Reviewed by Bill Jefferies
This collection covers the economic crisis. It focuses mainly on the USA but includes pieces on Latin America, Eastern Europe, China and the Eurozone. Inevitably given the spread of authors, and with contributions ranging from carbon trading to auto bail-outs, the overriding theme is not always clear. Occasionally the authors conflict with or even contradict each other. That is no bad thing in itself of course., If there is a common thread, it is that the credit crunch has ushered in a new crisis-ridden phase of capitalist development.
The two opening pieces establish this theme. David Harvey discusses how Marxists need to integrate finance into Marx’s critique of political economy if they are to develop a successful and rounded understanding of the contemporary world system. David McNally asserts capitalism has entered a period of “global slump”, the current crisis signals “the exhaustion of the accumulation regime that had emerged almost thirty years earlier. Rather than an ordinary recession, a short-lived downturn in the business cycle, it constituted a systemic crisis, a major contraction whose effects will be with us for many years to come” (36). Quantitative easing (QE) “can no more generate sustained growth today than it has in Japan over the past 15 years” (36).
McNally says that by every significant measure, the Great Recession was the deepest and longest decline experienced by global capitalism since the catastrophic collapse of 1929-33. World industrial output fell 13% in 2009 (37). McNally is mistaken here: in 2009 world trade fell by 13%, world industrial production fell by 7%. In 2010 trade grew by 15% and industrial production by 10%, (J. Ebregt, 2012). The OECD economies, which do not include China, experienced an average 6% fall in GDP. For several months the world economy traced the collapse after the 1929 Wall Street crash. But a $21 trillion bail-out package ensured that the world’s financial institutions survived the crisis. McNally points out that with “the important exception” of corporate profits, “the rebound in output, income, employment and investment” in these Western nations has been “incredibly tepid” (39). McNally shows that business investment had at the time of writing (mid-2011) failed to recover from its very low slump levels, but since then net business investment has begun to rise more strongly. Unfortunately, McNally fails to account for the rapid recovery of world trade and industrial production, while world GDP growth expanded at more than 4% in 2010 and 2011. At least until now, the “global slump” has been limited to parts of the West.
Ursula Huws discusses how neo-liberal governments see the crisis as a capitalist opportunity, with generalised austerity on the back of the financial crisis, seeing the pace of privatisation in the public services accelerating over the last two years. Larry Lohman considers how the creation for a market in carbon credits mirrors the growth of derivatives and is useless for limiting the growth of industrial carbon use, while Frances Fox Piven describes the disproportionate impact of unemployment and wage cuts on black people and women in the USA. Nicole M. Aschoff shows how the US government “rescue” of the three main US auto manufacturers was undertaken at the expense of its workers, with the complicity of the United Auto Workers (UAW) undermining pay, job security and pensions. Adolph Reed, Jr and Merlin Chowkwanyun consider how contemporary academics have discussed race and class in the USA.
The relative decoupling of the so-called emerging markets from the older Western powers is discussed in essays on the Arab uprisings, China and Eastern Europe.
Adam Hanieh considers how high oil prices are affecting the Gulf Cooperation Council (GCC), consisting of the most reactionary oil potentates, traditionally closely aligned with the USA. A nearly tenfold rise in oil prices in the noughties created a surplus of between $500 billion and $1 trillion and GCC holdings of US securities increased by 50% (185). The close relationship between the GCC and the USA is, however, being undermined by the growth of China, now the largest importer of Saudi Arabian oil, and the threat of the spread of the Arab uprisings to these very conservative states.
Claudio Katz explains the relatively limited and short-lived impact of the crisis on Latin America, as the authorities took advantage of the extensive restructuring of their economies already undertaken, and how high raw materials prices cushioned the recession. Katz examines the different types of government across the region – conservative, social democratic and leftist popular –and describes the political ferment that poses the possibility of the revival of the left.
Ho-Fung Hung assesses the durability of China’s growth, and whether the Sinomania of parts of the left is justified. Hung says that in 2007 the Chinese Academy of Social Sciences pointed to “unsustainable expansion of an asset bubble” (217), and that since then the reflation of the economy through post-crisis lending has created “a mega bubble” (217). The bursting of this bubble “can be the trigger of a second wave of global financial crisis” (218). He points to the possibility of bad debts through reckless local state spending, and Hung pointHhn says that by 2006 75% of Chinese industry was “plagued by overcapacity” (219). Hung says that new export industries have not replaced the jobs lost through the privatisation of state manufacturing in the 1990s (220). Hung demonstrates the growing income inequality and the decline in consumption as a proportion of GDP (221). Hung concludes that “From a Marxist perspective, a capitalist economy is said to encounter an over-accumulation crisis when the rate of capital accumulation surpasses the level that could not prevent rate of profit from failing, either because of the build up of excess production capacity or lack of consumption” (222).
But if productivity is rising faster than the physical increase in the amount of investment, then the organic composition of capital can fall, offsetting the fall in profit rates. While the cheapening of the cost of the reproduction of labour power means that living standards can rise, wages fall as a proportion of national income and relative surplus value increases. There might be over-accumulation of capital in China, but given the relatively undeveloped nature of China’s economy, with 50% of the population still employed in agriculture, and the very low or even absent organic composition of capital inherited from the abolition of state planning in the 1990s, there are reasons to doubt whether that situation has been reached yet.
The profit rate of all industries may have fallen from 7.69% in 2007 to 7.09% in 2009 (223), but this was at the bottom of the crisis, and over the last two years profits of Chinese firms have risen very fast. What is the rate of profit in 2010 or 2011? Since 2006 Chinese annual fixed investment has more than doubled, and China’s steel production has increased by a further 50% per annum in 2011. Is this a sign of chronic over-capacity? The probably 200 million strong army of unregistered migrant workers excluded from official unemployment figures makes estimates of the size of the industrial working class uncertain. While there is certainly evidence of a property bubble, house prices have fallen or stagnated in 2011, and a state housing programme to construct 10 million subsidised houses has limited the slow-down in the residential construction sector.
Hung points to China’s high proportion of exports relative to GDP, which reached about 40% in 2008 before falling to around 30% by 2009 (228). This is in and of itself evidence of rebalancing, but more importantly, this compares sales with GDP, which is a measure of value added. A very high proportion of China’s exports consists in the processing of imported parts, for assembly and so on. The contribution of exports to Chinese GDP is much lower than the nominal figure of export sales to GDP. Hung may be right that China faces immanent economic crisis, but as the inaccuracy of the 2007 Chinese Academy of Social Sciences forecast about the housing bubble shows, these predictions are fraught with difficulty.
Jan Toporowski considers the impact of the crisis on the post-Communist, newly restored capitalist economies of Central and Eastern Europe (CEE). Toporowski shows the wholesale destruction wrought by the introduction of the market into these states and their weakness faced with the crash of 2008. The smaller states like Latvia and Hungry remain prostrate before the agency of Western finance, the IMF, World Bank and ECB, while the absence of a socialist alternative stymies their resistance to the free reign of capital. Peadar Kirby considers the collapse of the Irish Tiger, and the failed response of the Irish authorities to stem the collapse of speculative building and the banks that had funded them. Kirby shows how the ECB imposed austerity in return for saving the Euro, and demonstrates the failure of the labour movement’s collaborationist strategy. The rich remain rich, and the structural features of the Irish economy and society remain largely unchanged, even though there is mass popular and working class disillusion with and alienation from them.
Socialist Register concludes with a symposium on the Eurozone crisis in the shape of the collapse of the Greek economy, and two alternative socialist strategies to deal with it. Elmar Altvater analyses the Greek economy within the Euro and contrasts it with the USA, showing how the deep structural inequalities of the Eurozone have shaped the response of the different players within it, and the determination of the Northern powers to make the South pay for the crisis. Costas Lapavitsas situates the Greek crisis within the attempt of European capitalists to create a world currency to rival the US dollar. Lapavitsas unequivocally asserts that this attempt has “effectively failed” (288). Lapavitsas shows how the Growth and Stability pact created a “race to the bottom for workers’ wages and conditions across the Eurozone” (289); attempts to rescue the Euro have been made at the expense of the peripheral countries, with lenders making healthy profits in 2011 (290). The authorities have bailed out the banks rather than the nations, maintaining pressure on workers’ conditions while attempting to avoid widespread banking failure. Germany as the hegemonic European power stands to gain most: “The risks are high but, if the strategy succeeds, Germany could become the undisputed master of European capitalism, in command of the second most important form of world money” (291). Recognising this “requires abandoning the notion that the European Monetary Union could be reformed in the interests of working people, or that a ‘good euro’ could be created” (291). Lapavitsas points to the contradiction at the heart of the position of those who want to stay in the Euro, while restructuring the debt: “they propose to write debt off unilaterally while remaining within the framework of the eurozone, the main powers of which will have to take the losses. Quite how this will be achieved has yet to be explained” (292). Instead, Lapavitsas proposes a solution that “alters the balance of social forces in favour of labour and pushes Europe in a socialist direction” (294). This requires a departure from the Euro. A default on debt would raise the question of Eurozone membership. It would require the public ownership and control of the banks, capital controls, redistributive tax and wage policies and a democratic restructuring of the state. According to Lapavitsas, these measures “would not necessarily be socialist in the first instance”, as precise strategy would emerge through struggle. This is a moot point, since the logic of the struggle appears to impose socialist answers from the outset.
Michel Husson presents an alternative political perspective that attempts to reconcile membership of the Euro with a wholesale restructuring of national debt. Husson points out that devaluation benefits one country at the expense of others, that it is an individual rather than collective solution to the crisis. Husson says that “A government of social transformation would, indeed, commit a terrible strategic mistake by leaving the euro, exposing itself to all kinds of speculative retaliation” (302). But how much choice would a government of social transformation (presumably long hand for a socialist government) have in the matter? Indeed, Husson does not exclude leaving the Euro (304). The real difference seems to be whether departure from the Euro is a prerequisite for restructuring national debts in the interests of the workers – Husson thinks not, Lapavatisas thinks so – or whether it is simply the inevitable result of doing so. If so, how much of a difference is there really between the two sides? Rumours abound that even the current conservative, austerity-driven Greek government may be forced from the Euro, in spite of its commitment to meet the demands of the ECB and IMF. How much chance would any leftist government have under these circumstances?
The Socialist Register 2012 provides a fascinating and very informative series of pieces on diverse aspects of the current crisis. Although occasionally eclectic and contradictory, it is thought-provoking and insightful throughout.
3 April 2012
- 2012 CPB world trade monitor Feb 2012 Netherlands Bureau for Economic Policy Analysis Retrieved February 22, 2012 http://www.cpb.nl/sites/default/files/cijfer/CPB%20World%20Trade%20Monitor:%20December%202011/cpb-world-trade-monitor-december-2011.pdf