Unlike those that have gone before, the present economic crisis stands unique in the speed at which it happened and how no corner of the globe has remained untouched. However, as far as Bülent was concerned most mainstream commentators are at a loss to explain why it happened (see, for example, Alan Greenspan in the BBC's The Love of Money - with his theories in shreds he is forced to blame the crisis on that hoary old canard, human nature).
For those that go beyond essentialist arguments, one needs to look at the processes and longer-term historic trends that are involved. Most immediate, of course, was a boom driven by credit, overlaid with sophisticated speculative financial instruments and the fact economic decision-making happens away from the public gaze and in secret away from the eyes of competitors. Exacerbating and causing this overheating of the global economy were the policies of successive US administrations. As the world's hegemonic power and economic policeman, through the World Bank, IMF and direct aid it encouraged global deregulation and speculative, unproductive economic activity. In so doing capital became almost footloose and seemingly able to roam the world at will, seeking out the most profitable opportunities. This way national economies overlapped and enmeshed with one another at ever greater speed. So when it started unravelling and plunged the world into deep crisis not only were all the failings of neoliberal globalisation exposed, the crisis represented a challenge to the US's leadership.
In many ways this is a crisis made in America. Sub-prime lending, which is widely blamed as the trigger for the crisis was an exceedingly speculative activity. Lending mortgages at (initially) extremely low interest rates on repayments and without the need for a down payment proved attractive to many working class Americans. The lenders naively assumed that once the higher rates kicked in, larger repayments could be met by ever increasing incomes and/or the climbing house prices. Lenders believed this was the chance for risk-free profit, and so did many others, which was why investment banks like Lehman's funneled massive funds into this sector. The other side to this was the US's decline as a manufacturing power. With US-led overseas restructuring via the World Bank and IMF it became easier for capital to uproot plant and transport it half way round the world to churn out goods at a fraction of the labour costs of the home market. But in that market itself, with a drying up of profitable productive uses to which capital could be put, fiddles like sub-prime mortgages seemed like a good outlet.
There's no need to repeat the rest of the story. But there is a danger the crisis might, at some point in the future, repeat itself. The only lesson seemingly taken on board by governments, policy wonks, bankers and economists is the need for more regulation. It goes deeper than this, it was a crisis of the structural changes inaugurated by neoliberalism that encouraged particular kinds of economic behaviours, rather than reckless actions per se. However, the powers that be have stuck with subjective Greenspan-style "explanations" because it suits them to do so. None of them would dare admit the economic policies they foisted on the world these last 30 years have been wasteful, irresponsible and extremely damaging.
For Bülent the present crisis is an outcome of ongoing tectonic structural changes. On the one hand there has been the growth of finance at the expense of manufacturing, and on the other has been the loss of US power and the rise of alternative centres of capital accumulation.
Turning first to finance, in the West and particularly Britain and the US, the switch to the economic dominance of finance capital was rooted in their response to the falling rate of profit. Up until the late 1960s capitalism was booming as it basked in the high water mark of manufacturing. The ratio of profit to (productive) capital investment increased and economies expanded, fuelling full employment and the expansion of welfare states. From the late 60s the tendency for the rate of profit to fall reasserted itself. Rather than being locked into a long-term decline, UK and US capital looked for a way out. The election of Thatcher and Reagan saw them undertake attacks on labour movements and welfare, The resulting restrictive labour laws allowed capital to hold down or cut wages while increasing working hours. Governments attacked welfare spending to fund tax cuts on profits. Privatisation of state assets allowed for new accumulation opportunities. And overseas, weak developing economies were laid open to the predations of Western capital. Productivity rose but real wages lagged well behind. The proportion of wealth coming to workers stopped growing and went into reverse. Widening inequality gaps became the order of the day. Credit assumed an ever greater role in the economy and managed to lubricate the wheels of capitalism, but they could only delay and not stop them from coming off. But at least for a period mega profits poured into the coffers of the wealthy and super rich.
The second point is hegemonic. After the end of the Second World War, the devastation inflicted on the metropolitan centres of capital outside the US (Western Europe, Japan) meant they had no choice but to accept the restructuring of the global economy in America's interest. As they recovered under US leadership they became very effective competitors. While US profit rates were declining Japan and West Germany boomed. Relative economic decline however did not set in until the end of the Cold War, at which point the economies of south-east Asia took off in a rocket of state-directed development. China and India in particular are responsible for most of this growth, and not just because of their massive reserves of cheap labour. Not only are they workshops for the world, their internal markets are growing too. Presently China possesses the third largest domestic market. For Bülent this is the stirring of a new world order to come, one where the West is no longer hegemonic.
This is why the regulatory "solutions" proposed by Western politicians are clearly inadequate. No amount of regulation is going to alter the tectonic shift in capital accumulation toward the East. The uni-polar world of US dominance is rapidly becoming a thing of the past - the world is heading toward a multi-polar phase. And in the economies at the heart of the global crisis, governments are moving to cut public spending, and companies (even ones relatively untouched by the recession) are shedding jobs and freezing wages. Holding these down - in the absence of cheap credit - is storing up more trouble for the future.
In sum, I thought the talk was very interesting, but I have a couple of issues. First, Bülent talked about the present crisis as an economic and ideological crisis. Undoubtedly that is true - Greenspan's comments are echoed in New Labour's continued neoliberal habits of mind, albeit one that has been much toned down. The Tories on the other hand (and Republicans in America) cling on to the sinking neoliberal ship for want of anything else. But Bülent did not expand on the relationship between ideology and economics and how they reinforced each other through the 80s until recently. Second there is class struggle. Its importance is acknowledged as capital (aided and abetted by the state) took on and won battles with trade unions in America and Britain. This found short-termist answers to the tendency for the rate of profit to fall. But I think class struggle is the main missing actor in this narrative. Neoliberal deregulation and privatisation, and firms' ability to hold wages down while intensifying the rate of exploitation would have proven impossible had the key battles of the 1980s been won by labour movements. The credit bubble, the downgrading of manufacturing and today's economic crisis are the bitter fruits of what happened 20 or so years ago.
Will capital ride out the present crisis by successfully making the workers pay for it? Time, and struggle, will tell.
No comments:
Post a Comment