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Home > English > Alternatives International Journal > 2011 > September 2011 > The Political War

The Political War

Monday 29 August 2011, by Aijaz Ahmad

The economic warfare waged by the advanced nations is also the other face of of the globalized militarism that reserves to itself the right to unilateral military invasion and intervention.

THE main argument in this essay is that there is no such thing as an economy that is not also a politics. The capitalist economic system is by nature anarchic and erratic, prone to crises small and large. Any profound crisis in this system always has political dimensions, as both cause and effect.

A related argument shall be that what the world faces today is not just an acute and worsening economic crisis that, in the opinion of some eminent economists, may yet produce the first Great Depression of the 21st century, comparable to and perhaps even surpassing the Crash of 1929. Rather, we are in the midst of multiple crises in the various domains of state forms, political systems and social structures. These crises are intertwined with the economic one.

International law itself now exists more in the breach than in the observance. Madeleine Albright, Secretary of State in the Bill Clinton administration, was already telling us that the concept of national sovereignty that had been the basis of the world state system since the Westphalian settlement in the 17th century was now obsolete. The Bush administration then told us that the Geneva Convention, which sought to provide the legal framework for modern warfare since the Second World War, was no longer applicable, and the right of the United States to pre-emptive warfare was absolute. We now have euphemistic entities such as “the international community”, comprising the core countries of advanced capitalism, that make decisions relating to war and peace, not only superseding the General Assembly of the Untied Nations but also often bypassing the Security Council itself.

Conceptually, this is not very different from the rights of intervention that multilateral institutions such as the International Monetary Fund (IMF) and World Bank have exercised in breaking the economies of those poorer countries of the Tricontinent (the term I prefer to the “Third World”) that fell into the debt trap. Today, analogous powers are being exercised by the European Central Bank (ECB) within Europe to break a host of economies from Latvia to Spain, and from Greece to Ireland, by dictating to them how their domestic economies are to be re-structured to pay their debts, to keep their budgetary deficits below 3 per cent of gross domestic product (GDP) and their total debt below 60 per cent. In the process, we have new euphemisms such as “sovereign debt”. It is not at all clear what is so “sovereign” about a debt that can be used to force the debt-owing country, such as Latvia, to slash employment and wages, privatise public assets, and curtail public provisions such as health and education.

Significantly, the ECB functions under no democratic control whatsoever but is beholden to its commercial bank members. We also have words like “austerity”, invoking a familiar Protestant virtue, to wage that same economic warfare against the working class and the poorer segments of society. Not only lives but even language gets debased in the process. If Yugoslavia, from Bosnia to Kosovo, was the first instance in which the North Atlantic Treaty Organisation (NATO) undertook a savage war to impose its will on hapless little nationalities inside Europe, the current bank crisis is being used to impose the most extreme forms of neoliberal will on the weaker European economies.

Neoliberal offensive

It is not clear, though, just where this neoliberal offensive within Europe will stop. After Spain, what? Will Italy be next? Then Belgium? And so on. What is going on is something of a financial coup d’etat to roll back all the gains that the European working classes made through a century of struggles, in the historical epoch of socialism and communism. The crisis is an opportunity. Ruling parties and the dominant institutions that represent a bankers’ Europe are using it mercilessly to impose United States-style unrestricted market prerogatives. The past 12 months have witnessed massive demonstrations in country after country – from Spain to Greece, and from France to Iceland, and even England – but will the working classes break with their social democratic parties to form new parties and gain new capacities to fight back? It is much too early to tell.

This savage economic warfare is one side of the story, and I shall soon comment at some length on this same process in the U.S. But this economic warfare, waged invasively against and within formally sovereign states, is also the other face of the globalised militarism that reserves to itself the right of unilateral military invasion and intervention, in which the unmanned drone is the latest wonder of high-tech weaponry, in the name of ‘War Against Terror’, Human Rights or whatever, from north-western Pakistan to Yemen to Somalia to Libya – and only God knows where else. The news on August 19 said that the U.S. had called upon Syria’s President Bashar al-Assad to resign. Again, the sovereign right to tell others what to do. Or else!

In the process, crises multiply. The era of peace that the end of the so-called Cold War was expected to usher in has instead produced perpetual planetary war, thanks to unceasing imperial overreach, which deepens the economic crisis in the imperial centres and ruins the societies under attack. Even though neoliberal politics has condemned hundreds of millions to sheer destitution across the globe, the disarray of working-class politics in large parts of the globe is such that what seems to be on the rise, not just in South or West Asia but also in Europe and the U.S., is a whole array of fascist formations: a veritable revolt against state and society but from the extreme Right. In short, the crisis is comprehensive, multifaceted and global. It will leave no part of the world unscathed, least of all the Tricontinent. The economic crisis is part and parcel of this more far-reaching crisis.

I shall return to some of these other facets of the crisis presently. And, on the economic crisis itself the current issue of Frontline includes some excellent articles. So, let me offer just some remarks on the background, salient features and ambiguities of this side of things, pertaining mainly to the U.S., where this particular phase of the crisis originated: a bankers’ crisis that has been turned so successfully into a crisis of the working masses generally.

The “crisis” that is so persistently in the news has been with us for almost five years, since the onset of the recession of 2007-08, and it has included a period of “recovery” in large parts of the world, notably in the U.S. and the BRIC countries (Brazil, Russia, India and China). There were some outstanding features of this “recovery”. The first of these is that the swift recovery in the more brisk of the economies in the south, and their continued purchases of goods, especially capital goods, from the North combined with the availability of Chinese funds for covering a part of the U.S. deficit, played a substantial role in the recovery of Northern economies. This was the first time in history that the growth trajectory in Asia helped mitigate some of the extremity of the crisis in advanced capitalism, and this may prove to be a harbinger of times yet to come.

Second, and relatedly, the “recovery” was most pronounced in those countries, notably China and India, where private sector banks were either non-existent or played a relatively restricted role while capital controls were substantially in place, more so in China, of course, than in India. The lesson to be drawn from this experience for the rest of the world, notably the U.S., where a highly popular Democratic President entered office soon after the crisis had broken out, was that the oligarchic financial institutions that were chiefly responsible for it should be swiftly and thoroughly nationalised and subjected to public, democratic control of credit and investment. Nothing of the kind happened. Banks’ losses were socialised with taxpayers’ money but their institutional character was allowed to remain unscathed and they were allowed to resume their profligate ways. That was a political decision, in accordance with the class standpoint of the financial oligarchy itself.

Third, the recovery in China was facilitated by a purposeful state that provided a huge stimulus, roughly equivalent to about 13 per cent of the GDP and thus the largest stimulus, relative to the size of the economy, ever undertaken in the history of economic crises. Moreover, since no rescue of private profligacy was involved, virtually the whole of the stimulus went into productive activity – revival of employment, plant renewal, wage stability, social expenditures, development funds for neglected regions, and so on. A side effect was that this Chinese recovery also pulled along the smaller neighbouring economies and East Asian production was quickly restored to pre-recession levels. By contrast, the neoliberal state in the U.S., led by the Obama administration, offered a stimulus to the productive economy that was minuscule in comparison with what was gifted to the banks. Thanks to the systemic differences between China and the U.S., the latter refused to learn any lessons from the Chinese stimulus. Let me add, though, that the Chinese government has also said that, thanks to this experience, it will now set out to reorient its own economy, from export dependence to expansion of domestic demand and consumption. However, such gigantic private interests are now involved in this export orientation within China that the actual fate of such policy declaration is rather in doubt. What we have witnessed so far is the same kind of real estate boom in China, in municipal as well as private sectors, and hence the same tendency towards over-construction and price inflation in property assets, that have undermined so many other economies, from the U.S. to Ireland and Spain.

Be that as it may. The outstanding feature of this “recovery” in the West is that it has been very weak and is already showing signs of sputtering out. For instance, at no point during this recovery did the U.S. economy grow by much more than 3 per cent. By comparison, recovery during the middle years of the Great Depression of the 1930s registered a growth rate of almost 8 per cent in both 1934 and 1935 and a whopping 14 per cent in 1936. The secret of that growth in the mid-1930s was of course the Keynesian demand management and creation of jobs. By contrast, during the last three years in the U.S., the unemployment situation has hardly moved and hardly any of the half a million jobs lost during the recession have been recovered. The remaining workforce now produces roughly the same quantity of goods, through super-exploitation: speed-ups, longer hours, less pay, less insurance, and so on. Estimates vary, but it may be safe to say that one out of five Americans is now either unemployed or works on part-time employment or has stopped looking for work and is therefore not counted in the official unemployment figures.

Class polarisation

Corporate profits account for 95 per cent of this growth, and the market in luxury goods has returned to pre-recession days. Corporations such as Exxon-Mobile have posted profits hovering around 100 per cent during this “recovery” and the median annual income of an American CEO now stands at $9 million. No wonder, then, that even the non-financial corporations in the U.S. are sitting on a pool of liquid assets estimated at over $2 trillion. Super-exploitation leads to super-profits, but the combined effect of unemployment, wage repression and mass private indebtedness means sluggish demand for home-produced goods, and hence little investment. The result is immense class polarisation. According to statistics compiled by the U.N. Development Programme (UNDP) on income inequality worldwide, the U.S. is, among the high-income territories, the third most unequal, behind Singapore and Hong Kong – more unequal than any European country, including Ireland. This trend has continued unabated since the onset of neoliberalism with the election of Ronald Reagan in 1980, and the most recent recessionary crisis has only exacerbated the trend. During the decade up to 2009, the U.S. corporate sector shed two and a half million jobs, which actually means that the half a million jobs that have been lost since 2007 constitute only a fifth of the total job loss in a decade, while income distribution has worsened through all those years.

According to Jeffrey Sachs, “The richest 1 per cent of American households now have a higher net worth than the bottom 90 per cent. The annual income of the richest 12,000 households is greater than that of the poorest 24 million households.” According to Joseph Stiglitz, that richest 1 per cent now control 40 per cent of the U.S. economy. Writing in The New York Times (November 6, 2010), Nicholas Kristoff gave a succinct picture of this overall trend: “The richest 1 per cent of Americans now take home almost 24 per cent of income, up from almost 9 per cent in 1976… CEOs of the largest American companies earned an average of 42 times as much as the average worker in 1980, but 531 times as much in 2001. Perhaps the most astounding statistic is this: From 1980 to 2005, more than four-fifths of the total increase in American incomes went to the richest 1 per cent.” In aggregate terms, this has been probably the most dramatic shift of incomes upwards, from the poor to the rich, inside the advanced capitalist countries, in a matter of 30 years, quite comparable to the colonial loot in any phase of such brief duration. The “crisis” and “recovery” are the outcome of that structure already in place, and have only added to this trend.

The set of policies that go under the headings of neoliberalism, globalisation, the Washington Consensus, and so on are in fact components of a successful class war that the global corporate class, and finance capital in particular, has waged against the working classes; the years of crisis and recovery are part of that class offensive. So, one could legitimately ask: whose crisis is it? Take just one example. While business taxes average 22 per cent of GDP in the Organisation for Economic Cooperation and Development (OECD), the ratio is just 13 per cent in the U.S., and it is the only advanced country that charges no value added tax (VAT). So, the U.S., the wealthiest of them all, could easily tax itself out of its deficits. That is particularly so in view of the fact that, according to a variety of polls, 70 per cent of Americans – and even the majority of those earning more than $100,000 a year – favour higher taxes on the rich for resolving the deficit problem.

Instead, Obama allowed the tax cuts of the Bush years to continue. If allowed to remain on the books for another decade, those cuts will add almost four trillion to the wealth of the corporate class, about half of the debt the U.S. government owes to entities outside its own institutions (the other half is actually owed to institutions under its control, such as the Social Security Fund). These are political decisions even though they have immense economic consequences.

As the recession of 2007-08 unfolded, many on the Left deluded themselves with the thought that this was the ultimate crisis of neoliberalism, and that the neoliberal era was now drawing to a close, to give way, inevitably, to an opening for a renewed regime of social democratic, Keynesian demand management and “euthanasia of the rentiers”, oblivious to the fact that Keynesian economics in the U.S. was now strictly an academic sub-discipline, with no purchase on public policy, and that European social democracy itself had moved very much to the Right, already in the age of Francois Mitterrand, Bettino Craxi and the rest, perfectly at home in the neoliberal milieu.

With regard to the U.S. at least, extravagant hopes were attached to Obama, even though even before he came to occupy the Oval Office, Obama had received more funds from the Wall Street financial plutocracy than any presidential candidate in history. And as soon as Hillary Clinton ended her campaign, he went on CNBC to say “Look: I am a pro-growth, free-market guy. I love the market.” The hope, nevertheless, persisted that Obama would somehow stop listening to his chosen team of Wall Street representatives and a tame sort of Keynesianism would take hold through the advice of technocratic professionals such as Paul Krugman and Stiglitz. All such enthusiasm was misplaced. Obama never had a progressive bone in his body.

Neoliberalism, moreover, was always something much more fundamental, much more comprehensive than Bush era neoconservatives, and it was not going to die a quiet death unless there was a class-based popular mobilisation to defeat it. Given the actual balance of class forces, the crisis itself would be used to further intensify the neoliberal onslaught. Obama himself is now talking of cutting back on the two main pillars of the social state inherited from the Roosevelt era of the New Deal: Social Security and Medicare.

The U.S., of course, never had much of a social state. Much of Europe did. There too, the social state has been under attack since the ascendancy of Margaret Thatcher in Britain. Even so, the basics have survived rather well. As we said earlier in this piece, the current crisis, and the question of budgetary deficits in particular, are now being used to break all that remains of that social state, to turn Europe itself into something of a replica of the U.S., as far as the brutalities of class warfare are concerned. Britain was of course the first European country where the social state had come under massive attack under Margaret Thatcher, who won successive elections with an enthusiastic middle-class base and tacit support from the labour aristocracy itself. When Labour returned to power in the guise of “New Labour”, under Tony Blair and Gordon Brown, it was, in Ambalavaner Sivanandan’s superb phrase “Thatcherism in drag”. Today, Britain is part of E.U. but not a member of the eurozone, hence not under the discipline of the ECB, but the more extreme kind of “austerity” has come as part of the neo-Thatcherite Conservatives, with the aid of Lib-Dems, the mildly social democratic Liberal Democrats, just as the Greek government has acquiesced to the diktat of the ECB under the guidance of a socialist government.

In all the zones under the dominion of the Atlantic ruling class – the U.S., the eurozone, Britain itself – what we are witnessing is not a crisis of the neoliberal model but its most ferocious offensive. The final upshot of this offensive may be further anarchy, further crisis, perhaps a Great Depression, even, conceivably, “a common ruination of all the contending classes”, in Marx’s eloquent phrase. What we do have in the provisional present, however, is the fact of the offensive. It appears that the ruling classes associated with the Bankers’ Europe, which is otherwise known as the eurozone, has decided that the moment of final reckoning has come and that a truly neoliberal Europe can only arise out of the ashes of the social Europe that took a hundred years. On the other side of the Atlantic, a conglomeration of the Far Right is emerging, comprising the Republican Right, the Religious Right, the right-wing Tea Party libertarians, proto-fascist media conglomerates, and so on. The fate of even the Obama administration hangs in the balance.

With this remark, then, let me turn to the political crisis that is the other side of the economic crisis that is so much in the news. If the neoliberal solution to the crisis of stagnation in advanced capitalism was unleashed in the West with the onset of Margaret Thatcher’s premiership in Britain (in 1979) and Reagan’s ascendancy to the U.S. presidency two years later (in 1981), its subsequent trajectory has been inseparable from the collapse of the socialist state system in the COMECON countries roughly a decade later. That collapse led also to the decomposition of communist movements all across Europe, where a huge party such as the Italian one just disappeared and a militant one such as the Portuguese party was greatly reduced in size and influence. Social democracy, which had already moved very much to the right and was already dominant on the Left, now came to occupy virtually the whole of space of working-class politics.

Meanwhile, the dissolution of socialism in the Soviet zone as well as China not only made capitalism a universal mode of production, for the first time in history, but also added hundreds of millions of low-paid workers to the global workforce at the disposal of this capitalism, further eroding the position of the working class everywhere in the world. This reorganisation of capital and labour on the global scale is part of the secret behind the emergence of China as “the workshop of the world” in the current phase of neoliberalised global capitalism. Stagnant economies of the West gained a new lease on life and part of the crisis of advanced capitalism was exported to other regions of the world under the guise of Shock Therapy, Globalisation, World Trade Organisation (WTO), and so on, and the myriad kinds of privatisations and deregulations that went with all these mechanisms. By the time the new crisis set in, with the recession of 2007-08, at least three major consequences had accumulated inside the advanced zones.

The first of these is the collapse of social democracy, as it had come to be known historically, as an alternative not only to communism but also to liberal or neoliberal capitalism. All across Western Europe, social democrats implemented neoliberal policies as diligently as their more openly right-wing counterparts would. The labour confederations that had bought into the social democratic, welfarist compact between capital and labour were now ideologically and programmatically incapable of defending labour against capital and bought into whatever policies their parties recommended.

The second, and related, development was that any programmatic difference among parties contending for power in the electoral field largely disappeared. When Labour won the elections again, under the guise of “New Labour”, it bore all the hallmarks of Thatcherism, and Blair openly expressed his admiration for Margaret Thatcher just as Obama today expresses his admiration for Ronald Reagan. The degree of convergence between the main contending political parties is such that the historic differentiation between the Right and the Left, which has been intrinsic to parliamentary democracy since the French Revolution, no longer holds. Who in his right mind would use the term ‘Left’ for the Democrats in the U.S. or New Labour in England? This is openly so in the Anglo-Saxon countries; and very much so in substance on the continent as well, even though the rhetorical form remains.

Meanwhile, substantial right-wing parties of a fascist orientation have appeared all across Europe, from France to Italy to Austria to Norway. That is not so in the Anglo-Saxon countries, only because the Conservative Party in Britain and the Republican Party in the U.S. have substantial wings of the extreme Right within them, as the strength of Evangelicals and Tea Party extremists among the Republicans would testify. This crisis of the parliamentary institutions of liberal democracy is intertwined with the equally far-reaching collapse of what used to be called the Fourth Estate – those whom we now simply call “the media” – whose task was to sustain a mature public sphere of information and debate. Some of that sphere still survives in parts of Europe but not in the main imperial centre in the U.S. where it has been reduced to a handful of marginalised periodicals and websites of – and for – the liberal Left. Rupert Murdoch is simply the living symbol of this comprehensive degradation. An informed and politically engaged citizenry, and elected representatives who would represent the demands of such a citizenry in Parliament, was the very premise of liberal democracy.

In this era of corporately owned media spectacles and corporately owned parliamentarians, that premise is in the process of disappearing. The question that Michal Kalecki had posed in 1964 – what would fascism look like if it ever came to an advanced capitalist country with all the institutions of liberal democracy but under the control of Big Business and without an effective labour movement? – appears now to be the key question of U.S. politics.

Islamophobia

As we said earlier, this whole period has witnessed an immense shift of wealth and incomes upwards in the imperial centres themselves, from the majority of the population to the top 10 per cent. Tens of millions live in absolute immiseration; other tens of millions live on the edge of ruin; more tens of millions live in fear of getting driven to that edge and that ruin. What does that mean for politics? This great fear for their own future has been successfully redirected by the state and its mass media into a full-scale ideology of Islamophobia and the fear of unnamed, unnameable “terrorists”, against whom wars have to be fought across the world, but also at home, because the terrorist might well be one’s own neighbour. This Islamophobia plays the same role in contemporary U.S. politics as anti-Semitism did in Nazi Germany. I might add that this Islamophobia is a property that the U.S. shares with its two major non-European allies, namely Israel and India. Those who do not partake of it are increasingly in a minority; in the U.S., as in India, some variety of Islamophobia is now part of the liberal common sense.

In Europe, meanwhile, Islamophobia is fast emerging as the principal driving force behind all the right-wing movements. For two quite different reasons. One is that the planetary War on Terror unleashed by the U.S. and the active collusion of the European states in that globalised militarism feeds into the Islamophobia of the populist right wing. But far more fundamental is the presence of millions of Muslim immigrants – mainly from North Africa, Turkey and Pakistan – inside Europe at a time when unemployment is high and these immigrants are seen to be taking away jobs from local workers. In this respect, European Islamophobia really is very much like the anti-Semitism of the past, as an ideological ploy to obtain national cohesion across classes by blaming the social outsider for economic distress, native unemployment and general erosion of the national ethos.

However, this Islamophobia also serves the function that anti-communism used to serve in the recent past: War on Terror now is where Crusade Against Communism once was. Joseph Lieberman, a senior U.S. Senator and reputedly one of Barack Obama’s mentors, said just a few days ago that Americans should accept cuts in Social Security and Medicare so that the money can go into the military budget and they can be protected against terror. Islamophobia is thus designed to obtain social cohesion at home and underwrite imperialist wars abroad. Considering how little damage this brand of terrorism has done to the imperialist centres in the aftermath of September 2001, the raising of the spectre of Islamic terrorism as a reason for a planetary war is pure fascist phantasmagoria, invented to terrify the population into giving the rulers any power they want. All this also goes a long way in explaining not only the unfolding of the global military offensive by the U.S. without significant active opposition at home but also the active collaboration of Europe in that offensive, from Afghanistan to Libya.

Likely consequences

A few words now about the likely consequences of all this for the Tricontinent. Anything very firm is hard to predict because we just do not know how far this crisis will go and what directions it might take. At worst, it could go very far, leading to a veritable Great Depression, a global slump, a disarticulation in the world system of trade and investment. That will be disastrous for those of the Tricontinental economies that have tied their growth fortunes to exports, not only China (the great exporter of commodities) and India (the great exporter of services) but also a whole range of lesser economies that rely on exports of primary commodities and simple manufactures.

In a much happier possible scenario, it is also possible that faced with utter collapse, Europe, at least, will muster the will to change the entire pattern of rule, muster up courage to socialise credit and finance, and reconstruct the social Europe that was once envisioned by some of the original founders. Things are too much in a state of flux to say.

What we can reasonably expect is a period of great protectionism on both sides of the Atlantic: a great drive to promote exports and restrict imports. This too is likely to adversely affect the export-oriented economies of the Tricontinent. Consequences are likely to be less dire for South America where plans for greater regional integration of production chains and markets are already afoot, under the leadership of Venezuela and Brazil, with a view to gradual diminution of dependency links with the advanced capitalist countries. Many countries are currently resisting those blueprints. Protectionism in the advanced countries will give a new breath of life to those blueprints.

Effects are also likely to be less severe in East Asia where development of domestic markets has always been part of the project of the purposeful states, such as the one in South Korea and Taiwan, and China certainly has the state structures and the capacity to reorient its production systems towards greater domestic development and consumption while also helping in constructing a regional economic zone. Other countries, with anarchic and reckless belief in unlimited prospects of exports to the West, will not fare so well.

During the Great Depression of the 1930s, when prospects for exports to their North American neighbours disappeared along with dreams of import substitution, several Latin American countries, such as Chile turned the crisis into an opportunity to industrialise and develop a more nation-centred economy. Is it too much to hope that in the face of the coming protectionism in Western countries, the Indian leadership might learn to look inward and finally face the hundreds of millions they leave behind in the delusional pursuit for Shining India, Rising India, etc.? And, we have not even touched upon the ecological crisis of Mother Earth itself, nor of the intensifying wars over the world’s shrinking resources, both brought to us by the same capitalism whose antics on the stock exchanges sizzle the pages of our newspapers.

FRONTLINE, Vol. 28 No.18, September 9, 2011