Recognize a divided Ukraine "for the time being" against NATO membership
by the editors of infosperber.ch
Just in time for the NATO summit in Washington, the magazine "Foreign Affairs" has published a proposal for ending the war in Ukraine. © "SRF"
Even less than ideal options for Ukraine should be considered. This is the view of US historian Mary Elise Sarotte.
[This
article posted on 7/12/2024 is translated from the German on the
Internet,
https://www.infosperber.ch/politik/geteilte-ukraine-vorerst-anerkennen-gegen-nato-mitgliedschaft/.]
Red.–
The leading US strategy journal "Foreign Affairs" has published a
"better path for Ukraine and NATO" to accompany the 75th anniversary
summit of NATO in Washington. The
author is historian Mary Elise Sarotte of Johns Hopkins University in
Washington, a recognized expert on NATO's eastward expansion, who ten
years ago detailed how the US, together with West Germany, had outwitted
Russia after the fall of the Berlin Wall in order to keep the door open
for the later eastward expansion of the alliance. Now the historian is
causing a stir with a compromise proposal for ending the war in Ukraine.
She explains what Kiev could do to get a place in NATO. Infosperber summarizes the author's central arguments.
_____________________
Securing
Ukraine's future cannot be postponed to a later date, as is being done
with the promise of a "bridge to NATO". It must be implemented now.
Because, as historian Mary Elise Sarotte says:
"It
is unlikely that support from the American and European governments
will reach anywhere near the level of the last two and a half years. The
likelihood of a major Russian advance or breakthrough will increase.
This could lead to destabilizing refugee movements and panic in the
Russian border states (and beyond). Some
countries may respond by doing what French President Emmanuel Macron
has suggested: sending their own forces into Ukraine, which could lead
to retaliation against their NATO-protected homelands.”
Against escalation and against negotiations with Russia
Historian
Sarotte would like to avoid this escalation with its unforeseeable
consequences. However, she does not believe in negotiations with Russia.
Ukraine and NATO do not have to wait for Russia's approval or for the
war to end. History after the Second World War teaches us that NATO can
grant Ukraine membership even "if Russian troops are almost certain to
occupy parts of its territory for years to come".
Historian
Sarotte first recalls the example of Norway, which 75 years ago wanted
what Ukraine wants today, "to become an ally, even though it borders
Russia (then the Soviet Union)":
“The
Norwegians considered two options: greater Nordic defense cooperation
or a transatlantic alliance – despite the risk of becoming the only NATO
founding member with a Soviet border and thus taking responsibility for
bringing the alliance to Russia's doorstep. Norway chose the second
option, albeit with a certain twist. The
Norwegian government issued a unilateral declaration on February 1,
1949, two months before the alliance was founded, stating that it would
not ‘provide bases for the armed forces of foreign powers on Norwegian
territory, as long as Norway is not attacked or there is a danger of
attack’. It later added similar restrictions for nuclear weapons.”
West
Germany's accession to NATO in 1955 is the second example cited by
Sarotte. It shows how a country can join the alliance despite being
divided. But, as Sarotte points out,
"No
state without clear borders can join NATO, because for Article 5 (on
the obligation to assist a member state that is the victim of an attack)
to be credible, the scope of application must be clearly defined. A
clearly defined border does not, however, mean that it is irrevocable
or even internationally recognized, as long as a country follows the
example of the Federal Republic of Germany and pursues a strategy of
provisionality, i.e. makes it clear from the outset that the border is
provisional."
Mary
Elise Sarotte is a professor at the Henry A. Kissinger Center for
Global Affairs at Johns Hopkins University and at the Minda de Gunzburg
Center for European Studies at Harvard. © "ARD" / "ttt"
The division of Ukraine is a reality for the time being
Ukraine "deserves better than this bitter model" of a divided country, Sarotte emphasizes. But she has no better choice:
"Since
Ukraine and its supporters have been unable to end the de facto
division of the country, this division is a reality for the time being.
It is better to follow the example of West Germany and achieve full
membership of NATO for an independent Ukraine than to watch as the
important support of the United States dwindles while Congress argues
and Trump's chances of re-election increase."
At
the same time, the example of West Germany stands for a better future,
historian Sarotte wants to make her proposal palatable to Ukraine:
"After
joining NATO in 1955, West Germany consolidated both its economic
recovery and its new democratic norms, becoming an important export
country and a strong NATO ally – a future that one can only wish for
Ukraine."
Agreement between NATO and Ukraine
But
how can Ukraine be persuaded to do this? Sarotte suggests that the
heads of state and government of the NATO member states encourage Kiev
to do the following three things:
"First,
to establish a provisional, militarily defensible border. Second, to
agree on self-restraint in terms of infrastructure in unoccupied
territory (e.g. no permanent stationing of foreign troops or nuclear
weapons), with the important Norwegian exclusion clause that these
restrictions only apply as long as Ukraine is not attacked or threatened
with attack. Thirdly,
and most painfully, they should commit not to use military force beyond
that line, except in self-defense, as the West Germans did to reassure
their NATO allies that they would not suddenly find themselves at war
with Russia once Ukraine became a member."
Sarotte
suggests that the NATO states should agree with Ukraine on this and –
as soon as it has been done – announce it publicly and present Russia
with a fait accompli. The aim would be for the divided Ukraine to "join
NATO as soon as possible, ideally before January 20, 2025" and thus
before Donald Trump could possibly take office as President of the
United States.
Sarotte
is aware that her "Better path for Ukraine and Nato" will meet with
skepticism in Ukraine and Russia. Why should Ukraine give up land, even
if only "temporarily"? Why should Russia accept the Nato membership of
Ukraine, which is "temporarily" divided?
With regard to Ukraine, Mary Elise Sarotte agrees with her fellow historian Stephen Kotkin:
"The
indispensable condition for Ukraine to win peace is a ceasefire and an
end to the fighting as soon as possible, an achievable security
guarantee and accession to the European Union. In other words, a Ukraine
that is secure and has joined the West."
And Sarotte concludes:
"NATO
membership covering most of Ukraine would enable the country to move
towards such a future without having to wait for Putin to relent."
On Russia, the historian says:
"Given
that former Russian President Dmitry Medvedev called for the division
of Ukraine, Moscow would have the face-saving option of calling this a
victory."
"The clock is ticking"
In conclusion, Mary Elise Sarotte points out that
"The
clock is ticking and there are only a few options left. If Ukraine is
not to be abandoned while US support wanes – and Europeans are to be
forced to fill the gaps (…), then all options, even the less ideal ones,
must be considered for the institutionalization of its security in
NATO."
The history and power of economic ideas (I)
Economic fairy tales and the fear of enlightenment
Who still believes them? The story that "today's profits are tomorrow's investments and the jobs of the day after tomorrow" (Helmut Schmidt)? That lower wages and taxes in favor of higher corporate profits lead to prosperity for all? That stable prices and balanced budgets promote international competitiveness? If
the belief in the all-powerful forces of the market is called into
question at the bottom, they argue at the top whether the policies
pursued over decades in the name of the market are still up to date.
Neoliberalism in one country?
In
step with the disintegration of the radical market or neoliberal
political model, a new right-wing movement is gaining ground, which
focuses on questions of national and racial identity, but is more
radical in terms of economic and social policy than most former or
current supporters of neoliberalism. The new right does not stand for an alternative to it, but for a new version of it. Instead of neoliberal globalization, it demands state protection against unfair competition from foreign imports and workers. Neoliberalism in one country, so to speak.
Neoliberal thinkers and politicians, just like their old liberal ancestors, were no strangers to nationalist and racist ideas. But
they always linked these to their main goal: free trade, according to
the rules of the nation or race they considered chosen. For them, free trade only within one country is a contradiction in terms.
The
fact that such an absurdity is gaining popularity is mainly due to the
fact that the left is unable to take advantage of the crisis of
neoliberal globalization. Not
least because most left-wingers are completely silent on the subject of
the economy or occasionally utter abstract words about capital
accumulation and crises.
The left's silence on the economy is fatal. Because history keeps catching up with the left. This
is partly because neoliberalism has succeeded in branding leftists of
all shades of red as know-it-alls who meddle in other people's affairs
without being asked. The
justified criticism of bureaucracy and democratic deficits has become a
popular prejudice that has stuck to the left beyond the sell-by date of
neoliberalism. The new right declares leftists and neoliberal globalizers alike to be agents of state paternalism. With the result that the left is often enough perceived as an appendage of the globalization elites.
One hundred and one legends
What
the left lacks is a unique selling point that allows them to take the
experiences of small people and condense them into images in which these
people can recognize themselves. Images that invite an exchange of ideas and can thus contribute to the development of conceivable alternatives. To
do this, they must deal with the everyday lives of small people without
losing sight of the powerful people who determine everyday conditions. Everyday life is primarily about money and work, economic issues. A small number of left-wingers are concerned with such issues, but are hardly heard. Why?
The example of the book Wirtschaftsmärchen* (Economic Fairy Tales* ) explains the limited impact of left-wing economic criticism. In
the subtitle, the authors, Patrick Schreiner and Kai Eicker-Wolf,
announce "One hundred and one legends about economics, work and social
issues". Each of these legends is told over two to three pages. Each is introduced with a quote from a neoliberal ideology producer, including brief biographical details and sources. This
provides a good overview of the entire range of universities,
associations and media through which neoliberal slogans are spread. Thematically,
these slogans and legends cover the whole range from wage labor, the
welfare state and taxes to the world market and politics to the effects
of neoliberal policies on income and wealth distribution and the
subjugation of democracy to market forces.
Free
of technical and political jargon, the authors explain the assumptions
on which each legend is based and show that the associated political
demands have different consequences in reality than in the legend. One
hundred and one legends are refuted empirically, one after the other,
and the interests of those propagating the legends are revealed. At the same time, the outlines of alternative economic policies geared towards justice, ecology and democracy become clear.
With their book, Schreiner and Eicker-Wolf are doing educational work in the best sense of the word. Anyone who reads the book will be prepared for many discussions. In times of rampant irrationalism, this is a necessary condition for getting back on the offensive politically. But not a sufficient one.
Exposing
neoliberal economic fairy tales as empirically false and revealing the
interests of the rich and powerful behind the legends in no way leads to
mobilization for alternatives. At least not automatically. Although the associated goals achieve high approval ratings in opinion polls. The fear of enlightenment stands in the way of alternatives.
Fear of enlightenment
If
alternatives are inconceivable, knowledge of the causes of unloved
working and living conditions reinforces existing unease, and feelings
of helplessness, fear and powerlessness spread. If
the understanding of one's own misery is not linked to a perspective of
overcoming it, the belief in the justice of the market, if it is freed
from the interference of malicious elites, creates emotional relief.
But why are alternatives unthinkable? The
disintegration of the neoliberal world view, which was previously
inextricably linked to globalization, does not remove the pieces of the
puzzle that made up this world view. This
applies in particular to the core of this world view inherited from old
liberalism: the idea of the freedom and equality of those involved in
the exchange of goods, which Marx claimed must have the "firmness of a
popular prejudice" in order for the exchange of goods to become the
predominant form of transport in societies based on the division of
labor.
Commodity,
money and capital fetishism remain dominant forms of thought even when
accumulation and crisis lead to conditions that are rejected en masse. These forms of thinking make the path from enlightenment about the causes to thinking about alternatives so difficult.
The
internalized ideas of freedom and equality, as much as they flatter
one's own self-esteem - who likes to see themselves as a subject? - contradict daily experiences of subordination to the orders of bosses and officials. Or, in the search for work, the anticipatory submission to the presumed expectations of potential "employers".
There
is a gap between the self-image of the free, equal and enlightened
individual and the experience of submission and being at the mercy of
others. The prevailing thoughts do not allow us to make sense of the subaltern situation, let alone imagine ways out of it. Instead, the fear of not living up to internalized ideals or, worse still, not being able to survive on the market prevails.
In
order for alternatives to become conceivable, the forms of thought
associated with the exchange of goods must be seen through as
ideological pillars of an economic system based on lack of freedom and
exploitation, then they can be overcome. Space must be created to share experiences with other subalterns. Sharing allows insight into knowledge that has existed for a long time but cannot be expressed in the old forms of thought. Knowledge is inextricably linked to the concrete work that people do to reproduce their lives.
Last year, SoZ published a series on the various forms of concrete work, whether paid or unpaid. This is now followed by a series on the history of economic ideas and the political power they continue to wield today. It
will show that the abstract fetishisms of commodity exchange elaborated
by Marx take on many concrete forms and create a web of ideas from
which it is difficult to free oneself. This requires a collective exchange of experience, learning and organizational processes.
*Patrick Schreiner, Kai Eicker-Wolf: Economic fairy tales. Hundertundeine Legende über Ökonomie, Arbeit und Soziales. Cologne: PapyRossa, 2023. 270 p., 19.90 euros.
Adam Smith: Free trade for the lower middle classes
by Ingo Schmidt
[This
article posted on 6/1/2024 is translated from the German on the
Internet,
https://www.sozonline.de/2024/06/geschichte-und-politische-macht-oekonomischer-ideen-ii/.]
Adam
Smith (1723–1790) was a child of the ruling class. His father was a
lawyer and his mother a landowner. He had influential friends who were
open to his economic theories and political advice. But it was only
after his death that his ideas became one of the central points of
reference for liberalism. The
"invisible hand of the market" is still a common phrase in liberal
theory and ideology today, although for Smith it was no more than a
metaphor mentioned in passing.
Like
other "great minds" before and after him, Smith took up ideas that were
already present in scientific and political discussions, summarized
them and created an intellectual crystallization point for formulating a
political project – in this case, liberalism.
Intellectuals
of subsequent generations describe summary works such as Smith's Wealth
of Nations as "great" when they can be used as a starting point for
reformulations – in the case of economics, this means neoclassical
theory since the late 19th century and neoliberalism since the mid-20th
century. For
ideologues of the ruling class, the aim is to adapt ideas that provide
guidelines for their political actions and help secure the consent of
the subaltern classes.
An economic Luther
Adam
Smith was concerned with the prosperity of nations. This is already
revealed by the title of his main work, published in 1776 – An Inquiry
into the Nature and Causes of the Wealth of Nations. This prosperity was
created by labor. The labor used to produce a good also determined the
exchange ratios on the market.
Free
from aristocratic privileges and state trade monopolies, individuals
should be able to pursue their own interests, produce and exchange. In
doing so, they would also increase the nation's prosperity. Nations
should also be free to trade with each other, free from import
restrictions and export subsidies.
The
work was an ideological challenge to absolutism and mercantilism, i.e.
to the state-sponsored efforts to achieve export surpluses and to
accumulate the proceeds earned in the state coffers. Smith had been able
to gain an insight into both of these in France, where he lived from
1764 to 1766 as the private tutor of a young Scottish nobleman. Had it been known there, the work would have been considered revolutionary literature.
In
England, where the rising bourgeoisie and the nobility had already
formed an alliance against the working classes after the revolution and
civil war in the 17th century, the book was more of a program for the
gradual expansion of the rights and influence of the bourgeoisie.
Friedrich Engels was right to call Smith the "economic Luther".
The
work ignores the violent opening of non-European countries to trade and
the class of propertyless proletarians in Great Britain created by a
mixture of violence and economic coercion.
Although
labor is seen as a value-creating factor that regulates exchange, and
the degradation of labor through specialization in simple and repetitive
movements is criticized, it is not the immediate producers, but the
petit bourgeois or, in Marx's words, the simple commodity producers, who
are Smith's true heroes.
Smith
was not interested in why there were many small-time businessmen, who
would later form the numerically smaller class of industrial
capitalists, but many more proletarians without property. His ideas were
characterized not by class struggle, but by market harmony.
Although
Smith's ideas were popularized in the USA, they were not initially
popular in his own country. There was no inherited class rule there, but
instead a mass of settlers who wanted to become independent as farmers,
craftsmen or traders. Their ambitions found ideological expression in
Smith's theory of the middle classes.
There
were also plantation owners who shared Smith's enthusiasm for free
trade, but ignored his cautious criticism of slavery. They were as
little interested in the fact that their free trade ideal was based on
the expulsion and genocide of the Native Americans as the settlers who
arrived after them or Adam Smith.
A large market creates increasing prosperity
According
to Smith, the prosperity of nations is preceded by a "natural
development" of hunter-gatherer, pastoral and agricultural societies.
The latter must increase agricultural production to such an extent that
an increasing proportion of the population not working in agriculture
can be fed. This is a prerequisite for trading companies, which Smith
sees as the crowning achievement of economic development.
Smith
cites China as an example of a country that has undergone this natural
development. He cites Holland as an example of an unnatural development,
because it first opened up overseas markets by force of arms, thus
becoming a trading company, and only then carried out reforms to
increase agricultural productivity in its own country.
Smith's
"natural development" does not necessarily seem to apply to colonies.
Smith recommended that Great Britain's North American colonies, which
declared their independence in the year The Wealth of Nations was
published, specialize in the production of agricultural goods and import
manufactured goods from the motherland.
Less
than a hundred years later, the clash of interests between plantation
owners, who supported Smith's free trade to promote their agricultural
exports, and aspiring industrialists, who demanded tariff protection
from the overpowering British competition, led to the Civil War.
The
conflict was not foreseeable during Smith's lifetime. James Watt, the
inventor of the steam engine, was one of Smith's friends, but the
industrial revolution was still in its infancy. That is why, in Smith's
view, it was not technical progress that was responsible for the
increase in the wealth of nations, but market size and the organization
of labor.
The
larger the market, Smith's central argument went, the more companies
can specialize in the production of a particular product and achieve
increasing returns to scale. If an extra hour of work is put in,
production increases disproportionately. Added to this is the
specialization within the company in hand movements that are easy to
learn and monotonously repetitive.
However,
the prerequisite for both forms of specialization is an expansion of
the market. If this is the case, labor productivity and wages will rise
without the profit rate falling. The wealth of nations increases. Thanks
to the market.
Although
Smith formulated his theory from the perspective of simple commodity
producers, at that time craftsmen and factory owners, and thus ignored
class antagonisms, he was nevertheless aware that such antagonisms
existed and that workers were at a disadvantage.
He
was clearly opposed to mergers between company owners. He believed that
they would only lead to price fixing and thus reduce the purchasing
power of workers and non-monopolized companies. Although he bemoaned the
sad fate of workers as a result of the increasing specialization of
their work, he did not comment on mergers between workers. His friend
and Prime Minister William Pitt made the founding of trade unions a
punishable offense in 1799.
After
the USA had replaced Great Britain as the leading industrial power, it
became an enthusiastic advocate of free trade, always citing Smith in
support of its position, even though corporations and labor-saving
technical progress, which makes production more capital-intensive, were
not mentioned in his theory.
Recently,
China has been seen as a challenge to which the USA in particular has
responded with protectionist measures. The British business newspaper
The Economist, which was founded in 1843 to propagate the ideas of Adam
Smith and other liberal economists, warns of the disintegration of the
liberal world order.
Ingo Schmidt is a Marxist economist and lives in Canada and Germany.
The history and political power of economic ideas (III)
Thomas Malthus and David Ricardo: The discovery of class struggle
by Ingo Schmidt
[This
article posted on 7/1/2024 is translated from the German on the
Internet,
https://www.sozonline.de/2024/07/geschichte-und-politische-macht-oekonomischer-ideen-iii/.]
Let
us recall that Adam Smith regarded workers, entrepreneurs and
landowners as members of income classes, as recipients of wages, profits
and ground rents, respectively. However, he was not interested in the
question of why workers owned nothing except their labor, while others
owned businesses and land. Instead of seeing conflicts of interest
between these classes, he saw the possibility of growing prosperity for
the entire nation. As
long as politics allowed free trade, the pursuit of one's own business
interests would lead to larger markets, a deepening of the division of
labor that would increase productivity, and thus rising incomes for all.
Smith's
philosophy of "the coexistence of classes for the benefit of all" was a
product of the Scottish Enlightenment. And it met with opposition: from
Thomas Malthus (1766–1834), a clergyman and professor at a college
established by the East India Company. And
David Ricardo (1772–1823), who had earned enough money as a stockbroker
to devote himself entirely to his economic studies as a free-floating
intellectual and, towards the end of his life, to campaign as a member
of parliament for the abolition of corn duties.
Malthus'
"Population Law" (An Essay on the Principle of Population) was
published in 1798, just under a decade after the French Revolution and
in the midst of the enclosures, the fencing in of peasant land by
landowners, which in England transformed peasants into poor,
propertyless proletarians. With
the Sansculottes, in some respects a French variant of the English
Diggers, the spectre of an uprising of the poor had returned.
There is not enough for everyone
Malthus
developed a theory according to which the poor could not be helped.
They were doomed to poverty. Although industrialization had not
progressed very far during Malthus' lifetime, he recognized the
possibility of overproduction of goods that workers could not afford
because of their poverty and that entrepreneurs did not want to afford
because their consumption needs were already satisfied. Malthus'
proposal to prevent overproduction crises: Landowners
could afford the goods that could not be sold elsewhere, but their
luxury consumption would not contribute to the development of further
production capacities. In doing so, he openly stated what liberal
apostles of equality deny: as in feudalism, not everyone is equal in
capitalism. Or to put it more bluntly: there is not enough for everyone.
Ricardo
shared Malthus' view that workers were condemned to a life of poverty,
but he considered overproduction crises to be impossible. His
"Principles of Political Economy" (On the Principles of Political
Economy and Taxation) was published in 1817. Two years after the
Congress of Vienna, which had put an end to the spectre of the French
Revolution, which had spread throughout Europe, sometimes by force of
arms, and which had therefore also been severely distorted, the rule of
monarchs in Europe was consolidated, which did not stop the development
of capitalism.
While
Malthus' ideas were still strongly influenced by the transition from
feudalism to capitalism, Ricardo was concerned with the entire economic
power of capital. To achieve this, not only wages but also ground rents
had to be kept as low as possible. After all, they represented a
deduction from the capitalists' accumulation fund. And this fund could
not be large enough, since it determined the amount of labor used to
create value and, above all, profit. The
expansion of the accumulation fund required capital to fight against
workers and landowners. The class struggle as a means of capitalist
enrichment had been discovered.
Poverty as a law of nature?
But
why do workers have to live in poverty? And how can the basic rent be
limited? Malthus answered the first question by claiming that rising
wages would tempt workers to have more children. More food, more sex,
more children. Population growth corresponds to a geometric series: 2,
4, 8, 16. The production of food cannot keep up with this. The
growth of agricultural production, he claimed, followed an arithmetic
progression: 2, 4, 6, 8. The growing population could not be fed. Hunger
would reduce the population and wages to their original levels. Less
food, less sex, fewer children.
That
was why he rejected the idea of caring for the poor. Despite the best
of intentions, it would not be able to lift workers out of poverty. His
recommendation for sexual abstinence was also entirely in line with this
theory – and probably also with his moral views as a priest.
Charles
Darwin rejected the assumption of arithmetic growth in the animal and
plant world, although his thinking was strongly influenced by Malthus.
Malthus had postulated this arithmetic growth, as well as geometric
population growth, but had not bothered to seek empirical evidence. This
did not prevent Ricardo from adopting Malthus's wage theory. Just
as Ferdinand Lassalle later did, who spread it under the name of the
"iron law of wages" in the emerging German labor movement.
Imports as a way out
Despite
the assumption that wages could not rise above a physiological minimum,
Ricardo saw limits to capital accumulation. In order to feed the
workers employed in the process of accumulation, more land would have to
be cultivated. However, this land would be less fertile than the land
already cultivated. The effort required to produce an additional unit of
food would therefore require a disproportionate amount of labor per
hectare of land. However,
it is the yield of the last, least fertile hectare of land that
determines the ground rent. The more fertile areas, which allow a unit
of food to be produced with less labor, would yield a higher
differential rent. This
differential rent would continue to rise as the marginal returns of the
land fall due to progressive accumulation, enriching the landowners but
driving the capitalists into a profit squeeze despite constant and
minimal wages.
This
led Ricardo to ask how ground rent could be limited. His answer: free
trade and technical progress. If food, in Ricardo's time mainly grain,
were imported from countries where it was cheaper to produce than in
Great Britain, the workers' wages could be reduced and the profit rate
increased accordingly without reducing the real wage. Which was not
possible anyway, because it already corresponded to the subsistence
minimum. Furthermore,
the cultivation of additional, but less fertile land could be avoided
through technical progress in industry. As a result, less labor would be
needed to produce a unit of product.
In
the third edition of his "Principles", Ricardo added a chapter entitled
"On Machinery", which considered the possibility of technological
unemployment. According to this, the level of employment is determined
not by the supply of labor, but by the demand for labor, which in turn
depends on capital accumulation and technological progress. From
there, it was only a small step to Marx's theory of the industrial
reserve army as a mechanism that prevents wage increases that threaten
profits. Marx explicitly understood the theory of the reserve army as a
counter-proposal to Malthus's population law.
Malthus and Ricardo today
Later
liberals did not want to hear anything about Ricardo's theory of
technological progress. The warning of technological unemployment did
not fit in with the idea that anyone looking for a job would find one.
It was too close to Marx's anti-capitalist theories. In
pursuit of the globalization project at the end of the 20th century,
they did, however, invoke the free trade theorist Ricardo – even though
they were more concerned with direct investment and relocation than with
free trade.
Malthus
became a prophet who had recognized the connection between poverty and
population growth early on. In fact, both increased massively in the
20th century. But the connection between temporarily rising incomes and
rising numbers of children, as claimed by Malthus, proved to be false.
In countries where incomes rose permanently, the number of children
decreased.
Although
empirically refuted, Malthus's ideology blames the poor for their own
misery. It also blames them for the depletion of natural resources –
there are simply too many people. Although the per capita consumption of
resources is much higher among the rich than among the poor. This is
because technical progress since the days of Ricardo has been
labor-saving but not resource-saving. This
kind of technological progress will not solve the ecological problems
of the present. And it certainly won't do so by blaming the poor for the
problems. They suffer from them much more than the rich.
China
Contradictions of the boom
by Ingo Schmidt
[This article posted on 3/1/2024 is translated from the German on the Internet, https://www.sozonline.de/2024/03/china-4/.]
Since
growth in China seems to have settled at mid-single-digit figures,
companies have been complaining about the failure of the Far Eastern
growth engine, while politicians fear for their global political
supremacy.
It
seems as if they have concluded from the fact that the China boom was
longer and stronger than any other growth period in the history of the
global economy that it must continue for all eternity. Yet
growth has been slowing for over ten years and there is no reason to
believe that there is a way back to the double-digit growth rates of the
period before the global economic crisis of 2008/2009. A look back at
the initial phase of the boom also helps to understand its end.
World market integration under state control
Since
the debt crisis of the 1980s, the governments of the West and
institutions such as the World Bank and IMF have been pushing countries
of the South to switch from domestically oriented industrialization to
export-oriented development: agricultural products and mass products in
exchange for technologically sophisticated goods from the rich
countries. After
initial market reforms geared towards the domestic market in the 1980s,
China also embarked on the path of world market integration.
The
Communist Party was prepared to follow the market model of the West,
albeit under its control: land remained state property. To this day. Land can be leased, even on a very long-term basis, but cannot be traded. Capital and foreign exchange transactions with foreign countries remained under state control. Foreign investors had to enter into joint ventures that gave Chinese companies access to advanced technologies.
Not
exactly the location conditions that Western investors wanted, but
access to unbeatably cheap and skilled labor and a reasonably intact
infrastructure, a legacy of the original accumulation in Mao's China,
made up for these disadvantages. Within a few years, they transformed some of China's coastal regions into the capitalist world's extended workbench. The labor required for this came from the agrarian hinterland. The
continued access to land in their home communities allowed them to
support themselves or their families when their labor was not needed in
the export industries. This was a factor that kept the reproduction costs of labor low. Accommodation in mass housing and extremely long working hours were further factors.
There
is no doubt that the successful integration into the world market was
bought by over-exploiting the Chinese working class. Not only foreign companies were involved in this. World
market integration went hand in hand with a kind of "second original
accumulation", in which old state-owned companies, including the social
systems they provided for the workforce, collapsed under the newly
created competitive conditions, while new Chinese companies emerged,
some state-owned, some private, but in any case without the social
safeguards from Mao's time, the famous iron rice bowl.
From mercantilism to the engine of the global economy
The model of world market integration through over-exploitation initially only got off to a stuttering start in the 1990s. In the early 2000s, it virtually exploded. The
share of gross fixed capital formation in gross domestic product rose
from between 20 and 30 percent in the 1960s to 45 percent within a
decade. The consumption rate fell from between 60 and 75 percent to less than 50 percent. The share of exports rose from 13.5 percent in 1990 to 21 percent in 2000 and shot up to a high of 36 percent in 2006. The current account balance developed even more dramatically. In 2000 it was 1.7 percent, in 2007 over 10 percent.
Western
politicians had good reason to complain about China's mercantilist
conquest of the world market, even though Western companies had
contributed significantly to this by relocating production to China and
private households were happy to resort to cheap imports from the Far
East under pressure from weak or even declining real incomes. In
some countries, above all the USA, they also increasingly resorted to
cheap consumer and real estate loans, which were temporarily offset by
the speculative rise in real estate prices. The bursting of the associated real estate bubble triggered a global financial and then general economic crisis.
This also brought Chinese mercantilism to an end. In the best Keynesian manner, the Chinese government increased public spending to compensate for the decline in exports. The
spending increases were so massive that they not only stabilized the
Chinese economy, but also made a decisive contribution to overcoming the
global economic crisis.
Within
a very short space of time, China became the engine of the global
economy, contributing twice as much to growth as the USA since the
crisis. In 2011, China's current account surplus was only 1.9 percent and has fluctuated around the 2 percent mark ever since. However,
gross fixed capital formation continued to rise as government spending
flowed into infrastructure projects in particular. It only peaked at 45% in 2013 and is currently still at 42%.
A
state-subsidized real estate boom also helped to stabilize the economy,
keeping the savings rate of private households high and their
consumption rate low. After
rising to 56% in 2016, the consumption rate fell again by two
percentage points during the coronavirus recession and has not risen
again since the end of the recession. Similar to developments in the USA in the early 2000s, the real estate sector is plagued by overcapacity and over-indebtedness. After just a few years, China's growth engine is stuttering.
A new development model
However,
it is also possible that China is not striving to be a growth engine at
all, but has been assigned this role by Western elites - out of
desperation because the USA fell into stagnation after the global
economic crisis. Shortly
after the crisis, the Chinese party and state leadership declared that
it was not aiming for a return to the double-digit growth rates of the
pre-crisis years and that its priorities were shifting from growth at
any price towards social balance at home and the creation of a
multipolar world order in which sovereign states ensure free and fair
economic relations. Hegemonic ambitions and competition for growth rates and world market shares would have no place in this vision.
Whether
the steps taken by the Chinese leadership since the crisis will prove
to be steps in such a direction remains to be seen. From today's perspective, a policy of muddling through dominates. Fiscal and monetary policy are geared towards stabilizing the economy, not towards maximum growth. The collapse of the over-indebted real estate sector is to be prevented, as is the emergence of new speculative bubbles.
The
fact that the state still has control over international capital
movements makes this balancing act somewhat easier and at the same time
makes it clear that the Chinese leadership has no intention of launching
the renminbi as a global currency or as an alternative to the dollar. This
would require free convertibility, so that international investors
could anchor their money in the safe haven of the global currency as
required, but also transfer it at any time to any part of the world
where they see profitable investment projects.
As
difficult as the balancing act may be, more than a decade after the
major crisis, apart from the ongoing operations of the crisis fire
department, at least core elements of an alternative to the mercantilism
of pre-crisis times should be recognizable. The
argument that state control was necessary to prevent the collapse of
the People's Republic and the emergence of a capitalism based
exclusively on the appropriation of former state property may be
accepted by the Chinese communists. Russia was a deterrent example in this respect. The
argument that there was no alternative to world market integration
after the collapse of the Soviet Union and that the over-exploitation of
the Chinese working class was the price for preventing peripheral
integration into a world market dominated by the West can also be
accepted.
But
now that the long boom has lifted per capita incomes out of poverty and
created technological capacities that make the West fear for its
technological leadership, the situation is different. Now
the Chinese communists must prove that they are communists, that they
can lead the country out of a society of exploitation and resist the
temptations of great power politics.
Ingo Schmidt is a Marxist economist and lives in Canada and Germany.
The political economy of the new militarism
Profits for the arms industry, but not for world capital
by Ingo Schmidt
[This
article posted on 2/1/2024 is translated from the German on the
Internet,
https://www.sozonline.de/2024/02/die-politische-oekonomie-des-neuen-militarismus/.]
He
likes to be photographed in a Bundeswehr parka and looking out of the
turret of a battle tank - Boris Pistorius, a few months ago a
little-known SPD man even in Lower Saxony, where he was Minister of the
Interior. As Minister of Defense and Minister of War, he has become a real man of the troops, the mobilizer of the nation.
The special Bundeswehr fund set up after the Russian attack on Ukraine is at best a lower limit for financing the military. There also needs to be a change in mentality. The Germans need to become fit for war, to prepare for wars in Europe again. He
says this as if there had never been a NATO attack on Yugoslavia and as
if Ukraine were in Asia, although he naturally places the country in
Europe when it comes to EU accession. But
he is not the only one who cannot clearly define the border between
Europe and Asia, between Western democracy and Oriental despotism.
It is part of the discourse of the new militarism that more is insinuated than argued. Who is to attack whom and what is to be fought over remains unclear. However, it can be assumed that the enemy comes from the East. The announcement that Germany must play a leading role in the fight against him is somewhat clearer. The question of whether other European countries want to go to war under German leadership is not even asked. The same applies to the question of whether Europe should act independently or as a junior partner to the USA. While
on the one hand the West is invoked as a unified bloc against eastern
autocracies, on the other hand there is a fear that Trump's return to
the White House will bring back an America-first unilateralism that will
relegate Europe from junior partner to vassal.
The
inconsistencies of the new militarism are as numerous as the
contradictions that pervade capitalism in the decaying phase of
neoliberalism. Too
numerous to reduce the shift from the primacy of international
competitiveness to the primacy of militarized foreign policy to a simple
formula. However, some of these contradictions can be identified as causes of the new militarism. They also provide clues as to its goals, which Pistorius and other bellicists either conceal or are unaware of themselves.
The terms and conditions
Time and again these days there is talk of a new Cold War. It
remains to be seen whether the propagandistic juxtaposition of
democracy and authoritarianism is linked to a systemic rivalry such as
that which existed between US-led capitalism and the Soviet Union. Although
Russian capitalism is characterized by its Soviet legacy, it does not
exhibit any features of a socialist social formation. Continuity exists only in terms of nuclear first and second strike capabilities.
Although
China is ruled by a Communist Party, and its rise to become the largest
or second largest economy in the world would not have been possible
without the original accumulation that took place under state socialism,
the accelerated accumulation in the course of world market integration
was also accompanied by the spread of capitalist production relations.
Despite
all reservations about proclaiming a new Cold War, the allusion to the
old Cold War provides a suitable starting point for understanding the
current situation of the capitalist world market, state system and
social relations within individual countries. And thus also the causes of the new militarism.
The
end of the systemic competition with the Soviet Union marked the
beginning of the dual hegemony of the USA and neoliberalism. The promise: Integration
into the world market and acceptance of the terms of trade written
largely by the USA would allow prosperity for all, everywhere in the
world. Great power conflicts and wars over zones of influence were a thing of the past. Military
operations against rogue states and terrorist networks were not wars,
but a kind of police operation to enforce general capitalist business
conditions.
This combined hegemony exhibited two central contradictions:
-
The US ruling class claimed the right to set the rules for all other
world market participants, while not having to abide by them itself.
-
The liberation of the market from state regulation was credited with
creating economic equality - in individual countries, but also on an
international scale. However,
it did not take long for it to become clear that the globalization of
neoliberalism was accompanied by increasing inequality and that
neocolonialism was taking on a new face. The
peripheries of the world market now supplied not only cheap raw
materials and agricultural products, but also a large proportion of
finished industrial goods and cheap labor for the service sectors in the
metropolises. Financial
and economic crises, which had already opened up peripheral markets to
metropolitan capital in the 1980s during the final phase of the Cold War
against the Soviet Union, finally returned to the American Empire
itself.
Since
real estate and financial crises "made in America" have plunged the
global economy into crisis and stagnation, the ideological rule of
neoliberalism has been crumbling. Since
then, the US bourgeoisie has been asking itself whether its claims to
profit and world power are still being served by neoliberal
globalization. Since then, globalization policy has been mixed with protectionism, sanctions and the rediscovery of great power politics. It is not rogue states, but "real enemies" such as Russia and China that must now be fought. What was previously shamefully concealed is now openly proclaimed: America First.
Extra profits
It
is becoming increasingly clear what has always been the economic basis
of US hegemony: not the exchange of equivalents between equal trading
partners, but the rule of monopoly capital and the associated
appropriation of extra profits. More precisely: technological rents based on the monopoly, even if only temporary, of new products and production processes. Extra profits based on the role of the dollar as the world currency, enabling the USA to borrow almost unlimited amounts. In addition, a military potential that allows the USA to hold the whole world hostage.
These
"three monopolies", technology, currency and military, on which the
American Empire rests, continue to exist, but the extra profits gained
from them are considered a threat to the American bourgeoisie. Only
communist-ruled China has succeeded in catching up with the development
promised to all countries in the course of their integration into the
world market, but not achieved by any other country. At
least not to the extent that a country specializing in labour-intensive
mass production could become a location for cutting-edge technological
research. China's
economic and technological strength, combined with that of a number of
other emerging economies, makes the creation of a currency system beyond
the dollar conceivable, even if little has happened in this direction
so far.
The US military is increasingly proving to be a cost factor. What
is good for the profits of arms companies is by no means good for the
conditions of exploitation of American capital and certainly not for
those of world capital. Superior
firepower allows the USA to destroy rogue states, but it does not
succeed in creating regimes conducive to accumulation. Instead, failed states emerge from which terrorist networks can attack the supply chains of global capital circulation.
And then Russia. Under Yeltsin, a coalition of Russian liberals and Western advisors determined policy. The
Russian nuclear arsenal was no longer a source of independent power,
the Russian people's property was sold off, the proceeds taken to the
West by newly rich Russians. Under Putin, the state has once again become a power factor. The
combination of nuclear weapons and a wealth of raw materials - not only
oil and gas, but also minerals of all kinds - calls into question the
one-sided control of global raw material reserves by the imperialist
centers of the West. Other countries may have many raw materials, but they are politically powerless. This is why, alongside the industrial and technological upstart China, it has been declared an opponent of the West. Although
China has recognized the American-dominated terms and conditions of
world trade by joining the WTO and Putin has proposed Russia's
membership of NATO.
Images of the enemy
The militarization of foreign policy will not secure the extra profits of the imperialist centers. It is a sign of weakness. The
bluster about rearmament and the ability to wage war is in inverse
proportion to the self-confidence of the ruling classes in the
imperialist centers. Masses
who feel cheated of their share of imperialist exploitation reach for
the castles in the air of national and racial superiority. Even if the ruling classes lose credibility, the rulers and the ruled share fear and uncertainty about the future. War cries are a helpless attempt to distract themselves from their own lack of a future. But it can become a self-fulfilling prophecy.
Ingo Schmidt is a Marxist economist and lives in Canada and Germany.
Countering the shift to the right
Solidarity is not a Sunday speech
An appeal
by the SOZ (Sozialistische Zeitung) editors
[This
editorial posted on 12/1/2023 is translated from the German on the
Internet,
https://www.sozonline.de/2023/12/dem-rechtsruck-entgegentreten/.]
We are facing a shambles, an authoritarian tipping point. It is time to decide: For a defense of the open society or for a slide into authoritarianism.
What
has been achieved in decades of anti-racist and anti-fascist struggles
has come under unprecedented attack in recent months, with no end in
sight.
The social left and previously committed forces are speechless and are unable to oppose these rapid developments. And
migrant civil society suddenly finds itself almost alone, marginalized
and cut off in a way that we thought impossible just a few months ago. This is a scandal and must change. Solidarity is needed, and more than ever it requires a willingness to take risks and clarity. The open society is no longer just a Sunday rhetoric.
An ever greater threat is brewing from the far right. [...] The AfD is no longer a fringe social phenomenon. And its inhumane positions are not social outliers. In
the country of the perpetrators of Nazi racial and extermination
policies, a third of eligible voters vote for a party that stigmatizes
otherness, wants to banish deviance and nurtures illusions of a return
to the white patriarchal nuclear family as a haven of safety and
security.
But this is only one half of the problem. It goes hand in hand with the radicalization and shift to the right of the center of society. Across
the party landscape, we are experiencing a massive shift in discourse
to the right, a disinhibition of language and disenfranchisement that
was hardly thought possible - and not just since the recent rise of the
AfD. The
underlying problem is a policy that fails to find an answer to the
world's key crises - war, climate change and global exploitation. A
policy that has instead been trying to turn back the history of
migration in this country for years, whenever it is convenient. It
nurtures fantasies of management and control and uses refugees as
scapegoats to divert attention from its own political failures.
The Greens also seem to be painlessly supporting dehumanization and militarization - and not just in migration policy. They are riding the right-wing wave in the hope of surviving. In
a European country of immigration, migration is once again being
declared a problem, even though it is a core element of economic wealth,
cultural modernization and democratization. The racism of politics is supposed to "solve" this problem. But the history of migration cannot be turned back. And that's a good thing! [...]
Migration is the mother of all societies. Migration
is not responsible for the much-vaunted "overburdening" of local
authorities, but rather social and education policies that have been
neglected for years. It is also a fiction that migration can be stopped without sacrificing fundamental democratic principles. Simplistic models of push and pull factors have been refuted for years. Reasons
for flight such as poverty, exploitation and wars do not disappear if
people are treated as undignified as possible in Germany. Calls
for an ever stronger regulatory policy cling to the desperate hope that
the consequences of overlapping polycrises such as the climate crisis
and the associated increase in uninhabitable places, imperialism and war
policy can be kept at bay by further militarization and isolation.
Divisions and a lack of solidarity with people affected by racism and anti-Semitism are currently deepening. This prevents resolute sympathy with all victims, whose suffering must not be played off against each other. Jewish life in Germany must be protected - but anti-Semitism remains primarily a German and not a migrant problem. Anti-Semitism
and racism must not be played off against each other or used to justify
racist policies of exclusion and deportation.
We will not allow the open society and the rights we have fought for in it to be taken away from us. Our solidarity is and remains indivisible.
China
The indispensable opponent
by Ingo Schmidt
[This article posted on 12/1/2024 is translated from the German on the Internet, https://www.sozonline.de/2023/12/china-3/.]
The long economic boom has turned China into a challenge, a danger, if not an enemy for Western foreign policy makers. Many
economic policymakers share this opinion, but are also worried that the
end of the Chinese boom will stifle the economy in the West. After
the real estate and financial crisis in the USA plunged the global
economy into a barely contained recession in 2008, China became the
indispensable engine of capital accumulation. Also in the West.
The West's hostility towards China has increased since this engine began to stutter. At
the same time, the US government is pumping massive amounts of money
into the economy and has thus been able to prevent an impending
recession for the time being, but is far from regaining its former role
as a global engine of growth. China
is indispensable in this role, but is not playing it as reliably after
the coronavirus recession as it did in the years following the global
economic crisis of 2008/09.
The
politicians of the West, accustomed to global power, find it difficult
to admit their economic dependence on the upstart China. It
is equally difficult to reconcile their increasingly hostile attitude
with the long-held ideology of peace and prosperity through free global
trade. This
is why current reporting on China says less about actual developments
in China than about the contradictory relations between China and the
old imperialist centers. The country serves as a projection surface. The "oriental stories" told about China in the West provide an insight into the fears and desires of the storytellers.
Projection surface
Reference is often made to state capitalism in order to characterize China as "the other". This deviates from the norms of liberal capitalism or a free market economy set by the West. The
accusations that China does not adhere to the rules of free competition
and thus takes advantage of its Western business partners are
correspondingly frequent. They then have to ask "their" heads of state for protective measures in pure self-defense. The central role of the state in the emergence and reproduction of capitalism in the West is ignored. Just
like colonialism and imperialism, which have helped and continue to
help Western capitalism achieve world domination and extra profits.
Instead, China is repeatedly branded as a colonialist or imperialist power. By
liberals, because states, unlike markets, are "naturally associated
with the pursuit of power and in China the state is in charge. By
conservatives, because China is a communist wolf in market-economy garb
and communism is the most domineering of all forms of state rule.
Finally,
the accusation of colonialism and imperialism also comes from some
Western Marxists, who see China as a country whose rulers try to conceal
a particularly exploitative capitalism under clichés about socialism
with Chinese characteristics.
On
the left of center, there have always been voices who believe that
there is something to be learned from the state economic management in
China, even if you don't like the political system. Liberals,
on the other hand, have always warned, ignoring the massive
interventions of Western states, that every step of state interference
leads to political servitude.
The
debate has changed since industrial policy has been discussed in the
West and US President Biden has openly distinguished his economic policy
from the neoliberalism of his predecessors and positioned himself in
the tradition of Roosevelt's New Deal and Johnson's Great Society,
although his approaches to domestic social reform are significantly more
modest than those of Roosevelt and Johnson. Instead,
they are accompanied by a militarization of foreign policy that defines
China and Russia as authoritarian opponents of the free West.
Export boom
Nothing
has remained of the earlier hopes articulated by Clinton, in
particular, of getting China to adopt the rules of world trade, which
are largely shaped by the USA, through admission to the WTO. This would make China, like Germany and Japan, an economically large but politically subordinate country to the USA. This
hope was linked to the Faustian pact that the Chinese state and party
leadership had entered into with the US capitalists after the collapse
of the USSR. The
latter hoped that the relocation of production to China, a low-wage
country, would generate substantial extra profits and that the spread of
the market and private property would undermine the rule of the
Communist Party. The
Chinese Communist Party was banking on the opposite: by retreating to
the commanding heights of the economy, it sought to maintain its
political power and turn the country into an economic giant that could
not be pushed around at will, even by the superpower USA.
The market reforms of the 1980s, which were primarily aimed at the domestic economy, had already triggered an upswing. Towards
the end of the decade, however, real growth rates fell while inflation
soared - one of the reasons for the Tiananmen protests in 1989. After
these were suppressed and the country turned to the world market, there
was a renewed upswing, again accompanied by rising inflation rates.
After joining the WTO, real growth rates soared without inflationary side effects. But the investment ratio and export surpluses also rose to unprecedented heights. US
politicians, who until recently had praised the relocation of
production to China as good business, shed crocodile tears over the loss
of American jobs. And worried that the import deficits were accompanied by increasing debts to China.
Higher wages and booming investment
After
the crash on the US real estate market triggered a global economic
crisis, US Federal Reserve Chairman Bernanke complained that China had
flooded the US with loans, tempting many households that were not
actually creditworthy to take on debt. But
the assumption that the US debtor is just as dependent on creditors as
the countries of the indebted South are on their Western creditors was
wrong. As the investment of Chinese export surpluses in dollars shows, the dollar was still the world currency. Therefore, it was not the US that had to worry about repaying the accumulated debt. The creditor, China, had to worry about servicing the loans extended to the US. US demands to limit Chinese export surpluses and the associated borrowing were therefore also heard in Beijing. All the more so as demand for Chinese manufactured goods had plummeted during the global economic crisis.
One way to reduce the share of exports in overall economic demand was to increase wages and thus domestic consumption. This is what happened, not least because over-exploitation in the export industries led to mass strikes. Between
2010 and 2016, the wage share rose from 54% to 58%, just one percent
below the level set by the planners under Mao and which was also
achieved in the 1980s, the decade of domestic market reforms.
However,
investment in real estate and infrastructure, both domestically and
abroad since the start of the New Silk Road project in 2013, played a
decisive role in reducing dependence on foreign trade. The
foreign trade ratio was reduced from a high of 64.5 percent in 2007 to
38 percent in 2022 - to the value in the year of WTO accession or double
the value from the time of the transition to the global market in the
early 1990s. On
the other hand, the investment ratio, which had already risen from 33%
to 38% during the export boom from 2001 to 2007, climbed to a high of
45% in 2013. Since then, it has fallen to 42%, a consequence of the
massive overcapacities that have arisen in the face of the unprecedented
investments of previous years. The overcapacity has also led to a decline in the growth of overall economic demand.
Prospect of stagnation
Following
the end of the export boom, China has transformed itself from the
world's mercantilist workbench into the engine of the global economy. There
are no other candidates for this role in sight; China can no longer
play it because the existing overcapacity is driving down the return on
future investments in production facilities, real estate or
infrastructure. A
period of stagnation lies ahead in which China can neither be an
exporter nor an engine of growth, given the economic size and
technological capabilities that the country has achieved in these two
roles, but has become a potential rival to the previous world power, the
USA. And
must be seen as a challenge or opponent by its capitalists and rulers
because they cannot be sure of the foundations of their rule.
Ingo Schmidt is a Marxist economist and lives in Canada and Germany.
USA Today
Too big to fail, too weak to lead
by Ingo Schmidt
[This article posted on 11/1/2024 is translated from the German on the Internet, https://www.sozonline.de/2023/11/usa-today/.]
The country is deeply divided. Its freedom and economic power are threatened by the great power ambitions of Russia and China. These
two assertions can be found in almost all reports from the USA, whether
it is about the next interest rate decision by the Federal Reserve,
budget squabbles in Congress, state visits to the White House or arms
deliveries from the Pentagon.
The first assertion is a rather superficial statement. Culture wars and political intrigue in Washington regularly cause uncertainty on Wall Street. Will the US government run out of money or not? Will US Treasury bonds remain a safe investment or not? On
one point, however, there is broad agreement between Democrats,
Republicans and the vast majority of their supporters: the USA must be
No. 1. According
to former Secretary of State Albright, it is seen as an "indispensable
nation", but must be restored to its former greatness. Accordingly, Donald Trump entered the 2015 presidential election campaign with the slogan "Make America Great Again". Ronald
Reagan was elected president in 1980 under the same slogan and
subsequently became the symbol of the USA's re-emergence as an
undisputed world power and therefore an indispensable nation.
But there is a gap between wanting to and being able to. Even Joe Biden, who promised during the 2020 election campaign to finally achieve Trump's goal, was unable to close this gap. His campaign slogan: "Build Back Better". To this end, he offered the American people, with reference to Franklin D. Roosevelt, he offered the Americans a Green New Deal. Although
this enabled him to win the elections, he was unable to achieve a
social consensus that would have included some of his political
opponents.
Even internationally, the USA is not seen as an indispensable leading power. The much-vaunted unity of the West is more fragile than oaths of allegiance from Europe would suggest. The
nuclear power Russia and the economic power China are perceived as a
threat because they cannot be forced to fully adopt American business
conditions - a sign of weakness that is difficult for the USA to bear.
The free market and its state
When US capitalism weakened recently, parts of US society looked to the future with hope. The labor, women's, civil rights and peace movements were on the rise. However, many of their demands were seen by the bourgeoisie as a threat to their profits and international supremacy.
This
role was already threatened enough by the rising export powers Germany
and Japan, the policy of détente in Europe and the demands for a new
international economic order from the global South. The
abandonment of the gold backing of the dollar and the exchange rates
linked to it, the OPEC price shock, the withdrawal from Vietnam and the
fall of the Shah symbolized the weakness of US capitalism in the 1970s. Inflationary distribution struggles, overcapacity and stagnation were the underlying economic problems. They were solved by a mixture of a strong state and a free market.
Freedom is understood as the ability of American capitalists to invest their money and sell their goods unhindered. Only a strong state could create the freedom to do business. The American state proved to be up to the task.
Drastic interest rate hikes by the Federal Reserve led to recession and mass unemployment worldwide. The bargaining power of the trade unions was broken. Many
countries in the South were plunged into debt crises by the interest
rate shock, and the USA became a safe haven for international financial
investments. Through
the World Bank and IMF, they were able to push through privatization
and the dismantling of social benefits and trade union rights in the
over-indebted countries of the South. A policy that they also pursued domestically, while corporations and the upper income brackets were spoiled with tax gifts. There were also massive arms orders. A
new round of the arms race with the Soviet Union and support for the
Contras in Central America, southern Africa and the Islamist Mujahideen
in Afghanistan positioned the USA as the vanguard in the fight against
communism and anti-colonialism.
From the Cold War to globalization
Reagan
had begun the neoliberal restructuring of US capitalism and strongly
promoted the export of neoliberal policies in the wake of the debt
crisis in the South. However,
the globalization of neoliberalism only came about after the end of the
Soviet Union and the reorientation of the Chinese Communist Party.
To
a lesser extent, production facilities had already been relocated to
countries in the global South, whose cheap labor could produce for the
world market thanks to neoliberal structural adjustment. But
also to the southern states of the USA, where, in contrast to the
industrial centers of the Northeast, trade union rights do not even
exist to any extent. In
addition, Japanese companies were pressured by the US government to
limit the export of finished products from Japan and instead set up
production facilities in the USA - union-free, of course, and using the
just-in-time and group work methods developed in their home country.
However, it was only as a result of China's opening up to the global market that large-scale production relocations took place. Research
and development, financing and control of international and, above all,
transpacific value chains remained in the USA and helped a numerically
small but media-rich middle class to find jobs. Manufacturing jobs tended to be created in China and a few other countries in the South. Or they fell victim to automation. Instead, masses of poorly paid service jobs were created.
Despite
wage cuts for many, stagnating wages for some and rising incomes for a
few, and despite a long-term decline in the accumulation rate (i.e. the
share of investment in gross domestic product), the USA became an
international economic engine, particularly in the years of
globalization. Not least because the principle of balanced budgets did not apply to them. As
the dollar was once again the undisputed international reserve currency
thanks to petrodollar recycling in the 1970s and the debt crisis in the
1980s, the USA - the state as well as private households and companies -
was able to take out almost unlimited loans in other countries and thus
also finance current account deficits, which became an economic driver
for the surplus countries.
Socialism for capital, austerity for the people
The crux of debt-driven accumulation was that it was not even perceived as such. In
the 1990s, rising securities prices were seen as evidence of rising
real assets - production facilities, infrastructure, real estate. The
debt-financed acquisition of such assets is not a problem as long as
these assets generate sufficient income for interest and redemption
payments. In fact, expected profits have increasingly exceeded realized profits. Private
households that financed their consumption, including real estate
purchases, through debt due to stagnating or falling wages never had a
chance to repay their debts. In addition, more and more financial instruments were issued on one and the same real asset portfolio and acquired via loans. The era of derivatives and their financing via fast-ball systems had begun.
The
end of dot.com speculation in 2001 was a warning shot, and the
financial and economic crisis of 2008/2009 made the limits of the
US-managed model of debt-driven accumulation clear. Government
money to restructure bankrupt banks and central bank money at zero cost
contained the crisis, led to a new speculative bubble, but hardly to
real accumulation. Instead of the USA, China became the international economic engine. An economic fact that many Americans saw as a disgrace. A mass base of disappointed and insecure people emerged, which Trump was able to mobilize for his aggressive nationalism.
Trump's
rhetoric should not make us forget that Obama had already initiated the
turnaround from the war on terror to the containment and repression of
China and Russia. The
war on terror was based on the idea that the USA, as an indispensable
nation, had the task of reshaping the entire world in its image, by
force if necessary. Without success. Unloved
regimes could be destroyed, but the countries overrun by war could not
be integrated into the US-controlled world market as prosperity zones. The regrouping of Russia and China as opponents rather than partners reduces the claim to shaping the world. Even if this is not admitted.
Obama,
Trump and Biden are all pursuing the goal of at least keeping the world
they consider democratic together - under US leadership. However,
the means used to achieve this, proxy wars and sanctions, undermine the
neoliberal globalization that has made the USA the world's No. 1 from
Reagan to Clinton.
Ingo Schmidt is a Marxist economist and lives in Canada and Germany.
Invisible hands
Forms of social labor and class politics (VI - abstract and concrete labor)
by Ingo Schmidt
[This
article posted on 9/1/2023 is translated from the German on the
Internet, https://www.sozonline.de/2023/09/unsichtbare-haende-4/.]
Everyone is equal before the law of supply and demand. Nevertheless, many have the feeling that they are being ripped off. That
the invisible hand of the market does not grant everyone the same
rights and opportunities to shape their lives as they see fit. The
biblical saying still applies: To everyone who has, it will be given;
but from him who does not have, what he has will be taken away.
Marx explained in Capital
why legal freedom and equality, where they were fought for against
feudal privileges, serfdom or slavery, do not abolish exploitation if
the means of production are the private property of a few and everyone
else has to sell their labor to buy necessary food - from the private
owners, of course, who have the means of distribution as well as the
means of production.
But
this form of exploitation is invisible because buyers and sellers of
the commodity of labor power have equal rights on the market and are
free to conclude a contract or not. The
fact that a contract is only concluded if the buyers expect the
employment of the purchased labor power to produce surplus value and
terminate the employment contract if this expectation is disappointed
cannot be seen in the legal relationships between buyers and sellers. Marx
analytically demonstrated this invisible form of capitalist
exploitation and thus confirmed the widespread impression among sellers
of labor power that they were being ripped off.
With Marx
Marx's
analysis was based on a theoretical critique of political economy and
empirical studies of labor processes in emerging industrial capitalism. It
was used by countless activists to educate themselves and others about
their situation and to organize movements to improve or overcome it. In this way, Marxist ideas became material force. Not least because they were extended beyond Marx's analyses.
In
the anti-colonial movements of the 20th century, Lenin's theory of
imperialism played a greater role than Marx's analyses of the factory
regime of the 19th century. Capitalism
and imperialism have changed drastically since then, not least
industrial production processes and employment relations - not unlike
those described by Marx in Capital - have emerged in some
regions of the post-colonial South, which during Lenin's lifetime were
still entirely specialized in the supply of primary goods. Nevertheless,
the world today is more in line with Marx's picture of capitalism than
it was during his lifetime, when capitalist relations of production on a
global scale were a rarity and far from fully established even in the
core countries of capitalism.
In
view of this, one would assume that Marxist ideas would still provide a
toolkit for formulating common interests and strategies today. But this is rarely the case. Marxism has retreated into circles and niches of academia. Some
are mainly concerned with cultivating tradition, while others seek to
connect with the discourses of their non-Marxist colleagues in order to
maintain their precarious position. In both cases, there is little time for the necessary updates of socialist theory and practice.
Against Marx
The majority of those who call themselves left-wing today know one thing for sure: you can't come at them with Marx. And certainly not Lenin. Pioneers of totalitarianism, growth fetishists, economists, blind to racial and gender discrimination, they say. In
this way, the anti-Marxists and sometimes post-Marxists show that they
have not taken note of the theoretical and practical starting point of
Marxist socialism. It is not about imagining a world as it should be. And only partially about describing the miserable situation of the working classes. It
is first and foremost about promoting an understanding of their misery
within these classes and the self-confidence to overcome it.
The critique of political economy is an immanent critique. It
looks behind the appearance of equality and freedom of the market,
shows how living labor power is subsumed under capital, exploited and
reduced to abstract labor in order to make the goods it produces
comparable. Not
because Marx sees labor and labor power this way, but because
capitalist relations of production force capitalists to treat them this
way.
Accordingly,
race and gender are only treated insofar as the discrimination
associated with them allows capital to play off different groups of
workers against each other and thus lower the average value of the
commodity labor power. It
is the position of capital that non-capitalist milieus should naturally
be available for the development of new markets and the procurement of
primary goods and labor. Marx therefore assumes in Capital that society is completely permeated by the capitalist mode of production.
Rosa
Luxemburg made it sufficiently clear that the accumulation of capital
depends on the progressive expansion into non-capitalist milieus, the
complete penetration of which would lead to a lack of demand and
stagnation. And
thus created an analytical framework in which the struggles against
colonization from the households in the metropolises of capitalism to
the subsistence farms of the peripheries can be understood and included
in strategic considerations. Not only wage laborers are in opposition to capital, but also people who are not yet subsumed to capital.
Totalitarianism
The accusation of totalitarianism is not so easy to dismiss. Not because Marx's or even Hegel's theory would necessarily lead to totalitarianism. But
because the great attempt at socialism in the 20th century led to party
and bureaucratic rule, at times also to terror, and stifled mass
initiatives from below. Until socialism, which had become a state, collapsed due to its own contradictions. Marxists must face up to this history. Former supporters, because they contributed to the tragedy. Dissidents, because they were unable to prevent the tragedy.
It is not a question of closing the books on history, but of learning for future attempts at socialism. This is the only way to overcome the belief that there is no alternative to capitalism, which has become a material force. Only
in this way can a concrete utopia of socialist possibilities be
developed from the defeats and mistakes of the past, on which a class
policy that is also yet to be developed can be oriented.
In
addition to a self-critical examination of its own history, socialist
class politics requires a renewed critique of the political, perhaps
today we should say neoliberal, economy, a critique of abstract work and
the organization of the hands that perform concrete work in all its
diversity.
Critique and organization
This
is not about (self-)reassurance that the laws of movement discovered by
Marx are still valid, but about uncovering the forms in which these
laws are enforced today. Today, the criticism must begin with Friedman, Hayek and Schumpeter. For
too long, Marxists have resorted to labeling (neo)liberal economists as
"paid knockers of the bourgeoisie" and have assumed that nothing but
apologetics can be expected from (neo)liberal economists.
They
did not realize that the socialist project in which they were involved
represented a real challenge to the bourgeoisie, which was now creating
powerful antidotes. Keynesians
and neoliberals not only produced mass ideologies, but also
instructions for action to contain and push back socialism. The class politics from above based on these ideologies have had resounding success.
A new offer from the left is now missing. This
could consist of the creation of spaces in which those who carry out
concrete work can exchange their experiences, fears and aspirations,
learn to see through and shake off their mental integration in the
neoliberal world of thought and thereby enable themselves to formulate
demands and strategies. The
critique of the neoliberal economy will play an important role here,
because it has become the dominant form of thought in everyday life. A kind of totalitarianism of the market that only knows exploitable abstract work.
But the recognition of the diversity of concrete work also plays an important role in the renewal of socialist class politics. Then
a multitude of different groups of working hands becomes visible -
different according to activity, education, cultural and national
background, gender. A multitude rather than a class. The
latter will only emerge in the course of collective learning and
organizing processes and develop its own voice in the process.
Ingo Schmidt is a Marxist economist and lives in Canada and Germany.
Invisible hands
Forms of social work and class politics (V - independent work)
by Ingo Schmidt
[This
article posted on 7/1/2023 is translated from the German on the
Internet, https://www.sozonline.de/2023/07/unsichtbare-haende-3/.]
When it comes to "self-employed work", it quickly becomes clear what does and does not count in a liberal society. Wage labor is not, neither is unpaid work, and forced labor certainly not.
The
ideology producers of liberalism equate independent work with
entrepreneurship and praise its diligence and innovative power. In
this way, even if it is rarely said openly, non-entrepreneurs, however
they earn their living, are portrayed as somewhat lame, as people who
can't get anything done without the guidance of others, namely
entrepreneurs.
The fascination of entrepreneurship is not alien to those who are disparaged in this way. Not that many seriously believe that they will one day be on a par with Jeff Bezos or Elon Musk. But becoming self-employed, no longer having a boss, that would be nice. Many
people are trying, even if the number of start-ups includes not only
those who want to become self-employed, but also those who are forced
into bogus self-employment. And even though the risk of bankruptcy is particularly high for start-ups.
Despite
the above-average risk of insolvency among new companies and despite
the increasing concentration and centralization of capital,
self-employment still contributes significantly to social reproduction,
in small businesses, bogus self-employment and informal sectors, which
in some countries of the Global South contribute more to reproduction
than self-employment and wage-based employment.
Self-employment also plays a key role in the ideological reproduction of capitalism. The
liberal idea of a market society, in which equal owners of goods, free
of hierarchies and power, produce at will and for the purpose of
exchange, does not allow for any other kind of work. In
view of the power that companies actually have over paid and unpaid
labor, liberal ideology at least keeps open the possibility that
everyone is free to try their hand at entrepreneurship.
There
is a consolation for those who fail to do so: instead of being wage
earners, they can prove their (labor) market fitness as labor
entrepreneurs, on their own, self-employed. And preferably without union organization.
Independent work and entrepreneurship
Under capitalist production conditions, independent work means owning the means of production and deciding how to use them. This includes the personal use of these means of production, but also the employment of wage labor.
This
form of self-employed entrepreneur only exists in small and
medium-sized enterprises; large companies employ managing directors. Due
to the size of the companies they manage, such managers have more power
than independent entrepreneurs, but are accountable to the owners and
are also bound by instructions in terms of strategic direction.
In
stock corporations, the predominant corporate form among large
companies, even CEOs must coordinate with other members of the Executive
Board. If the return targets set by the shareholders' meeting or the supervisory board are not met, board members are quickly fired. Just like coaches when the team does not achieve the desired position in the table. This has little to do with the liberal ideal of the self-reliant entrepreneur.
This applies more to smaller companies - but their power is limited by the big ones. Whether
it's a kebab stand or a Späti, a law firm or a doctor's surgery, a car
repair shop or a manufacturer of highly specialized products - none of
these businesses compete directly with industrial or service groups. They serve other markets.
However, the demand for their products depends to a large extent on the state of the economy. Whether
it goes up or down, whether consumers hold back or spend a few euros
more, depends on the investments of large companies and the respective
monetary and fiscal policy, not on formally independent entrepreneurs in
small and medium-sized enterprises.
When it comes to political regulation, their associations also have less influence than the lobbying of large companies. In
addition, many of the smaller companies are more or less directly
involved in the supply chains of the corporations - as law firms and
management consultants, as franchisees, specialized suppliers or
industrial service providers.
Moreover, all of these areas are subject to concentration and centralization tendencies. This
will not lead to the disappearance of the small and medium-sized
enterprise sector, but will put existing businesses under constant
pressure and push many into bankruptcy.
However, it can be expected that new areas of small business activity will continue to emerge. These, in turn, will be drawn into the vortex of concentration and centralization. The platform economy is a current example of this.
From wage labor to bogus self-employment
The desire to become self-employed does not stem from the fact that people have an innate urge for entrepreneurship. It seems to offer a way out of being controlled by superiors. The desire to be your own boss has an emancipatory element. In the 1980s, the bosses of large companies built on this to put an end to the worker militancy of the previous decades. Acceleration
of the work process, ever smaller work steps and more control had
increasingly restricted existing niches of autonomous work, especially
in large companies.
In
view of the high level of employment and correspondingly low fear of
losing their jobs, more and more employees dared to express their
displeasure at the stress of work and control.
By the end of the 1970s, the wave of protests and strikes of the previous years was already subsiding. The
economic crisis and mass unemployment had brought fear back into the
companies and with it the willingness to submit to unpopular working
conditions. But
many of these companies were still highly vertically integrated, and
the work performed in them was socialized to a correspondingly high
degree. In a better economic climate, mass protests could easily have broken out again. A
new corporate culture, the outsourcing of entire sections of production
into formally independent companies, was intended to avert this danger
by reducing the degree of socialization.
Many one-person companies also emerged. Drivers
took over their trucks, usually financed on credit, construction
workers became subcontractors, department heads became franchisees. The promise: independent work, no more bosses ordering them around. The
reality: almost complete dependence on a company that gives the new
contractors orders, sets deadlines and, if necessary, intervenes in the
execution of the work. Failure to fulfill the orders can result in contractual penalties and the withdrawal of follow-up orders.
There
is uncertainty, as with fixed-term employment contracts, topped off by
the assumption of the famous entrepreneurial risk that the large
companies awarding contracts pass on downwards. Under
these conditions of insecurity, fear and competition, organizing
solidarity is much more difficult than in vertically integrated large
companies.
At the bottom and outside
The problem with bogus self-employed workers is that they occupy a subordinate position in the social division of labor. Although
this grants them formal rights, exercising them would require an
organization for which no functioning forms have yet been found. Workers
in the informal sector have completely different problems; they are
largely excluded from the social division of labor, but can be recruited
as an industrial reserve army if necessary. Until then, they live in the shadow of the rule of law and the welfare state, especially in countries of the Global South. Completely on their own, truly self-sufficient.
However
weak legal standards may be, they still offer a potential protection
that is denied to those excluded from capitalist production relations. This would not be a problem if they had their own means of subsistence. But
they have been cut off from these by capitalist accumulation, otherwise
they would not be eking out a living in the informal sector.
Ingo Schmidt is a Marxist economist and lives in Canada and Germany.
Invisible hands
Forms of social labor and class politics (IV - Forced labor)
by Ingo Schmidt
[This
article posted on 6/1/2023 is translated from the German on the
Internet, https://www.sozonline.de/2023/06/unsichtbare-haende-2/.]
Forced labor is of only marginal interest in a liberal society. Coexistence is governed by contracts concluded by legally free citizens, not by discipline and order enforced from above. If forced labor is mentioned, it is usually about illiberal societies.
People like to point to China and Russia. Slavery
in the American southern states and extermination through labor in Nazi
concentration camps are also sometimes mentioned. Human
trafficking and forced prostitution in today's liberal societies are
blamed primarily on Eastern European mafias and Islamic clans.
The victims of these machinations are of secondary interest. The
message is more important: liberal societies can overcome illiberal
practices, but must constantly defend themselves against the threat of
illiberal forces. Anyone who believes that self-criticism is part of liberalism is mistaken. One's own illiberalism is often overlooked in the heat of the battle against the external threat.
The silent and not-so-silent compulsion of circumstances
Karl Marx was an early critic of liberal self-righteousness. The
fact that under capitalist relations of production, equality is not far
off and freedom is questionable, i.e. that the cornerstones of liberal
thought promise something that capitalism cannot deliver, was the
ideology-critical starting point of Marx's project. The
political conclusion: real freedom and equality can only exist in a
socialist society in which the means of production belong to everyone
and are used by everyone to carry out work that is considered necessary.
In Wage Labor and Capital, Marx worked out the differences between slave labor and wage labor. In
the first volume of Capital, he shows that the freedom to enter into
contracts forces people who neither have their own means of production
nor receive income from others to sell their labor power. And thus subject themselves to the command of the buyer of their labor power for the time in which they work.
The
analytical distinction between slave labor and wage labor, which also
revealed parallels between the two, in no way obscured Marx's view of
the historical coexistence of both forms of labor. The
supply chain of the cotton industry that Marx had in mind ranged from
slave labor enforced by physical force on the plantations of the
American southern states to wage labor in English textile factories to
India, whose small producers were driven to ruin by the import of
textiles produced with slave and wage labor. And
who, deprived of their means of production, now became workers
themselves, looking for work under the silent compulsion of the new
conditions. Some
became wage laborers, many found themselves in debt bondage - a kind of
self-enslavement for a definite, often indefinite period of time in
countless British colonies.
Meanwhile,
even in the imperial center, the silent coercion of conditions was
underpinned by the threat and exercise of direct violence. The
creation of propertyless proletarians went hand in hand with the
prohibition of vagrancy and draconian punishments for property crimes. Theft
was not tolerated and was often punished with death, but also with
forced deportation and enslavement in the settler colonies. Not all settlers went there voluntarily. For
the ruling classes of Great Britain and America, who presented
themselves as the global champions of liberalism, this is an
embarrassing and often hushed-up story. The
ruling classes of all countries remain silent about the persistence of
various forms of forced labor right up to the present day. At least as far as their own areas of power are concerned.
Forced labor today
Today,
a far larger proportion of the world's population is subject to the
silent coercion of capitalist production relations than in the days of
Karl Marx. For a very small proportion of them, however, this coercion is mitigated by the welfare state. This
required long struggles, and liberal economists have been claiming
since the advent of the first minimum wages and social insurance that
these would unduly restrict the freedom of jobseekers because they push
jobs that would be profitable in the absence of such cost drivers out of
the market. Countries in which the labor movements were too weak to enforce minimum social standards prove that this is not true. Despite
starvation wages, there are many more jobseekers there than in
countries where minimum social standards have been enforced and continue
to exist despite decades of social cuts. The former also have the most forced laborers. This does not mean that there is no forced labor in countries regulated by the welfare state.
As in Marx's time, there is still a mixture of forced and wage labor along individual value chains today. Just like back then, forced labor is more concentrated in the peripheries, wage labor in the metropolises. In Marx's time, the USA, including its slaveholding southern states, still belonged to the global periphery. At
that time, the system of inequality before the law known as Jim Crow
also developed, which intensified the silent coercion of conditions to
such an extent that the difference to slavery became ever smaller. Slaves,
however, were considered assets to their owners, so they were still fed
or allowed to use farmland for self-sufficiency even when there was
little to do due to a poor economy. Despite
the lowest standard of living and all the torments, slavery was quite
costly, which is one of the reasons why Adam Smith recommended its
abolition.
The
end of formal slavery and the simultaneous second-class status of more
or less free citizens created more profitable opportunities for forced
labor, which continue to this day; they have even increased considerably
in recent years in the name of international competitiveness.
These are workers who cannot claim any rights because they are illegal immigrants. Workers who work abroad on temporary work permits linked to a company. Formally, they have the same rights as domestic employees for the duration of their employment, but cannot assert them. Getting justice costs more than most people can afford. Anyone who has to reckon with the loss of their residence permit as a result of a complaint will not even try to get justice. Many do not even know what rights they have.
Even
if legal discrimination has been abolished, those affected find
themselves in forced labor much more often than other groups. This applies to black people in the USA, Dalits in India and women all over the world. If
debt is taken on to keep afloat in the informal sector, to go to the
doctor or to finance emigration and job placement, debt bondage is not
far away.
But it also involves naked violence. In
some parts of the world, state authorities tolerate the activities of
manhunters who recruit people at gunpoint in poor neighborhoods, drag
them off to labor camps and throw them out onto the streets when they
have worked themselves to the bone. Unlike the slaves of the past, these forced laborers are not seen as assets, but as cheap labor to be consumed. They are disposable. Outsourcing
certain stages of production to subcontractors allows multinational
corporations, the majority of which are based in liberal model
societies, to exploit this cheap labor and at the same time wash their
hands of it. They don't even want to know what it's like at the lower end of the value chain.
Companies that employ forced laborers in American prisons are not quite so ignorant. Forced labor was formally banned with the abolition of slavery. With one exception: prisoners can be used for such work. Prisons
loan tens of thousands of prisoners to private companies, including
household names such as AT&T, Boeing, Dell and Microsoft. Many of these prisons are private and do a roaring trade. They
receive fat dollar amounts from the state to house the prisoners, and
they collect dollar amounts from their respective clients for hiring
them out as forced labor, but only pay the prisoners a few cents. No wonder forced labor is rarely an issue in liberal societies.
Ingo Schmidt is a Marxist economist and lives in Canada and Germany.
Forms of social labor and class politics (III - Housework)
Invisible hands
by Ingo Schmidt
[This
article posted on 5/1/2023 is translated from the German on the
Internet,
https://www.sozonline.de/2023/05/formen-gesellschaftlicher-arbeit-und-klassenpolitik-iii-hausarbeit/.]
Cooking
and baking, tailoring and mending, cleaning and washing, looking after
children, caring for the sick and elderly - work that has contributed to
the reproduction of human life for thousands of years, but only became
domestic work with the development of capitalism - as the unpaid
counterpart to wage labor. Movements of wage laborers against capitalist exploitation date back to the early 19th century.
Domestic work only became an arena of political conflict in the second half of the 20th century. An
autonomous women's movement, which set itself apart from both the
proletarian and bourgeois women's movements, argued about whether
housework was productive and should be remunerated. It
tried out forms of living and working together beyond the bourgeois
nuclear family and sought to join forces with subsistence farmers in the
capitalist peripheries.
Instead
of proletarianization, which the workers' movement hoped would attract
new members, the autonomous women's movement advocated housewifization. Women were the last colony without whose exploitation capitalism and patriarchy could not exist.
Housewives and subsistence farmers
But
the male breadwinner model with its "housewives only" was never as
dominant as its conservative supporters would have liked. Households at the lower end of the income pyramid were always dependent on two incomes. At
the top end, women were less concerned with housework themselves than
with managing paid domestic help, women from poorer backgrounds.
Two world wars upset the gender balance. No matter what their life plans were, many women lived alone or as single mothers afterwards.
It remained unclear how housewives in the metropolitan areas and subsistence farmers in the periphery could join forces. As
correct and important as the reference to the neo-colonial exploitation
of the peripheries was, given the widespread metropolitan-centrism in
left-wing movements, the assertion of identical interests of women on
both sides of the "imperialist divide" was questionable. Housewives in the metropolises and subsistence farmers in the peripheries perform unpaid work. That's where the common ground ends.
Housewives have to buy labor and means of production. Their patriarchal dependence consists of having to ask their wage-earning husbands for the money they need. If
these means include cheap raw materials, agricultural products or, more
recently, industrial goods from the peripheries, households in the
metropolises, men and women alike, benefit from the neo-colonial
exploitation of the peripheries.
From feudalism to capitalism
However, it is not the subsistence farmers who are exploited. Their way of life and production is being destroyed by the spread of capitalism into non-capitalist milieus. Exploited
are all the workers and peasants in the peripheries who produce goods
for sale within the capitalist relations of production.
But
even if the basis of a sisterly united front is unclear, the reference
to subsistence production made by "metropolitan feminists" is a
necessary starting point for understanding the development of paid and
unpaid labor in the course of the global development of capitalism,
including its metropolises. For even there, subsistence production dominated at the beginning of capitalist development.
The tributes to be paid to feudal lords may have been so high that they made life unbearable for the subjects. However,
it should not be overlooked that the overwhelming majority of these
subjects spent much of their time on subsistence agricultural
production. To finance their wars, the feudal lords increasingly levied rents in money rather than in kind.
As a result, the production and exchange of commodities penetrated the economy in kind. This
also included the publishing system, in which peasant households
undertook to carry out certain tasks for a certain amount of money.
Even
if the actual work - spinning and weaving back then, computer work
today - is very different, the form in which the work is organized in
today's gig economy is very similar to the publishing system of that
time. In
both cases, paid work was and is performed within a household as part
of the commodity economy and unpaid work to reproduce life.
The
coexistence of paid and unpaid work within the household shifted
radically towards wage labor as more and more peasants were driven from
their farms and forced to work in manufactories and factories. Working hours of between 12 and 16 hours left no time for reproductive work. Families, the economic backbone of feudal society, disintegrated without new forms of organizing reproductive work being found. The life expectancy of the emerging proletariat fell compared to that of the rural population.
As
long as a sufficient influx of fresh laborers could be ensured by
expelling them from their homes and farms, the absolute impoverishment
of the proletariat did not bother the industrial capitalists. Expulsion
from the land and proletarianization always took place when
cost-driving labour movements made themselves felt in previously
proletarianized regions.
Communist ghosts and respectable workers
The
industrial masters of the world had learned by then that
proletarianization does not automatically produce such movements - at
least not immediately and certainly not revolutionary ones. They did not know this at the time of the industrialization of Western Europe. At that time, the spectre of communism was associated with the proletariat. In
the land- and industry-owning classes, the idea spread that the police
truncheon alone would not keep proletarian masses, who had nothing to
lose but their chains, from revolting in the long run.
At least part of the proletariat had to be given a respectable livelihood. This included the male breadwinner model. It was already exemplified by the industrial bourgeoisie. Entrepreneurial
men posed as hard-working, precisely calculating breadwinners driven by
concern for the family; the non-working woman adorning the household
was a badge of hard-earned wealth.
Maintaining
the social distance, workers were offered the possibility of a junior
partnership with their bosses; their wives were promised freedom from
the drudgery of factory work. As
housewives, however, they had to do the work themselves; the employment
of domestic help was reserved for the nobility and bourgeoisie.
The male breadwinner model paid off. The
male workforce, which was reproduced through caring housework and was
no longer regarded as completely without rights in the workplace, was
more reliable and, if necessary, more capable than the proletarian
masses. The higher labor productivity covered part of the increased wage costs. Another
part was covered by colonial exploitation, which increased at about the
same time as the male breadwinner model became established in the
metropolitan areas.
Politically,
this model paid off because the respectable strata of the working class
looked down on the uncouth proles at home and the backward masses in
the colonies and identified more with their bosses than with their
worse-off class brothers and sisters.
Different than expected: wages for housework
The "costs of respectability", ideally a car and a home, nevertheless forced many women to earn extra income. At
the same time, working hours saved by washing machines and fridges in
the kitchen and bathroom were extended into the living room and garden. Everything has to look nice. The increasing double burden of paid work and housework formed the background to the autonomous women's movement.
The demand for wages for housework was met, but in a different way than the activists of the time had intended. Many
jobs that had previously been done almost exclusively in the home,
particularly care work but also the preparation of meals, became paid
work in private and sometimes public companies.
What was referred to at the time as housewifization also fits quite well with the developments in work since the 1970s. The
juxtaposition and confusion of unpaid and poorly paid work without the
protection of socially insured respectability became the model of
neoliberal employment. It became just as little universal as its predecessors, the normal employment relationship and the male breadwinner model.
Ingo Schmidt is a Marxist economist and lives in Canada and Germany.
Late capitalism
Ernest Mandel on his 100th birthday (April 5)
by Ingo Schmidt
[This
article posted on 4/1/2023 is translated from the German on the
Internet, https://www.sozonline.de/2023/04/der-spaetkapitalismus/.]
Ernest Mandel: Late capitalism . An attempt at a Marxist explanation. Frankfurt/M.: Suhrkamp, 1972. 541 p., still available in antiquarian bookshops
In Der Spätkapitalismus
(Engl., 1972) Ernest Mandel attempts to demystify the "economic
miracle", i.e. the long upswing that followed the "age of catastrophes"
(Eric Hobsbawm) from 1914 to 1945.
Mandel aptly predicted the end of this cycle and an intensification of class struggles. He naturally thought of class struggles from below and naturally assumed that the labor movement would be victorious. But it was defeated again.
The
rejuvenation of capitalism that began in the 1980s was accompanied by a
weakening of left-wing movements and the rise of post-Marxist ideas
among the remaining leftists. The
Marxists' assertion that capitalist crises would lead to an upsurge in
proletarian class struggles, which was refuted empirically time and time
again, contributed to the post-Marxist turn. However, post-Marxism has not contributed to a resurgence of left-wing movements either. And the renewed upswing of capitalism that followed the defeat of the workers' movement in the 1980s is also long gone.
It is therefore time for a new reorientation. Reading old books can be helpful here. Not
because everything is already written in them, but because the critical
analysis of the post-war upswing provides a contrast against which the
development of subsequent neoliberal capitalism and its crisis can be
understood in a way that makes historical developments and starting
points for socialist politics recognizable.
From industrial society to the IT economy?
Neoliberal
ideology distinguishes a technologically outdated industrial society,
strangled by state intervention, from a subsequent era of shaking off
state shackles, permanent computer revolutions and the
internationalization of production, trade and finance. Reading Late Capitalism,
however, it becomes clear that the microelectronic revolution was
already a driving force of accumulation during the post-war upswing,
that its technological foundations were by no means developed by
pioneering entrepreneurs in the garage, but in state laboratories
closely linked to the arms industry.
The
emergence of multinational corporations and international associations
of capitalists can also be traced back at least to the post-war period. Far
from intensifying competition between companies, the
internationalization of the economy was accompanied by progressive
concentration and centralization of capital.
Nevertheless,
it would be wrong to overlook the differences between the post-war
upswing and the subsequent neoliberal wave of accumulation. As
the Marxist saying goes, quantity turns into quality: the
miniaturization of computer chips and the dramatically decreasing cost
of transmission per unit of data allowed the construction and management
of international production networks as an alternative to ever larger
factories, which had proved to be the organizational centers of the
labour movement in the past. The development of these networks allowed highly concentrated capital to play off smaller production sites against each other.
It
was not the differences in labor productivity between centers and
peripheries, which Mandel had identified as the cause of unequal
exchange, that became the main source of unequal exchange, but
starvation wages, i.e. over-exploitation in the periphery. In
contrast to the post-war period, however, the fruits of this
exploitation were no longer shared between labor and capital in the
centers. No
matter how great the pressure on wages in the centers became, the wage
differentials between the centers and the periphery remained. Wages have not converged on either a global or national scale. Today,
wage differences within and between individual countries are greater
than in the days of post-war capitalism, which was contained by the
welfare state.
From the state to the market?
During
the post-war upswing, state intervention was seen as the means finally
found to prevent recurring economic crises and, above all, the
accompanying political destabilization that had brought capitalism to
the brink of collapse in the 1930s. In
addition to guaranteeing private property rights, the state was to use
monetary and fiscal policy to stabilize overall economic demand at a
level close to full employment. Science was to serve not only the development of new production techniques, but also the "programming of economic development". Technological
rationalism extended to politics would lead to the overcoming of the
class antagonisms that had characterized and destabilized the preceding,
politically unregulated capitalism.
Mandel shows that politics in post-war capitalism was involved to a large extent in day-to-day business. It had already rehearsed this role in the war economies of 1914/18 and 1939/45. But
he also shows that the direction of capital flows and investments
continued to be determined by large corporations and business
organizations. And
he argues that profitable investment conditions and full employment
cannot be permanently reconciled in a capitalist economy. Such
attempts would only lead to permanent inflation, which would eventually
accelerate and lead to the end of state stabilization of demand. Moreover, increasingly international capital cannot be contained at a national level.
Savior and bogeyman
With this argument, Mandel anticipated many of the developments that took place immediately after the publication of his book. Inflation rates were rising. A high level of employment made distributional inflation possible. Unionized
workers tried to enforce a redistribution of profits to workers'
incomes through wage negotiations, while companies sought to defend
their profit margins against the unions. The
continuing power of capital over the state, even in politically
regulated capitalism, became clear when the latter was able to implement
a change of course in the fight against inflation through austerity and
the restoration of an industrial reserve army. The further internationalization of the economy became a lever for lowering corporate and profit taxes and social standards.
The
change of course from a politically moderated balance of interests
between labour and capital to the promotion of profits at all costs was
not accompanied by a denationalization of the economy. The
influence of trade unions and social organizations was pushed back,
while companies and increasingly stock market players exerted ever more
direct influence on politics.
Unemployment
and competition between locations weakened the trade unions to such an
extent that profit margins could be kept high even without rising prices
on the goods markets. Instead,
permanent inflation shifted to the securities markets and accelerated
until a series of speculative bubbles burst - most dramatically in the
financial and economic crisis of 2008/2009. As a result, capital openly
called on the state to intervene on a massive scale. In
order to save banks and assets, tax and central bank money was
mobilized on a scale that had not been available to the welfare state
even in its heyday.
This brings us full circle to Mandel's analysis of late capitalism and his prediction of a crisis. To a certain extent, Mandel had anticipated a crisis of legitimacy for capitalism. After
the crises of the 1970s, but also in 2008/2009, the state in particular
became the target of criticism, especially among those sections of the
population that are classified by capital as uncompetitive. Criticism of the state has become ever louder, while criticism of capitalism has remained marginalized. Not
least because the left largely turned away from economic issues after
the hope that the crisis would more or less automatically lead to an
upswing in class struggles from below was dashed in the 1970s.
Ingo Schmidt is a Marxist economist and lives in Canada and Germany.
Forms of social labor and class politics (II)
Industrial work
by Ingo Schmidt
[This
article posted on 3/1/2024 is translated from the German on the
Internet,
https://www.sozonline.de/2023/03/formen-gesellschaftlicher-arbeit-und-klassenpolitik-ii/.]
Once there was a proletariat, today there is a precariat. At best. With
industry, capitalism has not only created unimagined productive and
profit forces, but also its gravedigger, masses of impoverished
proletarians who would unite to form a class and take over the
industrial productive forces on their own. That was the theory. But it did not come to that.
After
all, the struggles and organization of various groups of workers,
mainly but not exclusively employed in large-scale industry, were enough
to push through social reforms: Working
time regulations and the linking of wage labor and the acquisition of
pension entitlements in the event of illness, incapacity to work and old
age created the standard employment relationship from which today's
precarious workers are excluded - a minority who work part-time, often
on fixed-term contracts, with limited or no access to social insurance.
In
recent years, a number of left-wing academics and activists have
discovered precarious workers as a potential basis for a new social
movement. However,
there is no talk of masses, let alone a broad majority of the
population, whose historical mission is to overcome exploitation and
class rule. The
precariat is included in the other social movements that are still
described as new in comparison to the old proletarian movement. Another piece of the mosaic left, of which nobody knows what holds it together at its core. It
is progress not to cling to the idea of class unity and the inexorable
transition to socialism when class fragmentation and defeats of
proletarian and other social movements characterize the real world.
But it is only one step towards understanding the present. For, according to Marx, the tradition of all dead class fighters weighs like a nightmare on the brains of the living. It is difficult to step out of the shadow of an imagined past. As
soon as there is a strike somewhere, images of calloused hands
resolutely waving their - presumably red - flags appear in the
reporting. There is a whiff of class struggle in the air. Even
if the strikers are merely trying to fend off company demands for wage
cuts or longer working hours and their work requires caring, sensitive
and skillful hands instead of calloused ones.
The images of clenched fists and red flags come from an imagined, empirically unsupported past. The present can only be embarrassed by the class-struggle exaggerated past. Future class struggles become unthinkable. Minority politics becomes the only option in a world in which the many suffer under the rule of the few.
After
the certainties of historical missions and the inevitable transition to
socialism, the myths of class unity and the permanent struggle against
capital must also be abandoned in order to enable practical steps
towards such unity, or more modern: unifying class politics. What
is glorified in retrospect as unity was always a mosaic of different
groups of working people, objectively held together by the social
division of labor, capable of collective action to the extent that
ideological and practical struggles succeeded in creating a subjective
understanding of common concerns alongside the interests of specific
groups. In
the past, too, not only calloused but also caring, sensitive and
skillful hands, together with the hearts and brains that went with them,
were involved in the creation of class unity and the struggle against
capital.
The myth of class unity revolved around factories and large corporations. Concentration and centralization of capital would unite more and more workers under a unified command. The
accompanying socialization of labour would also pave the way for the
workers to take over and jointly manage the means of production. This idea of industrial development was not only popular in the labor movement, but also in bourgeois circles. In
the matter-of-fact language of capitalist managers, capitalist centers
became industrial societies that were presented as models for the
(post)colonial world of developing countries. Many anti-colonial movements focused on catch-up development or industrialization under socialist auspices. Despite
irreconcilable differences on the question of property, most
capitalists and socialists shared the universalist idea that industrial
mass production was the key to human progress.
The new women's movement of the 1960s and 1970s vehemently disagreed. The female half of the sky did not exist in the industrial male world. The
truth of this criticism was that men's worlds did not recognize the
unpaid domestic work performed almost exclusively by women, but took the
services rendered there for granted. Only
a few activists in the new women's movement, which was largely
independent of the old socialist movement, were aware that the
industrial worlds were managed by both men and women: The
problem for female factory workers was not that they were excluded from
industrial employment, but that they had to carry it out under
precarious conditions and work a second shift as domestic workers "on
the side".
With regard to industrial work, it should be noted: The
factory was never a leveler, but was at all times determined by
internal hierarchies in terms of wages, job security, access to social
security beyond employment and autonomy or direct control in the
workplace. For the most part, certain segments of the internal labor market were and are intended for certain demographic groups. Often
enough, these groups (men-women, natives-immigrants, skilled-unskilled)
fought each other more than the common enemy identified by socialist
theorists.
On the side of capital, too, class unity was usually not very far away. Competition
within an industry, differing interests between large and small
enterprises and between productive, commercial and money capital
represented just as many weak points in the capitalist class front. Proletarian
successes along the line of conflict between wage labor and capital
could only be achieved if different groups of workers were able to
create a "diverse unity", at least to some extent. This required a great deal of agitational and organizational work. Class unity, insofar as it existed at all, was not an automatic by-product of industrial development. Capital
did not create the proletariat as its gravedigger, but rather many, and
by no means equal, proletarians who were able to organize themselves as
a collective actor, as a class for themselves, but did so only
rudimentarily.
The
preoccupation with the myths of industrial work seems anachronistic, as
the former model of industrial development has now been replaced by the
reality of post-industrial societies. At
least that's what a majority of academics, journalists, politicians and
spokespeople from service, media and, above all, IT companies claim. But this is also a myth.
Even
before the first industrial revolution, there was the utopian idea that
machines would free mankind from all drudgery and create paradise on
earth. These
utopias were repeatedly updated with the spread of radical
technological innovation, but were always at odds with the reality of
industrial work.
Thus,
capital transformed industrial production in a way that deprived the
organizational centers of the labour movement of their basis. This
also includes a new wave of automation, which was ideologically
exaggerated as the long-awaited realization of the post-industrial
paradise. Although
its share of total employment and value creation has fallen, industrial
work has not disappeared from the capitalist centers. And on a global scale, there have never been as many people working in industry as there are today.
The
ideologues of post-industrialism in the centers perceive this work just
as little as the almost extinct ideologues of industrial progress
perceived unpaid domestic work. Furthermore, the latter is only perceived to the extent that it is replaced by wage labor in the food and care industries. In
the remaining industries, work is anything but a paradise, especially
not for the significantly increased proportion of precarious workers. For
the masses of industrial workers in the peripheries, however, to which
entire sectors or production sections have been relocated from the
centers, it is hell.
Ingo Schmidt is a Marxist economist and lives in Canada and Germany.
Invisible hands
Forms of social labor and class politics (I)
by Ingo Schmidt
[This
article posted on 2/1/2023 is translated from the German on the
Internet, https://www.sozonline.de/2023/02/unsichtbare-haende/.]
Two assertions - or more modern: narratives - structure pretty much all economic and socio-political debates these days. One is based on a labor shortage that is currently limiting economic growth and threatening future pension payments. Declining birth rates are cited as the main cause of this shortage. The political conclusions: Raising the retirement age, extending working hours, increasing the number of people in employment. Women in particular are expected to do paid work instead of or in addition to housework. Workers are being recruited abroad.
On the other hand, a drastic decline in demand for labour is predicted as a result of digitalization. There will be technological unemployment. Longer working lives and working weeks, higher employment rates and immigration would only make this worse. It would be better to think about decoupling work and income. Keyword: guaranteed minimum income, possibly financed by machine taxes.
Falling birth rates reduce the supply of labour, digitalization reduces the demand for labour. Depending on which of these two factors is stronger, unemployment will rise or fall. The effects of digitalization in particular are almost impossible to predict reliably. In the political arena, speculation is rife.
In
general, there is little argumentation based on reasonably reliable
empirical knowledge and, as far as possible, predictions. Instead,
either the shortage of labor or a technologically induced end of work
is arbitrarily pointed out in order to support the respective preferred
demands.
Work: a spectre
The resulting demands cannot be clearly assigned to the political left or right. An increase in the retirement age is criticized on the left, loudly demanded in the center and tacitly supported on the right. Increasing
the number of women in employment is demanded from the left to the
center, viewed rather skeptically on the right, but not rejected
outright. Increased
immigration is viewed positively by the majority on the left and in the
center, but is almost universally rejected by the right. A
guaranteed minimum income is supported by parts of both the left and
the liberal center, while there is little interest in the topic on the
right.
There is no independent positioning on the left. Here too, references to technological and demographic developments dominate. The
actual work performed, without which the reproduction of individuals
and society would not be possible, remains largely invisible.
There would already be starting points for a work-centered policy. However,
work and the social division of labor are the subject of theory circles
and publication projects here and there, but do not penetrate the
general public and the political sphere. Where
does this blindness of the left to the working hands, whose
organization once made them a political force and who continue to
provide the daily bread, come from?
Unifying class politics
Before
the pandemic, around the same time as the candidacies and campaigns of
Jeremy Corbyn and Bernie Sanders, a debate about "unifying class
politics" flared up in the Left Party and its intellectual environment. It
drew on the experiences of labour struggles and organizational projects
of various groups of workers and attempted to give them a common
direction. It also addressed issues that are rarely if ever associated with the relationship between wage labor and capital: Destruction of nature, sexism and racism, were to find their place in the new class politics.
The debate quickly petered out. It
was too closely linked to the current disputes within the Left Party
and too little to actual, but isolated, labour struggles and
organizational approaches. The
separation between old class politics and the issues of the new social
movements was reproduced and continues to characterize the factional
struggles within the Left Party, but also the Left in other countries. They
are themselves a consequence and expression of the lack of an
independent left strategy vis-à-vis liberalism, conservatism and
neo-fascism. A new class politics could fill the vacuum on the left, but is obviously difficult to achieve. Why is that?
Class constitution and workers' politics
With the development of capitalism, wage labor has increasingly become the dominant form of social labor. And with it the buying and selling of the commodity of labor power. This
is based on the idea that labor power, like any other commodity, is
exchanged between legally equal and free market participants. The
fact that this labor power produces surplus value is made invisible by
the buying and selling of labor power on the market; Marx aptly
described this as commodity fetishism.
The question of why a new class policy is so difficult to achieve could therefore also be posed differently: How could a class capable of collective action ever emerge despite commodity fetishism?
With
the emergence of capitalism, the liberal idea of freedom and equality
became the ideal basis of the new mode of production. Nevertheless,
the moral concepts that had ideologically stabilized the previous
feudal mode of production did not disappear overnight. Rather,
dissident interpretations of the Bible that emphasized equality in
particular became a common point of reference for peasants driven from
the land and artisans driven down by the up-and-coming industry.
Here
they found a unifying morality around which working classes could form
as, to borrow Benedict Anderson's definition of the nation, imagined or
imaginary communities. The
associated emergence of workers' organizations and the production of
their own theories ultimately led to an independent but polyphonic moral
economy of the working class. Workers
drew their self-confidence from this, despite their different
activities and cultural and ethnic backgrounds, and developed political
strategies from it. Together, these two factors turned the working class into a power bloc that challenged capitalist rule.
A power bloc with limited reach, however. There was little room for work outside of industrial wage labor. This
applies to unpaid domestic work in the core countries of industrial
capitalism as well as to the peasant majorities in the peripheries of
global capitalism. New
social movements emerged that could have overcome the rule of
capitalism, imperialism and patriarchy if they had achieved a synthesis
with the labor movement.
Although
this synthesis did not come about, the ruling classes of the world felt
so challenged that they pushed ahead with a restructuring of capitalism
that was at least as profound as the one from which capitalism had
emerged a few hundred years earlier.
The
moral economy and infrastructures of all social movements that had
emerged in the course of the intervening period were eroded, destroyed
or marginalized. Long-held patterns of thought on the left no longer apply. This
is why liberals have long found it easy to sell their project of
capitalist renewal as one of liberating individuals from the paternalism
of the welfare state and even more so from "communist party
dictatorship". This
is why it has been so easy for right-wingers to invoke communities,
nation and race, supposedly dating back to pre-capitalist times, since
renewed capitalism has lost its luster.
However,
the misery, alienation and insecurity produced by everyday capitalist
life are not overcome by invoking nation and race. The
suspicion that the hopes placed in them will not overcome the misery
transforms alienation and insecurity into (self-)hatred, fear and
aggression.
Only
a politics of work, or more precisely of workers, regardless of the
form in which they work - paid, unpaid, in the fields, in the factory,
in the office, in social institutions or in transportation - can create
new forms of cooperation, forms in which people are not strangers to
each other, are not at war with non-human nature and can therefore share
with each other as brothers and sisters.
Ingo Schmidt is an economist and head of the Labor Studies Program at Athabasca University in Canada.
The USA
A destructive leading power
by Ingo Schmidt
[This article posted on 1/1/2023 is translated from the German on the Internet, https://www.sozonline.de/2023/01/die-usa/.]
America is great again. And
we can be there when, under American leadership, the teeth of the
Russian bear are pulled out and the fire is blown out of the Chinese
dragon. The cash registers are ringing on Wall Street. In
the rest of the country, the stars and stripes are being waved - and
despite all the patriotism, the question is being asked whether the new
war is not being paid for from domestic coffers instead of the leading
power collecting tributes from allies and opponents. The ability to lead lags far behind the proclaimed claims. The USA is increasingly proving to be an obstacle on the path to a free world; it is a destructive leading power.
Welfare state and anti-colonialism
Mass
consumption and full employment were the decisive means by which the
USA sought to prove its superiority over Soviet communism in the first
Cold War, thereby securing the turnover of domestic industries and the
loyalty of broad sections of the population. It was not long before this combination of economic prosperity, domestic loyalty and international example became fragile.
Domestically,
women as well as the black population and migrants were largely
excluded from the labor market or pushed into hard, dirty and poorly
paid jobs, without social security and opportunities for advancement. There was also a lack of public infrastructure in the black ghettos.
The
women's and civil rights movements that resisted this discrimination
were attacked as a cost factor that threatened profits and as Moscow's
fifth column. In parts of these movements, this led to precisely the left-wing orientation that had been assumed. The
attempt to integrate moderate sections through social reforms, on the
other hand, together with the escalation of the Vietnam War, led to
rising government spending. Private
companies took advantage of the resulting opportunity to push through
higher prices on the market, to which the trade unions responded with
corresponding wage demands.
On
an international level, many anti-colonial movements, which initially
only pursued projects of catch-up industrialization, became radicalized
with the aim of eventually catching up with the model of American mass
consumption. Part
of this radicalization was the struggle for higher export earnings,
which, in the form of two oil price shocks, led to an acceleration of
the price-wage spiral that began in the late 1960s - at a time when
industrial overcapacity was becoming apparent.
During the post-war period of prosperity, production capacities had always run ahead of the growth in mass consumption. They could only have been fully utilized if all demands for higher wages and public infrastructure had been met. But then the often invoked profit squeeze would have become a reality. The demands of social movements in the USA and other Western countries, but also in the South, had to be curtailed.
New international division of labor
The mixture of inflation, overcapacity, protest and strike movements dampened companies' willingness to invest. With
the end of post-war prosperity, the USA's claim to leadership, which
was centrally linked to the promise of mass consumption for the entire
non-communist world, also fell into crisis. The
US government's abandonment of the gold standard and the subsequent
decline of the dollar as well as its withdrawal from Vietnam were
further signs of weakness.
However,
through its role in pushing back social movements, the US was able to
re-establish its position as the leading capitalist power and pave the
way for a long wave of accumulation, even if it was weaker than the
post-war prosperity. The
increase in the prime rate by the US central bank provided the impetus
for this, but its immediate effect was a global recession.
Rising
unemployment broke the bargaining power of trade unions, and the
relocation of previously well-organized production sectors to low-wage
areas with few trade union rights, whether in the US or the global
South, perpetuated this weakening. Rising
interest rates turned borrowers, who had previously obtained cheap
money in the course of petrodollar recycling, into debt servants.
To service their debts, governments cut spending, sold off public companies and offered tax breaks to potential investors. Wall Street became the nerve center of a new international division of labor. Main Street residents were able to get jobs again after the 1980/81 recession. But they were mostly poorly paid or required expensive university degrees. Even those who obtained them could not be sure of getting the middle-class job they had hoped for.
The South on the rise
After
the collapse of the Soviet Union, the associated euphoria about the
victory of the so-called free world over the "communist" world did not
last long. US
Secretary of State Madelaine Albright had arrogantly but accurately
described the USA as an indispensable nation, but the moment soon faded.
Despite
the debt crisis and integration into US-controlled value chains, larger
countries in the South were able to maintain a certain degree of
independence: e.g. Brazil, India, Indonesia. Russia because of its nuclear weapons. And
of course China, whose leadership had drawn the conclusion from the
collapse of the Soviet Union that it was necessary to maintain political
power and at the same time seek integration into the global market. The
US-led West was looking for cheap but skilled labor and a reliable
infrastructure - China offered these and made Western corporations
dependent on it. At
the same time, it facilitated the rise of a Chinese capitalist class
whose loyalties are divided between love of country and the capitalist
world market.
US
governments are seeking to exploit this dichotomy in order to free
themselves from their dependence on China - even if this means risking
the collapse of the global neoliberal order to which their global
leadership role was linked after the end of welfare state capitalism and
Soviet communism.
The limits of globalization
The anti-Chinese turn was foreshadowed after the global economic crisis of 2008/2009. Critics
of globalization and many governments around the world saw the causes
of the crisis in the real estate and financial bubbles in the USA. Ben Bernanke, then Chairman of the US Federal Reserve, blamed China for the crisis. The
Chinese had flooded the American market with their savings, pushing
down interest rates and tempting Americans into reckless borrowing.
Shortly afterwards, Obama declared China to be the greatest challenge facing the USA. Less
diplomatically, his successor Trump made the flooding of American
markets with cheap Chinese goods the focus of his propaganda. Russia was added to the axis of evil after the annexation of Crimea. It
is no longer peripheral rogue states from North Korea to the Middle
East, North Africa, Cuba and Venezuela, but nuclear and economic powers
that are now seen as enemies against which the West must defend itself.
But the means to keep the West together are limited. When
a liberal transatlanticist like Christian Lindner and the EU Commission
criticize Biden's industrial policy for competition-distorting
subsidies and warn of a trade war, the Western alliance cannot be far
behind. Countries
outside the hard core of Western states cannot be sure that they
themselves will not soon be regarded as enemies and hit with sanctions. This is no way to win allies.
Treasury
Secretary Janet Yellen's "friend shoring" approach as an alternative to
global outsourcing ideologically conceals the failure of neoliberal
globalization under American leadership. However,
this no longer has anything to do with the project of securing
international supremacy by enabling private companies to make profits
and creating mass loyalty among the political class at home.
The
Green New Deal was an attempt to create such a project, but the
Democrats could not or would not push the deal through against cultural
warriors on the right and the interests of fossil capital. To compensate for the failure on the home front, Biden has toughened the tone in foreign policy. The Russian attack on Ukraine came at just the right time. Even if the main enemy is in China.
Ingo Schmidt is an economist and head of the Labor Studies Program at Athabasca University in Canada.
A brilliant business
A brief history of price-profit inflation
by Ingo Schmidt
[This
article posted on 9/1/2022 is translated from the German on the
Internet, https://www.sozonline.de/2022/09/ein-glaenzendes-geschaeft//]
Inflation is on everyone's lips. The media provide the necessary talking points. The drivers of inflation are presented in countless articles: Central bankers, trade unions, Russians and Chinese. And warned that if they are not stopped soon, inflation will choke off the real economy. As in the 1970s, the result would be stagnation plus inflation, in short: stagflation. The historical comparisons are skewed.
Evil central bankers, trade unionists and foreign powers
Central bankers are at the top of the list of accused inflation drivers. An expansion of money in circulation beyond the growth of production capacity inevitably leads to price increases. The
head of the US Federal Reserve, Jerome Powell, has now recognized his
mistakes and has switched to a restrictive monetary policy. In
contrast to his ECB colleague Christine Lagarde, who is allegedly
delaying necessary interest rate hikes and the end of bond purchases by
the ECB out of consideration for the escalating sovereign debt of the
Mediterranean countries.
Not
a word about the fact that the 2008 global economic crisis would have
turned into a depression if the central banks had not taken
countermeasures with a super-loose monetary policy. Nor
a word about why money in circulation was able to increase sharply over
a decade, but prices barely rose, and sometimes even fell. The
theoretically claimed correlation between rising money supply and
inflation was empirically refuted in the years after 2008. Only since the summer of 2020, after the end of the first coronavirus lockdowns, have prices continued to rise.
Also guilty of driving inflation: the trade unions with their constantly exaggerated wage demands. They are forcing companies to raise prices. Not a word about the fact that prices have risen faster than wages in recent decades, even with low inflation rates. Nor a word about the fact that prices have virtually run away from wages in the last two years. Even
if the demands that trade unions are currently making in their wage
negotiations were met 100 percent, the real wage losses suffered
previously would not be offset. The theory of the wage-price spiral has recently been refuted by the empirical reality of a price-profit spiral.
The price-profit spiral
And then there are the foreign powers. Unable
or unwilling to follow the rules of liberal global trade, they turn off
the gas tap, like Russia, or, like China, send entire cities or regions
into lockdown with every small coronavirus outbreak. Interrupted
supply chains reduce the quantity of the affected goods on offer and
create uncertainty regarding future availability. This is a good opportunity to sell currently available quantities at higher prices and speculate on further price increases.
Little is heard in the media about these crisis profits for trading capital. The
fact that energy prices had already risen before the war in Ukraine and
were significantly higher at times between the global economic crisis
in 2008 and the coronavirus recession in 2020 than after the Russian
attack on Ukraine also goes largely unmentioned.
Nor
is it asked why Western governments that want to stop Russian oil and
gas imports complain when the Russian government accommodates them in
this respect. Or
why lockdowns in China are bad, after they were considered necessary in
the West for a while and cannot be ruled out in the future. Or
whether the supply chains that connect Western and Chinese economies
were really functioning smoothly before coronavirus and were not already
fragile as a result of sanctions and tariffs.
The
companies that earn a lot from inflation or drive it themselves are
disappearing into the community of the good, the citizens of the Western
world that identifies itself as liberal, as if there were not also
class differences and other forms of social exclusion in this world.
History repeats itself - differently every time
In
terms of monetary policy, the parallels seem clear: after a period of
lax monetary policy that encouraged governments, private households and
even some companies to spend lavishly, the US Federal Reserve is taking
the lead in the fight against inflation. After
all, for the USA it is not just a question of losing purchasing power
at home, but also the role of the dollar as the international reserve
currency. Other central banks are joining the fight against inflation. Not least in order to keep the exchange rates of their own currencies reasonably stable.
But the nature of inflation has changed dramatically. In the 1970s, the trade unions were strong enough to defend real wages against rising prices. More or less in line with the growth in labor productivity, they even rose. They
were able to erect a real wage barrier, as the British economist Joan
Robinson put it, against the efforts of companies to increase their
profits by means of rising prices.
Overcoming this was the declared aim of the monetarist turnaround. High
interest rates were supposed to trigger a recession, cause mass
unemployment and break the bargaining power of the trade unions.
In
order to prevent rising employment from strengthening the unions again
in the next upswing, companies began to fundamentally restructure
production and logistics. Labor-saving technologies were introduced, parts of the company were outsourced and sections of production were relocated. By
importing cheap finished goods from countries in the South, the attack
on wages and welfare states in the North was cushioned. On the other hand, the costs of education, medical care and housing rose. Slowly enough not to be reflected in the inflation rates, which show annual changes. But
steadily enough to significantly reduce the purchasing power of wages
despite imported cheap goods and to increase the profits of
international capital.
The stock market price/debt spiral
Some
of these profits flowed into the construction of plants, buildings and
infrastructure, while others were used to buy securities. Securities inflation was the result. In order to make a dollar or euro profit, more and more dollars or euros had to be spent on buying securities. As
long as rising prices for these securities were seen as an expression
of rising wealth, further financial assets could be financed through
loans. The stock market price/debt spiral continued to accelerate. Financial crises in the periphery opened up new markets for capital from the centers.
The
2008 crisis, which originated in the US real estate market and Wall
Street, marked the end of the neoliberal business model. It could only be contained by a complete break with the monetarist principles that had paved the way for this model. Flooding the financial markets with free money from the central bank became a question of capitalism's survival.
But
the crisis also highlighted a fundamental contradiction of capitalism
in its neoliberal form: the expansion and acceleration of turnover on
the financial markets stood in contrast to the growing importance of
real estate, infrastructure, raw materials and agricultural production. The
neoliberal restructuring of production and logistics had considerably
improved the conditions for the exploitation of industrial capital. However,
land ownership and financial assets with their land rents and interest
claims now drove industrial capital into a profit squeeze. It was able to escape this for a long time by putting further pressure on wages.
Since the 2008 crisis, fragile supply chains have opened up another way out: price-profit inflation. Make a quick profit before the fight against inflation triggers the next recession.
The ways in which profit is generated have changed - and have long since reached their limits. Profit is still being made, and inflation in particular is a brilliant business. But it is also a kind of clearance sale. An overused business model with self-destructive tendencies. There is no mention of this in the media. Because it's always the fault of others.
Ingo Schmidt is an economist and heads the Labor Studies Program at Athabasca University in Canada.
Oil, ecology and geopolitics
A slightly different view of inflation
by Ingo Schmidt *
[This
article posted on 6/1/2022 is translated from the German on the
Internet,
https://www.sozonline.de/2022/06/oel-oekologie-und-geopolitik/.]
Just over a year ago, economic researchers assumed that the end of the pandemic would lead to a temporary surge in demand. As a result, inflation would also increase. Economic
policymakers argued about whether to simply wait out this temporary
boom or immediately switch from offering unlimited amounts of money at
zero interest rates to fighting inflation. The central banks decided to wait and see.
Since then, inflation has accelerated considerably. But not because of a boom in demand.
Recurrent
lockdowns and, most recently, the uncertainty surrounding the war in
Ukraine and its impact on international supply chains have put an end to
the boom before it even got going. Economic researchers are now warning of a recession. Despite
this, economic policy is almost unanimously in favor of high interest
rates and restricting the money supply, knowing that the feared
recession will become a certainty. If the recession is deep enough, prices will also fall at some point due to a lack of demand.
Whether this will also eliminate the causes of the current price increases is anything but certain. It is true that a potpourri of current events with old textbook wisdom is offered to explain inflation. But there are also blind spots.
Although
the empirical weight of rising energy prices suggests a link between
inflation and the ecological crisis, economic research and policy are
keeping a low profile in this respect. The
same applies to geopolitical conflicts, even though Russia's war
against Ukraine, lockdowns in China and the resulting supply problems
are at the top of the list of buzzwords.
A few grains of truth
"Demand boom" has now disappeared from the list of buzzwords used to explain inflation. Instead, wage increases are seen as one of the causes, if not the main cause, of rising prices. In
some countries, particularly in the USA, nominal wages have actually
risen significantly more recently than in previous decades (!) - in many
cases a recovery of nominal wage losses during the coronavirus
recession. In other countries, such as Germany, this catch-up effect is already over. In some cases, it was rather meagre or did not take place at all.
Insofar
as nominal wages determine prices, there is a lot to be said for the
theory that the recent surge in inflation is a temporary phenomenon. If we look at nominal wages and prices, a different picture emerges: the gap is widening. Prices are rising faster than wages, real wages are falling and profits are rising. Not wage inflation, but profit inflation.
The empirical correlation between price increases and profit growth is too strong to be denied. Especially as people on average and low incomes feel a real loss of purchasing power with every purchase. According
to the economic mainstream, however, it is not private companies with
ample pricing power that are to blame, but the central banks with their
ultra-loose monetary policy.
Monetarism, the second textbook classic on inflation alongside wage pressure theory, is used to justify this. According
to this theory, companies calculate exactly how much money the central
bank puts into circulation and adjust their prices accordingly. If the amount of money in circulation increases, prices rise. If the amount of money in circulation is limited, inflation also disappears.
The logic is compelling, the empirical content is poor. In
order to stop the collapse of private payment transactions in the wake
of the Great Recession of 2008/2009, central banks around the world
switched to a loose money supply. The economy recovered and inflation rates rose. But not very strongly and not for very long.
Despite
the continued generous supply of money by the central banks, inflation
rates in most countries fell back below the target level of 2 percent
two or three years after the end of the recession.
At the same time, it became clear that the economic recovery was not far off. The
only people who knew what to do with asset purchases by central banks
and zero interest rates were the stock market players. Including commodity traders.
Oil and ecology
The
2008/2009 recession was barely over before stock market prices exceeded
pre-crisis levels, as did the prices of commodities, agricultural
products and real estate. As a reminder, the recession was triggered by a real estate crisis in the USA. It
was these price rises that led to an increase in the inflation rate due
to the proportion of private household expenditure spent on energy,
food and accommodation. Unlike
now, however, the price increases in the early 2010s, which
incidentally were all directly related to the use of land, did not spill
over into the economy as a whole.
However,
there was a boom in the development of so-called unconventional energy
deposits, fracked gas in the USA, oil shale in Canada and deep-sea
drilling off the coasts of various countries. Anyone
who believed that the rise in the price of fossil fuels would
accelerate the introduction of energy-saving technologies and the use of
alternative energies was half wrong. Although
a lot is happening in terms of solar and wind energy and
electromobility, nothing is happening when it comes to switching to
ecologically sustainable production and lifestyles.
When the boom in unconventional energies led to global overcapacity, commodity prices collapsed. Apart from capital and employees in this sector, nobody was bothered by this. People
continued to talk about the need for ecological restructuring - and at
the same time speculated on the stimulating effects of low commodity
prices.
At first, high energy prices did not lead to an exit from intensive production and lifestyles. Then even low prices for energy, other raw materials, labor and credit were not enough to get the economy going. Even principled supporters of supply and demand began to doubt the functioning of the price mechanism.
Calls for public investment in, naturally, green infrastructure were heard right into the business camp. Traces
of a Green New Deal could be found in the election campaigns of Joe
Biden, the SPD and the Greens, without calling a spade a spade.
Oil and geopolitics
This
was enough to win elections, but not to organize sufficient political
majorities to implement ecological and social restructuring plans. In the US Congress, the no vote of a Democratic senator was enough to block Biden's light version of a Green New Deal. In Germany, FDP leader Lindner reserved the right to veto funding. In view of rising inflation rates, it was foreseeable that he would make use of this.
Although
companies in all sectors are enjoying rising profits - prices are
rising faster than wages - calls from the business camp to combat
inflation and austerity are getting louder. There is no question that Lindner, as a man of his class, is complying with these demands. However, this is now complicated by the political mandate to rearm. It
is foreseeable that butter will have to be saved all the more in order
to be able to build cannons and fight inflation at the same time.
The
federal government's current relief programs are taking the edge off
the upcoming distribution battles for the time being, but are
contributing to their subsequent intensification. Further
increases in government debt and rising interest rates as part of the
fight against inflation will make the calls for less butter for the
people louder.
The geopolitical tensions, which are largely responsible for inflation, will not disappear any time soon. A new cold, and in some countries hot, war has been declared. In the leading role: oil and gas, including food.
The
USA, which has already declared Russia and China to be the greatest
"security challenge" under President Obama and now openly an enemy, is
faced with a paradox: on the one hand, it needs high oil and gas prices
to remain a global player. Otherwise, the extraction of largely unconventional energy in the USA is not profitable. On the other hand, as prices rise, so do revenues in producing countries that the USA has identified as enemies: Iraq and Libya, before they were attacked by Western troops. Rising energy prices were the result in both cases.
Also on the list of enemies: Iran, Venezuela and Russia, which have been subject to sanctions at various times.
So far, wars and sanctions have not led to the formation of a united front against the West. This is unlikely to continue to be the case due to differing interests. But they perpetuate the weakness of the West and the fossil capitalism associated with it. To the detriment of people and nature all over the world.
*IngoSchmidt is an economist and head of the Labor Studies Program at Athabasca University in Canada.
Ukraine war
Russian war in the American world system
by Ingo Schmidt*
[This article posted on 5/1/2022 is translated from the German on the Internet, https://www.sozonline.de/2022/05/ukrainekrieg/.]
Since the Russian attack on Ukraine, the ranks of NATO have been tightly closed. Beyond the war in Ukraine, the governments of the member states are promising more military involvement.
The moment of unity will not last. The
centrifugal forces that have eroded the cohesion of NATO members over
the years and created popular distrust of their governments, if not "the
system", will be reinforced by the war. These are the same forces that drove Russian President Putin to attack Ukraine - from a position of weakness, not strength.
The starting conditions
Politically, Russia is a giant. Because of its nuclear weapons. A legacy from Soviet times that weighs heavily on the country. Economically, Russia is a dwarf.
4.3 percent of Russia's gross domestic product (GDP) is spent on armaments, which is 3.1 percent of global armaments spending. Germany only spent 1.4 percent of its GDP on its 2.7 percent share of global defense spending last year. The UK manages its share of 3.1 percent with 2.7 percent of its GDP. China spends 1.7 percent of its GDP on 13 percent of global spending. The USA accounts for 39 percent of global military spending with 3.7 percent of GDP.
The Russian military therefore rests on a weak economic foundation. In
macroeconomic terms too, its arms exports are hardly significant,
although it is the second largest arms supplier in the world after the
USA. Russia is primarily an exporter of oil, gas, coal, wheat and various minerals. Similar
to the potentates of other countries that depend on raw material and
agricultural exports, the Russian oligarchs transfer their profits
abroad - as private assets, not to strengthen Russian companies abroad. Gazprom, Russia's No. 1, is ranked just 84th on the global list of corporations. Among the top 50 are 23 US companies, 13 from China, two each from Germany, Japan and the UK.
Standards instead of factories
It is clear that the USA is No. 1 in terms of military and economic size, but its model of global domination is in danger. Under
pressure from militant labor struggles and foreign competition, US
companies have increasingly withdrawn from industrial manufacturing
since the 1980s.
When
class struggles at home and foreign competition destroyed the
competitive advantage of American factories - a pillar of American
dominance until then - this dominance was re-established on a different
basis.
From
then on, legal and technological standards as well as management
practices "made in the USA" provided the organizational framework for
global supply chains, which were secured by the US Army with its global
network of bases. Companies
from all over the world were invited to join the global production and
logistics model, provided they accepted the terms and conditions:
technological rents flowed into the USA, which was also allowed to incur
unlimited dollar debt to its trading partners. A clear locational advantage.
Nevertheless, many Western European and Japanese companies agreed to the deal. The
prospect of bypassing trade unions and the welfare state in their own
country and employing cheap labor elsewhere was too tempting. The associated hopes of profit were fully realized. With
side effects: some low-wage countries became, if not capitalist
centers, then at least serious economic competitors: the Asian "tiger
states", regional powers such as Brazil, India and South Africa.
China
And then there is the Chinese hybrid model of Manchester capitalism and state socialism. The
hopes of the USA and its NATO partners that China's integration into
global production and logistics networks would turn the country into
pure capitalism have not been fulfilled. So
far, the regime in Beijing has been able to balance the contradiction
between China's role as a factory of the capitalist world and an
anti-systemic challenge in a kind of "peaceful coexistence in one
country".
The
US has declared China to be the greatest political challenge, a role it
had ascribed to the Taliban & Co. for almost two decades. When
it comes to trade, however, they have so far limited themselves to
rather symbolic sanctions and complain loudly about any disruption to
trans-Pacific supply chains. As
long as both sides want to avoid breaking off their economic relations
and military confrontation, China and the USA are condemned to
antagonistic cooperation. It
is not the relationship between the USA and the EU, not the tensions
between NATO and Russia, but the transpacific relations that determine
global politics.
The
Russian attack on Ukraine offered the USA a welcome opportunity to bind
the EU to itself, even though Europe only plays a subordinate role in
global terms. The regained unity with the USA after the euro crisis and Brexit is only right for the rulers of the EU member states. Like NATO, which was declared brain-dead a few years ago, the EU has also found a new role as a result of the war in Ukraine.
A sign of weakness
At least for the time being. The exhaustion of American power was already weighing heavily on the global economy and politics before the war in Ukraine. The
withdrawal from Afghanistan, which came out of the blue even for the
USA's allies, confirmed once again what the war against Iraq had already
shown: the US Army can chase regimes declared enemies out of office and
assassinate their leaders, but neither the army nor civilian
organizations can establish well-meaning regimes that can hold on to
power without permanent support from the USA or its allies.
Like
the Vietnam War, all subsequent US wars have been great business for
the arms industry, but at the same time have made it clear that military
destructive power was not linked to political creative power.
Nor did these wars open up any new markets. Iraq, Yugoslavia and Afghanistan were already part of the capitalist world market when they were attacked. In macroeconomic terms, the US wars were bad business. Despite
considerable spending on armaments, there was no arms boom in the USA
as in the Second World War or the first decades of the Cold War. To a not inconsiderable extent, the wars contributed to rising national and foreign debt.
Added to this is the debt of private households. For decades, cheap loans have kept consumption going despite stagnating mass incomes and contributed to the financial crisis. The
fact that the dollar still serves as a reserve currency is not due to
investor confidence, but to the fact that Chinese and Europeans alike
are afraid to take the risk of launching renminbi or euros as
alternatives. The freezing of Afghan and Russian currency reserves by the US government will further weaken confidence in the dollar.
A
dollar-centric financial system groaning under debt and speculation
already led to speculation of an upturn towards the end of the
coronavirus recession in early summer 2020. The
upturn remained stuck in ever new coronavirus waves until the war in
Ukraine further dampened private companies' and households' appetite for
investment and consumption. But speculation has remained - on the commodity and agricultural markets.
From there, it has spread to the goods markets. Rising
inflation rates have led to a bitter dispute among economic policy
elites as to whether they should accept inflation as a lesser evil or
push it back by restricting the supply of money, knowing that this would
completely stifle an already weakening economy. If
the increases in military spending announced in many countries are
implemented, households at the lower end of the income pyramid, whose
purchasing power has already been eroded by inflation, will have to do
without butter. For more guns.
The poor in the peripheral countries will be hit even harder. Prices
for basic foodstuffs had already risen before the Russian attack, after
which Ukraine imposed an export ban on wheat, which will lead to supply
shortages in North Africa in particular. The issue there is not butter, but bread.
When
it comes to energy, the USA is almost imposing itself as a replacement
supplier, but is demonstrating desperation rather than leadership. Russia's
gas reserves are sufficient for 77 years, those of the USA for 14.
Another sign of weakness: despite all the bluster about sanctions
against Russian oil and gas, the US government has exempted the import
of Russian uranium from the sanctions due to a lack of other sources.
*IngoSchmidt is an economist and head of the Labor Studies Program at Athabasca University in Canada.
Canada
'Freedom Convoy' and state of emergency
by Ingo Schmidt*
[This article posted on 4/1/2022 is translated from the German on the Internet, https://www.sozonline.de/2022/04/kanada-2/.]
They
set off on the west and east coasts in articulated lorries, pick-ups
and SUVs, driving thousands of kilometers in long columns to protest
against the coronavirus measures introduced by Justin Trudeau's minority
Liberal government. In the capital Ottawa, they occupied the government district. In Alberta and Ontario, they blocked border crossings to the USA. They ignored police orders to leave, confiscated driver's licenses and insurance policies.
After
two weeks, a state of emergency was declared first in Ontario and then
nationwide, bank accounts were frozen, the public leaders were arrested,
vehicles parked in the wrong direction were towed away and the
remaining demonstrators were forced out under threat of punishment.
Occupation of the government district
In
light of the fourth wave of coronavirus, the Trudeau government decided
on January 15 that truck drivers coming from the US who have not been
vaccinated will have to spend two weeks in quarantine. This is effectively a mandatory vaccination for all drivers who regularly cross the border. On January 22, motorcades from Prince Rupert on the West Coast made their way to Ottawa to protest against these measures.
On January 27, like-minded people set out from Enfield, Nova Scotia. Two days later, the Freedom Convoy participants from east and west arrived in Ottawa. They blocked the access roads to the government district with parked trucks. In sub-zero temperatures, the engines had to run around the clock to heat the drivers' cabins. The necessary fuel was hauled in canisters.
The Freedom Convoy drew attention to itself with a concert of horns from early in the morning until late in the evening. The
police estimate that around a thousand vehicles and five thousand
people were involved in the blockade of the government district. There were significantly more during individual rallies.
Residents who complained about the noise and the smell of diesel fumes received death threats. Most
of the stores and restaurants in the government district and the
adjacent streets closed down after being visited by groups of aggressive
and unmasked "customers".
There were also occasional counter-protests, including a "blockade of the blockaders". As the police showed little interest in the residents' complaints, local trade union activists founded Community Solidarity Ottawa. Their mobilization focused on the social consequences of the corona crisis.
Blocked border crossings and a state of emergency
The blockades of two border crossings to the USA were about the economic consequences. Since
the quarantine requirement for unvaccinated truck drivers - or more
precisely: all people entering the country from the USA - was the reason
for the Freedom Convoy, such blockades were an obvious choice. The
Coutts border crossing in Alberta was closed from January 29 to
February 15, and the Ambassador Bridge between Windsor and Detroit from
February 7 to 12. A quarter of all foreign trade between the USA and Canada passes over this bridge.
This
disruption to supply chains disrupted businesses on both sides of the
border and even prompted US President Biden to call his counterpart
Trudeau and urge that the bridge be cleared.
Trudeau
passed this demand on to Ontario Premier Ford, who declared a state of
emergency in the province on February 11 and had the bridge cleared the
next day. He did not order the occupation of the government quarter. Trudeau did so after declaring the entire country a state of emergency on February 14. The
blockaders at the Coutts border crossing, who Alberta's Prime Minister
Kenney, like Ford a Conservative, had allowed to go largely
unchallenged, were then also removed. The Freedom Convoy 2022 chapter was over.
The
fact that the convoy was able to start just one week after the
announcement of new coronavirus rules was not least due to the United We Roll convoy, which had crossed Canada in 2019. Inspired by the French yellow vests, they demonstrated for oil and gas pipelines and againstCO2 taxes. In contrast to the ideological hodgepodge of the yellow vests, the organizers of United We Roll were clearly positioned: Against immigrants, Islam, Jews and trade unions. Alberta's independence, and perhaps even joining the USA, was also up for debate.
Organizers and supporters
The group of organizers and leaders who launched the Freedom Convoy also emerged from United We Roll. The political aims of the organizers came under fire as the Freedom Convoy attracted more and more attention. In response, the abolition of all corona measures was named as the main objective.
Through the company GoFundMe,
5 million dollars in donations were collected between January 14 and
January 25, one day before the quarantine requirement for unvaccinated
border crossers was issued. At
the beginning of February, a parliamentary committee demanded
information about the fundraising campaign and the company pulled out of
the campaign. After that, over 8 million dollars were collected via GiveSendGo, a platform run by fundamentalist Christians.
From
donor data leaked to the press, it is known that a significant
proportion of the money came from the USA, primarily from better-off to
well-heeled conservatives. Less is known about the truckers, who appeared publicly as hard-working freedom fighters. The Canadian Truckers Alliance, which opposed the Freedom Convoy, as did the Teamsters truck drivers' union, claimed that the majority of participants were not drivers. This claim cannot be verified.
The
trucking industry is divided between small self-employed drivers who
drive their own vehicles and more or less large companies that hire
drivers for wages. Competition
and time pressure is high throughout the industry and comes from
industrial groups whose profit targets cannot be met without fast and
cheap transportation.
It
was obvious that the participants in the Freedom Convoy were all white,
while around half of the employees in the industry are not white. A
group of Indian drivers fighting against wage theft and poor working
conditions accused the convoy of distracting from the real problems.
Nevertheless, the message that working Canada needs to free itself from government paternalism has resonated with many. According
to surveys, around a third of the population expressed support or at
least understanding for the Freedom Convoy's actions. Lower income groups and those with low formal qualifications are over-represented among the Convoy supporters.
According
to reports from counter-demonstrators, who also sought out
conversations with Convoy supporters, the image of a gang of violent
racists and sexists painted in the liberal media only partially reflects
reality. There
were such people - they were probably in the majority among the
organizers - but there were also many whose concerns and needs no one
else wants to hear.
Conservative half-support
The
organizers of the Freedom Convoy are not the only ones who, under the
label of freedom from paternalism, pose as advocates for hard-working
people without representation in the media and politics, but have no
interest in solving the problems of these people. The conservatives play the same tune. But they were divided over how far they should go in supporting the Freedom Convoy.
Some,
committed to law and order, would not recognize the unlawful blockades,
but could not bring themselves to give eviction orders to the police,
in whose ranks there was much support for the convoy. Among these waverers were Prime Ministers Ford and Kenney and former federal party leader O'Toole.
Amid
the blockade wrangling, the majority of Conservatives swung to a line
that the right represented by Trudeau was not entirely legitimate, so
unlawful protests against it were justified.
After
police efforts to clear the blockades failed due to the boycott stance
of conservative provincial governments and parts of the police
leadership, Trudeau declared a nationwide state of emergency in his
distress. The radical wing of the Conservatives saw their "Trudeau-equals-dictator" stance confirmed. The social democratic NDP secured Trudeau a parliamentary majority. The move was also welcomed by the majority in opinion polls.
Nevertheless, Trudeau's position has been shaken. Opinion polls change quickly. Parts
of the NDP, especially its active supporters, swallowed the state of
emergency, but at the same time warned that it would set a precedent
against protests from the left.
*IngoSchmidt is an economist and head of the Labor Studies Program at Athabasca University in Canada.
Inflation: Data, explanations, policy (Part 4)
Supply chains, globalization & a new Cold War
by Ingo Schmidt
[This
article posted on 3/1/2022 is translated from the German on the
Internet,
https://www.sozonline.de/2022/03/inflation-daten-erklaerungen-politik-teil-4/.]
Inflation and the fight against inflation are topic no. 1. Finally something familiar again. The usual suspects are presented: Money
in circulation is too high, the economy is running hot, the trade
unions are unrestrainedly turning the wage-price spiral. But the evidence is weak.
Since the 2008/2009 financial crisis, central banks have been pumping masses of money into the economic cycle at zero cost. Before the crisis, the financial system printed the money itself. Despite this, inflation rates remained close to zero. The economy never really got going again after the financial crisis. The coronavirus recession in the first half of 2020 was followed by an equally strong recovery in the second half of the year. The economy stagnated in 2021. No sign of economic overheating. There were significantly more strikes in 2015 and 2018 than in the previous two decades. But these were exceptions. In 2019, the temporary militancy was over again. The rising inflation rates of recent months cannot be blamed on the trade unions either.
Disrupted supply chains
But there is a new suspect: the disrupted supply chain. In the manufacturing industry, production is being cut back due to a lack of computer chips. In China, every local wave of infection leads to a lockdown. Containers are piling up in the ports. Putin is supplying too little gas. However, the chain of evidence is even more fragile than the supply chain. The production of computer chips is as high as it was before the coronavirus recession. But demand for smartphones, tablets and computers has skyrocketed during the recession. Netflix, Spotify and Zoom brought the virtual world into the living room, digitally controlled delivery services brought pizza. Car
manufacturers, used to stocking up on the necessary chips via
last-minute orders, suddenly found themselves at the end of a queue.
Demand for other consumer durables also increased during the coronavirus recession. The
general economic slump was accompanied by a shift in consumer demand in
favor of goods and services that can be used at home. The boom in demand led to bottlenecks in transportation. Containers are piling up in the ports and ships are waiting to be unloaded. However, there are already signs of saturation.
The situation is different in the energy supply sector. The liberalization of the energy markets has led to an increase in short-term contracts. In the EU, only part of the gas demand is covered by long-term contracts with fixed prices. Anything in excess of this must be procured at short notice at current prices. This is why there are regularly significant price increases in the cold season when demand rises.
There is also a medium-term effect. The
current rise in energy prices would have been less pronounced if there
had not been a collapse in gas and oil prices in 2014. As a result, investments in fossil fuel extraction projects, but also in wind and solar energy, fell. Investments were not profitable. In addition, there was uncertainty about the direction of future energy supply. At some point, capacity limits were reached and prices rose. In
2014, it was the other way around: more than a decade of high prices
had led to overcapacity, particularly because fracking and the
processing of oil shale became profitable. This made the USA one of the largest oil exporters in the world.
At the center: access to energy and labor
A
boom in durable consumer goods, associated transportation bottlenecks
and the renewed rise in energy prices have led to a rising inflation
rate in recent months. The boom in consumer goods has already peaked. Energy prices could be pushed down by a restrictive monetary policy - at the cost of a general recession.
It is doubtful whether the power elites in politics and business will follow this path. Not
only because of the gloomy economic outlook, but above all because
their business model of global access to cheap labor and - despite
sometimes high commodity prices - unlimited consumption of natural
resources has been under pressure for some time. Shortages of computer chips and energy supply problems are not the only reasons for the current price increases. They also point to the conflict lines of a New Cold War declared by the West. The opponents are Russia, which offers cheaper energy than the USA but, unlike other energy exporters, has nuclear weapons. And China, whose economy has changed from being an extension of the West's workbench to a technological challenge.
Inflation as an ideological weapon
This business model was promoted by the fight against inflation in the 1970s. Unlike today, there were distribution battles between companies and trade unions as well as commodity exporters and importers. These
struggles led to inflation and were linked to system-changing ideas on
the left wing of trade unions and anti-colonial movements. Economic democracy and a new world economic order were to put capitalism and imperialism in their place. The
wage-price or price-wage spiral was still turning and the oil shocks
had not yet been overcome when individual companies began to relocate
their production to countries with lower wages and without militant
trade unions.
With
the aim of breaking the unions' bargaining power and accepting a
recession, the US central bank turned off the money tap in 1980. Interest rates shot up and the economy collapsed. Mass unemployment took the wind out of the unions' sails. Nevertheless, the relocation of production picked up speed. A
side effect of the temporary explosion in interest rates was the
international debt crisis, during which the IMF and World Bank forced
almost all countries in the global South to switch from import
substitution to export orientation. For
many, this meant selling off raw materials and agricultural products,
while others became locations for industrial production. However,
the design, sale and financing of the respective production processes
remained almost entirely in the hands of Western corporations.
After the collapse of the Soviet Union, China became the global center of manufacturing. The supply chains remained under the control of Western corporations. However,
a state sector continued to exist alongside this, which soon raised
doubts among Western managers, asset owners and capitalists as to
whether China's opening up to the global market also meant the
transition from a "communist" command economy to a "free market
economy". Alongside ideological doubts came the fear of economic and political competition.
While
the rest of the world entered a phase of stagnation on the verge of
deflation following the global economic crisis of 2008/09, the Chinese
economy was quickly brought back on course for growth with state aid. Shortly afterwards, US President Obama declared China to be the greatest security threat to the USA. The NATO partners adopted this assessment. The Trans-Pacific Partnership was established with the aim of economic containment. Sanctions
and tariffs pursue the same goal - even if they contradict the
otherwise sacred principles of free trade and strain global supply
chains.
Alongside China, Russia has become the main opponent of the new Cold Warriors. Less central to the global power game than China, it is easier to criticize Moscow. However,
unlike in the Cold War against the Soviet Union, today we are not
facing two blocs that are almost completely isolated from each other
economically, but highly intertwined countries, with China and the USA
as rival centers. Russia
stands somewhat apart, but with its combination of raw material wealth
and nuclear weapons, it is still a near-world power.
The power elites of the West present themselves as defenders of freedom against the anti-liberal regimes in China and Moscow. But they are also afraid of a Eurasian alliance. And
with their distinction between liberalism and anti-liberalism, they
contribute a great deal to the emergence of such an alliance. Inflation
is less of an economic problem than an ideological weapon - after all,
it can easily be blamed on the Russians and Chinese. In the 1970s, "the oil sheikhs" played the role of the price-driving villain.
*Ingo Schmidt is an economist and head of the Labor Studies Program at Athabasca University in Canada.
Inflation: Data, explanations, policy (Part 3)
Energy prices and the cost of destroying nature
by Ingo Schmidt
[This
article posted on 2/1/2022 is translated from the German on the
Internet,
https://www.sozonline.de/2022/02/inflation-daten-erklaerungen-politik-teil-3/.]
The poor will soon be sitting in the cold. Driving will become more expensive. And the lights will probably soon go out in Germany. Unless politicians do something soon to bring cheap oil and gas to the German, European or Western market. Putin should supply more. The Chinese should not buy up everything. AbolishCO2 tax and emissions trading, or at least suspend them for the time being.
A
mixture of concern for the poor and car drivers, disaster reports and
crude demands characterizes a debate that was unthinkable just a year
ago: warnings about the economic and social consequences of inflation in
general and rising energy prices in particular.
The concerns expressed about the poor need not be taken so seriously. The
conservative-liberal voices leading the fight against inflation warn
even more loudly of a wage-price spiral, for which no empirical evidence
can be found even with the sharpest scrutiny, and a softening of the
debt brake. For
decades, they have pursued a policy of reducing wages and social
benefits, which today makes it difficult for many people to pay for
electricity and heating. And
if they were really interested in cheap energy, they would promote the
rapid and comprehensive expansion of renewable energies.
Market prices and external costs
The more wind turbines and solar cells are installed, the more their price has fallen in recent decades. These also leave an ecological footprint, but it is significantly smaller than that of the promotion and use of fossil fuels. If
the costs of destroying nature are included, which in turn causes
increasing social and economic costs via drought, flooding and storms,
fossil fuels have long since ceased to be competitive. They
have only been able to hold their own on the market because a large
proportion of the costs associated with extraction and use have been
externalized. Since the beginning of industrialization.
The self-appointed inflation watchdogs are playing a false game. They are not concerned with the loss of purchasing power of small people or cheap energy. It
is about a conflict between capital whose utilization is tied to the
use of fossil fuels and that which can be powered by alternative energy,
solar, wind and even nuclear power. It is about the threat of depreciation of existing plants and the expansion conditions for new plants. The interests of fossil capital are articulated in the name of combating inflation. It is directed againstCO2 taxes, emissions trading and public infrastructure investments, which are intended to promote the expansion of "green capital".
Supercycle and crash
When it comes to phasing out fossil fuels, rising prices are a double-edged sword. On the consumer side, they are an incentive to save energy or switch to other energy sources. Provided they have a choice. Tenants do not decide whether to install solar panels, but homeowners do. People who take the bus to work and to the shops do not decide whether to install a fuel cell. People who drive could switch to buses or bicycles. But
when it comes to cars in particular, it is clear that gas guzzlers are
becoming increasingly popular - no matter how much people moan about
rising fuel prices.
On the investor side, rising prices are an incentive to expand production. In 2014, oil prices collapsed worldwide, as did gas prices in North America. After that, investment went downhill. Production was essentially maintained with existing extraction projects. Hardly any new projects were initiated. Conversely,
the previous "super cycle" of oil and gas prices, which began in 1998
and picked up speed rapidly after 2001, had brought completely new
extraction technologies into the profit zone: oil shale, fracking and
deep-sea extraction were unprofitable before the super cycle. Many projects that were started during the high-price years slipped back into the red after the end of the cycle. No incentive to invest in oil and gas.
Investment and uncertainty
But not for alternative energies either. Their production increased sharply during the oil and gas supercycle. Following the law of mass production, prices fell. As oil and gas prices fell, the incentive for consumers to switch to alternative energies disappeared. As a result, the expansion of production capacities, including solar and wind power plants, slowed down. There was a general investment backlog as demand for energy continued to rise. Global
economic growth since the Great Recession of 2008/2009 has not been
strong, but strong enough to increase energy consumption again.
The
rebound in energy prices is usually explained by the rapid growth in
demand following the coronavirus recession in the first half of 2021. It is worth taking a closer look at the calendar. Oil and gas have been more expensive since April 2021. The recession had only just begun and nobody knew how long it would last. There
was indeed a massive growth spurt in the third quarter, up 9 percent,
but since then growth rates have been more or less in the two percent
range. Not exactly a boom in demand.
Nevertheless, energy prices continue to rise. One reason: despite the shaky economic situation, profits and property income are booming. In
view of the uncertainty about future developments, many investors feel
it is safer to put their money into speculative investments in the short
term than to make long-term investments in infrastructure or production
facilities. The result: a massive rise in securities and commodity prices since the coronavirus recession.
In
the energy sector, in addition to the general uncertainty about future
economic development, there is even greater uncertainty about the
technological foundations of future economic development. It's
not as if the advocates of fossil capital don't know that its continued
operation will cause escalating economic, social and ecological costs,
i.e. the very cost inflation they constantly warn against. They would just like to make some profit before they close down their plants.
On
the other hand, alternative energy sources are far from being able to
replace fossil fuels overnight in terms of production, distribution and
technologies. Investments in innovative technologies are riskier than those in long-established processes. No wonder advocates of alternative energies are calling for public investment - a form of risk shifting. And
it is also clear to many, especially those with a scientific
background, that no technology, no matter how alternative, can reduce
greenhouse gas emissions sufficiently to stop climate change. This requires a reduction in energy use, not a change in energy sources. But the subject is taboo.
Choice and the social question
Another taboo: the issue of choice. Investors
have the choice between short-term speculation and long-term
investments, between fossil fuels and alternative energy projects. If
they call on the public purse for long-term investments and turn to
speculation in the meantime, they are making a choice - at the expense
of nature, society and economic stability. In doing so, they are showing that it would be better if they had no choice. At
least not as far as the fundamental decisions about the expenditure of
social labor, the technologies used and the metabolism between humans
and nature are concerned.
Below the investor class, there are those who don't have much to say but a lot of money to spend on consumption. They do this in order to demonstrate their own superiority to those who have even less to say and less money. They like to choose big houses and cars, more recently also with electric motors and bicycle racks on the roof. With so much self-imposed conspicuous consumption, no ecological conversion is possible.
And
then there are those who have little or no choice, because it is clear
that they are going to take the bus and prefer to shop at discount
stores anyway. What remains for them is the fear of inflation.
*IngoSchmidt is an economist and head of the Labor Studies Program at Athabasca University in Canada.
Inflation: data, explanations, policy (part 2)
Causes and effects of inflation fears
by Ingo Schmidt
[This
article posted on 12/24/2021 is translated from the German on the
Internet,
https://www.sozonline.de/2021/12/inflation-daten-erklaerungen-politik-teil-2//]
As
soon as the news mentions inflation a few times, the "perceived
inflation" exceeds the statistically reported price increases. Anyone
who points out the gap between perceived and actual inflation at work,
among friends or in the family is met with suspicion. At least astonishment. After all, everyone knows that "they" - meaning the statisticians - are not telling the truth.
The fear of inflation spreads quickly. It
sometimes has considerable political and economic consequences that
have little to do with what those fearing inflation expect. Fear of inflation leads to a loss of reality. It can hardly be countered with facts and arguments.
Historical narratives
If anyone in Germany is interested in inflation fears and their effects, it is historians and sociologists. Their
starting point: the hyperinflation of 1923. Their questions: Why are
events that happened almost a hundred years ago so deeply rooted in the
collective memory? What influence does this memory have on individual and collective action in the present?
When
analyzing the relationship between inflation, collective memory and
later developments, it is striking that the context almost completely
disappears. Memories
of inflation could still be recalled decades later, even among those
who were born later and did not experience inflation themselves. War defeat, revolution and counter-revolution, the speculation boom and Stinnes, however, have been forgotten or suppressed. Just
like the difference between inflation, a permanent increase in the
price level or devaluation of money, and hyperinflation, in which the
inflation rate increases - and at an ever faster rate - without the
mechanisms of supply and demand, as in the case of the economic cycle,
stopping the devaluation of money at some point, let alone reversing it.
However, such analyses do not explain why inflation in particular has become so deeply engraved in our memories. The question is not even asked. The analysts themselves are involved in suppressing the context.
And there is something else that stands out in these analyses. Inflation is presented as a very German phenomenon. The Germans are therefore particularly sensitive to inflation. Which is why, as the texts in question may well be interpreted, they are assigned the role of international inflation police.
Accordingly,
the Bundesbank and the German government have presented themselves as
guardians of stability throughout their existence, with the widespread
approval of the domestic public, but often to the displeasure of the
governments and populations of other countries, most recently in the
euro crisis.
There
is no doubt that the development from the inflation of 1923 to the
introduction of the Rentenmark and the introduction of the Deutschmark
in West Germany in 1948 and East Germany in 1990 is a special story. It is part of the collective memory, even after the introduction of the euro in 2002. It
shapes the tone of political debates, sometimes also their content, and
is the ideological raw material of national consensus building. In this respect, every country has its own particular history.
But
there is also an international history, and this includes the fact that
the hyperinflation of the early 1920s was by no means unique to
Germany. It
occurred at the same time in Austria, Hungary, Poland and Russia - all
countries that had just emerged from the ruins of feudal empires.
Since
the beginning of neoliberal globalization in the early 1980s, a whole
series of countries in the global South have gone through phases of
capital flight, currency devaluation and hyperinflation. The
starting signal for these recurring episodes of monetary chaos was the
debt crisis triggered by the high interest rate policy in the USA in
1980. The aim of this policy was to combat inflation. Even though the USA was a long way from hyperinflation at the time - oil price shocks and militant trade unions notwithstanding.
Structural causes
If
inflation and hyperinflation occur at different times in countries
around the world, it is not very plausible to attribute inflationary
fears only to the Germans. It
is equally implausible to explain fears of inflation on the basis of
the particularities of a country's history - even if the respective
national histories shape the tone in which such fears are expressed. It
is reasonable to assume that fears of inflation are structural in
capitalism, in which everything revolves around money, and can be
politically mobilized in countries that have experienced periods of
accelerating and perhaps even galloping inflation.
Inflation - like money, whose value is eroded by inflation - has something sinister about it. In
the distribution struggle between wage labor and capital, the fronts
are clear: the wage increase of the one is the lesser gain of the other.
And vice versa. When
it comes to tax collection, the fronts are still reasonably clear: the
tax-collecting state enriches itself at the expense of private
households and companies. The
expenditure side of public budgets, through which money, public
services and infrastructure are returned to the private sector, is
somewhat unclear, or more precisely: often concealed.
When it comes to money, everything is both completely clear and unclear. Clear, because the reproduction of individual life depends on money. Even unpaid work in the household or allotment garden association depends on the purchase of inputs. Everyone is equal before money. There
are no longer any class distinctions; the widespread ideology of the
dissolution of feudal status or class distinctions in the market society
of the free and equal seems to be confirmed. Paradoxically, this is where the ambiguities and uncertainties begin.
Although
the ideology of classlessness is readily believed - if only to disguise
one's own second-class status - everyone knows that the difference
between a beggar and a billionaire is not just a handful of dollars. The
knowledge of differences in wealth, power and the accumulation of both
in the hands of a few is uncomfortable for many - but at the same time a
point of orientation for finding one's way in a correspondingly
structured society. Inflation, at least as it accelerates, makes this orientation difficult.
Financial assets that are not transferred abroad in time, which hopefully has a stable currency, lose their value overnight. The well-heeled can become beggars. At
the same time, shrewd have-nots can accumulate huge fortunes - but also
lose them again if they do not exchange the wealth they have acquired
in inflation money for real assets or stable foreign currency in time.
Practical consequences
At the moment of its disappearance, the value-creating role of labour is recognized. In a normal capitalist state, money seems to produce more money. Money is productive. Those who have none can at least hope to get to the top through hard work and saving. As inflation accelerates, this hope is also lost.
The moral values that otherwise contribute to the ideological reproduction of capitalism also collapse with the value of money. However, they are not automatically replaced by a different set of values that guide our actions. When inflation becomes hyperinflation, the 99 percent are left with nothing. Those
who have not experienced it themselves know nothing of the depth of the
collapse, but can imagine that it is better avoided.
Money is scary, the prospect of losing its value frightening. Even, or especially, if you don't have much of it. Fear is not a good advisor. It
makes people susceptible to a policy of inflation protection, even if
inflation rates are low and an acceleration of currency devaluation is
not to be expected. In
such cases, the policy pursued in the name of fighting inflation
contributes more to the loss of income and savings at the lower end of
the social ladder than inflation itself - by cutting wages, social
benefits and public services. And by increasing the prices of individual goods and services, particularly rents in recent years. People are annoyed about this too. But organizing the fight against rent sharks is much more difficult than stirring up fears of inflation.
*IngoSchmidt is an economist and head of the Labor Studies Program at Athabasca University in Canada.
Inflation: data, explanations, policy (Part 1)
Exaggerated forecasts, inconclusive explanations
by Ingo Schmidt*
[This
article posted on 12/1/2021 is translated from the German on the
Internet,
https://www.sozonline.de/2021/12/inflation-daten-erklaerungen-politik-teil-1/.]
Inflation warnings have become a recurring theme. This would be expected in Argentina or Turkey. Inflation rates there are approaching the 53% and 20% mark respectively. The
current figure of 4.5 percent in Germany seems high in comparison with
Japan (0.2 percent), China (0.7 percent), non-EU neighbor Switzerland
(0.9 percent), perhaps even euro member Greece (2.2 percent).
Such differences are hardly mentioned in the media. There is no shortage of explanations for this: Loose monetary policy, lack of labor, wage-price spiral and broken supply chains are the most frequently cited.
If the empirical findings are exaggerated, the explanations are often inconsistent. But the warning can always be heard - sometimes openly, sometimes between the lines: Savings have to be made somewhere. After
countless spending programs in the wake of the coronavirus pandemic,
"we" - whoever that means - cannot afford climate protection programs. At least not with social cushioning.
Empirical findings
An inflation rate of 4.5% was last seen in 1992, when the unification boom came to an end. This was followed by a long period of low inflation rates, mostly between 1 and 2 percent. In
view of falling prices a year ago, it is clear that the increase in the
inflation rate, which is quite remarkable in a long-term comparison, is
due to a statistical base effect: starting from low absolute prices,
even moderate price increases result in a relatively high growth rate.
In addition to the general inflation rate, the statistical offices also calculate a core inflation rate. This currently stands at 2.9 percent. This
does not include food and energy prices, which fluctuate significantly
more than other private consumption prices, both seasonally and over
longer periods of time. At
4.8%, the inflation rate for food is currently slightly higher than the
general inflation rate, but has reached levels that were also achieved
in the fall of 2013, 2017 and 2019.
The
price of oil has more than quadrupled since the start of the first
lockdown in April 2020, but at USD 84 per barrel it is currently barely
above the level of October 2018; in June 2014 it was USD 113 and in June
2008 USD 140. At
USD 5.60 per million BTU, the price of gas is almost eight times higher
than in April 2020, but at the level of January 2014 and well below the
USD 16.50 of June 2008.
Like
other commodities, oil and gas prices went through a long boom that
began at the turn of the century and, after a brief but severe
interruption during the global economic crisis of 2008/2009, lasted
until spring 2014. Since
then, commodity prices have seen wild ups and downs, including lows not
seen since the beginning of the long boom in the wake of the
coronavirus crisis. However, there are also commodities, such as timber, iron ore and magnesium, whose prices have fallen again after a brief spike.
Compared to the time of the first lockdown in spring and summer 2020, the prices of many goods have risen considerably. Due to the statistical base effect, the resulting inflation rates have reached levels not seen since the early 1990s. However,
there have been repeated price increases for individual goods and
groups of goods in the meantime, as in recent months. In addition, prices for individual goods fluctuate greatly. Whether there will be a sustained rise in inflation rates in the coming months or even years is debatable. This is where theory comes into play.
Too much money, too few goods
For a long time, inflation alarmists blamed central banks for rising prices. If
the amount of money in circulation increased faster than production
capacity, they argued, the surplus money supply would be used to sell a
given quantity of goods at higher prices. To put it more populistically: Too much money chases too few goods.
This
argument was never valid, because companies and banks lend to each
other in day-to-day business transactions and can thus create the
necessary means of payment, even in excess of the central bank's money
supply if necessary. Sometimes, such as in the 1970s, this demand was low. There was overcapacity, unemployment and falling investment rates - and yet prices rose.
Nevertheless,
complaints about an overly lax monetary policy were politically
powerful at the time, justifying a policy of strictly combating
inflation. If
means of payment can be created by private actors when needed, the
reverse is not true: an increase in the price of the money supply, the
"monetarist shock", led to a recession in the early 1980s.
In the face of rising interest rates, many investment projects became unprofitable. Mass
unemployment became permanent and weakened the trade unions to such an
extent that wages lagged behind productivity growth. Companies were able to increase their profits without raising prices. Inflation rates fell. And
they remained low, sometimes even negative, when the central bank
switched to an extreme expansion of the money supply to contain the
global economic crisis in 2008 and continued to do so even after the
crisis was over. Until a few months ago, however, there were no rising prices.
Nevertheless,
the idea that inflation is caused by the printing press has become a
popular prejudice that is repeatedly repeated by many economists,
company spokespeople and politicians.
Wage-price spiral
The
same applies to the argument that companies can only remain profitable
by raising prices in the face of excessive wage demands. This
may have been plausible in the 1970s, when trade unions had sufficient
bargaining power to secure or sometimes even increase employees' share
of productivity growth.
Since
the "monetarist shock" paved the way for a permanent shift in
bargaining power and income from wage labor to capital, this is no
longer the case. In
the course of the development of global production networks, wages in
the centers, with their previously reasonably powerful trade unions,
have been exposed to competition from poor countries.
The inflation alarmists of these days know this too. Accordingly, they do not invoke the danger of excessive trade union demands - but rather the shortage of labor. Falling birth rates and rising average ages have been haunting researchers, the media and politicians for decades. It is unclear why they should lead to a wage-driving shortage of labor just now, after a few months of the coronavirus crisis. It is true that real wages have risen recently, which seems to indicate that the wage-price spiral is turning.
However, just like the prices of other goods, the price of labor has also fallen considerably during the coronavirus recession. So there is also a catch-up effect for wages.
Labor market researchers can name economic sectors in which companies are currently short of staff. However, they only know where some of those employed in these sectors before coronavirus have found work. The
fact that some people previously employed in the catering industry are
now working for online retailers and delivery services does not explain
the real, or perhaps only alleged, lack of jobs. Neither do the low wages that trade unions point to. Wages were already low before coronavirus and yet there were enough people to work for these wages.
Interrupted supply chains
Some of these low-wage workers were seasonal migrant workers. Their
entry and exit was interrupted by the lockdown, as was the
transportation of raw materials, intermediate and finished products. Both have been associated with considerable uncertainty ever since.
After
the end of the pandemic was announced several times, but then a new
wave of infections occurred, considerable uncertainty has spread. Supply chains, which are designed for low stock levels and fast transportation, are repeatedly interrupted. Sometimes there is a shortage of semiconductors, then of containers. This means that higher prices can be demanded. But for limited quantities of goods. No wonder economic researchers are revising their growth forecasts downwards time and time again. However, this also reduces the risk of inflation.
If the pandemic does end one day, existing supply chains will be reactivated without causing price-driving shortages. Or,
in the wake of increasing trade conflicts and the move away from
largely fossil-fuel-driven production processes, completely different
production and logistics networks will be established technologically
and geographically. The one has as little to do with inflation as the other.
*IngoSchmidt is an economist and head of the Labor Studies Program at Athabasca University in Canada.
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