Audacity, not hoping for reforms, the route to a humane world

Working people in the core capitalist countries have received benefits from imperialism (even if only crumbs) that workers in the rest of the world don’t receive. That dichotomy is a barrier that has hindered the building of global alliances necessary to reverse neoliberalism.

Or, going beyond, to create an international social movement strong enough steer the world from its present course of economic and ecological suicide to a sustainable system oriented toward human need. A further division among the world’s working peoples between the diminishing numbers with reasonably secure, regular employment and the vast numbers of those without available regular work — the “reserve army of labor” or, to use the increasingly popular term, the “precariat” — and divisions within these broad categories also, on the surface, seems to imply that the world’s workers don’t have any unifying interests.

On the contrary, an international movement that brings together the peoples of the global North and the global South, with a common goal of nationalizing the monopolies that currently have a stranglehold on the world’s economy and a commitment to “de-financialization” (a “world without Wall Street”) is not only possible but indispensable, argues Samir Amin in his latest book, The Implosion of Contemporary Capitalism.* These would not be ends unto themselves, but rather the first necessary steps on a long road toward a sustainable and equitable future.

The Implosion of Contemporary CapitalismCritical to developing strategies to transcend an “imploding” capitalist system is developing an understanding of the world’s current organization. In the current stage of “generalized monopoly capitalism,” as Dr. Amin defines today’s world, monopolies tightly control all systems of production and thereby extract extraordinarily large profits. These surpluses are so large they can’t be invested rationally and therefore can only be deployed in speculation, fueling financialization. The process of financialization in turn enables banks to amass vast power and create debt that they profit from.

Increases in productivity outstripping growth in wages further fuels this process. But these monopolies are not located just anywhere — they are located in the capitalist core of the United States, Europe and Japan. Thus the power amassed by these monopolies is inflated by the extraction of capital from peripheries to these centers. Dr. Amin writes:

“In its globalized setup capitalism is inseparable from imperialist exploitation of its dominated peripheries by its dominant centers. Under monopoly capitalism this exploitation takes the form of monopoly rents (in ordinary language, the superprofits of multinational corporations) that are by and large imperialist rents. … [T]he material benefits drawn from this rent, accruing not only to the profit of capital ruling on a world scale but equally to the centers’ opulent societies, are more than considerable.” [pages 20-21]

(The term “monopoly” here is not meant in the “pure” sense of one single corporation dominating an industry, but rather refers to a handful of corporations that, as a group, act in a monopolistic manner. “Rent” is a macroeconomic term meaning the extraction of profits above the ordinary level derived from an advantage.)

The ability of monopoly capital to exploit the global South is aided by the collaboration of local elites, a class of “corruptionists,” to use Dr. Amin’s pungent phrase, who are “highly compensated intermediaries” allowed to take a slice of the extracted superprofits. The whole is partially masked by the fragmentation of production, which nonetheless remains tightly controlled by monopoly capitalists.

This creates the illusion of a divergence in the interests of working people, both within and among countries, but differences in skill levels and ability to earn higher wages has always existed. All working people have in common that they are exploited; the challenge then becomes to effect the unity of workers (including those in informal sectors), peasants and the middle classes in a united front crossing borders.

Smaller enterprises and farmers subordinate to dominant firms

The latest stage of capitalism, starting with the late 20th century, is the era of “generalized monopolies” in which monopolies command the heights of the economy and directly control entire production systems, reducing small, medium and all peripheral enterprises to subordinate roles. Those subordinate enterprises, as well as farmers, have become subcontractors whose operations are subject to rigid control by the monopolies. From this, Dr. Amin concludes:

“There is no other possible answer to the challenge: the monopolies must be nationalized. This is a first, unavoidable step toward a possible socialization of their management by workers and citizens. Only this will make it possible to make progress along the long road to socialism. At the same time it will be the only way to develop a new macro economy that restores genuine space for the operations of small and medium enterprises. If that is not done, the logic of domination by abstract capital can produce nothing but the decline of democracy and civilization, and a ‘generalized apartheid’ at the world level.” [page 113]

The “imperial rent” that accrues to the capitalist core’s monopolies mainly flows to the capitalists, but the workers of the North also benefit from it, and this creates a barrier to North-South alliance building. Workers of the South can’t help but be acutely aware of global imbalances that impoverish them, in contrast to many workers of the North tacitly embracing the relative crumbs they receive at the expense of their Southern brothers and sisters through uncritical acceptance of nationalist ideologies extolling the supposed superiority of imperial countries; this acceptance is reflected, for example, in the U.S. labor federation AFL-CIO’s decades-long uncritical embrace of Washington’s imperialist foreign policy.

Creating a better world — a world in which economic decisions are reached through democratic processes in which all affected parties have a voice and in which the economy is run for the benefit and development of all humanity rather than the private profit of capitalists — is therefore inextricably linked with providing solutions and better living conditions to the majority of the world who live in the peripheral countries.

Change must be in three “dimensions,” Dr. Amin writes — peoples, nations and states. The liberation of a nation and achievements by a state are complements to the advancements of the people; the idea that people can transform the world without taking power is “simply naïve,” the author writes. But it is the people who must be at the forefront:

“[T]he notion of national liberation ‘at all costs,’ in other words being independent of the social content of the hegemonic coalition, leads to the cultural illusion of attachment to the past (political Islam, Hinduism, and Buddhism are examples) [that] is in fact powerless. The notion of power, conceived as being capable of ‘achievements’ for the people, but carried out without them, leads to the drift to authoritarianism and crystallization of a new bourgeoisie. The deviation of Sovietism, evolving from ‘capitalism without capitalists’ (state capitalism) to ‘capitalism with capitalists,’ is the most tragic example of this.” [pages 116-117]

The impossibility of reforming away concentrated power

Additional illusions are that the South can “catch up” with the core capitalist countries or that the maldevelopment of capitalism can be wished away through reforms. The imperialist system blocks the development of new industrial contenders; moreover, the rise of European capitalism required the “safety valve” of emigration to the New World as peasants were forced off the land. There are no new worlds that can absorb the many millions of peasants displaced and to be displaced as capitalism washes over all parts of the globe.

And, although this was not discussed in The Implosion of Contemporary Capitalism, anarchist and Proudhonist ideas that employees can gradually take control of their workplaces while ignoring the state are also illusions. You may wish to ignore the state, but that does not mean the state will ignore you, nor will capitalists, with the powerful coercive apparatus of the state at their disposal, idly sit by and allow their property and prerogatives to be gradually taken away. Similarly, reformist ideas such as more regulation or a return to the post-World War II model are illusions — reforms can and are taken back and there is no going back to the past because the conditions of today are not the conditions of yesterday.

What Dr. Amin does advocate is “audacity, more audacity.” The proposed audacity centers on three programs: socializing the ownership of monopolies, “de-financialization,” and “de-linking” at the international level. Reversing the current social order is impossible without expropriating the power of monopolies.

Economic activity should be organized by public institutions representing groups up and down production supply chains, consumers, local authorities and citizens self-organized democratically. Management of monopolies should include workers in the enterprise as well as representatives of consumers, citizens, (democratically controlled) banks, research institutions and upstream industries. Large-scale production would continue to exist because it is unrealistic to believe that artisans and small local collectives could replace the production of large enterprises, the author writes, but production must be done on the basis of being answerable to society’s collective choices.

“De-financialization” is conceptualized as not simply the abolishment of “shareholder value” as the supreme force animating production but going beyond nationalization/socialization to establish direct participation in management by relevant social partners. Ecological impact, minimization of risk and client participation would be the foundation of banking. The focus on community control and international “de-linking,” however, does not mean a retreat into isolationism; rather it would be a reconstruction of global relations through negotiation rather than the current system of submission to the imperial powers.

These programs can’t be implemented on a global or regional basis, Dr. Amin argues, but only within countries committed to socialization and democratization of the economy. Thus the South must de-link from international institutions controlled by the imperial powers and Europeans must dismantle their undemocratic institutions responsive only to “market” reactions. There are no alternatives, the author writes:

“Capitalism is now an obsolete system, its continuation leading only to barbarism. No other capitalism is possible. … Either the radical left will succeed through the audacity of its initiatives to make revolutionary advances, or the counterrevolution will win. There is no effective compromise between these two responses to the challenge.” [page 146]

There is no guarantee as to what will succeed capitalism. We can sit back and let history unfold, continuing to cede the initiative to elites who have imposed austerity on the world and can only offer ever more harsh and repressive policies while consuming the Earth’s resources until nothing is left. Or we can collectively work together to create a humane, democratic future by overturning capitalism. If we don’t accomplish the latter, we will surely find ourselves in the hell of the former.

* Samir Amin, The Implosion of Contemporary Capitalism [Monthly Review Press, New York, 2013]

Conceptualizing globalization as a corporate elite project, not a nationalistic project

Corporate globalization is an international phenomenon by definition that is commonly opposed on nationalist lines. A process imbedded in capitalist competition and advanced by the industrialists and financiers who directly benefit from it, however, transcends borders.

Understanding corporate globalization is necessary to developing strategies to effectively counter it, and relying on nationalist arguments is a barrier to grasping the systemic nature of globalization, argues Martin Hart-Landsberg in his just released book Capitalist Globalization: Consequences, Resistance and Alternatives.* All too often, he writes, activists fall back on pointing fingers at China or similar nationalistic talking points, thereby obscuring the true culprits in the global race to the bottom.

Capitalist GlobalizationBy doing so, activists not only erode their potential effectiveness by not prioritizing cross-border alliance building, they drag the spotlight away from the trans-national corporate elite who drive the process.

Today’s world is one decades in the making, Professor Hart-Landsberg writes. Following World War II, multi-national corporations sought access to foreign markets and to evade tariffs; developing countries were later converted into “export platforms” to take advantage of low wages; and, as competition intensified this process, entire production processes became outsourced. Parallel to those developments, trade agreements have evolved from merely engineering tariff reductions to dictating economic and social policy through bi-lateral and multi-lateral trade agreements.

Multi-national corporations that have transferred production to China account for most of China’s exports, including the vast majority of high-tech exports, to which China contributes very little. Professor Hart-Landsberg writes:

“China is the world’s number one exporter of computers. Yet China’s contribution to this activity is limited to providing cheap labor and land. … [E]ight of China’s top ten exporters are now Taiwanese [manufacturers] that supply ‘branded [personal computer] sellers such as Dell with unbranded computers and components.’ … China’s rise as an export powerhouse is primarily due to its position as the final assembly platform for transnational corporate cross-border production networks.” [pages 45-46]

That doesn’t mean that Taiwanese manufacturers reap the lion’s share of the profits that accrue from these cross-border production networks. Those companies, such as Foxconn, are contractors to Western and Japanese companies including Apple, Microsoft and Hewlett-Packard that take most of the money. Only US$6.50 of the US$179 cost of an iPhone is generated by China (due to extremely low Chinese wages). Thus, the author determines that China’s true net trade gain from the iPhone is $73 million, not the $1.9 billion of standard trade calculations:

“In short, although national accounting implies that China is the big winner and the United States the big loser, in reality the profit generated by the production and sale of iPhones was largely captured by a select few transnational corporations, none of which are Chinese, with Apple, a U.S. company, the biggest winner.” [page 22]

More exports, but more jobs are precarious

All of East Asia is increasingly dependent on exports. Other East Asian countries are tied, especially, to the United States because their production is oriented toward making components that are shipped to China, which in turn is heavily dependent on exporting to the U.S. Chinese demand has raised the prices of commodities, which has some benefit for Latin American and African countries reliant on exporting raw materials, but at the cost of stifling their efforts at industrial development. Chinese policies that exploit domestic labor not only force wages down regionally, but crowd out production elsewhere in East Asia — production has become geared to making parts that are shipped to China for final assembly rather than done to meet domestic needs.

Highly exploited workers in China not only receive ultra-low wages, but are increasingly precarious — virtually all job growth in China from 1990 to 2002, the author writes, was in irregular employment.

The disastrous results for workers from “free trade” agreements has been replicated around the world. Professor Hart-Landsberg, in a chapter devoted to analyzing the South Korea-United States Free Trade Agreement, cites a study finding that the U.S. will lose 159,000 jobs due to the pact from 2008 to 2015, and a separate study that found that from 1998 to 2008 U.S. exports to countries that did not have a “free trade” agreement with the U.S. grew as fast as double the rate to countries with “free trade” agreements. The percentage of South Korean workers with irregular employment has increased from 40 percent before 2000 to more than 60 percent in 2008, while the Korean economy has become more dependent on exports.

Nor have the results been better elsewhere. For the developing world as a whole (other than China), the average growth rate in the 1990s is two percentage points lower than it was in the 1970s, while trade deficits are larger.

Given the inevitable falling wages, eroding manufacturing bases and waves of dislocation — only part of the fallout from the race to the bottom resulting from corporate globalization — how is it that “free trade” agreements are invariably promoted with “predictions” promising miraculous growth in jobs and benefits? This is self-serving nonsense, yes, but it goes beyond that: “Free trade” is based on ideology and ridiculous assumptions, not scholarship.

Economic models that presume wondrous benefits from “free trade” agreements assume, inter alia:

  • There are only two inputs, capital and labor, which are able to move instantaneously but never cross national borders.
  • Total aggregate expenditures in each economy will be sufficient, and automatically adjust, to ensure full use of all resources.
  • Flexible exchange rates will prevent lowered tariffs from causing changes in trade balances.

As a result of these specious starting points, the author writes:

“[T]his kind of modeling assumes a world in which liberalization cannot, by assumption, cause or worsen unemployment, capital flight or trade imbalances. Thanks to these assumptions, if a country drops its trade restrictions, market forces will quickly and effortlessly lead capital and labor to shift into new, more productive uses. And since trade always remains in balance, this restructuring will generate a dollar’s worth of new exports for every dollar of new imports. Given these assumptions, it is no wonder that mainstream economic studies always produce results supporting ratification of free trade agreements.” [page 104]

This is standard Chicago School ideology, the leading source of justification for the wish lists of the biggest industrialists and financiers. The South Korea-United States Free Trade Agreement, for example, bans either government, when soliciting bidders for contacts, from giving consideration to corporate policies on the environment or labor, and prohibits buy-local policies, financial regulations, capital controls or “indirect expropriations.” These tend to be replicated in other “free trade” deals.

Effective movements must stress system, not country

Although such policies are detrimental to working people in each of the countries, Professor Hart-Landsberg strongly cautions against portraying such deals as merely “flawed,” rather than as fundamental attacks on working people and a continuation of capitalist assaults. He argues that the effectiveness of Korean and U.S. movements against the agreement was weakened because activists in both countries tended to stress nationalistic themes. The United Auto Workers union, for example, reversed its initial opposition in exchange for Korea weakening its fuel and safety standards and the U.S. delaying tariff reductions on Korean vehicles while failing to address the larger structural issues.

Similarly, arguments that point fingers at China imply that there is nothing wrong with “free trade” policy or U.S. capitalism, the actual drivers of the race to the bottom.

The author argues that movements must build toward the future and point toward a society built on different grounds while responding to immediate needs. A shared vision of the future should include struggles to expand the public sector as part of a fight for social property. Public education must be a priority, both as a social goal and as opening spaces for teaching social skills.

“Successful movement building involves creating strong, accountable, and politicized organizations; a community-based structure that connects these organizations; and a common commitment to struggle based on a shared vision of the future.” [page 148]

Human liberation can only be built on principles of equality, democracy and solidarity. One component of such orientations is to use strategies in combating capitalist ills such as sweatshops and low labor standards that go beyond mere reforms but rather aim at confronting and opposing the capitalist system that spawns them.

“The potential of … anti-sweatshop struggles lies in the fact that they encourage resistance to the corporate dominance of education, promote student-labor alliances, and strengthen international solidarity. They also draw new people into political movements for change.” [page 152]

No country, however, can be a socialist island — it is impossible for any single country to de-link from the world capitalist system. Regional developmental strategies are needed. The author, in his final chapters, discusses South America’s Bolivarian Alliance for the Americas (ALBA) and Bank of the South, and the post-World War II European Payments Union system dissolved in the 1950s. It would have been preferable if Professor Hart-Landsberg had attempted to sketch out ideas for what a regional system of mutual development might look like rather than concentrate on an example like the payments union that he admits is “not a blueprint” and also flawed because it was designed to liberalize trade even if it did provide European industry protection from U.S. dominance.

Nonetheless, the author’s discussion of ALBA is valuable. ALBA pursues national projects that enhance the conditions of working-class majorities, finances and facilitates production and infrastructure projects, and enables cooperative trading of expertise and resources. On the other hand, he argues, the eight-nation bloc is overly dependent on Venezuelan largesse and its top-down decision-making undercuts social and civil-society groups.

In extracting “lessons” from his discussion of ALBA, the author argues that movements must take state power seriously, not confining themselves to grassroots initiatives while leveraging community organizations to steer state policies in the proper directions. He also writes that critiques must be shifted from anti-neoliberalism to anti-capitalism, and educational work deepened — reliance on capitalist crises should not substitute for the work of building support for socialist alternatives.

The realization of such alternatives can not be other than a long-term struggle. But what choice does humanity have?

* Martin Hart-Landsberg, Capitalist Globalization: Consequences, Resistance and Alternatives [Monthly Review Press, New York, 2013]

Venezuela’s revolution is a process propelled by millions, not one leader

Venezuela’s Bolivarian Revolution is much bigger than Hugo Chávez; it is a movement of millions. The movement that drives the process forward long predates his election and his failed 1992 coup.

Saying this should not come as a revelation, for no large-scale social movement can exist as a personal vehicle, nor can any one person, no matter how charismatic, single-handedly carry the responsibility for social change, especially when that change has the long-term, open goal of supplanting the global capitalist order.

We Created ChávezContrary to the myopic, superficial corporate-media narrative of a caudillo motivated by a fathomless desire to poke Uncle Sam in the eye (although we must immediately ask how a leader who won 16 of 17 national elections, almost all by at least 10 percentage points, can be a “dictator”), the Bolivarian Revolution is a continuation of struggles that have been waged since the late 1950s. The defining moments, George Ciccariello-Maher argues in We Created Chávez: A People’s History of the Venezuelan Revolution,* are not President Chávez’s electoral victories but rather two outbursts of people’s power, a 1989 uprising and the 2002 uprising that re-installed him, reversing the business coup.

The Bolivarian Revolution can’t be understood without a bottom-up perspective, without analysis of the pressure from below that buffeted President Chávez, pushed forward by organizations that support the revolution. Professor Ciccariello-Maher, as his book’s title signals, provides that necessary background:

“Hugo Chávez is not a cause but an effect, not Creator but creation; in this sense, the history that follows is literally a defetishization, a demystification. His election and even his failed coup did not mark the beginning of the Bolivarian Revolution, but were instead the results and reflection of its long and largely subterraneous history.” [page 21]

That history has roots two centuries old, and the modern manifestation of Venezuelan struggle begins in the late 1950s, ironically with the downfall of Venezuela’s last dictator and the establishment of a formally “democratic” republic. Marcos Pérez Jiménez was overthrown in 1958, replaced by a two-party system designed to stifle popular participation. The “social democratic” party, Acción Democrática — unusually ruthless in attacking its base even by the standards of world social democracy — mostly was in power, alternating with Copei, the Christian democrats.

‘Democracy’ proves little different than dictatorship

Acción Democrática leader Rómulo Betancourt won office in the first post-Pérez Jiménez election. Within a year, his government was shooting people dead in the streets and ruling under states of emergency. Violent repression was the swift response by the new president to his unpopularity; repeated massacres sparked uprisings across the country. A revolutionary situation developed, but Professor Ciccariello-Maher argues that the Venezuelan Communist Party waited too long while the Revolutionary Left Movement went too soon. A series of tactical mistakes doomed this armed struggle, not least of which was a lack of connections with the people, the author writes.

A series of groups blossomed and declined, rural guerrilla strategies failed, the electoral Left floundered, and mass fronts and other popular organizations faced severe state repression during the following years. The net of state repression was cast steadily wider — the government provided little services but attacked those who asked for them. Out of this situation, barrio assembles and popular militias began to be organized for self-defense; the latter forcibly ended the drug trade in neighborhoods in which they operated. These popular organizations organized sporting and cultural activities, and expelled the police — their militancy propelled people forward.

Professor Ciccariello-Maher argues that the 1989 uprising known as the “Caracazo” is the first of two “ruptures” (the 2002 coup reversal the other) that are the critical moments in the process that is the Venezuelan Revolution. Carlos Andrés Pérez took office as president that year as the Acción Democrática candidate on an explicitly anti-International Monetary Fund platform. It took him two weeks to jettison his campaign pledges and impose the full IMF-dictated austerity package. Riots broke out the morning of imposition, led by informal workers. But because political organization was widespread, these were not blind lashings-out — the target of the anger quickly went from bus drivers (a doubling of oil prices prompted large fare increases) to the state and its system.

A curfew was declared the next day, and a violent crackdown ensued, with as many as 3,000 left dead. The author leaves no doubt as to the severity of the government crackdown:

“Known organizers were dragged from their homes to be either executed or ‘disappeared,’ and when security forces met resistance from rooftop snipers, they sprayed entire apartment blocks with automatic machine guns. … The human toll of the rebellion has never been fully revealed, especially because the Pérez government subsequently obstructed any and all efforts to investigate the events. … A recent study has shown that some four million bullets were fired to quell the rebellion, and the Relatives of Victims Committee, an organization founded around the victims of the Caracazo, reports that 97 percent of the documented victims died in their own homes.” [pages 96-97]

Grassroots organizations build opposition

The author writes that the Caracazo crystallized and focused organized opposition within the military while civilian armed groups sought to unify the popular militias with the military opposition. By 1991, barrio assemblies in Caracas were organizing and coordinating opposition. The military uprisings in February and November 1992 (the former the one led by Hugo Chávez) were the “detonators” for subsequent popular rebellions. State repression could not break popular control of the streets, and these social movements led to the 1998 election of President Chávez.

“[D]efeat notwithstanding, the Caracazo sounded the death knell of the old system, simultaneously reflecting and contributing to the inevitability of its collapse and thereby setting into motion the entire process that came after it. In symbolic terms, it smashed in a single stroke the façade of [Venezuelan] ‘democratic exceptionalism,’ revealing the bankruptcy and the violence of the existing system for all to see. Neither completely spontaneous nor fully organized, the Caracazo was an instant in which widespread disgust and revolutionary capacity met on the streets, generating historical agency by emboldening the faithful and converting the waverers: it was 1989 that enabled 1992, and 1992 that enabled 1998.” [page 89]

The author’s second moment of rupture, the reversal of the 2002 business coup against President Chávez after two days, was a product of the connections between militias and military, of political understanding and experience. Millions poured into the center of Caracas in defiance of the coup. Venezuela’s corporate media had unleashed an orgy of lies before and during the coup; the state television channel was closed while the private media blacked out any coverage of the mounting resistance. The coup leader, Pedro Carmona Estanga, the head of the national chamber of commerce, dissolved all branches of government and declared the 1999 constitution void, despite its having been approved by 72 percent of the electorate.

Loyalist military units, taking their cues from the mass popular resistance to the coup, took the presidential palace back, with officers giving the credit to the people and their “spontaneity” — but the “spontaneity” was the product of years of organizing, with Left activists seeking much more than the mere return of President Chávez to the palace.

“[M]ass spontaneity, while fundamental in its importance, is often the result of serious organizing that, in the case of Venezuela, spans decades. As with the Caracazo, then, this spontaneous mobilization and its spontaneous grasp of the strategic realities of the situation it confronted should not lead us merely to a panegyric of spontaneity for spontaneity’s sake. Rather, every moment of this spontaneity and every gesture of these spontaneous masses contained an aspiration toward increasingly conscious organization. In this explosive dialectic between spontaneity and organization that was resistance to the 2002 coup, such conscious effort would be especially important in the realm of mediatic and popular armed organizing.” [pages 172-173]

Struggle within the struggle

Can an engaged people go back to the ancien régime? We Created Chávez was published just before Hugo Chávez’s untimely death, but given the context of this story the president’s passing in no way renders the book out of date. The modern history of Venezuela is that of regularly employed workers, informal workers, peasants, students, women, Afro-Venezuelans and Indigenous peoples in a many-sided struggle against domestic elites and the country’s subaltern status in global capitalism. Then there is the struggle within the Bolivarian Revolution.

There are tensions between economic and political demands, between workers’ autonomy and the state, over the nature and content of “co-management” and over if co-management is a step toward a higher level or a capitalist trick, as well as opposition to developing the Bolivarian process from managers and within the ranks of the movement.

What forms should workers’ control take? Some argue for state ownership with employee participation, others argue for full autonomy of enterprises and the workers in them, and there are gradations in between. Enterprises under state ownership presumably should be managed to benefit the community, but how much management should be ceded to the workforce? Should workers fortunate enough to work in the oil industry be able to reap benefits far in excess of other workers? How should autonomous enterprises be managed to benefit the community, not only those who work in them?

There are similarly serious questions regarding agriculture. Venezuelan land ownership remains highly unequal, with owners of large ranches in control of the countryside. Moreover, because the countryside emptied out and the economy grew overly dependent on the oil industry before 1998, the country lost its food sovereignty. This exodus to the cities has swelled the size of the informal workforce, who get by with street vending and whatever other means they can to survive.

Less than half of the workforce has formal employment, Professor Ciccariello-Maher writes, but although the Chávez government had difficulty with informals, to the point of occasional hostility, the author argues that this sector has been the staunchest base of support for the revolution and is neglected at the government’s peril. Informal workers played no small role in reversing the 2002 coup, for example.

There is no stasis

Ultimately, the revolution can only succeed through creating mechanisms for self-government. “Patriotic Circles” became Bolivarian Circles after 1998, and were tasked with drafting and defending the 1999 constitution. Communal councils (local bodies that manage policy and projects in their communities) came into existence after a 2006 law. These are legally on par with state institutions and have oversight over them; these are views as potential replacements for the state bureaucracy. The councils are linked horizontally to one another and vertically in communes with a goal of them exercising sovereignty.

Due to the timing of the book, the author concludes with an analysis of President Chávez’s “complex and nuanced position” as someone who is not purely a representative of the state but also an ally of the social movements that have driven Venezuela forward in past decades:

“[M]ore often than not he has pushed a radical agenda that facilitates the transformation of that state, a fact most visible in the recent development of communal councils and popular militias. Here there are no guarantees, and despite the fact that the collective ‘we’ of the Venezuelan revolutionary movements … ‘created him,’ this does not mean the creation will not betray the creators. However … to do so would certainly require a fight.” [pages 254-255]

The necessity of struggle to deepen the revolution is unchanged by the president’s death. Social movements have driven the process forward, and will continue to do so, regardless of who occupies the palace. We Created Chávez is indispensable toward understanding the process that is the Bolivarian Revolution and the path taken by Venezuela.

* George Ciccariello-Maher, We Created Chávez: A People’s History of the Venezuelan Revolution [Duke University Press, Durham, North Carolina, USA, and London 2013]

Mirror images and ideological straitjackets on the path from Solidarity to sellout

For much of the 20th century, there was a curious mirror effect between orthodox Soviet and Chicago School ideologies — both saw the other as the only other possible economic system. Although both time and the ongoing global crisis of capitalism has begun to chip away at such a ridiculous binary, to a maddening degree this ideological straitjacket continues to assert itself. A straitjacket that does not spontaneously materialize but is crafted for the maintenance of power.

The effects of this mirrored duality are still very much with us, and are a crucial factor in the path the countries of the former Soviet bloc have traveled. The usages of this ideological construct are obvious enough in the capitalist world, distilled into “there is no alternative” by the just departed Margaret Thatcher. Less obvious were the usages further East; perhaps the nearest equivalent of the prime minister’s “TINA” is Leonid Brezhnev’s declaration of the Soviet system as “irreversible.”

When the general secretary’s formulation began unraveling in the late 1980s, what was a Soviet bloc economist to do? For many, the answer was to pick up a copy of a book by Friedrich Hayek or Milton Friedman, and jump through the looking glass. And when their new mirror seductively told them to apply shock treatment to their own countries, they did — the mirror told them there was no alternative.

There is always an alternative, Polish economist Tadeusz Kowalik reminds us in his book From Solidarity to Sellout: The Restoration of Capitalism in Poland.* Professor Kowalik, drawing on his decades of experience as a reform socialist often on the outs with the communist authorities for his willingness to challenge orthodoxy, his work as an adviser with the Solidarity trade union and his personal knowledge of the key players, reminds us that Poland — and, by implication, the Soviet bloc as a whole — had an opportunity to create a different economy, one built on cooperatives and democratic participation in the economy.

Solidarity to Sellout coverSuch an outcome was widely desired by Poles, and the outlines of such a system emerged in the “Round Table” negotiations held between Poland’s communist authorities and representatives of opposition groups, led by Solidarity, from February to April 1989. Economic democracy was already an established concept, embodied in the “Self-Governing Republic” program of Solidarity, adopted at its first national congress in 1981. In it, Solidarity, which consciously identified itself as a labor union and a broad social movement, declared:

“In the organization of the economy, the basic unit will be a collectively managed social enterprise, represented by a workers’ council and led by a director who shall be appointed with the council’s help and subject to recall by the council. The social enterprise shall … [work] in the interests of society and the enterprise itself.  … The reform must socialize planning so that the central plan reflects the aspirations of society and is freely accepted by it. Public debates are therefore indispensable. It should be possible to bring forward plans of every kind, including those drafted by social or civil organizations. Access to comprehensive economic information is therefore absolutely essential.”

Solidarity’s program forgotten, but the looking glass not on agenda

Although Solidarity’s original program was tossed aside, the Round Table negotiators envisioned significant changes without any “leap” into a capitalist market. The two sides did not have serious disagreements, ultimately agreeing in principal, on the political side, on pluralism, freedom of speech and freely elected local governments. On the economic side, there was agreement on facilitating employee ownership, for employee control of state-owned enterprises and a uniform policy toward enterprises, regardless of ownership form. Summarizing the agreement in Solidarity to Sellout, Professor Kowalik wrote:

“Of primary importance here are the provisions concerning protection of labor and employment, written out in ten settled upon and two contentious points. All these detailed settlements distinctly show that the participants of the agreement had no such thought in mind as a ‘leap’ into a market economy.” [page 60]

Yet a particularly harsh brand of capitalism was instituted; “Thatcherism” or “Reaganism” in the parlance of then and “neoliberalism” in today’s vernacular. Professor Kowalik cites several factors leading to the imposition of shock therapy in contradiction to popular opinion, negotiated agreements and pre-existing platforms:

  • The centralization of Solidarity while underground during the period of martial law during the 1980s converted it into a top-down organization with a severe cut in membership and an isolated leadership that drifted to the Right.
  • The grabbing of state property by the nomenklatura (the bureaucracy managing enterprises and overseeing that management from within the government) for themselves.
  • A blurring of Catholicism with socialism, particularly on the part of Tadeusz Mazowiecki, who would become the first non-communist prime minister, but also by other influential people.
  • The adoption of undiluted neoliberal ideology by the Polish economists who would become the architects of economic policy by becoming ministers and government advisers.

One of the agreements arising out of the Round Table was that one-third of the seats to the Polish parliament (the Sejm) would be contested later that year (1989) in June. Solidarity won all but one of the contested seats — so sweeping was the rout that Solidarity became the effective government even though the communists still held a parliamentary majority. Mr. Mazowiecki became prime minister when the next government was formed three months after the election. Solidarity activists dominated the new government, although communists retained some portfolios, including the Interior and Defense ministries.

Critically, however, the new finance minister/deputy prime minister was Leszek Balcerowicz, a proponent of neoliberalism who was distant from Solidarity’s struggles and whose writings were of an abstract nature; “his interests were limited to pure theory,” according to Professor Kowalik. Prime Minister Mazowiecki’s leading economic adviser was Stanisław Gomułka, who converted to neoliberal ideology while at the London School of Economics. And Western advisers beat a path to Warsaw as they did to other Soviet bloc capitals; Jeffrey Sachs, who oversaw shock therapy in multiple countries, perhaps was the most prominent. The International Monetary Fund was also on the scene.

Abstract theorizing instead of examination of concrete reality

Other economists who had imbibed starry-eyed ideas of how market forces would shortly create paradise played roles as well; but the finance minister’s role was so important that Poland’s shock therapy became known as the “Balcerowicz Plan.” Professor Kowalik wrote of his obfuscating tendencies:

“Balcerowicz made great efforts to compromise — like the term ‘social interest’ — the adjective ‘social.’ … Such a standpoint was bound to lead him to extreme individualism, a negation of the role of the state as a general social institution, with only the interest of the authorities being important. Balcerowicz does not write this outright, but his reasoning resembles a lot the well-known view of Margaret Thatcher, that there is no such thing as society (and thus it does not exist). He rejects the very notion of social justice and often simply avoids this subject. … Balcerowicz’s knowledge, of course, remained theoretical, abstract, and distant from real economic policies.” [pages 112-114]

Such an approach and outlook dovetails with orthodox capitalist economics, as distilled through the wellspring of neoliberalism, Chicago School economics: highly abstract, built on mathematics and based on airy concepts such as “perfect competition” rather than on the real world. Firms and individuals are not seen as part of a social structure; factors such as wealth and property are taken as given. Production is alleged to be independent of all social factors, the employees who do the work of production are in their jobs due to personal choice, and wages are based only on individual achievement independent of race, gender and other differences.

Such is the underlying rationale for neoliberalism, which seeks to make “market forces” — the aggregate interests of the wealthiest industrialists and financiers as expressed through the power of the corporations they control — the sole arbiter of outcomes in all social spheres. Neoliberalism, as Henry Giroux recently put it, “construes profit-making as the essence of democracy, consuming as the only operable form of citizenship, and an irrational belief in the market to solve all problems and serve as a model for structuring all social relations.”

New laws accelerate grabbing of state property already in progress

Privatization, however, was already under way by the time the Round Table negotiators hammered out their agreement. A 1987 law enabled the creation of private businesses with the assets of state enterprises and a January 1989 law stipulated outright that state assets could be transferred to private individuals for conducting economic activity. Such transfers were not necessarily done with full value paid, and private firms were given preferential treatment. Professor Kowalik wrote in Solidarity to Sellout:

“[T]he players of the nomenklatura offshoot of privatization consisted of managers of various rank, government and party functionaries associated with them, along with their families. The process, commonly called ‘enfranchisement of the nomenklatura,’ deserves attention because it was then that the phenomenon of corrupt privatization, or arranged clientelistic privatization, developed. …

“The state sector shortly became a cash machine, which was made easier by the authorities through relevant legal regulations. … These laws sanctioned the plunder of the state sector earlier begun by its own managers. The state sector was highly taxed to maintain the entire state infrastructure and doomed to hopeless competition with the nearly tax-free private firms that were also paying infinitesimal customs duties.” [pages 204-205]

The pace was accelerated when the parliament, in late December 1989, hurriedly passed nearly unanimously a series of bills implementing the Balcerowicz Plan, with the plan going into effect on January 1, 1990. Noting the later contrition of the parliament speaker, who said Finance Minister Balcerowicz and Professor Sachs “plainly tricked us,” Professor Kowalik summed up the vote this way:

“Advantage was simply taken of the immense trust that the people had in the first non-communist government. There could be no serious debate, because without a general document presenting a synthesis of the systemic contents of eleven laws and the simultaneously ratified budget, such a discussion was not possible. The parliamentarians acted under the pressure of a race with time, imposed on them by the executive authorities.” [page 133]

One scheme for privatization was the creation of “National Investment Funds” — state companies disposed in this program were to be 15 percent owned by employees, 25 percent by the state treasury and 60 percent by the funds, with the public allowed to buy shares in the funds. Only a minority of privatized enterprises were disposed of this way (more were simply sold to foreign buyers), but the funds were a failure, Solidarity to Sellout reports, because inflation and a declining stock market caused the shares to steadily lose value; moreover, most of the public shares wound up in foreign hands.

What capital remained in Polish hands also became concentrated as, similar to the pattern in Russia, the nomenklatura-turned-privatizers were soon dwarfed by a new class of oligarchs.

Actual cooperatives faced consistent hostility from the government, which saw coops as a temporary “transition” to what it termed “real” privatization. Pre-existing cooperatives were simply  “administratively eliminated,” new coops had barriers placed in front of them and foreign capital, which soon controlled Polish banking, was also hostile. At the same time, state farms were immediately thrown into competition with subsidized Western European agricultural with all domestic subsidies removed at a stroke, devastating Polish farmers. This was in contrast to the buildup of Western European agriculture after World War II, which was nurtured through protective measures.

Results of shock therapy differ widely from promises

The results of the Balcerowicz Plan were devastating, in contrast to promises of a short-lived downturn followed by rapid growth and transition to Poland becoming a “normal” European country, a concept dangled by Western advisers skillfully playing on Polish antipathy toward Russia:

  • A 50 percent drop in real wages and a 30 percent drop in industrial output in the first month of the Balcerowicz Plan.
  • From 1996 to 2005, the percentage of Poles whose income was so low as to be insufficient for biological survival tripled to 12 percent even though the national income rose by one-third.
  • Wage inequality became the highest in the European Union.
  • The number of Poles living below the official poverty level ballooned to 58 percent by 2003; the statistics bureau then stopped publishing this figure.
  • Before entry into the European Union, the average unemployment rate was 16 percent, topping 20 percent during the early 2000s, more than a decade after the imposition of shock therapy; the rate declined after E.U. ascension due to a stream of emigration.

Having told this story in a somewhat idiosyncratic but nonetheless compelling style, Solidarity to Sellout ends, surprisingly, on an unimaginative note by championing the Scandinavian model of capitalism, seeing Sweden as the model for Poland to emulate. In part, the conclusion follows from Professor Kowalik’s acknowledgment that a lack of organized anger and the sellout by trade unions has allowed the Polish Right to flourish, and a tacit understanding that creating a cooperative economy is drastically more difficult in a privatized economy than it would have been when enterprises were in state hands. He writes:

“[I]t was enough for the trade unions to become involved in support of anti-employee systemic changes and the shock operation. That is why rebuilding he strength of the trade unions in Poland is going to be an extremely difficult task.” [page 298]

Professor Kowalik calls the Scandinavian countries “centers of economic excellence,” contrasting them to Poland’s “role of subcontractor.” The former model by any reasonable measure is superior to neoliberalism, but the professor has perhaps not fully considered that Poland, and the rest of the Soviet bloc, were destined by the dynamics of capitalism to become a source of cheap labor, akin to Latin America’s relationship to the United States. Nor are the more powerful capitalist countries likely to acquiesce to a subcontractor becoming a serious competitor.

Having become completely entangled in the global capitalist system, Poland can only transcend to a better system as part of an international bloc; it can’t be an island unto itself. Given the structural crisis of global capitalism, the aim will have to be higher than simply emulating Sweden, where capitalist pressures are not unknown and the European Union methodically imposes downward pressure.

But regardless of one’s opinion of the conclusion, Solidarity to Sellout provides an outstanding analysis of the capitalist restoration of Poland on neoliberal grounds, as could only be written by an economist with an intimate understanding of Poland, economics, the Solidarity movement and the key individuals in the process. Professor Kowalik’s book is well worth pursing by anybody interested in understanding the post-Soviet path of Central Europe, or, more generally, the dynamics of neoliberalism.

* Tadeusz Kowalik, From Solidarity to Sellout: The Restoration of Capitalism in Poland [Monthly Review Press, New York, 2012]

Stagnation, not growth, is the norm for mature capitalism

Economic growth is supposedly the norm, necessitating that an explanation be found for slumps and stagnation. But are these reversed? Is stagnation is the norm with the periods of strong growth requiring explanation?

A two-decade “long depression” occurred after an 1870s bubble inflated by speculation in railroads and construction in North America and Europe burst; the Great Depression lasted more than a decade and ended only because of World War II; and stagnation had been the recent fate of the world’s advanced capitalist countries even before the economic crisis that broke out in 2007 and 2008.

There are no signs of any recovery; on the contrary unemployment remains high across North America and Europe, with consumer and governmental debt rising to unsustainable levels. This state of affairs is the new norm of capitalism, argue John Bellamy Foster and Robert W. McChesney in their newly released book, The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China.*

The authors, frequent collaborators in Monthly Review (of which Professor Foster is the editor), marshal an impressive collection of material to present an understanding of the capitalist dynamics that have brought the world to its present state of crisis and why that is the natural outcome of these dynamic forces, examining the crisis from a global perspective.

A structural crisis of capitalism is not the same as a standard “business cycle.” During the Great Depression, the U.S. economy moved through an entire cycle, but the “boom” period of the cycle merely gained back some of the dramatic losses of the early 1930s before the economy began sinking again in 1937. Periods of “epoch-making innovation,” such as that resulting from the steam engine or the automobile, have fueled growth for a time, but no such inventions are on the horizon today.

The reassertion of stagnation as normal state

Professors Foster and McChesney argue that, in the absence of such dramatic innovation, which have not occurred for several decades, stagnation is the expected norm, particularly in “mature” capitalist economies:

“The result was that the economy, despite its ordinary ups and downs, tended to sink into a normal state of long-run slow growth, rather than the robust growth assumed by orthodox economics. In essence, an economy in which decisions on [business] savings and investment are made privately tends to fall into a stagnation trap; existing demand is insufficient to absorb all of the actual and potential savings (or surplus) available, output falls, and there is no automatic mechanism that generates full recovery.” [page 12]

One way of conceptualizing that is to note that U.S. corporations are sitting on at least $2 trillion of cash — there are not enough investment opportunities to put that money, accumulated by a small number of hands, to good use. Investment decreases because demand decreases under the impact of stagnant or declining wages, and financial speculation increases.

The rise in the accumulated surplus leads to general deprivation. The “competitive capitalism” of the 19th century kept over-accumulation at bay through dramatic expansion but also through frequent bankruptcies, the authors write. In the modern era, they argue, there is a chronic buildup of excess capacity and thus stagnation, although regular business cycles continue. A lack of price competition caused by the consolidation of many industries into a small number of major competitors pushes prices higher, aggravating the erosion of living standards.

Price competition is ruinous to oligopolistic corporations, the authors argue, so they indirectly collude to prop up prices. (This requires no formal agreement when serious competitors can counted on one’s fingers.) Specific cases of price competition come in destructive forms, such as outsourcing huge amounts of production to countries with extremely low wages and sweatshop conditions. Firms compete through cutting production costs and by increasing market share through advertising and marketing techniques, rather on on retail pricing.

Thus, competition in a modern capitalist economy assumes a form drastically different than the mythological image of small firms competing on an even playing field commonly taught:

“Competition over productivity or for low-cost position remains intense, but the drastically diminished role of price competition means that the benefits of economic progress tend to be concentrated in the growing surplus of the big firms rather than disseminated more broadly by falling prices throughout the entire economy. This aggravates problems of overaccumulation. Faced with a tendency to market saturation, and hence the threat of overproduction, monopolistic corporations attempt to defend their prices and profit margins by further reducing capacity utilization. This, however, prevents the economy from clearing out its excess capacity, reinforcing stagnation tendencies. … Major corporations have considerable latitude to govern their output and investment levels, as well as their price levels, which are not externally determined by the market, but rather with an eye to their nearest oligopolistic rivals.” [page 37]

(The reference to “monopolistic corporations” in the quote above does not refer to a “pure” monopoly, but rather a handful of corporations that, as a group, act in a monopolistic manner — “monopolistic” and “oligopolistic” are used interchangeably throughout The Endless Crisis.)

“The stagnation tendency endemic to the mature, monopolistic economy, it is crucial to understand, is not due to technological stagnation, i.e., any failure at technology innovation and productivity expansion. Productivity continues to advance and technological innovations are introduced (if in a more rationalized way) as firms continue to compete for low-cost position. Yet this, in itself, turns into a major problem of the capital-rich societies at the center of the system, since the main constraint on accumulation is not that the economy is not productive enough, but rather that it is too productive.” [page 38]

Crisis is not a bolt from the blue

The current slump — ongoing stagnation following a steep downturn — is decades in the making. The Great Depression was ended by the massive spending needed to fight World War II, but the boom period of the 1950s and 1960s wound down as pent-up consumer demand was satiated, the final boosts from the automobile ran their course, the stimulus of the Vietnam War ended, and new productive capacity in Europe and Japan contributed to a global surplus. Professors Foster and McChesney demonstrate that financialization was the response to the stagnation that began to grip capitalist economies in the 1970s.

“[U]nable to find an outlet for its growing surplus in the real economy, capital (via corporations and individual investors) poured its excess surplus/savings into finance, speculating in the increase in asset prices. Financial institutions, meanwhile, on their part, found new, innovative ways to accommodate this vast inflow of money capital and to leverage the financial superstructure of the economy up to ever greater heights with added borrowing — facilitated by all sorts of exotic instruments, such as derivatives, options, securitization, etc. Some growth of finance was, of course, required as capital became more mobile globally. This, too, acted as a catalyst, promoting the runaway growth of finance on a global scale.” [page 42]

As a result, debt and financial profits increased much faster than the overall economy. Financialization rests on increasing asset prices; thus, a series of financial bubbles was necessary to keep the whole thing going. As instability increased, repeated central-bank interventions were necessary to deal with a steady outbreak of market and currency crises. The increasing power of financial institutions enabled them to induce governments to deregulate markets, encouraging ever more risky behavior.

The effect of these developments, the authors write, is a “stagnation-financialization trap,” whereby financial expansion has become the main fix for the system, which merely enables the cycle of crises to continue without dealing with the underlying structural weaknesses.

“Today’s neoliberal regime itself is best viewed as the political-policy counterpart of monopoly-finance capital. It is aimed at promoting more extreme forms of exploitation. … Neoliberal accumulation strategies, which function with the aid of a ‘predator state,’ are thus directed first and foremost at enhancing corporate profits in the face of stagnation, while providing further needed cash infusions into the financial sector. … Neoliberalism has also increased international inequalities, taking advantage of the very debt burden that peripheral economies were encouraged to take on, in order to force stringent restructuring on poorer economies.” [pages 44-45]

Thus, the system’s only answer has been attempts to re-inflate new asset bubbles. Globalization has only made this problem a global one:

“At the world level, what can be called a ‘new phase of financial imperialism,’ in the context of sluggish growth at the center of the system, constitutes the dominant reality of today’s globalization. Extremely high rates of exploitation, rooted in low wages in the export-oriented periphery, including ‘emerging economies,’ have given rise to global surpluses that can nowhere be profitably absorbed within production. The exports of such economies are dependent on the consumption of the wealthy economies, particularly the United States, with its massive current account deficit. At the same time, the vast export surpluses generated in these ‘emerging’ export economies are attracted to the highly leveraged capital markets of the global North, where such global surpluses serve to reinforce the financialization of the accumulation process centered in the rich economies.” [page 63]

International oligopoly supplants national oligopoly

The concomitant need for growth under the rigors of capitalist competition fuels corporate mergers; such combinations are necessary to buoy profits via increasing market shares when markets are mature. Because of globalization, the tendency toward oligopoly now takes place on an international scale.

This internationalization of oligopoly gives a false impression of renewed national competition, professors Foster and McChesney argue, because national firms are subsumed by international firms as part of the process of globalization. As under earlier, national scales, few corporations can survive this competition. The 500 largest corporations in the world collectively earn revenues of about 40 percent of world gross domestic product! [pages 76-77]

As ever more power accrues to the capitalists who reap the profits from these corporations, they can move production, or, as is standard in the apparel and computer industries, subcontract production to the places with the lowest wages and longest hours, thereby accumulating fantastic profits and reversing, for now, earlier downward pressures on profits.

“Corporations seek, by means of divide-and-rule strategies, to gain advantages over different local, regional, and national labor markets, benefiting from the reality that, while capital is globally mobile, labor — due to a combination of cultural, political, economic, and geographical reasons — for the most part, is not. Consequently, workers increasingly feel the crunch of worldwide job and wage competition, and giant capital enjoys widening profit margins as the world races to the bottom in wages and working conditions. …

The conflict between workers is engendered by capital through the creating of an industrial reserve army of the unemployed. This divide-and-rule strategy integrates disparate labor surpluses, ensuring a constant and growing supply of recruits to the global reserve army, which is made less recalcitrant by insecure employment and the continued threat of unemployment.” [pages 114-115]

Chinese wages, for instance, have remained at about five percent of the U.S. level since the Deng Xiaoping-led imposition of capitalism in the late 1980s because of hundreds of millions of displaced rural farm workers streaming into cities; rural incomes are still lower than average city wages.

Nonetheless, sweatshop pay and conditions are so poor in China that the pattern is workers staying for at most a few years then returning to their villages because physical survival under such conditions for much longer is impossible. That they can return is because the Chinese government has not yet succeeded in eliminating rights to the land held by villagers, a remaining vestige of the Mao era that, ironically, props up the sweatshop system. Those land rights are a social benefit that enables migrants to survive their stints working in sweatshops.

On such horrific conditions rests modern capitalism. Nor are workers, primarily in advanced capitalist countries, who have steady employment the norm, when viewed on a global scale. Using International Labour Organisation figures as a starting point, professors Foster and McChesney calculate that the “global reserve army” — workers who are underemployed, unemployed or “vulnerably employed” (including informal workers) totals 2.4 billion. In contrast, the world’s wage workers total 1.4 billion — far less! [pages 144-146]

Failure of orthodox economic ‘theory

The authors note that orthodox economics assumes that new industrial development will eventually employ all these people, a hope based on ideology and not on reality. The countries that industrialized in the 19th century, particularly Britain and other European countries, were far from able to absorb all their displaced farmers — each experienced massive emigration. But today’s developing countries can’t export their population; as a result, the economy can’t possibly grow fast enough to absorb all their reserve labor armies even if the global economy weren’t in a years-long slump.

China and India contain too large a reserve army of labor for wages to substantially increase there; therefore Chinese and Indian consumption will not be a path out of world economic crisis as many orthodox economists and political leaders have hoped, according to The Endless Crisis. Orthodox economics, dominated by rigid Chicago School thinking, completely failed to predict the financial meltdown and subsequent stagnation. The reason for that lies in orthodox economics existing as an ideological campaign that long ago severed itself from analyzing the real world.

“Their abstract models, geared more toward legitimizing the system than to understanding its laws of motion, have become increasingly otherworldly — constructed around such unreal assumptions such as perfect and pure competition, perfect information, perfect rationality … and the market efficiency hypothesis. … This is an economics that has gone the way of stark idealism — removed altogether from material conditions.” [page 5]

The Endless Crisis is a welcome, and very needed, departure from the usual apologetics for capitalist outcomes. Professors Foster and McChesney provide a single source for understanding the present economic impasse, laying out with devastating precision the reasons for the economic crisis, the inevitability of crisis, the inequality and instability inherent in the capitalist system, and the need to move to a more humane system. Transcending capitalism and creating a better world can only be accomplished internationally, with working people around the world linking together. The authors write:

“Never before has the conflict between private appropriation and the social needs (even survival) of humanity been so stark.” [page 63]

Past structural crises of capitalism could be overcome because there was still room to grow. But when there are no more new markets to conquer, deprivation for the many is the only way for the few to continue to accumulate in a system dedicated to that ever narrower accumulation.

* John Bellamy Foster and Robert W. McChesney, The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China [Monthly Review Press, New York, 2012]

Self-directed workers as a “cure for capitalism”

The economy of the future will not be a tabula rasa. Today’s bricks will form part of tomorrow’s edifice and, assuming that humanity’s zig-zagging and often circular course toward greater freedom continues, pieces of a better world exist scattered around us.

Cooperative enterprises are surely part of that (hoped for) better tomorrow. If tomorrow’s better world is one of economic democracy, environmental sensitivity, rationality in production and distribution, equality and meaningful community involvement, than cooperatives will form some of the backbone. Some of these bricks are already here: Successful cooperatives exist today, although they are as yet small islands of democracy in the vast sea of authoritarian capitalist enterprises.

No one model could ever be universal. Differentiated internal operations and cultures are bound to develop. But certain bedrock principals can, and should, be in place for cooperative enterprises operating in an economy that increasingly includes them. The economist Richard Wolff, in his latest book, Democracy at Work: A Cure for Capitalism,* argues that the ability of the workers of an enterprise to be involved in all its strategic decisions is the most important principal to bring about economic democracy, without which political democracy is a formal, empty shell. He introduces the term “workers’ self-directed enterprises” to encompass such enterprises.

During the last structural crisis of capitalism, the Great Depression of the 1930s, massive movements from the Left, including unions, socialist parties and communist parties, forced widespread reforms to be instituted. Eventually, however, Keynesianism and social democratic programs developed new sets of instability and capitalists were able to at first slowly and then more vigorously roll back one reform after another. Professor Wolff argues that even if a suite of reforms could be enacted, the fix would be temporary — capitalists would intervene to take back the reforms, plunging us back into crisis.

But the problem is not simply that the wealthy, through their concentration of accumulated capital, can so readily bend political systems to their ends. The problem is the instability of capitalism itself — capitalists are induced to do everything they can to increase profits due to the relentless nature of competition. That can be achieved through taking a larger share of a market or through cutting costs — the latter can include the introduction of machinery or moving facilities to somewhere else where the workers can be paid far less. These decisions are made by a small number of people at the top of the company, ultimately by the board of directors, a body that almost always includes top executives.

A similar process of alienation happened in countries that used the system of the former Soviet Union, in which the government owned all enterprises. Professor Wolff uses the term “state capitalism” to describe that model because, in place of a private board of directors, state officials made all the decisions, again excluding workers. Those officials controlled all the production of the workers, appropriating the surplus by paying the workers a small fraction of the value of what they produced, the same as in a traditional private capitalist enterprise. A many-sided argument among Bolsheviks and others on how to organize production raged after the October Revolution, but, within a year of assuming power, the Bolsheviks nationalized large enterprises under the impact of the multiple deep crises of World War I and the threat of the advancing German army.

Such a system became synonymous with “socialism.” Along with many others, Professor Wolff argues that “socialism” has to be a much different system, one in which the workers themselves make the decisions of their enterprises, in conjunction with the community of which they are a part. A central part of the ongoing furious campaign against “socialism” is the supposed efficiency of capitalism in comparison to anything else. The inherent instability of capitalism (euphemistically called “business cycles” in orthodox economics) is itself inefficient, nor is it possible to measure all the wins and losses across a society.

“In short, the notion of measuring the efficiency of economic events or processes or of an economic system is a mirage. It is not possible to identify or measure all of the effects of any social factor, nor is it possible to separate and weigh all the influences that combine to produce each effect. The very concept of efficiency would have been banished from discourse, let alone science, long ago had it not proven so ideologically useful. Efficiency discourses resemble capitalist notions of efficiency, which in turn resemble the medieval doctrines and debates concerning how many angels can dance on the head of a pin: they too will one day strike people looking back as bizarre and absurd.” [pages 29-30]

Moreover, Professor Wolff continues:

“The efficiency argument for capitalism rings hollow in the face of high and enduring unemployment affecting jobless millions and their relatives, friends, and neighbors. Watching the growing absurdity of foreclosures creating both homeless people and empty homes throws into serious question the standard defense of capitalist efficiency. … Socialists and communists during the Cold War often simply inverted the standard argument by insisting that is was [their version of] socialism or communism that was efficient (or more efficient than capitalism) and thus represented progress. They, too, often ignored the impossibilities of identifying and measuring all costs and benefits and of separating and evaluating each of the myriad influences that produced them.” [pages 30-31]

Having set the stage, Democracy at Work provides a concise summary of the lead-up to the present crisis, from the Great Depression through the explosion of debt incurred as a result of stagnant or declining wages, and summarizes in clear, accessible language the basic problems of advanced capitalist and Soviet-style systems. The book then gets to its heart, sketching out the concept of “workers’ self-directed enterprises.” WSDEs are a distinct form of cooperative enterprise — this is an enterprise in which the workers themselves are the directors, making all decisions on what to produce, where to produce, how to distribute, determining wages and other compensation, and hiring management.

The surpluses produced would never be appropriated and distributed by anybody else. In a capitalist corporation, the board of directors are legally required to maximize the profits of the corporation going to the shareholders, regardless of the cost to the workers or the local community, and only the shareholders vote on who the directors are. The profits of the company, the bloated pay of the top executives and the huge piles of cash diverted into speculation are the product of the surpluses produced by the workers — and the competitive pressures of capitalism ensure that this process continually deepens.

WSDEs would operate in a far more humane manner. The workers themselves will make the decisions on technological innovation, which is only proper since they, and the surrounding community of which they are a part, will have to live with such decisions. (This is unlike a capitalist enterprise, in which those who bear the cost have no say in the decision.) The self-directed workers can consider a far wider set of issues and concerns about adopting new technology, or any other strategic decision, thereby fully weighing the effects on themselves, their families and their communities.

Professor Wolff proposes that a specialized agency be created that would monitor technological innovations, what enterprises need more workers, which enterprises have registered a desire to commence new production, and other social needs, to be funded with enterprise profits.

“Rather like a matchmaking service, this agency’s task would be to match employees willing to change jobs with job availability and to arrange for appropriate training and inducements to facilitate the reallocation of personnel. No loss of income would attend the transition period for workers who left one job for another. To run this agency would cost a small portion of all the surpluses distributed by WSDEs to sustain its staff and activities. This agency’s reports and services would form one basis for the decision by all workers about whether to make the technical change in question.” [page 132]

Jobs can be rotated (easing boredom), pay differentials minimized (drastically reducing inequality), environmental concerns would be taken seriously (otherwise you’d be polluting your own home) and communities would be stabilized (who would move their jobs to another country for a cut in pay?). And by being involved in your workplace’s decisions — and rewarded for your efforts in making the enterprise a success — alienation is drastically reduced. Without the need to work a crushing number of hours to compensate for low pay, you would have the time to be more of a participant in your community.

Professor Wolff’s concept of WSDEs rests on the workers being their own directors; that is, making all the strategic business decisions themselves. He stresses this aspect, and sees ownership of the enterprise as less important, arguing that different ownership models can co-exist with WSDEs. Local, regional and national governments could own them but allow them to be run by the workers; the workers themselves could own the enterprise individually or collectively; or ownership could take the form of shares traded on a market. The author also prefers not to pre-judge whether a system based on WSDEs would take place under market conditions or in which planning predominates; he believes that they can be compatible with either.

“How WSDEs will come to exist with private versus socialized productive property and to coexist with markets versus planning will not be determined by spurious claims about their comparative efficiencies. It will be determined through the construction of particular, specific postcapitalist economic systems as they emerge in transitions from both private and state capitalist systems.” [page 144]

Fair enough. But here I believe caution is warranted. Leaving a full market system in place would inevitably re-introduce some of the problems of capitalism, albeit in different and milder forms. As I have previously discussed, if collective enterprises, no matter how democratically they are run internally, compete with each other in unfettered markets, market forces would require the collectives to ruthlessly reduce costs (including their own wages) and aggressively expand the market for their products. Failure to do so would mean not surviving in competition with the enterprises who do adapt themselves to market conditions. Because all materials and finished products would remain commodities subject to price volatility in this scenario, the cooperative workers’ own labor would also become a commodity — in essence, they would “become their own capitalists.”

Some amount of planning — democratic, bottom-up planning based on aggregate demand as a guide and not top-down planning imposed as an order — would seem to have a significant role in an economy dominated by cooperatives; moreover, the cooperatives would have to have some cooperation with each other, particularly in negotiating prices up and down the supply chain. Ultimately, these are questions that won’t begin to be solved until there is more practice, although a “matchmaking” agency of the type proposed above implies some amount of planning.

Much more immediate is the question of how WSDEs would co-exist with capitalist enterprises. WSDEs would handle competitive problems and grapple with issues of size and other issues differently than a capitalist enterprise. For instance, Professor Wolff argues, if WSDEs organized mutual support and pooled political strength, or prove to be more productive, they could prevail against capitalist enterprises. Not extracting large amounts of money for bloated executive pay could free extra funds for developing innovations, or differentiating their products as made under democratic conditions could be a marketing advantage.

Early on, WSDEs would need state assistance. Professor Wolff advocates adapting the model of Italy’s “Marcora Law,” which enabled workers to take over troubled enterprises. The author suggests offering the unemployed a choice: Either the traditional weekly benefits, or taking it as a lump sum, pooling their resources with others taking the lump sum, and forming a WSDE. These new enterprises would likely need to rely on technical assistance, subsidized credit, tax breaks and other assistance; such aid can be looked upon as an extension of existing programs to assist small businesses or for women- or minority-owned businesses.

Social solidarity with and by existing cooperatives, unions and activist groups would be another form of support. A strong cooperative movement would provide an alternative to traditional authoritarian capitalist employment, eroding capitalists’ ability to impose harsher working conditions.

Democracy at Work does formulate one difference from traditional concepts of cooperative enterprises that will likely be seen as controversial: A differentiation between “surplus-producing” workers and “enabling” workers. The first group are those who directly produce the outputs that are sold. The second group include accountants, managers, secretaries, clerks and many other job functions that provide the conditions that enable the “surplus-producing” workers to do their work. Professor Wolff is careful to stress that both categories are equally crucial to the success of an enterprise.

Nonetheless, he advocates that only the “surplus producers” be allowed to make the decisions regarding the appropriation and distribution of the surplus. All other decisions would be voted on collectively by all workers. The rationale is that such an arrangement “secures the absence of any exploitation within the WSDE” [page 166]. But leaving such major decisions to only a portion of the workforce risks engendering a division within the workforce, the opposite of the goal, and arguably applies too narrowly the laudable goal of ending exploitation.

Moreover, this formulation presupposes that management will form a group distinct from line workers. But there should not be such a distinction: Managers should be elected by the workers a whole, to specific terms and be recallable. There is no reason why management and supervisory positions should not be rotated — workers can become managers, and then go back to being workers. More people would become familiar with more roles, be able to assume greater responsibility and be better equipped to participate in strategic decision-making.

Nor is there any reason why people can’t change roles from a direct production job to a support job, which, to be fair, is tacitly acknowledged in the author’s stress on the ability of workers to change job functions within WSDEs. Having two categories of jobs with a crucial decision-making function reserved for one category would seem to defeat the purpose of cooperation — equality. If everybody is necessary to the enterprise, then everybody should be eligible to vote on everything.

Decision-making, however, will not be confined to the walls of the enterprise. Residents and workers should participate in each other’s decisions to the extent that they are affected, Professor Wolff writes. Community representatives should participate in WSDE decision-making, and vice versa, as WSDE members are part of the community.

“In societies where WSDEs are the prevailing organization of production, capitalists will no longer occupy a crucial political position. Capitalists’ use of the surpluses they appropriate will no longer dominate politics. We will no longer have capitalists making political use of the resources typically at their disposal — the surpluses they appropriate. Instead, the community of workers who direct WSDEs will be the prevailing political partner of residence-based governing bodies. …They might finally realize democracy, which under capitalism was never allowed to go beyond very limited electoral functions.” [pages 167-168]

A much higher level of democracy does not mean that a society with an economy based on WSDEs would be a utopia. Professor Wolff is forthright in noting that there will be new problems and contradictions. But with vastly less inequality distorting all areas of society, problems would be more easily tackled. And just as the transcending of earlier systems eliminated many but not all social ills, transcending capitalism will put many problems behind us.

“The slave and feudal systems that proceeded capitalism fostered forms of crime rooted in their mixes of economic risks and rewards. But those systems never displayed the recurring boom-and-bust cycles common to all forms of capitalism. These cycles are the products of capitalism — not of this or that group (the state, criminals, others) functioning within that system and in response to its upswings and downswings. … Overcoming the systemic roots and nature of capitalist crises requires a change in the economic system.” [pages 51-52]

Professor Wolff’s Democracy at Work offers us a well-written practical guide to alternatives to capitalism, one that we can begin to build today with the tools at our disposal. Whatever disagreements a reader may have with this or that detail, Democracy at Work is recommended to anyone seeking a concise study of why we need to bring a better world into being and how we might get there.

* Richard Wolff, Democracy at Work: A Cure for Capitalism [Haymarket Books, Chicago, 2012]

Could the rise of China fatally de-stabilize capitalism?

By Pete Dolack

The world is not limitless, yet growth without limits is touted as a permanent economic elixir. But natural resources aren’t infinite, nor can demand be infinite. What happens when the limits of growth are reached?

We aren’t supposed to ask that question about capitalism; the assumption is that economic activity will always grow. The insertion of China into the world capitalist system has created the opportunity for more growth as a country of 1.3 billion people has been thrown open to the world’s markets.

But what if, rather than throwing capitalism a lifeline in the form of a vast pool of consumers who will drive demand, China instead will fatally destabilize an already weakened world economic system?

China will be the final straw that will bring about the downfall of the capitalist system is the provocative conclusion of an interesting book by a Chinese economist, Minqi Li, who now teaches at the University of Utah. Professor Li doesn’t pull any punches in his book; indeed his book’s title is The Rise of China and the Demise of the Capitalist World Economy.* The book’s central thesis is that the huge mass of low-wage Chinese workers will drag down wage levels globally; the increase of industrialization in developing countries will lead to exhaustion of energy sources; and that ecological limits will force a halt to growth, fatal to a system dependent on growth.

Professor Li believes that the combination of these crises will bring an end to the capitalist system by the middle of this century. The Rise of China, however, is not apocalyptic; rather it methodically builds it case piece by piece through a sober examination of economic trends, calculations of the limits to a range of natural resources, analysis of long-term environmental unsustainability, and study of historical trends going back centuries. Nor is this a bleak work; Professor Li writes in the Gramscian spirit: pessimism of the intellect, optimism of the will. What will follow the collapse of capitalism is not pre-ordained but is up to humanity to determine.

The first two of the book’s seven chapters provide an interesting discussion of Chinese history, before and after the 1949 revolution. Pro-capitalist factions within the Chinese Communist Party gained the upper hand soon after Mao Zedong’s death in 1976, with Deng Xiaoping wresting party leadership by the end of the decade. Early reforms granting concessions to workers and peasants cemented political control for the Deng faction, Professor Li writes, enabling the party to then introduce capitalism. A 1988 law granted enterprise managers full control in the workplace (including hiring and firing at will), and the development of market relations enabled privileged bureaucrats to enrich themselves.

Intellectuals on the one hand, and enterprise and bureaucratic elites on the other, sought the growth of market relations and a firm turn toward capitalism. The two groups, however, disagreed on how the spoils would be divided between them, and the party was split three ways on how fast and how far to move toward putting the economy on full market relations. It was Deng who proved to be “the master of Chinese politics,” Professor Li writes, as he was able to implement an intermediate strategy between the party’s poles and use the crackdown in Tianamen Square to reduce the intellectuals to the junior partners of the ruling elites and to break the resistance of urban working people. Thus the stage was set:

“Throughout the 1990s, most of the state and collective-owned enterprises were privatized. Tens of millions of workers were laid off. The urban working class was deprived of their remaining socialist rights. Moreover, the dismantling of the rural collective economy and basic public services had forced hundreds of millions of peasants into the cities where they became ‘migrant workers,’ that is, an enormous, cheap labor force that would work for transnational corporations and Chinese capitalists for the lowest possible wages under the most demanding conditions. The massive influx of foreign capital contributed to a huge export boom.” [pages 64-65]

The “socialist rights” that were revoked included job security, medical insurance, access to housing and guaranteed pensions. The creation of an exodus from the countryside provided a huge pool of surplus labor to keep wages extremely low.

“China’s economic rise has important global implications. First, China’s deeper incorporation into the capitalist world-economy has massively increased the size of the global reserve army of cheap labor. In some industries, this allows capitalists in the core states to directly lower their wages and other costs by directly relocating capital to China. But more important is the ‘threat effect.’ That is, capitalists in the core states force core-state workers to accept lower wages and worse working conditions by threatening to move their factories or offices to cheap labor areas such as China, without actual movement of physical capital. …

“Secondly, China’s low-cost manufacturing exports directly lower the prices of many industrial goods. To the extent that unequal exchange takes place between China and the core states, part of the surplus value produced by Chinese workers is transferred to the core states and helps to raise the profit rate for capitalists in the core states.” [pages 70-71]

Professor Li’s analysis rests on “world systems” theory, which divides the world’s capitalist countries into three general groupings. World systems theory emphasizes that capitalism is a global system that changes and mutates over time and therefore must be analyzed as a single unit rather than as a collection of nation-states. The global division of labor forms the basis for a division of the world’s countries into three broad categories: core, semi-periphery and periphery, with the latter two subordinate to the core countries and the periphery the most exploited.

Inequality between core and periphery is an “indispensable mechanism” of global capitalism, Professor Li writes, and the existence of a semi-periphery acts as an important buffer because it is exploited to a relatively lesser degree than the periphery and can also, to a lesser degree, exploit the periphery. The semi-periphery historically comprised a small percentage of the world’s population and thus could be “bought off” relatively easily and thus a buffer against any united resistance by the world’s non-core countries. But if the semi-periphery were to become a significant portion of the world’s population, the world system would be destabilized.

The massive size of China is the destabilizing agent, Professor Li argues. He presents four possible scenarios that could arise from the rise of China:

“First, China may fail. China’s great drive toward ‘development’ in the end may turn out to be no more than a great bubble. [In this scenario,] as China sinks back to the status of periphery or poor semi-periphery, China’s existing regime of accumulation will collapse as it can no longer withstand the exploding social pressures the very process of accumulation has generated. This scenario, however, may be the least devastating for the capitalist world-economy.

“For the capitalist world-economy, the problem of China lies with its huge size. China has a labor force that is larger than the total labor force in all the core states, or that in the entire well-to-do semi-periphery. As China competes with the well-to-do semi-peripheral states in a wide range of global commodity chains, the competition eventually would lead to the convergence between China and well-to-do semi-peripheral states in profit rates and wage rates. This convergence may take place in an upward manner or a downward manner.

“In the downward-conversion scenario (the second scenario), China’s competition, with its enormous labor force, will completely undermine the relative monopoly of the historical well-to-do semi-peripheral states in certain commodity chains. As relative monopoly is replaced by intense competition, the value added contained in the traditional semi-peripheral commodity chains will be squeezed, forcing the historical well-to-do semi-peripheral states to accept lower wage rates that are closer to Chinese wage rates.” [pages 109-110]

Professor Li is arguing that, in this second possible scenario, wages rates in industrialized countries not among the “core” states (industrialized countries other than Western and Northern Europe, North America, Japan, arguably South Korea) would collapse under the competitive pressure of China’s low wages, which long hovered at about five percent of U.S. wage rates, and in the mid-2000s were one-quarter to one-fifth of countries such as Argentina and Hungary. A collapse in wages in semi-peripheral countries around the world such as Argentina, Hungary and Turkey would spark unrest and lead to economic depression around the world.

“There is the third scenario, that of upward convergence. China may succeed in its pursuit of ‘modernization’ and become a secured, well-to-do semi-peripheral state. In the meantime, the historical well-to-do semi-peripheral states may succeed in maintaining their relative monopoly in certain commodity chains. As a result, the Chinese wage rates converge upwards towards the semi-peripheral levels. Unfortunately, this scenario is as dangerous for the capitalist world-economy as the second scenario. The problem, again, lies with China’s huge size. Should the Chinese workers generally receive the semi-peripheral levels of wages, given the size of the Chinese population, the total surplus value distributed to the working classes in the entire well-to-do semi-periphery would have to more than double. This will greatly reduce the share of the surplus value available for the rest of the world.” [pages 110-111]

Here, Professor Li is arguing that a multi-fold increase in Chinese wages simultaneous with a maintenance of wages in countries around the world would likely be unsustainable. Multi-national companies based in core countries have moved production to China to take advantage of its low wages and lack of effective labor laws, enabling them to extract more surplus value. “Surplus value” is the sizable difference between the value of what an employee produces and what the employee is paid; some of the surplus value is used by capitalists for investment or to cover other expenses but much of it goes into stratospheric executive pay and financial-market speculation.

An upward convergence of wages around the world in present-day low-wage havens such as China would significantly reduce capitalists’ profits. In this scenario, capitalists would seek to cut wages in core countries to make up the difference, which in turn would trigger reductions in demand. Declining rates of profit, under capitalism, lead to economic downturns. Each of the world’s major economic crises, from 1873 on, have followed declines in the rate of profit.

“If the scenario of upward convergence turns out to be too expensive for the capitalist world-economy, what if China’s upward mobility takes place at the expense of the historical well-to-do semi-periphery? In other words, imagine the scenario (the fourth scenario) in which the rise of China (and India) successfully displaces the historical well-to-do semi-periphery, what are the likely implications for the existing world system? … [A]fter all of the investment is distributed, how much will be left for the other half of the globe?” [page 111]

Were the growth in energy consumption of the Chinese and Indian economies to continue at the same rates, and likewise for the United States and the eurozone, the rest of the world would be left without an energy supply in two decades, Professor Li argues. He writes:

“Given these trends, the rest of the world will have to get by with less and less energy consumption after 2017 and by 2035 there would be virtually no available energy left for the entire world outside China, India, the U.S. and the Eurozone. It is certainly impossible for such a scenario to materialize.” [pages 111-112]

But will there be enough energy to meet even the increasing needs of whatever countries will be in a position to dominate energy resources? Because of the intense competition imposed by the market in capitalism — individuals, businesses and states must all engage in it — a substantial amount of available surplus value must be used toward further capital accumulation to secure and expand market share. Those who do not do so are eliminated in the competition.

Investment is a necessity, and to compete successfully, what is wrung out of labor must rise. Machinery is the route toward greater efficiency. But as machinery and consumer products become more sophisticated, energy and other resources are consumed at greater rates; thus energy inputs rise faster than the population, pushing energy usage beyond sustainability and degrading the environment.

The world is already consuming resources beyond the world’s bio-capacity, Professor Li argues. Not only have the world’s “core” countries already exceeded their regional bio-capacities, but China, India, the Middle East and Central Asia have as well. Using calculations in a 2006 report by the World Wildlife Fund in the USA and Canada, the Zoological Society of London and Global Footprint Network, China and India consume resources and impose domestic environmental damage at a rate twice beyond their ability to be sustainable. Although those countries consume per capita far less than do the U.S. or the European Union, they also have much lower bio-capacities.

Such problems are compounded by an imminent peak in oil and gas, and limits to a variety of metals and other natural resources. If renewable energy sources prove unable to make up for the future shortfall in energy from oil and gas, the world will have much less energy available to it in the latter part of the 21st century than is available now. Professor Li believes that renewable energy will only be able to produce a small percentage of that of non-renewable sources. Even if his pessimism proves unfounded, the unsustainability of present energy consumption remains — as is the damage being done to the environment.

Another looming crisis for the capitalist system is the lack of a successor to the United States as the system’s center. Capitalism has had a succession of dominant centers; each successive center has been bigger to be able to cope with increasingly complex tasks. When London succeeded Amsterdam as the financial center, the financial center became located within a country with a powerful military, not only a large merchant fleet as Amsterdam’s United Provinces possessed. With New York succeeding London, the country at the center is continental in size and possesses a military that can be projected around the world.

Professor Li predicts a rapid decline for the U.S., including an imminent end to the dollar as the world’s central currency. Here I believe the professor’s forecast will prove to be considerably off; although the U.S. has entered a period of decline, its military and financial powers will remain preeminent for some time. And the dollar and U.S. debt instruments remain safe havens.

Declines from the capitalist system’s apex have tended to be gradual and not precipitous; moreover, the former financial center tends to remain powerful in financial markets for some time after the military baton has been passed. And there is no country remotely near being able to mount any challenge to U.S. military supremacy; U.S. military spending is nearly equal to military spending of all the rest of world put together and a significant portion of the Pentagon budget goes to weaponry.

It is a contradiction that the “duties” of the central power contribute to its ultimate decline. For the U.S., that is not only the enormous drain of military spending that starves the rest of its economy of investment and needed social provisions, but that it props up the world system through its deficits.

“After the systemic breakdown of the early twentieth century, the capitalist world-economy can no longer afford another similar breakdown. The hegemonic power has since then assumed the new responsibility to actively manage the global economy. Instead of allowing the system to simply collapse [during the repeated economic crises from the 1980s], the U.S. responded to growing systemic instability by running large and rising current account deficits, in effect pumping ‘liquidity’ into the global economy.” [page 123]

No other country has a big enough economy, nor a big enough military to apply the muscle that underlies the capitalist system, to replace the U.S., yet the capitalist system is unable to function without such a center. The next hegemon must be bigger than the U.S., and there is no country or bloc that fits the bill. Moreover, Professor Li argues, such a hegemon would be so large that it would stifle competition among countries, kicking out one of the crucial legs of the capitalist system.

Crises in economics, the environment, shrinking natural resources and the chaos of global warming are leading to a threat to very survival of humanity, Professor Li argues. Moreover, multiple crises are leading to a point where economic growth is no longer possible, the ultimate contradiction for the capitalist system, the very existence of which is based on endless growth and accumulation. He writes:

“Centuries of relentless capitalist accumulation have set humanity on a course of self-destruction. The very survival of humanity and civilization is at stake. The crisis can not be avoided or overcome within the historical framework of capitalism. To rebuild human society on an ecologically sustainable basis, there must be an economic system that is based on the production for use which is capable of meeting people’s basic needs, rather than one that is oriented towards the endless pursuit of profit and accumulation.” [page 173]

What comes next is up to humanity to decide. Professor Li quotes world-systems theorist Immanuel Wallerstein as predicting the world will enter a post-capitalist era in the second half of the 21st century. But what will that system or systems be? It could well be much worse — an authoritarian feudalism in which survival is a struggle in a time of scarcity is certainly foreseeable. Or it could be a democratic socialist system, in which production is for human necessity rather than an elite’s wealth accumulation and in which the consequences of a changing climate and the limitations on the world’s resources are handled in fully democratic, rational manners without elites to confiscate most of what is produced.

All social systems are historical, and capitalism is no exception, Professor Li argues. Indeed, all previous systems have reached their limits and been supplanted by newer forms. Ending on an optimistic note, he writes that “if the future socialism is able to make the best use of the human knowledge of nature that has been developed under capitalism and further expand that knowledge” and a sustainable relationship between population and resources can be established, then “humanity will be in a position to resume the great historical march to the realm of freedom.”

The Rise of China rewards the reader with a wealth of information and analysis. It is not necessary to agree with everything in the book to find it a valuable contribution toward understanding the stresses of the present economic crisis and a stimulant to discussion of the viability of continuing on the current economic path. One conclusion that shouldn’t be controversial, however, is that there will be no saviors. We’ll have to save ourselves.

* Minqi Li, The Rise of China and the Demise of the Capitalist World Economy [Monthly Review Press, New York, 2008]