Category: MAGAZINE

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.

References

Amin, S (1982) The Disarticulation of Economy Within “Developing Societies”. In: Alavi, H. and Shanin, T. (eds.) Introduction to the Sociology of “Developing Societies”. London: Macmillan Education UK, 205-209.

Amsden, AH, Kochanowicz, J and Taylor, L (1994) The market meets its match: restructuring the economies of Eastern Europe. Cambridge: Harvard University Press.

Antal, A (2017) The political theories, preconditions and dangers of the governing populism in Hungary. Czech Journal of Political Science 24(1): 5-20.

Antalóczy, K, Sass, M and Szanyi, M (2011) Policies for attracting foreign direct investment and enhancing its spillovers to indigenous firms: the case of Hungary. In: Rugraff, E. and Hansen, M.W. (eds.) Multinational Corporations and Local Firms in Emerging Economies. Amsterdam: Amsterdam University Press, 181-210.

Appel, H and Orenstein, M (2018) From triumph to crisis: Neoliberal economic reform in post-communist countries. Cambridge: Cambridge University Press.

Associated Press (2018) Huge Pro-Government Media Conglomerate Formed in Hungary, Pablo Gorondi, AP News, 28 November 2018, URL: https://apnews.com/39028d9c44b64e08a6609b60a8bf7a13.

Atlatszo.hu (2018) Hungarian government spent €40 million on anti-Soros propaganda in 2017, Katalin Erdélyi, atlatszo.hu, 4 February 2018, URL: https://english.atlatszo.hu/2018/02/04/hungarian-government-spent-e40-million-on-anti-soros-propaganda-in-2017/.

Bajomi-Lázár, P (2012) The Party Colonisation of the Media: The Case of Hungary. East European Politics and Societies 27(1): 69-89.

Bandelj, N (2008) From Communists to Foreign Capitalists: The Social Foundations of Foreign Direct Investment in Postsocialist Europe. Princeton: Princeton University Press.

Bandelj, N (2009) The Global Economy as Instituted Process: The Case of Central and Eastern Europe. American Sociological Review 74(1): 128-149.

Bánkuti, M, Halmai, G and Scheppele, KL (2012) Hungary’s Illiberal Turn: Disabling the Constitution. Journal of Democracy 23(3): 138-146.

Boda, Z and Scheiring, G (2006) Water Privatisation in the Context of Transition. In: Chávez, D. (ed.) Public Services Yearbook. Amsterdam, Montevideo: Transnational Institute.

Bohle, D and Greskovits, B (2012) Capitalist diversity on Europe’s periphery. New York: Cornell University Press.

Böröcz, J (1999) From comprador state to auctioneer state: property change, realignment, and peripheralization in post-state-socialist Central and Eastern Europe. In: Smith, D.A., Solinger, D.J. and Topik, S.C. (eds.) States and Sovereignity in the Global Economy. London & New York: Routledge, 193-209.

Bozóki, A and Hegedűs, D (2018) An externally constrained hybrid regime: Hungary in the European Union. Democratization 25(7): 1173-1189.

Bretter, Z (2014) Halfway or no way? Politeja 2(28): 5-30.

Bruszt, L (2006) Making capitalism compatible with democracy – tentative reflections from the East. In: Crouch, C. and Streeck, W. (eds.) The diversity of democracy – a tribute to Philippe C. Schmitter. Northampton: Edward Elgar, 149-175.

Buchowski, M (2006) The specter of orientalism in Europe: From exotic other to stigmatized brother. Anthropological Quarterly 79(3): 463-482.

Cardoso, FH and Faletto, E (1979) Dependency and Development in Latin America. Berkeley: University of California Press.

Drahokoupil, J (2008a) The rise of the competition state in the Visegrád Four: Internationalization of the state as a local project. In: van Apeldoorn, B., Drahokoupil, J. and Horn, L. (eds.) From Lisbon to Lisbon: Contradictions and limits of neoliberal European governance. Basingstoke: Palgrave.

Drahokoupil, J (2008b) The Rise of the Comprador Service Sector: The Politics of State Transformation in Central and Eastern Europe. Polish Sociological Review 2(162): 175-189.

Enyedi, Z, Fábián, Z and Tardos, R (2014) Parties and Voters, 2002-2014 [in Hungarian]. In: Kolosi, T. and Tóth, I.G. (eds.) Social Report 2014. Budapest: TÁRKI, 532-556.

Eurostat (2018a) Employment (main characteristics and rates) – annual averages, Eurostat, URL: http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=lfsi_emp_a&lang=en (last access: 22/01/2018).

Eurostat (2018b) General government expenditure by function (COFOG), Eurostat, gov_10a_exp, URL: http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=gov_10a_exp&lang=eng (last access: 14/12/2018).

Eurostat (2019) At-risk-of-poverty rate by poverty threshold, age and sex – EU-SILC survey, Eurostat, [ilc_li02], URL: http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=ilc_li02 (last access: 19/01/2019).

Evans, PB (1979) Dependent Development: The Alliance of Multinational, State, and Local Capital in Brazil. Princeton: Princeton University Press.

Fazekas, M and King, LP (2018) Perils of development funding? The tale of EU Funds and grand corruption in Central and Eastern Europe. Regulation & Governance 2018(First published: 04 January 2018): 1-26.

Feischmidt, M (ed) (2014) Nation in the Everyday: The Popular Culture of Neo-Nationalism (In Hungarian: ‘Nemzet a mindennapokban. Az újnacionalizmus populáris kultúrája’). Budapest: L’Harmattan Kiadó – MTA Társadalomtudományi Kutatóközpont.

Freedom House (2018) Hungary. In: Puddington, A. (ed.) Freedom in the World 2017: The Annual Survey of Political Rights and Civil Liberties. New York & Washington DC: Rowman & Littlefield / Freedom House, 224-231.

Friedman, J (ed) (2003) Globalization, the State, and Violence. Walnut Creek: AltaMira Press.

G7.hu (2018) 30 of the largest multinational companies could siphon off 48 billion forints each year from Hungary (In Hungarian: ‘Évi 48 milliárd forintnyi társasági adót trükközhet ki az országból 30 magyarországi multi’), Péter Bucsky, g7.hu, 12 November 2018, URL: https://g7.hu/piac/20181112/evi-48-milliard-forintnyi-tarsasagi-adot-trukkozhet-ki-az-orszagbol-30-magyarorszagi-multi/

Gagyi, Á (2016) ‘Coloniality of Power’ in East Central Europe: External Penetration as Internal Force in Post-Socialist Hungarian Politics. Journal of World-Systems Research 22(2): 349-372.

Gagyi, Á and Gerőcs, T (2019) The Political Economy of Hungary’s New “Slave Law”, Lefteast blog, criticatac.ro, 1 January 2019, URL: http://www.criticatac.ro/lefteast/the-political-economy-of-hungarys-new-slave-law/.

Gonda, N (2019) Land grabbing and the making of an authoritarian populist regime in Hungary. The Journal of Peasant Studies: 1-20.

Gregor, A and Kováts, E (2018) Women’s issues 2018: Social problems and interventions (In Hungarian: ‘Nőügyek ​2018: Társadalmi problémák és megoldási stratégiák’). Budapest: Friedrich Ebert Stiftung.

Greskovits, B (2017) Rebuilding the Hungarian right through civil organization and contention: the civic circles movement, EUI Working Papers, RSCAS 2017/37, Robert Schuman Centre for Advanced Studies, July 2017, European University Institute, Florence.

Hall, S (1979) The great moving right show. Marxism Today 23(1): 14-20.

Hall, S (1985) Authoritarian Populism: A Reply. New Left Review 0(151): 115.

Halmai, G (2011) (Dis)possessed by the Spectre of Socialism: Nationalist Mobilization in ‘Transitional’ Hungary. In: Kalb, D. and Halmai, G. (eds.) Headlines of Nation, Subtexts of Class: Working Class Populism and the Return of the Repressed in Neoliberal Europe. New York and Oxford: Berghahn Books, 113-141.

Hann, C (2016a) Cucumbers and Courgettes: Rural Workfare and the New Double Movement in Hungary. Intersections. East European Journal of Society and Politics 2(2).

Hann, C (2016b) Overheated Underdogs: Civilizational Analysis and Migration on the Danube-Tisza Interfluve. History and Anthropology 27(5): 602-616.

Hann, C (2018) Moral(ity and) Economy: Work, Workfare, and Fairness in Provincial Hungary. European Journal of Sociology 59(2): 225-254.

Hay, C (2004) Re‐stating politics, re‐politicising the state: Neo‐liberalism, economic imperatives and the rise of the competition state. The Political Quarterly 75(s1): 38-50.

HCSO (2018) Data of total households by deciles, regions and type of settlements (2010–), Hungarian Central Statistical Office, URL: http://www.ksh.hu/docs/eng/xstadat/xstadat_annual/i_zhc014a.html (last access: 12/15/2018).

Hirschman, AO (1978) The Strategy of Economic Development. New York: Norton.

Hochschild, AR (2016) Strangers in Their Own Land: Anger and Mourning on the American Right: New Press.

Hungarian Spectrum (2017) Fidesz’s very own ‘NGOs’ stuffed with public money, Éva Balogh, Hungarian Spectrum, 13 May 2017, URL: http://hungarianspectrum.org/2017/05/13/fideszs-very-own-ngos-stuffed-with-public-money/.

hvg.hu (2018) György Spiró: “The serf-mentality lives on” (In Hungarian: ‘Spiró György: “Tovább él a jobbágymentalitás”‘), Hamvay Péter, hvg.hu, 2018. január 6., URL: https://hvg.hu/kultura/201749__spiro_gyorgy__diktaturarol_elmeszesedesrol_feudalizmusrol__tovabb_el_a_jobbagymentalitas.

Kalb, D (2009) Conversations with a Polish populist: Tracing hidden histories of globalization, class, and dispossession in postsocialism (and beyond). American Ethnologist 36(2): 207-223.

Kalb, D (2018) Upscaling Illiberalism: Class, Contradiction, and the Rise of the Populist Right in Post-socialist Central Europe. Fudan Journal of the Humanities and Social Sciences 11(3): 303–321.

King, L (2007) Central European Capitalism in Comparative Perspective. In: Hancké, B., Rhodes, M. and Thatcher, M. (eds.) Beyond Varieties of Capitalism: Conflict, Contradictions, and Complementarities in the European Economy. Oxford: Oxford University Press.

King, L and Váradi, B (2002) Beyond Manichean economics: foreign direct investment and growth in the transition from socialism. Communist and Post-Communist Studies 35(1): 1-21.

Koch, I (2017) What’s in a vote? Brexit beyond culture wars. American Ethnologist 44(2): 225-230.

Kolosi, T and Szelényi, I (2010) How to become a billionaire? Neoliberal ethics and the spirit of postcommunist capitalism (In Hungarian: ‘Hogyan legyünk milliárdosok: A neoliberális etika és a posztkommunista kapitalizmus szelleme). Budapest: Corvina.

Korkut, U and Buzogány, A (2015) Successful Transplants, Reform Governments, and Health Care Policy Reform in Slovakia and Hungary. In: Korkut, U., Mahendran, K., Bucken-Knapp, G. and Cox, R.H. (eds.) Discursive Governance in Politics, Policy, and the Public Sphere. New York: Palgrave Macmillan, 47-61.

Mares, I and Young, L (2019) Varieties of Clientelism in Hungarian Elections. Comparative Politics 51(3): 449-480.

McQuarrie, M (2017) The revolt of the Rust Belt: place and politics in the age of anger. The British Journal of Sociology 68(S1): S120-S152.

Moore, B (1978) Injustice: The social bases of obedience and revolt. White Plains, NY: ME Sharpe

Nölke, A and Vliegenthart, A (2009) Enlarging the Varieties of Capitalism: The Emergence of Dependent Market Economies in East Central Europe. World Politics 61(04): 670-702.

OECD (2018) Taxing wages – Comparative tables (current model), The Organisation for Economic Co-operation and Development (OECD), Development (OECD), Accessed on 2 February 2018, URL: http://stats.oecd.org/Index.aspx?DataSetCode=AWCOMP.

Ost, D (2006) The Defeat of Solidarity: Anger and Politics in Postcommunist Europe. New York: Cornell University Press.

Pew Research Centre (2009) The Pew Global Attitudes Project 2009. Two Decades After the Wall’s Fall: End of Communism Cheered but Now With More Reservations Washington: Pew Global.

Pitti, Z (2010) Economic Performance Contra Social Expectations (In Hungarian: ‘Gazdasági Teljesítmények Kontra Társadalmi Elvárások’. Budapest: Napvilág Kiadó.

Polanyi, K (2001[1944]) The Great Transformation: The Political and Economic Origins of Our Time. Boston: Beacon Press.

Sachs, J (1994) Understanding Shock Therapy. London: Social Market Foundation.

Sargentini, J (2018) Report on a proposal calling on the Council to determine, pursuant to Article 7(1) of the Treaty on European Union, the existence of a clear risk of a serious breach by Hungary of the values on which the Union is founded A8-0250/2018, Committee on Civil Liberties, Justice and Home Affairs, Wednesday, 12 September 2018, Strasbourg.

Scheiring, G (2015) The Political Economy of De-Democratisation in Hungary, Paper presented at the Session of the Critical Political Economy Network at the 12th Conference of the European Sociological Association, 25-28 August 2015, Prague, Czech Republic.

Scheiring, G (2016a) The Rise of Illiberalism from East to the West: A Lesson About Class for the Left, politicalcritique.org, November 12, 2016, URL: http://politicalcritique.org/cee/hungary/2016/the-rise-of-illiberalism-from-east-to-the-west-a-lesson-about-class-for-the-left/.

Scheiring, G (2016b) Sustaining Democracy in an Era of Dependent Financialization: Karl Polanyi’s Perspectives on the Politics of Finance. Intersections: East European Journal of Society and Politics 2(2): 84.

Scheiring, G (2018) Lessons from the Political Economy of Authoritarian Capitalism in Hungary, Transnational Institute, Challenging Authoritarianism Series, No 1, April 2018, Amsterdam.

Scheiring, G (2019a) Dependent development and authoritarian state capitalism: Democratic backsliding and the rise of the accumulative state in Hungary. Geoforum Forthcoming(Special issue on authoritarian developmentalism).

Scheiring, G (2019b) Left Behind in the Hungarian Rust Belt: The Political Economy of Working-Class Neo-Nationalism, Paper presented at the ‘Universal Capitalism in Decline? Karl Polanyi for the 21st Century’ Conference, International Karl Polanyi Society (IKPS), University of Vienna, 3-5 May 2019, Vienna.

Scheiring, G, Stefler, D, Irdam, D, Fazekas, M, Azarova, A, Kolesnikova, I, et al. (2018) The gendered effects of foreign investment and prolonged state ownership on mortality in Hungary: an indirect demographic, retrospective cohort study. The Lancet Global Health 6(1): 95-102.

Skidelsky, R (2019) Rhymes from Central Europe, Project Syndicate, 15 January 2019, URL: https://www.project-syndicate.org/commentary/hungary-orban-revives-nationalism-anti-semitism-by-robert-skidelsky-2019-01.

Szabó, I (2013) Between Polarization and Statism: Effects of the Crisis on Collective Bargaining Processes and Outcomes in Hungary. Transfer: European Review of Labour and Research 19(2): 205-215.

Szalai, E (1999) Post-Socialism and Globalization. Budapest: Új Mandátum.

Szikra, D (2014) Democracy and welfare in hard times: The social policy of the Orbán Government in Hungary between 2010 and 2014. Journal of European Social Policy 24(5): 486–500.

Szombati, K (2018) The Revolt of the Provinces: Anti-Gypsyism and Right-Wing Politics in Hungary. New York and Oxford: Berghahn Books.

Szombati, K and Scheiring, G (2019) Thoughts on the stability of illiberal rule in Hungary, Manuscript, Max Planck Institute for Social Anthropology, Halle (Saale), Germany.

Sztompka, P (1993) Civilizational Incompetence: The Trap of Post-Communist Societies. Zeitschrift für Soziologie 22(2): 85-95.

The New York Times (2018a) Hungary’s Judges Warn of Threats to Judicial Independence, Benjamin Novak and Patrick Kingsley, The New York Times, 2 May 2018, URL: https://www.nytimes.com/2018/05/02/world/europe/hungary-judges-independence.html.

The New York Times (2018b) Orban and His Allies Cement Control of Hungary’s News Media, Patrick Kingsley, The New York Times, 29 November, 2018, URL: https://www.nytimes.com/2018/11/29/world/europe/hungary-orban-media.html.

Tóka, G (2014) Constitutional Principles and Electoral Democracy in Hungary. In: Bos, E. and Pócza, K. (eds.) Constitution Building in Consolidated Democracies: A New Beginning or Decay of a Political System? Baden-Baden: Nomos Verlag.

Wilkin, P (2016) Hungary and the Road to Serfdom. Lanham, Maryland: Lexington Books.

Wimmer, A (1997) Who Owns the State? Understanding Ethnic Conflict in Post-Colonial Societies. Nations and Nationalism 3(4): 631-666.

Wolfe, A (1977) The Limits of Legitimacy: Political Contradictions of Contemporary Capitalism. New York: Free Press.

World Bank (2018) World Development Indicators, The World Bank, Washington D.C., URL: http://data.worldbank.org/data-catalog/world-development-indicators (last access: 7/12/2018).

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.

Cihan 1

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.

Cihan 4

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.

Cihan 5

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.”

“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”

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”. 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”.

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.”

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”.

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”.

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 INNEVITABILITY 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

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. 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).

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”. 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. 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.

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”.

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”

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.”

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”.

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”.

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.”

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.

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).

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. 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.

China versus Imperialist States GDP per capita 1960-2017
FIGURE 1 – GDP per capita (US dollars)
Source:  https://data.worldbank.org/

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

-2022282340 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.

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.

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. 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. 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”.

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”.

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.” 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”.

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.” “The incumbents – global lead firms – are hardly stationary, and in many cases have completely transformed themselves.”

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.”

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 -2022282283 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. 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”. 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”.

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”. 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.

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”.

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. 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 Harvey) 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. 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.

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.

Roberts 3

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).

Roberts 4

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.

Roberts 5

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.

US-China Economic and Military Competition and the Flight of Capital from Emerging Economies – Jörg Nowak, Ekrem Ekici

In the last issue, we have made two statements in our text on the national imperialist state: First, that a trade war between the US and China is not in sight, and second, that the national reorientation of the mightiest imperialist countries will increase the contradictions between emerging economies and the imperialist countries. As it stands now in November 2018, we were wrong about the trade war that has started to unfold, and is starting to depress growth and trade. And we were right about the effects of the policies of the Trump administration on emerging economies like Turkey, Mexico, Brazil, Argentina, India, Indonesia etc.: the rise in interest rates of the Fed and the temporary spike of the oil price during spring and summer 2018 led to popular unrest, currency crises, the outflow of investment from emerging economies and a renewed focus on debt in emerging economies.

The current situation is impregnated by two tendencies: 1. The competition between the US and China in a technological-military-economic race, accompanied by Japan and the EU as secondary competitors. 2. The subordination of emerging economies (excluding China) in the current scenario of higher interest rates in imperialist core countries.

We will start to outline the second phenomenon and then relate it back to the first one.

1. From emerging to stagnating economies

The mid term tendency in the relationship between imperialist economies and emerging economies is expressed in a change in the monetary policy: the end of quantitative easing in the US and the EU, and thus the end of the hyperliquidity flowing to emerging economies, accompanied by a tendency to higher interest rates in imperialist economies, most importantly the interest rate rises by the US Fed. This change in monetary policy is not the content of the reorientation at stake, but its instrument: the short term effect is an outflow of liquidity in dollars from the emerging economies, and ensuing currency crises, leading in the mid-term to a cementing of the subaltern position of emerging economies like Indonesia, Turkey, South Africa, the Philippines, India, Brazil and Argentina. For example, in May and June 2018 investors withdrew 14 billion dollar from EM bonds and equities (IIF 2018). Several currencies went down significantly in relation to the US dollar since November 2017, headed by the Argentine peso that fell about 50 % in one year, followed by the Turkish Lira that fell one third against the dollar, while other countries saw lighter but still quite significant depreciation of their national currencies: 10 % devaluation of the Brazilian Real in comparison with the US dollar, 10 % of the Indonesian Rupiah, 10 % of the Phillippine Peso, 12 % for the Indian Rupee and only 5 % for the Mexican Peso. The South African Rand is at the same level as one year ago compared to the dollar, but had dropped 10 % lower in August and September 2018. If one adjusts to inflation, emerging market currencies are at its lowest since the 1980s (Johnson 2018), the time of debt and currency crises, and the first major structural adjustment programs. The JPMorgan EM currency index is 11 per cent down compared to one year earlier, in early September 2018 it was even 14 per cent down since January 2018 (Allen 2018).

While the crises of currencies of emerging economies are not as serious as in the 1980s, high debt of the private corporate sector in emerging economies and current account deficits of those countries are the basis for the currency crisis. In countries like India and the Philippines with a dependence on oil imports the rising oil price increases the strain, while the governments of Brazil and Argentina faced pressure to abandon world market prices of petrol on their internal markets in the wake of popular pressure, expressed in the mighty truck drivers strike in Brazil in May 2018.

The mid-term tendency of those emerging economies will be rather that of “stagnating economies” – while they will still play a significant role for resource extraction, the absorption of consumer products, and low-wage industrial production, they will remain stuck in the middle-income trap – i.e. a large part of the population is poor, and the relatively small middle classes will not be able to catch up with their Western counterparts in terms of income, social security, public infrastructure etc. The most important issue is that those currency crises come with increased dependency on imperialist countries with higher costs for technological inputs (i.e. fertilizer, production machines), higher costs of imported consumer products, higher inflation and higher external debt. The effect highlighted by Heiner Flassbeck of a more competitive position for exports e.g. for Turkey1 due to the depreciation of the Turkish currency will not outweigh the costs for the working class and producers in those countries with inflation and higher prices for imported goods. Thus, the short to mid-term effect of what Flassbeck wrongly termed ‘currency crises’ will be a severe limitation of the level of reproduction of working classes in emerging economies.

The slowdown of exports of emerging markets is not primarily an effect of the trade war and its tariffs, as it went down already between February and May 2018 from a 6.5 per cent year-on-year rate to 1.8 per cent according to the CPB Netherlands Bureau for Policy Analysis, and similar data have been provided by consultancy Capital Economics. Causes can be found in low growth in the Eurozone, China and emerging economies. With the depreciation of the Renminbi (down 10 % since February 2018 in comparison with the US dollar), China will increasingly compete with emerging economies in Southeast Asia in the area of manufacturing (Sender 2018).

While the high debt in many emerging economies – it increased about 40 trillion US dollars since 2008 due to the Institute of International Finance – raises the risk of banking crashes or a default of a national economy, the main tendency will be a halt of the forward march of emerging economies in increasing their share of the world market in trade and exports: the looming debt crisis will serve to dump wages and contain the ‘rise of the South’ in the context of world market participation.

China, which we qualified as one of the main imperialist countries in the last issue, plays the part of a global power stuck between the status of an emerging economy and a global superpower. It has features of both, and its potential to get rid of the features of an emerging economy is one of the drivers of the restructuring of the global capitalist system undertaken at the moment. We do not consider China as an emerging market, but as an upcoming power able to compete with other imperialist powers to some extent, while it does not have the same status, both in geopolitical differences with the imperialist bloc of the US, Germany, Japan and the UK, and in per capita income of its population. Thus, it is not a country that forms part of the imperialist core, but assumes an independent leading position, and aims to build alliances with states like Russia, Pakistan and other smaller states. We will turn now to the competition between China and the US on the economic and military plane.

2. Economic and military competition between US and China

In this section we will look at the effects of the changing China-US relation. Both China and the US are grappling with slow growth – China’s growth is still around 6 per cent this year but is clearly on a slow downward trajectory since the Xi government aims to decrease financial bubbles and to diminish debt. While US growth seems steady, there is not much substance to it: non-financial profits remain below the levels of 2014 and once the effect of the tax cuts in the US has subsided, numbers will look different (Roberts 2018). And both countries grapple with a lot of corporate debt. This is the background scenario for the current economic and military competition between the still hegemonic US and the still emerging People’s Republic of China.

The national reorientation of parts of the US ruling class is based to a large extent on the interests of the military-industrial complex that aims to draw a demarcation line regarding which types of production are outsourced to China and other countries, for the fear of losing control over strategic intelligence and war technology. Due to the new type of productive forces in which production machines and war machines increasingly overlap (artificial intelligence, drones, satellites and other computer technology), the current form of outsourcing and arms-length manufacturing risks losing the upper hand in military technology and access to intelligence information. This is the essential interest behind the Trump strategy, and it is not possible to divide this into an economic and a military interest since both are essentially intertwined. In other words: If Wal-Mart produces clothes in Bangladesh or Ethiopia it is not of relevance for the military-industrial complex. If important lines of high-tech electronic communication products are partly produced in China, or Silicon valley startups are founded by Chinese capital, it is highly relevant (Foroohar 2018). Between 10 and 16 % of venture capital in Silicon Valley was financed by Chinese capital between 2015 and 2017 and 25 per cent of graduate students in relevant subjects in the US are Chinese citizens. So there is much cooperation in the AI sector between Chinese and US commerce and research which will be difficult to disentangle. One example is the artificial intelligence lab of Chinese tech giant Baidu in Silicon Valley — Baidu announced in 2018 a cooperation with state-owned China Electronics Technology Group (CETC) which develops electronic war technology for the People’s Liberation Army. At the same time, CETC cooperates with the University of Technology in Sydney on projects related to AI (Hille/Waters 2018).

The US government decided on first measures for a disentanglement: a broader mandate for the Committee on Foreign Investment that could block further Chinese investment in Silicon Valley; the Export Control Reform Act, legislated in August 2018, with stricter requirements for exports. A corresponding list that will serve as criteria for export controls is being put together and might be released in 2019. Nonetheless, a strict separation between civil and military use of electronics will be difficult to implement and would at least require close cooperation of the US with countries like Germany and Japan if crucial technologies i.e. hardware like precision tool makers for semiconductors and software for machine learning are about to be sealed off from Chinese companies. The Chinese economy is obviously lacking behind in the research and development capacity compared with the US (King 2014). But recent initiatives at least try to fill this gap: the Chinese government funded private companies who work on potential military technology with 55 billion US dollar (Feng 2018) and the Chinese private company DJI already is global market leader for commercial drones, and China is already the third largest exporter for military drones after the US and Israel (Hille 2018).

The ideological excess that comes with every political strategy led the Trump administration to go way beyond crucial technology and expand trade tariffs to a number of irrelevant goods like washing machines, solar panels etc. The main complaint by US think-thanks and government figures is that Chinese scientists may spy in other countries for the Chinese government, a practice that is only legitimate in the eyes of Western governments if they themselves use it. The trade war itself has until now mainly led to a slowdown of economic activity in general. Orders for US soybeans from China went down considerably, and the US trade deficit with China went up about 4 % in September 2018 – this can be a result of stockpiling in the face of a coming trade war, but could probably persist since consumer goods companies in the US rely heavily on Chinese imports (Tett 2018).

A second aspect of geopolitical competition between China and the US is about influence on third countries. China has set up the One Belt One Road Initiative as a massive infrastructure program, based on debt financing. It is significant that the US recently restructured its development agency, renamed as International Development Finance Corporation in order to systematically support US investments with a volume of 60 billion dollars. This move is clearly a response to the global Chinese strategy.

Another form to impose conditions on poorer countries is the Trump way of bilateral negotiations, under the threat of tariffs on exported goods, which aims to create favourable conditions for US capital, a newly packaged form of blackmail which ran as demands for ‘free trade’ since the 19th century, and now comes under the more honest label ‘America first’. One specific feature of Trump’s variant is that it is openly debated and not negotiated behind closed doors, often combined with hostilities and public attacks, and mixed up with strictly political agendas as in the case of the US pastor in Turkey, the border wall that Trump wants to build against Mexican immigration, and the personal attacks against the Canadian prime minister after the G 7 meeting.

Various countries will become a playground for this bidding for influence. While Western countries are still clearly ahead of Chinese influence in Africa, there are some countries in Latin America where Chinese investment exceeds US investment if not in some cases all Western imperialist investment altogether. This is why the political turn to the right in Brazil with its immense resource reserves in agriculture, iron, bauxit and above all petroleum was such a decisive manoeuvre. While Mexico with an incoming leftist president will probably balance between Chinese and US influence, Bolsonaro in Brazil can be expected to limit Chinese economic and political influence as much as possible. Given that a large part of Brazilian agrobusiness – Bolsonaro’s main power base – is competing mainly with US agrobusiness and is delivering the largest chunk of soy and other goods to China, it will be interesting to see how this contradiction will be managed on the ideological level.

3. The inability of capital to end the crisis

The phenomenon at the base of this form of economic restructuring is the inability of capital to end the current crisis. According to the theory of crisis of Japanese Marxist Uno Kozo, every crisis is an opportunity for capital to get rid of old capital equipment (via bankruptcies, downscaling etc.), and the crisis ends as soon as the productive capacities have been renewed with more updated technology (Walker/Kawashima 2018; Uno). Given the ongoing slump in labour productivity that we have pointed at in our contribution to the last issue, we witness the inability to update technology in those companies that are not major TNCs with an amount of 10-15 % zombie companies in the core capitalist countries. The subordination of emerging economies and the depreciation of their currencies is thus a displacement of this crisis since this will ease profit rates momentarily through access to cheaper goods in the face of lower currency rates, and increased access to raw materials and formerly state-owned enterprises or public sectors. The electoral victory of far-right Jair Bolsonaro in Brazil demonstrates this well: The privatisation of the education system, the postal service, further parts of state-owned energy companies like Eletrobras and Petrobras, and enhanced access to Brazilian oilfields and other mineral resources are the core agenda of the new incoming government. Thus, we are facing the mighty return of forms of the comprador bourgeoisie in Latin America, and possibly in other countries, trying to leverage both with the US and China (and Japan, Canada, Australia and EU countries) as investors and buyers, and without much scope for an independent national development. The illusion that emerging markets and the BRICS could delink from the imperialist core of capitalism was a short one. Thus, the alternative to a recovery of productivity growth — which capital seems unable to succeed with in the mid-term — is a more violent imperialism, and stricter subordination of emerging economies.

At the same time, the two leading economies, China and the US will continue to engage in a competitive struggle to get hold of high-tech technologies, both as productive and military capacity. The main aim of the US government is to stop the Chinese economy and government to catch up to the US in both areas, while a significant amount of Chinese economic sectors, like retail and fast food, remains under control of US companies (Starrs 2018). Both economies have their own zombie sectors that they struggle to get rid of and a high level of corporate debt. The way how China and the US will balance out between advances in the high-tech sector, the managing of debt bubbles and bankruptcies of SMEs, and the ability to increase or at least maintain wage levels of workers will be decisive in the coming year, and any major imbalance can lead to a new financial crisis as the volatile stock markets in late summer 2018 have shown.

Literature

Allen, Kate, 2018: Dollar strength hits emerging market bonds sales. Financial Times. November 7.

Feng, Emily, 2018: China pours money into private sector military technology. Financial Times. November 11.

Foroohar, Rana, 2018: Globalised business is a US security issue. Financial Times, July 15.

Hille, Katrin, 2018: China’s drone makers zero in on armed forces. Financial Times, November 9.

Hille, Kathrin and Richard Waters, 2018: Washington unnerved by China’s ‘military-civil fusion’, Financial Times, November 8.

Institute of International Finance, Global Debt Monitor – July 2018. July 9. https://www.iif.com/publication/global-debt-monitor/global-debt-monitor-july-2018

Johnson, Steve, 2018: Emerging market currencies at ‘multi-decade lows’. EM FX may be at its cheapest since the 1980s in inflation-adjusted terms. Financial Times, November 1.

King, Samuel, 2014: Lenin’s theory of imperialism: a defence of its relevance in the 21st century. Marxist Left Review, No. 8. http://marxistleftreview.org/index.php/no8-winter-2014/112-lenins-theory-of-imperialism-a-defence-of-its-relevance-in-the-21st-century

Kozo, Uno, Theory of Crisis, trans. Ken Kawashima, Leiden: Brill, forthcoming.

Roberts, Michael, 2018. America’s halfway house. 7 November. https://thenextrecession.wordpress.com/2018/11/07/americas-halfway-house/

Sender, Henny, 2018: China can no longer be counted on for EM growth. Financial Times, 7 November.

Starrs, Sean Kenji (2018):  Can China Unmake the American Making of Global Capitalism? in Leo Panitch and Greg Albo, eds. Socialist Register 2019: A World Turned Upside Down? London: Merlin Press; New York: Monthly Review Press.

Tett, Gillian, 2018: China is winning the trade war with America for now. Financial Times, 15 November.

Walker, Gavin and Ken Kawashima, 2018: Surplus alongside excess: Uno Kozo, Imperialism, and the Theory of Crisis. Viewpoint Magazine No. 6, https://www.viewpointmag.com/2018/02/01/surplus-alongside-excess-uno-kozo-imperialism-theory-crisis/

Weatley, Jonathan, 2018: Rising debt leaves emerging markets at epicentre of worries, Financial Times, July 14.

1 See Heiner Flassbeck and Ekrem Ekici on the crisis in Turkey here: https://therealnews.com/stories/turkeys-president-erdogan-vows-to-win-economic-war-with-u-s

Marxist or Keynesian macro? – Michael Roberts

Can we talk about Marxist ‘macroeconomics’? After all, macroeconomics is an invention of Keynesian economics through the development of the concept of gross domestic product and macro identities such savings equals investment etc.i Mainstream macroeconomics separated itself from microeconomics, the analysis of markets (supply and demand) or, to be more to the point, what is the value of a unit of production for sale. For the classical economists of the early 19th century capitalism, there was no distinction between the micro and the macro. The task was to analyse the motion and trends in ‘economies’ and for that a theory of value was a necessary tool but not an end in itself.

Microeconomics became an end in itself as a way of combating the dangerous development in classical economy towards a theory of value that implied the exploitation of labour and conflicting social relations. So the labour theory of value was replaced with the marginal utility of purchase by the consumer as a result.ii

Political economy’ started as an analysis of the nature of capitalism on an ‘objective’ basis by the great classical economists Adam Smith, David Ricardo, James Mill and others.  But once capitalism became the dominant mode of production in the major economies and it became clear that capitalism was another form of the exploitation of labour (this time by capital), then economics quickly moved to deny that reality.  Instead, mainstream economics became an apologia for capitalism, with general equilibrium replacing real competition; marginal utility replacing the labour theory of value and Say’s law replacing crises.

Macroeconomics appears in the 20th century as a response to the failure of capitalist production – in particular, the great depression of the 1930s. Something had to be done. John Keynesiii took marginalist theory from his mentor, Alfred Marshalliv, and dynamically moved it beyond supply and demand among individual consumers and producers onto the aggregate. Mainstream ‘bourgeois’ economics could no longer rely on the comforting theory that marginal utility would equate with marginal productivity to deliver a general equilibrium of supply and demand and thus a harmonious and stable growth path for production, investment, incomes and employment. The equality of aggregate supply and demand, Say’s law, was denied. It had to be recognised that capitalism was subject to booms and slumps, to (permanent) disequilibria, and thus to regular crises. And these crises had to be dealt with – to be ‘managed’. That required macroeconomic analysis.

In a sense, bourgeois economics had to put back the economic clock to classical economics – the study of aggregate trends – but without returning to ‘political economy’, which recognised that economics was really about social structure and relations and not a theory of things.

At first, it appeared that modern Keynesian macroeconomics had done the trick. In the ‘golden age’ of post-1948 capitalism, economic growth was strong, employment was full and incomes rose without significant increases in inequality (inequality was there, although, according to Thomas Piketty, it had been reducedv). So (macro) economics could provide policies to ‘manage’ capitalism successfully.

This turned out to be an illusion. The first simultaneous international recession of 1974-5 was followed by the deep slump of 1980-2 and growth slowed, unemployment rose and over the next three decades inequality of income and wealth rocketed. The final nail in the coffin of bourgeois macroeconomics was the Great Recession of 2008-9 and the subsequent Long Depression of low growth in output, trade, investment and wages for the last ten years.

Mainstream ‘bourgeois’ economics failed to spot the global financial crash and a slump that matched the crash of 1929 and the Great Depression. Mainstream economists considered a return of a similar crisis like the 1930s as impossible as most were stuck in the illusions of ‘demand management’ from the 1960s. Even worse, macroeconomics had suffered a reaction back to the ideas of general equilibrium and crises caused by ‘imagined shocks’. Dynamic stochastic general equilibrium (DSGE) models were the order of the day. Along with a revival of the equilibrium microeconomics of the marginalists and the Lucas Critiquevi, there developed a theoretical justification for deregulation, privatisation and weakening of the power of labour – wrapped up in the label of ‘neoliberalism’.

Recently, mainstream economists have been debatingvii why ‘economics’ was unable to see the global financial crash coming and/or provide effective policies to end it. Mainstream economists John Quiggin and Henry Farrell summed up the debateviii: some blame non-academic economists. Others blame prominent academics. Others still say that economic advice doesn’t really matter, because politicians will pay attention only to the advice that they wanted to hear anyway.”

But Quiggin and Farrell reckon the real reason that mainstream economics failed to be of any use was the lack of agreement among economists on what to do.  Economists could not agree on whether austerity was good or bad for the economy; or on whether economists had any influence over politicians.  And the reason for this lack of agreement was not due to differences on theory but to “sociology”.  By this they meant that mainstream economists are not pure objective ‘economists’ but are “deeply bound up with the political systems that they live within.”

Quiggin and Farrell explain that, “prominent academic economists, far more than other social scientists, are likely to go back and forth between universities and roles in the Treasury Department, Federal Reserve, International Monetary Fund and World Bank. This means that economics has far more political clout than other social sciences, but it also has reshaped the profession, turning external policy influence into an important form of internal disciplinary prestige.” 

In other words, economists with jobs in government and the central bank go with the flow (from the forces of capital): “So the world of economic politics and the world of economic thought are deeply intertwined. Channels of influence rarely flow only in one direction, as some economists have discovered to their dismay.”

This conclusion seemed to surprise as well as upset Quiggin and Farrell.  Yet, if they had read Marx, they would have expected nothing else.  As Marx pointed out 150 years ago, in a footnote to the chapter on Commodities and Money in Capital, while making the distinction between classical economics and vulgar economics“Once for all I may here state, that by classical political economy, I understand that economy which, since the time of W. Petty, has investigated the real relations of production in bourgeois society, in contradistinction to vulgar economy, which deals with appearances only, ruminates without ceasing on the materials long since provided by scientific economy, and there seeks plausible explanations of the most obtrusive phenomena, for bourgeois daily use, but for the rest, confines itself to systematizing in a pedantic way, and proclaiming for everlasting truths, the trite ideas held by the self-complacent bourgeoisie with regard to their own world, to them the best of all possible worlds”ix 

Even earlier, Frederick Engels had anticipated the trend of economics in his Outlines Of A Critique Of Political Economy in 1843: “The nearer to our time the economists whom we have to judge, the more severe must our judgment become. For while Smith and Malthus found only scattered fragments, the modern economists had the whole system complete before them: the consequences had all been drawn; the contradictions came clearly enough to light, yet they did not come to examine the premises and still accepted the responsibility for the whole system. The nearer the economists come to the present time, the further they depart from honesty”.

And in Theories of Surplus Value, Marx described the vulgar economists—by no means to be confused with the economic investigators we have been criticising—translate the concepts, motives, etc., of the representatives of the capitalist mode of production who are held in thrall to this system of production and in whose consciousness only its superficial appearance is reflected.  They translate them into a doctrinaire language, but they do so from the standpoint of the ruling section, i.e., the capitalists, and their treatment is therefore not naïve and objective, but apologetic.”x

In other words, all the obstruse theory presented by modern mainstream economics is presented as purely neutral, unbiased and logical, but in reality it is not “naïve and objective” but merely an apologia for the capitalist mode of production. “It was henceforth,” Marx wrote, “no longer a question whether this theorem or that was true, but whether it was useful to capital or harmful, expedient or inexpedient, politically dangerous or not. Pure, selfless research gave way to battles between hired scribblers, and genuine scientific research was replaced by the bad conscience and the evil intent of apologetic”.xi 

Recently, two mainstream economistsxii commented: “Any scientific enterprise needs to be grounded in solid empirical knowledge about the phenomenon in question. Milton Friedman put this well in his Nobel lecture in 1976: “In order to recommend a course of action to achieve an objective, we must first know whether that course of action will in fact promote the objective. Positive scientific knowledge that enables us to predict the consequences of a possible course of action is clearly a prerequisite for the normative judgment whether that course of action is desirable.” 

Sounds good, but unfortunately, they continued: “Many of the main empirical questions in macroeconomics are the same as they were 80 years ago when macroeconomics came into being as a separate sub-discipline of economics in the wake of the Great Depression. These are questions such as: What are the sources of business cycle fluctuations? How does monetary policy affect the economy? How does fiscal policy affect the economy? Why do some countries grow faster than others? Those new to our field or viewing it from afar may be tempted to ask: How can it be that after all this time we don’t know the answers to these questions?”  Indeed!

However, the authors remain optimistic. For them, the problem is not that economists are locked into an apologia for the capitalist system, but that it is difficult to ‘identify’ the right variables in any causal analysis. In other words, economics is a positivist science like physics but it is just behind in its understanding of ‘the economy’ compared to physics because of the extra difficulty in empirical work.

Economics could progress in the same way that ‘natural science’ has. Macroeconomics and meteorology are similar in certain ways. First, both fields deal with highly complex general equilibrium systems. Second, both fields have trouble making long-term predictions. For this reason, considering the evolution of meteorology is helpful for understanding the potential upside of our research in macroeconomics. In the olden days, before the advent of modern science, people spent a lot of time praying to the rain gods and doing other crazy things meant to improve the weather. But as our scientific understanding of the weather has improved, people have spent a lot less time praying to the rain gods and a lot more time watching the weather channel.“

Unfortunately for the authors, such progress towards the truth will not take place in economics. To think so is just naïve. To quote Milton Friedman as the epitomy of unbiased, objective positivist scientific analysis demonstrates that naivety. Friedman was the peer example of an ideologist for capital, including his job as an advisor for General Pinochet after his coup against the democratically elected government of Chile in the 1970s.

Yes, economics is a science, in my view.  More accurately, as Marx says, it is political economy, the study of the social relations of the capitalist mode of production. Yes, we need to test economic theories against the facts xiii by identifying the causal variables. Indeed, we should make predictions to test our theories.xiv

But do not expect the body of mainstream economics to do so in any systematic way.  It has been hopelessly distorted by the need to preserve and defend the capitalist system.  As the authors say: “Policy discussions about macroeconomics today are, unfortunately, highly influenced by ideology. Politicians, policy makers and even some academics have held strong views about how macroeconomic policy works that are not based on evidence but rather on faith.”

Ten years since the Great Recession, it is worth reminding ourselves of some of the lessons and implications of that economic earthquake.xv First, the official institutions and mainstream economists never saw it coming.  In 2002, the head of the Federal Reserve Bank, Alan Greenspan, then dubbed as the great maestro for apparently engineering a substantial economic boom, announced that ‘financial innovations’ i.e. derivatives of mortgage funds etc, had ‘diversified risk’ so that “shocks to overall economic will be better absorbed and less likely to create cascading failures that could threaten financial stability”.  Ben Bernanke, who eventually presided at the Fed over the global financial crash, remarked in 2004 that “the past two decades had seen a marked reduction in economic volatility” that he dubbed as the Great Moderation. And as late as October 2007, the IMF concluded that “in advanced economies, economic recessions had virtually disappeared in the post-war period”.xvi

Once the depth of the crisis was revealed in 2008, Greenspan told the US Congress, “I am in a state of shocked disbelief” He was questioned “in other words, you found that your view of the world, your ideology, was not right, it was not working” (House Oversight Committee Chair, Henry Waxman). “Absolutely, precisely, you know that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well”.xvii

The great mainstream economists were no better.  When asked what caused the Great Recession if it was not a credit bubble that burst, Nobel Prize winner and top Chicago neoclassical economist Eugene Fama respondedxviiiWe don’t know what causes recessions. I’m not a macroeconomist, so I don’t feel bad about that. We’ve never known. Debates go on to this day about what caused the Great Depression. Economics is not very good at explaining swings in economic activity… If I could have predicted the crisis, I would have. I don’t see it.  I’d love to know more what causes business cycles.”

Soon to be IMF chief economist, Olivier Blanchard, commented in hindsight that, “The financial crisis raises a potentially existential crisis for macroeconomics.” … some fundamental [neoclassical] assumptions are being challenged, for example the clean separation between cycles and trends” or “econometric tools, based on a vision of the world as being stationary around a trend, are being challenged.xix

As for the causes of the global financial crash and the ensuing Great Recession, they have been analysed ad nauseam since.  Mainstream economics did not see the crash coming and were totally perplexed to explain it afterwards. The crash was clearly financial in form: with collapse of banks and other financial institutions and the weapons of mass financial destruction, to use the now famous phrase of Warren Buffett, the world’s most successful stock market investor.  But many fell back on the theory of chance, an event that was one in a billion; ‘a black swan’ as Nassim Taleb claimed.xx

Alternatively, capitalism was inherently unstable and occasional slumps were unavoidable. Greenspan took this view: “I know of no form of economic organisation based on the division of labour (he refers to the Smithian view of a capitalist economy), from unfettered laisser-faire to oppressive central planning that has succeeded in achieving both maximum sustainable economic growth and permanent stability. Central planning certainly failed and I strongly doubt that stability is achievable in capitalist economies, given the always turbulent competitive markets continuously being drawn toward but never quite achieving equilibrium.  He went on, “unless there is a societal choice to abandon dynamic markets and leverage for some form of central planning, I fear that preventing bubbles will in the end turn out to be infeasible.  Assuaging the aftermath is all we can hope for.”xxi

Many saw only the surface phenomena of the financial crash and concluded that the Great Recession was the result of financial recklessness by unregulated banks or a ‘financial panic’.  This coincided with some heterodox views based on the theories of Hyman Minsky, radical Keynesian economist of the 1980s, that the finance sector was inherently unstable because “the financial system necessary for capitalist vitality and vigour, which translates entrepreneurial animal spirits into effective demand investment, contains the potential for runaway expansion, powered by an investment boom.”  Steve Keen, a follower of Minsky put it thus: “capitalism is inherently flawed, being prone to booms, crises and depressions.  This instability, in my view, is due to characteristics that the financial system must possess if it is to be consistent with full-blown capitalism.”xxii  

Of the mainstream Keynesians, Paul Krugman railed against the neoclassical school’s failings but offered no explanation himself except that it was a ‘technical malfunction’ that needed and could be corrected by restoring ‘effective demand’.xxiii 

But what about Marxist macroeconomics or to be more exact Marxian political economy? Were the practitioners of Marxism able to offer answers that the mainstream failed to do? My answer is short: in so far as Marxist economists adopted the macro analysis of Keynesian economics, they failed. In so far as they rejected Keynesianism and relied on Marx’s law of value (rejected by Keynes) and on his law of profitability (ignored by the mainstream), Marxist economists had something to say.

Most Marxists did not see the crash and the ensuing Great Recession coming either.  There were a few exceptions:  In 2003, Anwar Shaikh reckoned the downturn in the profitability of capital and the downwave in investment was leading to a new depression.xxiv And yours truly in 2005 said: “There has not been such a coincidence of cycles since 1991. And this time (unlike 1991), it will be accompanied by the downwave in profitability within the downwave in Kondratiev prices cycle. It is all at the bottom of the hill in 2009-2010! That suggests we can expect a very severe economic slump of a degree not seen since 1980-2 or more” xxv .

Very few Marxist economists looked to the original view of Marx on the causes of commercial and financial crashes and ensuing slumps in production.  Most Marxists accepted something similar to the Minskyite view, seeing the Great Recession as a result of ‘financialisation’ creating a new form of fragility in capitalism.xxvi

However, some did return to what Marx said and tried to make it relevant to now. One such was Guglielmo Carchedi, who summed that view up in his excellent, but often ignored Behind the Crisis with: “The basic point is that financial crises are caused by the shrinking productive base of the economy. A point is thus reached at which there has to be a sudden and massive deflation in the financial and speculative sectors. Even though it looks as though the crisis has been generated in these sectors, the ultimate cause resides in the productive sphere and the attendant falling rate of profit in this sphere.”xxvii Agreeing with that explanation, the best Marxist macro book on the crash remains that by Paul Mattick Jnr, Business as usual. xxviii

Marxist ‘macro’ has generally failed because it has been more Keynesian than Marxian; and it has been too easily attracted to the surface of things and not to the inner core of socio-economic relations under capitalism. The Marxian law of value has been regarded as irrelevant; the Marxian law of accumulation has been ignored; and the Marxian law of profitability denied. So Marxian macro has not developed a clear explanation of the causes of recent crises.

If we do not develop general theories then we remain in ignorance at the level of surface appearance.  In the case of crises, every slump in capitalist production may appear to have a different cause.  The 1929 crash was caused by a stock market collapse; the 1974-5 global slump by oil price hikes; the 2008-9 Great Recession by a property crash.  And yet, crises under capitalism occur regularly and repeatedly.  That suggests that there are underlying general causes of crises to be discovered.  Capitalist slumps are not just random events or shocks.

The scientific method is an attempt to draw out laws that explain why things happen and thus be able to understand how, why and when they may happen again.  Of course, it is difficult to get accurate scientific results when human behaviour is involved and laboratory experiments are ruled out.  But the power of the aggregate and the multiplicity of datapoints help.  Trends can be ascertained and even points of reversal. The Lucas critique was an attempt to deny this.

A general theory of crises also reveals that capitalism is a flawed mode of production that can never deliver a harmonious and stable development of the productive forces to meet people’s needs across the globe.  Only its replacement by planned production in common ownership offers that.

Marxist economics often seems divided between those who spend their time pouring over Marx’s works to understand their deeper meaning without relating it to contemporary events; and those who take empirical evidence without analysing through ‘the prism of value’ and so end up repeating the mistakes of bourgeois macro.

Interpreting Marx’s voluminous writings to ascertain what in his theory of crises is useful, but only to some extent.  Marx’s contribution must be the foundation of any effective and relevant theory of crises under capitalism.  But there can be many interpretations and Marx’s unfinished works lead to ambiguities that can exercise academics and scholars for a lifetime!  So there are severe limits on this type of research.  Even if we were to agree on what Marx’s theory of crises is (or even that he had one – because that is disputed), what if he were just wrong?

Moreover, it is 150 years since Marx developed his analysis of capitalism based on the main example of British capital in the mid-19th century.  The world and capitalism has moved on since then – in particular, it is the US that is now the dominant hegemonic capital, capitalism is now global and controlled even more than before by finance capital.  Thus a theory of crises must take into account these new developments.  Also, we have much more data and information to work on compared to Marx’s limited access.  The task now is not to keep analyzing and re-interpreting Marx, but to stand on his shoulders and raise our understanding. Marxian macro, like mainstream macro, faces the difficulties of empirical research, but that is no excuse for not trying.

For example, the difficulties of measuring the rate of profit from the view of Marxian categories are manifold.  First, we must use official statistics that are not accumulated in the best way to measure Marxian categories.  Indeed, some Marxist economists reckon that trying to measure the rate of profit using official statistics in money is impossible and pointless.  Others reckon that the data are so poor we cannot do it practically.  It is the job of any scientific analysis to overcome these theoretical and practical difficulties in measurement.  And many Marxist economists are doing just that.

On categories, should we measure the rate of profit of the whole economy, or just the capitalist sector, or just the corporate sector, or just the non-financial corporate sector, or just the ‘productive’ sector?  Should or can we include variable capital and circulating capital in the denominator?  Should we measure gross profit or net profit after depreciation?  Can we measure depreciation correctly?

Yes, there are big differences in the level of the rate of profit in different countries.  Theoretically, Marx’s law would suggest a higher rate of profit in so-called emerging economies where the organic composition of capital should be lower (more use of human labour).  And we would expect that, as these countries industrialise, the organic composition of capital would rise and the rate of profit would fall.  And the empirical work that has been done shows just that.xxix

Theoretically too, we would expect capital flows to be towards those economies with higher rates of profit.  There is some evidence to suggest this is the case – in the period of globalization, capital flows to the emerging economies rose sharply. But it is also the case that flows among the more advanced economies (Europe, US, Japan) are still larger.  That is perhaps due to trade and investment pacts and the huge stock of capital already in these areas.  Finance capital flows more efficiently and effectively there.  Also in the recent period of ‘financialisation’ and with falling profitability in productive capital, capital has flowed into fictitious capital markets (portfolio capital) and not into the more productive sectors. All these various measures are useful and possible.  The data are available for many major economies and many Marxist scholars have now made such measurements. 

What increases confidence in this work is that, by and large, whatever measure is used, it shows, for most countries, over time that the rate of profit has been fallingxxx, of course, not in a straight line because there are periods when the ‘counteracting factors’ dominate, if only for a while.  And each major slump produces a temporary recovery in profitability.  But these turning points are also broadly at the same time.  All this increases confidence that Marx’s law of profitability is valid and relevant to an explanation of recurrent crises under capitalism and also its eventual demise as a mode of production.

And yet Marx’s law is denied or ignored, not only by mainstream macro but also by the majority of Marxian economists. The reason that profitability is not considered in any discussion of crises is both ideological and theoretical. Mainstream economics has no real theory of crises anyway: crises are just chance, random events or shocks to harmonious growth under capitalism; or they are the result of the interference in competition and markets by governments, or central banks; or they are result of monopoly or financial recklessness or greed.  Mainstream economics also denies any role or concept of profit in its marginalist theories of production and demand. 

This is deliberate: there is no place for a theory of profit based on the exploitation of labour power (Marx’s value theory).  Diminishing returns on utility and productivity lead to no profit at the point of equilibrium. Also, heterodox/Keynesian theories deny the role of profit, as they too are based on marginalism and (im)perfect competition. Crises are therefore the result of a ‘lack of effective demand’ caused by an ‘irrational’ change in expectations (‘animal spirits’). It has nothing to do with the profitability of capital, apparently – or more precisely the exploitation of labour. And yet capitalism is a system of production for profit in competition.  So why is profit not a determinant in investment and production?  It is an ideological refusal to accept that.  Instead apparently, everybody gets their fair share according to their (marginal) contribution.  The mainstream finds no explanation of crises as a result; and the Keynesians look to ‘demand’ not profit as the driver of crises.

The mainstream view is understandable – as it represents the interests of capital, not labour and so denies the social contradictions involved. But it is less understandable why Marxian macro, on the whole, rejects profit and profitability as the underlying driving force of capital and thus regular and recurring crises of capitalism.

Take the most eminent Marxist economist today – with the widest popular appeal – David Harvey. Harvey has made it clear on numerous occasions that Marx’s law of profitability is irrelevant, wrong and even rejected by Marx himself (in his later years). So we must look away from the contradictions of the production of surplus value as the kernel of macroeconomic crises and instead consider the contradictions in other parts of the ‘circuit of capital’, namely the realisation and distribution of surplus value or profit.xxxi Harvey’s arguments are mainly theoretical and descriptive. There is little or no empirical work.

On the other hand, eminent Marxian economists, Gerard Dumenil and Dominique Levy base themselves very much on the data.xxxii D-L argue that the depression of the 1880s was a classic profitability crisis; that the crash of 1929 and the depression of the 1930s was not.  Instead it was one of rising inequality and debt, sparking a speculative slump.  The 1970s was another classic profitability crisis, but the global financial crash of 2008 and the Great Recession was similar to 1929 and the 1930s – a result of rising inequality and debt. Their main argument against the relevance of Marx’s law of profitability as an explanation of crises is the rise in profitability in the major economies from the 1980s.

But this development is explained by Marx’s law. Although profitability in the major economies stopped falling from the early 1980s up to the end of the 20th century due to counteracting factors, one of those counteracting factors was the switch from productive capital, where profitability did not recover, to financial and unproductive sectors like property.  Financial profits boomed and investment went into ‘fictitious’ sectors. 

Financialisation’ could be the word to describe this development.  But this buzz word in Marxist macro should not mean that finance capital is now the decisive factor in crises or slumps.xxxiii  Nor does it mean the Great Recession was just a financial crisis or a ‘Minsky moment’ (to refer to Hyman Minsky’s thesis that crises are a result of ‘financial instability’ alone).xxxiv Crises always appear as monetary panics or financial collapses, because capitalism is a monetary economy.  But that is only a symptom of the underlying cause of crises, namely the failure to make enough money! 

If Harvey and Dumenil-Levy are right, then we Marxists do not have a viable general theory of crisis as each major crisis under capitalism appears to have a different cause. So we may then have to fall back on the theories of the post-Keynesian/neo-Ricardians who look to a distribution theory, namely that some crises are ‘wage-led’ like the current one due to falling wage share resulting in a lack of wage demand; or ‘profit-led’, like the 1970s when wages squeezed profits.

But the evidence does not show that Harvey, Dumenil-Levy or the post-Keynesians are right.  All the major crises came after a fall in profitability (particularly in productive sectors) and then a collapse in profits (industrial profits in the 1870s and 1930s and financial profits at first in the Great Recession).  Wages did not collapse in any of these slumps until they started.

And Marx’s theory of crises does stand up to time. Marx’s law of profitability is intimately connected with Marx’s value theory as it rests on two assumptions, both realistic in Marx’s view.  The first is that all value is created by labour alone (in conjunction with natural resources) and that the capitalist mode of production and competition leads to a rising organic composition as a trend.  But capitalism is a monetary economy.  Capitalists start with money as the crystallised form of previously accumulated value, and then advance money to buy means of production and employ a labour force, which in turn produces a new commodity or service (new value) which is sold on the market for money.  Money leads to more money through the exploitation of labour.

Capitalism is a monetary economy but it is not a money economy (alone).  Money cannot make more money if no new value is created and realized.  And that requires the employment and exploitation of labour power.  Marx said it was a fetish to think that money can create more money out of the air.  Yet mainstream and some heterodox (even Marxist) economists seem to think it can.  When central banks expand the money supply through printing ‘fiat’ money or creating bank reserves (deposits), more recently so-called quantitative easing, this does not expand value.  It would only do so if this money is then put to productive use in increasing the means of production or the workforce to increase output and so increase value.  But, as Marx argued way back in the 1840s against the ‘quantity theory of money’, just expanding the supply of ‘fiat’ money will not increase value and production but is more likely to inflate prices and thus devalue the national currency, or inflate financial asset prices.  It is the latter that has mostly happened in the recent period of money printing.  Quantitative easing has not ended the current global depression but merely sparked new financial speculation. 

Unlike the Keynesians, the movement of personal consumption is not the driver of slumps, it coincides with them, and so is part of the description of a slump.  Indeed, personal consumption does not fall much in recessions (even in the Great Recession).  What does fall heavily is capitalist investment and this drops before the slump or any fall in consumption or employment.xxxv  So business investment is the driver not consumption.  Investment is part of ‘aggregate demand’ to use the Keynesian category, but it is led by profits and profitability – contrary to the theoretical view of Keynes-Kalecki who see investment as creating profit.  Their view is partly because Keynes and Kalecki accepted marginalism and rejected Marx’s value theory of profit as coming from the exploitation of labour.  Indeed, for Kalecki, profit is only ‘rent’ that comes from monopoly power replacing competition.  Thus we have loads of heterodox explanations of modern capitalism as one of ‘rent extraction’, monopoly capital, finance capital – but not plain capitalism making profit from the exploitation of labour.

If Marx’s laws of value, accumulation and profitability are invalid, either logically or empirically, then we would have to recognise that alternative macro theories may be right that imply capitalism can succeed, with or without ‘management’. And macroeconomic policies designed to ‘correct’ disequilibria can work.

Indeed, this is the message of many leftist heterodox economists that rely on a radical version of Keynesian theory. Keynes saw all his policies as designed to save capitalism from itself and to avoid the dreaded alternative of socialism. xxxvi For the most part, I think that Capitalism, wisely managed, can probably be made more efficient for attaining economic ends than any alternative system yet in sight, but that in itself it is in many ways extremely objectionable. Our problem is to work out a social organisation which shall be as efficient as possible without offending our notions of a satisfactory way of life.”  So “the class war will find me on the side of the educated bourgeoisie.”  

Keynes reckoned that as capitalism expanded, it would, through more technology, create a world of abundance and leisure.  Because of that abundance, the return on lending money to invest would fall.  So bankers and financiers would no longer be necessary; they could be phased out.  Well, that does not seem to be happening.  Indeed, the very ‘heterodox economists’ who claim that Keynes is a ‘progressive’ economist with great similarities to Marx now argue that capitalism is being distorted by ‘financialisation’ and finance capital – and that is the real enemy.  But what happened to the gradual phasing out of finance in late capitalism a la Keynes?

In contrast, Marx’s theory of finance capital did not foresee a gradual removal of finance; on the contrary, he describes the increased role of credit and finance in the concentration and centralisation of capital in late capitalism.  Yes, the functions of management and investment become more separated from the shareholders in the big companies, but this does not alter the essential nature of the capitalist mode of production – and certainly does not imply that coupon clippers or speculators in financial investment will gradually disappear.

So I reckon that the differences between Keynes and Marx are fundamental and any superficial similarities pale in comparison.  That is important because it is Keynesian macro that dominates in the labour movement, not Marxist macro, 200 years after his birth.xxxvii

vi The Lucas critique, named for Robert Lucas’s work on macroeconomic policymaking, argues that it is naive to try to predict the effects of a change in economic policy entirely on the basis of relationships observed in historical data, especially highly aggregated historical data https://thenextrecession.wordpress.com/2018/01/21/the-macro-whats-the-big-idea/

xxx See Carchedi and Roberts, A world in crisis: a global analysis of Marx’s law of profitability, Haymarket October 2018.

xxxiii file:///C:/Users/ToshibaT/Downloads/2ndWorldMarxismCongresspaper%20(1).pdf

Forget the Anthropocene (for a minute); we are living in the Idiocene – Toby Carroll, Jörg Nowak

Last year, Nordstrom’s advertised jeans caked in fake mud for US$425 dollars, creating a storm on social media. It was but the latest micro-level sign – complementing a surfeit of macro indicators – that we live in a sort of end times in which the idiots have ascended and the masses are dosed up on bread and circuses; a period characterised by a rotten ruling class, infotainment, crumbling education systems (that do the opposite of preparing people for purposeful participation in civic life) and palliative consumption, the latter assuaging the banality of everyday life with ever-diminishing doses of dopamine.

The fake mud jeans, a grotesquely ironic garment manufactured by exploited labour yet channelling working class chic, are still in reach of some middle class consumers, albeit probably via credit and at around six times the minimum monthly wage in Bangladesh. Yet, this garment was striking for both hinting at and forgetting the working class; emblematic of the conveniently compartmentalised lives that many now live, that seamlessly leverage off incredible levels of ignorance (especially of social, political and environmental realities), cynicism, technology-fuelled escapism and debt.

At the top end of town, we are now presented with a truly surreal smorgasbord of hyper-decadent forms of luxury consumption and apocalyptic panic within the global elite – with both often combined into a hedonistic end times elixir. The most striking examples are perhaps the Silicon Valley libertarian elite variously buying large swathes of the land in supposedly safe and social democratic locations such as New Zealand and or plotting to place humanity’s survival on colonising distant and hostile planets.

In February 2017, media reports revealed that Peter Thiel, PayPal’s co-founder, Facebook’s first professional investor and a prominent Trump supporter, was granted New Zealand citizenship under ‘exceptional circumstances’ after he purchased a large property without requiring foreign investment approval. This revelation was met with nonchalance from within the tech elite, who retorted that purchasing a New Zealand property was simply code for ‘apocalypse insurance’.

While YouTube is now littered with everyman doomsday preppers, flogging both prepper-ware on eBay and knowledge of how to ride out the coming zombie-film-esque end by storing canned food, building a bunker and engaging in combat training and survival tactics, the Silicon Valley variant are evidently preparing their own airfields and keeping their aircraft fully fuelled.

All of this is happening instead of, for example, investing in proper social security systems funded out of taxing people precisely like Thiel; an approach built to avert apocalyptic uprisings by establishing the sorts of socially-grounded institutions that libertarians so despise. In essence, these supposedly smart Silicon Valley superrich – who despite being socially stupid, attract near-automatic reverence from many – spend their wealth on constructing high security prisons for themselves, while doing their bit to tear up social compacts that were won by working classes. Meanwhile, such hypocrisy has the added ‘bonus’ of challenging housing affordability in host countries, with new propertied classes and estate agents relishing in housing price increases while everybody else struggles with stifling rents and an inability to buy property in an environment of declining social mobility and stagnating wages, the latter fuelled by the sorts of policies that neoliberals and libertarians treasure so dearly.

At the same time, ultra-libertarians in the tech industry have made huge profits and increased share prices by selling high-tech surveillance systems to, and making Faustian bargains with, state agencies and supporting true idiocratic royalty, such as Donald Trump. Their proclaimed belief in radical ‘independence’ from the state is easily compartmentalised, mostly to the culling of any social services that impose costs on their ability to accumulate, and they easily turn a blind eye to the inconvenient manner in which populists like Trump advocate policies that are far from libertarian or neoliberal in nature. Indeed, their ability to accumulate such staggering wealth is often dependent upon the plundering of public budgets and delivering crucial infrastructure to strengthen repressive state apparatuses. On this front, Thiel’s company Palantir was contracted to build and maintain a new system to help the US deportation agency ICE to integrate data and establish a comprehensive surveillance of immigrants. And despite their ostensible brilliance, it is now apparent from the Cambridge Analytica and US election influence scandals that the vast social media systems that big tech have developed – systems that feed people much of their information about the world – are easily gamed and exploited.

In terms of compartmentalisation and contradiction, there are of course myriad, and seemingly more modest, versions, including the so-called ‘climate refugees’ and ‘falling stars’ – part of the new cashed up Chinese elite living in urban areas. These people respectively use their holiday time to go to countries like Iceland where the air is still clean or upload photos of themselves on social media falling out of German cars and the like with luxury items sprayed out in the most ostentatious, yet supposedly cute (read ‘infantile’), displays of wealth.

With the apparent impossibility of making companies in China adhere to environmental law in an if-it-grows-it-goes atmosphere (crucial to maintaining political legitimacy and accumulation and supplying the outputs that algorithms ensure consumers buy), the trip to Iceland or Wales during the Lunar New Year holiday has actually become a very popular option, which is seen as having the added bonus of contributing to the economy.

Indeed, business experts exalted the fact that during the 2017 Lunar New Year, climate refugees helped bolster the revenues of airlines and the tourism industry, while of course neglecting the inconvenient fact that these climate refugees were contributing to further climate change and pollution by massively boosting carbon emissions. And the lower classes haven’t been neglected in benefiting from market solutions to extant conditions. For the less well off in China, people can now purchase cans of fresh air from places such as – wait for it – New Zealand.

We could go on and expand the list of ridiculous scenarios that characterise the idiocene era: the Russian billionaire intent on reconstituting the Russian monarchy on a Pacific Island; Jeff Bezos’ plans to engage in space tourism; the Australian billionaire determined to build a replica of the Titanic; the blatant tax dodging and egregious corruption now found at the highest levels all over the place from Europe to Asia that seems to receive little more than a collective shrug or the endorsement of an often equally questionable reactionary populist politician.

The essential message here is that the global elite has become so detached from the workings of everyday life that its members appear to have no concern for notions of maintaining legitimacy. This is not just about politicians in Hong Kong, South Korea and the US who don’t know how to buy toilet paper or metro tickets (which shouldn’t be surprising given that they never use public transport or shop at convenience stores). It’s about a complete loss of ideological and political leadership amidst various grand economic, political and environmental crises combining to reinforce one another.

The complementary double to daft idiocratic luxury consumption is the idiocratic politician. Bequeathed to us by politicians such as Clinton, Blair, Obama, Hollande and Merkel of the ‘extreme centre’, as Tariq Ali has dubbed it, the original purveyors of false fixes who advanced progressively-packaged policies that actually increased inequality and precariousness for many, idiocrats like Trump, Bolsonaro, Modi, Erdogan, Duterte, and Le Pen are increasingly successful.

Political idiocrats like to trade off their status as outsiders and or being self-made, ignoring the usual etiquette of more established liberal elites. However, they have even less of a clue of how to deal with today’s problems than the pseudo-progressive politicians that they now replace. Indeed, the idiocrats are the political equivalent of the doomsday preppers: instead of facing fundamental problems, they deny them, or retreat to dog whistle ‘solutions’ such as national identity, religion or national security.

The idiocratic action plan hinges simply upon simulating the capability to act, presenting the appearance of being action men in a world that has escaped our control, as Eric Hobsbawm once put it, while they are in reality completely incapable of conceiving and addressing problems that are beyond efforts limited to the nation-state and their anachronistic ideologies.

That the global elite is moribund and bereft of solutions is on display for all to see, and this is potentially good news. It is the first serious step in creating a new world that works for the many rather than the few. However, truly progressive change demands ideological leadership and coordinated action to shake populations from bread and circus distractions and deep cynicism, the latter only finding solace in preparing for the end. It also requires solidarity against the powers that be, remembering that the only real solutions are political, demanding a rebalancing of power and a wholesale transformation in the institutions governing human activity.

It seems quite emblematic of the ideological limitations of the technology-and-science-can-fix-everything times that we live in, that the only idea that the late Stephen Hawking could come up with in early May 2017 to solve the grand crises facing humanity was to leave Earth altogether; a truly outlandish substitute now taken seriously by many for the actual necessity of getting rid of the global elite and the socially and environmentally destructive system that it defends.

Imperialism and Neo-Protectionism In The Trump Era – By Adrián Sotelo Valencia

Introduction

Up until now the investigations, judgments, predictions, analyses, desires, and projections about the recent electoral process of the United States have been studied through examining the campaign speeches given by Mrs. Clinton and Mr. Trump, the latter being elected president by the Electoral College. This current anti-democratic electoral system differentiates the vote of the “popular vote” to that of the Electoral College. The “popular vote” went to the Iron Lady, Mrs. Clinton with a 3 million differential against the business magnate Trump, losing only the Electoral College and as a consequence the presidency.

In the United States, the president and vice-president are chosen in November, not by the general public but by 270 delegates who, after being voted in, join the elitist Electoral College, which has a total of 538 members. That is, there is no universal, direct, and secret election but only an indirect one. As is the case in other capitalist countries, the founders of the country decided in 1787 that the general public should not be trusted, instead giving all the power of election to the states. This system was ratified by the Twelfth Amendment of the Constitution in 1804 and survives to this day.

A heap of analyses, opinions, and reports, from mass media or from social media networks, were diffused to coincide with the speeches of the candidates as an attempt to persuade the general public to support and vote for them. Mrs. Clinton’s discourse was practically the same as the arguments of past Democratic presidents, prioritizing warmongering threats against Russia and China. Meanwhile, the xenophobic, racist and conservative Trump primarily went against the undocumented and immigrants in general. He promised to “recover” the power of the United States — framed in what is known as “American Exceptionalism,” Dixit Seymour Martin LIPSET (2000) — through protectionist policies that have already existed under the neoliberalism of the “free market” functional to advanced capitalism in the environment of the “Welfare State” that everyone criticizes and repudiates today, especially the supporters of the “free market” (IMF and WB).

Despite this, we must point out that from a historic and imperialist geopolitical view, both of these discourses combine when their interests are threatened in any circumstance. In this sense, there should be no illusion of a “benevolence” from any of these forces when it comes to the problems and contradictions of capitalism as they will always position themselves against the workers and the oppressed peoples.

The elected president also promised to give a revitalization to the country’s industrialization that, according to him, was seriously damaged by past administrations. Very briefly we must point out that while Clinton represents the interests of a faction of the imperialists of speculative financial capital (of the fictitious type), Trump represents the faction of industrial capital that has lost out to inter-capitalist competition on a global scale. In particular, to active competitors such as China who has expanded its radius of action in recent years, namely in Latin America and Africa

Since it was Mr. Trump who was elected to head the imperialist presidency by this political system for the next four years, we center our analytical commentary on the perspectives that are opened up under his influence, especially in relation to Mexico’s subordination to the United States.

Imperialism as a system of domination

The United States cannot be treated as any other country with which it could be compared to (Mexico, South Africa or Brazil); additionally and different to these, it is the main representative and chief of the capitalist-imperialist world system through its economic and financial organisms such as the IMF and the WB; diplomats, such as the UN; the ministry of the colonies, as is the OAS to the United States, and militaries, such as NATO. This is often forgotten. Therefore, we agree with those who affirm, correctly, that whatever candidate is voted in by the College as president would, essentially, not change neither the vocation nor the imperialist practices of the United States on a global scale: he may have his own peculiar way of governing and making decisions but this is all within the unalterable framework of its imperialist policy in the world.

What is sure is that the electoral ritual was performed and now the president-elect is precisely the authoritarian business magnate that has promised to deport three million undocumented people from his country, claiming they are “thieves, murderers, addicts” among other labels, accentuating his profound racism and xenophobia and infecting North American society with it.

We are dealing with an imperialist system, which Lenin and other Marxist analysts of imperialism have depicted. Trump’s emergence does not in any way signify a change to its essence but rather the reaffirmation of this global capitalist system that came up in the middle of the nineteenth century. The United States continues to be an active protagonist despite this system’s accumulating problems and relative decadence as has been demonstrated by some authors linked to world system analysis as well as the Marxist theory of dependency.

With the endorsement and power given to president Trump by the imperialist system, he has reiterated his plans to build a wall along the border of the United States and Mexico to stop the influx of undocumented people, affirming that it will be paid for by Mexicans themselves. He has also said he will confiscate the remittances, that’s to say the salaries, of millions of undocumented workers gained from the work they carry out in the United States.

The media campaign that was carried out after Trump’s victory helped to highlight the atrocities and hardships that would emerge in the world economy, the United States, as well as in Mexico and other Latin American countries, after his ascendency to the presidency in January of 2017. However, this media coverage only helps to cover up the evident widely felt frustration that Mrs. Clinton was not favored by the electoral college, as most polls had suggested she would. All the more frustrating since she had obtained more of the popular vote against her competition who, at one point, even said he would not acknowledge the results if he lost. Though they are atrocities we insist that they are must be understood as hereditary of an imperialist system, independently of who it is headed by.

What is more concerning is that sections of the Left have adopted this argument from an angle that defends the ominous and Neo-Panamericanist treaties such as the North American Free Trade Agreement; presenting personalities of the dominant elite such as Mrs. Clinton or Obama as “democrats and human right defenders”. Most unfortunately, they present them as the only alternative that could resolve the crisis in the global capitalist system, without understanding that the crisis is a genuine product of its structural, social, political and military contradictions that exceed, per se, the individual actions and good intentions of the rulers.

There’s little doubt that the swearing in and subsequent presidential term of Trump and his team of white multi-millionaires will have an impact on the world with their peculiar manner of intervening in domestic and world events. Two examples will suffice to illustrate this point. The president-elect managed to “convince” the owners of the North American company, Carrier, which specializes in air conditioning equipment, to stop moving its factory to Nuevo Leon State, Mexico, to supposedly “save” around one thousand jobs of North Americans in Indiana. Will the owners of the said company really maintain the salaries of these workers even though they are 14 times higher than the salaries they would pay Mexicans? Furthermore, the president-elect caused a diplomatic fallout due to a phone call with the president of Taiwan, causing the Chinese Foreign Ministry to complain to the United States for neglecting the diplomatic protocol which has been observed for decades.

We can add a third example: the racist and xenophobic irradiation from Trump and his entourage of white business magnates into their country’s social fabric, have intensified racism and has encouraged fascist organizations and militant ultra-right groups like the Ku Klux Klan, who have even held demonstrations in support of the president-elect. Thus uncovering the sewers of age-old historical racism, as well as uncovering the reality of class struggle in the United States.

These facts demonstrate the peculiar behavior of a ruler who must nevertheless be viewed from the unalterable framework of imperialist politics to which all representatives of the United States are obedient, within their own country as well as in relation to the rest of the world. Mexican authorities, from the presidential level, have docilely folded their arms when it comes to the threats that Mexican people will have to pay for Trump’s wall. Using the FTA as leverage, the United States have threatened to pull out from the agreement which will evidently cause job losses — the majority of which are precarious and badly paid — likely increasing the already intense crisis unfolding for the Mexican neoliberal capitalist owners whose sustenance is dependent on the manufacturers for exportation that has up until now only really benefited the big North American transnational companies. There has been no significant reaction from the representatives of the Mexican political regime who are, undoubtedly, waiting to receive orders from Washington to act. That is, to conform to their designs.

The parameters and coordinates of imperialism

Historically, capitalist-imperialism has constructed geopolitics and strategic coordinates and parameters of its action in the world’s space. The coordinates define the location and position in distinct places and spaces of the earth where, generally, military bases are established in order to guard and reproduce its interests. The parameters are what guides imperialist action in terms of achieving its objectives as set out in the coordinates. The above is described in order to argue that the imperialist system is not limited to the action of one country, be it the United States, Germany, France or England, a block (NATO) or a region (EU); rather, it corresponds to a global system within the very structure of operation of the historical capitalist mode of production in its current phase that we can characterize as neo-imperialist.

In this context, we insist that independent from the personality that may occupy the imperial presidency, namely the United States, the person in power must move within the strict framework that determines the parameters and coordinates of an imperialist system. In order for it to reproduce itself it has to comply with the established actions of deploying investments, land appropriation, invasions of nations and the imposition of any necessary policies (protectionist or free traders), reserving at any moment to resort to the use of force, and, as a last resort, to imperialist war.

A paradigmatic example today is Syria where the imperialist project commanded by the United States and the terrorist forces against the legitimate government of President Bashar Háfez al-Ásad who, whit the military, logistical and strategic support that Russia lends him as an allied power, exterminating extremist groups and liberating the territory in favor of the Arab nation. In this case, it is irrelevant if the Imperial Presidency is occupied by Obama, Clinton, or Trump. Ultimately, the only thing that changes is the “style of governing” but only within the structural context of the geopolitical and military interests that predominate it. That is why it is an illusion to think that the course of history would change if Clinton or another person had been elected over Trump. For example, in both cases there would have been no change in the behaviour of the United States towards Latin America in terms of trying to defeat progressive governments (Venezuela, Bolivia and Ecuador) as they already have done in Argentina and, through a parliamentary coup, in Brazil in the interest of North American organizations such as the IMF and WB.

Another example is the racist and xenophobic tirade by President Trump against immigrant workers and, especially, against undocumented Mexican migrants whom he has insulted through stating that he belongs to the white bourgeoisie and that they are simply Indians, drug addicts, criminals, and rapists, threatening to deport them from his territory. Similarly, he has threatened to reject the “North American Free Trade Agreement” that has been commanded, since its inception, by the big transnational companies who are predominantly North American, including Canadian and some Mexican businessmen, who are completely subordinated to their interests and mandate. In this respect, there has been a series of worries, alarms and tearful auguries that affirm that if this Pan-Americanist trade agreement were to disappear, the whole world would enter into a situation of chaos and anarchy, and the whole (capitalist) system would come to an end. These predictions reveal the extent to which great international capitalists invest and act in that ominous agreement. Of course, this calamitous scenario is promoted by the hegemonic media with a seat in the developed countries of advanced capitalism and their correspondents in the underdeveloped countries, generally dependent of and promoters of the dominant ideologies and therefore playing a central role.

Imperialist protectionism

As the representative of the interests of the factions of industrial capital in the United States, President Trump has proposed to boost a kind of protectionism, even threatening to sanction and tax businesses that look to invest and take their factories abroad, particularly to Mexico where real wages per hour are at around ten or fourteen times lower than in the United States. The deception in this policy is not so much that it cannot be practiced in real life, as has been shown in the different phases of the history of capitalism. It is more so due to the fact that his proposal, that has a certain dose of demagogy coming from a businessman-president prone to liberalism, is made in a moment when global capitalism finds itself submerged in a profound structural crisis. A crisis that is not just commercial, financial, trade and monetary, but also a natural crisis that is much more complex and profound. A crisis that is expressed in the ever more difficult ways that this system can produce the value and surplus sufficient to reverse today’s economic recession and, at the same time, predicting a new phase of growth of the global economy (Sotelo, 2010 & 2015). Although significantly lower than what was recorded in the period after World War II (called the “glorious 30 years”) a gloomy picture of quasi-stagnation is presented, only solved by the dynamic economies such as China and India who are nevertheless also presenting difficulties in recent months that concern the monetary and financial circles and businessmen of the West.

This is, then, the scenario of capitalist crisis in which the US government will have to operate for the next few years under the presidency of the Presbyterian D. Trump and, it seems, this will not just be a job for one government, but also for the other conservative governments of Europe, of Japan and Latin America, particularly, where rights and social gains have been drastically reversed against workers and the people as in Argentina and Brazil.

The crisis in Mexico is not just because of the uncertainties and convulsions of the national monetary and financial system caused by the presidential elections in the United States — and that actually benefits speculators and rentiers — but, fundamentally, because of the structural historical condition of the country’s dependence on the dynamics of the US economic cycle which subsumes virtually all of the Mexican macroeconomic variables to its designs. To such a degree that at present the pattern of accumulation of manufacturing-export capital depends on more than 80% of North American imports, enough for the government in power to the North to make it difficult for commercial transactions between both countries. Similar to the Cuban boycott, it submerges the national economy in a deep pit hardly surmountable under the vicissitudes of the validity of neoliberal policies widely promoted by the government regime led by the PRI and the Mexican partycracy.

This regime is precisely the fundamental variable necessary in order to keep things as they are, independent of the changes that have occurred in the North American political system. The Mexican authorities have their arms folded in response to the declarations of the new government of that country and have rushed to take a series of measures framed as so-called structural reforms (energy, labor, financial, educational). They have privatized public enterprises, particularly the energy sector, and sacrificed the rights and living and working conditions of the population by cutting social budgets in the areas of education, housing, health, pensions. They do this as a way to try and ease the difficulties rooted in the profound economic crisis of the country as well as to preserve their interests as the dominant class in a country that is dependent and underdeveloped before the power of the new imperialist bloc led by President Trump.

Everything points to the government and the lumpen-bourgeoisie businesses of Mexico maintaining their status as dependents and subordinates to the strategic interests of imperialism. In this scenario, it is probable that the political and social situation of the country, while it will become ever more complex, of course, will continue to be a huge problem for the majority of the people.

The gradual and surreptitious delivery of Mexican territory to transnational companies in energy, mining, water, natural resources, infrastructure, etc., adds to the historical-structural dependence of the country a new neocolonial status. A status that is entirely favorable to the geopolitical and strategic-military interests of the United States which, as we have already stated, under the permanence of this condition of dependent subordination of the country, will only expand and deepen under the auspices of the government of President Trump in the next four years and, probably, for another four years, until 2025, if he is re-elected by the College of Electors once his first term ends.

Crisis of imperialism, crisis of capitalism

The backdrop of the Obama administration fell like a heavy slab on a government that reaped the most negative results of recent decades. Not just because the Democratic candidate lost the elections, after having shown that she had the support of Wall Street and financial capital, but also because she had practically lost the war in Syria. The legitimate government of that country, with overwhelming military support from the Russian government, was able to finally liberate the strategic city of Aleppo, pushing out the terrorist forces that sought to divide the country favoring the geopolitical interests and strategies of the West and the United States. Lacking arguments to justify said defeat, the outgoing President Barack Obama accused Vladimir Putin of being Trump’s “promoter”; the architect of his triumph through “cyber-spying” practices used against the Democrats and their presidential candidate. The same candidate that was investigated and discredited by the FBI in a sort of “soft coup” using controversial emails that incriminated her in endangering the security of the State.

During his annual speech, the Russian president pronounced himself on this case: “the administration of the outgoing United States President, Barack Obama, divided the nation due to calling for a rejection of the new president-elect (Donald Trump); this is a step toward dividing the nation”. He also reminded his audience that the Democratic Party did not only lose the presidential elections but also the Senate and Congress where the Republicans now have the majority of seats. He then, ironically asked: “was this also my doing?”, alluding to the accusations that make him directly responsible. “All of this demonstrates that the current administration suffers from structural problems and the elites of the Democratic Party do not understand reality”. He took advantage to affirm “… I see the data that says that 37% of the Republican Party voters sympathize with the President of Russia… this means that a great part of the United States public has the same idea about how the world should be, our common problems and dangers” (EFE and AP, Moscow, Russia, December 23, 2016).

These facts show, in the context of the crisis of the international capitalist system a point of inflection in word history characterized by the relative decline of the United States hegemony. They also show the emergence of new powers such as Russia, China, India, Iran, North Korea, among the most important and with undoubted nuclear capacity to destroy the planet several times over.

It is not by chance, therefore, that the rhetoric of the United States president resuscitates the old protectionist and nationalist policies and ideologies entangled with a furious racism, an exacerbated xenophobia and the practically unrealisable promise to recover the so-called “American exceptionalism” for “the good of the American people”, returning the historic imperial power which it had against most nations, particularly after the World War II. This “ideal” of the elected business magnate only helps to remind us of that phrase which was impregnated with racist stench, written by California’s State Attorney in 1930: “… It was us, the whites, that founded America first and we want to protect ourselves in our enjoyment of it” (Chomsky, 2011: 4).

In the mind of President Trump there is a dangerous imperial hologram that radiates rays of light in opaque circles that gradually dissipate until they practically vanish. Flanked by borders and walls that divide them, not only geographically, physically, territorially, and culturally, the United States intends to “shield itself” from “external enemies” such as the bulky and “dangerous” human crowds, like the millions of undocumented Mexican workers, that the new government equates to terrorists. It intends to do this by using its powerful military and anti-immigrant paramilitary groups (such as the official border patrol) and racists (such as the Ku Klux Klan), which most of the time is supported and promoted by the government of (okay? Yes) the United States. This is just a continuation and deepening of Obama’s “border security”, in other words its militarization, only now it is presented by Trump.

Up until now the Mexican authorities have done nothing but wait docilely, hoping for the new government of the United States to “sit down and negotiate”. It has to be made clear that you can only negotiate between equals and not while you are a subordinate as is the historical status for governments of nations that are dependent and oppressed as is the Mexican nation, who share similar migration policies towards its southern neighbour states with its northern neighbor, and to which they have always remained silent and submissive when it comes to deportations, murders, massacres and the ruthless super-exploitation of undocumented workers who receive some of the lowest wages in the world.

The delusions that things will improve when both countries feel they are negotiating, is not only a chimera, but a way of covering up their behavior, the harsh reality for millions of workers who cross the border every day in search of the much-sought and now deteriorating “American way of life”: in reality super-exploitation, precariousness of work and the ripping apart of social life.

One of the comparative advantages between Mexico and the United States, in terms of immigration and the cycle of capital, has been precisely the economic annexation of the former by the latter, which has led, historically, to agricultural and manufacturing production based largely on export maquiladoras. The Mexican economic system has specialized in the massive export of supernumerary, cheap, docile and flexible workforce that has practically no human and labor rights and that has nurtured the ranks of the army of workers in the United States allowing the bosses of this country to obtain large and juicy profits in their industries.

Therefore, undocumented activity is not, as the American president thinks, something harmful for the economic cycle and the reproduction of capital. On the contrary, it turns out to be the greatest advantage that North American capitalism has to obtain high rates of exploitation and masses of surplus value derived fundamentally from the combined mechanisms of intensive and extensive labor and the very low salaries that, even today, are below the wages of Chinese workers and other countries of the so-called third world.

This is one of the advantages that explains the historical dynamism of the US economy at least since the 1960s. That is why we say that the protectionist policies that President Donald Trump threatens to impose as part of his safety and labor policies in practice are not only doomed to failure. They will also have to be reworked according to reality, to a global competitive capitalism which is in crisis and whose internal dynamics of operation has installed super-exploitation of labor as the best system of production of surplus value and capital accumulation based on labor flexibility, labor deregulation, low wages, and on the monumental precarization of the components of the world of work and in the savage rejection of workers’ social and contractual rights practically all over the planet (SOTELO, 2018).

Following are just some of the myths that mobilized sectors of the electorate, including Hispanics, to vote for the Republican candidate: a) Immigrants take American jobs. b) there being a very limited number of jobs, a greater number of immigrants will bring more competition that will put a downward pressure on salaries. c) Undocumented workers, foreigners, particularly Mexicans that constitute the majority, are vicious, rapists and criminals, the reason why social life in North America is degraded. d) North American unions are against immigration because it harms the white American working class. e) Immigrants do not pay taxes. f) They are a burden on the economy. g) They send remittances to their countries of origin “damaging” the United States. h) They are a “danger” because they are invading the United States (CHOMSKY, 2011).

All these arguments-fallacies-myths promoted widely by the dominant media caught the minds and consciousness of North American society which is currently enveloped in a deep crisis —which, among other explanations, is the crisis of the “American way of life” and the so-called Welfare State. A society that is extremely malleable to the manipulation of the mass media and social media networks. These media outlets being the ones who introject, like a gospel yet lacking the message of the bona spe. Ideas that configure an ideological result, leading to the election of President Trump, which was unexpected indeed by most polls and experts.

Obviously, this ideological spectrum promulgated by the US ruling classes and the national and international media, harms the Mexico-US relationship and, in particular, casts shadows of uncertainty on the population of both countries. Above all, in Mexico, if we consider that currently, in the face of the structural, financial and monetary crisis, remittances are the central element in obtaining foreign currency in the face of the precipitous fall of oil and tourism derivatives. The latter case being due to the widespread violation of human rights as well as the official violence of the repressive and counterinsurgent practices of the Mexican State and, finally, to the generalized climate of insecurity in the country that “scares” tourists.

Under the current block of bourgeois power made up by the dependent dominant classes, especially by its monopolistic and financial factions completely committed to the dynamics of capital accumulation of the United States; by the partycracy, the leadership of corporate unionism and under the influence of irregular criminal groups that operate at ease throughout the country, it is practically impossible to think that the situation will change favorably in Mexico for the national and undocumented population under the Trump administration.

On the contrary, under the auspices of the crisis of the current pattern of accumulation and reproduction of the dependent capital specialized in manufacturing and maquiladora production for the world market, in particular, for the United States, the processes and trends that underpin the medium and long terms are those of deepening the structural and financial crisis of world capitalism that will become more extensive and profound. The United States itself, with the implementation of its protectionist and restrictive policies, now has to deal with problems arising from the necessary increase to military spending in order to counteract the growing nuclear power headed by Russia and China.

We insist that all these social, political, cultural, geo-strategic and military problems that surround the practices of imperialism on a global scale, in no way depends on the personality of those who temporarily assume the political power of the hitherto still greatest power of the planet (United States). Rather, it is the historical-structural conditions of multiple relationships and determinations of class struggles, economic and political crises, natural calamities and environmental disasters. It is the implementation of neoliberal economic policies under the auspices of the International Monetary Fund and the World Bank. It is the annexation of countries and territories, coups d’états, crises of bourgeois democracy and an endless number of problems whose solution is far from being found. These are what in the long term determine the action of the rulers and the peculiar way in which they affect the course of its development.

The new power of the protectionist United States is to deploy an imperialist praxis both within the United States, towards its own working class, its citizens, the undocumented, immigrants, health policies, salaries, education and social welfare among others, as well as its foreign policy vis-a-vis the great powers of the world and of regions such as Latin America.

Conclusion

In short, more than a crisis of globalization or of the “free market” economy linked to the neoliberal capitalist practices, the current systemic and civilizational crisis is part of a secular cycle of decline not only of Capitalism as a form of accumulation and exploitation of labor power, but as a mode of production and life, in which humanity no longer has any future or, if it does, it is from the perspective of barbarism, its own extinction.

References

¬ LIPSET, Seymour Martin, El excepcionalismo norteamericano. Una espada de dos filos, FCE México, 2000.

¬ SAPIR, Jacques, El nuevo siglo XXI. Del siglo americano al retorno de las naciones, El Viejo Topo, Madrid, 2008.

¬ SOTELO, Valencia, Adrián, Crisis capitalista y desmedida del valor: un enfoque desde los Grundrisse, coedición Editorial ITACA-UNAM-FCPyS, México, 2010.

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

¬ SOTELO, Valencia, Adrián, United States. Geopolitics of the super-exploitation and the precariousness of work in a world in crisis (to be published).

¬ CHOMSKY, Aviva, Nos quitan nuestros trabajos y 20 mitos más sobre la inmigración, Editorial Haymarket Brooks, Chicago, Illinois, 2011.

Imperialism, globalization and the profitability of capital – Michael Roberts

Profitability and imperialism

The characteristics of modern imperialism are to be found in modern capitalism.  That is not a tautology.  The key connection between imperialism and capitalism is the general tendency of the profitability of capital to fall over time, leading to shifting of capital ‘abroad’ by national capitals seeking to reverse any fall.

When 150 years ago Marx outlined the law of tendency of the rate of profit to fall in capitalist accumulation – a law that he considered the ‘most important in political economy’ – he made it clear that there were ‘counteracting’ factors to the operation of that law[i].  Indeed, this is why the law was a ‘tendency’ that was not always realized.  One important counteracting factor was foreign trade and investment overseas.  This could cheapen the cost of raw materials extracted from the colonies and could raise the rate of exploitation of the labour force by using the plentiful supplies of cheap labour (an untapped ‘reserve army’) in the colonial territories. The profit created by that labour could be transferred to the imperialist economies and thus raise the rate of profit at the centre.

Lenin, in Imperialism[ii] explained this counteracting factor as follows.  “The need to export capital arises from the fact that in a few countries capitalism has become ‘overripe’ and (owing to the backward state of agriculture and the poverty of the masses)” …. capital cannot find a field for ‘profitable’ investment.”  This is a limited explanation.  Henryk Grossman took it further[iii].  “Why,” then, “are profitable investments not to be found at home? The fact of capital export is as old as modern capitalism itself. The scientific task consists in explaining this fact, hence in demonstrating the role it plays in the mechanism of capitalist production.”

Marx’s theory argues that there will be a tendency to equalise the rate of profit between capitals (even under monopoly capital) – indeed, this is how the higher rates of exploitation in the poor or colonial South end up in the profit rates of the rich and imperialist North.  There is a transfer of value from less productive capitals of the South to more productive ones of the North.

See this example below.  In both the North and the South, the rate of exploitation (s/v) in value terms is the same = 100%.  The capitalists of the North use the latest technology so that the time taken to produce the value of labour power is much less (20v) than in the South where the capitalists use less technology and more cheap labour.  But the rate of exploitation is the same in this example (North 20/20 and South 60/60).

North: 80c + 20v + 20s=120V.  Rate of profit = 20/(80c+20v) = 20%
Rate of exploitation = 20s/20v = 100%

South: 40c + 60v + 60s= 160V.  Rate of profit = 60/(40c+60v) = 60%
Rate of exploitation = 60s/60v = 100%

Total: 120c + 80v + 80s= 280V.
Average rate of profit = 80s/(120c+80v) = 40%.

The capitalists in the South get 160V in value out of their workers, while the capitalists in the North get less, 120V.  The rate of profit in value terms in the North would only be 20% while it would be 60% in the South.  But competition in the global market equalizes the average rate of profit at 40%.  So the market price of production for the North and South is 140 and the North gets a transfer of value of 20 from the South.  The capitalists of the North get some of the value created by the workers in the South through price competition equalizing the rate of profit on the global market.

North = 80c + 20v + 40s = 140P (compared to 120V), so transfer gain of 20.

South = 40c + 60v + 40s = 140P (compared to 160V), so transfer loss of 20.

Now suppose that the workers in the South are ‘super-exploited’ and forced to accept a lower wage (halved from 60v to 30v in the above example).  Now the surplus value in the South is way higher (and the rate of surplus value is now 300% compared to 100% in the North).  The process of the global market produces an average rate of profit that is higher than before, at 65%.

North = 80c + 20v + 20s = 120V.  Rate of profit 20s/(80c+20v) = 20%.

Rate of exploitation 20s/20v = 100%

South = 40c + 30v + 90s = 160V.  Rate of profit 90s/(40c+30v) = 130%.
Rate of exploitation 90s/30v = 300%

Total = 120c + 50v + 110s = 280V.
Average rate of profit 110s/(120c+50v) = 65%

Through the transfer of values in the global market, the capitalists of the North now get an extra 45V out of the super-exploited workers of the South.  Super-exploitation in the South increases profits for the North.  Total surplus value in the North and South has risen from 80 in the first case to 110 in the super-exploitation case.

North = 80c + 20v + 65s = 165P (compared to 120V), so transfer gain of 45.

South = 40c + 30v + 45s = 115P (compared to 160V), so transfer loss of 45.

The wages of the workers of the North are unchanged.  In this sense, the workers of the North are not ‘living off’ those of the South.  Both the capitalists of the South and the North are exploiting the workers of the South by squeezing more value out of them.

It is the race for higher rates of profit that is the motive power of world capitalism and the driver of imperialism and rivalry among imperialist nation-states.  Foreign trade can yield a surplus profit for the advanced country.   For example, from about the mid-1960s onwards, the rate of profit fell in the major economies and reached a post-war low by the early 1980s.  So the leading capitalist states looked to counteract Marx’s law through renewed capital flows into countries that had massive potential reserves of labour that would be submissive and accept ‘super-exploiting’ wages. World trade barriers were lowered, restrictions on cross-border capital flows were reduced and multi-national corporations moved capital at will within their corporate accounts.  This explains the policies of the major imperialist states at home (an intensified attack on the working class) and abroad (a drive to transform foreign nations into tributaries).  Globalisation is thus a product of the drive to raise profitability after a significant decline in the major capitalist economies.

MR graph 1

This connection between the changes in the rate of profit in the major capitalist economies and globalization from the 1980s can be shown to have a common thread ever since capitalism became the dominant mode of production in the world, starting with Europe, the US and Japan in the mid-19th century.  Moreover, it appears that after a particularly long period of low profitability and stagnation in production, imperialist rivalry in the struggle of the share of global surplus value becomes intense.  Competition among imperialist powers for the spoils of exploitation turns into capturing the spoils of war.

There have been three depressions in the history of capitalism: one in the late 19th century; the Great Depression of the 1930s; and the current Long Depression[i].

They coincided with different stages of capitalism. The depression of the late 19th century was the impulse for the development of modern imperialism, namely the expansion of finance capital into the “colonies”.  This eventually led to a new imperialist battle, one that was not resolved by World War I.

The hegemonic imperialist power, Great Britain, had been irretrievably weakened by the 1914–18 war, but the rising hegemonic power, the United States, was not ready or willing to assume the mantle of imperialist dominance. The rising imperialist powers, Germany and Japan, tried to gain a bigger cut of the spoils. That led to World War II and the eventual assumption of Pax Americana after 1945.

The current Long Depression could also give way to a new period of imperialist rivalry (but more on that later).

We can show empirically that globalisation of trade and capital took off whenever the profitability of capital fell in the imperialist centres.

MR graph 2

Between 1832-48 profitability of capital in the major economies fell; after which there was an expansion of globalization to drive up profitability (1850-70).  However, a new fall in profitability led to the first depression of the late 19th century (1870-90), during which protectionism rose and capital flows shrunk.  With economic recovery after 1890, imperialist rivalry intensified, leading up to the Great War of 1914-18.

In the post-1918 period, after the defeats of various European revolutions and the isolation of the Soviet state, there was a brief period of rising profitability, before a new drop led into the Great Depression of the 1930s.  Imperialist rivalry bubbled up again, leading to WW2.

Again, after the defeats of various labour struggles post 1945 in Europe, Japan and in the colonial territories, capitalism entered a new ‘golden age’ of relatively fast growth and rising profitability.  Globalisation of trade (reduction in tariffs and protectionism) and capital (dollar-led economies and international institutions) revived, until profitability again began to fall in the 1970s.  The 1970s saw a weakening of trade liberalization and capital flows.  From the 1980s, however, capitalism saw a new expansion of globalization in trade and capital to restore profitability.

It is no coincidence that the movement in the profitability of capital in the imperialist countries aligned with the degree of openness in world trade.  Rising profitability from 1850-70 saw a significant fall in international trade barriers, relative to intranational trade barriers. However, as profitability fell from the mid-1860s during the late 19th century depression, open trade stopped and protectionism returned.  With rising profitability in the 1920s, trade barriers fell further until the Great Depression arrived.  A new wave of trade liberalisation only began again after the 1970s.

Export openness for three country samples: 1827-2014

MR graph 3

So we can divide globalization into three great waves[i].  The first wave was from 1860-1914 when Europe and North America were strongly affected by internationalisation. The flow of goods accelerated. Capital moved relatively freely between countries. In some respects, financial integration was more pronounced than it is today. Even international migration was greater than it is today. Roughly 60 million people left Europe to seek their fortunes in the New World.  Great Britain was the world’s leading economy.

The basis for the European free trade system was the 1860 free trade pact between Great Britain and France. Many other European countries subsequently aligned themselves with this free trade system.  However, from the 1870s, in the depression period, a Russian and American ‘grain invasion’ prompted higher tariffs in most of continental Europe. So overall trade costs did not decline dramatically after 1870 since tariffs and non-tariff barriers rose.

In the second wave after WW2, international regulations and organisations to support economic integration at the global level were created. Cooperation was based on the Bretton Woods Agreement of 1944.  The US was now the leading economy in the world and the dollar became the monetary basis of the financial system. The ‘Bretton Woods system’ meant that nations had fixed currency exchanges in relation to the US dollar, which in turn was fixed to the gold standard.

Two organisations were established during this period, the World Bank (IBRD) and the International Monetary Fund (IMF). In addition, a special agreement, the General Agreement on Tariffs and Trade (GATT) became operative in 1948. In practice, GATT became the international organisation which set the framework for several important steps towards increased global free trade, particularly via successive reductions in industrial tariffs. But by 1970 the Bretton Woods system was coming under increasing pressure.

MR graph 4

In the third wave from the mid-1980s, the more populous countries in the developing world, particularly China and India, opened their doors to the world. European cooperation widened and deepened. In the decades up to the end of 20th century, international trade grew significantly faster than total production. The export of goods amounted to 31% of global GDP in 2006 as compared to 12% in 1970. Foreign direct investment (establishing or buying up companies abroad) increased twice as fast as trade. An even more rapid increase has been seen in foreign securities (investments that do not lead to controlled ownership in foreign companies).

This third wave is visible in the expansion of gross foreign assets (capital invested abroad) since the 1980s.

MR graph 5

The ratio of global foreign assets to global GDP more than doubled – from 7% in 1870 to 19% in 1900. This upswing was reversed during the first half of the 20th century. The mayhem created by two world wars and the Great Depression on the one hand and the emergence of domestic ‘institutionalized waste’ on the other undermined the flow of capital and caused the share of foreign ownership to recede. After the second world war, the new world order under the US allowed the expansion of international capital flows again and by 2003, after a quarter century of exponential growth, it reached an all-time high of 122%.

According to the McKinsey Global Institute[i], between 1990 and 2006 the global proportion of foreign-owned assets has nearly tripled, from 9% to 26% of all world assets (both foreign and domestically-owned). The increase was broadly based: foreign ownership of corporate bonds rose from 7% to 21% of the world total, foreign ownership of government bonds rose from 11% to 31% and foreign ownership of corporate stocks rose from 9% to 27%.

Capitalism became truly global in the late 20th century. That’s because increased investment into emerging capitalist economies brought into the capitalist mode of production a huge supply of peasant and non-capitalist labor and much of it at a cost below poverty.

At the same time, imperialist economies are acting even more as bases for finance capital globally.  Tony Norfield points out that US corporation revenues from abroad are worth $3bn a day and total more than the annual GDP of Switzerland. A financial company operating in a major international financial centre can draw upon the surplus value produced anywhere in the world, for the ultimate benefit of the imperialist power in which it is based.  Just 147 companies globally control the world[ii].   The IMF reckons that just 30 banks have more than $47trn in assets, or more than one-third of bank assets and these banks control 70% of credit markets.[iii]

However, the world of international business is still a regional one, not a global one. Capitalism today remains divided, whatever the degree of its global integration, into distinct capitalist nation-states, ruled by their own capitalist classes, which project their interests and protect those interests against rivals. In 1980, when US ‘financialization’ started in earnest, US owners accounted for only 28% of global foreign assets. But by 2003, the asset share of US owners was reduced to a mere 18%.

MR graph 6The rapid expansion of international financial dealing since the 1980s has been a potential source of profit for, and an incentive behind the growth of, the financial sector of the economy in many countries. However, at the forefront of this trend has been the boom in the activities of the City of London, the centre of dealing for the imperialist power most closely associated with finance.

British capitalism lost its hegemonic status a hundred years ago but in the post-war period its financial sector has maintained its global status while its manufacturing base diminished.  The Eurodollar market in the 1960s and the ‘Big Bang’ of the 1980s, when US banks and foreign banks operated without restriction, preserved the City’s pre-eminence.

Britain is second only to the US in the importance of its financial sector globally and in some areas like foreign currency trading it leads[i] .  Britain has the second largest stock of foreign direct investment (FDI) of nearly $2trn, equivalent to 30% of UK GDP.  Of the top 500 global companies, the UK was second only to the US with 34 companies.  The UK had six financial institutions in the top 50, compared to the US with ten.  And UK bank assets are four times UK GDP, the highest ratio in the world after Switzerland and tax-haven Luxembourg.

The global pecking order (Norfield index).

MR graph 7

In the previous wave of globalisation after 1980, power had shifted from owners in one core country (Britain) to those in another (the United States). By contrast, in the next wave, the contenders could be from China, OPEC, Russia, Brazil, Korea and India, countries that have become major foreign investors with significant international positions, including large stakes in America’s ‘imperial’ debt.

The beginning of the 21st century brought to an end the third wave of globalisation.  Profitability in the major imperialist economies peaked by the early 2000s and after the short credit-fuelled burst of up to 2007, they entered the Great Recession, which was followed a by a new Long Depression[i].  So the counteracting factor to low profitability of exports of commodities and credit has died away. This threatens the hegemony of US imperialism, already in relative decline to new ambitious powers like China, Brazil, India and Russia. Renewed rivalry threatens to unleash major conflicts in the next decade or so.

MR graph 8

World trade growth in 2016 was well below the post-Great Recession average of 2.7% a year, which in turn is less than half the rate of world trade growth before the global financial crash (at 5.7%).[i] As the IMF put it: “Since 2012, growth in the volume of world trade in goods and services has been less than half the rate during the preceding three decades. It has barely kept pace with world GDP and the slowdown has been widespread.”  [ii]

McKinsey outlined why global trade and industrial growth has slowed to a crawl since the end of the Great Recession in 2009[iii].  “The shock of the 2008 global financial crisis triggered the first recorded drop in global GDP and the hangover has since persisted, with many countries struggling with unexpectedly weak recoveries.”  And it is not going to get any better. “More worryingly, long-term growth prospects are serious cause for concern. Annual GDP growth from 2014 to 2064 is projected to effectively halve, falling to 2.1% globally and 1.9% for developed countries”.

The ratio of import growth to real GDP growth in the major economies has fallen back sharply.

Trade elasticity (ratio of trade growth to GDP growth)

MR graph 9

Deutsche Bank economists concluded that “It feels like we’re coming towards the end of an economic era. Such eras often come and go in long waves.  In the past 30 years a perfect storm of factors — China re-entering the global economy in the 70s, the fall of the Soviet Union, and to some extent, the economic liberalisation of India — added more than a billion workers into the global labour market.”  [i]

Globalization and the high-tech revolution reversed the productivity growth decline in the 1990s.  But in this century productivity growth in the advanced economies has headed toward stagnation. Only productivity growth in the emerging economies has enabled world productivity growth to stay near 2% a year. Since the Great Recession, productivity growth has dropped to under 1% a year.

Advanced economy average productivity growth (%)

MR graph 10Source: OECD

What the productivity growth figures show is that the ability of capitalism (or at least the advanced capitalist economies) to generate better productivity is receding. Capitalists have squeezed the share of new value going to labor and raised the profit share to compensate. Above all, they have cut back on the rate of capital accumulation in the ‘real economy’, increasingly trying to find extra profit in financial and property speculation.

This story on productivity is repeated for employment growth in the advanced economies. Employment growth is now less than 1% a year.  If you add (to productivity growth) an employment growth rate globally of 1% a year, then global growth is going to be little more than 3% a year for the next decade (and a maximum of just 2% a year for the advanced economies).  The dynamism of world capitalism is waning.

Some argue that, after its 60-year decline, manufacturing may start to return to the advanced capitalist economies. Then profitability will rise again in the major capitalist economies through a new manufacturing revolution.  This is the theme of President Trump, who reckons he can cajole American manufacturers to produce at home and restrict cheap imports from China etc.

But this is really just so much wishful thinking. American manufacturing has been growing in the past few years, but the sector still has 2 million fewer jobs than when the Great Recession began. Worldwide manufacturing is growing much faster, even for many of the American-owned companies that are expanding at home. Wage levels may have risen in emerging economies and stagnated in the advanced economies, but the gap is still huge. Hourly compensation costs for manufacturing in the US were about four times those in Taiwan and 20 times those in the Philippines.

As John Smith has shown[i] “about 80% of global trade (in terms of gross exports) is linked to the international production networks of transnational corporations”. UNCTAD estimates that “about 60% of global trade … consists of trade in intermediate goods and services that are incorporated at various stages in the production process of goods and services for final consumption”. –A striking feature of contemporary globalisation is that a very large and growing proportion of the workforce in many global value chains is now located in developing economies. In a phrase, the centre of gravity of much of the world’s industrial production has “shifted from the north to the south of the global economy”.

On a standard measure of participation in global value chains produced by the IMF, the rise in profitability for the major multinationals is now stalling. Sure, information flows (internet traffic and telephone calls, mainly) have exploded, but trade and capital flows are still below their pre-recession peaks. Global foreign direct investment as a share of GDP is also falling and capital flows to the so-called ‘emerging economies’ have plummeted (See https://www.imf.org/~/media/Websites/IMF/imported-flagship-issues/external/pubs/ft/weo/2016/02/pdf/_c2pdf.ashx).

MR graph 11

Yet imperialism continues to suck profit out of the peripheral economies in the way Marx outlined in his theory of profit equalisation and unequal exchange.  The US-based Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics tallied up all of the financial resources that get transferred between rich countries and poor countries each year: not just aid, foreign investment and trade flows but also non-financial transfers such as debt cancellation, unrequited transfers like workers’ remittances, and unrecorded capital flight (more of this later).  What they discovered is that the flow of money from rich countries to poor countries pales in comparison to the flow that runs in the other direction.

In 2012, the last year of recorded data, developing countries received a total of $1.3tn, including all aid, investment, and income from abroad. But that same year some $3.3tn flowed out of them. In other words, developing countries sent $2tn more to the rest of the world than they received. If we look at all years since 1980, these net outflows add up to $16.3tn – that’s how much money has been drained out of the global south over the past few decades.

Developing countries have forked out over $4.2tn in interest payments alone since 1980 – a direct cash transfer to big banks in New York and London, on a scale that dwarfs the aid that they received during the same period. Another big contributor is the income that foreigners make on their investments in developing countries and then repatriate back home.  But by far the biggest chunk of outflows has to do with unrecorded – and usually illicit – capital flight. GFI calculates that developing countries have lost a total of $13.4tn through unrecorded capital flight since 1980.

Most of these unrecorded outflows take place through the international trade system. Basically, corporations – foreign and domestic alike – report false prices on their trade invoices in order to spirit money out of developing countries directly into tax havens and secrecy jurisdictions, a practice known as “trade misinvoicing”. Usually the goal is to evade taxes, but sometimes this practice is used to launder money or circumvent capital controls. In 2012, developing countries lost $700bn through trade misinvoicing, which outstripped aid receipts that year by a factor of five.

A new phase of imperialism ahead?

The strategists of capital are worried that Trumponomics will only make things worse for profitability globally. Lorenzo Bini Smaghi, ex-member of the European Central Bank’s executive board and leading strategist of finance capital, commented: “Trying to reverse globalisation can be damaging, particularly for the country that takes the first step. It is the advanced economies that are facing the greatest challenges in its most recent wave, which is why anti-globalisation movements are gaining support and governments are tempted to become inward-looking. However, because their economies are so large, and so bound by the web of globalisation, they cannot reverse its course, unless emerging markets also retreat.”[i]

The world economy is in a Long Depression. However, world capitalism will not stay in this depressed state. Eventually, probably after another slump that will destroy sufficient value (the value of means of production, fictitious capital and employment), profitability for those capitals that survive will rise again to start a new upwave in investment and growth. This assumes, of course, that the class struggle does not lead to the forces of labor triumphing over capital in any major imperialist economy.

A new wave of globalization is thus possible. There are yet more human beings in the world to be exploited and there are always new technological innovations that can provide a new cycle for expansion of value and surplus value.

There are still huge reserves of labor as yet untapped, particularly in Africa. The latest UN projections for the world’s economies show that Africa is expected to dominate population growth over the next ninety years as populations in many of the world’s developed economies and China shrink.[ii] Africa’s population is expected to more than quadruple over just 90 years, while Asia will continue to grow but peak about 50 years from now and then start declining.

Can capitalism get a further kick forward from exploiting these hundreds of millions coming into the labor forces of Asia, South America, and the Middle East? While the industrial workforce in the mature capitalist economies has shrunk to under 150 million; in the so-called emerging economies the industrial workforce now stands at 500 million, having surpassed the industrial workforce in the imperialist countries by the early 1980s. In addition, there is a large reserve army of labor composed of unemployed, underemployed, or inactive adults of another 2.3 billion people that could also be exploited for new value.

The global industrial workforce (in millions) 1950-2010

MR graph 12

Source: International Labor Organisation (2016)  http://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/—publ/documents/publication/wcms_443480.pdf

America’s intelligence services also looked recently at developments in the world economy.  The Office of the Director of National Intelligence (DNI)  published its latest assessment[i], called Global Trends: The Paradox of Progress, which “explores trends and scenarios over the next 20 years”.  And the DNI reckons that things are not going to get better.  The next five years will see rising tensions within and between countries. Global growth will slow, just as increasingly complex global challenges impend.”

What is the answer?  Well, this comment from the DNI report is unvarnished: It will be tempting to impose order on this apparent chaos, but that ultimately would be too costly in the short run and would fail in the long. Dominating empowered, proliferating actors in multiple domains would require unacceptable resources in an era of slow growth, fiscal limits, and debt burdens. Doing so domestically would be the end of democracy, resulting in authoritarianism or instability or both. Although material strength will remain essential to geopolitical and state power, the most powerful actors of the future will draw on networks, relationships, and information to compete and cooperate. This is the lesson of great power politics in the 1900s, even if those powers had to learn and relearn it.”

In other words, while it would be better to just crush opposition and “impose order” in America’s interests, this is probably not possible with a weak world economy and lack of funds.  Better to try “draw on networks, relationships and information” (ie spy and manipulate) to get “cooperation”.

But it is not going to be easy to sustain America’s dominance and the rule of capital, the DNI report concludes, as globalisation “hollowed out Western middle classes (read working classes) and stoked a pushback against globalization.”  Moreover, “migrant flows are greater now than in the past 70 years, raising the specter of drained welfare coffers and increased competition for jobs, and reinforcing nativist, anti-elite impulses.” And “slow growth plus technology-induced disruptions in job markets will threaten poverty reduction and drive tensions within countries in the years to come, fueling the very nationalism that contributes to tensions between countries.”

America’s intelligence services expose imperialism’s two Achilles heels.  The first is the tendency of the rate of profit to fall as capitalism accumulates, posing increased rivalry and even damaging and destructive wars. The second is the global proletariat – the gravediggers of capitalism – who are still growing in size across the world. The global proletariat has never been larger in the history of capitalism.  In that sense, Marx’s prophecy in the Communist Manifesto 160 years ago is confirmed.  Sure, the majority of the proletariat is now in the South and not the North.  But that does not mean the workers of the North will play no role in ending capitalism.  On the contrary, they are the key to ending imperialism in its centre.

  1. Capital Volume 3, Chapter 15.
  2. https://www.marxists.org/archive/lenin/works/1916/imp-hsc/
  3. https://thenextrecession.files.wordpress.com/2017/07/henryk_grossman_on_imperialism.pdf
  4. M Roberts, The Long Depression, 2016, Haymarket Books.
  5. http://www.nordregio.se/en/Metameny/About-Nordregio/Journal-of-Nordregio/2008/Journal-of-Nordregio-no-1-2008/The-Three-Waves-of-Globalisation/
  6. McKinsey, Financial globalization: retreat or reset?, 2013
  7. http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0104655
  8. IMF Global Financial Stability Report, October 2017, p5.
  9. Tony Norfield, The City, Verso Books, 2016
  10. M Roberts, The Long Depression (2016), Haymarket books.
  11. CPB World Trade Monitor, November 2016, http://www.cpb.nl/en/figure/cpb-world-trade-monitor-november-2016
  12. IMF World Economic Outlook, October 2016, http://www.imf.org/external/pubs/ft/weo/2016/02/
  13. Turbulence ahead: Renewing consensus amidst greater volatility, McKinsey Global Institute, September 2016
  14. Deutsche Bank, Long-Term Asset Return Study, strategists Jim Reid, Nick Burns, and Sukanto Chanda, http://uk.businessinsider.com/deutsche-bank-on-the-end-of-an-economic-era-2016-9?r=US&IR=T
  15. John Smith, Imperialism in the Twenty-First Century: Globalization, Super-Exploitation, and Capitalism’s Final Crisis, Monthly Review Press, 2016
  16. [1] http://blogs.ft.com/the-exchange/2016/11/15/how-far-will-the-pendulum-swing-against-globalisation.
  17. UN World Population Prospects, 2015 Revision, http://esa.un.org/unpd/wpp/Publications/Files/Key_Findings_WPP_2015.pdf.
  18. https://www.dni.gov/index.php/carousel-items/1465-nic-releases-global-trends-paradox-of-progress

[i] https://www.dni.gov/index.php/carousel-items/1465-nic-releases-global-trends-paradox-of-progress

[i] http://blogs.ft.com/the-exchange/2016/11/15/how-far-will-the-pendulum-swing-against-globalisation.

[ii] UN World Population Prospects, 2015 Revision, http://esa.un.org/unpd/wpp/Publications/Files/Key_Findings_WPP_2015.pdf.

[i] John Smith, Imperialism in the Twenty-First Century: Globalization, Super-Exploitation, and Capitalism’s Final Crisis, Monthly Review Press, 2016

[i]  Deutsche Bank, Long-Term Asset Return Study, strategists Jim Reid, Nick Burns, and Sukanto Chanda, http://uk.businessinsider.com/deutsche-bank-on-the-end-of-an-economic-era-2016-9?r=US&IR=T

[i] CPB World Trade Monitor, November 2016, http://www.cpb.nl/en/figure/cpb-world-trade-monitor-november-2016

[ii] IMF World Economic Outlook, October 2016, http://www.imf.org/external/pubs/ft/weo/2016/02/

[iii] Turbulence ahead: Renewing consensus amidst greater volatility, McKinsey Global Institute, September 2016

[i] M Roberts, The Long Depression (2016), Haymarket books.

[i] Tony Norfield, The City, Verso Books, 2016

[i] McKinsey, Financial globalization: retreat or reset?, 2013

[ii] http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0104655

[iii] IMF Global Financial Stability Report, October 2017, p5.

[i] http://www.nordregio.se/en/Metameny/About-Nordregio/Journal-of-Nordregio/2008/Journal-of-Nordregio-no-1-2008/The-Three-Waves-of-Globalisation/

[i] M Roberts, The Long Depression, 2016, Haymarket Books.

[i] Capital Volume 3, Chapter 15.

[ii] https://www.marxists.org/archive/lenin/works/1916/imp-hsc/

[iii] https://thenextrecession.files.wordpress.com/2017/07/henryk_grossman_on_imperialism.pdf

Rethinking anti-imperialism today – Panagiotis Sotiris

Recent developments from the election to Donald Trump to Brexit and the increased tension between the US on the one hand, Russia and China on the other, have been presented as evidence for a broader crisis of ‘globalization’ and a turning point in modern imperialism. Many have even talked about an ‘end of globalization’. Moreover, these changes have been presented as a turn towards a nationalism or oven isolation. In what follows I will try to offer my thoughts on these questions in an attempt to problematize them but also to suggest what these changes imply regarding radical left strategy. In particular I will insist on the need for a new anti-imperialism based upon a rethinking of the notions of the people and popular sovereignty.

The question regarding some form of ‘crisis of globalization’ or even an ‘end of globalization’ is based on the assumption that there was indeed some form of globalized capitalism in the previous period. However, I think that globalization has been a misleading term since it suggested that we were moving towards some form of a unified system of social relations, a transnational social formation, with a transnational bourgeoisie.[1] In contrast, I insist that what we have witnessed has been a process of increased internationalization of capitalist production. This process has been instrumental regarding the reproduction and enhancement of aggressive forms of capitalist accumulation. Moreover, increased internationalization of production, in the form of increased capital flows, direct investment and trade, has been a mechanism of constant pressure for capitalist restructuring and for the expansion of neoliberalism as the dominant regime of accumulation. However, national capitalist formations and nation-states have remained the main loci of capitalist accumulation. By this I do not mean that there have not been important changes. In contrast, I would say that Poulantzas’s original insight in the 1970s that the relations of forces in the imperialist chain are being interiorized in the power block of each national capitalist formation has been exacerbated in the past decades.[2] By this I do not simply refer to the role of ‘foreign capital’, a constant reference point of older dependency theories, but to the way imperatives for certain strategies of accumulation become dominant in each capitalist formation. The centrality of competitiveness as the main measure of success and the main justification and legitimacy for aggressive capitalist restructuring and neoliberal reform after the 1980s attests to this. Processes of regional integration such as European Integration, with their extensive forms not only of lowering barriers to trade and the free movement of capitals, but also of ceding of forms of sovereignty, have been the most aggressive cases of using the exposure to increased foreign competition as a pressure for capitalist restructuring.[3]

Such an approach suggests that we put aside the rhetoric of globalization and instead attempt to theorize an inherently contradictory process of capitalist internationalization. Such an approach can explain both the tendency towards increased liberalization of trade and capital flows but also the presence of increased antagonism. In this sense, what we are witnessing today is a tendency towards increased conflict and competition within this process of capitalist internationalization. However, before proceeding along this line, we must also see some other important aspects of modern imperialism.

If we are to keep something from what in a very schematic way has been presented as a Marxist or even Leninist theory of imperialism are two important insights. The first has to do with the way that the Marxist tradition, including Lenin revolutionized the theorization of international relations by giving priority not to interstate relations, but to class relations and strategies and their projection to the international plane. States’ behavior is based in their internal class composition, accumulation strategies and the relation of forces in the class struggle. The second is that the hierarchy in the international plane, namely the complex interplay of interdependency and antagonism that the notion of the imperialist chain suggests, is not determined simply on the economic level, but also on the basis of political and even ideological relations of forces. The dominant social formation in the imperialist chain is not simply the most powerful in economic terms but also the one that can in a certain way guarantee the collective capitalist-imperialist interest of the entire imperialist chain, by having the political and military capacity to do so. Moreover, this also implies that modern capitalist imperialism has been fundamentally non-territorial having to do with the expansion of social relations of production, of social forms and of accumulation strategies and less with direct territorial domination, despite the importance of territorially based resources such as energy flows, minerals etc.[4]

To this classical ‘Leninist’ approach I would also like to add another important aspect. The antagonistic and hierarchical relations inside the imperialist chain also have to be treated as hegemonic relations. By this I am not referring to the traditional conception of hegemony one can find in the discourse of mainstream International Relations Theory, or even at classical Marxist texts on imperialism. I am using hegemony in its Gramscian conceptualization as a way to theorize the complex modalities of power in capitalist social formations and as a concept that refers not simply to ‘consent’ or ‘intellectual leadership’ but as the complex articulation of force, leadership and ideological appeal that indeed leads to a social class becoming not just ruling but the leading force of society. In such an approach the hegemonic force in the imperialist chain, or in a block of imperialist states is not just the most advanced in economic terms or the most powerful in terms of military force, however important these aspects are, but the one that can project a hegemonic project that ‘links in the chain’ would want to attach to. To give an obvious example, the United States became the hegemonic force of global capitalism after 1945 because they were the most advanced and productive capitalist economy, the only country that could match Soviet military capabilities but also a country that offered a hegemonic project. This hegemonic project combined the Fordist regime of intensified capitalist accumulation, ‘Western’ liberal-democratic institutions, and a mass culture that comprised consumerist hedonism and individualism. The fact that for example the United States initially helped other social formations becoming more competitive in relation to the US as part of a strategy to strengthen the reproduction of capitalist social relations, is something that can be seen in the support given by the US to both European Integration and the capitalist development of Japan.[5]

Apart from these broader theoretical lines of demarcation, I would like to point to another important point. We are still in the aftermath of the capitalist crisis of 2007-2008. There is an impressive literature and an open debate regarding the actual causal mechanisms of this crisis, and in a certain way the discussion has not yet been concluded. However, we can say that what happened was neither a typical cyclical recession nor just a crisis of financialization. Also, it was not another manifestation of a prolonged crisis that started in the 1970s. What we witnessed was the combined crisis of an entire social paradigm that comprised the productive model based upon post-fordist capitalist restructuring, the over expansion of the financial sector, neoliberalism as a regime of accumulation and a certain form of international monetary, financial, productive architecture. The reduced dynamism of the post-2010 recovery, the absence of large gains in both productivity and profitability, the stagnation of the EU, the continuous problem of increased debt, both public and private, the crisis in public finances despite successive waves of austerity, and the inability to go ahead with the big interregional free trade agreements (long before Donald Trump’s rise to power), all these attest to the structural and still unresolved character of this crisis. The reason is that what is needed is a new social and technological paradigm that has yet to emerge. Moreover, another important aspect is the uneven character of both the extent of the crisis and the responses to it. It is obvious that the crisis was deeper in the ‘western’ formations in the imperialist chain in contrast to the new competitors in the East and in particular China.

The economic crisis also created — especially in the US — certain cleavages inside the dominant power block. Although neoliberalism, deregulation and reduced taxation (along with the intervention of the FED towards keeping the banking system afloat) have been common elements, it is interesting to see the divergence between those sectors that were based upon globalized production and supply networks and those more based in the US, a fact that can account for different approaches towards international trade agreements and also different approaches towards the politics of Trump administration. However, it is interesting to underline the fact that so far the Trump administration has refrained from ‘protectionist’ measures and has mainly opted for aggressive attacks on social rights, such as the attack on Obamacare.

At the same time this economic crisis was combined with a deep political and in some sense hegemonic crisis in many formations. 2011 represents an important landmark in the sense of the opening of a broader global cycle of protest and contestation. There is growing widespread disillusionment with mainstream politics as a result of austerity policies, an authoritarian post-democratic turn (enhanced by the absence of any real difference between centre-right and centre-left political parties) along with a broader tendency towards an insulation of the political scene against the demands and aspirations of the subaltern classes.

All these tendencies and developments in their articulation not only represent the effectivity of social antagonism, but also form the basis of the new wave of increased antagonisms in the imperialist chain. Ever since the fall of the Soviet Union it was obvious that the United States has opted for a strategy that aimed at maintaining that kind of military superiority that would guarantee their leading role in the imperialist chain, even in the sense of a “management of instability” that would always make a US intervention indispensable. Despite the setbacks that this strategy suffered, especially in the form of the Iraq debacle and the failure of the attempt to  ‘export western-style democracy and market economy’ by military means, it remained dominant, exactly because it offered a means to maintain a leading role.[6]

However, at the same time the expansion of capitalist productive forms and shift regarding the poles of accumulation created new forms of antagonism. Especially China managed not only to expand its domestic economy but also to play an increasingly important role in the global economy, not only as the leading force in manufacturing or as attracting foreign investments but also as a major investor abroad. The rhetoric notwithstanding, the ‘one belt one road’ strategy indeed points towards China claiming an increased role in the internationalization of capital, also expressed in the fact that the Chinese leadership attempts to present itself as the leading force in favour of a globalization based on investment and not just financial transactions. At the same time the emerging alliance with Russia, which not only has advanced military capabilities but also an important productive and high technology base, suggests an attempt indeed to create an alternative pole in the global system. What is important is that this new model attempts to also have some form of ‘hegemonic projection’. The combination of neoliberalism with increased state intervention, the attempt towards a more ‘paternalistic’ approach to social inequality along with a more authoritarian version of a strong state, plus a more classical approach to international relations as balance of force and cooperation can indeed be considered a different hegemonic project, one that can have a certain appeal.

The response to this by the United States has been a preemptive attempt towards military confrontation, by means of attempting to turn regional crisis into forms of pressure towards Russia and China. From Ukraine and Syria to North Korea and the renewed attempt at aggression towards Iran, this has taken many forms in the past years with differing degrees of success (for example the Syria crisis ended up in a situation of increased Russian presence as an integral aspect of the attempt to solve the crisis). It is interesting that this strategy, which in certain aspects has the support of some of the leading ‘western’ formations — although not all of them (see for example European governments feeling uncomfortable with increased sanctions against Russia given the energy dependency of Western Europe) — in a certain way represents an element of continuity regarding US administrations (see for example the fact how Trump was forced to distance himself from advisors and senior staff that had opted for a different strategy).

At the same time we are witnessing the deep crisis of European Integration, which also leads to the inability of the EU to play a leading role.[7] The crisis of European Integration is multifold. On the one hand we face the same problem as in the US of an inability to attain increases in productivity that would enable increased and sustainable profitability. The economic, institutional and financial architecture of the Euro as a single currency has exacerbated both regional differences but also indebtedness. Although designed as the most aggressive use of the ceding of sovereignty as a means to enhance capitalist restructuring it also led to increased divergences in competitiveness which in their turn also created conditions for increased private and public debt. Moreover, as a result of the German dominance in the EU combined with reluctance of German capital and the German political system to even think about redistributive policies or even some form of mutualisation of the debt (e.g. Euro-bonds), the tendency has been mainly towards automatic ‘penal’ mechanisms and even more austerity instead of a coordination of policies.One might say that Germany has been dominant but not hegemonic. At the same time the political crisis in Europe also comes as a result of an increased authoritarian, disciplinary turn, exemplified in the unprecedented social and political violence unleashed upon Greek society.[8] All this creates conditions towards an intensified crisis of representation, especially since what is at stake in Europe is not just “austerity” but a much more profound erosion of whatever aspects of the ‘European Social Model’ were still in place. The emergence of coalition governments or of new political hybrids such as the “movement of Emmanuel Macron” are evidence of this deeper crisis. At the same time the increased turn of countries that became part of the EU as part of the enlargement process, especially in Eastern Europe, towards a much more authoritarian and racist politics is also an element stressing the extent of the political crisis at traversing European integration.

All this points towards a period of transition and a period of increased conflict and antagonism within the imperialist chain. It is not the end of globalization, but rather a period of a more conflictual form of capitalist internationalization, a period in which it is open what hegemonic relations will emerge.

It is in light of the above tendencies that we can see the re-emergence of nationalist rhetoric and also of certain forms of the Far-Right. Especially the Far-Right usually manages to gain the political space left open by the combination of the crisis of systemic political forces and the inability or inexistence of radical left forces that could represent and at the same time transform growing sentiments of resentment from the part of the subaltern classes. At the same time, it is obvious that most far-right formations do not actually challenge the basic premises of both the dominant regime of accumulation and the core of the process of the internationalization of capital. In this sense, I would not present contemporary politics as a return of isolationism. We are still living in a world of increased interdependency, yet this is becoming a contested terrain.  Moreover, as far as institutional racism and the politics of increased barriers to migrants and refugees are concerned, it was the political mainstream that initiated a reactionary policy of border fences, ‘discouraging’ of migrants and refugees to arrive, and anti-migrant and anti-refugee policies all over Europe. This has been the hard reality of Fortress Europe.

The forms that the conflict in the imperialist chain will take along with the form of a new balance of forces or a new hierarchy, are not easy to discern. At the same time, one cannot rule out the possibility that in the end this struggle for hegemony in the imperialist chain will take a more open or even violent form, as it has been the case in the 20th century with two world wars! For the time being it seems that this conflict mainly fuels the tension and the violence in peripheral conflicts and the various forms of ‘war by proxy’ between opposing blocks.

I believe that in such a conjuncture anti-imperialism acquires a new meaning. First of all the very fact of a world with more conflicts is also a world with more ruptures and more openings which means that it is possible to suggest a strategy of de-linking from imperialist networks, on the economic, political and ideological level. However, this approach does not suggest simply taking advantage of cleavages in the sense of an attachment to one or the other pole in the international system. Opposing increased US aggression against Russia and to a certain degree China should not lead to thinking of Russia or China as potentially ‘progressive’ allies.  Nor does it simply points towards the emergence of a different ‘foreign policy’. Rather it points to the direction of the possibility of a broad alliance of the subaltern classes becoming hegemonic in a ‘weak link of the chain’ and initiating a process of profound social change and transformation which would also include a different approach to foreign relations and a new internationalism. The centrality of the de-linking is not linked to some form of isolationist utopia but to the fact that any process of social change must reduce its exposure to the pervasive influence of internationalized capitalism and the ways that competitive pressure induces the reproduction of capitalist social relations.

In this sense, any process of radical change today is in a certain sense a form of reclaiming of sovereignty. However, as always with questions of sovereignty the crucial question has to do with the subject of sovereignty, the subject that exercises sovereignty or the collective subjective of which sovereignty is exercised. To play a little with words I would like to suggest that we do not need some form of national sovereignty; rather we need to re-invent popular sovereignty.

There are two important points to be made here. The first one is whether such an approach towards an anti-imperialist de-linking runs the danger of nationalism. To take an example in the debates in the European Left regarding the question of the Euro and the European Union in general, advocates of a strategy of rupture and exit have often been accused of having the same position as the populist far-right. I believe that such criticisms make two mistakes. On the one hand they do not see that capitalist internationalisation is in fact the ‘nationalism’ of capital, in the sense that the European Integration is a class project of the European bourgeoisies aiming at strengthening capitalist power and hegemony. Any anticapitalist strategy must necessarily include some form of rupture with these processes. There can be no socialism under the supervision of the European Central Bank and the European Commission. On the other hand, they underestimate the possibility that the demand for sovereignty can be articulated in a progressive, democratic, radically emancipatory fashion representing a broad alliance of the subaltern classes against not just the European Union but also capitalists. Such an alliance also makes possible to rethink internationalism. I do not think that it is possible to conceive of internationalism in the form – to take again the example of the European Union – of a pan-European movement that could coordinate movements of the subaltern classes in 27 different countries, with different languages, traditions, histories of struggle and relations of force. In contrast, I think that it is more probable to see the possibility of a sequence of ruptures, based upon the uneven development of class struggles. In such a sequence each rupture will induce destabilizing tendencies in other social formations along with offering examples of successful struggles. This can be the basis of a new internationalism. A movement reclaiming democracy and popular sovereignty is a movement that can more easily opt on ‘foreign relations’ based upon solidarity and cooperation instead of antagonism. States that have reclaimed sovereignty by means of movements that challenge imperialism but also capitalist social relations are more likely to find new forms of cooperation.

This reclaiming of sovereignty cannot be conceived in terms of a ‘national economic –capitalist– development’. Rather it would be a process of intensified class struggle around the possibility of a transition program that would represent a radical alternative in an anticapitalist direction. Processes of integration, such the European Union, have pervasive effects upon national economies and the forms of accumulation. ‘National’ bourgeoisies become attached to the processes of integration and the linkages with global capital. Consequently, it is no longer possible to think in terms of segments of capital supporting some form of reclaiming sovereignty. Even in those cases in which we saw fractions of capital supporting some form of rupture (such as Britain or Italy) these are internationalised fractions that feel that they could compete in the international plane better outside the contours of European Integration. In a country like Greece, where the measures imposed by the EU, the IMF and the ECB led to an economic depression without precedent,[9] the forces of capital remained loyal to the euro and insisted on Greece remaining inside the Eurozone.

The other important point concerns the very subject of sovereignty. This cannot be conceived in terms of the nation. It is here that the notion of the people acquires a new importance. In such an approach the people is not a discursive construction or a signifier waiting to be articulated as part of the antagonism of discourses as Laclau and the neo-populist current have suggested.[10] Instead, we should point towards a class-based analysis, which makes the people “a concept for strategy” as Poulantzas has suggested.[11] In this reading, ‘the people’ refers to a potential alliance of the subaltern classes under the hegemony of the working class, the ensemble of all those that are obliged, one way or the other, to sell their labour power in order to make ends meet. It is here that the question of a post-national and post-colonial conception of the people acquires its significance. From refugee flows to mass migration, it is impossible to find societies where the subalterns have the same ‘national origin’. Moreover, racism and what can only be termed as neo-colonialism create new divisions and new forms of increased exploitation and oppression among the subalterns. A post-national and post-colonial conception of the people as the ensemble of all those who live at the same state territory and share the same conditions of exploitation and oppression and also the same needs, aspirations and struggle, can help overcoming these divisions. This points to something more complex than the formation of the people by means of a process of signification that creates both a common identity and an opposition to a common ‘enemy’, however important such aspects for this re-emergence of the people as the collective agent of transformation and emancipation. When dealing with the particular problems posed by the need to create new forms of popular unity between the different segments of the subaltern classes and groups, divided as they are by ethnic or religious lines, but also by the institutional division between citizens and migrants and also undocumented migrants, more important than the common ‘cultural referents’ are the collective practices, demands, strategies, re-writings of histories, knowledges of each other, and –above all– common aspirations, that can indeed induce the common identification as people. This process also requires concrete struggles for the institutional forms that enable this convergence, especially full social and political rights, but also the forms of political organizing and mass political intellectuality that link this common condition to common hegemonic projects of transformation and emancipation and help the articulation of common struggles and alliances, in sum what Gramsci tried to define as the ‘Modern Prince’, the political form of a modern United Front. In this sense, following Deleuze we are talking about a people that is missing, a people that has to be produced, a people-to-come, ‘[n]ot the myth of a past people, but the story-telling of the people to come. The speech-act must create itself as a foreign language in a dominant language, precisely in order to express an impossibility of living under domination.’[12]

It is in light of the above that Antonio Gramsci’s notion of the historical bloc can be useful in any attempt to rethink such questions. For Gramsci the historical bloc,[13] a complex conceptual elaboration that refers to the relation between structure and superstructures, is not simply a reference to the combination between an alliance of the subaltern classes, a transition program of social transformation and new forms of organization and political practice.[14] In such a perspective, the question of sovereignty as a part of a radical and emancipatory perspective requires exactly the formation of a new historical bloc, in the sense of a process of transformation and an alternative narrative for societies. In this sense, there is a dialectical correlation between anti-imperialism and anti-capitalism. The question of sovereignty becomes a stake in the class struggle, and only a socialist perspective can indeed point towards reclaiming popular sovereignty and reclaiming democracy. It is exactly the emergence of a new historical bloc that can actually give a different meaning to sovereignty, linking it to social transformation and emancipation, basing it upon a strategy to actually fight racism and neocolonialism and transforming into a form of a potentially revolutionary ‘general will’, representing the democratic instance that is at the heart of communism as a material tendency.

To conclude: a new anti-imperialism is today indispensable. Yet at the same time this implies the articulation of reclaiming sovereignty with crucial aspects of a contemporary socialist strategy and a project of profound social transformation. All these require a rethinking of the very notion of the people as the collective subject of this reclaimed form of popular sovereignty but also of a process of emancipation.

References

Deleuze G. (1989), Cinema 2. The Time-Image, trans. H. Tomlinson and R. Galeta, Minneapolis: University of Minnesota Press.

Durand, C. (ed.) (2013), En finir avec l’Europe, Paris : La Fabrique.

Gramsci, A. (1971), Selections from Prison Notebooks, ed. and tr. by Q. Hoare and G. Nowell Smith, London: Lawrence and Wishart

Gramsci A. (1975), Quaderni del carcere, ed. by V. Gerratana, Torino: Einaudi.

Laclau, E. (2005), On Populist Reason, London : Verso.

Lapavitsas, C. et al. (2012), Crisis in the Eurozone, London: Verso.

Poulantzas, N. (1975), Classes in Contemporary Capitalism, London: Verso

Sakellaropoulos, S. (2009), ‘The Issue of Globalization through the Theory of Imperialism and the Periodization of Modes of Production’, Critical Sociology 35 (1).

Sakellaropoulos, S. and P. Sotiris (2008), ‘American Foreign Policy as Modern Imperialism: From Armed Humanitarianism to Preemptive War’, Science and Society, 72(1),

Sakellaropoulos, S. and P. Sotiris (2015), ‘From Territorial to Nonterritorial Capitalist Imperialism: Lenin and the Possibility of a Marxist Theory of Imperialism’, Rethinking Marxism 27 (1).

Sotiris, P. (2013), ‘Gramsci and contemporary Left strategy: The ‘historical bloc’ as a strategic Concept’, https://www.academia.edu/5044558/Gramsci_and_contemporary_Left_strategy_The_historical_bloc_as_a_strategic_concept

Sotiris, P. (2017), From the Nation to the People of a Potential New Historical Bloc: Rethinking Popular Sovereignty through Gramsci’, International Gramsci Journal, 2(2).

Sotiropoulos, D., J. Milios and D. Lapatsioras (2013), A political economy of contemporary capitalism and its crisis: demystifying finance, London Routledge.

Toscano, A. (2015), ‘‘Portrait of a Leader as a Young Theorist’, Jacobin, https://www.jacobinmag.com/2015/12/podemos-iglesias-europe-austerity-elections-spain-theory-laclau/

[1] For a critique of the notion of globalization see Sakellaropoulos 2009.

[2] On this approach see Poulantzas 1975.

[3] As Sotiropoulos, Milios and Lapatsioras point out, “if a capitalist country has entered into the phase of developed or developing capitalism, the route of exposure to international competition is the most appropriate strategy for organizing bourgeois power: as a model for the continuing reorganization of labor and the elimination of non-competitive individual capitals to the benefit of overall social capital.” (Sotiropoulos et al. 2013, p. 190)

[4] For an extended version of this argument see Sakellaropoulos and Sotiris 2015.

[5] On this see Sakellaropoulos and Sotiris 2008.

[6] On this see Sakellaropoulos and Sotiris 2008.

[7] On the crisis of the Eurozone see Lapavitsas et al. 2012 and Durand (ed.) 2013.

[8] On this see Sotiris 2017.

[9] On this see Sakellaropoulos and Sotiris 2014.

[10] See Laclau 2005 and Toscano 2015.

[11] ‘The articulation of the structural determination of classes and of class positions within a social formation, the locus of existence of conjunctures, requires particular concepts. I shall call these concepts of strategy, embracing in particular such phenomena as class polarization and class alliance. Among these, on the side of the dominant classes, is the concept of the ‘power bloc’, designating a specific alliance of dominant classes and fractions; also, on the side of the dominated classes, the concept of the ‘people’, designating a specific alliance of these classes and fractions.’ Poulantzas 1975, p. 24.

[12]Deleuze 1989, p. 223.

[13] ‘If the relationship between intellectuals and people-nation, between the leaders and the led, the rulers and the ruled, is provided by an organic cohesion in which feeling-passion becomes understanding and thence knowledge (not mechanically but in a way that is alive), then and only then is the relationship one of representation. Only then can there take place an exchange of individual elements between the rulers and ruled, leaders [dirigenti] and led, and can the shared life be realised which alone is a social force with the creation of the “historical bloc”’ (Gramsci 1975, pp. 1505-1506; Gramsci 1971, p. 418 [Q11, §67])

[14] On this see Sotiris 2013 and Sotiris 2017.