Globalization versus National Capitalism

In 1648 the first modern diplomatic congress established a new political order in Europe, based for the first time on the principle of “national sovereignty.” This principle drew a sharp dividing line between foreign and domestic affairs. Each “national sovereign” was given free rein within the internationally recognized borders of his state. No outsider had any right to interfere. Recognized borders were inviolable. The “sovereign” was originally simply a prince; later the term was applied to any effective government.

National sovereignty facilitated the undisturbed development of separate national capitalisms - British, French, German, American, and so on. Interstate boundaries were stabilized. Governments were able to take protectionist measures to defend home manufacturers against foreign competition.

Even today the principle of national sovereignty is far from dead. It is enshrined in the United Nations Charter: Chapter VII authorizes the Security Council to impose sanctions or use armed force only in the event of a “threat to the peace, breach of the peace or act of aggression.”

National sovereignty undermined

But in practice national sovereignty has been deeply undermined - first of all, by the emergence of a global economy dominated by huge transnational corporations. International financial institutions such as the World Trade Organization and IMF have largely taken over economic policy making. Indebtedness leaves many states with merely the formal husk of independence.

Some groups of states have “pooled” part of their sovereignty in supranational regional institutions. The prime example is the European Union.

The old interstate system has also been destabilised by the breakup of Yugoslavia and the USSR into 26 new states, four of which lack international recognition. The decision of the West to recognize the independence of Kosovo from Serbia has set a precedent that makes it easier to carve up other states. Of course, the “independence” of Kosovo - occupied by NATO forces, governed by officials from the European Union, its constitution drafted at the US State Department - is purely notional. Russia has now retaliated by recognizing Abkhazia and South Ossetia. Although this will encourage secessionist movements inside Russia, blocking Georgia’s accession to NATO is evidently a higher priority (see September’s Material World).

Legitimising aggression

National sovereignty is not only undermined in practice, but also contested in theory.

Thus, in recent years the United States and its closest allies have sought to legitimise their military attacks on other states. True, such attacks are nothing new. What is new is open advocacy of the principle of aggression. The main rationales used are the prevention of nuclear proliferation, counter-terrorism and humanitarian intervention (see August’s Material World).

It is instructive to compare the Gulf War of 1991 with the current war against Iraq. The Gulf War, at least ostensibly, was launched in defence of the principle of national sovereignty, violated by the Iraqi invasion of Kuwait. The elder Bush resisted pressure to “finish the job” - occupy Iraq and throw out the Ba’athist regime - out of concern that it would lead to the breakup of Iraq and, in particular, a new Kurdish state that would destabilise the whole region. Such considerations have not deterred his son.

Globalisation of capital, fragmentation of states

Paradoxically, the fragmentation of states is a natural corollary of the globalisation of capital. From the point of view of the transnational corporations, states no longer have important policy-making functions. It is enough if they enforce property rights and maintain basic infrastructure in areas important for business. Small states can do these jobs as well as large ones. In fact, they have definite advantages. They are more easily controlled, less likely to develop the will or capacity to challenge the prerogatives of global capital.

Global versus national capitalism

All the same, there is nothing inevitable about globalisation. It has lost impetus recently, and may even have passed its zenith. One sign is the disarray within the WTO. Another is Russia’s change of direction: in contrast to the Yeltsin administration, which was politically submissive and kept the country wide open to global capital, the Putin regime reasserted national sovereignty, expelled foreign firms from strategic sectors of the economy, and ensured the dominant position of national (state and private) capital.

Global versus national capitalism has emerged as an important divide in world politics. This divide exists, first of all, within the capitalist class of individual countries. Thus, even in the US, the citadel of globalisation, some capitalists - currently excluded from power - are oriented toward the home market and favour national capitalism. And even in Russia some capitalists support globalization.

Nevertheless, the pattern of political forces differs from country to country, and as a result the global/national divide is reflected in international relations. Here the “globalisers,” led by the US, confront in the Shanghai Cooperation Organization (Russia, China and the Central Asian states) an embryonic alliance of national capitals bent on restoring the principle of national sovereignty to its former place in the interstate system.

A different perspective

This context clarifies the difference between our perspective as socialists and the attitude of anti-globalisation activists. Being against capitalist globalisation is not the same as being against capitalism in general. We have ample past experience of a world of competing national capitalisms - quite enough to demonstrate that there is no good reason for preferring such a world to a world under the sway of global capital. The main problem with the movement against globalisation is that it can be mobilized so easily in the interests of national capital, whatever the intentions of its supporters.

To be fair, some anti-globalisation activists are aware of this danger. Acknowledging that humanity faces urgent problems that can only be tackled effectively at the global level, they emphasize that they are not against globalisation as such: they are only against the sort of globalisation that serves the interests of the transnational corporations. This then leads them to explore ideas of globalisation of an “alternative” kind. These ideas at least point in the right direction. Socialism is also an alternative form of globalisation - a globalisation of human community that abolishes capital.

Trotskyist Laundry List

One of the most laughable aspects of Trotskyist politics is the continual trotting out of laundry lists of demands. Stalinist/Maoist demands and tactics tend to be cynically practical - e.g.. the alliance of the USSR and Nazi Germany between 1939-41. Trotskyists, on the other hand, make demands that are so unreal they make Charles Fourier’s expectation of sea-water turning to lemonade under communism seem likely. At least Fourier’s most bizarre proposals were “based on a brilliant world outlook“. Certainly more brilliant than the remnants (ruminants?) of Trotsky’s organization.

Socialist Action (SA) is the current orthodox Trotskyist group in the US. In September, they released their proposals for dealing with the current capitalist economic crisis. Titled “A Workers’ Action Program to Meet the Economic Crisis“, SA draws out a long manifesto (not forgetting to include many exclamation points) of how working class should address said crisis.

We’ll address some of the more absurd proposals this would-be vanguard has for the working class.

• We call on the leaders of the AFL-CIO and Change to Win federations, and of independent unions, to call an Emergency Congress of Labor at which representatives of the working class can draw up a set of demands and vote on a strategy to win them.

SA is calling for a new congress which will vie for power against the current congress in Washington. In other words, SA is calling for an immediate period of dual power and thus a likely civil war. Does SA actually believe the working class ready for such adventures? If not, why propose it?

Note they also don’t declare how this “Congress” will be structured, how delegates/representatives would be elected, etc. As this list is full of flights of fancy, why not throw in “democratically elected”? Unless you don’t want it…

• Nationalize the entire banking system under the control of capitalism’s victims, not its agents! …Make the banks, corporations and the ruling class pay the full price of the crisis!

OK, we’ll come back to this demand later.

• As one of its first tasks in mobilizing support for the demands adopted at it, the Congress [fnb note: Congress of Labor] should organize committees in every workplace in which workers’ jobs, pensions and health benefits are threatened by the crisis, and in every neighborhood threatened by foreclosures and evictions.

• We demand an immediate halt to all foreclosures, cancellation of all interest on mortgages to banks and mortgage lenders, and renegotiating of all mortgage terms, including the principal and debt built up due to usurious interest rates, such negotiations to be led by workers’ and homeowners’ neighborhood committees.

So SA wants to nationalize the banks under worker control. Then they also want to cancel the repayment of principal and interest to these “worker controlled” nationalized banks. What would happen under this scenario? Surely a very quick collapse of banking.

And also don’t forget to throw in negotiations between the worker-bankers and the neighborhood committees to add further conflict between different segments of the class.

Another ironic twist to this proposal is it would seriously effect foreign investments in the US, which include huge amounts from China. Now Socialist Action, being the orthodox Trotskyists they are, believe China is socialist. We disagree, but that’s not the point. The nonsense SA is proposing would undermine the economy of one of those “workers states” they believe in. Adds a new twist on the constant Trotskyist bickering over the causes of degeneration in the supposed workers states.

• We call for the nationalized banks to be merged into one public institution under the supervision of workers’ committees, which could then decide how that public bank’s funds can be used to rebuild society, based on the needs expressed in the plan of the Congress of labor and supplemented by demands of local workplace and neighborhood committees.

Ah, yes, an economy with commands flowing from the top to the workers. It works so well now, why change?

• The agribusiness and energy monopolies must be nationalized as a first step to dealing with inflation.

How will this deal with inflation? Since what the SA is proposing is capitalism, the law of supply and demand will still apply. SA has just choked off capital to the banks by eliminating debts owed. Due to tightening ability for banks to lend, supply diminishes and costs increase.

• To combat inflation, we call for a sliding scale of wages that fully matches the Consumer Price Index (including food and energy, left out of the official CPI). Such a scale should be applied also to retirees. It must be monitored by workers’ and consumers’ committees, which could inspect and if need be take over companies claiming they can’t survive under the new wage schedule.

• In addition to the 6-hour day and 30-hour week, reflecting the gains in our productivity, we demand reduction of the retirement age to 55. We demand unemployment insurance at union wages and benefits.

Again, Socialist Action shows it’s complete ignorance of how capitalism operates. Reducing the hours of labor tightens the number of workers available to work. Demand will drive up cost of labor. Since credit would be tightened (see above) the double pinch of lessened supply and soaring labor costs could probably lead to a collapse of the market greater than G. W. Bush has accomplished.

Of course, Socialist Action has no expectation of actually implementing their program. It is simply a feel-good laundry list of demands cynically written to attract concerned workers to their organization.

SA adds nothing to the knowledge needed by workers to create socialism. Such ideas as abolishing the wage system and the market.

Good Cap, Bad Cap

Investment bankers have gone in the past few months from being the "masters of the universe" to the object of universal scorn. Across the political spectrum in the United States, particularly at the fraying ends of its two main political parties, criticism of Wall Street can be heard. Even McCain and Obama– whose presidential campaigns have been generously funded by Wall Street– have had to make half-hearted statements about how "greed is, um, bad."

Download the entire article as a PDF from our site: [pdf leaflet]

Production for Profit

The motive for production under capitalism is making a profit. In order for goods to be manufactured or services to be provided, they must result in a reasonable amount of profit, otherwise they won’t be produced. Even ‘loss leaders’ serve the goal of profit, by enticing customers into a shop.

In contrast, socialism will be based on production for use. The whole issue of profit will be meaningless in a socialist society, with no money or buying and selling. Items will be made because they are useful, because they satisfy people’s needs for food, housing, transport, clothes, leisure interests, or whatever.

Read the rest of the article here.

Why Economic Crisis?

The WSP has produced two leaflets (in pdf format) meant to aid working people to understand the causes of the current economic crisis:

“Booms and slumps - what causes them?” - Discusses in plain terms the causes of economic cycles and why “Ultimately, it is the economy that controls politicians and not the other way around.”

“Bubble Troubles” - Deals specifically with the housing market collapse.


Please feel free to forward, e-mail, repost and/or print them widely.

Marxism and needs

Is the “world of abundance” traditionally advocated by socialists feasible? Not according to Claude Bitot, known as the author of a book on the future of the movement for communism (see Socialist Standard, December 1995), in his recent book Quel autre monde possible? (“What other world is possible”?). Echoing the ideas of some Greens but denying any affinity with them as “bobos” (trendies), Bitot argues that the only viable form of communism (or socialism) today is the austere pre-industrial communism advocated by Babeuf and his followers during the French Revolution and first part of the 19th century.

His criticism of Marx – that he accepted the development of capitalism as a necessary step towards socialism – can be traced back to the influence of a “productivist” or technological determinist reading of Marx, based on The Poverty of Philosophy and the Communist Manifesto, which the great man was considerably qualifying by the time he got round to writing the Grundrisse. According to this simplified version of Marxism – faithfully trotted out by Bitot – it is the development of the forces of production that drives history. Capitalism in the form of merchant capital develops in the pores of feudalism, notably in the towns. Over time the forces of production develop to the point where feudal relations become fetters on the possibilities of further development. Feudalism therefore disappears with the rise of the revolutionary bourgeoisie whose task it is to abolish lordly privilege so as to permit the further development of the forces of production. Eventually the enormous development of the forces of production – notably industrialisation and mass production – would enter into contradiction with the limitations placed on the restricted consumption capacity of the proletarians. The latter in their turn become the new revolutionary class capable whose “historic task” is to overthrow the capitalist class and unleash of the forces of production to meet a greatly expanded range of human needs.

To further add to the confusion, the building of what was falsely called ‘communism’ in Russia by the Soviet authorities popularized the idea that a long transition period – misleadingly called ‘socialism’ – was required in order to bring about the communist utopia. During the transition period working class consumption would be sidelined to allow the breakneck development of the forces of production, (tractor factories, dams, electrical power plants and the like). And there was of course doctrinal justification for such a position given that Marx was absolutely clear that in underdeveloped countries like early twentieth century Russia ‘communism’ was not in any way feasible. Although Marx never separated the ‘socialist’ stage from the ‘communist’ one, the early enthusiasm for the Soviet experiment led to the transitional stage idea sticking. Indeed, many left-leaning thinkers became obsessed with technological development as such, with Bordiga – as Bitot conveniently points out – in the uncomfortable position of trashing the need for further technical advance in capitalist Italy whilst recommending the rapid development of the forces of production in Soviet Russia. This has created a good deal of confusion about what progress towards socialism really means.

Bitot’s objection to capitalist development seems in many ways to be an attempt to overcome the legacy of these confusions in the light of what he rightly considers to be a looming ecological crisis. But he adds a few more confusions of his own. To begin with he goes back to the very origins of communism as a political movement: the agrarian communism of Buonarroti and Babeuf and he contrasts this with what he sees as the consumerist interpretations of socialism popularized during the twentieth century. As we know these pioneering communists were imprisoned and – in Babeuf’s case executed – in the years following the French revolution. Bitot sees in these interpretations an anticipation of the errors which socialists would make in the second half of the twentieth century.

Incorrectly believing that the emergence of agricultural capitalism could be largely explained by the immoderate expansion of needs and taste for luxury, the agrarian communists turned their backs on the unconstrained development of industry and championed a system based on fair but austere shares for all. In this communist utopia technological development in the shape of machinery would take place simply as a need to lighten manual labour, production being oriented toward the meeting of a fixed standard of living.

The development of English commerce depended, Bitot tells us, on the sharpening of acquisitive appetites and the introduction of machinery to meet an ever-expanding sphere of consumption: the upward spiral of capitalist production. This simplified depiction of capitalist development has the advantage of wrong-footing Marx who notoriously celebrated the technical achievements of the English industrial revolution in the Communist Manifesto and castigated the narrow material basis of the agrarian communists in France (he called them “crude communists”). Indeed, since Marx was prepared to admit that industrial capitalism provided the material preconditions for communism, he had in effect became a de facto fellow-traveller in the capitalist party, albeit a pretty unruly one. The solution, according to Bitot was to have nipped the capitalist weed in the bud by a bit of revolutionary action and Bitot appreciates the fact that French agrarian communism was an extension of the revolutionary political approach adopted earlier by Robespierre, the advocate of revolutionary terror. If only, one thinks, the English had read these thinkers rather than that scoundrel Adam Smith then they would have abandoned their silly economic ideas and got us to socialism a lot earlier.

Bitot’s French communists may have been poor but they were neither wage-labourers nor serfs. Subsistence with only limited participation in the monetary economy still remained a possibility and the village could still operate as a community. In this sense, the emergence of capitalism could all too easily be identified with the inability of individuals to control their own desires once faced with the temptations of the marketplace. But however admirable their thinking was on any number of issues – and they were interesting thinkers - they were nonetheless not faced with the peculiar economic system which we now call capitalism. Furthermore, even if agrarian communist communities could have resisted the advent of a world market in agricultural products it is more than likely that an ever-more powerful capitalist class would have found a way to break them up as they have always done and continue to do today.

The problem with Bitot’s interpretation of the communist tradition is that it facilitates the treatment of technological development as a force which develops in a social vacuum justified by a largely ahistorical appreciation of the development of needs. In fact, the aim of the mature Marx was always to demonstrate that the ‘immutable laws’ of political economy were in fact nothing more than the expression of highly specific social and historical relations. The hothouse development of technology under capitalism, for example, was simply a vector of its unremitting search for new markets and its insatiable appetite for profits. As Bitot himself concedes, Marx shows how the needs of the wage labourer under capitalism contain a historical and relative element beyond the purely physiological necessities which also have to be satisfied: in other words my wages now allow me to obtain some commodities which used to be considered as luxuries but I can still be ‘poor’ in the (Marxist) sense that I still have to sell my labour-power to another. Dependence on the capitalist is neither based on being starved nor reduced by the possession of a few luxuries; it resides in the fact that my access to the means of subsistence has become indirect in that it is mediated by the possession of money.

Thus, although Bitot seems to have discovered a convenient jumping off point for the criticism of capitalism, his ideas provide few clues about how to find a way out. In the terms of this critique socialists who continue to believe in the possibility of open access to the means of consumption under socialism can be too easily accused of wanting to continue the consumerist game and Bitot doesn’t hesitate to tar the SPGB. with this brush. On the other hand, Bitot seems to accept that a fairly austere socialism is possible following the abolition of commodity production. But with the wants created by consumer society unconnected to the overall functioning of production, he is left with the difficulty of defining ‘moderate needs’ and showing how they would emerge within a society where commodity production no longer existed. After all, even if we can all agree that socialism will place more emphasis on meeting essential needs over the satisfaction of the trivial desires excited by capitalism, one still has the difficulty of defining these ‘essential needs’ no matter how austere one believes that socialism should be. But the problem of ‘austere’ or ‘abundant’ socialism is perhaps in the final analysis something of a quibble over words. As anyone who has argued the socialist case on a street corner will know, the ‘abundance’ referred to by socialists has never referred to the open-ended consumerism encouraged by the advertisers but has rather as its target a stable and more satisfying way of life in which the scramble to get things is no longer central. With material survival removed from the casino of the marketplace by the abolition of commodity production we can expect that individuals will calm down their acquisitive desires and pursue more satisfying activities.

Fortunately even though he rehearses the usual arguments against socialism brought up by conservatives, Bitot seems reluctant to abandon the revolutionary idea altogether. He remains committed to the abolition of commodity production and has adopted the notion that production under socialism needs to be co-ordinated and de-centralized. (The SPGB can tell him how to do this without the price system). On the down side, he has now taken up the Third World population problem as a factor which he claims has been totally neglected by socialists. Regardless of the charge of inconsistency he then argues that further industrial development in these countries is necessary presumably on the grounds that the Third World exists on another planet. But capitalism is now more than ever a global system – witness the avalanche of books on the ills of globalization. The green beans in our plates come from Kenya, the knives and forks from China and the shirts on our backs from India. Subsidized crops from the advanced countries are killing peasant production in Africa. But the Third World industrial proletariat now outstrips that of the so-called First World. Bitot’s argument here is clearly self-defeating: If there is already a major population problem, then socialism as a world system is not only impossible but it is getting more impossible with every day which passes. So why write a book on the subject? Whilst there is clearly a need to deal with this problem lucidly, Bitot seems to have accepted the Malthusian legend at face value. But he gives only one statistic to prove the case about agricultural production in the Third World whilst First World production is subject to a statistical over-kill. Even Malthus, whose jeremiads have so far proved disastrously wrong, provided more substance to his arguments.

One is left with a curious diatribe against the word ‘abundance’ coupled to an off-centre accusation that socialists advocate a world of passive consumerism and idleness; a picture of the Third World as a boundless reservoir of illegal immigrants associated with the conviction that the abolition of commodity production is nonetheless possible.

We are all socialists now

A long time ago Milton Friedman asked Richard Nixon why he never took his economic advice to which Tricky Dick replied “We are all Keynesians now”. Less than ten years later Ronald Reagan would declare “Government is not the solution to our problem. Government is the problem.”, and we were all Reaganomists now. At least until last week.

What makes this economic downturn different from the other recessions post-1980 is not so much the size, but the reaction of the powers that be. While Treasury Secretary Lex Luther wanted a 700 billion dollar blank check that “may not be reviewed by any court of law or any administrative agency.” (a plan referred to as an economic PATRIOT ACT), the usually spineless Democrats have actually said no. They have plans of their own. The most likely of these to pass is Chris Dodd’s (D-CT) which would cap CEO pay, include foreclosure relief, and give the government a share in the profits the bailed out firms. Peter DeFazio (D-OR) is floating an idea to put a tax on stock transactions. Getting a lot of ink on the Internet is Debbsian socialist Bernie Sanders’ (I-VT) four point plan which includes a wealth surtax, increased regulation, increased social spending, and busting up the big financial firms. None of this is really socialism, but everything’s been laissez-faire so long it looks like the Paris Commune in comparison. While this kind of faux-populism is to be expected during an election year crisis other less than expected critics are questioning the status quo.

From a Yahoo article entitled Many economists skeptical of bailout comes this quote from University of Chicago professor Luigi Zingales:

“For somebody like me who believes strongly in the free market system, the most serious risk of the current situation is that the interest of a few financiers will undermine the fundamental workings of the capitalist system. The time has come to save capitalism from the capitalists.”

A capitalism without capitalists if you will. Eric D. Hovde, the CEO of Hovde Capital and Hovde Acquisitions, writing in an op-ed praises government regulation, and decries Wall Street’s influence on government. Actually most of the op-ed is a concise and well written history of this mess that blames everyone who deserves it. For example:

In an attempt to protect his legacy after the Internet-bubble collapse, [former Fed chairmen Alan] Greenspan provided unprecedented stimulus to re-inflate the economy and maintain his popularity with Wall Street. (Remember the “Greenspan put”?) But in doing so, he spawned the largest debt and asset bubble in U.S. history.

In case you couldn’t tell Greenspan was a close personal friend of Ayn Rand. In putting the blame where it’s due Hovde also gives what I think is the definition of capitalism:

And in my view, there’s no need to look beyond Wall Street — and the halls of power in Washington. The former has created the nightmare by chasing obscene profits, and the latter have allowed it to spread by not practicing the oversight that is the federal government’s responsibility.

What was the great fraud of Reaganomics was the belief that the government and the free market are two totally different and opposing forces. The government was either well intentioned (or evil) but incompetent, and only interfered with the perfect, all wise free market. The events of the last week have shown that’s to be bullshit. There is no such thing as a “free” market. During the good times the state is there to put a veneer of respectability on fraud and extortion. During the bad times it’s the knife that cuts off a finger to save the hand, but it is always capitalism’s co-conspirator. This current down turn will lead to the state taking a greater role in the economy, and we might even get some increase in social spending (a la the New Deal). Capitalism will be saved from itself, and inevitably when the economy gets better and we’ve all forgotten (remember the Glass-Steagall Act? Me neither) these reforms will be repealed; we’ll be right back here. The bad times is also when we should push for a real change that scraps capitalism and it’s good buddy: the state, not just make them nicer. -JM

-From the Marx and Coca Cola blog