Nölke and Vliegenthart 2009). The resulting state structure was the ‘competition state’, institutionalised by the dominant power bloc formed by transnational corporations (TNCs), technocratic politicians and the liberal intelligentsia (Drahokoupil 2008a; Hay 2004).

Liberal-technocratic politicians dominated economic policymaking in every Hungarian government before 2010. Though their approach to privatisation differed, there was a consensus among them about the need to compete for FDI (Bandelj 2008; King and Váradi 2002; Szalai 1999). The policy instruments of the liberal competition state included generous tax incentives, direct subsidies, deregulation, flexible labour standards and low wages for a relatively well-educated labour force (Antalóczy et al. 2011). The tax incentives and the continuously lowered corporate tax rate positively discriminated TNCs at the expense of domestic capitalists. The duration and value of unemployment insurance continually declined between 1990 and 2010. At the same time, left-liberal governments did not do much to strengthen the trade union movement, which saw its membership gradually decrease. Also, the left-liberal coalition presided over the most avant-garde phases of neoliberalism, including the privatisation of pensions (Appel and Orenstein 2018), as well as energy and water utilities (Boda and Scheiring 2006). It also made – an ultimately failed – effort to privatise health care (Korkut and Buzogány 2015).

The hope that liberalisation would help the emergence of efficient enterprises and suck up inactivated segments of the labour force failed to materialise. Even though Hungary was a champion in attracting FDI, the country also had one of the lowest employment rates in Europe, with a meagre 55% of the population employed in 2009 (Eurostat 2018a). A large segment of society, the early victims of the transition, could not take part in the new growth centres of the economy, which were dominated by technology-intensive TNCs. At the same time, jobless growth also undercut wage convergence with Western Europe. The share of wages in total national income decreased from 57.2% to 46.3% in the period of the transition (Pitti 2010). Hungarian wages were also lagging behind average wages in the Central and Eastern European region throughout the 2000s and have long been among the lowest in the OECD (OECD 2018). The majority of workers experienced the transition as an accumulation of injustices, but especially those who found themselves permanently excluded from the labour market or trapped in low-wage jobs. In previous quantitative research, using a novel multilevel database covering 52 towns, more than 300 companies and the life chances of 27,694 individuals, we demonstrated that the expansion of markets led to a temporary increase in mortality during the 1990s in towns dominated by domestic capital as well as in towns dominated by TNCs (Scheiring et al. 2018).

The neoliberal disembedding of labour relations and the weakness of trade unions ensured that policymakers could repress wage growth to allow the country to attract foreign investors. At the same time, the dual structure of the economy also contributed to wage stagnation. The highly productive and profitable (technology-intensive) transnational sector and the less productive and less profitable (labour-intensive) domestic sector of the economy became increasingly disarticulated: forward and backward linkages have remained weak. This process of structural disintegration has become a well-established trope in the literature on dependent development (Amin 1982; Cardoso and Faletto 1979; Evans 1979; Hirschman 1978). Wages in the transnational sector are higher than in the domestic sector, but this was restricted to educated people living in the few growth hubs situated mostly in the northwest of the country, without much impact on wage levels in the domestic sector. Domestic capitalists have been generally hostile towards wage growth as their enterprises depend on cheap low-skilled labour.

The technocratic politicians (including the leaders of the Socialist Party) who steered the country through the process of neoliberal disembedding knew that this would generate discontents with the potential to destabilise their rule. Indeed, capitalism’s approval declined dramatically between 1991 and 2009 (Pew Research Centre 2009). To prevent the politicisation of diffuse discontentment, successive governments introduced strategic social policy initiatives to pacify losers and help citizens satisfy at least some desires. In the 1990s, unemployment benefits and pension schemes were introduced to counterbalance the most corrosive effects of deindustrialisation (Bohle and Greskovits 2012; Bruszt 2006). Then, in the 2000s, governments sought to counterbalance the lack of wage growth by helping families acquire homes and boosting private consumption. In this, they relied on Western banks, which offered citizens relatively cheap mortgage loans.

While pacification through inactivation and civic privatism prevented the explosion of discontents, both strategies were exhausted by the end of the 2000s. Inactivation put a break on growth and strained public budgets, and these problems became acute when the global economic crisis hit Hungary. The country was especially negatively affected by the drying up of credit and the depreciation of the national currency, which drove interests (which had been borrowed in Swiss Francs and Euros) on public debt and private mortgages into the ceiling, sending the state and hundreds of thousands of families into a debt spiral. These conditions triggered a political crisis, leading to the collapse of the left-liberal government in 2009. In 2010 voters abandoned the Socialists in droves, flocking to rival Fidesz, which had been out of power since 2002 and could, therefore, disassociate itself from the crisis and the neoliberal politics, which led to it (Enyedi et al. 2014).

The demise of the Left and the rise of the Right thus appear almost natural. A closer glance, however, reveals the process to be anything but straightforward. We do not have space to go into details, but nevertheless want to highlight that the spectacular rise of Fidesz is part and parcel of a by now familiar story of the structuring effects of neoliberal disembedding coming together with the Left’s increasingly evident abandonment of its former support base and the latter’s recuperation by a reinvented Right.

The first chapter of the story is the disintegration of a culturally and ideologically integrated (in fact, never fully unified) working class. In our qualitative research (Scheiring 2019b; Szombati 2018), we have begun to trace how working-class communities collapsed during the transition from socialism to capitalism. The disintegration of communities was most acute in towns where state-owned enterprises were shut down, as in ‘steal’ and ‘sugar’ towns. We found that disintegration was experienced as a loss of control over one’s life, of being at the mercy of uncontrollable forces. This rhymes with the Kalb’s (2009) experience among Polish workers in Wroclaw and his emphasis on powerlessness. The other dominant structure of feeling was an increasing alienation from and anger towards formerly trusted political elites. This theme was highlighted by Ost (2006), who focused on the increasing gap between trade union organisers and liberal politicians in Poland. A new strand of qualitative research in the wake of the Trump and Brexit shocks has also shown that working-class populism in the US and UK is connected to the loss of industrial jobs and workers’ sense of being left behind and abandoned by neoliberal politicians (Koch 2017; Mcquarrie 2017). Reading these works together, it becomes evident that East European, West European and American populisms emerge out of the lived experiences of class in the context of globalisation (Scheiring 2016a). To be sure, such experiences are not homogenous. However, they do share essential traits, and it appears that these traits are connected to the structuring effects of globalisation.

Jonathan Friedman (2003) has, in our view, usefully highlighted how the interplay of ‘vertical’ and ‘horizontal polarisation’ has led to the reconfiguration of worker solidarities. Vertical polarisation refers to new dimensions of class polarisation, which increased the distance between workers and elites in astounding proportions. Friedman highlights how the credentialled, i.e. those endowed with cultural capital (e.g. skilled technicians, lawyers, accountants, corporate managers and top politicians) have integrated into global networks of production and consumption. While previously, this cultural elite was domesticated by the working class; the global capitalist elite has gradually assimilated it. This gives rise to a global cosmopolitan class, a class in which cultural and economic elites are integrated more tightly than before. At the same time, less skilled white- and blue-collar workers remain embedded in localised modes of production and wedded to traditional lifestyles. This fragment of the working class does not get to enjoy the fruits of globalisation and feels culturally alienated from the cosmopolitan class. And vice versa, cosmopolitans, adopting a neo-colonial gesture (Buchowski 2006; for further details see Gagyi 2016) look down on the ‘ethno-national folk’ (Kalb 2018) whom they regard as civilizationally incompetent (Bretter 2014; Sztompka 1993), imbued with a serf mentality (Hvg.Hu 2018) and instinctively inclined towards illiberalism (Skidelsky 2019).

Horizontal polarisation refers to geographical decentralisation of production and the emergent cultural divides, which result in the fragmentation of the national community of solidarity. Just as workers become estranged from elites, the material and cultural rifts between workers of different backgrounds also widen dramatically. Typically, it is the relation between the working poor and surplus populations that becomes problematised. This is nothing new: after all, Marx had already problematised the relationship between the proletariat and the ‘lumpenproletariat’ – and this distinction continues to be applied by those who consider themselves more worthy of support than others, typical strategies being the moral debasement and racialization of those below. This is what Barrington Moore (1978: 35) pointed out in his book on the social bases of obedience and revolt where he notes that ‘the person who is being deprived of his or her property by impersonal social forces is often the one most eager to apply severe social sanctions against the idler, even though both of them may be suffering from the same set of impersonal social forces’.

In the case of Hungary (as in many other European countries) it has been the Roma who have historically been singled out as that part of the population, which is unworthy of support. As we have shown, an organically rooted moral panic played a vital role in delegitimating the left-liberal elite, whose representatives were accused by non-Roma workers and worker peasantries of supporting ‘lazy Gypsies’ (Scheiring 2019b; Szombati 2018). We see similar mechanisms at play in the rise of exclusionary populism in the South of the US where white workers blamed the federal government for putting the interests of less worthy racial and ethnic minorities before theirs (Hochschild 2016).

Double polarisation thus created favourable conditions for the mobilisation of workers against deracinated, uncaring cosmopolitans and unworthy, unruly populations. In Hungary, this task was taken up by the newly formed Jobbik party, which relied on paramilitary proxy organisations to mobilise workers and worker peasantries against Roma in economically deprived communities where Roma and non-Roma were competing over increasingly scarce public goods and services. At the same time, the more moderate Fidesz party sought to mobilise society in defence of public services (which the left-liberal government sought to privatise) under the banner of more inclusive nationalism. Fidesz promised to reintegrate the national community by returning the state to its rightful owners: hard-working workers and entrepreneurs who could come to a new compromise in the sharing of national wealth.

This message resonated with diverse worker constituencies and Fidesz spent a great deal of effort to integrate them through rituals of resistance and solidarity (Feischmidt 2014; Greskovits 2017; Halmai 2011). It is important to note that this political strategy did not have to compete with Left-wing rivals. The labour movement was severely weakened, fragmented and lacked the intellectual and organisational resources to incorporate workers ideologically, and the Socialist Party adopted a Third Way program and strategy after Ferenc Gyurcsány became a leader in 2004. It was as a result of all these factors that workers shifted to the right, choosing Fidesz over the Socialists in 2010 (Enyedi et al. 2014).

There was one more factor that played an essential role in the collapse of the neoliberal compromise: the increasing polarisation of the capitalist class (Scheiring 2015; 2018; 2019a). Transnational corporations, the very few successful technological companies owned by domestic entrepreneurs, and the domestic service class which directly profited from the presence of TNCs (see Drahokoupil 2008b) were mostly satisfied with the liberal competition state and continued to support the left-liberal political elite. However, the overwhelming majority of the national bourgeoisie grew dissatisfied with the ruling elite after the turn of the millennium, as the elite-interviews conducted by Kolosi and Szelényi demonstrate (Kolosi and Szelényi 2010). Elsewhere, we have also shown that the left-liberal coalition that governed between 2002 and 2010 lost support among billionaires during the second half of its rein (Scheiring 2019a). Just like the working class, the national bourgeoisie also shifted its allegiance to Fidesz.

Authoritarian re-embedding

Orbán kept his promise after scoring a historical victory, orchestrating a new class compromise between the national bourgeoisie and TNCs. The latter were allowed to maintain their dominance in technology-intensive sectors, but Fidesz actively sought to change the balance of power between foreign and domestic capital in other sectors, such as banking and energy. This necessitated a stronger fusion of economic and state power than previously under the competition state and the introduction of new policy tools to support capital accumulation. It also led to the national bourgeoisie being incorporated more tightly than before into the dominant power bloc alongside multinational capital. Elsewhere, we have called this process of state transformation the building of the ‘accumulative state’ (Scheiring 2019a). The concept of the accumulative state was first coined by Alan Wolfe (1977) who developed the term to refer to the compromise between the landed aristocracy and the nascent commercial and industrial bourgeoisie in the 18th and 19th centuries in Western Europe and North America. We adopt his concept to interpret the conflictual relations between foreign and domestic capital and political elites in semi-peripheral states. In the case of Hungary, the nascent national bourgeoisie plays the role of the landed aristocracy, while TNCs replace the commercial and industrial bourgeoisie of the early version of the accumulative state.

We posit that the accumulative state offers a political solution to the internal contradictions of dependent development by accelerating capital accumulation in a way that is favourable to both factions of capital. It does this by retaining and intensifying the policies of the competition state in relation to foreign capital, while at the same time introducing new tools to satisfy the needs of domestic capital and the political class which has coalesced around Orbán. The new class compromise involves the satisfaction of short-term capitalist needs through the reduction of welfare spending, the repression of labour unions, and enhanced direct and indirect support to both capital factions. The most critical policy instruments are the following (for a more detailed discussion see Scheiring 2019a):

  1. Public procurement clientelism: Corruption related to public procurement significantly increased after 2010, as Fidesz took control of the distribution of EU transfers, seeking to channel a greater of the latter to domestic capital (Fazekas and King 2018). The lack of European mechanisms of oversight and control has allowed Fidesz to use EU transfers to feed its clientelistic networks and keep the national bourgeoisie on its side.

  2. Property rights actions: These are measures designed to influence and realign property rights, including the acquisition of private assets by the state and their subsequent re-privatisation, which played a prominent role in the redistribution of wealth in favour of the national bourgeoisie, especially in the financial sector (Gonda 2019; Scheiring 2018).

  3. Tax reduction: This included the introduction of a flat personal income tax (16%) and a flat corporate tax (9%). While the former benefited the higher-middle class, the latter favoured domestic capital and TNCs. The government, continuing its predecessor’s policy, also offers generous tax rebates to the largest corporations. The actual corporate tax paid by the 30 largest companies is only 3.6% (G7.Hu 2018). Fidesz has quietly transformed Hungary into a new tax haven.

  4. Austerity: To balance the budget, the government offset tax reduction by curtailing expenditures and increasing the taxation of lower incomes. The new constitution adopted in 2011 incorporated a lock-in mechanism preventing deficit spending until state debt decreases below 50% of GDP (Szikra 2014). Furthermore, social welfare spending was reduced from 18.2% of the GDP in 2009 to 14.3% in 2016; public health care spending declined from 5.2% to 4.8% of GDP in the same period; and education spending from 5.4% to 4.9% (Eurostat 2018b).

  5. Increasing the supply of low-skilled labour: As part of a complete overhaul of the education system, the government reduced the compulsory education age from 18 to 16 and curtailed spending on state-funded higher education – leading to a 15% decline in tertiary school enrolment between 2010 and 2016 (World Bank 2018).

  6. Increasing the flexibility of labour: A new Labour Code in 2012 hollowed out the institutions of tripartite consultations (Szabó 2013). Fidesz also introduced a stringent strike law, which rendered strikes in public services almost impossible. Most recently, in response to an increasingly acute shortage of labour caused by a post-2010 emigration wave, the government re-amended the Labour Code in December 2018, raising the maximum of overtime hours from 300 to 400 (Gagyi and Gerőcs 2019).

What was the impact of these policies? TNCs involved in technology-intensive production, especially those active in the automotive sector, continued to relocate manufacturing capacities to Hungary to take advantage of its relatively cheap, flexible labour force. These companies have created new jobs that offer better wages than the companies owned by domestic capitalists. However, the latter has also been forced to raise salaries after more, and younger workers moved to Western Europe to find better-paying jobs. The increasingly acute labour shortage led to a moderate 4.3% increase in the average real wage between 2010 and 2017 (OECD 2018).

This average figure hides enormous discrepancies. Whereas the real income of the bottom 10% has remained virtually unchanged, the income of the top 10% skyrocketed (Hcso 2018). The share of working poor (those earning less than 60% of the median wage) has increased by 6.8% between 2010 and 2017, one of the most significant increases in the whole of the EU (Eurostat 2019). Governmental policies directly contributed to the rise in inequality. The social income (i.e. income that individuals receive from the state in addition to their wage) of the bottom 40% has been reduced by 6-12% between 2009 and 2016, while the social income support of the top 10% increased by 42% (Hcso 2018). These numbers clearly show that supporting the social reproduction of impoverished populations is not a concern for Fidesz. At the same time, initiatives such as the ‘slave law’ reveal the ruling elite’s commitment to prioritising the needs of capital over workers.

While there have been outbursts of anger about the obscene enrichment of a new regime-friendly nobility, such anger has failed to break the cross-class popular alliance of workers and the bourgeoisie, which had brought Fidesz to power. While there are indications that working-class support for the ruling party dips at certain moments (one such instance being the period of the mobilisations against the ‘slave law’), the opposition has proven incapable of taking advantage of these windows of opportunity, while Fidesz has exhibited a remarkable ability to claw back (working class) support. How can we explain this?

For one thing, the rise in real wages – which has been more pronounced in the last two years – contributed to the diffusion of widespread anger with the enrichment of the new nobility. Our personal experience with interviewing workers in rural towns makes clear that they see a difference between the economic record of the Fidesz government and the record of its left-liberal predecessors. Their lived experience confirms Fidesz’s claim to work for the benefit of the whole national community, even if it is abundantly clear to them that those at the top have been dealt a better hand than others. Historical memory also pushes towards the normalisation of elite privilege. After all, the socialist nomenklatura also benefited from exclusive privileges during socialism and then went on to convert its political capital into economic capital – that, at least, is how workers remember socialism.

This line of argumentation fails, however, to account for the absence of anti-systemic mobilisation among the poor (the clear losers of the new accumulation regime). Neither does it account for labour’s inability to mobilise broad sections of workers against the slave law. We posit that to explain these failures, we need to focus on the ruling party’s strategy of ‘authoritarian re-embedding’. This comprehensive strategy comprises legal-institutional and administrative-coercive measures that are designed to prevent the emergence and mobilisation of discontents. We call this sub-strategy ‘pre-emptive repression’. At the same time, the regime also deploys initiatives that seek to bolster its legitimacy in the ranks of workers. We call this sub-strategy authoritarian populism. In what follows we briefly outline what we mean by these in detail.

To protect itself against a possible political backlash from the losers of capital accumulation, Fidesz occupied all democratic institutions (Sargentini 2018), undermined the system of checks and balances and obstructed the channels of direct democracy (Bánkuti et al. 2012), thereby centralising power in the hands of the executive and, more precisely, a very small group of people surrounding the prime minister. It was able to achieve this legally by taking advantage of the ruling party’s parliamentary supermajority and writing a new constitution that provides the regime with a mantle of legitimacy and respectability. While the facade of a functioning democracy has been preserved, the mechanisms characteristic of a functioning democracy (transparent decision-making, oversight, deliberation) is missing. The only institutions which have retained an ability to place limits on executive power have been the courts, but even these are coming under intense pressure to stop interfering with key governmental initiatives (The New York Times 2018a).

This near-total takeover of the polity has been accompanied by a coordinated effort to re-feudalise the public sphere in a way as to allow Fidesz to control the airwaves and prevent critical voices from reaching rural citizens who now constitute the ruling party’s core constituency. The government transformed public broadcasting into a well-oiled centralised propaganda machine (Bajomi-Lázár 2012). Key representatives of the national bourgeoisie have contributed significantly to this effort by acquisitioning private media (Associated Press 2018; Wilkin 2016) and, most recently, handing more than 400 news outlets over to a centralised holding company (The New York Times 2018b). This mighty arsenal is complemented by governmental communication campaigns, which are endowed with a budget outweighing the total budget of the opposition by a factor of ten (Atlatszo.Hu 2018) and allow Fidesz to reach every citizen directly.

Finally, the ruling party has also sought to restrict the political opposition’s room of manoeuvre and tilt the political playing field in its favour to engineer massive electoral victories. These victories not only legitimise Fidesz’s rule but also contribute to the regime’s stability by demoralising opponents. The key initiative was the drafting of a new electoral law which favours Fidesz (Tóka 2014). However, recent research has also shown that the ruling party relies on local mayors to coerce poor citizens into supporting Fidesz at elections (Mares and Young 2019). Fidesz’s arsenal also includes more ad hoc initiatives. The State Audit Office has been mobilised to impose arbitrary fines on opposition parties (Freedom House 2018). The ruling party has, on one occasion, even mobilised football hooligans to physically prevent opposition MPs from initiating a referendum (Freedom House 2018: 226-227). While state-owned companies fund loyal ‘civil society groups’ organised from above (Hungarian Spectrum 2017), trade unions’ organisational possibilities have been severely curtailed (Szabó 2013) and human rights NGOs face recurrent attacks (The New York Times 2018a). Taken together, the country’s rulers have thus managed to impose significant obstacles to the emergence, signification and mobilisation of discontents. There is a new consensus emerging among political scientists that Hungary is not a democracy anymore, but a hybrid regime, a competitive authoritarian system (Bozóki and Hegedűs 2018).

Pre-emptive repression is, however, only one of the sub-strategies deployed by the regime. The ruling party also seeks to manufacture consent through a strategy of authoritarian populism (Hall 1979; 1985): by addressing people’s everyday problems and ‘represent[ing] them within a logic of discourse which pulls them systematically into line with policies and class strategies of the Right’ (Hall 1979: 20). An analysis of this strategy is clearly beyond the scope of this article (for further details see Szombati and Scheiring 2019), so we will limit ourselves to summarising the three policy instruments, which we consider crucial.

First, the government’s welfare policies have increasingly become narrowly centred on supporting the biological reproduction of ‘hard-working’ people. In February the prime minister announced a 7 point ‘family protection action plan’ to boost fertility, which Fidesz has established as a strategic priority. The new measures fall within the Social Darwinist logic of supporting people who conform to the ideal of biological-cum-economic productivity and withdrawing support from those who do not (single mothers, disabled people, the unemployed). The plan has been received with near unanimous approval in a society which extols motherhood and sees the family as the last bastion of solidarity (Gregor and Kováts 2018).

The government’s other highly popular policy is the so-called ‘public works program’ (Hann 2016a; 2018), a centrally financed but locally administered workfare scheme, which was introduced with the dual aim of establishing greater control over ‘unruly’ surplus populations and demonstrating the ruling party’s commitment to restoring social order in the countryside (Szombati 2018). Just as the family policy addressed a real problem (low fertility), the national workfare program also responded to pressing social concerns: the lack of jobs and social security in regions hit by economic decline. Moreover, it did so within a frame that resonated with workers: as an effort to build a ‘work-based society’ which rewards those (and only those) who fulfil their obligations toward the wider community and punishes idle, unproductive citizens.

The third policy that was key for manufacturing consent was the securitisation of Hungary’s southern border. In the summer of 2015, at the height of the Syrian refugee crisis, the government, claiming that the EU was too slow to act, began building a border barrier on its border with Serbia to prevent asylum-seekers (whom state officials labelled ‘economic migrants’) from ‘illegally’ entering Hungary. Hungary’s new wall symbolises the barrier between ‘civilisation’ and ‘barbarity’, thus establishing Orbán as the leader of a pan-European civilizational crusade. This holy war, as all holy wars, required national unity and therefore incorporated calls for the centralisation of power in the hands of the executive and for the opposition to support the ruling party in protecting the citizenry. Besides being hugely popular and significantly contributing to Fidesz’s triumphant re-election in 2018, the wall and the broader discourse of securitisation also had the salutary effect of relegating internal conflicts (such as the enrichment of the new nobility or the underfunding of health services) to the sideline of politics (Hann 2016b).

These three authoritarian populist policies thus played a crucial role in legitimising Fidesz’s rule in the eyes of workers and, more broadly, the lower-middle class. While most Hungarians are critical of tendencies which we have framed as the rise of the accumulative state, the policies mentioned above have made Orbán’s politics palatable or at least tolerable to broad segments of the electorate. This is especially true for workers and worker peasantries. The reconfiguration of welfare according to the ideal of productivity met the expectations of these ‘hard-working’ categories whose representatives felt encroached by ‘workshy and thievish Gypsies’ and neglected by neoliberal elites (Szombati 2018). Having successfully rearticulated working-class solidarities in strictly speaking national-socialist terms (see the previous section on neoliberal disembedding and Scheiring 2019b), the leading force of the political right returned the state to its ‘legitimate owners’ (Wimmer 1997), reaping handsome political dividends for turning the page on the neoliberal era.

Fidesz, importantly, compensated this divisive politics of class warfare from above – the pitting of ‘productive’ populations against ‘unproductive’ ones – by offering to protect the whole population from looming external threats posed by migration and especially migration from the Islamic world. This reconfiguration, which was framed in opposition to the competing Western liberal model founded on the idea of multi-culturalism, allowed Orbán to parade as the protector of the ‘national community’. Both reconfigurations constituted the state as a vehicle of social transformation and as an object of political struggle, in response to the double polarisation induced by globalisation. This represented a move from a technocratic-liberal conception of the state to a robust activist state in the spirit of political constitutionalism (Antal 2017). Moreover, both were, importantly, articulated in an agonistic mode, as a choice between two mutually exclusive political programs – a liberal and an ethnic-nationalist one – making it very difficult for the political opposition to avoid being associated with neoliberal politics.

Conclusions: the strategic trap of labour politics

The analysis we presented above is a long answer to the short question we posed at the beginning of the article: How can we explain the failure of the anti-slave law protest movement, and the collapse of labour politics? Before summing up the lessons of our analysis, we think it is necessary to highlight some factors that have less to do with deep structural tensions and more with organisations.

When the anti-slave law protests erupted, there was no lack of political will among oppositional parties to take up the issue and ride its wave. However, the organisational capacity of trade unions and Left-wing parties was insufficient to sustain the protest momentum. Trade union leaders are just now familiarising themselves with a more activist, combative style that goes beyond the bureaucratic mode of operation which they had been socialised into. The trade union movement is also highly fragmented. Most of the labour conflicts take place at the factory level, and bargaining rarely involves trade unions at the sectoral or national level. There is also a considerable difference between unionisation rates in foreign-owned manufacturing plants and enterprises owned by domestic capitalists. While trade unions operating in the former have recently organised successful strikes, their peers have not managed to take advantage of an economic environment that is favourable for labour organisation. This gap explains the lack of a unified nation-wide trade union movement and labour’s inability to influence national politics. Trade unions have also neglected the crucial symbolic dimension of class politics: they did not invest in education, research or other activities that could strengthen workers’ political identity. A single protest event cannot make up for the decades-long neglect of building a Left-wing working-class political culture. It remains to be seen if trade unions will be able to regain momentum after the quickly fading success of the protest movement against the ‘slave-law’.

If unions have failed, then the political Left has doubly failed. The Socialist Party did not invest any significant effort into organising workers or into building a political culture for the Left. As the party was the successor of the state-socialist party, it inherited an organisational culture that took the existence of the party for granted. This led to a complete neglect of political education, research and activism. The party elite, following Tony Blair’s example, gradually shifted toward a media-focused style of politics. As noted above, it also embraced neoliberalism. After 2010, the will to survive paralysed some leaders, while compelling others to strike bargains with Fidesz. All of this naturally led to the latest EP election fiasco, which was probably the last nail in the party’s coffin.

The Politics Can Be Different Party had a chance to occupy the political vacuum left behind by the Socialist Party. However, its membership did not support this, pushing the leadership to keep an equal distance from Fidesz and the Socialists. This in-between position generated the impression that the party tolerated Fidesz’s politics and proved increasingly unpopular amid Fidesz’s continuous shift towards authoritarianism and to the Right. The leaders of Dialogue Party, who broke away from Politics Can Be Different Party in 2012, steered clearly to the Left. However, they also failed to invest into building a political community, opting instead to enter deals with other parties (most lately: the Socialists) to survive, without building a functional political organisation. The party still counts some popular personalities among its ranks, such as Gergely Karácsony, who won the primary election held to choose the opposition’s joint candidate for the mayor of Budapest. If Karácsony wins the mayoral election (scheduled for October), this might allow the alliance of the Socialists and Dialogue to retain some political significance, while also handing the opposition a much needed victory and potentially energising its support base. The latest polls suggest that the opposition’s candidate has a realistic chance of defeating Fidesz. However, they also point to a process of realignment in the oppositional field, with Gyurcsány’s Democratic Coalition consolidating its leadership role. In sum, none of these parties succeeded in breathing life into the Left. The lack of mobilisational drive and grassroots activity partly explains why episodes like the slave law protests have failed to energise labour politics or to act as springboards for the building of a pro-labour narrative.

These organisational factors are crucial, but the broader environment presents an even tougher challenge, a structural trap for labour politics in Hungary. As we have shown, Orbán’s strategy of authoritarian re-embedding involves pre-emptive repression. From amongst the tools designed to make oppositional organising difficult, we highlight the hefty fines that were imposed by the State Audit Office on Jobbik and Dialogue, thereby effectively ruining both financially and harming their electoral prospects. The collapse of Jobbik at the EP elections shows that Fidesz (whose media actively promoted a new radical Right-wing party that split from Jobbik last year) has the capacity to appoint its own opposition.

Orbán’s strategy of authoritarian re-embedding also involves an element which we called authoritarian populism, that is an effort to legitimise Fidesz’s politics and attract workers to the ruling party. We highlighted the government’s family and workfare policies to show that these addressed real problems, but in a partial way and while reinforcing the logic of social Darwinism, which entices citizens to compete for diminished public goods through a micro-politics of stigmatisation. At the same time, the securitisation of the Southern border also allowed Orbán to parade as the grand protector of Hungarians and Christian Europe. These initiatives are designed to spur competition and prevent the building of inter-class alliances, while also fostering a sense of common interest and purpose in the face of looming external threat.

Orbán has thus successfully polarised politics along the nationalist–cosmopolitan axis, articulating a neo-nationalist vision that combines elements of ethnic-nationalism and a newfound ‘civilizationism’. He simultaneously purports to defend Hungarians from the dictates of big capital and illegal migrants. The story he tells is a compelling one: ‘European elites, led by George Soros, are quietly furthering big capital’s agenda, conspiring to satisfy its appetite for cheap labour by letting economic migrants into Europe. This agenda is detrimental for Hungarians: it undercuts wages, increases welfare competition and threatens their culture and security. To avoid these threats, Hungarians must unite to “stop Brussels” and defend national sovereignty until the very last breath’.

Orbán’s narrative taps into Hungarians’ sense of relative deprivation and resonates with historically sedimented suspicions about faraway cosmopolitan bureaucracies. In our analysis, we alluded to the fact that this brand of peripheral national populism draws energy from the double polarisation that is deepening fault lines separating cosmopolitan growth centres from traditional manufacturing hubs and agricultural heartlands. Although Hungary’s accumulative state does not seek to close this structural gap (through development policy) and does not even offer to help aspiring individuals jump across it (by promoting social mobility), Orbán offers a minimum of social protection and a sense of belonging to those who live on the ‘periphery’s periphery’. Although this is not much, it is more than what his liberal predecessors have done for these people.

The EU election amplified this new polarisation, with Right-wing populists continuing to cannibalise the working-class constituencies of traditional social democratic parties, and liberals and greens capturing the urban vote in most countries. Labour, admittedly, has managed to safeguard its turf in Scandinavia and claw back some lost ground in Southern Europe. While the new centrist forces may be capable of obstructing the national populist tide in the core, this is difficult to imagine in places where two-thirds of the population consider themselves the losers of neoliberal disembedding. Cosmopolitan liberalism may be back in Hungary, but it alone will not challenge Orbán’s strategy of authoritarian re-embedding.

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Notes on the Yellow Vests – Cihan Özpınar

There is already a vast literature produced on the Gilets Jaunes since the beginnings of their mobilization in November 2018. This literature focused either on the theoretical or empirical aspects of the Yellow-Vest mobilizations by taking into account the problems arising from within, ranging from the ideological and political character of the protests to the social basis of the protestors to the question of strategy and mass-organizing. In what follows, I will first delve into the both parts of this literature, and emphasize crucial points regarding the social basis of the Yellow-Vest mobilizations and the question of political strategy; then I will situate the mobilizations within the disruptive social reproduction scheme of French social formation; following this, I will go on to search and examine the dynamics leading that social reproduction model in the relations of production—hence class relations; and I will continue with underlining what I see as the two essential contradictions concerning the movement—the differences and inequalities within the low-income earning strata in France; and finally, in the light of this empirical analysis, I will finish with a return to the discussion and critique of the political strategies at stake which claim to organize the ‘popular’ demands for a substantial political change.

***

[T]o adapt the pace of transition to socialism to the hopes and fears of [middle and small urban French kulaks] is to advocate paralysis or to prepare for defeat. Better not to start at all. How to deal with the problem is a different matter. But it is important to start with the fact that as a class or social stratum, this element must be reckoned as part of the conservative forces.’1

I

The Gilets Jaunes in France have brought to life the dynamism of a reinvigorated mass mobilization that challenged, for more than 8 months, the ‘ultra-liberal’ presidency of Emmanuel Macron and the reforms attempted and made under Eduard Philippe government. Since the 2008 economic crisis, France has been particularly a fragile case as regards the mass mobilization vis-à-vis the economic reforms developed in order to cope with the crisis; but Yellow-Vest mobilizations, with their symbolism, spatiality and persistent fury, have merited their worldwide fame. But what lay beyond the performance of the protestors, how could the historical roots of this social phenomenon be elaborated and what constitutes the social basis of the mobilizations remain as crucial questions.

The strange course of French neoliberalism ever since the ‘socialist’ Mitterrand took power in 1981, and under liberal and socialist governments in the following period,2 put the economic stability of the large masses in a precarious situation, and, in this regard, the coming to power in 2017 of the ‘centrist’ Macron administration now poses a much serious threat of a coup de grâce that would sweep what has left behind the welfare state.3 But this final blow must have come, ideally, at the moment when the death whistles of the welfare state have already been blowing.4 Ever since the economic crisis of 2008 and during the following recession, several attempts have been made to blow that whistle, each resulting with a strong response from an amalgam of mass organizations and political parties, leading to the widespread strikes of 2010 and, more recently, the Nuit Debout protests of 2016. In these cases what was at stake was the government reforms on pensions (during centre-right Fillon government, under Sarkozy’s presidency) and the labour law (during centre-left Valls government, under Hollande’s presidency), and government attempts were met with organized labour and political opposition. However, as Kouvelakis rightly underlines, in the case of Gilets Jaunes the government attempts in undermining what remained from the welfare state were met by the uprising of the popular classes, without any clear ideological discourse and significant organizational role of the unions or political parties, but by forming themselves ‘from below’ the assemblies (‘assembly of assemblies’) based on ‘self-organization, direct democracy and expanding participation’5—leading many observers to closely deal with, and at times solely focus on, the aspect of ‘political subjectivity’ of the Gilets Jaunes, albeit through occasionally over-reading historical comparisons with French Revolution (e.g. the Sans-Culottes),6 or revolutionary situation comparisons by coining terms such as ‘counter-power’ in reference to ‘dual power’.7 Such features rendered the recent Yellow-Vest mobilizations substantially different from the preceding mobilizations, both pre- and post-2008, not necessarily in terms of underlying motivations and reasons, but the protestation forms developed by protestors.

Although there certainly is an intrinsic, dialectical relationship between the form and the content, it is important not to be dazed by the attractiveness of the form-analysis to the detriment of neglecting the content. The content inevitably refers one to the social basis of the Gilets Jaunes and the underlying motivations and reasons behind their mobilizations. Observations from the field and empirical studies on Yellow-Vest mobilizations and its social basis both show that the Gilets Jaunes actually stand for a mass movement of the ‘lower middle class’8 whose economic stability has for so long time been under threat and now in the face of a final blow. But the sign of this Macronian blow did not appear in the way those of the previous ones used to do: the initial protests by the Gilets Jaunes were triggered not as response to some government assaults on redistributive mechanisms (such as pension reform or labour law, as is the case with the previous moments of mobilization) but by the fury occurred against the increase in indirect taxes on fuel—the carbon tax. Directly influencing hundreds of thousands of people’s daily consumption practices, this new tax policy was to add extra cost over many households all over the Hexagon, especially those in the provinces and countryside,9 which are under the grip of low-income receiving. It was those directly threatened by this tax policy who first took on the roads and highways; among them were the small business owners, artisans, farmers and smallholders along with workers in different sectors, most notably transportation, such as truck drivers;10 they then became the ‘vanguard’ of the wider array of protestors coming from other sectors of the society who feel the threat of the ‘ultra-liberal’ economic reforms that would undo what has been secured so far under the welfare state. In that, the relation of the Yellow-Vest mobilizations in times of economic stagnation and ‘long downturn’11 to the workings of capitalism is all the more obvious; yet what is of determining character is its relation to French capitalism’s social reproduction scheme. In other words, the social character of this government attempt (a political intervention to economy) lay not in the relation between capital and wage-labour, i.e. at the point of surplus production, but at the point of surplus realization which takes place in the sphere of circulation of commodities.12

Now, one might argue that transportation is an essential part of the production process; this is certainly true. Indeed, as Marx once put it, ‘[t]he transport industry forms on the one hand an independent branch of production, and hence a particular sphere for the investment of productive capital’. But he also emphasizes that it actually has a dual character: ‘On the other hand it is distinguished by its appearance as the continuation of a production process within the circulation process and for the circulation process’.13 Throughout the sections he wrote on the costs of circulation as well as the reproduction of the total social capital in Volume 2 of Capital, he draws on the distinction between surplus production happening at the site of production and surplus realization during circulation, of which the latter is adding extra costs on the value of the commodity when it is brought to the point of consumption—in both cases where the commodity takes part of the production of means of production (Department I) or that of consumer goods (Department II). To the extent that these tax reforms add extra weight on the enterprises in the transformation business, and threatens the stability of the working class employed in this sector, it is directly related to the total social capital; but to the extent they are effective on the total costs that increase the commodity prices, they are essentially related to the process of the realization of surplus value which takes place in the reproduction of the total social capital. And this brings us to the dynamics of a particular social reproduction scheme adopted by a particular social formation.

II

This analysis related to capitalist social reproduction gives way to a set of intertwined questions: How is the agency of class at work in the case of Gilets Jaunes, boldly defined as a lower middle class movement? Do analyses, especially Marxist ones, based on social reproduction fall into the trap of hiding the class divides? And what could be the effects of such tendencies vis-à-vis the necessity of a profound analysis of the real mechanisms behind social and racial inequalities? In order to deal with these questions, we need to delve into the concept of lower middle class.

Indeed, the Yellow-Vest mobilizations brought on the incessant actuality of what the Marxist historian Arno J. Mayer has once discussed under ‘the lower middle class as historical problem’.14 In this celebrated article, Mayer elaborated the fluid and unstable character of the lower middle class, both in political and social terms, and lay out the underlying reasons for this characterization through recourse to historical evolution of the social groups that fall under this category of ‘social class’. Informed by Poulantzas’s theory of class,15 particularly regarding the petty bourgeoisie, Mayer went on distinguishing within the lower middle class essentially two fractions which belong to traditional and modern petty bourgeoisies, while the course of capitalist development and the imposition of market forces put both fractions under a great economic distress, resulting in them occasionally producing similar political responses to rapid social change. As is the case with Poulantzas’s theorization, Mayer, too, treated the lower middle class as essentially different from the industrial proletariat which then constituted the bulk of the working class—a distinction established by one or more of the following features: mental labour (as opposed to manual labour);16 salary-earning status (as opposed to wage-earning); property-owning status over means of production (self-employed business owners, craftsmen, etc.); relative control over production processes (primacy of low-skilled workers over the non-skilled)—the parameters which had been systematically absent in traditional Marxist theories of class prior to Poulantzas, and since then became part of more refined approaches in labour and class studies.17 The articulation of such social groups, therefore, results in the formation of a wider lower middle class that is best identified, perhaps, with the status of low-income receiving, which in turn puts these strata in constant anxiety especially in economic downturn periods.

Despite its analytical value and conforming to the articulation the Gilets Jaunes involves, lower middle class, however, stands rather as a category of what is described as ‘gradational’ class approach in that it is defined most visibly on the basis of income status.18 While Mayer and especially Poulantzas intended to view this social class in a relational way, counting on the extra-economic features of the production processes as the complementary determinants of the economic features, that they defined two distinct strata—the traditional and new middle classes—and categorized both within the same social class of petty bourgeoisie is to concede in fact that its basic, underlying determinant is the income status, rather than their places in the production processes.19 Moreover Mayer’s contribution to this middle class theory by identifying a ‘lower’ layer from within is even more broadly highlighting the gradational character of his class analysis. If in historical materialist tradition class is a relationship in the same way capital is a social relation,20 then the gradational character must be stripped of its determinant role and pushed back to a subordinate position.

But also it is from this subordinate position that emerges the analytical value of the concept of lower middle class. Mayer’s lower middle class—whose political character is understood in a way in fact quite similar to that understood by Miliband in the epigraph—is the social profile of the Yellow-Vest protestors in that they are low-income earners; they are seriously threatened by the lifting-off of the barriers set by the welfare state that prevent them from the full imposition of free-market dynamics.21 This is the common ground for the lower middle class that is at stake; by this token, it is a useful category while describing both the profile of the protestors and the social basis of the mobilizations. Lower middle class, however, is not a social class in the Marxist sense of the term for that it does not designate a shared position of the social strata involved within itself under the same social-property relations. What this means is that the various strata making up the lower middle class in fact belong to different social classes; therefore they actually undergo fundamentally different class experiences. All of these component strata might have swung in a given historical momentum under the same threat, but the point is that each stratum goes through a different process of social change when their ‘rules for reproduction’ are fundamentally challenged in their own ways and according to their own peculiarities.22

III

This brings us to the problem of tackling the mode of production–class agency–social reproduction nexus. In the particular case of the Gilets Jaunes what is at stake is a discussion around the different class components of the movement and the class divides within the ‘unity-in-action’ of the protestors, and the changing mechanisms of capitalist social reproduction in which the role of the political—the state, or the French model—is involved, all placed in the wider picture of the actual workings of capitalism. Let us start with the latter.

What led to the Yellow-Vest mobilizations was the latest link of a chain of systemic attempts according to the project started by the neoliberal programme towards dismantling the many benefits of the welfare state. This welfare state was particularly strong in France; but its fundamental role was, in order ‘to cushion the transition to industrial economy’, functioning as ‘a welfare state aimed toward social insurance for the middle classes … rather than redistribution’—unlike other advanced Western capitalist economies.23 So that, given the state’s greater size in economy relative to its counterparts, the French neoliberalism, characteristically, has showed up dominantly in the sphere of privatization, rather than taxation and social costs. But this trend seems to have changed course since late 2000s: as response to the economic crisis of 2008 and conforming to the conditions of the following stagnation, successive government attempts (from centre-right via centre-left to ‘centrist’ presidencies) have rather focused on reducing the social expenditures and reforming the already non-progressive taxation structure—all to the detriment of the growth of low- and middle-income strata, for which the economic stagnation in the post-2008 period has stabilized their shares in the total household income, and to the advantage of the rich and the super-rich whose economic dominance has been secured (see Chart 1). Moreover, this underlying inequality in terms of redistribution has been consolidated by the enormous increases after 2008 in the household debts as well as the private consumption expenditure accompanying that development (see Charts 2 and 3). In other words, while there has been little change, if not regression, in the structure of income inequality, the French households have been subjected to a significantly growing indebtedness due to exigencies of the private consumption hungry economy (Chart 4).

Here it is important to note that recent studies on private debt found that the situation of French households vis-à-vis their European counterparts depicts a relatively positive portrait.24 This could be considered in a way that the French model is yet to be broken completely, but at the verge of it. Whereas the French model, designed to protect the citizens from the harms of market dynamics, supposed to present its social-insurance instruments especially for the small-propertied classes, which is potentially unstable if exposed to free-market, joined by a fraction of the working class with privileges (both manuel and mental labourers) whose subsistence has been a central matter for the post-war French polities, it now appears to be failing as a viable social-reproduction model in that its firm presence and intervening capacities in French capitalist development is dislocated—it is to the extent the French state withdraws from its role as a key player in economy and for economic growth that it has been going through a disruptive process which bears the incentive to transform the ‘rules for reproduction’ specific to French social formation fundamentally.

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Chart 1. Evolution of the income share by deciles and quintiles in France, 2009–2015. Source: World Bank.

Cihan 2 3Cihan 2 3 1

 

Charts 2 and 3. Household debt in France, 2000–2018 (USD and percentage of GDP). Source: CEIC Data.

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Chart 4. Private consumption expenditure in France, 2000–2018. Source: CEIC Data.

These data suggest that, under capitalist social-property relations, several social classes and strata within the French social formation have, in their own class ways, been experiencing the hardships of the transformation of the rules for their social reproduction. Wage-labourers (including salary-earners), especially those in the rural areas, whose jobs are dependent to small and medium-size enterprises, are particularly vulnerable in this process; this stratum of the working class is followed by the small-propertied classes, who are actually running their SMEs under quite unstable conditions and whose dependence to bank credits in order to remain in business is increasing consistently; these strata have been reinforced largely by those on retreat whose living is dependent on social insurances granted by the state; and finally a considerable segment of the urban working class, both manual labourers and lower- and middle-income strata of non-manual labourers, has been under the threat of being stripped off of the privileges and protections they benefit from the welfare state, which upheld the standard of wages high by taking role in negotiations between corporations and unions, and losing the privilege of being employed to the creation of precarious labour market based on low-wage economy.

IV

It is the compulsion of these circumstances that undermines the French model and its adopted mechanisms of social reproduction, and that has led to the unity-in-action of a large array of social bases; yet, although it is the same root of disruption that applies for each of these social groups, the way how they have been experiencing the disruption is essentially and fundamentally different from each other—therefore, what is at stake vis-à-vis not the root-cause of their actions but the way how they engage with social reality is the fact that different class agencies are set in motion. Moreover, although under their yellow vests ‘popular classes’ are brought together as the profile of the protestors, the social function of mobilizations is not limited to these popular classes but it actually incorporates the agency of certain fractions of the dominant classes.

I will emphasize three cases in point concerning the problem of class agency: (i) albeit conceived as a crisis of capitalist social reproduction where the root-cause of Yellow-Vest mobilizations is originated, the disruption of capitalist social reproduction cycle specific to French social formation is a consequence of stagnant labour productivity as well as the profitability of the French firms in which an entire set of relations of production is involved—i.e. multiplicity of class relations; conforming to this point, (ii) the social function of the mobilizations is not only a tendency towards preserving the past privileges of the social strata that belong to popular classes, but also those of a fraction of the capitalist class, along with the cooperating political elites at the ‘heights of the state’—it is those privileges granted by the French model that undermine the economic incentive for them to invest in new technologies so as to develop the means of production, and instead lead them to rely more on ‘outmoded’ techniques and means, as symbolized in policies over carbon fuel versus new energies; (iii) the privileges which benefit some fractions of the working class25 do in fact cause intra-class division on the basis ofprivilege-of-being-employed’ as opposed to a large ‘reserve army of labour’, a product of France’s acute unemployment problem—whereas the objective class interests of these different strata or fractions are naturally common, for they all are dependent on wage-labour and hence take part of the working class, their short- and mid-term interests derived from this or that economic model (social-reproduction model) are fairly diversified, resulting in the political division of the working class and instead creating an amalgam of social groups belonging to different social classes that gives way to theorization on the basis of the political subjectivity of categories such as ‘the people’.

(i) Productivity, profitability and class relations

If social reproduction models are conceived as politically-constituted systems by which different social groups—from the propertied to non-propertied classes, from capitalist to working classes, also comprising the middle strata such as small-business owners, traditional petty bourgeoisie, and so on—are benefitted according to their shares and roles in the political edifice, then it logically follows that they are subject to change to the extent class conflicts and class struggle in a given social formation pressure the existing status quo. Therefore, the French crisis, understood as a disruption in its social reproduction model (the French model), is firmly rooted in the sphere where class conflicts and class struggle take place, not reduced to that between two polarized but multiple parties of the social formation. In that sense, in order to understand how class struggle takes place it is necessary to understand in what terms class relations are subject to change—and, in that, it is imperative to understand how the relations of production are changing. For that matter, I will briefly overview labour productivity rates in France and the profitability of the French firms.

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Chart 5. Labour productivity growth in France, 1979–2018. Source: CEIC Data.

In the first place, it should be noted that Macron’s attempt at raising the carbon fuel tax is a consistent move with the ‘decarbonization’ policies adopted by successive governments from Hollande to Macron, notably the 2015 law related to ‘Energy Transition for Green Growth’ as a historical milestone which has the long-term aim of reducing energy demand as well as introducing effectively decarbonized energy by 2050.26 This was, in turn, consistent with European policies on low-carbon transition, the EU’s role in the agenda on global climate change, and its soft-power strategy as represented by the Paris Conference, and Paris Accord, in 2015.27 However, apart from the evident fact that the ecological crisis threatens the survival of capitalism in the longer term, what underlaid these efforts was a rather structural problem related to productivity. Both in France and Europe, the productive capacity of the economy during the long downturn has fallen well below the levels of the long boom; and the stagnant productivity, or the ‘falling productive capacity’, poses a threat for the further economic growth of France—a country experiencing acute stagnation (see Chart 5). Therefore, decarbonization policies throughout France and Europe must be understood as a possible reformative attempt on raising the organic composition of capital: on the one hand, it should be the case that the value of the constant capital increased; on the other hand, that of the variable capital decreased. If, as understood by a certain fraction of the capitalist class and the policy-makers in-line with them, the French economy is in such a quagmire of falling productive capacity that prevents it from further growth and French firms from further global competition, then decarbonization could actually stand as a strong incentive to French capital to invest in newer, less carbon-dependent, more sustainable and, of course, more effective means of production which could in turn increase the returns to labour—hence, labour productivity.28

(ii) Market competition, profitability, and class conflict

But this projection could not have been realized without resistance, particularly from the side of business-owners themselves. What actually has been at stake was Marx’s prophecy: the expropriation of the expropriators. For this to be understood in historical perspective, the causality relation between profitability and productivity should be underlined.29 According to Brenner’s historical analysis, a possible explanation to the economic crisis of the mid-1970s lies in the period that was underway since 1960s, when the profitability of the capitalist enterprises had begun to fall due to intense market competition. This competitiveness in turn should be read as the class conflict intra-capitalist class. If, by the same token, we take market competition as a determinant factor of falling profitability under the conditions of stagnant productivity, then the incentive towards raising organic composition of capital and labour productivity in order to increase profitability is an expression of the class conflict within capitalists. For it is not always easy, even profitable, from the point of view of the enterprises to invest in new means of production in order to increase their productive capacities; since under increased conditions of competition their short- and mid-term profits would have been in a precarious situation if such investments have been made vis-à-vis the firms with better capital-structure and new players in the game. Therefore, what appears to be the case is that the well-entrenched enterprises in the French economy behave rather in a conservative manner than reformative, and, however big their sizes, they tend to take a position as against the more innovative, and seemingly progressive, fractions of capital, both national and multi-national.30 No wonder, then, the Macronian understanding of the future francité is based on a ‘start-up nation’, which supposes to take over the place of the old-fashioned, obsolete capital.

(iii) Political division of the working class

On the other side of the coin, the rising organic composition of capital also requires the reduced costs in variable capital—i.e. labour force. This, in turn, is consistent with a labour-regime reliant more on automation as well as the prevalence of low-skilled labour, as anticipated in many future characterizations of capitalism.31 The development of new techniques here puts an important fraction of the working class in contradiction with the means of production, leading them to resist against not only ‘machine-produced machinery’ but, more importantly, the deskilling of labour. Deskilling, on the other hand, brings forth the creation of a ‘surplus army of employed’, as against the reserve army of labour, which functions in a way that transforms the labour market into a ‘low-wage economy’.32 This development strips off the employed from those privileges—privileges as defined on the basis of being employed in an increasingly-precarious job market and in a country like France which suffers from chronic unemployment rates but provides its working class with a higher growth in real wages than, say, in Germany—and equates the employed and the unemployed vis-à-vis the same low-waged, underemployed, precarious jobs. Such transformation of the labour regime shows its effects more on non-manual than manual jobs, further boosting the expanding of the services economy as the main site of job openings.

By this process, there arises the differentiation in the short- and mid-term interests for different fractions of the working class, which in turn brings forth the division of the working class on political grounds and choices. While some fractions of the working class, in a social-reproduction system like the French model, benefit from the privileges of the old labour regime, the rest have no particular interest in its continuation but actually suffer from the structural barriers imposed over them; hence, they tend to remain indifferent to the deskilling of the labour force and the accompanying process of the creation of low-wage economy, in which they would survive relatively better compared to the previous labour regime. This is particularly the case with the migrant labour force (both first and second generations), especially of North-African, Sub-Saharan and Turkish origins, whose intergenerational reproduction is met by systemic barriers in terms of access to education and lower income in comparison to other population groups.33 This fact is also relevant as to why immigrants have not endorsed the Yellow-Vest mobilizations; and, while greatly exaggerated especially by pro-Macron pundits such as Bernard-Henri Lévy, it also partly explains the undeniable existence of racist and far-right elements in the mobilizations. Whereas the Yellow-Vest movement as a whole is not racist, far-right or reactionary protestors, their unity-in-action is certainly not immune to such elements to prevent them from within—and not necessarily so, as it is concrete conditions that precede ideological leanings, not vice versa. Here, it is noteworthy to make a contrast with the Gilets Noirs who appeared in a somewhat alternative, if not contradictory, position to that of the Gilets Jaunes and are attempting to claim their civic rights—the lack thereof constituting a further inequality within the working class, and preventing the unity of the working class on the basis of their objective class interests.34 Although at the grassroots level such a division could be surpassed in cases when joint actions take place,35 it remains a crucial matter whether those are enduring unities organized on the basis of a political programme. For what sets the Gilets Noirs separate from the Gilets Jaunes is an urgent issue that cannot be confined to the dichotomy of recognition vs. redistribution, as the civic demands of the former are discernibly alien to the redistributive demands of the latter.36 This point brings us to the problem of strategy.

V

What has been discussed so far had the aim to outline the background for the Yellow-Vest mobilizations and to show how a multiplicity of class relations and, therefore, different class agencies have been at work regarding the mobilizations. But analysing the workings of these class agencies is one thing, and making use of them politically another. The latter requires the specific relationship between theory and political strategy—strategy to be informed by theory, and theory not to be distorted by the necessities of some ‘realistic’, even ‘possibilist’, political strategy. As shown in the first section, the political-subjectivity aspect of the mobilizations has been the most widely discussed topic on this matter. Here I have no interest in engaging those discussions—some of which are brilliantly thought-provoking—but I will finish my account with pointing out some of the basic contradictions and problems on the nexus of political subjectivity/class agency.

Any socialist strategy of taking power would naturally be relying on the anti-capitalist elements of a social movement, uprising, mobilization or protest. Marxism, on the other hand, with its distinguished historical-materialist approach, provides a methodology for political strategy, which would rely on class agency and be named as class politics; it surely is the philosophy of praxis, the task of changing the world, but it also assumed that this task would not be achieved without a proper methodology and theory. Now, Marxist philosophy of praxis is also, by its nature, strictly anti-capitalist; but what underlies its distinguished character from other anti-capitalist political visions is the scientific way it interprets the world, and it is at this point that the notion of class gets into the picture, according to which the workings of the existing world is on the basis of the class agency. This is what sets Marxism so radically apart from other anti-capitalist, even socialist, projects. And while class agency traverses all the spheres comprising both the sites of production and social-reproduction, the point where it is originated is uniquely the site of production, where the specificity of capitalism emerges: the separation of the economic and the political.37 While the economic involves the relations of production, and therefore exploitation, the political involves all the extra-economic relations of domination—two essentially distinct type of relationships that characterizes the workings of capitalism both at the sites of production and reproduction. This is what makes class a social category defined on the basis of relations of production and exploitation, not on extra-economic relations of domination.

That said, it is not intended here to undermine the importance of extra-economic relations vis-à-vis class agency; what it is intended instead could be expressed as follows: (i) underlining that exploitative relations of production (the economic) are essentially different from oppressive relations of domination (the extra-economic), i.e. that they are in different natures; (ii) in so far as they are historically separated in capitalism, it is necessary to make this distinction to understand the true nature of capitalist relations of production; (iii) it is this latter point that gives the basis of class determination, made on the relations of production, and it is strictly a relationship between capital and labour under capitalist mode of production; (iv) while it is true that class(es) undergo(es) extra-economic processes, which might be defined as ‘class formation’, this—the point of social reproduction—is in fact where the class agency is set in motion: social classes interact, they oppress and are oppressed, dominate and are dominated, and they establish political relations among each other, in the same way do the other social groups defined on the basis of race, gender, nation, ethnicity, etc.; (v) if it is accepted that the extra-economic relations could also be variables in class definition it would give way such concepts as ‘women’s class’, and the like, which obviously loses the rigour in analysis. Now, Poulantzas’s class conception did not go as far as this of course, but his formulation led to the famous conclusion that an important part of the wage-earning class actually belonged to the new middle class instead of the working class on the basis of these extra-economic determinants, and there is a point in Wood’s description of Poulantzas as ‘the forerunner’ of the historical ‘retreat from class’, according to which, in late 1970s and early 1980s, the proletariat was to bid farewell for the reason that the manual working class has already shrunk in the North and therefore was incapable of leading the revolution. This understanding paved the way not only for the Eurocommunist strategy in the 1970s, resulting with the abandon of the ‘dictatorship of the proletariat’, but also for the left-populist strategies of later decades in which the class aspect has more and more lost sight.38

Therefore, the totality of the social-property relations under capitalism which involves both the production and realization of surplus value (the sphere of the latter process involves the relations of domination, not exploitation) within an integrated unity39 should not be conceived as the bedrock of a ‘left-populist strategy’ in which the class divisions are blurred and treated identically within some melting-pot category of ‘the people’, conforming to the logic underlying such formulations: ‘A left populist strategy aims at federating the democratic demands into a collective will to construct a “we”, a “people” confronting a common adversary: the oligarchy.’ Thus theorists such as Mouffe offer a cross-class alliance in which not only ‘the establishment of a chain of equivalence among the demands of the workers, the immigrants and the precarious middle class’, but also ‘other democratic demands, such as those of the LGBT community’.40 Then she goes on to tell, quite rightly, that ‘[p]eople do not fight against “capitalism” as an abstract entity because they believe in a “law of history” leading to socialism’, and underlines the ‘importance of the “social question”’ along with ‘the specificity of the various democratic demands’; by way of referring to David Harvey’s ‘accumulation by dispossession’, she relates the demands of the people concerning the social question to the workings of capitalism, especially its neoliberal model, and makes her case for a left populist strategy that is realistic in counter-hegemonic struggle grounded on both economic and extra-economic demands.41

Mouffe’s recent contribution to the theoretical position launched by ‘post-Marxism’ can be understood as a remarkable sign of shifting the emphasis from ‘the ideological’ to ‘the economic’ via a reconsideration of the social question as the underlying condition for political strategy. In this turn, the effect of the economic crisis of 2008 and stagnation afterwards over the re-emergence of the social question as an urgent political matter has been undeniable. As a ‘Marxian-inspired’ political theory, however, the left-populist case à la Mouffe suffers at two fronts. First, it lacks a rigorous class conception which affirms the specificity of capitalist relations of production; second, by taking into her account Harvey’s influential concept of ‘accumulation by dispossession’42 she underscores the totality of capitalist social-property relations but, as is the case with Harvey, does not distinguish the nature of the social relations that take place at the sites of production and realization of surplus value, therefore the nature of the social relations of production from the nature of the relations of social reproduction. As a line of continuity, therefore, ‘the autonomization of ideology and politics’ from class remains as a determinant factor in the dynamics of social change. In that manner, concepts such as ‘accumulation by dispossession’ or ‘primitive accumulation’, when taken out of their contexts and not put in their place in relation to the economic, are used as deus ex machina, considered enough to stress the connection between, or the integrity of, the economic system and the political edifice. As a result, though the demands related to the ‘social question’ are distinguished from democratic demands, this remains only a verbal distinction: class becomes a non-specific, almost ordinary, category among different identities, which are in reality the products of political relations of domination; therefore the relations of exploitation—the economic—become indiscernible from the relations of domination—the political. The practical result of this strategy is, naturally, its neglect of the class relations and class agency, as well as its indifference to the class struggle between classes and class conflict within classes, and ends it up with either the complete failure of coherently articulating social and political demands and their defence down to the last member of the organization, or the dissuasion of this or that social stratum taking part in the cross-class alliance through compromise by what actually is ‘the enemy’ of the populist movement—the oligarchy. In Miliband’s words quoted in the epigraph above, advocating paralysis or preparing for defeat—are the Marxists in an epoch of populisms really caught at this pincer?

Indeed, a mass mobilization like the Gilets Jaunes is what a (left) populist movement would have dreamt of. Informed by the post-Marxist position of building counter-hegemony and taking power, Jean-Luc Mélenchon’s left-populist La France Insoumise and its relation to the mobilizations has been considered by Mouffe, an inspirer of LFI, as the ‘populist moment’.43 It is clearly opportunistic for Mélenchon’s LFI to invest politically in mobilizations driven by popular classes, since it targets both the Macron-style liberalism in defending lower-middle classes and the EU-style globalism in defending souverainisme and Euroscepticism, blended with nationalistic appeals especially in immigration politics, all subordinated to a malleable parliamentarism headed by a charismatic leader.44 It is important here to note that this political line has quite some international resonances in the guise of ‘politics of the 99%’ symbolized, and intended to be organized on a world scale, by the Progressive International on the both sides of the Atlantic, encompassing politicians from Sanders to Varoufakis to Corbyn to Mélenchon.45 Of course, the differences among them are evident. Though all retain the outlook of electoral politics as the main road to power, there are cases where the role of working class as the transformative subject is given primacy compared to other cases where that role befalls to ‘the people’: an immediate comparison between DSA and LFI suits well to the case. And especially in the French case, the core of political strategy—the social basis—is a cross-class alliance in which the dominant elements are tending to be the relatively privileged fractions of the working class along with small-propertied class, whereas in the US case the politics of 99%, though led by the working class, treats the masses as if they are primarily opposed to the super-rich, the oligarchy, or the 1%. This is to concede that the determining contradiction that gives rise to heightened class struggle is not between the capitalist and working classes, or not even the propertied and non-propertied classes, but between the super-rich and the rest. This eventually leads to rupture/revolutionary strategies adopted or not by the party that is led by the working class.46

This is hardly a sound strategy, especially for the French case: the aim of popularity diffusion among masses is subject to very unstable waves of conjuncture, and never a self-sustained organizational development; it gives so much place to ideology and so little room to concrete interests that the assumed common ground for a populist cross-class alliance could in fact be more illusionary than realistic; even though an electoral campaign becomes successful enough to take offices, since it readily accepts the autonomy of the political from the economic and does not minutely elaborate the power balance, i.e. how this autonomy actually takes place, at the political level in class terms, it remains exposed to external pressures from different political quarters—leaving the decision-making processes paralyzed and, worse, rendering the fragile alliance self-sabotaging. Such was the lesson taught by the Syriza experience in Greece, which after yielding to the neoliberal agenda throughout their term in power has eventually lost the ‘radical moment’ to the centre-right New Democracy in the 2019 elections.47 And if the lesson was learnt well, the remedy should have been sought elsewhere: in the political unity of the working class—a class that is free from privileges and hierarchies which constitute its political division and function a role in alienating away the immediate interests of different fractions of the working class so as to undermine its class consciousness—by radically demanding that the remaining part of the working-class privileges, including the civic ones, be expanded to the whole working class, and by organizing this social basis, under the leadership of the more class-conscious, better-organized, and militant privileged fraction of the working-class, immediately around the programme of expanding privileges. Provided this condition that a cross-class alliance could only take its place at the table of Marxist political strategy.

1 Ralph Miliband, ‘The Coup in Chile’, The Socialist Register, 10 (1973), p. 457.

2 For a historical account, see: Chris Howell, ‘The French Road to Neoliberalism’, Catalyst 2:3 (Fall 2018), pp. 83–121.

3 Perry Anderson, ‘The Centre Can Hold: The French Spring’, New Left Review, II/105 (May–June 2017), pp. 5–27.

4 It is a defining moment of Macronism that this ‘Merciful Blow’ comes along with the perceived fact that ‘the Merciful State is already dead’: ‘Pour Emmanuel Macron, l’état de grâce est déjà fini’, Le Figaro (23 July 2017), URL: http://www.lefigaro.fr/politique/2017/07/23/01002-20170723ARTFIG00131-pour-emmanuel-macron-l-etat-de-grace-est-deja-fini.php.

5 Stathis Kouvelakis, ‘The French Insurgency: Political Economy of the Gilets Jaunes’, New Left Review, II/116–7 (March–June 2019), pp. 83–6.

6 An important historian of the French Revolution makes the case in the comparison with Sans-Culottes: Sophie Wahnich, ‘The Structure of Current Mobilizations Corresponds to that of the Sans-Culottes’, interview by Joseph Confavreux (trans. David Fernbach), Verso Blog (4 December 2018), URL: https://www.versobooks.com/blogs/4160-the-structure-of-current-mobilizations-corresponds-to-that-of-the-sans-culottes. This was followed by a piece from Le Monde editor: Sylvain Cypel, ‘From Sans Culottes to Gilets Jaunes: Macron’s Marie Antoinette Moment’ (trans. Jeffrey Zuckerman), New York Review of Books Daily (11 December 2018), URL: https://www.nybooks.com/daily/2018/12/11/from-sans-culottes-to-gilets-jaunes-macrons-marie-antoinette-moment/; and then by a piece from a magistrate: Vincent Sizaire, ‘Maintien de l’ordre, les faux-semblants du modèle français: des sans-culottes aux “gilets jaunes”, histoire d’une surenchère répressive’, Le Monde Diplomatique (April 2019), URL: https://www.monde-diplomatique.fr/2019/04/SIZAIRE/59748.

7 Toni Negri, ‘French Insurrection’ (trans. Bethan Bowett), Verso Blog (8 December 2018), URL: https://www.versobooks.com/blogs/4158-french-insurrection. In fact Negri makes his historical reference for Gilets Jaunes essentially to the jacquerie revolts of the French peasantry during the late Middle Ages and Early Modern period. This is not surprising at all. For the jacqueries appear to stand for to him a permanent case in point for literally any form of mass mobilization and protest marked by ‘indignation’ and ‘spontaneity’, paving the way for the insurrectionists to constitute a counter-power, or dual power. In this scheme, the Maoist Long March and even the Bolshevik revolutionary situation are all corresponding to rural or urban jacquerie moments. Cf. Michael Hardt and Antonio Negri, Commonwealth (Cambridge, MA 2009), pp. 236–40, ff. Also see Negri on Gilets Jaunes and counter-power: ‘Gilets jaunes: un contropotere?’, EuroNomade (21 December 2018), URL: http://www.euronomade.info/?p=11461. A more ‘moderate’ usage of the term ‘counter-power’ in relation to Yellow-Vest mobilizations can be found in: Etienne Balibar, ‘“Gilets jaunes”: le sens du face à face’, Mediapart (13 December 2018), URL: https://blogs.mediapart.fr/etienne-balibar/blog/131218/gilets-jaunes-le-sens-du-face-face. For some other notable pieces on the political subjectivity of Gilets Jaunes, see: Cédric Durand, ‘Le fond de l’air est jaune’, Contretemps (11 December 2018), URL: http://www.contretemps.eu/gilets-jaunes-macron/; Jacques Rancière, ‘The Virtues of the Inexplicable — Apropos the Yellow Vests’ (trans. David Broder), Verso Blog (12 February 2019), URL: https://www.versobooks.com/blogs/4237-jacques-ranciere-on-the-gilets-jaunes-protests; Enzo Traverso, ‘Understanding the Gilets Jaunes’, Verso Blog (15 February 2019), URL: https://www.versobooks.com/blogs/4242-understanding-the-gilets-jaunes.

8 The initial results of an empirical survey can be found at: ‘“Gilets jaunes”: une enquête pionnière sur la “révolte des revenus modestes”’, Le Monde (11 December 2018), URL: https://www.lemonde.fr/idees/article/2018/12/11/gilets-jaunes-une-enquete-pionniere-sur-la-revolte-des-revenus-modestes_5395562_3232.html; English translation: ‘Gilets jaunes: a pioneering study of the “low earners” revolte’ (trans. David Fernbach), Verso Blog (14 December 2018), URL: https://www.versobooks.com/blogs/4180-gilets-jaunes-a-pioneering-study-of-the-low-earners-revolt. A comprehensive coverage and analysis of the mobilization and the movement based on field observations can be found in: Kouvelakis, ‘The French Insurgency’, pp. 75–98. Note that although it carries the subtitle ‘Political Economy of the Gilets Jaunes’ this article, a synthesis of the author’s three previously published articles in Contretemps, too, is rather focused on their political subjectivity.

9 Ivan Bruneau, Julian Mischi and Nicolas Rehany, ‘Rural France in Revolt’, Jacobin Online (24 March 2019), URL: https://jacobinmag.com/2019/03/gilets-jaunes-rural-dispossession-macron.

10 Gilets jaunes: a pioneering study …’, op. cit.; Bruneau et al., op. cit. One leader of the Gilets Jaunes, Eric Drouet, is a full-time salaried truck driver while another, Prisciallia Ludosky, is a small entrepreneur.

11 Robert Brenner, The Economics of Global Turbulence: The Advanced Capitalist Economies from Long Boom to Long Downturn, 1945–2005 (London 2006).

12 Here I am drawing on the distinction made by Marx himself and emphasized in various occasions by David Harvey, most recently in his Marx, Capital and the Madness of Economic Reason (London 2017), based on his interpretation of Volume 2: A Companion to Marx’s Capital, Volume 2 (London 2013). Whereas Harvey uses this distinction to highlight the ‘totality’ of capitalism, I will stress the differentiation of processes in the following sections.

13 Karl Marx, Capital, Vol. 2 (London [1885]1992), p. 229.

14 Arno J. Mayer, ‘The Lower Middle Class as Historical Problem’, The Journal of Modern History, 47:3 (1975), pp. 409–36.

15 Especially see: Nicos Poulantzas, Les classes sociales dans le capitalisme aujourd’hui (Paris 1974); but also: Pouvoir politique et classes sociales (Paris 1968).

16 In Poulantzas’s theory, this artificial separation of mental and manual labour reflects the most the ideologically different leanings of the waged and salaried labour, which in turn determines their class positions within distinct social classes as the working class and the new middle class. At the political level, it reflects the hierarchically distinguished control mechanisms of different social classes within a process of production. In that, the ideological and the political hold their autonomous powers in the determination of social classes.

17 Probably the most notable example is Erik Olin Wright’s Class, Crisis and the State (London 1979).

18 Erik Olin Wright, Class Structure and Income Determination (New York 1979), pp. 5–8.

19 For a critique of the ‘boundary’ theories and an emphasis on the centrality of exploitation, as opposed to status, see: Peter Meiksins, ‘Beyond the Boundary Question’, New Left Review, I/157 (May–June 1986), pp. 101–20.

20 For a detailed argumentation of ‘class as relationship’, see: Ellen Meiksins Wood, ‘Class as Process and Relationship’, in her groundbreaking collection of essays Democracy Against Capitalism: Renewing Historical Materialism (Cambridge 1995), pp. 76–107. For Marx’s overarching theoretical position on ‘capital as social relation [of production]’ and his reference to E.G. Wakefield as the discoverer of this formulation, see Capital, Vol. 1 (London [1867]1990), p. 932.

21 This is the case particularly, and historically, with small farmers and shopkeepers (i.e. the traditional petty bourgeoisie) in France, whose existence was systematically preserved by the hand of state regulations against free-market—see: Roger Price, A Concise History of France, third edition (Cambridge 2014), p. 325.

22 For the concepts of ‘social-property relations’ and ‘rules for reproduction’, see: Robert Brenner, ‘The Social Basis of Economic Development’, in Analytical Marxism, edited by John Roemer (Cambridge 1986), pp. 23–53.

23 Monica Prasad, ‘Why Is France So French? Culture, Institutions, and Neoliberalism, 1974–1981’, American Journal of Sociology, 111:2 (2005), pp. 360–1.

24 François-René Burnod, ‘What’s the Matter with France? The French Corporate Private Debt Binge, 2008–2016’, Private Debt Project, URL: https://privatedebtproject.org/view-articles.php?What-s-the-Matter-with-France-The-French-Corporate-Private-Debt-Binge-2008-2016-30.

25 The notion of privileged fractions within the working class reminds, of course, the concept of ‘labour aristocracy’. But I do not tend to use this concept as an analytical tool, not only for that it is not sufficiently theorized in Marxist literature, but also contrary to the concept’s aim of distinguishing a small fraction of the working class (the skilled labourers) from the rest (the non-skilled), the privileges here at stake actually are benefiting a much larger portion of the working class; therefore the threat of their loss provokes a wave of social mobilizations such as the Gilets Jaunes, but not some behind-the-scenes sort of negotiations among workers/labour unions, capitalists, and the state. For a powerful critique of ‘labour aristocracy’, see Charles Post, ‘Exploring Working-Class Consciousness: A Critique of the Theory of the ‘Labour-Aristocracy’, Historical Materialism 18:4 (2010), pp. 3–38.

26 Sandrine Mathy, Patrick Criqui and Jean Charles Hourcade, ‘Pathways to Deep Decarbonization in France’, Research Report, Institute for Sustainable Development and International Relations (2015).

27 Michel Aglietta, Etienne Espagne and Baptiste Perrissin Fabert, ‘A Proposal to Finance Low Carbon Investment in Europe’, Studies and Documents no. 121 (English version), Department for the Economics, Assessment and Integration of Sustainable Development (March 2015).

28 See the case made in Michel Aglietta, The Reform of Europe: A Political Guide to the Future, trans. Gregory Elliott (London 2019), especially chapters 4 and 9. Note that the book was originally published in 2014 in Paris with the title: Europe. Sortir de la crise et inventer l’avenir. Also see his more recent book, co-authored with Nicolas Leron: La double démocratie: une Europe politique pour la croissance (Paris 2017).

29 This causality was underlined and examined most effectively in Robert Brenner’s historical work on the long boom and long downturn: The Economics of Global Turbulence. For a résumé of his thesis and argument and a comparison with the contemporaries, see: Moishe Postone, ‘Theorizing the Contemporary World: Robert Brenner, Giovanni Arrighi, David Harvey’, in Political Economy and Global Capitalism: the 21st Century, Present and Future, edited by Rob Albritton, Bob Jessop and Richard Westra (London 2010), pp. 7–23.

30 A hesitant, if not conservative, position is explicit in a recent report published by the Institut Montaigne in Paris: ‘Pour réussir la transition énergétique’, Institut Montaigne (June 2019), URL: https://www.institutmontaigne.org/publications/pour-reussir-la-transition-energetique. The IM is particularly important: a giant of the French civil society, it brings together the representatives of a number of the most powerful French institutions—corporations and public institutions alike—in order to influence the policy-making processes at the political level. Also note that corporations like Renault or Total which have invested heavily on carbon-fuel technologies are contributors to the institute.

31 Francis Green, ‘Employee Involvement, Technology and Evolution in Job Skills: A Task-Based Analysis’, Industrial and Labor Relations Review 65:1 (January 2012), pp. 36–67.

32 Brenner, The Economics of Global Turbulence, p. 254.

33 This fact is revealed by the data presented in the Trajectoires et origines survey of 2015, edited by INED demographers Cris Beauchemin, Christelle Hamel and Patrick Simon. I am currently undertaking a research article on the intergenerational reproduction of the migrant labour force and the systemic barriers they face, not only erected by the political edifice itself but also as consequence of their own social-reproduction strategies vis-à-vis the labour market.

34 See the following statement made by the Gilets Noirs: ‘The Gilets Noirs are coming for the Prime Minister’, Verso Blog (1 July 2019), URL: https://www.versobooks.com/blogs/4367-the-gilets-noirs-are-coming-for-the-prime-minister; this statement originally appeared with the title ‘Gilets Noirs cherchent 1er Ministre’ on change.org as a petition: https://www.change.org/p/edouard-philippe-gilets-noirs-cherchent-1er-ministre. Also see the following piece: Luke Butterly, ‘The “Gilets Noirs”: The Undocumented Migrant Movement in France’, Verso Blog (4 June 2019), URL: https://www.versobooks.com/blogs/4341-the-gilets-noirs-the-undocumented-migrant-movement-in-france.

35 For example, see: ‘Gilets jaunes, gilets noirs et employés s’unissent à Geodis’, Mediapart (6 July 2019), URL: https://www.mediapart.fr/journal/france/060719/gilets-jaunes-gilets-noirs-et-employes-s-unissent-geodis.

36 In that matter, the symbolic act of occupying the Panthéon by the Gilets Noirs has been extremely powerful. See: Luke Butterly, ‘The gilets noirs occupy the Panthéon’, Verso Blog (15 July 2019), URL: https://www.versobooks.com/blogs/4379-the-gilets-noirs-occupy-the-pantheon.

37 On this point, see, of course, the seminal article by Ellen Meiksins Wood, ‘The Separation of the Economic and the Political in Capitalism’, New Left Review I/127 (May–June 1982), pp. 66–95, reprinted in her Democracy Against Capitalism, pp. 19–48.

38 For a critique of Poulantzas, see E.M. Wood’s classic The Retreat from Class: A New ‘True’ Socialism, revised edition (London 1998), pp. 25–46; of Laclau and Mouffe, see: ibid., pp. 47–74.

39 See the last paragraph of the Section I above.

40 Chantal Mouffe, For A Left Populism (London 2018), p. 24.

41 Ibid., pp. 50, 59–62.

42 Harvey for the first time uses this concept in his The New Imperialism (Oxford 2003), pp. 137–82. For an important debate around this concept, see the contributions of Ellen Meiksins Wood, ‘Logics of Power: A Conversation with David Harvey’, and Robert Brenner, ‘What Is, and What Is Not, Imperialism?’, both published in Historical Materialism 14:4 (2006), pp. 9–34, and pp. 79–105, respectively.

43 Chantal Mouffe, ‘The “gilets jaunes”: A reaction to the explosion of inequalities between the super-rich and the middle classes’, interview by Simon Blin (trans. David Fernbach), Verso Blog (6 December 2018), URL: https://www.versobooks.com/blogs/4149-the-gilets-jaunes-a-reaction-to-the-explosion-of-inequalities-between-the-super-rich-and-the-middle-classes.

44 Some sort of left-wing nationalism has always been instrumental in the post-Marxist, left-populist strategy drawn by Laclau-Mouffe ever since Laclau’s essay on ‘Fascism and Ideology’. See: Ernesto Laclau, Politics and Ideology in Marxist Theory (London 1977), pp. 81–142. The official position of the party on migration can be found in: Bernard Féraud and Elisa Senon, ‘Respecter les migrants, régler les causes des migrations’, Booklet no. 32 of L’Avenir en commun, the political programme of LFI (2017), URL: https://avenirencommun.fr/le-livret-migrations/.

45 For an account and discussion of the ‘democratic socialist’ political strategies and their problems in US, British and Greek cases, see Leo Panitch and Sam Gindin, The Socialist Challenge Today (London 2018).

46 For the case with DSA, see Chibber’s take on political strategy in a critical issue of Jacobin on the centenary of the Bolshevik Revolution, where a rupture/revolutionary strategy is explicitly rejected: Vivek Chibber, ‘Our Road to Power’, Jacobin 27 (Fall 2017). As a counter-position, see: Charles Post, ‘What Strategy for the US Left?’, Jacobin Online (23 February 2018), URL: https://jacobinmag.com/2018/02/socialist-organization-strategy-electoral-politics.

47 For a self-reflection and criticism of the Syriza experience, see: Panagiotis Sotiris, ‘Defeat and Recomposition: Thoughts on the Greek Elections’, Historical Materialism Blog (12 July 2019), URL: http://www.historicalmaterialism.org/blog/defeat-and-recomposition-thoughts-greek-election. Also see from the same author: ‘Is A “Left Populism” Possible?’, Historical Materialism 27:2 (2019), pp. 18–9.

Why China Cannot Win a Trade War against the USA
 – Samuel T. King


“China has few if any companies that supply technology inputs to U.S. companies that America either doesn’t produce or cannot buy from friendly nations.”i

“Analysts reckon China is more than 10 years behind in designing high-end logic chips of the kind used in Huawei’s switches and routers”ii

Speaking at a rally in Florida in May 2019, United States President Donald Trump told his supporters, “We won’t back down until China stops cheating our workers and stealing our jobs. And that’s what’s going to happen. Otherwise, we don’t have to do business with them. We can make the product right here, if we have to, like we used to.”

On June 1, US customs began collecting a 25 percent tariff on $200 billion of more than $500 billion of Chinese goods arriving in US ports annually. Trump is also threatening tariffs on the remaining goods. China responded by increasing its own tariffs of between 5 percent and 25 percent on almost all of its annual $120 billion of US imports.

Perhaps even more significantly, the US added Huawei, the Chinese multinational corporation (MNC), to the Department of Commerce “entities list” with which US companies are prohibited from doing business without departmental permission. Among other things, the ban means Huawei can no longer offer Google applications such as Gmail, Google Maps and Play Store on its phones, nor purchase US- and British-designed microprocessors needed to produce high-end phones and telecommunications equipment. There is widespread speculation that these two issues alone will gravely undermine Huawei’s market position – at least outside of China. The Trump administration has threatened five other Chinese technology companies, including Hangzhou Hikvision, a leading global supplier of security cameras, with inclusion on the entities list.

In doing this, Trump has spread the so called “US-China trade war” well beyond just tariffs. China has responded in kind, announcing its own Unreliable Entities list – which may include companies complying with the US Commerce Department’s bans. This would include some of the biggest and most powerful companies in the world, such as Google and leading microchip companies like Qualcomm, Intel and British-based ARM, which do a considerable share of their global business in China, or companies making products that are assembled in China.

Chinese garment workers


Popular Support for Trump’s Trade War

While the markets are in a spin and neither the terms nor outcomes of this latest stage are clear yet, what has long been clear is the widespread popular support Trump has for attacking China. US Senator Bernie Sanders, who has long advocated a protectionist stance similar to Trump’s, recently attacked rival Democratic presidential nominee Joe Biden for being soft on China. He promised a Sanders administration would best lead the U.S. struggle against China, tweeting, “It’s wrong to pretend that China isn’t one of our major economic competitors” and “When we are in the White House, we will win that competition by fixing our trade policies”.iii Supporting Trump’s contention that US manufacturing job losses are principally caused by China, Sanders tweeted, “Since the China trade deal I voted against, America has lost over 3 million manufacturing jobs”. Besides Sanders, Trump enjoys bipartisan support for his trade policies on China.

Pew Research Center’s spring 2018 Global Attitudes Survey asked, “How serious a problem is the loss of US jobs to China?” Some 83 percent of the US-based respondents rated this as either somewhat serious (32%) or very serious (51%). “Somewhat” or “very serious” was also how 82 percent of respondents rated the US bilateral trade deficit with China. Fully 89 percent of respondents said the same about Chinese ownership of US debt. Eighty-eight percent believe it is “better if the US, not China, is the world’s leading power”. iv

Arguably, this overwhelming anti-China public sentiment is fundamentally based in the wildly popular view that China’s economic development is a threat to US hegemony and economic dominance (and by extension also a threat to the rest of the imperialist camp). In a typical and common piece of reportage, economic journalists at the New York Times argued on May 13:

“China has indeed grown in prosperity, leaping into the ranks of what the World Bank defines as upper-middle income countries. Its economy is now bigger than any other country except the United States. Its manufacturing sector is now bigger than those of the United States, Germany and South Korea combined.”v

The same general view of China’s supposed threat to the dominance of the US and other rich countries appears also to be fairly ubiquitous on the left. In a recent article commenting on the trade war in Truth Out, US socialist Ashley Smith characterised the relationship between the US and China as “the central inter-imperial rivalry of the 21st century”.vi

Smith does not even clearly oppose US aggression against China, even while admitting the US is the richer, more powerful country. According to Smith,

“The new socialist movement must adopt a clear and principled anti-imperialist position against both the U.S. and China. We must oppose Trump’s nationalism and protectionism; it will only whip up anti-Asian racism domestically and divide workers in China and the U.S., who share common interests in a struggle against their bosses and their states. We should also oppose the Chinese state.” China “competes as an imperialist power with the U.S. for dominance in the world market”.vii

But is it at all realistic to view China as a rising peer competitor to the United States? Or Chinese competition as the cause of widespread pain to working class communities? Or China as a country that has the potential to rise further into the top ranks of the imperialist hierarchy of nations?

It is hugely convenient for the US capitalist class to present the very real pain inflicted on workers over several decades as essentially inflicted by a foreign enemy (assisted, as Trump says, by that enemy’s feckless domestic lackeys). But left acceptance of the idea of China’s supposed rise as an “imperialist” power risks falling boots and all into what is essentially a national chauvinist dead end. The reality, it will be shown, is that the US will win its trade war against China because US companies – wielding technology developed largely by the US state and organisations it supports – (together with similar companies from the other high income countries) possess an unshakeable control over the international division of labour.

The Apparent Inevitability of China’s Rise

Images of gigantic container ports, angular fast train carriages, modern high rise buildings and warehouses full of neatly stacked steel coils are constantly fed through the capitalist press. These images, which are rarely contrasted with striking images of hugely underdeveloped parts of China’s economy, suggest the view we might take of China’s level of economic development.

Yangshan Deep Water Port in Shanghai, China
PICTURE: Yangshan Deep Water Port in Shanghai, China

To most, China’s rise appears irrefutable, at least at first glance. On World Bank figures, China’s share of world GDP rose from 3% to 15% in just the two decades 1997 through 2017.viii According to the Federal Reserve Bank of St Louis, US manufacturing employment fell from a high of 17.6 million in 1998 to 12.8 million today (up from 11.5 million in mid-2010).ix

It is taken to be self-evident that this collapse in US manufacturing employment is caused by China’s growth as a major manufacturing and assembly location and its corresponding rise in manufacturing employment. It is, of course, a reality that businesses in the US and other imperialist states moved many simple, labour-intensive production processes to China. It is also true that, in other cases, First World companies lost business to Chinese competitors – typically in standardised, ordinary or labour-intensive production processes. These basic facts are the very real material basis for the popular view bolstering Trump’s policy.

However the narrative that sees China’s as a peer competitor with US capitalism, one that challenges the dominance of the US, fails to understand the principal dynamic of the international division of labour. The attraction of cheap labour in China and other Third World countries did not encourage MNCs to move production processes offshore in an indiscriminate way. It encouraged them to move simple, ordinary or labour-intensive processes.

The very selective character of offshoring or “globalisation” means rich country-based MNCs tended to retain sophisticated or less labour-intensive labour processes inside the rich countries. Over time, China and some other Third World countries such as Malaysia and Thailand have increased the number of less simple labour processes they could carry out competitively on the international market.

China, as we are endlessly reminded, has also attempted to develop some more advanced labour processes domestically. Yet the scope and prospects of this policy, and its level of success, are often wildly overstated – while the history of false starts and failures is virtually unknown.

Perhaps most importantly, US and other First World capitals and states have not stood still. Offshoring of simple labour processes already shaped a division of labour whereby low-end labour processes are concentrated in the poor countries (keeping them poor), while high-end labour is kept inside the borders of the rich states. Further, the abandonment or competitive loss of low-end spheres of production freed First World capital to concentrate on continual development of its technological supremacy. These capitals increasingly specialise in sophisticated or more mechanised processes. In doing so, they have increased their overall monopolistic control of the global division of labour, as well as their share of world income.

At the same time, through the development of ever more automated factories, of factory-less research and development companies (like Apple and Qualcomm) and of specialisation on only the specific production processes that are technically new or difficult, the new global division of labour has indeed resulted in a decline in US factory jobs. It is not, however, the result of China’s rise. It flows from the technically new forms in which imperialist domination over the Third World is expressed and reinforced.

China as the Principal Loser in the Trade War

In May 2018 Chinese mobile phone maker ZTE announced it was shutting its factories. The announcement came just weeks after the US government prohibited US companies from doing business with ZTE following an alleged violation of US-imposed sanctions on Iran. The US ban was clearly the cause of the company’s collapse.

ZTE had 74,000 employees at the time and was China’s second largest telecommunications equipment maker, after Huawei. Forbes reported ZTE confirmed it would shut down because “most of its products use American technologies, from high-end 5G equipment to low-end Android smartphones, and that it will be close to impossible for ZTE to redesign new products around the U.S. tech ban”.x As part of ongoing trade negotiations with China, Trump ultimately rescinded the ban – bringing ZTE back to life – after a personal appeal from Chinese President Xi Jinping and an agreement from ZTE to pay US1 billion in fines. In May 2019 Huawei – China’s largest telecommunications equipment company, and its most successful international company – was targeted in almost the same fashion.

Huawei is not the largest Chinese corporation but with sales of $108 billion and profits of $8.8 billion dollars last financial year, it is still one of the biggest companies in the world. It is perhaps the only major Chinese company that competes with the global MNCs as a peer competitor in high value markets. It is likely this is the real reason – and not national security – that Huawei has been singled out by the Trump administration.

Like ZTE, Huawei is facing loss of its critical high technology suppliers, without which it is unlikely to keep producing high-end phones or 5G telecommunications equipment. Huawei bought roughly $11bn in components and services from 1200 US suppliers last year – all will be subject to the ban.xi Leading microchip companies Intel, Qualcomm, Xilinix, Broadcom, Infineon and ARM all suspended business with Huawei following the Commerce Department announcement. In addition British Telecommunications companies Vodafone and EE have both excluded Huawei handsets from their new 5G networks. Smartphone sellers across the world have suspended sales of Huawei’s latest handsets.

Google, also complying with the US sanctions, announced suspension of Huawei’s access to future Android operating system updates – though it has applied for an exemption to the ban. While Huawei would still be able to use the open source version of Android on its phones, it could not use Google applications such as Gmail, Google Maps and Play Store, making it harder to sell phones outside China.

Huawei’s phones rely, for their primary microchips, on both the US-based market leader Qualcomm and Huawei’s fully owned subsidiary HiSilicon, based in China, making it less dependent than ZTE on US parts. However, HiSilicon is itself dependent on foreign technology, in particular ARM, the U.K.-based provider of basic chip designs and California-based software companies Synopsys and Cadence, which are used to produce the blueprints for circuits.xii

While Huawei is believed to have stockpiled supplies of current generation chips adequate for around 6–9 months, and may be able to produce more of the same generation chips under current licensing agreements, the company will likely have difficulty upgrading to new chips. Geoff Blaber, from CCS Insight, told the BBC, ARM is the foundation of Huawei’s smartphone chip designs, so this is an insurmountable obstacle for Huawei … They’re not going to be able to easily replace these parts with new, in-house designs – the semiconductor industry in China is nascent.”

In their article “American Threat to Huawei’s Chip Maker Shows Chinese Tech Isn’t Self-Sufficient”, Wall Street Journal business writers Kubota and Strumpf suggest, “While other chip makers and HiSilicon’s suppliers shift to future versions of ARM technology or products from the software companies, the U.S. blacklisting will leave HiSilicon stuck with older tools, hindering its ability to compete on the frontiers of chip design and extending the time it takes to develop its products”.xiii

Yuan Yang of the Financial Times reports, “When it comes to telecoms equipment such as mobile Financial Times masts, Huawei relies on logic chips called field-programmable gate arrays (FPGAs) made by US company Xilinx. The other major FPGA suppliers, Intel’s Altera and Lattice Semiconductor, are also US companies … Analysts reckon China is more than 10 years behind in designing high-end logic chips of the kind used in Huawei’s switches and routers”xiv

US attacks on Huawei might not be isolated. The Washing Post reported on May 22, “The Commerce Department is drafting new regulations to limit exports to China of 14 categories of advanced technologies, including quantum computing, robotics and artificial intelligence.”xv

The dependent state of China’s technology companies today has not come about through light mindedness or lack of trying to turn around the situation. China has been attempting to gain semiconductor independence for decades. For example, as Craig Addison wrote in the South China Morning Post last year, “In the 1990s billions of yuan were invested into new semiconductor fabrication lines using technology (legitimately, in this case) transferred from foreign chipmakers, only to find that these ‘wafer fabs’ – that can take two years to build from scratch – were outdated on day one because the state of the art had moved on”.xvi

It’s not that China will not be able to produce smartphones, 5G equipment or other “technology” goods without inputs from the US and other First World countries. What Trump’s ban brings into question is its ability to do that competitively on the world market and especially at the highest end of the world market.

China’s Muted Response

There appears to have been zero discussion in the US press – that this writer can find – about any supposed or feared Chinese responses that involve withholding Chinese technology. Yet we might expect that a rising competitor to US imperialism would have developed at least some technological monopolies of its own, even if not yet on the scale or complexity of the US, Europe or Japan. However, discussion around possible Chinese responses to Trump’s attacks seem to revolve exclusively around non-technological, mostly very weak, possible responses. These are further tariffs, sale of US Treasuries, an embargo on selling rare earth elements and state regulatory obstruction to US companies doing business in China.

During a recent visit to southern China, responding to US attacks, President Xi Jinping urged Chinese people to prepare for difficulties that he likened to a “new Long March” – hardly an optimistic outlook. Notably, Huawei founder Ren Zhengfei strikes similar notes. In a recent interview with Bloomberg, he likened his company to an airplane, now with holes in it, though vowing to work tirelessly at fixing the holes, even if the holes would allow others to catch up.

China now applies tariffs of 5 to 25 percent on $110 billion of its $120 billion in US imports – a lower rate, on average, than the US has so far applied to $200 billion of Chinese imports. $110 billion amounts to less than 7 percent of the $1.7 trillion total US exports for 2018 and is not expected to land a major blow to US expansion. China, by contrast, was already showing signs of slowdown even before the effect of the new tariffs, with many companies moving production to alternative cheap labour locations such as Vietnam or Mexico, or planning to do so. Miao Wei, China’s minister of industry and information technology, told the recent China Development Forum, “The total size of the work force is falling, the labor cost is rising and we are losing our competitive advantage in low-cost industries”.xvii

Given that Chinese tariffs are not expected to have a big impact on the US, several commentators who view China as a powerful competitor with the US have speculated that China might use its $3.1 trillion foreign currency reserves to somehow gain an advantage. However, there is very little China could do with these funds – even if it did wish to initiate a financial war with the USA. The principal problem is that $3.1 trillion is actually not a large foreign reserve in relation to the size of China’s economy. All Third World countries are forced to keep foreign currency reserves as insurance against currency depreciation or other speculative attack. China’s represent around 25 percent of its GDP. This compares to 27 percent for the Philippines, 33 percent for Malaysia and 13 percent for Indonesia.

Moreover, as the New York Times reported, “few see any alternative for China, other than remaining invested in [US] Treasuries. The benchmark 10-year Treasury yield is currently 2.42 per cent, well above the negative yields on equivalent German and Japanese sovereign bonds and still markedly higher than the 1.03 per cent offered on 10-year gilts in the UK.”xviii

China holds just 7 percent of around $16 trillion in total outstanding US Treasuries or 17 percent of foreign-held Treasuries. Even if it did start selling these, it could not blow up the Treasuries market. The likely effect of China’s sell-off would be a tendency to push interest rates higher. Yet the overriding tendency at the moment – due to global fear of economic downturn – is for rates to sink lower. So it’s possible the effect of a China sell-off would hardly even be noticed.

Another speculated silver bullet for China is its global monopoly on the production of so-called rare earth elements – a prospect apparently bolstered by Xi Jinping’s recent visit to a rare earths processing facility in Jiangxi province. But here too, there seems to be no prospect of inflicting serious damage on the US.

Rare earths mine in Jiangxi, China

Rare earths refers to seventeen chemical elements that are not actually rare. They have also been exploited in California, Malaysia and Australia as well as China. Japan recently discovered rare earths reserves estimated to be adequate to cover domestic needs for 780 years. The Chinese monopoly consists not of a finite natural resource but of most of the world’s operational processing capacity.

Historically the US was the leading producer globally. The reason production shifted to China was because it is a dangerous and environmentally damaging process that produces, among other things, radioactive waste. Chinese capital was willing to win market share by tolerating such costs for returns that were not considered adequate by US or other First World monopoly capital. In doing so China has been providing the materials cheaply – a scenario typical of the Chinese expansion in a whole range of spheres.

However, possessing neither a monopoly over the natural resource nor of technology or productivity in the mining or processing, the current Chinese monopolistic position is vulnerable. There are already three processing plans under construction or planning in the US.xix

While China still controls around 80 percent of the global rare earths market, current US demand accounts for just 4% of China’s rare earth exports. These quantities are considered small enough to circumvent any Chinese attempt at embargo through alternative sourcing, especially via the Mount Weld Mine in Western Australia, which has the world’s largest reserves, or through use of alternatives. Notably the Australian owner of Mount Weld – Lynas Corporation – also outsources environmentally damaging processing to the Third World, in this case to Kuantan in Malaysia, where it’s so-called Lynas Advanced Materials Plant is subject to an ongoing campaign for its closure (and the removal of its radioactive waste to Australia).xx

Chinese attempts to embargo rare earths exports to Japan in 2010, over the Japanese arrest of a fishing boat captain detained in waters surrounding the disputed Diaoyutai/Senkaku Islands, ultimately failed despite Japan’s heavy dependence on rare earths from China and China’s much greater global market share (97%) at the time.xxi While Japan did release the boat captain, it still controls the islands.

Probably most worrying to US capital is the potential for the Chinese state to obstruct the considerable operations of US MNCs inside China. Many US corporations, such as General Motors, make a large part, or even most, of their sales in the Chinese market – dominating many sectors of it, or dominating its high end. Hence they are dependent on Chinese state regulatory approvals, such as environmental approvals, to sell or invest.

Squeezing US corporations out of certain sectors, or simply making their life difficult and more costly through delays, uncertainty and increased regulatory scrutiny and enforcement certainly has the potential to hit US corporate profits, and perhaps make some corporations’ China business unviable. It’s also the case that US retaliation in kind would have nothing like the same impact on China simply because Chinese investment in the US is less significant and has dropped off under existing US state pressures.

Yet the ability or willingness of the Chinese state to roll out such a policy in a wide range of areas critically depends on the capacity of its capitalist producers to replace the roles that US capital is currently playing. Overall, that would tend to be possible for lower technology operations and not high tech. There seems to be little appetite in other advanced countries, such as Japan or Germany, to defy US policy on China. Arguably this is because these rich developed countries have an economic relationship to China similar to the US’s. While selective Chinese harassment of US firms may occur, broad-based hindrance of US capital would likely lower the overall technical level and efficiency of production processes in China.

Chinese ownership of Treasury bonds or rare earth factories hardly seems the favourable terrain of a rising hegemon launching itself against US power. Yet these are the areas where China supposedly wields most power. The perilous position that China is in raises the question of how it is that the second biggest economy in the world, with the largest labour force and the centre of much world manufacturing and assembly and – until recently – the highest levels of GDP growth, could remain so weak in the face of what many view as an ailing US empire.

To answer this question, we have to look beyond the GDP growth figures and ask what is the essential character of the apparently very different types of economic development that have been pursued in China and the US over the last three or four decades.

Monopoly versus Non-monopoly Capital

The essential difference between Chinese capital and that of the US or other rich countries can be characterised as that between non-monopoly and monopoly capital. As seen above, the profitability of companies such as ZTE and Huawei is mediated by their degree of technological capacity. Before looking at how the concept of monopoly versus non-monopoly applies to the international division of labour (below) it is useful to look at how it corresponds to both the profitability of First and Third World corporations and to the income in First and Third World societies.

The characteristic feature of monopoly capital – which is based principally in the rich countries – is higher rates of profit. Non-monopoly, Third World corporations, even very large ones, tend to have far lower rates of profit. These high and low profit rates of the largest corporations also correspond to high and low national per capita income levels in the countries where these companies originate and are based.

The global divide between monopoly and non-monopoly capital is therefor also expressed as the growing global rich-poor divide between countries. While it is popular to think that China and other parts of the Third World are catching up to the rich countries, a look at per capita income data shows this is far from real.

Figure one shows Chinese per capita income is not catching up with core imperialist states. If we take only the period of its most rapid increase (2000–2017) Chinese annual income rose from an average of $959 to $8,827 or $7,868 total rise. Over the same period United States income rose from $36,450 to $59,928 i.e. $23,478. Thus even in the most favourable period for China – when the US economy suffered two recessions and a long depression – aggregate per capita income of US capitalists and workers grew, on average, three times faster than Chinese income. Figure 1 also shows that the divergence between low and high income countries is not isolated to China and the United States. In reality it is typical. The trend of divergence between rich and poor societies holds true for states representing 98.5% of the world population for the period 1980 – 2015.xxii

FIGURE 1: GDP per capita (US dollars)

China versus Imperialist States GDP per capita 1960-2017Source: https://data.worldbank.org/

FIGURE 2: GDP per capita (US Dollars)
China and other large, relatively developed, Third World States

China versus other large Third World statesSource: https://data.worldbank.org/

Figure 2 shows the real sense in which China has actually “risen”. By 2017 the large relatively developed Third World states had all converged around the same per capita income level – $8,820 to $10,750. China is the lowest among these major countries (income $8,827). This is less than Brazil ($9,812 – not labelled correctly in the figure). The highest is Russia ($10,749 – not labelled). The chart shows that China has indeed moved above the income level of South Asia (of which India is typical) and most of South-East Asia (represented in the figure by its most important nation, Indonesia). However, it has risen only enough to converge with other relatively developed Third World states – at a level far below that of the imperialist states.

The underlying reason for this is the low profitability of large Chinese capital compared to capitals based in the imperialist core. If we measure the profitability of giant Chinese corporations and compare this with MNCs from the US or other high income countries, we can observe a clear parallel to income polarisation between countries.

Forbes.com publishes data on the largest 2000 public companies globally. This excludes Huawei and a handful of large US companies such as Cargill and Koch Industries, which are private – but still provides a useful overview.

According to Forbes’ ranking system – which considers volume of sales, profits, assets and market value – Chinese companies make up five of the top twenty companies – positions one, three, four, seven and eight. The other fifteen positions in the top twenty are made up of companies from the USA (11 companies), plus Holland, South Korea, Japan and Germany. The apparent dominance of Chinese corporations on the list – like other indications of China’s size – is frequently understood as powerful evidence of China’s rise.

However, as soon as we ask the website to order the companies according to market value, we get a completely different list. Market value expresses what capitalists thinks the companies are worth and hence the profits one could expect to earn by owning its shares. By market value, the top six positions are all US companies, as are 14 of the top 20. China’s share of the top twenty drops from 5 to 3, while the remaining 3 positions are filled by Switzerland, South Korea and Holland.

Looking at the top fifty companies by market value, we get a similar picture. Forty-two companies are from the high income countries: USA (32), Switzerland (3) and Taiwan, Hong Kong, Japan, Belgium, United Kingdom, South Korea and Holland with one each. Only eight companies come from the Third World – all from China.

If we look at the top 100 companies by market value, the same basic picture emerges again. Of the companies ranked 51-100, 42 are from the rich countries: USA (22), United Kingdom (4), France (3), plus Holland, Germany, Canada and Ireland (2 each) and Australia, Hong Kong, Denmark, Japan and Spain with one each. The remaining eight companies are from China (4), India (2) and one each from South Africa and Saudi Arabia.


There is a striking contrast between China’s apparent domination on -2022282340 Forbes’ measure, which emphasises size, and its relative absence on the market value measure, which emphasises profits. However, market value still measures gross profits and hence includes even relatively low profit operations if they are big enough. If we want to understand the reason for the discrepancy between the two measures we need to look at companies’ profit rates.

Forbes also gives figures for the Return on Assets (RoA) of each company. While far from the only measure of company profitability, RoA at least gives us a general picture of the vast chasm separating almost all large Third World capital from large First World capital. We can see this by taking the biggest 20 companies according to -2022282340 Forbes and comparing their RoA. Arguably, RoA is less meaningful for financial companies. So the table below compiles the top ten non-financial First World and Third World corporations.

TABLE: Largest Non-Financial Public Corporations’ Return on Assets, 2019 (Billions of US Dollars)

First World Corporations

Forbes rank Company Country Assets Profits Return on Assets %
#6 Apple USA 374 59.4 15.9
#9 Royal Dutch Shell Netherlands 399 23.3 5.8
#11 ExxonMobil USA 279 20.8 7.5
#12 AT&T USA 532 19.4 3.7
#13 Samsung Electronics South Korea 304 39.9 13.1
#15 Toyota Motor Japan 466 17.2 3.7
#16 Microsoft USA 259 33.5 12.9
#17 Alphabet (Google) USA 233 30.7 13.2
#18 Volkswagen Germany 554 14 2.5
#19 Chevron USA 254 14.8 5.8
3654 273 7.5

Third World Corporations

Forbes Rank Company Country Assets Profits Return on Assets %
#22 PetroChina China 354 8 2.3
#35 Sinopec China 233 9.5 4.1
#40 Gazprom Russia 306 18.9 6.2
#50 Petrobras Brazil 222 7.1 3.2
#52 Rosneft Russia 191 8.7 4.6
#59 Alibaba China 134 10.3 7.7
#71 Reliance Industries India 125 5.6 4.5
#74 Tencent Holdings China 105 11.9 11.3
#80 China State Construction Engineering China 271 5.8 2.1
#94 Evergrande Group China 274 5.8 2.1
2215 91.6 4.1


Source: http://www.forbes.com/global2000/list/ 

As can be seen, First World MNCs achieve RoA almost double that of Third World corporations. If Third World capital was catching up, it would need to achieve a higher return on its investments than its much larger competitors, not a far lower return. This is no fluke of statistics. The same was true when this writer analysed both the Forbes Global 2000 and the Fortune Global 500 lists for 2017. For example, comparing the top 15 non-financial corporations from both rich and poor countries on the Fortune list gave a return on assets of 4.7% for First World corporations and just 2.7% for Third World companies that year.xxiii

The reality of Chinese giant companies – and those of other Third World countries – is that, overwhelmingly, these are domestic monopolies with few if any international operations. While the sheer size of China’s economy means it can sustain a high number of very large companies, the degree of their profitability (at least on average) is mediated by the weak competitive position of Chinese capital within the international division of labour.

This phenomenon is not at all unique to China (except for size). If we keep looking down the list for Third World companies, say in the top 200, top 500 and so on, what is noticeable is the appearance of companies from all major the Third World economies. For example India – because it too has a gigantic population – has ten companies among the largest 500 global companies and twenty-five in the largest 1000. This is despite having per capita income just 3.3 percent of the USA! Other smaller, though slightly richer, Third World countries similarly support several large companies. Turkey, for example, has seven companies in the largest one thousand, South Africa has nine, Thailand eight, Indonesia and Mexico five, Malaysia four, Colombia three and so on.

Typically these companies are nationally monopolistic oil, electricity, telecommunications or banking corporations. For the bigger or richer Third World countries, other domestic monopolies, such as steel and cement companies or retail and media companies can grow quite big and also appear on the list. However, with just a handful of exceptions, there are almost no internationally competitive, globalised companies comparable with First World MNCs (even embryonically) – at least not in the important economic spheres. As Nolan points out, building up a large domestic business in a period of rapid national expansion is one thing, building an internationally competitive company is another.xxiv

There are, however, some spheres in which Third World companies – and Chinese companies in particular – are globally competitive. The problem is that this occurs almost exclusively in the least profitable, lowest echelons of the global value chain. The classic case, perhaps, is Chinese computer maker and technology company Lenovo, headquartered in Beijing. Lenovo has grown to be world’s largest seller of personal computers (by units) since it acquired IBM’s personal computing business in 2005.

While the sale of such an iconic brand to a Chinese company was hyped at the time as a sign of China’s rising power, subsequent years at Lenovo suggest otherwise. Worldwide PC shipments have been in decline since 2011 and, at its low end, prices have dropped, as PC technology becomes more commonplace. Lenovo, while holding a leading market share, successfully defended a turf that was both shrinking and becoming lower value. The company’s annual profits for 2018 were $511 million according to Forbes, with a RoA of 1.6%. That compares to IBM, which made 17 times more profits: $8.6 (RoA 6.6%) by moving into higher end labour processes.

It is clear from the above data that China has not reached the economic development level of the US and other First World countries; otherwise, its companies would be able to demand higher prices on the world market for the commodities they produce. The more serious argument put forward by China boosters is not that China has caught up, but that it can catch up or will catch up. The least serious version of this argument consists essentially of maths sums. One can calculate the rate of China’s GDP growth over the last two or three decades and assume this will continue into the future. There is an obvious problem with the maths, because it ignores the statistical bias of percentage increase to the country starting from a low base. However, if we put down the calculator and look at the history, the maths method completely falls apart.

Rapid GDP growth was not a phenomenon unique to China but a general phenomenon among a number of very low income East Asian countries in the neoliberal period. It is a general phenomenon of the 35 years 1980–2015 that poorer Third World countries grow faster than richer ones – even if China represented a highly exaggerated case.xxv Fast growth occurred principally through farmers moving into the cities and taking up factory or other jobs. However, China has already largely carried through that transition. In doing so it has already moved, as mentioned, from among the lowest income countries to among the top, large Third World countries. If we take the example of the large Third World countries with the highest income at the beginning of the neoliberal period (1980) – Argentina, South Africa, Brazil and Mexico – and look at their rate of income growth over the neoliberal period, it was very slow – almost stagnant.xxvi That is the prospect China now faces if it cannot bring about a different development model to that at which it has been successful thus far.

World Division of Labour Between Monopoly and Non-monopoly Capital

Of course the Chinese Communist Party (CCP) is aware of the problem – the so called “middle income trap” – which in reality occurs at the quite low income levels of high-end Third World countries like China, Mexico and Brazil. The CCP is attempting to overcome the roadblocks by upgrading China’s technological capacity, especially through the flagship Made in China 2025 policy framework. While the theory is very simple – nations must technically upgrade in order to continue to raise incomes – the practice is fraught.

It would be possible to move up the ranks of the global division of labour if China could develop a scientific base and internal social organisation equal or superior to that of US imperialism. This is of course possible in the abstract. However, the policy of the CCP cannot be abstract but must correspond to the realities of an imperialist world system. It has chosen to attempt to develop Chinese society via a path of capitalist development integrated into the imperialist world market. Therefore it is the concrete realities of this market and social production processes that underlie it that Chinese capital must navigate.

The polarisation of money income manifests the underlying social productive polarisation: the division of the world into spheres of high and low labour productivity, technology, scientific development and social organisation. The world division of labour is also divided between high-end, most sophisticated labour processes monopolised within the imperialist core and low-end or ordinary labour processes, which are distributed to the Third World. China is not an exception to this rule but the major example of it – the most successful developer of ordinary labour processes.

Technical polarisation of the global division of labour means that the overwhelming bulk of labour processes carried out in the low income countries, including China, consist of basic or ordinary labour. For this reason the social demands on most Chinese workers, technicians, scientific workers etc. do not involve systematic thinking and problem solving in the most advanced available manner. From this material-social base, the cultural development of the society can never be as advanced as that of imperialist societies, which monopolise humanity’s social and scientific advances for themselves.

The imperative of capitalist profitability ensures that no true assault on the commanding heights of world scientific development and the division of labour can be launched from a low material-social base. Storming the commanding heights would involve competition with the most advanced capital for the most advanced labour processes – a competition that a less developed or, as Che Guevara described it, ill formed capitalist social formation, is ill suited to carry out. This is why frontally challenging imperialism will not deliver the highest available profits to Chinese capital. Challenging imperialist monopoly at its margins is necessary to make profits. Yet a frontal challenge risks complete debacle.

For this reason, the interests of Chinese capital will never form the social basis for a full blooded assault on imperialist dominance (even ignoring the politically perilous level of working class social mobilisation that would be required for an underdeveloped society to wage such a serious campaign against imperialist supremacy). Chinese capitalism is not and can never become the revolutionary social force that can storm the heavens of US power.

What could conceivably happen is that more areas of the labour process that are presently dominated by the imperialist societies and hence subject to monopoly pricing, could be wrested from them and become the domain of Third World production – the same thing that has already happened, for example, in low grade steel production and other industrial processes. The same may be true several years from now for the production of basic automobiles. If the proportion of necessary world labour coming under the control of non-monopoly capitalists increases, or the degree of imperialist technical superiority in high-end labour is reduced (and thereby the degree of imperialist monopoly in these is reduced), then the gap between Third World and First World income could conceivably narrow relatively – even as the overall polarisation remains robust. However, a narrowing gap between the two camps is the opposite result to the overall outcome of neoliberal period (1980–2015) and far from inevitable.

The gap cannot close entirely because it manifests the basic structure of the world market – the development of both monopoly and non-monopoly capital. The social and market polarisation between monopoly and non-monopoly capital, its reflection in the technical polarisation of labour, is the reason income inequalities manifest not as random variations, or on a spectrum, but mostly as two principal poles – rich and poor capitals, rich and poor states, rich and poor societies.

There is no ladder from ordinary to advanced labour accessible to Third World societies – except with the cooperation of imperialist core states. Every Third World society is continuously pulled back into the mundane routine of ordinary labour for the simple reason that this is where their capitalists can make money. There has been no change in that basic social structure of imperialism over the last several decades. Only the technical composition of what constitutes high and low-end labour has evolved in tandem with the general development of the human labour process itself.

To the question “can Chinese capital compete with US companies?”, there is a simple answer: “yes and no”. Yes, it can and does successfully in ordinary labour processes. Ordinary labour can be carried out by any or many average, competent capitals, which means no big advantage is imparted by a country’s higher level of scientific development. This type of labour process is most suited, under imperialism, to the Third World, where labour is cheaper. On the other hand, in labour processes in which the benefit of cheaper labour is less important than proximity to scientific research, availability of specialised skills, specialised state support etc., Chinese capital typically cannot compete with capital from the imperialist core.

However, success even in cutthroat competition for control of low-end labour processes is not the same thing in any sense as China developing into a similar type of economy to the US. On the contrary, out-competing, First World MNCs in low-end processes actually forces the rich countries to shape and consolidate their specialisation in the highest end, most monopolistic labour.

The massive shift of manufacturing to China in the neoliberal period was part of a general global trend (at least until recently) of shifting ordinary and low-end labour, as well as environmental destruction, to the Third World. As Bieler and Lee point out: “China is the assembly platform of global capital” and “is predominantly based on cheap labour, necessary for assembling the various parts into final products for export to North American and European markets”.xxvii

The increasingly sophisticated and hierarchical world division of labour is principally orchestrated by the leading MNCs that profit most from it. According to Nolan, “After the 1970s the world economy entered a new phase of capitalist globalization” which “witnessed massive asset restructuring, with firms extensively selling off ‘non-core businesses’ in order to develop their ‘core business’ and upgrade their asset portfolios”.xxviii

It is not the case that MNCs have cashed in on a quick dollar by forfeiting their leadership position in the long term. They have jealously and successfully guarded their control of the key processes within the international division of labour.

Upward specialisation occurred in the US throughout the neoliberal period. As Schwartz wrote, “large investments in production of durable goods” in the US from 1991 to 2005 outweighed loss of investment in non-durables: “leathergoods, textiles and clothing, and foods and beverages that combined account for just ten percent of manufacturing gross fixed capital formation, saw absolute declines. On the other hand machinery and equipment, transportation equipment, and electrical and optical equipment, combining to make up 40 percent, saw relative increases.”xxix Today common “durable goods” such as home (though not commercial) refrigerators, air-conditioners or washing machines are increasingly the domain of Chinese capital (at least in their final assembly). However, once again this hardly means the US companies that formerly occupied this space – like General Electric – have stood still. They have moved up.

Brenner observed the same phenomenon in Japan. From the time of the Plaza Accord, Japanese capital sought “to focus domestic production in Japan ever more exclusively on the highest tech lines by relying on the country’s highly skilled but expensive labour force, while sloughing off less advanced production to East Asia”.xxx

For Steinfeld, “Chinese specialization in manufacturing assembly has facilitated not only US but also Western European and Japanese specialization in something much more difficult to replicate: knowledge creation and invention.”xxxi “The incumbents – global lead firms – are hardly stationary, and in many cases have completely transformed themselves.”xxxii

Steinfeld’s work in particular demonstrates one new aspect or at least emphasis of the global division of labour as it developed in the neoliberal period – the so called ‘fine slicing’ of various sectors, or what Marx called “branches of production”, into their respective labour components. The purpose has been to divide distribute the various labour processes according to the relative degree of labour sophistication among monopoly and non-monopoly capitals. “Fine slicing” allowed imperialism to achieve a higher degree of concentration and specialisation on highest end labour processes.

Steinfeld says, “Whether for aerospace or apparel, we can conceive of some activities within their respective industry supply chains that are standardized and commodified, and other activities that are highly proprietary”. Industrial sectors that previously existed as a more or less single whole organised by one or more monopoly firms through vertical integration have subsequently been broken up and reorganised – at least in ownership terms – along lines determined by the degree of complexity of each production process.”xxxiii

Steinfeld’s seminal paper was published fifteen years ago, so it could be argued that it has gone out of date. However, it is easy to find contemporary examples of the same phenomena he describes, and they exist right at the heart of China’s efforts to upgrade. One critical aspect of the Made in China 2025 policy is a continuing push at commercial aerospace production through the Commercial Aircraft Corporation of China (COMAC). Headquartered in Shanghai, COMAC is directly controlled by China’s Cabinet, reflecting its national importance. COMAC has so far invested around $10 billion to develop the C919, a mid-sized passenger jet intended to compete with global duopoly of Boeing and Airbus in that line of production. COMAC’s enormous investment includes facilities and personnel spread over more than 110 buildings.

The test flight of the first prototype C919 passenger plane took place three years behind schedule in May 2017, while the second prototype was tested a further three months behind schedule in December 2017.xxxiv This compares to a monthly production of twenty commercial planes at Airbus’ Chinese assembly plant alone and Boeing’s 2016 sales to China of 116 aircraft. The C919, which uses long-established technologies, is considered unlikely to match the performance of Boeing’s and Airbus’ mid-sized commercial planes already in operation, let alone of their next generation planes already under development.

COMAC may not go bankrupt anytime soon, due to guaranteed orders by Chinese state-linked domestic airlines and state financial backing. However, so far, orders for the plane have come almost exclusively from Chinese state-owned companies and General Electric (GE) – which stands to gain from its involvement in the project, and has ordered twenty. If such a trend were to continue, the company would begin to look like an aerospace version of the numerous other large, hardly profitable domestic monopolies identified.

The C919 relies on collaboration with US industrial giants GE and Honeywell for high technology components. The New York Times reported, “In addition to the avionics, G.E. has also collaborated on the engines, while Honeywell is providing auxiliary power systems, wheels, brakes, fly-by-wire controls and navigation equipment”. The paper reported, “Honeywell expects $15 billion in sales to the C919 program during its 20 or more years of production”.xxxv Thus even if the Chinese Cabinet and COMAC are successful in establishing their own mid-sized aircraft as an international competitor to Boeing and Airbus, this will not guarantee that most of the profits from the aircraft’s sales will stay in China. Moreover, the mid-sized commercial jet market is a less lucrative and lower tech than large jets.

But it is not only leading technology companies like Honeywell and G.E. that benefit from their operations in China. According to Harley Seyedin of the American Chamber of Commerce in South China, “The reality is that our companies are continuing to operate in China successfully, they continue to make profits, substantial profits, they have to continue operating in China to maintain and capture additional market share”.xxxvi

Possibly the only major exception to this picture, or at least the most important exception, is, or was, the Huawei. The company’s central management is Chinese. However, its significant research and development expenditures span much of the imperialist world. According to company material, “In 2015, approximately 79,000 employees were engaged in R&D, comprising 45% of our total workforce”.xxxvii Huawei’s strategy has not been to develop world-beating R&D in China. Rather, it has funded research and development centres in China, the United States, Germany, Japan, United Kingdom, Russia, Israel, Turkey, Canada, India, Belgium, Finland, France, Brazil and other states.xxxviii

This is consistent with a strategy in which leading MNCs maintain a global network of R&D facilities alongside global networks of production facilities. Globalised R&D typically mimics the same hierarchical and polarised structure of the globalised division of labour more broadly. Third World R&D will cheaply carry out standard processes, while the imperialist core is used for high-end research.

Even if Huawei’s international businesses can survive Trump’s onslaught, its future as a leading global firm is hardly secure. Take the example of smartphones. Huawei quickly rose as a smartphone maker, surpassing Apple in sales volume (though not revenue) and trailing behind only Samsung as the highest selling mobile phone maker in the world.

Yet what this rise reflects is not only the advance of Huawei’s technical capacity but also the so called “maturing” of the smartphone market. As the technology “matures”, i.e. becomes more commonplace, smartphone design and assembly have begun to cease being areas of well above average profits or rapid sales growth. iPhone’s loss of market share (though still dominating the top end of the market) has not resulted in any proportionate overall reduction in Apple’s profit.

Compared to Huawei’s $8.8 billion, Apple made $59.9 billion profit in 2018. Apple’s business is not threatened by Huawei – only its phone business is (or was), and this only over the medium term. If Apple were unable to move into new lines of business, and remained forever dependent on iPhone sales, then it would lose its dominant position as the world’s most profitable company. However, the company has long been expanding higher end “services” businesses. As Ewan Spence put it, “Hardware sales, especially of the iPhone, need to be leveraged in the short- and medium-term as Apple looks to move to a services first business model”.xxxix

That transition has already begun, very successfully, according to Katy Huberty from Morgan Stanley, who estimates Apple received $37.2 billion in services revenues in 2018 for things like Apple Music, applications and cloud computing. Huberty estimates Apple will achieve 20% annual service growth over the next five years.xl Of course this upgrading and moving into newer, higher technology areas is not only Apple’s trajectory, but is the general tendency of monopoly capital and the key to its ongoing supremacy despite the progress of capitalist production in China and other Third World countries.

What is the Trade War Really About?

Nothing in Trump’s policy indicates China is some kind of existential threat to US hegemony. To China boosters, the very existence of economic conflict between the US and China seems to prove their view of China’s rise. However, this is not the case any more than the existence of conflict between workers and their boss proves they stand on an equal footing, or are just the same thing.

Imperialist core capital has historically driven extremely hard bargains against even the weakest Third World capital. The “trade war”, which is really an economic attack on China by US imperialism, is about the distribution of the value brought into the world economy by Chinese labour. No Marxist (besides Harveyxli) argues that Chinese capital is a net appropriator of value created by US, British or other First World workers.

The battle being waged between US and Chinese capital is over the degree to which value created by Chinese labour (and therefore Chinese capital) is appropriated by First World capital and US capital in particular. Sections of US capital evidently believe they can achieve better terms, i.e. extract a greater proportion of Chinese value, by embarking on an economic war against China – even if there are different ideas about the best method of war, or how much of a war is desirable before accepting a truce.

Yet, not all aspects of Trump’s policy reflect US capitalists’ specifically economic interests. Some aspects reflect their broader political interests and also the political interests of the Trump White House. After all, Trump can hardly sell a trade war to US workers purely on the basis of benefit to US corporations. He must talk mostly about jobs, and hence emphasise the trade balance and currency levels – even if these are not the key issues for the most powerful sections of US capital.

Since China joined the World Trade Organisation two decades ago, compared to other Third World states, it has enjoyed considerable advantages in negotiating the terms of its own exploitation: the size of its cheap, trained and educated labour force; its relatively well-developed and centralised state apparatus (a historical product of the Chinese masses’ defeat of imperialist political power in China after World War Two); and the size of its domestic market.

As seen, the primary beneficiaries of Chinese workers’ gigantic contribution to world labour have been the US and other imperialist countries. Yet these relative strengths of the Chinese state also coincided and combined with the runaway profits bonanza of cheap labour globalisation during the neoliberal period. In this historical context, Chinese capital was able to use its unique position as the centre of world labour to technically upgrade relatively rapidly compared with other Third World states. The degree of its success is reflected in China’s “rise” from about the income level of India in 1980, to a level today on a par with Mexico and Brazil.

However, since around 2011 cheap labour globalisation has ceased to be principal driving force of above average profits in the world economy. While many companies still rely on cheap Third World labour, and new instances of offshoring will continue (as was already the case prior to the neoliberal period) this is no longer the characteristic driver of economic expansion that it was.xlii In 2019 a greater portion of imperialism’s cheap labour needs can be provided by other Third World societies, giving imperialism a stronger hand to play off the various non-monopoly producing countries against each other.

Of course the Chinese domestic market is still crucial for imperialism to dominate, but it is no longer so rapidly expanding. Unless a radical technological upgrade is successful, the Chinese market will decline in relative importance to the same extent that China’s labour contribution falls as a proportion of total world labour. These weaknesses are counterbalanced by the considerable upgrading that sections of Chinese capital have achieved.

In the new situation, US capital today, or sections of it, are looking to reconfigure the terms of its engagement (exploitation) of China to better reflect its new strengths, weaknesses and needs. It’s not that the major US capitalists face competitors in China capable of defeating them. Rather, they face competitors more able to squeeze certain aspects of the monopolies’ overall dominance and reduce their profits for certain, particularly low-end, less profitable operations and take some market share at the margins.

This is reflected in Trump’s repeated refrains about China “stealing” US “intellectual property” and demands for a Chinese crackdown. What US capital seeks is not legal protection to artificially (politically) forestall the collapse of its tottering dominance over the labour process – although that is likely the case for marginal, individual capitals or sectors. Rather, the dominant sections of US capital seek legal protections that will increase the projection of their technological dominance. Greater legal protection extends the period of time that above average profits can be secured for a given new labour process, product, etc. by slowing competitors’ adoption of it.

Even the complete removal of legal protections would not end the ability of US capitalists to make above average profits on the basis of technological innovation simply because US capital is more technically advanced. If China were in fact developing its own world-beating technologies – the US state would not be demanding strict intellectual property laws; it would be busy trying to copy Chinese innovation.

The other principal aim of the Trump administration is winding back Chinese state subsidies for large state-owned enterprises (SOEs – many of which also have a large degree of private ownership). This reflects another advantage China does possess (at least compared to other Third World societies). As the largest Third World state, and one with a relatively strong state apparatus developed during the Chinese revolution, state subsidies for otherwise uneconomic producers are a key way that Chinese capital is able to compete globally. In doing so it undermines imperialist profitability in competing sectors by undercutting them on price. Yet Chinese state subsidies also increase the profitability of other branches of the imperialist economy, and potentially its overall profitability.

By subsidising and cheapening products, the Chinese state (and ultimately workers) in effect subsidise cheap inputs to the businesses that purchase these commodities. To the extent subsidised products are utilised by First World capital, this is essentially another form of offering Chinese labour cheaply on the world market. Chinese state organisation of subsidies allows China’s cheap labour advantage to be concentrated and shifted from the most labour intensive industries like textiles to higher rungs of manufacturing.

Once we remove the perception that China’s current technological level is a temporary phase in some sort of long march of inevitable transition to dominance, it becomes clear how devastatingly imperialism is plundering China, East Asia and the Third World. All of the burdens taken on by Chinese workers, all of the terrible environmental devastation, dispossession of farmers, separation of working parents from their children and many other injustices and crimes, are not sacrifices in aid of Chinese capitalism’s coming global triumph. They are the sacrifices of China’s success as Third World capitalism par excellence, as the number one provider of good, cheap products to the imperialist economies.

The sooner imperialist exploitation of China is recognised by Marxists and others on the left, the sooner it will be possible to start working towards building international solidarity with China and other Third World struggles. The surest way to break any possibility of Chinese workers trusting and looking for unity with working people in the United States and the other imperialist countries is to swallow the propaganda that China is fast becoming an imperialist power. The Chinese working class knows that it is not. The imperialist world’s workers, so far, do not.

i Atkinson, Rob, president of the Information Technology and Innovation Foundation (USA) cited in Lynch, David, J. (2019) ‘How the U.S.-China trade war became a conflict over the future of tech’, Washington Post, May 22

ii Yang, Yuan. (2019) ‘How Trump blacklisting affects the inside of a Huawei smartphone’, Financial Times, June 3.

iii Smith, Ashley. (2019) ‘Deal or No Deal, the Rivalry between the US and China Will Intensify’, Truthout May 22.

iv Devlin, Kat. (2018) ‘Americans leery of China as Trump prepares to meet Xi at G20’ Pew Research, November 30.

v Swanson, Ana and Bradsher, Keith. (2019) ‘U.S.-China Trade Standoff May Be Initial Skirmish in Broader Economic War’, New York Times, May 13.

vi Smith. (2019).

vii Smith. (2019).

viii World Bank. (2019) ‘databank’, see databank.worldbank.org, accessed May 2019.

ix Federal Reserve Bank of St Louis. (2019) ‘all employees manufacturing, see https://fred.stlouisfed.org/series/MANEMP accessed June 2019.

x Su, Jean Baptiste. (2018) ‘China’s ZTE Shuts Down After U.S. Tech Ban over Iran Sales’, Forbes, May 9.

xi Unknown. (2019) ‘Huawei warns ban set to hurt 1,200 US suppliers’, Financial Times May 29 (Pay Wall).

xii Kubota, Yoko and Strumpf, Dan. (2019) ‘American Threat to Huawei’s Chip Maker Shows Chinese Tech Isn’t Self-Sufficient’, Wall Street Journal, June 2; see also Unknown. (2019) ‘The technology industry is rife with bottlenecks’, The Economist, June 6.

xiii Kubota and Strumpf. (2019).

xiv Yang. (2019).

xv Lynch, David, J. (2019) ‘How the U.S.-China trade war became a conflict over the future of tech’, Washington Post, May 22.

xvi Addison, Craig. (2018) ‘China reliant on US core technology for some time, but so is the world: America’s unassailable lead in semiconductor manufacturing is the dividend from over 50 years of research and development’, South China Morning Post, July 4.

xvii Bradsher, Keith. (2019) ‘One Trump Victory: Companies Rethink China’, New York Times, April 5.

xviii Politi, James, Wong, Sue-Lin and Edgecliffe-Johnson, Andrew. (2019) ‘US Companies Step Up Response to Donald Trump’s China Ultimatum’, Financial Times, May 23.

xix Johnson, Keith and Groll, Elias. (2019) ‘China Raises Threat of Rare-Earths Cut off to U.S.’, Foreign Policy, May 21; see also Lynch, David, J. (2019) ‘China hints it will choke off U.S. ‘rare earths’ access. But it’s not that easy.’, Washington Post, June 10.

xx greenleft.org.au/content/malaysia-australian-corporate-polluter-lynas-told-remove-radioactive-waste ; savemalaysia-stoplynas.blogspot.com/ ; http://www.facebook.com/groups/stoplynas/about/

xxi Gholz, Eugene. (2014) ‘Rare Earth Elements and National Security’, Council on Foreign Relations; see also Barret, Eamon. (2019) ‘China’s Rare Earth Metals Aren’t the Trade War Weapon Beijing Makes Them Out to Be’, Fortune, May 29.

xxii King, Samuel T. (2018) ‘China and the Third World are not “catching up” to the rich countries’, Labor and Society, 21.

xxiii King, Samuel T. (2018) Lenin’s Theory of Imperialism Today: The Global Divide between Monopoly and Non-Monopoly Capital, PhD dissertation, available at http://vuir.vu.edu.au/37770/

xxiv Nolan, Peter. (2012) Is China Buying the World?, Cambridge, Polity.

xxv King. (2018) ‘China and the Third World are not “catching up”’; King. (2018) Lenin’s Theory of Imperialism Today.

xxvi King. (2018) Lenin’s Theory of Imperialism Today, p39.

xxvii Bieler, Andreas and Lee, Chun-Yi, (2017) ‘Chinese Labour in the Global Economy’, Globalizations, 14, 2.

xxviii Nolan. (2012), p16.

xxix Schwartz, Herman M. (2009) Subprime Nation: American Power, Global Capital, and the Housing Bubble, Cornell University Press, p123.

xxx Brenner, Robert. (2002) The Boom and the Bubble: The US in the World Economy, Verso, p116.

xxxi Steinfeld, Edward S. (2010) Playing Our Game: Why China’s Rise Doesn’t Threaten the West, Oxford University Press, p18 and p75.

xxxii Steinfeld, Edward, S. (2004) China’s Shallow Integration: Networked Production and the New Challenges for Late Industrialization, World Development, 32, 11, p1983.

xxxiii Steinfeld. (2004), p1983.

xxxiv Reuters Staff, (2017) ‘Second Prototype of China’s C919 Jet Conducts Test Flight: State TV’, Reuters, December 17.

xxxv Bradsher, Keith. (2017) ‘China’s New Jetliner, the COMAC C919, Takes Flight for First Time’, New York Times, May 5.

xxxvi
Politi, Wong and Edgecliffe-Johnson. (2019).

xxxvii Huawei.com (no date) ‘Research & Development’, Huawei.com, accessed January 2018.

xxxviii Sekiguchi, Waichi. (2016) ‘Huawei to Set up R&D Base in Tokyo’, Nikkei Asian Review, November 26.

xxxix Spence, Ewan. (2019) iPhone Profits Will Crash If China Seeks Huawei Revenge, Forbes.com, May 27.

xl Wuerthele, Mike. (2018) Apple’s services will grow to over $100 billion per year in 2023, says Morgan Stanley, appleinsider.com, November 8.

xli Harvey, David. (2014) Seventeen Contradictions and the End of Capitalism, UK, Profile, p239.

xlii Reshoring Initiative. (2016) ‘Data Report: The Tide Has Turned’, reshorenow.org; UNCTAD. (2017) Trade and Development Report 2017, United Nations, pp. ix–xi and p50; UNCTAD (2013) World Investment Report, 2013, pp. 26–29; King. (2018) Lenin’s Theory of Imperialism Today, pp. 207–210.

Brexit Britain – Michael Roberts

As I write, the British prime minister Theresa May has announced her resignation and a leadership campaign within the ruling Conservative party has begun.  And in the EU Assembly elections that Britain was reluctantly forced to participate in, the single issue so-called ‘Brexit’ party took the most seats.  The results reveal a total split among British voters between those who want to leave even without an agreement with the EU and those who want to stay in the EU.

Thus nothing has changed in three tortuous years since the narrow decision in the UK referendum in 2016 to leave the European Union after 50 years.  That referendum vote threw the British political elite into total disarray. The issue has cut across class-based politics and classes; whether it is the top 1% (as measured by wealth and income) of Britons; or the ‘middle-class’ professionals; or the working-class; the old and young; city or small town; or north and south.  All are split about whether to stay or leave.

The issue has caused paralysis in government policy, in corporate investment decisions; in parliamentary votes and even in individual spending on big ticket items like housing and cars.  The British pound has plummeted by 20% against other major currencies; and each week another corporation announces that it will move its headquarters or production facilities out of the country; while British companies like British Steel go bust.

The history of Brexit

How did this mess come about?  Underlying the decision is the historically unsettled split in the British ruling class about what direction to take British capital in the post-war period.  After the debacle of the so-called Suez crisis of 1956 when France and the UK learnt that they could no longer dictate colonial control over Egypt and the Middle East on their own, and must hand over that role to American imperialism, the British ruling class was in a dilemma.  Should they become just a junior partner of American hegemony and stay out of the European integration process being promoted by France and Germany from the late 1950s; or should they opt for becoming a senior partner in Franco-German capital’s drive to build an imperialist bloc to rival the US and the Soviet Union? 

The answer was at first to reject offers to join the European integration process and stay aloof.  But economics eventually dominates politics and when it became clear that France and Germany were leaping forward economically with the Common Market, European Economic Community and eventually the Treaty of Rome, the majority of the strategists of British capital opted for Europe. 

But a significant minority remained sceptical and even hostile to the European project.  Also, there was strong sentiment in the British labour movement that the EU was a ‘capitalist club’ with pro-market, anti-labour principles and must be avoided.  After the Conservative government under Ted Heath had taken the UK into the European Economic Community in 1973, when the Labour party got into office in 1974, the Labour left–wing pushed for a referendum, but overwhelmingly lost the vote.  The die was now cast for the next 50 years.

Throughout those years, Britain had an uneasy relationship with the Franco-German EU bloc.  Indeed, it insisted, under Thatcher, on obtaining a special deal on contributions to the budget and on other matters to do with EU regulations.  At the same time, Britain was a driving force for more de-regulation and other neoliberal measures (ie reduction in agricultural subsidies) within the EU, taking it away from its supposed ’social market’ principles. 

During the 1980s and especially in the 1990s, UK economic growth more than matched the major EU economies.  So the UK refused to join up fully for the Maastricht treaty and its move towards the establishment of the euro, as it meant losing control of monetary policy and the national currency – in effect placing British capital in a permanent marriage to the Franco-German bloc. 

But the City of London and the UK’s all-powerful financial services industry was strongly in favour of the UK joining the single currency to enable the smooth movement of capital flows and to enshrine the City’s dominance in FX trading and other financial business.  So in the early 1990s, the UK joined the EU’s Exchange Rate Mechanism (ERM) that kept national currencies in a strict band with the European Currency Unit (ECU), the precursor of the euro.  The City put the pressure on for Thatcher to do this.  But the irony was that the UK economy was too weak to sustain a strong pound as Franco-German economies drove up the ECU’s value against the dollar.  Eventually, ‘Black Wednesday’ occurred in September 1992, when John Major‘s Conservative government was forced to withdraw from the ERM. 

The US$/ECU rate – the ECU reached a high against the dollar in 1992, provoking the crisis for sterling.

Brexit for Rupture_JN_2106

This set the stage for a return of the split in the Conservative party and British capital over whether to move towards further integration with the EU or to distance itself.  The ERM debacle led to an attempt to remove the then Tory PM John Major by euro-skeptic MPs and later to Major’s defeat in the 1997 election that put the pro-EU Blair-Brown Labour Party in office for 13 years. 

That only increased the schism within the Conservatives. There was now a clear division between those leaders who represented the interests of big business and the City of London wanting ‘free trade’ and a big role in the EU and rank and file Conservatives who  represented small businesses and the narrow nationalist and racist elements in small provincial towns. They wanted no truck with ‘Europe’ and harkened back to ‘good old days’ of a white imperial Britain ploughing its own furrow – something, of course, that had disappeared even before the UK joined the EU. This division was heightened by the bulk of the ‘popular’ press, whose moguls were either Australian-Americans like Rupert Murdoch, or aristocratic empire believers like the Rothermeres or the Barclay brothers. 

The return of the Conservatives to power in 2010 after the Great Recession did not end this schism.  Indeed, when Europe entered its own severe recession in 2011-12, the euro-sceptics gained support and clamoured for leaving the EU. The argument was that Europe was an economic basket case with heavy debts and high unemployment. Indeed, EU immigrants were flooding into Britain looking for work, particularly those from Eastern Europe, countries which were now in the EU after the EU’s expansion. Support for the anti-immigrant, anti-EU party UKIP increased sharply and UKIP won the lion’s share of the vote in the 2014 EU elections.

The scene was thus set for the Brexit debacle. The Conservative PM David Cameron, supposedly the representative of big business and the City, was worried.  The Conservatives knew that they could lose a general election to Labour (because some of their votes would go to UKIP) unless it agreed to call a referendum on EU membership.  This manifesto promise sufficiently weakened the vote for UKIP in the 2014 election that Cameron narrowly won. By agreeing to a referendum, Cameron managed to reduce UKIP’s representation to just one seat in parliament.

But this political tactic backfired in the ensuing EU referendum itself.  The referendum delivered a 52-48 victory for the leavers.  Cameron immediately resigned and scuttled away to leave the new leader, the ‘remainer’ Theresa May, holding the poisoned chalice of having to conduct the fraught and tortuous negotiations with the EU, with her party and country split down the middle. 

In the referendum it seems that just a sufficient numbers of voters believed the arguments of the pro-Brexit Tories and UKIP that what was wrong with their lives was ‘too much immigration’ and ‘too much regulation’ by the EU (although Britain is already the most deregulated economy in the OECD). However, many voters did not swallow the immigration and regulation arguments; but these were mainly the young; those who lived in multi-ethnic areas like London and Manchester. Those who voted to leave were older, did little travel abroad, lived in small towns and cities mainly in the north or in Wales, far away from City of London and from the sight of any ‘immigrants’, but who had suffered the most from low paid jobs, public sector cuts, run-down housing and high streets and general neglect as a result of the austerity imposed by the Labour and Conservative governments after the Great Recession. So the working class vote was split; the young, trade unionists, educated and city dwellers voted remain; while the older, less educated and outside unions in smaller towns voted leave. But the vast bulk of small business people, the rich rural dwellers and farmers voted to leave on anti-immigrant and ‘pro-empire’ grounds. Their vote was enough to tip the split working-class vote into a majority for leave.

Britain and Europe after Brexit

So what now? The results in the EU Assembly elections and current public opinion polls suggest there has been little change in the split in the country, although it appears there would now be a narrow victory for staying in the EU if there was another referendum. And there is now the prospect of the British parliament agreeing on a second referendum vote in the next three months.

But let us assume that Brexit does happen by the end of October 2019. What then for the British economy? Would British capitalism do better outside the EU? The answer is that it depends, but on balance, probably not.

It is true that much of the gains from free trade within the EU have been exhausted. When it began, the European Union did show a degree of convergence between the rich northern core economies and the poor southern periphery.  Common trade rules and the free movement of labour and capital between countries in the EU led to some ‘convergence’ on productivity levels. The move to a common market, customs union and eventually the political and economic structures of the EU has been a relative success.  The EU-12/15 from the 1980s to 1999 managed to achieve a degree of harmonisation and convergence with the weaker capitalist economies growing faster than the stronger (graph below shows growth per capita 1986-99)..

Brexit for Rupture_JN_2106 2

Source: OECD

But that was only up to the point of the start of EMU.  The evidence for convergence since then has been much less convincing.  On the contrary, the experience of EMU has been divergence.  That divergence was cruelly exposed in the Eurozone debt depression in 2012 which forced bailout to Ireland, Portugal and Spain and nearly led to the expulsion of Greece.  Thus the EU was no longer a positive role model for British capital, and certainly not for swathes of the British population.  ‘Populism’ and euro-scepticism reared up in many EU countries, but no more so than in imperialist Britain.

So would British capital do better outside the EU from here? There is a myth pushed by the EU-leavers that Britain can negotiate just as good trade terms as they had within the EU without all the EU regulations and budget funding for EU institutions.  The EU institutions are certainly not holding the UK back from selling globally.  Germany has a world trade volume that is more than three times the UK figure, but it is suffering from the economic slowdown in China right now.  It is unlikely that British capital would do better than Germany by opting for Asia or America over Europe for exports or investment. Indeed, given the trade and technology war that has broken out between the US and China, this is not a good time to expect increased trade with Asia.

And the experience of European countries like Norway or Switzerland that have negotiated such agreements with the EU and other blocs shows that with any trade deal comes obligations and conditions. In their deal with the EU, Norway and Switzerland must abide by all EU single market standards and regulations, without any say in their formulation. They must agree to translate all relevant EU laws into their domestic legislation without consulting domestic voters. They contribute substantially to the EU budget. And they must accept unlimited EU immigration, resulting in a higher share of EU immigrants in the Swiss and Norwegian populations than in the UK! So overall, for British capital, there would be little difference outside than being in the EU, if it negotiated a similar arrangement that Norway and Switzerland have.

Also, European Economic Association (EEA) members such as Norway do not belong to the EU’s customs union. Consequently, Norwegian exports must satisfy ‘rules of origin’ requirements in order to enter the EU duty free and the EU can use anti-dumping measures to restrict imports from Norway, as occurred in 2006 when the EU imposed a 16% tariff on imports of Norwegian salmon. EEA members effectively pay a fee to be part of the Single Market. In 2011 Norway’s contribution to the EU budget was £106 per capita, only 17% lower than the UK’s net contribution of £128 per capita (House of Commons 2013). So becoming part of the EEA would not generate substantial fiscal savings for the UK government and taxpayers.  The UK’s contribution to the EU budget, after rebates, is not particularly high per head of population and low as % of GDP compared to other EU members.

The most important feature of British imperialism is that it is a rentier economy, meaning that it gets the bulk of its surplus value through extracting ‘rents’ in the form of interest, financial commissions and speculation in fictitious capital, increasingly from overseas, and less from the direct exploitation of labour in production at home. The UK is no longer a manufacturing nation as it was in the 19th century.  Now it is a service-based economy relying on imperialist flows of capital and income – the financial middleman for the global economy.

The key interest of British capital is to preserve its hegemonic global position in financial services – but with the UK outside the EU that hegemony could come under threat.  Britain’s specialisation in services – not only finance, but also law, accountancy, media, architecture, pharmaceutical research and so on – makes entry to the EU single market critical. Yet its service industries could be locked out. The French, German, and Irish governments would be particularly delighted to see UK-based banks and hedge funds isolated, and see UK-based businesses involved in asset management, insurance, accountancy, law, and media forced to transfer their jobs, head offices, and tax payments to Paris, Frankfurt, or Dublin.

EU states may also try and usurp the UK’s position as the EU’s most popular destination for foreign direct investment. Over the past 15 years, the UK has received more than 20% of inward EU FDI.  But without full access to the EU’s internal markets, future FDI flows into car factories or financial services hubs might be redirected and create jobs elsewhere in the EU.

What about turning the UK into a giant tax haven like Switzerland or Ireland, or deregulating industry and labour so that Britain becomes the port of call for multi-nationals looking for cheap educated labour and low taxation?  That is the aim of the Brexiters.  But as it is, Britain is already one of the least regulated countries in the world, as previous Labour and Conservative governments have boasted.  So getting rid of any EU regulations by leaving would have little added value for British capital. 

After all, the euro debt crisis in Greece, Portugal, Spain, Italy etc. was mainly to do with the crisis in capitalism since 2007 and not really to do with the institutions of the EU, cumbersome, bureaucratic and undemocratic as they are; or to do with the policies of the EU leaders for Europe.  The neo-liberal, pro-austerity measures applied by the EU Commission are the very same policies adopted by the national governments of Europe on their people.  EU policy is no more neo-liberal and pro-big business than is the policy of successive British governments of the last two decades, Conservative or Labour.

Anyway, even outside the EU, the UK would still be subject to 700 international treaties, as a member of the UN, WTO, NATO, IMF and World Bank, and subscribe to a swathe of nuclear test ban, energy, water, maritime law and air traffic treaties. The idea that leaving the EU would lead to a golden era of UK capital control and self-determination, is, it is fair to say, far-fetched at least. National sovereignty is a relative concept in modern imperialism.

As for the interests of labour, Britain’s Trade Union Congress (TUC) reckons that there are benefits for British workers from the EU.  In a report, the TUC cites rights such as paid annual leave and fair treatment for part-time workers may be in danger that could be rolled back by a Conservative government: “These are wide-ranging in scope, including access to paid annual holidays, improved health and safety protection, rights to unpaid parental leave, rights to time off work for urgent family reasons, equal treatment rights for part-time, fixed-term and agency workers, rights for outsourced workers, and rights for workers’ representatives to receive information and be consulted, particularly in the context of restructuring.  And without the back-up of EU laws, unscrupulous employers will have free rein to cut many of their workers’ hard-won benefits and protections”.

But the TUC exaggerates.  EU laws and directives like the 48-hour working week are hardly worth the paper that they have been written on, with many exemptions for employment sectors for example, like junior hospital doctors on a 72-hour week or the practice of many employers to get employees to sign a ‘waiver’ on working hours and conditions.  The point is that most of our working conditions are determined by national laws and by the class struggle at the workplace, not by EU laws.  Those battles have not been hindered or helped much either way by EU employment laws.

Even this isn’t the whole story, though, as it has become much more difficult in the UK for workers to enforce any employment law. The introduction of employment tribunal fees has seen a sharp drop in the number of cases being brought. As an employer in the UK there isn’t much employment law to fall foul of but, even if you do, the chances of being prosecuted for it are pretty remote.

Then there is the question of immigration.  Leaving the EU would supposedly allow Britain to block cheap labour from Eastern Europe flooding into the country and lowering wages and conditions.  Or so the argument goes.  But reducing immigration will not improve the situation for working people already in the UK.  Migrants often fill the gaps in the labour market that Britons won’t or can’t fill.  To take one example, strawberries are now available in the shops for much longer. They are picked by migrant workers who return to Eastern Europe at the end of the season.  Care work is another industry heavily populated with migrant labour. Migrants often perform low paid, dirty work that British workers would be reluctant to perform. Indeed, the UK’s growth rate in the last 20 years has only matched that of the major EU economies because of a relatively fast-expanding workforce from young immigrant workers who pay tax and social insurance and do not use health services or pensions as much. 

Around 3.7% of the total EU workforce – 3 million people – now work in a member state other than their own. The number of students studying in another EU state other than their own has increased from 3,000 in 1988 to 272,000 in 2014. Since 1987, over 3.3 million students and 470,000 teaching staff have taken part in the EU’s Erasmus programme.  There are 1.5 million Brits living in other EU countries and two-thirds of the long-term residents (800,000) are working (not retired) – although the UK has the lowest proportion of citizens living in the rest of the EU.

EU immigrants (indeed all immigrants) have contributed more to the UK economy in taxes (income and VAT), in filling low-paid jobs (hospitals, hotels, restaurants, farming, transport) than they have taken up (in extra cost of schools, public services etc).  That’s because most are young (often single) and help pay pension contributions for those Brits who are retired.  But the Brexit referendum has already brought about a sharp drop in net immigration into the UK from the EU, down 50-100,000 and still falling.  That can only add to the loss of national income and tax revenues down the road.

The pressure on public services and social resources in the UK is not the result of ‘too much immigration’ – on the contrary.  It is a result of huge cuts in public spending by the Conservative government and the overall slowdown in economic growth.  The answer is to stop cutting taxes for the rich and instead boost public spending, in welfare and investment.  State pension levels in the UK, relative to average wages, are the lowest in the OECD.  This has nothing to do with immigration, but only to do with the weak state of British capital and government policies against labour.

British capitalism on its own

So whether Britain is in or out of the European Union will make little difference to the majority of people in the UK.  What does matter is the health of the economy, the level of wages and employment and the state of public services. That does not depend on Britain’s membership of the EU.  Only if ‘freedom’ from EU institutions were to produce a sharp increase in productivity, investment and trade with the rest of the world, would these losses be overcome.  On balance, that seems unlikely.

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Source: OECD

Business investment in productive assets has been abysmally poor in the UK compared to other major economies (UK average is the lowest line below).

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When we consider the impact of Brexit, it is clear that already it has had a detrimental effect on the UK capitalist economy. During the referendum campaign in 2016, the combined forces of the then Tory government of Cameron and Osborne, the Liberal Democrat junior coalition partners, the right-wing of the Labour party, the City of London and big business screamed that to ‘vote leave’ would lead to the collapse of the economy and a deep recession.  This exaggeration, called Project Fear by the leavers, was only matched by the lies of the anti-immigrant UKIP party and the Tory right who claimed that leaving the EU would lead to extra money for the hard-pressed health service, trade would flourish and there would be prosperity all round.

Neither view was right.  There may have been no economic recession but the ‘uncertainty’ of the last two years and interminable squabbling has been accompanied by a sharp slowdown in Britain’s economic expansion. Sterling’s value has dropped from US $1.70 in 2014 to US $1.25 now, more than 20%.

Britain’s trade deficit with the rest of the world has widened to around 6% of GDP; and real GDP growth has slid back from over 2% a year to below 1.5%, with industrial production crawling along at 1%.  Whereas the UK economy was doing better than most other G7 top economies in 2015, it is now doing even worse than Italy, while inflation has picked up due to the devaluation of the currency – so much for the argument often presented by Keynesians that having the ability to control the national currency (unlike those in the Eurozone such as Greece) can help restore economic growth and avoid austerity.  Depreciation of a currency is not enough or even beneficial. Indeed, higher inflation and slower economic growth in the last two years have hit the average British household hard.  Real wage growth disappeared and has only just returned at a feeble rate.

Above all, from the point of view of British capital, business investment stagnated as companies paused on any investment plans while waiting for clarity on the Brexit deal.

And now with the possibility still of no transition deal with the EU, Project Fear has returned.  The Bank of England’s economists reckon that if there is a ‘no deal’ Brexit, then the UK economy could shrink 8% in 2020, while interest rates would rise to 5% to protect the pound and guard against rampant inflation, and home prices would fall by up to 30%!  This would be a bigger decline than during the Great Recession of 2008-9.  Capital Economics researchers are less pessimistic but still estimate that a ‘disruptive no-deal Brexit’, where the UK and the EU do not co-operate, could knock 3% off Britain’s likely national income in 2020 and possibly cause “an outright recession”.  However, a “managed” no-deal scenario — where the two sides seek to minimise disruption in key areas, for example by agreeing arrangements to enable flights between the UK and mainland Europe —  would only involve a 1% hit to gross domestic product by 2020.  Oxford Economics estimates that in this ‘managed scenario’ the economy would still “flirt with recession” and GDP would be 2% lower than its current baseline forecast by the end of 2020.

But let us look further ahead.  Assuming the UK leaves the EU in October with a transition deal in place and eventually some long-term trade arrangement is reached with the EU, what are the prospects for 1) British capital and 2) British labour?  Well, there have been a host of reports recently that try to measure the impact on the economy.  For British industry and service sectors, Europe is the main trading partner.  About 57% of UK goods trade is with EU; and 40% of services trade.

Most long-term forecasts by mainstream economic institutes, including the Bank of England and the UK government, reckon that there would be an accumulated loss in real GDP from potential for the UK over the next ten to 15 years of between 4-10% of GDP from leaving the EU. That’s a 3% of GDP loss per person, equivalent to about £1000 per person per year.  It all depends on whether any deal keeps the UK in a customs union (with similar tariffs and border regulations) with the EU and what parts of the existing Single Market (freedom of movement of labour and capital and citizens’ rights) are preserved.

But whatever the final trade deal with the EU (or no deal), it does not mean an actual fall in UK GDP over the next ten to 15 years.  This cannot be emphasised enough.  The UK economy will not be smaller in ten years if it leaves the EU, it will just grow slower than it otherwise would have.  The current average growth rate for the UK has been about 2% a year since 2010, which is down from an average 2.6% a year before the Great Recession in 2008.  Most mainstream forecasts are predicting a slowing of the growth rate to between 1.3-1.6% a year depending on the nature of the final deal with the EU.  This is hardly a disaster, if still a significant loss.

The elephant in the room

The problem with the mainstream forecasts is that they ignore the elephant in the room for the UK economy – another global slump or recession. The forecasts are based on ceteris paribus (other things being equal).  But they won’t be.  Can it be realistic to assume that there will be no major slump in the major capitalist economies over the next ten to 15 years?

A slump as the UK economy experienced in 2008-9 would deliver much more long-lasting damage to national income than even a ‘bad Brexit’ deal.  I calculate that the UK economy, like all the other major economies in the Long Depression that has taken place in the last ten years, has experienced a permanent relative loss in GDP – in the UK’s case of over 25%.  In other words, the UK economy has had average growth some one-quarter slower since 2008 than it did before.  Even if it continued to grow at around 2% over the next ten years with no impact from Brexit, that relative loss from the Great Recession would reach 40% by 2030.  That would be four times as much as the worst outcome from Brexit.

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Source: Author’s calculations

An economic slump and the Long Depression are way more damaging to the UK economy than Brexit.  Brexit will just be an extra burden for British capital to face.  The UK economy already has weak investment and productivity growth compared with the 1990s and with other OECD countries. As it is a ‘rentier’ economy that depends too heavily on its financial and business services sector, services sector trade with the EU is likely to fall 50-65% after Brexit.

Many banks, insurers and asset managers who want to retain access to customers in the EU have already redirected hundreds of millions of pounds of investment towards new or expanded hubs in the bloc.  Nearly 40 banks from London have applied to the European Central Bank for licences. According to Frankfurt Main Finance, which promotes German financial capital, these are set to transfer 750-800 billion euros in assets in 2019.  This is still a trickle, but it could turn into a flood.

From the point of view of labour, the failure of British capitalism and the prospect of yet another slump in the next few years is much more of concern than Brexit as such. Indeed, the EU as a trading destination for UK exports is in relative decline – as it is for other EU economies. The fastest-growing areas for trade are outside the EU, in particular, Asia.

British labour is already taking a pounding.  Research by the British Trades Union Congress (TUC) found that the average worker has lost £11,800 in real earnings since 2008. The UK has suffered the worst real wage slump among leading economies. Stephen Clarke, senior economic analyst at the Resolution Foundation think tank, put it: “While wages are currently growing at their fastest rate in a decade and employment is at a record high, the sobering big picture is that inflation-adjusted pay is still almost £5,000 a year lower than when Lehman Brothers was still around.”

Immigration into the UK from EU countries has been significant; but it also works the other way; with many Brits working and living in continental Europe.  The number of EU citizens living in member states other than their own has risen from 4.6 million in 1995 to 16 million in 2015. And 22 of the 28 EU Member States participate in the Schengen Agreement, which allows passport-free travel for over 400 million citizens, who make over 4 million trips as tourists in another member state every year.  With the UK out of the EU, British travellers will be subject to travel visas and other costs that will be greater than the total money per person saved from contributions to the EU.

On balance, leaving the EU is a negative for British capital but it is also not good news for British labour, even if the hit is relatively small compared to the hit that working-class households suffer from regular and recurring slumps in capitalist production, especially when followed by a depressionary stagnation, as in the last ten years.  The Brexit debacle will leave its scar on the living standards of the British people.