If we take the categories of the unemployed, the vulnerably employed, and the economically inactive population in prime working ages (25–54) and add them together, we come up with what might be called the maximum size of the global reserve army in 2011: some 2.4 billion people, compared to 1.4 billion in the active labor army.

The answer to the challenges facing world labor that Marx gave at the Lausanne Congress in 1867 remains the only possible one: “If the working class wishes to continue its struggle with some chance of success the national organisations must become international.” It is time for a new International.

The Global Reserve Army of Labor and the New Imperialism

John Bellamy Foster, Robert W. McChesney, and R. Jamil Jonna

n the last few decades there has been an enormous shift in the capitalist economy in the direction of the globalization of production. Much of the increase in manufacturing and even services production that would have formerly taken place in the global North—as well as a portion of the North’s preexisting production—is now being offshored to the global South, where it is feeding the rapid industrialization of a handful of emerging economies. It is customary to see this shift as arising from the economic crisis of 1974–75 and the rise of neoliberalism—or as erupting in the 1980s and after, with the huge increase in the global capitalist labor force resulting from the integration of Eastern Europe and China into the world economy. Yet, the foundations of production on a global scale, we will argue, were laid in the 1950s and 1960s, and were already depicted in the work of Stephen Hymer, the foremost theorist of the multinational corporation, who died in 1974.

For Hymer multinational corporations evolved out of the monopolistic (or oligopolistic) structure of modern industry in which the typical firm was a giant corporation controlling a substantial share of a given market or industry. At a certain point in their development (and in the development of the system) these giant corporations, headquartered in the rich economies, expanded abroad, seeking monopolistic advantages—as well as easier access to raw materials and local markets—through ownership and control of foreign subsidiaries. Such firms internalized within their own structure of corporate planning the international division of labor for their products. “Multinational corporations,” Hymer observed, “are a substitute for the market as a method of organizing international exchange.” They led inexorably to the internationalization of production and the formation of a system of “international oligopoly” that would increasingly dominate the world economy.1

In his last article, “International Politics and International Economics: A Radical Approach,” published posthumously in 1975, Hymer focused on the issue of the enormous “latent surplus-population” or reserve army of labor in both the backward areas of the developed economies and in the underdeveloped countries, “which could be broken down to form a constantly flowing surplus population to work at the bottom of the ladder.” Following Marx, Hymer insisted that, “accumulation of capital is, therefore, increase of the proletariat.” The vast “external reserve army” in the third world, supplementing the “internal reserve army” within the developed capitalist countries, constituted the real material basis on which multinational capital was able to internationalize production—creating a continual movement of surplus population into the labor force, and weakening labor globally through a process of “divide and rule.”2

A close consideration of Hymer’s work thus serves to clarify the essential point that “the great global job shift”3 from North to South, which has become such a central issue in our time, is not to be seen so much in terms of international competition, deindustrialization, economic crisis, new communication technologies—or even such general phenomena as globalization and financialization—though each of these can be said to have played a part. Rather, this shift is to be viewed as the result primarily of the internationalization of monopoly capital, arising from the global spread of multinational corporations and the concentration and centralization of production on a world scale. Moreover, it is tied to a whole system of polarization of wages (as well as wealth and poverty) on a world scale, which has its basis in the global reserve army of labor.

The international oligopolies that increasingly dominate the world economy avoid genuine price competition, colluding instead in the area of price. For example, Ford and Toyota and the other leading auto firms do not try to undersell each other in the prices of their final products—since to do so would unleash a destructive price war that would reduce the profits of all of these firms. With price competition—the primary form of competition in economic theory—for the most part banned, the two main forms of competition that remain in a mature market or industry are: (1) competition for low cost position, entailing reductions in prime production (labor and raw material) costs, and (2) what is known as “monopolistic competition,” that is, oligopolistic rivalry directed at marketing or the sales effort.4

In terms of international production it is important to understand that the giant firms constantly strive for the lowest possible costs globally in order to expand their profit margins and reinforce their degree of monopoly within a given industry. This arises from the very nature of oligopolistic rivalry. As Michael E. Porter of Harvard Business School wrote in his Competitive Strategy in 1980:

Having a low-cost position yields the firm above-average returns in its industry…. Its cost position gives the firm a defense against rivalry from competitors, because its lower costs mean that it can still earn returns after its competitors have competed away their profits through rivalry…. Low cost provides a defense against powerful suppliers by providing more flexibility to cope with input cost increases. The factors that lead to a low cost-position usually also provide substantial entry barriers in terms of scale economies or cost advantages.5

This continuous search for low-cost position and higher profit margins led, beginning with the expansion of foreign direct investment in the 1960s, to the “offshoring” of a considerable portion of production. This, however, required the successful tapping of huge potential pools of labor in the third world to create a vast low-wage workforce. The expansion of the global labor force available to capital in recent decades has occurred mainly as a result of two factors: (1) the depeasantization of a large portion of the global periphery by means of agribusiness—removing peasants from the land, with the resulting expansion of the population of urban slums; and (2) the integration of the workforce of the former “actually existing socialist” countries into the world capitalist economy. Between 1980 and 2007 the global labor force, according to the International Labor Organisation (ILO), grew from 1.9 billion to 3.1 billion, a rise of 63 percent—with 73 percent of the labor force located in the developing world, and 40 percent in China and India alone.6

The change in the share of “developing countries” (referred to here as the global South, although it includes some Eastern European nations), in world industrial employment, in relation to “developed countries” (the global North) can be seen in Chart 1. It shows that the South’s share of industrial employment has risen dramatically from 51 percent in 1980 to 73 percent in 2008. Developing country imports as a proportion of the total imports of the United States more than quadrupled in the last half of the twentieth century.7

The result of these global megatrends is the peculiar structure of the world economy that we find today, with corporate control and profits concentrated at the top, while the global labor force at the bottom is confronted with abysmally low wages and a chronic insufficiency of productive employment. Stagnation in the mature economies and the resulting financialization of accumulation have only intensified these tendencies by helping to drive what Stephen Roach of Morgan Stanley dubbed “global labor arbitrage,” i.e., the system of economic rewards derived from exploiting the international wage hierarchy, resulting in outsized returns for corporations and investors.8

Our argument here is that the key to understanding these changes in the imperialist system (beyond the analysis of the multinational corporation itself, which we have discussed elsewhere)9 is to be found in the growth of the global reserve army—as Hymer was among the first to realize. Not only has the growth of the global capitalist labor force (including the available reserve army) radically altered the position of third world labor, it also has had an effect on labor in the rich economies, where wage levels are stagnant or declining for this and other reasons. Everywhere multinational corporations have been able to apply a divide and rule policy, altering the relative positions of capital and labor worldwide.

Mainstream economics is not of much help in analyzing these changes. In line with the Panglossian view of globalization advanced by New York Times columnist Thomas Friedman, most orthodox economists see the growth of the global labor force, the North-South shift in jobs, and the expansion of international low-wage competition as simply reflecting an increasingly “flat world” in which economic differences (advantages/disadvantages) between nations are disappearing.10 As Paul Krugman, representing the stance of orthodox economics, has declared: “If policy makers and intellectuals think it is important to emphasize the adverse effects of low-wage competition [for developed countries and the global economy], then it is at least equally important for economists and business leaders to tell them they are wrong.” Krugman’s mistaken reasoning here is based on the assumption that wages will invariably adjust to productivity growth, and the inevitable result will be a new world-economic equilibrium.11All is for the best in the best of all capitalist worlds. Indeed, if there are worries in the orthodox economic camp in this respect, they have to do, as we shall see, with concerns about how long the huge gains derived from global labor arbitrage can be maintained.12

In sharp contrast, we shall develop an approach emphasizing that behind the phenomenon of global labor arbitrage lies a new global phase in the development of Marx’s “absolute general law of capitalist accumulation,” according to which:

The greater the social wealth, the functioning capital, the extent and energy of its growth, and therefore also the greater the absolute mass of the proletariat and the productivity of its labour, the greater is the industrial reserve army…. But the greater this reserve army in proportion to the active labour-army, the greater is the mass of a consolidated surplus population, whose misery is in inverse ratio to the amount of torture it has to undergo in the form of labour. The more extensive, finally, the pauperized sections of the working class and the industrial reserve army, the greater is official pauperism. This is the absolute general law of capitalist accumulation.13

“Nowadays…the field of action of this ‘law,’” as Harry Magdoff and Paul Sweezy stated in 1986,

is the entire global capitalist system, and its most spectacular manifestations are in the third world where unemployment rates range up to 50 percent and destitution, hunger, and starvation are increasingly endemic. But the advanced capitalist nations are by no means immune to its operation: more than 30 million men and women, in excess of 10 percent of the available labor force, are unemployed in the OECD countries; and in the United States itself, the richest of them all, officially defined poverty rates are rising even in a period of cyclical upswing.14

The new imperialism of the late twentieth and twenty-first centuries is thus characterized, at the top of the world system, by the domination of monopoly-finance capital, and, at the bottom, by the emergence of a massive global reserve army of labor. The result of this immense polarization, is an augmentation of the “imperialist rent” extracted from the South through the integration of low-wage, highly exploited workers into capitalist production. This then becomes a lever for an increase in the reserve army and the rate of exploitation in the North as well.15

Marx and the General Law of Accumulation

In addressing the general law of accumulation, it is important first to take note of a common misconception directed at Marx’s tendential law. It is customary for establishment critics to attribute to Marx—on the basis of one or at most two passages taken out of context—what these critics have dubbed as an “immiseration theory” or a “doctrine of ever-increasing misery.”16Illustrative of this is John Strachey in his 1956 book Contemporary Capitalism, the larger part of which was devoted to polemicizing against Marx on this point. Strachey repeatedly contended that Marx had “predicted” that real wages would not rise under capitalism, so that workers’ average standard of living must remain constant or decline—presenting this as a profound error on Marx’s part. However, Strachey, together with all subsequent critics who have advanced this view, managed only to provide a single partial sentence in Capital (plus one early on in The Communist Manifesto—not one of Marx’s economic works) as purported evidence for this. Thus in the famous summary paragraph on the “expropriation of the expropriators” at the end of volume one, Marx (as quoted by Strachey) wrote: “While there is thus a progressive diminution in the number of the capitalist magnates (who usurp and monopolise all the advantages of this transformative process) there occurs a corresponding increase in the mass of poverty, oppression, enslavement, degeneration and exploitation….”17

Hardly resounding proof of a crude immiseration thesis! Marx’s point rather was that the system is polarized between the growing monopolization of capital by a relatively smaller number of individual capitals at the top and the relative impoverishment of the great mass of people at the bottom. This passage said nothing about the movement of real wages. Moreover, Strachey deliberately excluded the sentence immediately preceding the one he quoted, in which Marx indicated that he was concerned in this context not simply with the working class of the rich countries but with the entire capitalist world and the global working class—or as he put it, “the entanglement of all peoples in the net of the world market, and, with this, the growth of the international character of the capitalist regime.” Indeed, the “kernel of truth” to the “theory of immiseration,” Roman Rosdolsky wrote in The Making of Marx’s ‘Capital’, lay in the fact that such tendencies towards an absolute increase in human misery can be found “in two spheres: firstly (temporary) in all times of crisis, and secondly (permanent) in the so-called underdeveloped areas of the world.”18

Far from being a crude theory of immiseration, Marx’s general law was an attempt to explain how the accumulation of capital could occur at all: that is, why the growth in demand for labor did not lead to a continual rise in wages, which would squeeze profits and cut off accumulation. Moreover, it served to explain: (1) the functional role that unemployment played in the capitalist system; (2) the reason why crisis was so devastating to the working class as a whole; and (3) the tendency towards the pauperization of a large part of the population. Today it has its greatest significance in accounting for “global labor arbitrage,” i.e., capital’s earning of enormous monopolistic returns or imperial rents by shifting certain sectors of production to underdeveloped regions of the world to take advantage of the global immobility of labor, and the existence of subsistence (or below subsistence) wages in much of the global South.

As Fredric Jameson recently noted in Representing Capital, despite the “mockery” thrown at Marx’s general law of accumulation in the early post-Second World War era, “it is…no longer a joking matter.” Rather, the general law highlights “the actuality today of Capital on a world scale.”19

It is therefore essential to take a close examination of Marx’s argument. In his best-known single statement on the general law of accumulation, Marx wrote:

In proportion as capital accumulates, the situation of the worker, be his payment high or low, must grow worse.… The law which always holds the relative surplus population in equilibrium with the extent and energy of accumulation rivets the worker to capital more firmly than the wedges of Hephaestus held Prometheus to the rock. It makes an accumulation of misery a necessary condition, corresponding to the accumulation of wealth. Accumulation at one pole is, therefore, at the same time accumulation of misery, the torment of labour, slavery, ignorance, brutalization and moral degradation at the opposite pole, i.e. on the side of the class that produces its own product as capital [italics added].20

By pointing to an “equilibrium” between accumulation of capital and the “relative surplus population” or reserve army of labor, Marx was arguing, that under “normal” conditions the growth of accumulation is able to proceed unhindered only if it also results in the displacement of large numbers of workers. The resulting “redundancy” of workers checks any tendency toward a too rapid rise in real wages which would bring accumulation to a halt. Rather than a crude theory of “immiseration,” then, the general law of accumulation highlighted that capitalism, via the constant generation of a reserve army of the unemployed, naturally tended to polarize between relative wealth at the top and relative poverty at the bottom—with the threat of falling into the latter constituting an enormous lever for the increase in the rate of exploitation of employed workers.

Marx commenced his treatment of the general law by straightforwardly observing, as we have noted, that the accumulation of capital, all other things being equal, increased the demand for labor. In order to prevent this growing demand for labor from contracting the available supply of workers, and thereby forcing up wages and squeezing profits, it was necessary that a counterforce come into being that would reduce the amount of labor needed at any given level of output. This was accomplished primarily through increases in labor productivity with the introduction of new capital and technology, resulting in the displacement of labor. (Marx specifically rejected the classical “iron law of wages” that saw the labor force as determined primarily by population growth.) In this way, by “constantly revolutionizing the instruments of production,” the capitalist system is able, no less constantly, to reproduce a relative surplus population or reserve army of labor, which competes for jobs with those in the active labor army.21 “The industrial reserve army,” Marx wrote, “during periods of stagnation and average prosperity, weighs down the active army of workers; during the period of over-production and feverish activity, it puts a curb on their pretensions. The relative surplus population is therefore the background against which the law of the demand and supply of labour does its work. It confines the field of action of this law to the limits absolutely convenient to capital’s drive to exploit and dominate the workers.”22

It followed that if this essential lever of accumulation were to be maintained, the reserve army would need to be continually restocked so as to remain in a constant (if not increasing) ratio to the active labor army. While generals won battles by “recruiting” armies, capitalists won them by “discharging the army of workers.”23

It is important to note that Marx developed his well-known analysis of the concentration and centralization of capital as part the argument on the general law of accumulation. Thus the tendency toward the domination of the economy by bigger and fewer capitals, was as much a part of his overall argument on the general law as was the growth of the reserve army itself. The two processes were inextricably bound together.24

Marx’s breakdown of the reserve army of labor into its various components was complex, and was clearly aimed both at comprehensiveness and at deriving what were for his time statistically relevant categories. It included not only those who were “wholly unemployed” but also those who were only “partially employed.” Thus the relative surplus population, he wrote, “exists in all kinds of forms.” Nevertheless, outside of periods of acute economic crisis, there were three major forms of the relative surplus population: the floating, latent, and stagnant. On top of that there was the whole additional realm of official pauperism, which concealed even more elements of the reserve army.

The floating population consisted of workers who were unemployed due to the normal ups and downs of accumulation or as a result of technological unemployment: people who have recently worked, but who were now out of work and in the process of searching for new jobs. Here Marx discussed the age structure of employment and its effects on unemployment, with capital constantly seeking younger, cheaper workers. So exploitative was the work process that workers were physically used up quickly and discarded at a fairly early age well before their working life was properly over.25

The latent reserve army was to be found in agriculture, where the demand for labor, Marx wrote, “falls absolutely” as soon as capitalist production has taken it over. Hence, there was a “constant flow” of labor from subsistence agriculture to industry in the towns: “The constant movement towards the towns presupposes, in the countryside itself, a constant latent surplus population, the extent of which only becomes evident at those exceptional times when its distribution channels are wide open. The wages of the agricultural labourer are therefore reduced to a minimum, and he always stands with one foot already in the swamp of pauperism.”26

The third major form of the reserve army, the stagnant population, formed, according to Marx, “a part of the active reserve army but with extremely irregular employment.” This included all sorts of part-time, casual (and what would today be called informal) labor. The wages of workers in this category could be said to “sink below the average normal level of the working class” (i.e., below the value of labor power). It was here that the bulk of the masses ended up who had been “made ‘redundant’” by large-scale industry and agriculture. Indeed, these workers represented “a proportionately greater part” of “the general increase in the [working] class than the other elements” of the reserve army.

The largest part of this stagnant reserve army was to be found in “modern domestic industry,” which consisted of “outwork” carried out through the agency of subcontractors on behalf of manufacture, and dominated by so-called “cheap labor,” primarily women and children. Often such “outworkers” outweighed factory labor in an industry. For example, a shirt factory in Londonderry employed 1,000 workers but also had another 9,000 outworkers attached to it stretched out over the countryside. Here the most “murderous side of the economy” was revealed.27

For Marx, pauperism constituted “the lowest sediment of the relative surplus population” and it was here that the “precarious…condition of existence” of the entire working population was most evident. “Pauperism,” he wrote, “is the hospital of the active labor-army and the dead weight of the industrial reserve army.” Beyond the actual “lumpenproletariat” or “vagabonds, criminals, prostitutes,” etc., there were three categories of paupers. First, those who were able to work, and who reflected the drop in the numbers of the poor in every period of industrial prosperity, when the demand for labor was greatest. These destitute elements employed only in times of prosperity were an extension of the active labor army. Second, it included orphans and pauper children, who in the capitalist system were drawn into industry in great numbers during periods of expansion. Third, it encompassed “the demoralized, the ragged, and those unable to work, chiefly people who succumb to their incapacity for adaptation, an incapacity that arises from the division of labour; people who have lived beyond the worker’s average life-span; and the victims of industry whose number increases with the growth of dangerous machinery, of mines, chemical workers, etc., the mutilated, the sickly, the widows, etc.” Such pauperism was a creation of capitalism itself, “but capital usually knows how to transfer these [social costs] from its own shoulders to those of the working class and the petty bourgeoisie.”28

The full extent of the global reserve army was evident in periods of economic prosperity, when much larger numbers of workers were temporarily drawn into employment. This included foreign workers. In addition to the sections of the reserve armies mentioned above, Marx noted that Irish workers were drawn into employment in English industry in periods of peak production—such that they constituted part of the relative surplus population for English production.29 The temporary reduction in the size of the reserve army in comparison to the active labor army at the peak of the business cycle had the effect of pulling up wages above their average value and squeezing profits—though Marx repeatedly indicated that such increases in real wages were not the principal cause of crises in profitability, and never threatened the system itself.30

During an economic crisis, many of the workers in the active labor army would themselves be made “redundant,” thereby increasing the numbers of unemployed on top of the normal reserve army. In such periods, the enormous weight of the relative surplus population would tend to pull wages down below their average value (i.e., the historically determined value of labor power). As Marx himself put it: “Stagnation in production makes part of the working class idle and hence places the employed workers in conditions where they have to accept a fall in wages, even below the average.”31 Hence, in times of economic crisis, the working class as an organic whole, encompassing the active labor army and the reserve army, was placed in dire conditions, with a multitude of people succumbing to hunger and disease.

Marx was unable to complete his critique of political economy, and consequently never wrote his projected volume on world trade. Nevertheless, it is clear that he saw the general law of accumulation as extending eventually to the world level. Capital located in the rich countries, he believed, would take advantage of cheaper labor abroad—and of the higher levels of exploitation in the underdeveloped parts of the world made possible by the existence of vast surplus labor pools (and non-capitalist modes of production). In his speech to the Lausanne Congress of the First International in 1867 (the year of the publication of the first volume ofCapital) he declared: “A study of the struggle waged by the English working class reveals that, in order to oppose their workers, the employers either bring in workers from abroad or else transfer manufacture to countries where there is a cheap labor force. Given this state of affairs, if the working class wishes to continue its struggle with some chance of success, the national organisations must become international.”32

The reality of unequal exchange, whereby, in Marx’s words, “the richer country exploits the poorer, even where the latter gains by the exchange,” was a basic, scientific postulate of classical economy, to be found in both Ricardo and J.S. Mill. These higher profits were tied to the cheapness of labor in poor countries—attributable in turn to underdevelopment, and a seemingly unlimited labor supply (albeit much of it forced labor). “The profit rate,” Marx observed, “is generally higher there [in the colonies] on account of the lower degree of development, and so too is the exploitation of labour, through the use of slaves, coolies, etc.” In all trade relations, the richer country was in a position to extract what were in effect “monopoly profits” (or imperial rents) since “the privileged country receives more labour in exchange for less,” while inversely, “the poorer country gives more objectified labour in kind than it receives.” Hence, as opposed to a single country where gains and losses evened out, it was quite possible and indeed common, Marx argued, for one nation to “cheat” another. The growth of the relative surplus population, particularly at the global level, represented such a powerful influence in raising the rate of exploitation, in Marx’s conception, that it could be seen as a major “counterweight” to the tendency of the rate of profit to fall, “and in part even paralyse[s] it.”33

The one classical Marxist theorist who made useful additions to Marx’s reserve army analysis with respect to imperialism was Rosa Luxemburg. In The Accumulation of Capital she argued that in order for accumulation to proceed “capital must be able to mobilise world labour power without restriction.” According to Luxemburg, Marx had been too “influenced by English conditions involving a high level of capitalist development.” Although he had addressed the latent reserve in agriculture, he had not dealt with the drawing of surplus labor from non-capitalist modes of production (e.g., the peasantry) in his description of the reserve army. However, it was mainly here that the surplus labor for global accumulation was to be found. It was true, Luxemburg acknowledged, that Marx discussed the expropriation of the peasantry in his treatment of “so-called primitive accumulation,” in the chapter of Capital immediately following his discussion of the general law. But that argument was concerned primarily with the “genesis of capital” and not with its contemporary forms. Hence, the reserve army analysis had to be extended in a global context to take into account the enormous “social reservoir” of non-capitalist labor.34

Global Labor Arbitrage

The pursuit of “an ever extended market” Marx contended, is an “inner necessity” of the capitalist mode of production.35 This inner necessity took on a new significance, however, with the rise of monopoly capitalism in the late nineteenth and early twentieth centuries. The emergence of multinational corporations, first in the giant oil companies and a handful of other firms in the early twentieth century, and then becoming a much more general phenomenon in the post-Second World War years, was a product of the concentration and centralization of capital on a world scale; but equally involved the transformation of world labor and production.

It was the increasing multinational corporate dominance over the world economy, in fact, that led to the modern concept of “globalization,” which arose in the early 1970s as economists, particularly those on the left, tried to understand the way in which the giant firms were reorganizing world production and labor conditions.36 This was clearly evident by the early 1970s—not only in Hymer’s work, but also in Richard Barnet and Ronald Müller’s influential 1974 work, Global Reach, in which they argued: “The rise of the global corporation represents the globalization of oligopoly capitalism.” This was “the culmination of a process of concentration and internationalization that has put the world economy under the substantial control of a few hundred business enterprises which do not compete with one another according to the traditional rules of the market.” Moreover, the implications for labor were enormous. Explaining how oligopolistic rivalry now meant searching for the lowest unit labor costs worldwide, Barnet and Müller argued that this had generated “the ‘runaway shop’ which becomes the ‘export platform’ in an underdeveloped country,” and which had become a necessity of business for U.S. companies, just like their European and Japanese competitors.37

Over the past half century, these global oligopolies have been offshoring whole sectors of production from the rich/high-wage to the poor/low-wage countries, transforming global labor conditions in their search for global low-cost position, and in a divide and rule approach to world labor. Leading U.S. multinationals, such as General Electric, Exxon, Chevron, Ford, General Motors, Proctor and Gamble, IBM, Hewlett Packard, United Technologies, Johnson and Johnson, Alcoa, Kraft, and Coca Cola now employ more workers abroad than they do in the United States—even without considering the vast number of workers they employ through subcontractors. Some major corporations, such as Nike and Reebok, rely on third world subcontractors for 100 percent of their production workforce—with domestic employees confined simply to managerial, product development, marketing, and distribution activities.38The result has been the proletarianization, often under precarious conditions, of much of the population of the underdeveloped countries, working in massive export zones under conditions dictated by foreign multinationals.

Two realities dominate labor at the world level today. One is global labor arbitrage or the system of imperial rent. The other is the existence of a massive global reserve army, which makes this world system of extreme exploitation possible. “Labour arbitrage” is defined quite simply by The Economist as “taking advantage of lower wages abroad, especially in poor countries.” It is thus an unequal exchange process in which one country, as Marx said, is able to “cheat” another due to the much higher exploitation of labor in the poorer country.39 A study of production in China’s industrialized Pearl River Delta region (encompassing Guangzhou, Shenzhen, and Hong Kong) found in 2005 that some workers were compelled to work up to sixteen hours continuously, and that corporal punishment was routinely employed as a means of worker discipline. Some 200 million Chinese are said to work in hazardous conditions, claiming over a 100,000 lives a year.40

It is such superexploitation that lies behind much of the expansion of production in the global South.41 The fact that this has been the basis of rapid economic growth for some emerging economies does not alter the reality that it has generated enormous imperial rents for multinational corporations and capital at the center of the system. As labor economist Charles Whalen has written, “The prime motivation behind offshoring is the desire to reduce labor costs…a U.S.-based factory worker hired for $21 an hour can be replaced by a Chinese factory worker who is paid 64 cents an hour…. The main reason offshoring is happening now is because it can.”42

How this system of global labor arbitrage occurs by way of global supply chains, however, is enormously complex. Dell, the PC assembler, purchases some 4,500 parts from 300 different suppliers in multiple countries around the world.43 As the Asian Development Bank Institute indicated in a 2010 study of iPhone production: “It is almost impossible [today] to define clearly where a manufactured product is made in the global market. This is why on the back of iPhones one can read ‘Designed by Apple in California, Assembled in China.’” Although both statements on the back of the iPhones are literally correct, neither answers the question of where the real production takes place. Apple does not itself manufacture the iPhone. Rather the actual manufacture (that is, everything but its software and design) takes place primarily outside the United States. The production of iPhone parts and components is carried out principally by eight corporations (Toshiba, Samsung, Infineon, Broadcom, Numonyx, Murata, Dialog Semiconductor, and Cirrus Logic), which are located in Japan, South Korea, Germany, and the United States. All of the major parts and components of the iPhone are then shipped to the Shenzhen, China plants of Foxconn (a company headquartered in Taipei) for assembly and export to the United States.

Apple’s enormous, complex global supply chain for iPod production is aimed at obtaining the lowest unit labor costs (taking into consideration labor costs, technology, etc.), appropriate for each component, with the final assembly taking place in China, where production occurs on a massive scale, under enormous intensity, and with ultra-low wages. In Foxconn’s Longhu, Shenzhen factory 300,000 to 400,000 workers eat, work, and sleep under horrendous conditions, with workers, who are compelled to do rapid hand movements for long hours for months on end, finding themselves twitching constantly at night. Foxconn workers in 2009 were paid the minimum monthly wage in Shenzhen, or about 83 cents an hour. (Overall in China in 2008 manufacturing workers were paid $1.36 an hour, according to U.S. Bureau of Labor Statistics data.)

Despite the massive labor input of Chinese workers in assembling the final product, their low pay means that their work only amounts to 3.6 percent of the total manufacturing cost (shipping price) of the iPhone. The overall profit margin on iPhones in 2009 was 64 percent. If iPhones were assembled in the United States—assuming labor costs ten times that in China, equal productivity, and constant component costs—Apple would still have an ample profit margin, but it would drop from 64 percent to 50 percent. In effect, Apple makes 22 percent of its profit margin on iPhone production from the much higher rate of exploitation of Chinese labor.44

Of course in stipulating a mere tenfold difference in wages between the United States and China, in its calculation of the lower profit margins to be gained with United States as opposed to Chinese assembly, the Asian Development Bank Institute was adopting a very conservative assumption. Overall Chinese manufacturing workers in 2008, according to the U.S. Bureau of Labor Statistics, received only 4 percent of the compensation for comparable work in the United States, and 3 percent of that in the European Union.45 In comparison, hourly manufacturing wages in Mexico in 2008 were about 16 percent of the U.S. level.46

In spite of the low-wage “advantage” of China, some areas of Asia, such as Cambodia, Vietnam, and Bangladesh, have hourly compensation levels still lower, leading to a divide and rule tendency for multinational corporations—commonly acting through subcontractors—to locate some sectors of production, such as light industrial textile production, primarily in these still lower wage countries. Thus the New York Times indicated in July 2010, that Li & Fung, a Hong Kong-based company “that handles sourcing and apparel manufacturing for companies like Wal-Mart and Liz Claiborne” increased its production in Bangladesh by 20 percent in 2010, while China, its biggest supplier, slid 5 percent. Garment workers in Bangladesh earned around $64 a month, compared “to minimum wages in China’s coastal industrial provinces ranging from $117 to $147 a month.”47

For multinational corporations there is a clear logic to all of this. As General Electric CEO Jeffrey Immelt stated, the “most successful China strategy”—with China here clearly standing for global labor arbitrage in general—“is to capitalize on its market growth while exporting its deflationary power.” This “deflationary power” has to do of course with lower labor costs (and lower costs of reproduction of labor in the North through the lowering of the costs of wage-consumption goods). It thus represents a global strategy for raising the rate of surplus value (widening profit margins).48

Today Marx’s reserve army analysis is the basis, directly and indirectly (even in corporate circles) for ascertaining how long the extreme exploitation of low-wage workers in the underdeveloped world will persist. In 1997 Jannik Lindbaek, executive vice president of the International Finance Corporation, presented an influential paper entitled “Emerging Economies: How Long Will the Low-Wage Advantage Last?” He pointed out that international wage differentials were enormous, with labor costs for spinning and weaving in rich countries exceeding that of the lowest wage countries (Pakistan, Madagascar, Kenya, Indonesia, and China) by a factor of seventy-to-one in straight dollar terms, and ten-to-one in terms of purchasing power parity (taking into account the local cost of living).

The central issue from the standpoint of global capital, Lindbaek indicated, was China, which had emerged as an enormous platform for production, due to its ultra-low wages and seemingly unlimited supply of labor. The key strategic question then was, “How long will China’s low wage advantage last?” His answer was that China’s “enormous ‘reserve army of labor’…will be released gradually as agricultural productivity improves and jobs are created in the cities.” Looking at various demographic factors, including the expected downward shift in the number of working-age individuals beginning in the second decade of the twenty-first century, Lindbaek indicated that real wages in China would eventually rise above subsistence. But when?49

In mainstream economics, the analysis of the role of surplus labor in holding down wages in the global South draws primarily on W. Arthur Lewis’s famous article “Economic Development with Unlimited Supplies of Labour,” published in 1954. Basing his argument on the classical economics of Adam Smith and Marx (relying in fact primarily on the latter), Lewis argued that in third world countries with vast, seemingly “unlimited” supplies of labor, capital accumulation could occur at a high rate while wages remained constant and at subsistence level. This was due to the very high reserve army of labor, including “the farmers, the casuals, the petty traders, the retainers (domestic and commercial), women in the household, and population growth.” Although Lewis (in his original article on the subject) erroneously confined Marx’s own reserve army concept to the narrow question of technological unemployment—claiming on this basis that Marx was wrong on empirical grounds—he in fact adopted the broader framework of Marx’s reserve army analysis as his own. Thus he pointed to the enormous latent surplus population in agriculture. He also turned to Marx’s notion of primitive accumulation, to indicate how the depeasantization of the non-capitalist sector might take place.

Lewis, however, is best known within mainstream economics for having argued that eventually a turning point would occur. At some point capital accumulation would exceed the supply of surplus labor (primarily from a slowdown in internal migration from the countryside) resulting in a rise in the real wages of workers in industry. As he put it, “the process” of accumulation with “unlimited labor” and hence constant real wages must eventually stop “when capital accumulation has caught up with the labour supply.”50

Today the Lewisian framework, overlapping with Marx’s reserve army theory and in fact derived from it—but propounding the view (which Marx did not) that the reserve army of labor will ultimately be transcended in poor countries as part of a smooth path of capitalist development—is the primary basis on which establishment economics raises the issue of how long global labor arbitrage can last, particularly in relation to China. The concern is whether the huge imperial rents now being received from the superexploitation of labor in the poor countries will rapidly shrink or even disappear. The Economist magazine, for example, worries that a Lewisian turning point, combined with growing labor revolts in China, will soon bring to an end the huge surplus profits from the China trade. Chinese workers “in the cities at least,” it complains, “are now as expensive as their Thai or Filipino peers.” “The end of surplus labor,”The Economist declares, “is not an event, but a process. And that process may already be under way.” A whole host of factors, such as demography, the stability of Chinese rural labor with its family plots, and the growing organization of workers, may cause labor constraints to come into play earlier than had been expected. At the very least, The Economist suggests, the enormous gains of capital in the North that occurred “between 1997 and 2005 [when] the price of Chinese exports to America fell by more than 12%” are unlikely to be repeated. And if wages in China rise, cutting into imperial rents, where will multinational corporations turn? “Vietnam is cheap: its income per person is less than a third of China’s. But its pool of workers is not that deep.”51

Writing in Monthly Review, economist Minqi Li notes that since the early 1980s 150 million workers in China have migrated from rural to urban areas. China thus experienced a 13 percentage-point drop (from 50 percent to 37 percent) in the share of wages in GDP between 1990 and 2005. Now “after many years of rapid accumulation, the massive reserve army of cheap labor in China’s rural areas is starting to become depleted.” Li focuses mainly on demographic analysis, indicating that China’s total workforce is expected to peak at 970 million by 2012, and then decline by 30 million by 2020, with the decline occurring more rapidly among the prime age working population. This he believes will improve the bargaining power of workers and strengthen industrial strife in China, raising issues of radical transformation. Such industrial strife will inevitably mount if China’s non-agricultural population passes “the critical threshold of 70 percent by around 2020.”52

Others think that global labor arbitrage with respect to China is far from over. Yang Yao, an economist at Peking University, argues that “the countryside still has 45% of China’s labour force,” a huge reserve army of hundreds of millions, much of which will become available to industry as mechanization proceeds. Stephen Roach has observed that with Chinese wages at 4 percent of U.S. wages, there is “barely…a dent in narrowing the arbitrage with major industrial economies”—while China’s “hourly compensation in manufacturing” is “less than 15% of that elsewhere in East Asia” (excluding Japan), and well below that of Mexico.53

The Global Reserve Army

In order to develop a firmer grasp of this issue it is crucial to look both empirically and theoretically at the global reserve army as it appears in the current historical context—and then bring to bear the entire Marxian critique of imperialism. Without such a comprehensive critique, analyses of such problems as the global shift in production, the global labor arbitrage, deindustrialization, etc., are mere partial observations suspended in mid-air.

The data on the global workforce compiled by the ILO conforms closely to Marx’s main distinctions with regard to the active labor army and the reserve army of labor. In the ILO picture of the world workforce in 2011, 1.4 billion workers are wage workers—many of whom are precariously employed, and only part-time workers. In contrast, the number of those counted as unemployed worldwide in 2009 consisted of only 218 million workers. (In order to be classified as unemployed, workers need to have actively pursued job searches in the previous few weeks). The unemployed, in this sense, can be seen as conforming roughly to Marx’s “floating” portion of the reserve army.

A further 1.7 billion workers are classified today as “vulnerably employed.” This is a residual category of the “economically active population,” consisting of all those who work but are not wage workers—or part of the active labor army in Marx’s terminology. It includes two categories of workers: “own–account workers” and “contributing family workers.”

“Own-account workers,” according to the ILO, encompasses workers engaged in a combination of “subsistence and entrepreneurial activities.” The urban component of the “own-account workers” in third-world countries is primarily made up of workers in the informal sector, i.e. street workers of various kinds, while the agricultural component consists largely of subsistence agriculture. “The global informal working class,” Mike Davis observed in Planet of the Slums,“is about one billion strong, making it the fastest-growing, and most unprecedented, social class on earth.”54

The second category of the vulnerably employed, “contributing family workers,” consists of unpaid family workers. For example, in Pakistan “more than two-thirds of the female workers that entered employment during 1999/00 to 2005/06 consisted of contributing family workers.”55

The “vulnerably employed” thus includes the greater part of the vast pools of underemployed outside official unemployment rolls, in poor countries in particular. It reflects the fact that, as Michael Yates writes, “In most of the world, open unemployment is not an option; there is no safety net of unemployment compensation and other social welfare programs. Unemployment means death, so people must find work, no matter how onerous the conditions.”56 The various components of vulnerably employed workers correspond to what Marx described as the “stagnant” and “latent” portions of the reserve army.

Additionally, many individuals of working age are classified as not belonging to the economically active population, and thus as economically inactive. For the prime working ages of 25–54 years this adds up, globally, to 538 million people in 2011. This is a very heterogeneous grouping including university students, primarily in wealthier countries; the criminal element engendered at the bottom of the capitalist economy (what Marx called the lumpenproletariat); discouraged and disabled workers, who have been marginalized by the system; and in general what Marx called the pauperized portion of the working class—that portion of working age individuals, “the demoralized, the ragged,” and the disabled, who have been almost completely shut out of the labor force. It is here, he argued, that one finds the most “precarious…condition of existence.” Officially designated “discouraged workers” are a significant number of would-be workers. According to the ILO, if discouraged workers are included in Botswana’s unemployment rate in 2006 it nearly doubles from 17.5 percent to 31.6 percent.57

If we take the categories of the unemployed, the vulnerably employed, and the economically inactive population in prime working ages (25–54) and add them together, we come up with what might be called the maximum size of the global reserve army in 2011: some 2.4 billion people, compared to 1.4 billion in the active labor army. It is the existence of a reserve army that in its maximum extent is more than 70 percent larger than the active labor army that serves to restrain wages globally, and particularly in the poorer countries. Indeed, most of this reserve army is located in the underdeveloped countries of the world, though its growth can be seen today in the rich countries as well. The breakdown in percentages of its various components can be seen in Chart 2.

No related posts.

blowing across this globalized world, from Tunisia to Egypt to Greece to Spain to Occupy Wall Street. How do the theoretical investigations of this site relate to this, to what’s new and emerging? 

This question of the emergence of novelty, of understanding this very changing world so as to help to change it fundamentally, has always been central to this site. And some pivotal issues of the Occupy movement (Who are the 1%? for example) have been explored here as well.

At the urging of Mike Ely from Kasama, we’ve put together a guide to some important writings on khukuri, organized by topic:

What is current the structure of global capital? See essays concerning a transnational capitalist class (TNC) — truly the global 1% (or less) – by Leslie Sklair, by William Robinson, Jerry Harris, and by William K. Carroll, as well as in the recent piece on global corporate networks.

How do we analyze the present crisis, and how do we go forward from it? See this by David Harvey, as well as essays by Don Hamerquist, on the crisis of both capitalism and the left, and hollow states in a time of austerity and chaos, and John Steele’s notes from a conference devoted to this subject.

What is the relevance of Marxism today? This important question is explored in this essay by Vern Gray and in these by John Steele:

Our Relation to Revolutionary Tradition;

We Need a Politics We Haven’t Got;

and To what extent is revolutionary theory detachable?

as well as Bill Martin’s extensive essay Into the Wild.

How can we understand the present historical moment in a way that can also prepare us for the eruption of something new? And what is the relevance of the contemporary thinker Alain Badiou?

John Steele has written a series of essays: Another take on revolutionary theory; on Badiou and the event; Revolutionary fidelity and the radically new; on Badiou’s political value; and on Badiou’s Maoism.

Relatedly, there is J. Ramsey’s essay addressing the question.

And see these by Don Hamerquist: Barack, Badiou, and Bilal-al-hasan; and “…that which in them divides itself from the old”.

(And here too, Bill Martin, in the essay cited above.)

Finally, in terms of understanding the “new wind,” although this is a topic we’ll have more on, for now it’s worth noting an essay by Don Hamerquist on the earlier parts of this sequence.

Related posts:

1. Could the present crisis be an opening to communism?
2. Financialization and hegemony
3. Marxism, politics, and evil, part 2

Image at right: The 1318 transnational corporations that form the core of the economy. Superconnected companies are red, very connected companies are yellow. The size of the dot represents revenue.

The fact of highly concentrated global capitalist networks — as well as the related question of a transnational capitalist class — will be familiar ones to readers of this site. We’ve published a number of essays and interviews which center on these topics. And now these are also central questions for the Occupy Wall Street movement and all its offshoots.

The analysis we’ve seen so far, naturally enough, has come from thinkers with a Marxist background. The following essay, published in a recent issue of New Scientist, deals with a research project from the world of systems analysis, and as the authors of the following article make clear, a main concern is finding ways to make global capitalism more stable and secure. The analytic conclusions, though, have points of strong similarity.

Revealed – the capitalist network that runs the world

by Andy Coghlan and Debora MacKenzie

AS PROTESTS against financial power sweep the world this week, science may have confirmed the protesters’ worst fears. An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy.

The study’s assumptions have attracted some criticism, but complex systems analysts contacted by New Scientist say it is a unique effort to untangle control in the global economy. Pushing the analysis further, they say, could help to identify ways of making global capitalism more stable.

The idea that a few bankers control a large chunk of the global economy might not seem like news to New York’s Occupy Wall Street movement and protesters elsewhere. But the study, by a trio of complex systems theorists at the Swiss Federal Institute of Technology in Zurich, is the first to go beyond ideology to empirically identify such a network of power. It combines the mathematics long used to model natural systems with comprehensive corporate data to map ownership among the world’s transnational corporations (TNCs).

“Reality is so complex, we must move away from dogma, whether it’s conspiracy theories or free-market,” says James Glattfelder. “Our analysis is reality-based.”

Previous studies have found that a few TNCs own large chunks of the world’s economy, but they included only a limited number of companies and omitted indirect ownerships, so could not say how this affected the global economy – whether it made it more or less stable, for instance.

The Zurich team can. From Orbis 2007, a database listing 37 million companies and investors worldwide, they pulled out all 43,060 TNCs and the share ownerships linking them. Then they constructed a model of which companies controlled others through shareholding networks, coupled with each company’s operating revenues, to map the structure of economic power.

The work, to be published in PloS One, revealed a core of 1318 companies with interlocking ownerships (see image). Each of the 1318 had ties to two or more other companies, and on average they were connected to 20. What’s more, although they represented 20 per cent of global operating revenues, the 1318 appeared to collectively own through their shares the majority of the world’s large blue chip and manufacturing firms – the “real” economy – representing a further 60 per cent of global revenues.

When the team further untangled the web of ownership, it found much of it tracked back to a “super-entity” of 147 even more tightly knit companies – all of their ownership was held by other members of the super-entity – that controlled 40 per cent of the total wealth in the network. “In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network,” says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group.

John Driffill of the University of London, a macroeconomics expert, says the value of the analysis is not just to see if a small number of people controls the global economy, but rather its insights into economic stability.

Concentration of power is not good or bad in itself, says the Zurich team, but the core’s tight interconnections could be. As the world learned in 2008, such networks are unstable. “If one [company] suffers distress,” says Glattfelder, “this propagates.”

“It’s disconcerting to see how connected things really are,” agrees George Sugihara of the Scripps Institution of Oceanography in La Jolla, California, a complex systems expert who has advised Deutsche Bank.

Yaneer Bar-Yam, head of the New England Complex Systems Institute (NECSI), warns that the analysis assumes ownership equates to control, which is not always true. Most company shares are held by fund managers who may or may not control what the companies they part-own actually do. The impact of this on the system’s behaviour, he says, requires more analysis.

Crucially, by identifying the architecture of global economic power, the analysis could help make it more stable. By finding the vulnerable aspects of the system, economists can suggest measures to prevent future collapses spreading through the entire economy. Glattfelder says we may need global anti-trust rules, which now exist only at national level, to limit over-connection among TNCs. Bar-Yam says the analysis suggests one possible solution: firms should be taxed for excess interconnectivity to discourage this risk.

One thing won’t chime with some of the protesters’ claims: the super-entity is unlikely to be the intentional result of a conspiracy to rule the world. “Such structures are common in nature,” says Sugihara.

Newcomers to any network connect preferentially to highly connected members. TNCs buy shares in each other for business reasons, not for world domination. If connectedness clusters, so does wealth, says Dan Braha of NECSI: in similar models, money flows towards the most highly connected members. The Zurich study, says Sugihara, “is strong evidence that simple rules governing TNCs give rise spontaneously to highly connected groups”. Or as Braha puts it: “The Occupy Wall Street claim that 1 per cent of people have most of the wealth reflects a logical phase of the self-organising economy.”

So, the super-entity may not result from conspiracy. The real question, says the Zurich team, is whether it can exert concerted political power. Driffill feels 147 is too many to sustain collusion. Braha suspects they will compete in the market but act together on common interests. Resisting changes to the network structure may be one such common interest.

No related posts.

Don Hamerquist has published several essays previously on khukuri.

“…that which in them divides itself from the old”

Don Hamerquist

I would like to say a few things on the form and the content of the argument in Anselm Jappe’s article, in order to open up some issues that hopefully will go beyond this starting point.

Jappe, who I only know through this short piece, advances a generic Marxist conception of the limits of capitalist accumulation as if that is sufficient demonstration that most of what the contemporary left is writing and thinking about the current crisis is just stupidity – and probably reformist as well. While the conclusion has undeniable merit, the method falls well short of what we need. Jappe states:

(Karl Marx) also foresaw the eventuality that some day the capitalist machine would stop running on its own, through the exhaustion of its dynamic. Why? Capitalist commodity production contains, from its very inception an internal contradiction, a veritable time bomb built into its very structure.

We have waited a long time on this… “veritable time bomb.“

I have big questions about any explanations and prescriptions from decades in the past (in this instance, centuries) that are presented as what is needed for us to properly understand the politics of our present and immediate future.

It’s not as if propositions such as “…the capitalist machine would stop running on its own…” have been validated by historical experience. Putting questionable hypotheses from a distant past in a more forceful manifesto or a better set of theses tends to be a waste of our political resources. Whether Jappe provides a good rendering of Marx is open to a discussion that I will avoid for now, but regardless of what Marx said or meant – and both questions are quite debatable – it will hardly be sufficient for current circumstances.

My friend and long time comrade, Ken Lawrence, has written an interesting draft piece on his experience with C.L.R. James and the Facing Reality political tendency that relates to some of these issues. Lawrence reluctantly comes to some political conclusions – not ones that I fully share – from a critical appraisal that I do share of another familiar proposition from the Communist Manifesto:

All fixed, fast frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real condition of life and his relations with his kind.

As Ken argues, little in our collective experience demonstrates a capitalist compulsion on the working class to soberly confront, “real conditions” and “relations” and a good deal of our experience supports very different conclusions. This highlights the common problem with the proclamatory first principles methods of Jappe and too many others. They gloss over the indeterminacy and the reversibility of the processes through which a revolutionary anti capitalist subject will develop. But without such a subject, armed with a revolutionary program and the organized will to respond to the mass potentials created in a capitalist crisis, communism will “…remain an ideal that will be always yet to come.” (Bosteels, Badiou and Politics, p. 280)

Ken approaches these issues through the concept of “punctuated equilibria” that he adapts from evolutionary science. In this framework, moments of “great upheaval”, the punctuation, are normally followed by a more prolonged period of a new equilibrium with its unique functional methods of incremental adaptation. Assume, at least for purposes of discussion, that we are experiencing a disruption of a previous equilibrium, perhaps the situation that the Italians describe as “Fordism”, combined with what others of us have termed “imperialism”. We might be seeing some hopeful signs in these circumstances of disrupted equilibrium, but it seems quite clear that these fall well short the necessary and sufficient grounds for revolutionary outcomes. Without a plausibly adequate revolutionary subject, a new equilibrium –- but one that is still essentially capitalist, or at least not emancipatory and communist – will be the most likely outcome.

We know very well that every upsurge of mass resistance contains a tendency to fetishize various short- of-revolution possibilities that are more likely to fit into a new, non-emancipatory, equilibrium than to provide a foundation for a revolutionary advance. The elasticity of capitalist power is shown in limitations on the anti-capitalist counterpower that emerges at the moments of heightened contradiction and crisis. This conservative elasticity facilitates the elevation of illusory popular objectives into political substitutes for revolutionary communism that can dominate radical politics for generations.

So how should we respond? I like this formulation from the younger Badiou (circa 1975) as a starting point – and it is also the point where I will end this piece when I eventually get there:

It is never ‘the masses’, nor the ‘movement’ that as a whole carry the principle of engenderment of the new, but that which in them divides itself from the old.” (Cited from Badiou in Bosteels, p. 136)

The new potentials that develop in the explosively expanded struggles of periods of capitalist crisis aren’t necessarily cumulative and irreversible. They don’t emerge in a linear process. I think that Badiou’s formulation raises the contradictory character of this process and the necessity to counter the strategic unevenness through organized political interventions in a strong and beneficial way. Before capitalism can be overthrown, a number of very uncomfortable elements of the internal dialectic between a revolutionary communist component of a mass movement and the mass popular constituency of that movement will have to be worked through. This will be necessary to prevent popular insurgencies from overdosing on their own victories – real and illusory. As Badiou also points out, far too often: “…once the mass festivals of democracy and discourse are over, things make place for the modernist restoration of order among workers and bosses.” (Cited in Bosteels, P.279).

Capitalism will not topple “…through…exhaustion…”. It will not “…stop running on its own…” as Jappe suggests. It must be overthrown by a politically conscious mass counter force, and the primary issues for us concern how such a force might develop. I’m more a Leninist than a Marxist on such questions which will probably raise eyebrows – and not only from the anarchist crew. I think that this particular strategic process and its associated dilemmas underscore the importance of Lenin’s position on the ‘art’ of revolution. And, although Lenin would certainly have disagreed, I think that rather than an extension and elaboration of Marx, this is a break with Marx – certainly it is a break with the Marx of Jappe, that implies that capitalism might collapse from the working out of a simple internal contradiction.

Financialization

These issues of inevitability and of the complex relationship between the necessity and the possibility of revolution are important, but there is a different, and perhaps more relevant, weakness in the Jappe article. He shows little interest in any connection between such general questions of revolutionary process and this particular capitalist crisis. He dismisses the possibility that “financialization” might provide a key to features of this crisis without proposing any alternative way to understand the specific features that it does exhibit. Unlike Jappe, I think the development of financialization is a root source of a significant and unique disturbance to the capitalist equilibrium of our recent past, and this disturbance is central to this current crisis. I will try out a tentative approach to these issues below, but first, I want to spend a moment on Jappe’s view as I understand it.

He argues that the expanded system of financialization may have deferred and redirected a more basic crisis in capitalist accumulation, but it is not an important causal factor in its own right. Instead, it is more of a surface manifestation of an underlying reality that it partially disguises by projecting a false opposition between a ‘good’ and a ‘bad’ form of capitalism. In a certain sense this is right, but, in this same general sense it is also not particularly controversial among anti-capitalist revolutionaries. It’s true enough that the global financial system and its crisis should not – really cannot – be approached separately from the global circumstances for capitalism. But who on the anti-capitalist left thinks differently on this question? For the most part, the distinctions between a ‘bad’ capitalist financial system and a ‘good’ productive capitalism are features of populist tendencies and institutional reformists – with some neo-fascists among the former, and some social democrats among the economic nationalists in the latter. Not many of those folks regard themselves as revolutionary anti-capitalists and fewer still merit such a description.

When this ‘bad capitalism’ approach appears to be adopted by a genuinely radical tendency, perhaps through fixating on bank nationalization as a strategic political demand; the cause is less likely to be a mistaken understanding of the “capitalist machine”, than a reasonable, although slightly desperate, lack of confidence that Jappe’s ‘veritable time bomb’ will ever actually detonate. And as I have said above, there are grounds for such pessimism that Jappe would be well advised to consider. (This shouldn’t be seen as a backhanded endorsement of the Panitch/Gindin approach to bank nationalization which I think it is mistaken, but for reasons related to ‘transitional demand’ strategic conceptions that are not apparently a part of Jappe’s critique.)

When financialization is seen as an independent variable with only a contingent relationship to some idealized capitalism, or when it is reduced to that same idealized ‘simple’ capitalism; our ability to understand its actual impact will be severely reduced. And in the same process, so will our ability to clarify and implement the political interventions that can counter the tendencies for the emerging mass resistance to collapse back into itself; greasing the emergence of some new non-liberatory stage that might or might not be something that looks like an equilibrium.

I’d like to develop a counter argument to Jappe’s with respect to financialization and the unique role the capitalist state assumes in the current crisis, but some preliminary points are needed. What I intend to argue begins from material that is fairly new to me – although possibly not so much to others – and I’d welcome questions and challenges. In part this material is based on the Bosteel’s book on Badiou, Badiou and Politics, which I’ve cited a few times in the earlier argument. I find Bosteels useful, although I disagree with a major thrust of his argument that is peripheral to this discussion. This area of disagreement covers what appears to me to be an impressively academic, but rather unpersuasive attempt to project Badiou as a Marxist critic of “pure leftism” (Bosteels, p. 283-286). (“Pure leftism”, now that’s a camp where I probably fit, but perhaps not so pure).

Arrighi

However, my primary point of reference is the argument presented in Giovanni Arrighi’s book, The Long Twentieth Century. Arrighi covers a different subject matter than Bosteels, one that is primarily historical rather than philosophical. In my opinion, he also has far more to offer than Bosteels (although not Badiou). If his book hadn’t been finished well before the current crisis, Arrighi might have worked out some better resolutions of the dilemmas of juxtaposing patterned long wave historical cycles of capitalist accumulation with chaos theory. These are problems that that he shares with his friend and co-thinker, Wallerstein, in my opinion.

I did find some debatable themes in what I have read from Arrighi. One that is relevant to an understanding of this crisis is his recurring fixation on finding a new capitalist hegemon emerging between the “signal” and the “terminal” crisis of the current, “’organic core’ of the capitalist world-economy” (Arrighi, p. 332). At an earlier date, a greater Japan was Arrighi’s candidate for hegemon. More recently, shortly before Arrighi’s death and with Japan in a prolonged stagnation that was stretching into its third decade, he appears to assign the role to China. Laying aside whether or not these estimates were properly based in socio-economic fact, this strand of Arrighi’s approach is biased towards the possibility of a new long wave of capitalist accumulation, a ‘new equilibrium’, with all of the non-revolutionary implications that this would involve.

In my opinion this lingering reluctance to see a break in the pattern of essentially repetitive cycles of capital accumulation, although on larger scales and with shorter durations, is a major weakness. This is the case even taking into account Arrighi’s recognition that there are some qualitative changes from one cycle to the next that do imply broader and deeper questions about future possibilities. However, I think that this limited approach is at odds with another strand of Arrighi’s presentation that I like much more. Consider this passage from the concluding chapter of the book:

The uncontainability of violence in the contemporary world is closely associated with the withering away of the modern system of territorial states as the primary locus of world power…Combined with the internalization of world-scale processes of production and exchange within the organizational domains of transnational corporations, and with the resurgence of suprastatal world financial markets, these unprecedented restrictions and expectations have translated into strong pressures to relocate the authority of nation-states both upward and downward.” (Arrighi, p. 331)

“Hollow states”

Arrighi died in early 2009 and all versions and updates of this book were finished well before the events of 2008. Nevertheless I find this passage extremely relevant to the period that was initiated by the current crisis. The ‘withering away of the modern system of territorial states” seems to me to raise the ‘hollow state’ issue that I’ve been kicking around recently. The “suprastatal world financial markets,” that Arrighi sees as major active factors precipitating the “withering” process, are just another way of presenting the disruptive impacts of an active and growing – and increasingly problematic – global financial system.

I wouldn’t characterize the results quite as Arrighi does in this citation: “strong pressures to relocate the authority of national-states both upward and downward.” Rather than relocating the authority up and down, it seems to me that the new sources of authority trends are relocating at a diagonal from the previous institutional frameworks. More important, the processes of breakdown in hegemony and command occur at a distance in both space and time from the counter processes of that might activate new and relocated sites of command and acquiescence; the new “…networks of coercion…” (Arrighi, p. xi), that will be essential to any new cycle of capitalist accumulation. But perhaps this is more a disagreement with language than substance. In any case, I like this Arrighi. Consider another aspect of his argument:

In the scheme of things proposed here, the close historical tie between capitalism and the modern inter-state system is just as much one of contradiction as it is one of unity…capitalism and national states grew up together, and presumably depended on each other in some way, yet capitalists and centers of capital accumulation often offered concerted resistance to the extension of state power…the division of the world into competing political jurisdictions does not necessarily benefit the capitalist accumulation of capital.” (Arrighi, p. 32)

According to Arrighi, the emergence of the worldwide capitalist system has involved distinct historic cycles of accumulation that have been linked to the emergence of dominant hegemonic  political structures, primarily nation states, that, “…can credibly claim to be the motor force of a general expansion of the collective power of rulers vis a vis subjects” (Arrighi, p. 30 his emphasis). These hegemonic political structures play a distinct role in both expediting and defending specific capitalist accumulation processes. However, Arrighi perceptively notes that they also are the center of “territorialist” complexes of state formations and civil societies that embody, “…modes of rule… logics of power…” (Arrighi, p. 33), that are distinct from those of capitalist modes of production.

These differences are currently exacerbated to the point of rupture by the increasing influence of the suprastate elements of capital accumulation; transnational corporations; global productive processes and labor flows, and, above all, global financial markets dealing with magnitudes far in excess of any measure of the values of actual production, and more and more commonly, far in excess of the economic resources commanded by and encompassed within any state formation. All of this becomes less and less compatible with the viability and the success of any of these, “competing political jurisdictions”.

So let me turn around the Arrighi citation a bit and ask, isn’t it also true and perhaps more relevant, that the current mode of “…accumulation of capital…”, the business model as they say on CNBC, does not fully “benefit” any “…political jurisdiction…”? And if the growing organization of production within transnational economic structures and the pervasiveness of the global pursuit of ficticious capital translates, “… into strong pressures to relocate the authority of nation-state both upward and downward…”; these same pressures also qualitatively disrupt the traditional state forms, and raise the question of the viability of the essentially bourgeois category of nation-state. This makes for large difficulties in either relocating the various state functions “upward,” to the transnational level, or “downward,” to more local forms or to those emerging quasi-state functional capacities in what previously was considered the private sphere. (Perhaps this latter development shouldn’t be depicted as “downward.”) Thus the emergence of the phenomena of ‘hollow states’ which can’t effectively provide the essential ‘networks of coercion’ and the viable common ruling class project on which further development of new sites of capitalist accumulation depend.

I think that where Arrighi emphasizes the division of the world into competing territorial political jurisdictions that don’t adequately facilitate capital accumulation; the other side of the contradiction is equally, if not more, important. The current accumulation of (ficticious) capital does not benefit any unique array of ‘political jurisdictions’, and, indeed, it undermines most without much discrimination. This extends from the inability of local and regional governments to control adequate revenue streams to allow them to deliver political goods to their constituents, to the inability of supranational capitalist governmental structures to impose discipline on their national or regional components – or on particular segments of capital. I think that the tendency towards various types of financial crisis in this late stage of a cycle of capitalist development is presenting the ‘territorialist’ state complexes with major dilemmas. Specifically, it is proving very difficult to implement a capitalist resolution of a financial crisis through the existing territorial nation state institutional structures without disrupting those structures and eroding essential elements of their internal hegemonic character. This is a reality that we can see in the news of the day – and I mean this quite literally.

State power

I would like to end this by briefly attempting to tie it to some recent discussions of the state and state power. Let’s begin with another reference from a different article, on Marx and the State. (I owe this reference to John Garvey, an editor at Insurgent Notes.) The following is a surprisingly valuable passage from an article which otherwise is a routine defense of a ‘good’ Marx against a bad Kautsky and, particularly, a bad Lenin. The article argues that, according to the relatively early Marx:

The state is alien and detached from civil society precisely because bourgeois civil society is inherently divided. As Marx would put it in The German Ideology, “the practical struggle of these particular interests, which actually constantly run counter to the common and illusory common interests, necessitates practical intervention and restraint by the illusory ‘general’ interest in the form of the state.

This conception of the capitalist state, and note that it is the capitalist state, not the state in general that we are discussing, clarifies some potential stress lines. Capitalist political stability requires a state form that can effectively embody a common (capitalist) class interest derived from a mess of conflicting “particular (capitalist) interests”. But this same state form must integrate this common capitalist interest with a set of “illusory common interests,” based in the subordinated side of the consciousness of the oppressed and exploited; the side in which their needs and possibilities are confined within the limits of capital. This all then is aggregated into a “general interest” which is illusory in the sense that it needs to abstract from real differences and disguise real antagonisms as commonalities. Capitalist stability depends on the maintenance of an “…illusory ‘general’ interest”; illusory precisely because it integrates the real, but divergent interests common to capital with the fake ‘illusory common interests’ that rest on capital’s hegemony over the classes it oppresses and exploits. (I see this as an argument of Marx’s that anticipates Gramsci’s notion of the hegemonic capacity of the “classe dirigente.”) And as the earlier references to Badiou implied, it is the inadequacy of the break with this “illusory common” that dilutes revolutionary consciousness and deflects the trajectory of insurgent movements.

Nevertheless, capitalism does have this complex functional problem of disguising the fact that they are ‘ruled’ to those that actually are ruled – a problem with constantly changing characteristics requiring that the shape of the ‘rule’ must constantly be reset to adapt to changing circumstances, but without jeopardizing its capacity to appear as a manifestation of “common interest.” In terms of this discussion, these changing circumstances are those provided by the metastasized crisis of the global financial system and that is why it is so specifically important to the current situation.

Transnational financialization has created situations where particular competitive interests of blocs of capital can’t be adequately restrained by the intervention of any state since they have accumulated and can wield economic and political power that often exceeds and always compromises that which is available to any existing state or sub-state formation – including the most powerful of them, the U.S. nation state. This inability of the capitalist state formations to discipline the disparate competing tendencies in the class(es ?) they represent, undermines the material foundation for maintaining the illusory common interests on which the incorporation and subordination of the working classes have depended. This brings the issues of the legitimacy of state power closer to the surface and challenges to it develop more frequently and sharply. And, of course, any forceful exercise of state power against the working classes evokes a broader and deeper resistance, while exacerbating the contradictory elements of the “particular interests” within the ruling class.

I want to cut this off here with just one disconnected conclusion. While it will never be self evident just what this involves; our efforts should go to exacerbate this contradiction by focusing on the aspect of collective resistance that, as Badiou said, “divides itself from the old.” Not as easy to do as it is to say – but a point to be kept in mind.

Related posts:

1. A crisis of financial hegemony?
2. The crisis, financialization, and “cognitive capitalism”
3. Some contributions to thinking in the present moment

Translated from the Spanish translation posted at Comunización: Materiales para una concepción integral del movimiento comunista, and republished here from libcom.

Who Is To Blame?

Anselm Jappe

This time, all the commentators agree: what is now taking place is not a simple temporary adjustment of the financial markets. We are facing a crisis that is deemed to be the worst since the Second World War, or since 1929. But whose fault is it, and how can it be overcome? The answer is almost always the same: the “real economy” is healthy; the world economy is endangered by the insane mechanisms of a financial system that is totally out of control. The most facile answer, but also the most widespread, attributes all responsibility for this to the “greed” of a clique of speculators who have been gambling with everyone’s money as if they were in a casino.

However, this artifice of reducing the arcana of the capitalist economy, when the latter is not functioning properly, to the schemes of an evil conspiracy, has a long and dangerous history. The search for scapegoats, for “Jewish bankers” or other culprits, to serve as targets for the indignation of the “honest folk” composed of workers and small savers, would be the worst possible solution.

To contrast a “bad”, predatory and unbridled “Anglo-Saxon” capitalism with a “good”, more responsible “continental” capitalism, is not a serious proposition either. During the last few weeks we have seen that they are distinguishable only by minor details. All who demand—from ATTAC to Sarkozy—“more regulation” of the financial markets perceive the madness of the stock markets as merely an “excess”, or a tumor on an otherwise healthy body.

But what if financialization, far from having ruined the real economy, has helped it to survive past its expiration date?

What if financialization has breathed some life into a moribund body? Why are we so sure that capitalism is exempt from the cycle of birth, growth and death? May it not contain intrinsic limits to its development, limits that do not reside solely in the existence of a declared enemy (the proletariat, oppressed peoples), or in the exhaustion of natural resources?

These days it has once again become fashionable to quote Karl Marx. But the German philosopher did not speak only about the class struggle. He also foresaw the eventuality that some day the capitalist machine would stop running on its own, through the exhaustion of its dynamic. Why? Capitalist commodity production contains, from its very inception, an internal contradiction, a veritable time bomb built into its very structure.

Capital can only be made fruitful, and thus be accumulated, by the exploitation of labor power. The worker, however, in order to generate a profit for his employer, must be equipped with the necessary tools, and today this means cutting-edge technologies. This results in a permanent race—compelled by competition—to use the newest technologies. At each step, the first employer to adopt the newest technologies wins, because his workers produce more than those who do not use these new tools. But the system as a whole loses because technology is progressively replacing human labor. The value of each commodity consequently contains a constantly diminishing portion of human labor—which is, however, the only source of surplus value, and therefore of profit. The development of technology reduces the profit of the system as a whole. During the last century and a half, however, the expansion of commodity production on a global scale was capable of compensating for this tendency of the value of each commodity to fall.

Since the 1970s, this mechanism—which was nothing but a flight forward—has stalled. Paradoxically, it was the increase in productivity derived from the use of microelectronics that plunged capitalism into crisis. In order to make the labor of the few remaining workers conform to the standards of productivity of the world market, ever more gigantic investments were necessary. The real accumulation of capital threatened to come to a halt. This was the moment when “fictitious capital”, as Marx called it, came to the fore. The suspension of the dollar’s convertibility to gold in 1971 eliminated the last failsafe, the last connection between finance and real accumulation. Credit is nothing but an anticipation of expected future profits. But when the production of value, and therefore of surplus value, stagnated in the real economy (which has nothing to do with stagnation with regard to the production of things: capitalism functions on the basis of surplus value production and not on that of products with use value), the only thing that henceforth allowed the owners of capital to obtain the profits that were impossible to obtain in the real economy, was finance.

The rise of neo-liberalism after 1980 was not a sinister maneuver on the part of the most greedy capitalists, nor was it a coup d’état staged with the help of a few complacent politicians, as some on the “radical” left would have us believe (who must now decide: either graduate to a straightforward critique of capitalism, even if the latter does not proclaim its adherence to neo-liberalism; or participate in the management of an emerging form of capitalism that would include some of the critiques directed against its “excesses”). To the contrary, neo-liberalism was the only possible way to extend the life of the capitalist system just a little longer, a system whose fundamentals were never seriously questioned by anyone, on either the right or the left.

Numerous businesses and individuals could preserve an illusion of prosperity for a little longer thanks to credit. Now this crutch is broken, too. The return to Keynesianism, however, which has been suggested to some degree from all sides, will be utterly impossible: there is no longer enough “real” money in the hands of the States. For the moment, “those in charge” have managed to postpone the Mene, Tekel, Peres of their system by adding another zero to the whimsical numbers written on their screens, to which nothing corresponds. The loans recently conceded to save the Stock Markets are ten times larger than the losses that made the markets tremble ten years ago—real production, however (GDP, let’s say) has increased by approximately 20-30%! This “economic growth” has no real basis of its own, but was caused by the financial bubbles. But when these bubbles burst, there will be no “soft landing” after which everything can begin all over again.

Maybe there will not be a “Black Tuesday” like there was in 1929, or a “Judgment Day”. But there are good reasons to believe that we are experiencing the end of a long historical epoch. The epoch in which productive activity and products are not used to satisfy needs, but to feed the incessant cycle of labor that valorizes capital and capital that employs labor. Commodity and labor, money and government regulation, competition and market: after the financial crises that have repeatedly struck over the last twenty years with increasing intensity, there looms the crisis of all these categories. Categories which, it is always good to recall, have not always and everywhere formed part of human existence. These categories took possession of human life during the last few centuries, and could evolve into something different: something better or something worse. Whatever the outcome, it is not the type of decision that can be made at a meeting of the G-8. . . .

Spanish translation by Carlos Lagos.

No related posts.

It’s obvious that what happens in China will be of crucial importance for the future course of world history. Western analysts tend to play variations on the theme of China becoming the new world hegemon — even Arrighi (Adam Smith in Beijing) seems not far removed from this. Could there be a more emancipatory possibility? Minqi Li believes yes.

The following article originally appeared recently in Monthly Review. Minqi Li is the author of The Rise of China and the Demise of the Capitalist World Economy.

The Rise of the Working Class and the Future of the Chinese Revolution

Minqi Li

In July 2009, workers at the state-owned Tonghua Steel Company in Jilin, China organized a massive anti-privatization protest. Then, in the summer of 2010, a wave of strikes swept through China’s coastal provinces. These events may prove to be a historic turning point. After decades of defeat, retreat, and silence, the Chinese working class is now re-emerging as a new social and political force.

How will the rise of the Chinese working class shape the future of China and the world? Will the Chinese capitalist class manage to accommodate the working-class challenge while maintaining the capitalist system? Or will the rise of the Chinese working class lead to a new Chinese socialist revolution that could, in turn, pave the way for a global socialist revolution? The answers to these questions will, to a large extent, determine the course of world history in the twenty-first century.

The Defeat of the Working Class and the Triumph of Chinese Capitalism

The Chinese Revolution of 1949 was based on the broad mobilization of the overwhelming majority of the Chinese population against exploitation by the domestic feudal landlords, capitalists, and foreign imperialists. With all of its historical limitations, China in the Maoist period deserved to be characterized as “socialist” in the sense that the internal class relations within China were far more favorable for the proletarianized and non-proletarianized working classes than those that typically prevail in a capitalist state, especially in the context of the periphery and semi-periphery.1

Despite historic Maoist achievements, China remained a part of the capitalist world system and was compelled to operate under the basic laws of motion of the system. The economic surplus was concentrated in the hands of the state to promote capital accumulation and industrialization. This in turn created the material conditions that favored the new bureaucratic-technocratic elites who demanded ever increasing material privileges and political power. The new elites found their political representatives within the Communist Party, and became the “capitalist roaders who are in authority in the Party” (a common phrase in China).

Mao Zedong and his revolutionary comrades attempted to reverse the trend toward capitalist restoration by directly appealing to and mobilizing the masses of workers, peasants, and students. Politically inexperienced and confused, the workers and peasants were not yet ready directly to exercise economic and political power. After Mao’s death in 1976, the capitalist roaders led by Deng Xiaoping staged a counterrevolutionary coup and arrested the radical Maoist leaders. In a few years, Deng Xiaoping consolidated his political power and China was on the path of capitalist transition.

The so-called economic reform started in the countryside. The people’s communes were dismantled, and agriculture was privatized. Over the following years, hundreds of millions of rural workers became “surplus” workers, made available for exploitation by domestic and foreign capitalist enterprises.

Massive privatization was undertaken in the 1990s. Virtually all of the small and medium-sized state-owned enterprises and some big state-owned enterprises were privatized. Almost all of these were sold at artificially low prices or simply given away. The beneficiaries included government officials, former state-owned enterprise managers, private capitalists with connections in the government, and transnational corporations. In effect, a massive “primitive accumulation” was completed and a new capitalist class was formed, based on the massive theft of state and collective assets. Meanwhile, tens of millions of state- and collective-sector workers were laid off and left impoverished.

The legitimacy of this new capitalist class was recognized by the Communist Party leadership. At the Sixteenth Party Congress (in 2002), the Party Charter was revised. Under the old Charter, the Communist Party considered itself to be the vanguard of the working class, representing the interests of the proletariat. Under the new Charter, the Communist Party declared itself a representative of the interests of both the “broadest masses of people” and the “most advanced productive forces.” The term “most advanced productive forces” is widely viewed as a euphemism for the new capitalist class.

The Rise of the Chinese Working Class

Nonagricultural employment, as a share of China’s total employment, increased from 31 percent in 1980 to 50 percent in 2000, and increased further to 60 percent in 2008.2 According to a report prepared by the Chinese Academy of Social Sciences in 2002, about 80 percent of the nonagricultural labor force consisted of proletarianized wage workers, such as industrial workers, service workers, clerical workers, and the unemployed.3 Since the overwhelming majority of nonagricultural workers are wage workers who have to sell their labor power to make a living, the rapid growth of nonagricultural employment suggests massive formations of the proletarianized working class in China.

China’s rapid capitalist accumulation has been based on the ruthless exploitation of hundreds of millions of Chinese workers. From 1990 to 2005, China’s labor income, as a share of GDP, fell from 50 to 37 percent. The Chinese workers’ wage rate is about 5 percent of the U.S., 6 percent of the South Korean, and 40 percent of the Mexican level.4

Since the early 1980s, about one hundred fifty million migrant workers have moved from the rural areas to urban areas in search of employment. China’s export manufacturing is largely based on the exploitation of these migrant workers. A study of the workers’ conditions in the Pearl River Delta (an area that includes Guangzhou, Shenzhen, and Hong Kong) found that about two-thirds of the workers worked more than eight hours a day and never took weekends off. Some workers had to work continuously, up to sixteen hours. The capitalist managers routinely used corporal punishment to discipline the workers. About two hundred million Chinese workers work in hazardous conditions. There are about seven hundred thousand serious work-related injuries in China every year, claiming more than one hundred thousand lives.5

In The Communist Manifesto, Marx and Engels argued that the working-class struggle against the capitalists followed several stages of development. At first, the struggle was carried on by individual workers against the capitalists who directly exploited them. With the development of capitalist industry, the proletariat increased in number and became concentrated in greater masses. The workers’ strength grew and they began to form unions to fight the capitalists as a collective force. The same law of motion is operating in China today. As more and more migrant workers settle in the cities and increasingly regard themselves as wage workers rather than peasants, a new generation of proletarianized workers with growing class consciousness is emerging. Both the official government documents and the mainstream media now recognize the rise of the “second generation migrant workers.”

According to the Chinese mainstream media’s description, currently there are about one hundred million second-generation migrant workers, born after 1980. They moved to the cities soon after completing their high school or middle school education. Most of these people had no experience in agricultural production. They identified more with the cities than the countryside. Compared to the “first generation,” the second-generation migrant workers tend to have better education and higher expectations in employment; they demand better material and cultural living standards, and are less likely to tolerate harsh working conditions.6

Over the summer of 2010, dozens of strikes hit China’s auto, electronics, and textile industries, forcing capitalists to accept wage increases. Mainstream Chinese scholars are worried about the possibility that China is entering a new period of intense strikes that will bring China’s cheap labor regime to an end and threaten China’s “social stability.”7

Capitalist development itself is preparing the objective conditions that favor the growth of working-class organizations. After many years of rapid accumulation, the massive reserve army of cheap labor in China’s rural areas is starting to become depleted. China’s total working age population (those who are between fifteen and sixty-four years old) is expected to peak in 2012 at about 970 million and then gradually decline to about 940 million by 2020. The prime age labor force (those who are between nineteen and twenty-two years old), from which the bulk of the cheap, unskilled workers in manufacturing are recruited, is expected to decline drastically from about one hundred million in 2009 to about fifty million in 2020. The rapid decline of the prime age working population is likely to increase the young workers’ bargaining power further and encourage them to develop more permanent workers’ organizations.

In both Brazil and South Korea from the 1970s to the ’80s, when the nonagricultural share of employment (as a proxy for the degree of proletarianization) rose above 70 percent, the working-class movement emerged as a powerful social and political force. A similar development is now taking place in Egypt.8

China’s nonagricultural employment share is now about 60 percent. If China follows its own trend from 1980 to 2008, with nonagricultural employment shares rising by about 1 percent a year, then China’s nonagricultural employment share would pass the critical threshold of 70 percent by around 2020.

Given that the Chinese working class is set to emerge as a powerful social and political force in one or two decades, the key question is, What political direction will the Chinese workers’ movement take? The current official Chinese government policy is to build a so-called harmonious society with compromises between different social classes. Sections of the Chinese ruling elites are calling for “political reform” to dilute and divert the working-class challenge by introducing Western-style bourgeois democracy.9

Will the Chinese capitalist class manage to accommodate the working-class challenge while maintaining the basic economic and social order of the capitalist system? Or will the Chinese workers’ movement make a world-historic breakthrough, take the revolutionary socialist path, and make a fundamental break with the existing social system? The answers to these questions depend on objective as well as subjective historical conditions.

The Socialist Legacy: The State-Sector Working Class

In the Maoist socialist era, the Chinese workers enjoyed a level of class power and dignity unimaginable by an average worker in a capitalist state (especially in the peripheral and semi-peripheral context). However, the Chinese working class was young and politically inexperienced. After Mao’s death, the working class was left without political leadership and suffered a catastrophic defeat during the massive privatization in the 1990s.

Many of the former state-sector workers (known in China as the “old workers”) have since undertaken collective struggles against privatization and the massive layoffs. Their struggles have had an impact on not only the laid-off workers but also on the currently employed state-sector workers. This has contributed to the growth of class consciousness along with a substantial degree of socialist consciousness among one particular section of China’s proletarianized working class—the state-sector proletariat.

In the words of a prominent Chinese worker-activist, compared to the working classes in other capitalist states, the Chinese (state-sector) working class has developed a “relatively complete class consciousness,” based on its unique historical experience in both the socialist period and the capitalist period.10

Because of this historical experience, the Chinese state-sector workers’ struggles are often not limited to immediate economic demands. Many worker-activists understand that their current conditions result not only from exploitation by individual capitalists but also, at a more fundamental level, from the historical defeat of the working class in a major class war that led to the (temporary) triumph of capitalism over socialism.

A leader of the laid-off workers pointed out that under socialism, “the workers were masters of the factory, the workers were brothers and sisters within one class, and massive layoffs could not have happened; but after privatization, the workers have been reduced to ‘wage laborers,’ they are no longer the masters, and this is the true reason behind the massive lay-offs.” According to this leader, the workers’ struggle should not be limited to individual cases, nor satisfied with meeting particular demands. The “fundamental interest” of the workers lies with the restoration of “public ownership of the means of production.”11

Many of the currently employed state-sector workers are the children of the “old workers”; or they have had experience working together with the old workers; or they live in the same working-class neighborhoods. Thus, the currently employed state-sector workers have been influenced by the old workers’ struggles and their political experience. This was illustrated by the Tonghua Steel workers’ anti-privatization struggle in 2009.

Tonghua Steel was a state-owned steel factory in Tonghua, Jilin Province. In 2005 Tonghua Steel was privatized. The state assets, once worth 10 billion yuan, were appraised at only 2 billion yuan. Jianlong, a powerful private company having connections with high-ranking officials in Beijing, actually paid only 800 million yuan and took over the company. After Jianlong’s takeover, twenty-four thousand out of thirty-six thousand workers were laid off. Wages for the workers on “dangerous tasks” (with high rates of work-related injuries) were reduced by two-thirds. The managers could impose various arbitrary penalties and punishments on the workers.

In 2007 the Tonghua Steel workers started to protest. During the protests, a Maoist-era worker, “Master Wu,” emerged as the leader. Wu made it clear to the workers that the real issue was not about any particular problem, but about “the political line of privatization.”

July 2009 found the workers on a general strike. When the Jianlong general manager threatened to fire all workers, the enraged workers beat the manger to death. Although the provincial governor and thousands of armed police were at the scene, no one dared to intervene. After the beating, Jilin Province was forced to cancel the privatization plan.

The Tonghua Steel workers’ victory was a huge inspiration for workers in many parts of China. Workers in several other steel factories also protested and forced the local governments to cancel privatization plans. Worker-activists in other provinces saw the Tonghua victory as their own and regretted that “too few capitalists have been killed.”12

After years of massive privatization, the state-sector share in China’s industrial output value has been reduced to less than 30 percent. Nevertheless, the state sector continues to dominate several key industrial sectors. In 2008 the state-owned and state-holding enterprises accounted for 59 percent of the output value in coal mining and washing, 96 percent in extraction of petroleum and natural gas, 72 percent in processing of petroleum and coking, 42 percent in smelting and pressing of ferrous metals (iron and steel), 45 percent in manufacturing of transport equipment, and 92 percent in the production and supply of electric power and heat.13

Although the state-sector workers now account for only about 20 percent of the industrial-sector employment, they now number about 20 million and are concentrated in the energy and heavy industrial sectors that are of strategic importance to the Chinese capitalist economy. In the future upsurge of the Chinese working-class struggle, the state-sector workers, through their control of key industrial sectors, could exercise disproportionately large economic and political power.

Most importantly, the Chinese state-sector workers can benefit from their unique historical and political experience. With the help of revolutionary socialist intellectuals, the Chinese state-sector workers could emerge as the leadership of the entire Chinese working class and give future Chinese workers’ movements a clear revolutionary socialist direction.

The Illegitimacy of Chinese Capitalist Wealth

After three decades of capitalist transition, China has been transformed from what used to be one of the world’s economically most equal countries into one of the world’s most unequal countries. According to the World Bank, in 2005 the wealthiest 10 percent of households held 31 percent of the total Chinese income, while the poorest 10 percent held only 2 percent of the total income.14

The inequality in wealth is even more outrageous. According to the 2006 “World Wealth Report,” 0.4 percent of the wealthiest families controlled 70 percent of the national wealth in China. In 2006 there were about 3,200 people with personal property worth greater than 100 million yuan (about fifteen million U.S. dollars). Of these 3,200, about 2,900, or 90 percent, were children of senior government or Party officials. Their combined assets were estimated to be 20 trillion yuan—about the size of China’s GDP in 2006.15

Because of the origins of the Chinese capitalist class, a large share of its wealth came from the plunder of the state and collective assets accumulated in the socialist era. This wealth is widely considered to be illegitimate by the general population. According to one estimate, during the process of privatization and market liberalization, about 30 trillion yuan of state and collective assets were transferred to capitalists with strong government connections.16 A recent report found that in 2008, the so-called grey income amounted to 5.4 trillion yuan or 18 percent of China’s GDP. The report’s authors believed that most of the grey income derived from corruption and theft of public assets.17

Wen Jiabao, China’s Prime Minister, is said to be one of the richest prime ministers in the world. His son is the owner of China’s largest private equity firm. His wife is in charge of China’s jewelry industry. Wen’s family is estimated to have accumulated a wealth of 30 billion yuan (about 4.3 billion U.S. dollars). Jiang Zemin (the former President and Party General Secretary) is estimated to have a wealth of 7 billion yuan, and Zhu Rongji (the former Prime Minister) is estimated to have 5 billion yuan.18

The pervasive corruption has not only seriously undermined the legitimacy of Chinese capitalism, it has also undermined the ability of the ruling class to act in its own class interest. Sun Liping, a prominent mainstream sociologist, recently commented that “Chinese society is decaying at an accelerating rate.” According to Sun, members of the Chinese ruling elites are completely driven by their personal, short-term interests, so that no one cares about the long-term interests of Chinese capitalism. Corruption has “run out of control” and become “ungovernable.”19

The Proletarianization of the Petty Bourgeoisie

In the 1980s and ’90s, the petty bourgeoisie (the professional and technical workers) served as a significant social base for the pro-capitalist “reform and openness” policy. However, the current rapid increase in capitalist inequality has not only led to the impoverishment of hundreds of millions of workers, but it has also destroyed the “middle-class dreams” of many individuals in the petty bourgeoisie.

According to the official statistics, about a quarter of Chinese college students who graduated in the year 2010 were unemployed. Of the students who graduated in the previous year, about 15 percent remained unemployed. Those college graduates who are “employed” often have to accept a wage that is no higher than that of an unskilled migrant worker. About one million college graduates (compared to the current annual graduation of about six million) are said to belong to the so-called “ant tribes.” That is, they live in slum-like conditions on the outskirts of China’s major cities.20 The surge of housing, health care, and education costs have further undermined the economic and social status of China’s existing and potential petty bourgeoisie, forcing them to give up their aspiration to “middle-class” living standards.

A college graduate posted his thoughts on the Internet about his “miserable life.”21 After years of work, he found he could not afford to buy a flat or marry and raise a child. The young man asked himself:

Why do I need to have a girlfriend? Why do I need to have a child? Why do I need to care about my parents? Let us change our philosophy. If we do not care about our parents, do not marry, do not have children, do not need to buy flats, do not need to take buses, do not ever get sick, do not have any entertainment, do not ever buy lunch, we will have found the truth of a happy life! The society is driving us crazy. We cannot meet some simple basic needs. Are we wrong? We just want to survive.22

As more and more petty bourgeois individuals experience proletarianization in their economic and social conditions, a growing number of young people have become politically radicalized.

In the 1990s, the political left virtually did not exist in China. But during the first decade of this century, the Chinese left experienced a dramatic expansion. Three leftist Web sites, Wu You Zhi Xiang (the Utopia), The Mao Zedong Flag, and The China Workers’ Network, have gained national influence. Some mainstream Web sites, such as “Strengthening the Country Forum,” a current affairs site affiliated with the official Party newspaper, People’s Daily, have been dominated by posts of leftist political tendencies.

On September 9 and December 26, 2010, workers in hundreds of cities, and students in about eighty universities and colleges throughout China organized spontaneous mass meetings to commemorate Mao Zedong, often in the face of local government opposition and harassment. During the 2011 Chinese New Year (February 9), nearly seven hundred thousand people visited and paid respect to Mao’s hometown, Shaoshan, Hunan Province.23 Given China’s current political context, spontaneous commemorations of Mao Zedong have, in effect, become anti-capitalist mass protests.

The Limit to Capital Is Capital Itself

The Chinese model of capital accumulation has relied on a set of particular historical factors: the ruthless exploitation of a large cheap labor force; the massive exploitation of natural resources and its consequent degradation of the environment; and a growth model that depends on expanding exports to the markets of core capitalist countries. None of the factors are sustainable beyond the medium term.

As U.S. and European economies struggle with stagnation and face potentially increasing crises in the future, China can no longer rely on exports to lead its economic expansion. Moreover, it is widely recognized that China’s excessively high investment has led to massive excess production capacity, and contributed to unsustainable demands for energy and resources. Falling rates of return on capital may eventually lead to investment collapse and a major economic crisis. Thus, the Chinese capitalist economy needs to “rebalance” itself by promoting domestic consumption.24 But how can this be accomplished without undermining the basic interests of the Chinese capitalist class?

Currently, household consumption accounts for about 40 percent of China’s GDP, government consumption about 10 percent, trade surplus about 5 percent, and investment about 45 percent. Workers’ wages and rural peasants’ incomes add up to about 40 percent of GDP. Thus, the working-class income roughly matches the total household consumption.25 If government investment is treated as a part of the gross capitalist profit, then gross capitalist profit (which equals GDP, less wages and government consumption) is approximately 50 percent of GDP. After subtracting depreciation of fixed capital, net capitalist profit is approximately 35 percent of GDP. This very high capitalist profit (or very high rate of surplus value) is the political-economic basis of China’s rapid capital accumulation.

Now, suppose China needs to rebalance toward a consumption-led economy. Table 1 presents alternative scenarios of possible “rebalancing” of Chinese capitalism. Each scenario is consistent with one particular set of conditions required to stabilize the capitalist economy (with a stable, rather than falling, rate of profit). For example, if China’s economic growth rate were to fall to 7 percent a year, then to stabilize the capital-output ratio, investment needs to fall to 36 percent of GDP (rounded to 35 percent in Table 1). Considering that China’s main export markets (the United States and the European Union) are likely to stagnate in the future while China’s imports of energy and raw materials will continue to grow, China’s trade account is assumed to return to balance. It follows that the sum of household consumption (wages) and government consumption needs to rise to 65 percent of GDP. Gross profit needs to fall to 35 percent of GDP, and net profit needs to fall to 20 percent of GDP.26

Therefore, in this example, about 15 percent of GDP needs to be redistributed from capitalist profit to workers’ wages or social spending. How could such a large income redistribution be achieved, even under the most ideal political conditions? Which section of the capitalist class is going to sacrifice its own interest for the sake of the collective interests of the class? Given the very illegitimate and corrupt nature of Chinese capitalist wealth, there is also the question of how the collective interest of the capitalist class can be implemented, even if the Communist Party leadership decides to promote the capitalist collective interest. By definition, income and wealth from corrupt sources are not subject to taxation.

In one respect, the current historical context is fundamentally different from any previous moment in capitalist history. After centuries of relentless capitalist accumulation, the global ecological system is on the verge of collapse and the developing global ecological crisis threatens to destroy human civilization within the twenty-first century. As the world’s largest energy consumer and carbon dioxide emitter, China is now at the very center of global ecological contradictions.

China relies on coal for about 75 percent of its energy consumption. From 1979 to 2009, China’s coal consumption grew at an average annual rate of 5.3 percent, and the Chinese economy grew at an average annual rate of 10 percent (but for the last decade, 1999 to 2009, China’s coal consumption accelerated to 8.9 percent a year). Using a generous rule of thumb, China’s future economic growth rate is assumed to be the future coal production growth rate, plus five percentage points.27 According to Chinese government sources, China has coal reserves of about 190 billion metric tons. Chart 1 compares China’s historical coal production with its projected future production, assuming China’s remaining recoverable coal to be the same as the official reserve.28

China’s coal production is projected to peak in 2026 with a production level of 4.7 billion metric tons. The coal production growth rate is estimated to slow to 3.5 percent for 2009-2020; 0.4 percent for 2020-2030; -2.5 percent for 2030-2040; and -4.8 percent for 2040-2050. The implied economic growth rate would be 8.5 percent for the 2010s; 5.5 percent for the 2020s; 2.5 percent for the 2030s; and 0 percent for the 2040s.

Thus, by the 2020s, the Chinese capitalist economy will need to undertake an income redistribution of 20 percent of GDP from net profit to wages to maintain a stable capitalist economy (see Table 1). By the 2030s, capitalist net profit will need to fall below 10 percent of GDP, and there is virtually no more space for further income redistribution.

The impending energy crisis is just one among many ecological contradictions facing China. According to Charting Our Water Future, China is expected to have a water deficit of 25 percent by 2030, as rising demands from agriculture, industry, and cities overwhelm its limited water resources.29 If China’s current trend of soil erosion is not checked, it could suffer from a food deficit of 14 to 18 percent by 2030-2050. As a result of climate change and declining water availability, China’s grain production could fall by 9 to 18 percent by the 2040s.30

The Victory of the Proletariat?

Humanity is now at a critical crossroad. The continuing operation of the world capitalist system will not only guarantee the permanent impoverishment of billions of people; it will also almost certainly lead to the destruction of human civilization. This raises the urgent world-historical question: What force can humanity count on to achieve twenty-first century global revolution, hence both socialism and ecological sustainability?

Marx expected the proletariat to play the role of the gravediggers of capitalism. In the actual course of world history, the Western capitalist classes managed to accommodate the challenges of the working classes through limited social reforms. The core capitalist classes achieved this temporary compromise on the basis of the super-exploitation of the working classes in the periphery and the massive exploitation of the world’s natural resources and environmental space. Both conditions have, by now, been exhausted. In the next one or two decades, the proletarianized working classes may, for the first time, become the majority in the world population. With massive proletarianization in Asia, world-historical conditions are finally approaching what, in line with Marx, will lead to the victory of the proletariat and the downfall of the bourgeoisie.

As the world’s largest manufacturing producer and energy consumer, China is increasingly at the center of capitalism’s contradictions. The above analysis suggests that after the year 2020, economic, social, political, and ecological crises are likely to converge in China.

Given the legacy of the Chinese revolution, subjective historical conditions in China may favor a revolutionary socialist solution to China’s contradictions. A state-sector working class that is influenced by socialist consciousness can potentially take over China’s key economic sectors and play a leading role in the coming revolutionary struggle. A broad revolutionary class alliance may be formed between state-sector workers, migrant workers, and the proletarianized petty bourgeoisie.

Because of China’s central position in the global capitalist system, the significance of a victorious socialist revolution in China cannot be overstated. It will break the entire length of global capitalist commodity chains. It will turn the global balance of power decisively in favor of the world proletariat. It will pave the way for twenty-first century global socialist revolution, and dramatically increase the chance that the coming global crisis will be resolved in a way that is consistent with the preservation of human civilization.

History will decide whether the Chinese and the world proletariat are up to their revolutionary tasks.

Notes

* Some of the links below are broken because of sites being shut down. For readers interesting in obtaining any of the materials, please contact the author.

1. ↩ On the class contradictions under socialism and the favorable impact of the iron rice bowl on working-class power, see Minqi Li, The Rise of China and the Demise of the Capitalist World Economy (London: Pluto Press; New York: Monthly Review Press, 2008), 50-59.
2. ↩ National Bureau of Statistics, the People’s Republic of China, Statistical Year Book of China 2009, http://stats.gov.cn.
3. ↩ See Research Group of the Chinese Academy of Social Sciences, “A Research Report on the Current Structure of Social Strata in China,” in Social Blue Book 2002: Analyses and Predictions of China’s Social Conditions, ed. Ru Xin, Lu Xueyi, and Li Peilin (Beijing: Social Sciences Literature Press, 2002), 115-132.
4. ↩ Li, ibid., 89, 108.
5. ↩ On the Chinese workers’ conditions, see Dale Wen, “China Copes with Globalization,” A report by the International Forum on Globalization (2005), http://ifg.org; Martin Hart-Landsberg, “The Chinese Reform Experience: A Critical Assessment,” Review of Radical Political Economics, published online before print, September 28, 2010.
6. ↩ For a summary of Chinese media’s descriptions of the “second generation migrant workers,” see the clause on Xinshengdai Nongmingong or “A New Generation of Migrant Workers” by the Baidu online encyclopedia, http://baike.baidu.com.
7. ↩ John Chan, “Honda Rocked by Further Strikes in China,” The World Socialist Website, June 10, 2010, http://wsws.org.
8. ↩ For statistics on non-agricultural employment, see World Bank, World Development Indicators, http://databank.worldbank.org.
9. ↩ In October 2010, the Chinese Prime Minister Wen Jiabao called for “political reform” when he was interviewed by the American Television network CNN. See Jonathan Fenby, “Political Reform Is China’s Fatal Flaw,” Financial Times, October 15, 2010.
10. ↩ Zhang Yaozu, “The Evolution and Development of the Working Class Over the Six Decades of New China,” May 2010, http://zggr.net.*
11. ↩ Zhong Qinan, “The Class Experience of the Chongqing Kangmingsi Workers’ Struggle to Defend Their Proper Rights,” May 2010, http://zggr.net.*
12. ↩ Pei Haide, “A Study of Two Cases of Struggle by the Urban Traditional Workers,” May 2010, http://zggr.net.*
13. ↩ National Bureau of Statistics; ibid.
14. ↩ Another commonly used measure of inequality is the Gini coefficient. If Gini coefficient equals 100, it indicates complete inequality; if Gini coefficient equals 0, it indicates complete equality. According to the World Bank data, China’s Gini coefficient in 2005 was 41.5, compared to 40.8 for the United States (2000) and 36.8 for India (2005) See World Bank, ibid.
15. ↩ Yuzhi Zhang, and Zhongfu Jiang, “The Domestic Governance Countermeasure in Order to Enhance Soft Power of China Communist Party,” International Journal of Business and Management 5, no. 7 (July 2010): 170-74, http://ccsenet.org.
16. ↩ Qi Zhongfeng, “Economic Estimations of the Size of Rent-Seeking in the Period of Market Transition,” Commercial Times, 2006 (21), http://cnmoker.org.*
17. ↩ Wang Xiaolu, “Grey Income and National Income Distribution,” August 2010, http://view.news.qq.com.
18. ↩ Anonymous, “China’s Top Ten Families,” September 2010, http://hua-yue.net.
19. ↩ Sun Liping, “The Chinese Society Is Decaying at an Accelerating Rate,” February 2011, http://hua-yue.net.
20. ↩ Zac Hambides, “China’s Growing Army of Unemployed Graduates,” The World Socialist Website, October 4, 2010, http://wsws.org.
21. ↩ The college graduate claims to have an annual income of 50,000 yuan after taxes and deductions. By comparison, in 2008, the average annual pre-tax wage for China’s formal sector employees was about 29,000 yuan. See National Bureau of Statistics, ibid.
22. ↩ Anonymous, “A College Graduate’s Perspective: I Can Barely Survive—The Miserable Life with a Monthly Salary of 4,000 Yuan,” March 2008, http://bbs1.people.com.
23. ↩ Mao Zedong was born December 26, 1883, and died September 9, 1976. See Lao Shi, “People Commemorate the 117th Anniversary of Mao Zedong’s Birth Throughout the Country,” February 2001, http://wyzxsx.com; Xu Rong and Zuo Yuanyuan, “Mao Zedong‘s Hometown Becomes the Tourists’ Favorite—680,000 People Visited Shaoshan During the New Year,” February 2011, http://redchinacn.com.
24. ↩ See Martin Wolf, “How China Must Change If It Is to Sustain Its Ascent,” Financial Times, September 22, 2010, 11.
25. ↩ Of course, working-class households save a portion of their income. On the other hand, capitalists also consume. At the macro-level, working-class savings are roughly offset by the capitalist consumption.
26. ↩ To see why an investment-GDP ratio of 36 percent is needed to stabilize the capitalist economy, consider that if an investment ratio is greater than 36 percent, then net investment as a ratio to GDP will be greater than 21 percent (after subtracting depreciation). Since the initial capital-output ratio is set at 3:1, if net investment is greater than 21 percent of GDP, the capital stock will grow at more than 7 percent (7=21/3), that is, faster than GDP. This implies rising capital-output ratio or falling rate of return on capital.
27. ↩ This rule of thumb implies very rapid energy efficiency improvement and substitutions of coal by other energies that may not materialize. In the future, energy efficiency growth and energy substitution may be somewhat accelerated. But world oil production is likely to peak in the near future. Peak oil will reduce China’s oil consumption and impose an additional constraint on China’s economic growth.
28. ↩ If China’s remaining recoverable coal turns out to be significantly greater than its official reserve, then the additional carbon dioxide emissions from coal burning would make any reasonable climate stabilization virtually impossible.
29. ↩ International Finance Corporation, et al., Charting Our Water Future, Executive Summary, 2009, http://mckinsey.com.
30. ↩ Liming Ye, Jun Yang, Ann Verdoodt, Rachid Moussadek, and Eric Van Ranst, “China’s Food Security Threatened by Soil Degradation and Biofuels Production,” August 1-6, 2010, paper presented at the 19th World Congress of Soil Science, Brisbane, Australia; The Chinese Academy of Agricultural Sciences, “Impact of Climate Change on Chinese Agriculture,” 2010, http://china-climate-adapt.org.

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1. China, jobs, and the global economy
2. Can the impossible happen?

The following interview is republished here from the authors’ site.

Beginning in the late 19^th century, four such structural crises can be distinguished: the crisis of the 1890s, the Great Depression, the crisis of the 1970s, and the current crisis. Two crises, the first and third ones, can be imputed to phases of decline of the profit rate, but neither the Great Depression nor the current crisis. The common point between these two crises was that they occurred during periods of “financial hegemony.” The mechanisms typical of a crisis of financial hegemony are distinct from those accounting for a profitability crisis.

The Crisis of Neoliberalism

Questions to Gérard Duménil and Dominique Lévy by Bruno Tinel.[1]

 Summary: At the end of the first decade of the 21^st century, the world entered into a major crisis, the fourth structural crisis in the history of modern capitalism. The crisis is not the effect of the declining trend of the profit rate as was the case in the previous structural crisis during the 1970s. Like the Great Depression, it was the the consequence of the endeavor on the part of capitalist classes and their allies in the upper fractions of management to remove all national and international barriers limiting their quest for power and income. The crisis began in the United States and was caused by the convergence of two categories of mechanisms, the progress of globalization and financialization, on the one hand, and the macro trajectory of disequilibria of the U.S; economy. It was exported to the rest of the world.

A few years ago, we coordinated a special issue of Actuel Marx[2], entitled The End of Neoliberalism? It was a collection of essays devoted to the nature, the contradictions, and the future of neoliberalism.[3]  Concerning our contribution, it was in no way our first exposition of the nature of neoliberalism, a central theme of our research since the mid-1990s.

Was it possible to foretell the end of neoliberalism? The mere fact of raising the issue was the clear expression of a degree of consciousness of the necessary limitation in time of this phase of capitalism. None of the authors contributing to the issue had, however, forecasted neither the modalities nor the speed or violence of this outcome. But, finally, neoliberalism is in crisis, and it will not recover unscathed.

Neoliberalism is a phase of capitalism into which it entered at the transition between the 1970s and 1980s. Its establishment must be understood as a political event, in which all aspects of the economy were involved. Its objective was the increase of the income and wealth of upper classes. It can be interpreted as a process of “restoration” since the progress of the income of these classes had been moderated during the first decades following Word War II in comparison to the rest of the population. Considered from the class viewpoint proper to this objective, neoliberalism was an astounding success, as the income of upper classes grew tremendously. This is a well-known observation. Neoliberalism dramatically increased income inequalities in the United States, in Europe, and within the Periphery.

The means used to achieve this reversal are rather familiar. A new discipline was imposed on workers. Tougher labor conditions, the stagnation (or regression) of purchasing powers, the erosion of welfare protection, and so on were the main aspects of this increased pressure on labor. Management was narrowly targeted to the interest of shareholders. To the year 2000, interest rates remained considerably larger than inflation rates. The main objective of macro policies became the control of price stability, rather than growth and the limitation of unemployment. Financial mechanisms were wildly deregulated. Free trade and the free international circulation of capitals were imposed by governments around the globe, thus allowing the deployment of transnational corporations worldwide. These two latter aspects define what is known as “neoliberal globalization”.

This new social order radically upset the previous configuration typical of the first postwar decades. Despite the violence (colonial wars, Vietnam War, and the like) proper to these earlier decades and ecological devastation, the postwar period manifested a number of “progressive” features—the progress of the purchasing power of the bulk of wage-earners, financial regulation, policies in favor of development and employment, etc.—with significant differences among countries.

2. You used the phrase “upper classes”. Could you explain the notion? The class patterns prevailing within the upper spheres of social categories have been a constant theme of investigation in your previous work. Who benefited from neoliberalism among those groups? What do you mean by “Finance”?

One important aspect of our analytical framework is the central role conferred on managerial classes, an analysis that echoes the perspective of what was called “Managerial capitalism” in the United States. To us, management refers to a social relationship, besides the ownership of the means of production in the strict sense, a component of class patterns. In this respect, there is a convergence between Jacques Bidet’s analysis and ours, even if the basic conceptual framework is not fully identical. Bidet sees in organization a “class factor” (a factor in the determination of class patterns) besides ownership. In our view, class patterns are “tripolar” (a ternary setting): capitalist classes, managerial classes, and popular classes. By “popular classes”, we mean production workers and other lower ranking wage-earners (commercial-clerical workers).

By “upper classes”, we jointly refer to capitalists and managers. These two classes benefited from neoliberalism, but their role in the implementation of neoliberalism was not the same, and their position within neoliberalism remains also distinct. During the period of emergence of neoliberalism, capitalist classes assumed a leadership. More specifically, we denote as “Finance” the upper fractions of capitalist classes and large financial institutions. This Finance led the struggle leading to the establishment of neoliberalism. Nothing would have been, however, possible in the absence of the collaboration of managerial classes, notably financial managers that became gradually central actors in these dynamics. We denote this alliance as the “neoliberal compromise”. Again, one must emphasize that significant differences are observed among countries. For example, for historical reason, the adhesion of managerial classes to the objectives and ideology of neoliberalism was slower in France than in the United States.

3. Did your analysis of neoliberalism evolve from your earlier book Capital Resurgent to The Crisis of Neoliberalism? What were the social foundations of the alliance or the “hybridization” process between these various segments of social classes, as described in the book?

From one book to the next, we certainly deepened our understanding of social relations. We developed the original framework of analysis long ago, but the recent book elaborates on new empirical observations. Notably, the rise of the share of upper wages within total income appears as new trend of crucial importance. In the United States, no overall decline of the share of wages is observed. Thus the rising share of upper wages mirrors the distinct dynamics of this category of wages (not exclusively very high wages). It is not possible to approach these trends in terms of fractions of surplus-value and value of the labor power, considering all wages globally. The bipolar approach no longer matches the features of contemporary capitalism. Three components must be distinguished: (1) profits, whose share in total income grew; (2) upper wages, whose share also increased; and (3) the wages of the great mass of wage-earners, whose share diminished. Marxism can only gain from such an updating of its social framework.

The current crisis clearly emphasizes the importance of managerial classes in contemporary capitalism. Very high wages, the golden parachutes of upper executives, the bonuses of traders and other forms of supplements are major themes in the criticism of the excesses of neoliberalism. This is, however, only the emerged tip of the iceberg, since much more than top executives are involved. In addition, it would be difficult to discuss the future of neoliberalism, independently of these managerial logics.

In the analysis of the relationship between the upper fractions of capitalist classes and top managers, we use the notion of “hybridization” to refer to a form of convergence between social positions: capitalists increasingly benefiting from high wages, and high managers entering gradually more into the sphere of capital ownership due to their high incomes. At the top of social pyramids, it becomes more difficult to distinguish between capitalists and managers. Much empirical and theoretical work remains to be done.

4. The book extensively uses a typology of various “social orders”, the expression of class dominations and the corresponding compromises. Could you summarize the main aspects?

At the basis of this analysis is the ternary framework of class patterns, capitalists, managers, and popular classes. By “social order’, we denote the prevailing configuration of powers among classes, dominations and compromises. A first criterion is the location of the compromise, either between capitalist classes and managers or between managers and popular classes. In the first instance, the compromise is established toward the Right; in the second instance, toward the Left. In this respect, the neoliberal compromise is a compromise to the Right, and the postwar social order, a compromise to the Left. This first criterion must be combined with a second. Which social class assumes the leadership in each compromise? For example, in the implementation of neoliberalism, capitalist classes led the movement. Under such circumstances, the compromise can be rather unambiguously situated “to the Right”. But such a compromise to the Right could also exist under the leadership of managerial classes, a social order to be located to the “Center-Right”. Symmetrically, if managerial classes assume the leadership, the compromise between managers and popular classes can be denoted as “Center-Left”, as during the first postwar decades. A popular leadership would mean a compromise truly to the Left.

5. The book distinguishes between neoliberalism, globalization, and financialization. What are the differences? In what respects the notion of “imperialism” is relevant to the analysis of neoliberalism?

Globalization and financialization hark back to historical processes, typical of capitalism in general. Neoliberalism refers to a phase of capitalism. The three notions are often confused. This is due to the fact that neoliberalism caused a sharp acceleration of the two former processes. Neoliberalism actually woke up the old capitalist demons that the postwar compromise had never fully exorcized.

Consider, for example, the framework of international economic relationships. The Bretton-Woods agreements in 1944 had introduced limitations to free trade and the free international movements of capitals. The United States never fully accepted this new framework and, from its first steps after World War II, began to act in favor of its elimination. Neoliberalism led the task to completion. The reason underlying this determination on the part of the United States are simple, and relates to the second part of the question concerning imperialism. Imperialism remained a central feature of the first postwar decades. Beginning during the interwar years, a number of countries, as in Latin America, developed models of industrialization based on “import substitution”, a form of resistance to the imperial features of the international division of labor. This meant strong protections against importations. Even if such development policies were tolerated during a few decades, the most advanced countries could not accept such frameworks.

The answer to the second part of the question can be summarized in a few words: “Neoliberal globalization” means “imperialism in the neoliberal era”.

6. In the crisis of neoliberalism, you see the fourth structural crisis since the end of the 19^th century. What is a structural crisis? What are the various types of such crises? Can the contemporary crisis be imputed to a decline of the profit rate as assumed in the name of a certain Marxist orthodoxy?

In Capital, Marx pointed to periods of broad perturbation following phases of declines of the profit rate. Such situations were seen as distinct from the recurrent “crises” proper to business-cycle fluctuations, the repetition of what is now known as a “recession”. We use the phrase “structural crises” to refer to such periods of perturbation, another way of saying “large crises”. But profitability crises are not the single category. Capitalism also underwent distinct processes that we call “crises of financial hegemony”.

Beginning in the late 19^th century, four such structural crises can be distinguished: the crisis of the 1890s, the Great Depression, the crisis of the 1970s, and the current crisis. Two crises, the first and third ones, can me imputed to phases of decline of the profit rate, but neither the Great Depression nor the current crisis. In these two latter instances the profit rate was entering into phases of limited recovery. The common point between these two crises was that they occurred during periods of “financial hegemony”, that is, phases in which the domination of capitalist classes, supported by its financial institutions, was unchallenged or almost so. The first financial hegemony was led by the new great bourgeoisie of the beginning of the 20^th century, having to a large extent delegated managerial functions to managers (the effect of the managerial revolution). Neoliberalism can be interpreted as a second financial hegemony. In both cases, however, the existing social order was destabilized by large crises in which a broad segment of the financial system was destroyed and production plunged.

The mechanisms typical of a crisis of financial hegemony are distinct from those accounting for a profitability crisis. They manifest the unsustainable character of social practices leading to the removal of all limitations to the extension of capitalist domination and to the unlimited expansion of the wealth of these classes. This is the common point between the Great Depression and the current crisis. Concerning their social basis, the main difference between these two crises of financial hegemony is the larger role played by the upper fractions of managerial classes in the present crisis.

7. What are the main aspects of these unsustainable practices?

Two major aspects must be emphasized. The first aspect is the broad set of mechanisms related to financialization, notably financial globalization and the quest for high incomes by all means. The second aspect is specific to the United States. It is the economic (macroeconomic) trajectory of this country, in particular the growth of domestic and external indebtedness. It is the convergence of these two sets of mechanisms, in the context of the housing boom, which created the conditions for the crisis and explains its specific features.

8. The relationship between the excesses of financialization and globalization is rather easy to understand. But in what sense the quest of high income on the part of upper classes was unsustainable? You suggest that the demands of upper classes in this respect led to the production of a “fictitious surplus”. What do you mean?

In a sense, it is possible to contend that the two first elements, financialization and globalization, were means in the achievements of the third element, the quest for high incomes at the top of the income pyramid, the objective of neoliberalism. The limits that the New Deal and the postwar compromise had placed to the expansion of financial mechanisms, to financial globalization, and to the development of transnational corporations, were gradually lifted. Such trends were already manifest prior to neoliberalism, but a tremendous acceleration occurred during the three decades of neoliberalism. Actually, neoliberalism has, itself, a history in which various phases can be distinguished. The establishment of neoliberalism during the 1980s was difficult, included in the United States; the 1990s marked an acceleration (and the extension to other regions of the world, with repeated crises); and in the 2000, a form of explosion was observed.

Deregulation, the ensuing wave of financial innovation, the growth of financial investment within each country and worldwide, the growth of the investments of transnational corporations (direct investments abroad), etc., were all means aiming at the increase of the income of upper classes. New accounting procedures (in which assets are estimated at prices prevailing on markets or calculated by mathematical models) and the externalization of risky financial assets out of balance sheets are typical of the procedures that inflated the assessment of profits. These profits became fictitious to a significant extent and, simultaneously, justified the payment of tremendous real supplements (bonuses, stock-options, and the like).  The border between collective blindness and swindle was blurred. Deregulation and the preponderance of global financial mechanisms over domestic mechanisms deprived monetary authorities of their ability to control these mechanisms. The analysis of these trends is an important component of the demonstration in the book.

9. What do you mean by “trajectory of the U.S. economy”? In what sense is it unsustainable? What is the link between the quest for high income on the part of upper classes and the slowdown of accumulation on U.S. territory?

The main components of the trajectory of the U.S. economy are: (1) the gradual decline of the rate of accumulation of nonfinancial corporations and the rise of households’ consumption; (2) domestic indebtedness; (3) the deficit of foreign trade and the corresponding financing of the U.S. economy by the rest of the world. As a result of the rise of real interest rates (up to 2000), of the lavish distribution of dividends, and of the buybacks by corporations of their own shares, neoliberalism was at the origin of a process of disaccumulation on the part of nonfinancial corporations. Profits are less and less conserved by corporations to the end of investment, as they is more and more paid out as income to the benefit of high income brackets. The large flows of capital income and the high wages paid to households provoked the tremendous rise of the expenses of households (consumption and housing), despite the stagnation of the purchasing power of the great mass of wage-earners. This trajectory can be interpreted as a mix of overconsumption and under-accumulation. Saving rates plunged to negative values.

A problem with this expansion of demand could have been the rise of inflation. But, in the context of globalization, a growing share of this demand was directed toward foreign countries, generating a flow of imports increasingly larger than the U.S. exports toward the rest of the world. There was no other means to sustain the demand still directed toward local producers than to stimulate total demand, despite its excessive volume. To this end, it was necessary to entice U.S. potential buyers into debt by way of a lax monetary (that is, “credit”) policy. As a growing fraction of this demand benefited foreign producers, the deficit of trade increased in parallel to the rise of domestic loans, and this external deficit caused the growing financing of the U.S. economy by the rest of the world.

10. What was the role of the expansion of credits during the last stages of the progress of financialization? In what sense, the growth of mortgages was not simply the expression of deficient regulation but one link within an overall chain of macro mechanisms? Or, to formulate the same question differently, why the U.S. housing sector destabilized the financial sector?

After 2000, the growth of households’ debt was rapid, mostly on the part of upper income brackets. Gradually, more and more households with low or uncertain income were also involved. This is where the now well-known devices of subprime loans, securitization, and insurance against defaults played a central role. But all these devices were only the most conspicuous part of the overall explosion of financial mechanisms (in particular, derivative markets) after 2000. Thus, the relationship between the macro trajectory of the U.S. economy and the expansion of financial mechanisms is easy to understand. Its two facets, national and international, are involved, given that about one half of the securities resulting from securitization (asset backed securities) were sold to foreign investors.

The first manifestations of the dubious character of these loans (when the first signs of delinquencies were observed) acted like a seismic wave, destabilizing an otherwise fragile financial structure. The early symptoms were a growing reciprocal suspicion among financial institutions, resulting in a liquidity crisis on the interbank market (the lost capability to obtain short-term financing from other banks when necessary). Upper classes had drawn huge income flows from expected profits, fictitiously embodied within the value of the financial assets of financial corporations, often dramatically overvalued. The adjustment downward of these values provoked dramatic losses in the accounts of these corporations often considerable fractions of the own funds of these institutions, causing the fall of stock-market indices and the wave of bankruptcies.

Obviously, a stricter financial regulation (notably the preservation of the earlier New Deal framework) would have prevented such developments. First in the list of possible measures, comes the prohibition of subprime loans (impossible in a country like France); second, the prohibition or the strict regulation of securitization as conducted by private, unregulated, “vehicles”, or its limitation to the big agencies or Government sponsored enterprises (such as Fanny May).  The regulation of insurances on defaults and derivative markets was a third possible component. If such measures had been taken, the problem would, however, have been met through distinct channels, since the levels of demand to domestic producers had to be maintained by expansive credit policy, given the fraction of this demand directed toward foreign producers. The earlier statement must be repeated here. The growth of the domestic debt was a requirement in defense of economic activity on U.S. territory. A substitute to the growth of the debt of households was the growth of government debt, as became obvious in the treatment of the crisis.

11. The role of government spending, in particular military expenses, is frequently emphasized as an important factor in the stimulation of demand after 2001. What is your assessment?

We already implicitly answered to this question. After 2000, the main factor accounting for the stimulation of demand was the rising debt of households, not government expenses or to a limited extent.

12. Referring implicitly to the view that efficiency and social justice come together, Keynesian or Kaleckian economists frequently contend that the crisis was the consequence of the bias in income distribution in favor of upper income brackets. This view is also commonly held within the radical Left in France. What do you think?

This diagnosis is formulated in various manners. The simplest form refers to the respective shares of wages and profits within value added. “Profits” are defined in a broad sense, including government revenue, a much larger fraction of income than profits proper. The idea is that this supposedly diminishing share of wages had a negative impact on the overall level of demand. A first problem with this interpretation is that the share of wages did not diminish in the United States, the country in which the crisis originated. As stated earlier, the current crisis is neither due to overaccumulation or under-consumption. It must rather be interpreted as a crisis of overconsumption and under-accumulation.

A more sophisticated view elaborates on the observation that the bias in income distribution is concentrated within total wages, to the detriment of the great mass of wage-earners, in particular the lowest brackets. We are told that, as a reaction to the stagnation or regression of their purchasing powers, these households––the victims of neoliberalism—resorted gradually more to mortgages. (In the United States, such loans are used not only to finance residential investment but also consumption expenses.) Thus, a direct link is established between stagnating or declining purchasing powers and the growth of indebtedness. A first problem with this interpretation is that rules exist in a country to limit borrowing, either based on the capability to pay of borrowers or responding to the management of the macroeconomy. The lax character of these rules and the requirement of macro policies (as explained earlier in relation to the disequilibria of the U.S. economy) are involved here, not the excessive eagerness of households to borrow. A second problem is that the crisis was caused by a broad set of mechanisms besides subprime lending.

Abstracting from the ecological implications of growth, the struggle for the progress of the purchasing power of the great mass of wage-earners is, obviously, justified. And this is all the more true within a social order in which profits are distributed lavishly to the upper income brackets and, only to a small extent, used to support growth and employment. But it is not true that the decline of purchasing powers was a significant cause of the crisis or that the rise of purchasing powers would have avoided the crisis.

It is difficult to convince people in this respect since the explanation of the crisis by deficient purchasing powers is so simple that it is easily understood. It is also “politically correct” and efficient. These reasons explain why it is often put forward by the activists of political parties or other organizations but, from the viewpoint of economic mechanisms, it is wrong.

13. A number of economists emphasize the role of macro policies. They contend that important mistakes were made, notably Alan Greenspan’s lax conduct of monetary policy. Could such statements be, correspondingly, understood as implicit justifications of the restrictive policies implemented in Europe since the early 1990s? 

This statement is evocative of the analysis of the Great Depression by Milton Friedman and Anna Schwartz, imputing the severity of the contraction to a mistake in the conduct of monetary policy. This interpretation is not convincing.

During the second half of the 1990s, production was sustained in the United States by the boom of information technologies. The boom temporarily hid the underlying downward trend of accumulation. When the boom came to a halt in 2001, the recession was severe. As is traditional in the conduct of monetary policy, Greenspan reacted by lowering the Federal funds rate. This policy was pushed to the limit, as rates were diminished to levels inferior to inflation. But the contraction of growth rates was long and difficult to reverse despite the stimulation of residential investment. This determination was not the expression of Greenspan “laxness” but of the requirement to boost the economy, given that the basic tenets of neoliberalism were considered sacrosanct. From the first steps of the recovery, Greenspan began, without delay, to raise interest rates—17 small steps upward of 0.25 percent each, up to 5.25 percent. Simultaneously, Greenspan was bitterly complaining that these increased were not passed on mortgage rates. And the housing boom continued. In 2006, during the last step of this boom, the wave of delinquencies took rapidly dramatic proportions. Then, the situation was out of control.

It is a deep-seated belief in the European Left that, in the average, the interest rates of the European Central Bank (ECB) are higher than the Federal funds rates. Despite the hostile stand of the ECB toward inflation, this assertion is deprived of empirical foundations. The interest rates of the ECB are not larger than those of the Federal Reserve. There is no “worst” neoliberalism in Europe than in the United States in this respect. The crisis came from the United State, not from Europe for reasons which were introduced earlier. On the one hand, the United States acted as leader concerning the basic neoliberal trends such as financialization, globalization, and the quest for high income. On the other hand, the international hegemony of the United States gave the country the opportunity to continue a trajectory of growing disequilibria during almost three decades.

Many criticisms can be made to Greenspan, notably his blind faith in the discipline of markets and, correlatively, his determination to deregulate, but not a lax monetary policy. Greenspan is not more or less responsible for the contemporary crisis than other neoliberal leaders in the world. Involved is not a mistake in the conduct of monetary policy but a collective political crime against humanity, the utmost violence toward their own people and all peoples around the globe by ruling minorities in neoliberalism.

14. What are the main disequilibria the U.S. economy must confront in order to correct its trajectory and maintain his international domination? You refer to a process of “re-territorialization” of production. In what sense?

The assertion that a country like the United States spends more than its income is equivalent to the statement that the country imports more from the rest of the world than it exports to the rest of the world. Correlatively, the rest of the world lends money to the United States. A more accurate formulation is that the rest of the world “finances” the economy of the United States, since this support is not limited to loans in the strict sense but also includes the purchase of stock shares issued by U.S. corporations. From the viewpoint of the U.S. economy in general, “spending more than income” means “borrowing”. The domestic and the external debts are the two faces of the same coin. The consequence is that the domestic debt and the trade deficit had to be jointly curbed.

How can the United States jointly control the two trends toward increasing disequilibria? One possible answer is “protectionism”. This policy would, however, jeopardize the entire system of transnational corporations, the main pillar of the U.S. hegemony. By increasing international competitiveness? This would require a revolution in neoliberal management, jointly with efficient policies in favor of industry.

Another option would be to let internal and external debts grow, as was the case prior to the crisis, but mastering the corresponding risks. Is there a less risky way of increasing the debt of households than the one used prior to the collapse of the housing market? Can the government debt grow indefinitely? And will foreign countries go on financing the U.S. economy? Very difficult.

In any case, there will be not preservation in the long run of the domination of the United States without a re-territorialization of production, that is, new dynamics of local production. Is it compatible with neoliberal options? The Obama Administration dreams of a new boom of green technologies evocative of the boom of information technologies. The nostalgia of the type of neoliberalism that worked apparently well during the second half of the 1990s and marked the heydays of this social order can be easily understood. But a boom of technologies is not the sort of thing that can be “decided” from above. The difficulty would be to lead such a movement, ahead of other countries, and to preserve this advance. To initiate such a boom would already be a deed.

15. You consider that the new post-neoliberal  social order in preparation could mean the end of free trade and the free mobility of capital. On what grounds did you come to this conclusion? You repeatedly refer to national models of developments. What is the relevance of such frameworks within the contemporary globalized economy? Do countries and states enjoy a sufficient degree of autonomy?

Given what has just been said, one will understand that our viewpoint concerning free trade and the free movements of capital is more nuanced. Considering the situation of the United States, we believe that it will be extremely difficult, almost impossible, for this country to correct its economic trajectory within the framework of neoliberal globalization. Concerning the countries of the periphery, we consider that the preservation of the neoliberal framework is not a desirable option.

Numerous protectionist measures have already been taken in the United States, concerning for example the restrictions posed to foreign direct investment in the name of “national security”. It is very likely that these trends will be continued. Between economic super-efficiency and protectionism, the race is already on, and it is difficult to foretell the outcome. But the cost of protectionism would be such for transnational corporations that it is difficult to consider seriously the option of a stark reintroduction of international barriers to trade.

With respect to the rest of the world now engaged within the neoliberal international division of labor––a highly imperialist configuration—the cost of protectionism could be large in the short run. This would mean redirecting national economies toward new paths, away from the trajectories along which they are now progressing. The book refers to the frameworks of industrialization by import substitution as implemented after the Great Depression in Latin America. If the viewpoint here is more “normative” than “predictive”, we believe that this is the path that should be followed but, rather, within a context of “regionalization”, meaning regions of the world. New autonomies must be established—re-established—but not in the direction of isolationism. The “unwinding” of neoliberalism globalization is, however, an urgent task.

16. The previous crisis to which the current crisis can be more adequately compared is the Great Depression. What can be learnt from the New Deal and the first postwar decades concerning a post-neoliberal perspective?

A widely held view in France, concerning the New Deal, is that deliberate large deficits were the main component of the policy package. If it is true that deficits were large during the 1930s, this situation was much more a consequence of the Depression than the outcome of an active policy. (Deficits increased during the first phase of the crisis under the Hoover Administration.) Important public works were undertaken to fight unemployment and “prime the pump”, according the phrase used in those years, but there was  no “deliberate” deficits.

The New Deal must be understood as a broad political phenomenon, in which social alliances were reshuffled and the interests of Finance immediately contained by new regulations and taxes. Officials in the administration played a pivotal role, promoting the direct action of the Government. The Roosevelt Administration rapidly sought alliance with unions to confront employers, challenging “big business” and big capitalist owners. A new legislation was implemented aiming at an improved recognition of the rights of workers, supplemented by welfare measures as the public retirement system known as “Social Security”. (This system is still, today, the main source of income for a large fraction of elderly people.)

The analysis of the period also reveals that the balance of social forces in the new social compromise between managers and popular classes was significantly altered at the end of the war. The new content of the compromise involved the moderation of the measures taken in favor of popular classes and of those intending to the limitation of capitalist interests. The outcome was a “Center-Left” compromise. The course of events in France, from the Popular Front to the postwar social democracy, was not very different.

17. What could be the nature of a post-neoliberalism? A social compromise similar to the one that prevailed after World War II?

Among the possible alternatives to neoliberalism, it seems quite natural to think of a return to a social order similar to the postwar compromise. Neoliberalism disarticulated this compromise; the fall of neoliberalism would lead to its restoration. During the two financial hegemonies, the unchecked domination of capitalist classes led to the unsustainable exacerbation of mechanisms aiming at the maximization of upper incomes, and it is certainly difficult to imagine that neoliberal trends will be prolonged after the crisis. The requirement of new controls is now urgently felt. In addition, in the United States, the dimension of the task to be performed to fend off a sharp decline of the international hegemony of the country renders such an adjustment all the more necessary. In the set of alternative social orders two other options are opened. Besides a “Center-Left” configuration under the leadership of managers as after World War II, one should not overlook the other possible option, still a compromise to the Right but in which the leadership would be transferred to managerial classes—a “Center-Right” configuration. In such a society (and economy), the action of financial institutions would be limited and the power and income of capitalist classes contained, but both “to some extent”. The basic features of a compromise to the Right would be preserved, notably the concentration of income at the top of social hierarchies. What would be the fate of popular classes? Probably not much better than during thirty years of neoliberalism.

The prevalence of one or the other option will be determined by a combination of, on the one hand, mere economic requirements and imperial strategies (the preservation of the hegemony of the country worldwide) and, on the other hand, the direction and the radicalism of social struggles. What resistance capitalist classes would oppose to the end of their leadership? Entering a new compromise in which capitalist classes would no longer act as leaders supposes a sufficient degree of “flexibility” on the part of these classes (the capability to adapt to new historical circumstances). Or shall capitalist classes balk at this comparative demotion? Abstracting from these rivalries among upper classes, the crucial factor will be the capability of popular classes to push in the direction of a new social compromise to the Left.

18. Given the reference of a post-neoliberalism, should we link it to the end of U.S. hegemony? You refer to a “new global governance”.

Between neoliberalism and international hegemony there is no strict relationship. The continuation of neoliberalism after the crisis could mean the end of U.S. hegemony—given that, most likely, it would initiate a shift toward a “more extreme” Right. If it were efficiently conducted, a “Center-Right” option, as suggested above, could considerably prolong U.S. hegemony (slow down its decline). The outcome will also depend on the action of potential challengers on the part of the so-called emerging countries. A likely scenario is the continuation of the downward trend of U.S. hegemony, whatever its rapidity, but this does not imply the establishment of a real “substitute” to the towering power of this country, substituting China for the United States. Involved is rather the gradual emergence of a multipolar world, around regional leaders: the United States in the North-Atlantic word, Brazil in South America, China and Japan in Asia.

Such a configuration emphasizes the requirement of the dramatic strengthening of the power of international institutions, the embryonic forms of a “world state”. In the economic sphere, global regulatory frameworks and policies are, and will more and more be, as necessary as within individual countries. The current crisis testifies to this requirement. The question is straightforwardly posed of an increased role of the IMF to support countries confronting a shortage of foreign reserves. And, underlying these mechanisms is the much more fundamental issue of the creation of a genuinely international currency to which the United States directly opposed after World War II.

Note that, referring to the emergence of a global state, we do not point the “politically correct” framework of “the democracy of the citizens of the world”, but to an emerging global state determined by inter-imperialist hierarchies, themselves the echoes of class hierarchies.

19. What are the new perspectives opened by the structural crisis for popular classes within countries of the center and the periphery?

As during any other period of major perturbation, the current crisis creates new opportunities but, obviously, the crisis does not predetermine any outcome. The example of the interwar years is quite telling in this respect. The various experiences of intense class struggle during these decades led to social configurations as distinct as the New Deal, the Popular Front, or Nazism.

In each country, class struggle on the part of popular classes must take advantage of the opportunities created by the tensions prevailing among the fractions of upper classes. A government aiming at a degree of contention of capitalist interests may seek the support of popular classes. President Obama will not be able to implement the necessary transformations without such a support, and the welfare component of his program (notably concerning health insurance) reveals a degree of consciousness of this requirement. But it is easy to understand that the issue here is one of “degrees”, and that the situation is highly unstable (and susceptible of reversal). “Pushing” along the appropriate path is the historical responsibility of popular classes. In a country like France, whose present government straightforwardly embodies the interests underlying the neoliberal endeavour and where the “Left” that can ambition to win the elections adhered to neoliberal options, the requirement to fight is not less acute.

Internationally, the emergence of a multipolar world also creates significant opportunities. As during the first decades after World War II, there is a relationship between international hierarchies, on the one hand, and the various options opened to the peoples of particular countries to move toward alternative social orders, on the other hand. The bipolar configuration of the postwar decades was a crucial factor contributing to the emancipation of “third-world” countries in the periphery as in the Bandung conference. The contemporary movement toward a multipolar world could have similar effects. But, again, the capability to organize and struggle remains the central factor.

This new context creates a possibility for an enhanced differentiation of social orders within distinct countries, notably within the periphery. Straightforwardly, this means that a number of countries could progress along “social-democratic” trends, as a few countries did in Latin America in their determination to resist neoliberal pressures while other countries continued their path to the Right. In a multipolar world, the chances of political diversity are larger, and this opens opportunities to the peoples in search of emancipation.

Related posts:

1. Financialization and hegemony

We have previously published another piece by Hart-Landsberg.  The first article here is followed by a second, closely related piece (‘China and the Jobs Issue’) by the same author; they originally appeared here and here.

Globalization and Its Consequences

Martin Hart-Landsberg

Although capitalism has always been a global system, the international integration of production and finance and our dependence on cross-border activities seems greater than ever before.  At the risk of oversimplifying, we now have a world system within which Latin America, Africa and the Middle East specialize in the production and export of primary commodities, increasingly to East Asia.  East Asia operates as the world’s manufacturing hub, exporting final products to the developed capitalist world, especially the United States.  And the United States specializes in providing the finance that underpins the international production system and developed capitalist country consumption.

While this global system has done little for popular well-being, elites have clearly profited.

As the Wall Street Journal reports:

According to a new report by Boston Consulting Group out today, the number of millionaire households in the world grew by 12.2% in 2010, to 12.5 million. (BCG defines millionaires as those with $1 million or more in investible assets, excluding homes, luxury goods and ownership in one’s own company).

The U.S. continues to lead the world in millionaires, with 5.2 million millionaire households, followed by Japan with 1.5 million millionaire households, China with 1.1 million and the U.K. with 570,000. Singapore leads the world in “millionaire density,” or the percentage of millionaires, with 15.5% of its population now millionaire households.

The most important trend, however, is the global wealth distribution. According to the report, the world’s millionaires represent 0.9% of the world’s population but control 39% of the world’s wealth, up from 37% in 2009. Their wealth now totals $47.4 trillion in investible wealth, up from $41.8 trillion in 2009.

Those higher up the wealth ladder also gained. Those with $5 million or more, who represent 0.1% of the population, controlled 22% of the world’s wealth, up from 20 percent in 2009.

This growing concentration of wealth is increasingly underpinned by the globalization process itself.  Corporate mobility creates a framework within which governments compete for investment by offering the most attractive labor conditions possible.  That translates into a race to the bottom in terms of majority living and working conditions.

China provides an excellent example.  China plays a critical role as the final assembly platform for East Asia’s export driven growth.  As the Asian Development Bank explains:

there is the cluster of highly interdependent, open, and vibrant economies in East Asia and Southeast Asia that include the NIEs, the PRC, and the more advanced countries of ASEAN. With the PRC at the center of the assembly process and with exports going mainly to the U.S. and Europe, production in and trade among these economies have been increasingly organized through vertical specialization in networks, with intense trade in parts and components, particularly in the Information, Communication and Technology (ICT) and electrical machinery industries.

China’s unique position is highlighted by the fact that it is the only country in the region that runs a deficit in components trade, and whose exports are overwhelmingly final products.  It is this unique position that has enabled China to increase its share of world exports of ICT products (such as computers and telecom equipment) from 3 percent in 1992 to 24 percent 2006, and its share of electrical goods such as semiconductors and semiconductor devices) from 4 percent to 21 percent over the same period.  Of course, these are not truly Chinese exports, but rather exports assembled/produced in China.  Foreign corporations are responsible for approximately 60 percent of all Chinese exports; their share is 88 percent for high-tech goods.

All this production has generated real wealth for some Chinese.  As the BCG study highlights, China now hosts the third greatest number of millionaires and is closing fast on Japan for the number two position.  But what is happening to the manufacturing workers in China that produce the goods consumed by people in other countries?

Perhaps most surprising, according to a new study by the Bureau of Labor Statistics (BLS), the actual number of manufacturing workers in China is on the decline.  That’s right.  China is not stealing jobs from anyone.  The globalization process is erasing jobs everywhere, including in China, the “world’s workshop.”

The BLS drew upon official Chinese statistics to create a consistent employment series.  They found that the sum of manufacturing employment in urban enterprises and manufacturing employment in township and village enterprises (TVEs) provided the best estimate for the total number of Chinese manufacturing workers.  As the last two columns of the table below show, the absolute number of manufacturing workers in China has declined from a peak of 126.09 million in 1996 to 112.63 million in 2006.  The total drops even more dramatically in the following two years but that is largely because the Chinese government decided to drop self-employed workers from the TVE manufacturing employment series beginning in 2007.

Thus, despite becoming the workshop of the world, there has been no increase in the total number of Chinese workers employed in manufacturing.  That means the enormous increase in manufacturing production has been underpinned by an increase in the capital intensity of production and, perhaps even more importantly, a significant increase in the pace of work and length of the work week.  In terms of the latter, the BLS reports that some 25% of urban manufacturing workers were on the job between 41-48 hours a week and 35% worked more than 48 hours a week.   Work hours are generally longer in the TVEs.  No wonder that we have seen a dramatic increase in labor struggles in China.

The BLS also estimated the hourly compensation of Chinese manufacturing workers.  It is worth emphasizing that the figures in the table below represent compensation, which means wages plus all social benefits.  Moreover, they are in nominal terms, which means that they are not adjusted for inflation.  This is critical because inflation in China has been substantial.   Some researches believe that Chinese workers suffered a decade of wage stagnation until 2002.  That means that the nominal compensation increases shown in the table below may well reflect both wage catch-up and higher costs for an unchanged package of social benefits.

As the table shows, after several years of significant gains, Chinese manufacturing workers now earn an average of only $1.36 per hour.  In relative terms, Chinese hourly labor compensation costs in 2008 are roughly 4% of those in the United States.   They even remain considerably below those in Mexico.

What is especially significant about the above is that China is the world’s star economic performer.   If Chinese workers are finding their manufacturing jobs disappearing and their compensation limited, no wonder that workers in other countries are facing serious challenges.

We dont have a broken system.  Rather we have a system that works very efficiently to enrich an ever smaller number of people.  Those people think that it is working just fine.

China and the Jobs Issue

Related posts:

1. What will happen in China?

No related posts.

We’ve published a couple of things (an interview and a co-authored paper) by Robinson previously. The piece below has appeared on Znet and Aljazeera.

Under the conditions of capitalist globalisation the state’s contradictory functions of accumulation and legitimation cannot both be met. The economic crisis intensifies the problem of legitimation for dominant groups so that accumulation crises, such as the present one, generate social conflicts and appear as spiralling political crises. In essence, the state’s ability to function as a “factor of cohesion” within the social order breaks down to the extent that capitalist globalisation and the logic of accumulation or commodification penetrates every aspect of life, so that “cohesion” requires more and more social control.

Global Capitalism and 21st Century Fascism

William I. Robinson

The crisis of global capitalism is unprecedented, given its magnitude, its global reach, the extent of ecological degradation and social deterioration, and the scale of the means of violence. We truly face a crisis of humanity. The stakes have never been higher; our very survival is at risk. We have entered into a period of great upheavals and uncertainties, of momentous changes, fraught with dangers – if also opportunities.

I want to discuss here the crisis of global capitalism and the notion of distinct political responses to the crisis, with a focus on the far-right response and the danger of what I refer to as 21st century fascism, particularly in the United States.

Facing the crisis calls for an analysis of the capitalist system, which has undergone restructuring and transformation in recent decades. The current moment involves a qualitatively new transnational or global phase of world capitalism that can be traced back to the 1970s, and is characterised by the rise of truly transnational capital and a transnational capitalist class, or TCC. Transnational capital has been able to break free of nation-state constraints to accumulation beyond the previous epoch, and with it, to shift the correlation of class and social forces worldwide sharply in its favour – and to undercut the strength of popular and working class movements around the world, in the wake of the global rebellions of the 1960s and the 1970s.

Emergent transnational capital underwent a major expansion in the 1980s and 1990s, involving hyper-accumulation through new technologies such as computers and informatics, through neo-liberal policies, and through new modalities of mobilising and exploiting the global labour force - including a massive new round of primitive accumulation, uprooting, and displacing hundreds of millions of people – especially in the third world countryside, who have become internal and transnational migrants.

We face a system that is now much more integrated, and dominant groups that have accumulated an extraordinary amount of transnational power and control over global resources and institutions.

Militarised accumulation, financial speculation – and the sacking of public budgets

By the late 1990s, the system entered into chronic crisis. Sharp social polarisation and escalating inequality helped generate a deep crisis of over-accumulation. The extreme concentration of the planet’s wealth in the hands of the few and the accelerated impoverishment, and dispossession of the majority, even forced participants in the 2011 World Economic Forum’s annual meeting in Davos to acknowledge that the gap between the rich and the poor worldwide is “the most serious challenge in the world” and is “raising the spectre of worldwide instability and civil wars.”

Global inequalities and the impoverishment of broad majorities mean that transnational capitals cannot find productive outlets to unload the enormous amounts of surplus it has accumulated. By the 21st century, the TCC turned to several mechanisms to sustain global accumulation, or profit making, in the face of this crisis.

One is militarised accumulation; waging wars and interventions that unleash cycles of destruction and reconstruction and generate enormous profits for an ever-expanding military-prison-industrial-security-financial complex. We are now living in a global war economy that goes well beyond such “hot wars” in Iraq or Afghanistan.

For instance, the war on immigrants in the United States and elsewhere, and more generally, repression of social movements and vulnerable populations, is an accumulation strategy independent of any political objectives. This war on immigrants is extremely profitable for transnational corporations. In the United States, the private immigrant prison-industrial complex is a boom industry. Undocumented immigrants constitute the fastest growing sector of the US prison population and are detained in private detention centres and deported by private companies contracted out by the US state.

It is no surprise that William Andrews, the CEO of the Corrections Corporation of America, or CCA – the largest private US contractor for immigrant detention centres – declared in 2008 that: “The demand for our facilities and services could be adversely affected by the relaxation of enforcement efforts … or through decriminalisation [of immigrants].” Nor is it any surprise that CCA and other corporations have financed the spate of neo-fascist anti-immigrant legislation in Arizona and other US states.

A second mechanism is the raiding and sacking of public budgets. Transnational capital uses its financial power to take control of state finances and to impose further austerity on the working majority, resulting in ever greater social inequality and hardship. The TCC has used its structural power to accelerate the dismantling of what remains of the social wage and welfare states.

And a third is frenzied worldwide financial speculation - turning the global economy into a giant casino. The TCC has unloaded billions of dollars into speculation in the housing market, the food, energy and other global commodities markets, in bond markets worldwide (that is, public budgets and state finances), and into every imaginable “derivative”, ranging from hedge funds to swaps, futures markets, collateralised debt obligations, asset pyramiding, and ponzi schemes. The 2008 collapse of the global financial system was merely the straw that broke the camel’s back.

This is not a cyclical but a structural crisis - a restructuring crisis, such as we had in the 1970s, and before that, in the 1930s - that has the potential to become a systemic crisis, depending on how social agents respond to the crisis and on a host of unknown contingencies. A restructuring crisis means that the only way out of crisis is to restructure the system, whereas a systemic crisis is one in which only a change in the system itself will resolve the crisis. Times of crisis are times of rapid social change, when collective agency and contingency come into play more than in times of equilibrium in a system.

Responses to the crisis and Obama’s Weimar republic in the United States

In the face of crisis there appear to be distinct responses from states and social and political forces. Three stand out: global reformism; resurgent popular and leftist struggles from below; far-right and 21st century fascism. There appears to be, above all, a political polarisation worldwide between the left and the right, both of which are insurgent forces.

A neo-fascist insurgency is quite apparent in the United States. This insurgency can be traced back several decades, to the far-right mobilisation that began in the wake of the crisis of hegemony brought about by the mass struggles of the 1960s and the 1970s, especially the Black and Chicano liberation struggles and other militant movements by third world people, counter-cultural currents, and militant working class struggles.

Neo-fascist forces re-organised during the years of the George W Bush government. But my story here starts with Obama’s election.

The Obama project from the start was an effort by dominant groups to re-establish hegemony in the wake of its deterioration during the Bush years (which also involved the rise of a mass immigrant rights movement). Obama’s election was a challenge to the system at the cultural and ideological level, and has shaken up the racial/ethnic foundations upon which the US republic has always rested. However, the Obama project was never intended to challenge the socio-economic order; to the contrary; it sought to preserve and strengthen that order by reconstituting hegemony, conducting a passive revolution against mass discontent and spreading popular resistance that began to percolate in the final years of the Bush presidency.

The Italian socialist Antonio Gramsci developed the concept of passive revolution to refer to efforts by dominant groups to bring about mild change from above in order to undercut mobilisation from below for more far-reaching transformation. Integral to passive revolution is the co-option of leadership from below; its integration into the dominant project. Dominant forces in Egypt, Tunisia, and elsewhere in the Middle East and North America are attempting to carry out such a passive revolution. With regard to the immigrant rights movement in the United States - one of the most vibrant social movements in that country -moderate/mainstream Latino establishment leaders were brought into the Obama and Democratic Party fold – a classic case of passive revolution - while the mass immigrant base suffers intensified state repression.

Obama’s campaign tapped into and helped expand mass mobilisation and popular aspirations for change not seen in many years in the United States. The Obama project co-opted that brewing storm from below, channelled it into the electoral campaign, and then betrayed those aspirations, as the Democratic Party effectively demobilised the insurgency from below with more passive revolution.

In this sense, the Obama project weakened the popular and left response from below to the crisis, which opened space for the right-wing response to the crisis - for a project of 21st century fascism - to become insurgent. Obama’s administration appears in this way as a Weimar republic. Although the social democrats were in power during the Weimar republic of Germany in the 1920s and early 1930s, they did not pursue a leftist response to the crisis, but rather side-lined the militant trade unions, communists and socialists, and progressively pandered to capital and the right before turning over power to the Nazis in 1933.

21st century fascism in the United States

I don’t use the term fascism lightly. There are some key features of a 21st century fascism I identify here:

1. The fusion of transnational capital with reactionary political power
   This fusion had been developing  during the Bush years and would likely have deepened under a McCain-Palin White House. In the meantime, such neo-fascist movements as the Tea Party as well as neo-fascist legislation such as Arizona’s anti-immigrant law, SB1070, have been broadly financed by corporate capital. Three sectors of transnational capital in particular stand out as prone to seek fascist political arrangements to facilitate accumulation: speculative financial capital, the military-industrial-security complex, and the extractive and energy (particularly petroleum) sector.
2. Militarisation and extreme masculinisation
   As militarised accumulation has intensified the Pentagon budget, increasing 91 per cent in real terms in the past 12 years, the top military brass has become increasingly politicised and involved in policy making.
3. A scapegoat which serves to displace and redirect social tensions and contradictions
   In this case, immigrants and Muslims in particular. The Southern Poverty Law Centre recently reported that “three strands of the radical right - hate groups, nativist extremist groups, and patriot organisations – increased from 1,753 groups in 2009 to 2,145 in 2010, a 22 per cent rise, that followed a 2008-9 increase of 40 per cent.”A 2010 Department of Homeland Security report observed that “right wing extremists may be gaining new recruits by playing on the fears about several emergency issues. The economic downturn and the election of the first African American president present unique drivers for right wing radicalisation and recruitment.” The report concluded: “Over the past five years, various right wing extremists, including militia and white supremacists, have adopted the immigration issue as a call to action, rallying point, and recruitment tool.”
4. A mass social base
   In this case, such a social base is being organised among sectors of the white working class that historically enjoyed racial caste privilege and that have been experiencing displacement and experiencing rapid downward mobility as neo-liberalism comes to the US – while they are losing the security and stability they enjoyed in the previous Fordist-Keynesian epoch of national capitalism.
5. A fanatical millennial ideology involving race/culture supremacy embracing an idealised and mythical past, and a racist mobilisation against scapegoats
   The ideology of 21st century fascism often rests on irrationality - a promise to deliver security and restore stability is emotive, not rational.  21st century fascism is a project that does not - and need not - distinguish between the truth and the lie.
6. A charismatic leadership
   Such a leadership has so far been largely missing in the United States, although figures such as Sarah Palin and Glenn Beck appear as archetypes.

The mortal circuit of accumulation-exploitation-exclusion

One new structural dimension of 21st century global capitalism is the dramatic expansion of the global superfluous population - that portion marginalised and locked out of productive participation in the capitalist economy and constituting some 1/3rd of humanity. The need to assure the social control of this mass of humanity living in a planet of slums gives a powerful impetus to neo-fascist projects and facilitates the transition from social welfare to social control – otherwise known as “police states”. This system becomes ever more violent.

Theoretically stated - under the conditions of capitalist globalisation – the state’s contradictory functions of accumulation and legitimation cannot both be met. The economic crisis intensifies the problem of legitimation for dominant groups so that accumulation crises, such as the present one, generate social conflicts and appear as spiralling political crises. In essence, the state’s ability to function as a “factor of cohesion” within the social order breaks down to the extent that capitalist globalisation and the logic of accumulation or commodification penetrates every aspect of life, so that “cohesion” requires more and more social control.

Displacement and exclusion has accelerated since 2008. The system has abandoned broad sectors of humanity, who are caught in a deadly circuit of accumulation-exploitation-exclusion. The system does not even attempt to incorporate this surplus population, but rather tries to isolate and neutralise its real or potential rebellion, criminalising the poor and the dispossessed, with tendencies towards genocide in some cases.

As the state abandons efforts to secure legitimacy among broad swathes of the population that have been relegated to surplus - or super-exploited - labour, it resorts to a host of mechanisms of coercive exclusion: mass incarceration and prison-industrial complexes, pervasive policing, manipulation of space in new ways, highly repressive anti-immigrant legislation, and ideological campaigns aimed at seduction and passivity through petty consumption and fantasy.A 21st fascism would not look like 20th century fascism. Among other things, the ability of dominant groups to control and manipulate space and to exercise an unprecedented control over the mass media, the means of communication and the production of symbolic images and messages, means that repression can be more selective (as we see in Mexico or Colombia, for example), and also organised juridically so that mass “legal” incarceration takes the place of concentration camps. Moreover, the ability of economic power to determine electoral outcomes allows for 21st century fascism to emerge without a necessary rupture in electoral cycles and a constitutional order.

The United States cannot be characterised at this time as fascist. Nonetheless, all of the conditions and the processes are present and percolating, and the social and political forces behind such a project are mobilising rapidly. More generally, images in recent years of what such a political project would involve spanned the Israeli invasion of Gaza and ethnic cleansing of the Palestinians, to the scapegoating and criminalisation of immigrant workers and the Tea Party movement in the United States, genocide in the Congo, the US/United Nations occupation of Haiti, the spread of neo-Nazis and skinheads in Europe, and the intensified Indian repression in occupied Kashmir.

The counterweight to 21st century fascism must be a coordinated fight-back by the global working class. The only real solution to the crisis of global capitalism is a massive redistribution of wealth and power – downward towards the poor majority of humanity. And the only way such redistribution can come about is through mass transnational struggle from below.

Related posts:

1. Can capitalism exit from this crisis?
2. China, capitalism, and crisis
3. What could the end of capitalism look like?