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International Financial Catastrophe: Is this the BIG ONE?

Jeff Richards:There are many times when I think the Latin American preoccupations of radical left groups like the DSP and the RSP (thankfully, less so in the case of the DSP/SA) make you neglect what could be a truly historical moment in the history of late capitalism (it certainly beats the daily chronicles of the retreating horizons of the great struggles led by Chavez and Morales and Cuba's slow drift to Beijing style `socialism with Chinese characteristics'). While I have nothing but respect for those in groups like the DSP –people who put vast amounts time and effort to building a radical alternative- I have say that the amount of effort put into international economic reporting is paltry compared to Latin American politics. Where are the new generation of radical political economists? They are sadly missed.

Looking through all the messages over the last few days there was not one soul who dropped a reference to the annual report of the Bank of International Settlements, one of the most important financial institutions in the world. The BIS is warning that we might not just be facing a recession; we could be hurtling towards a depression!(In case anyone forgets, the last time we had a depression we had some rather earth shattering events e.g. world war 2). In my view, there is a pressing need to refocus on this global historical event.

Peter Boyle:Jeff, I share some of your frustration at the lack of good contemporary Marxist economic analysis on lists such as these. There has been interesting material and some debate on the Marxism List , which many on t is list follow. The fact is, that the revolutionary left has not been able to make up the loss of Ernest Mandel. There are radical political economists, many of whom working within the analytical framework of Marx but most of them lack engagement and commitment to revolutionary struggle. This was a point brought home to us by John Bellamy Foster (who is committed and involved in the struggle, through Monthly Review). He met up some of with the Sydney University Political Economy during his visit and came away with the impression that they had little or no interest in radical political struggle. Sad, if true.

What can we do about this? We can educate a generation of activists and build networks and interactions between the surviving Marxist economists. We try our best to do both, and in the DSP we are free to do more now that we are liberated from a stale internal debate that had clearly run its course. The Climate Change | Social Change conference was a fantastic example of Marxist political economy meets the climate change crisis (real radical political economy today must integrate the global environment crisis). Pity you missed this. You would have been stimulated and it would have made you less anxious about the state of the left. You would have seen the possibilities to do more in this direction. As you know we are working with others to follow up conferences around the country.

I did an interview on the global financial crisis with Foster, which you would have seen, and hope to do a follow up one soon (in the light of the new developments, including the dramatic fuel price rises).

The combination of the global financial crisis, climate change and ongoing and deepening political legitimacy crises of neo-liberalism makes for a dramatic situation today there is no doubt about it. It frames our political interventions. For example, the financial crisis has spilled over into crazy speculative activity that has accelerated the fuel price rise (by up to 60%, according to the not-uninformed Soros) with dramatic consequences for the estimated one billion people
starving or suffering malnutrition, and for several embattled political regimes around the world.

But it has to be said that the references to the "Is this the Big One?" should underline another fact that any serious Marxist should take into account. Capitalism can survive any economic crisis no matter how severe, if it can force the working classes to bear the pain of it. So we can see that recession is already underway. Which is why we are very interested in the real advances of mass revolutionary movements in Latin America (you would mistaken to see this as an exotic obsession). The revolutionary left underwent a massive retreat in the 1990s and now there is an advance (albeit uneven) so we are correvtly focusing attention on it. Without a mass revolutionary movement, capitalist crisis, no matter how severe, simply delivers more pain to the majority and more devastation to the environment.

All this said, I'd urge you or anyone else with the ability to aggregate, absorb and analyse the new economic developments to have a go at an article for Green Left Weekly of Links.

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Dave Riley | July 07, 2008

My claim to economic fame was that I studied my Keynesian how-to with David Morgan -- later the Westpac CEO -- way back when I got invited to his 21st birthday shin dig.

If I'd only have stuck with "Mushrooms" Morgan -- I woudl have been situated at the big end of town long ago....

Since Keynes has been dumped from de rigueur status I've not been able to comprehend capitalist economic theory much at all. It seems almost totally chaotic -- rather than being a science of economy management.

But I fear this discussion here has made the logic a bit more complicated than it need be.

Part of our problem -- aside from the demise of Ernest Mandel and what he represented for Marxist economics -- is that there has been a reaction to the crude economism that was standard both for Stalinist and Healyite (WSWS) analysis.

The ready attempt to drag analysis back to the economistic coal face tended to ignore a lot of the other stuff -- a lot of other very important stuff -- that was going on. Stuff thats' been our political bread and butter -- like the movements.

Nonetheless, looking back I think there has been a tendency to underestimate macro economic changes that kicked in during the eighties as they panned out into the nineties onto today.(For instance: the economic basis for Howard's 2004 re-election). At its heart, I think, is the service the Australian ALP gave the local bourgeoisie in the easy time the ruling class had during the engineered Accord years.

(This was perhaps local 'social democracy's last great service to capitalism.)

Here was this truly brilliant manoevre (sponsored by the left) where incomes were massively shifted from labour to capital and historiography simply prefers a practised amnesia in regard to this theft.

Variously this same pursuit was engineered in the US and the UK etc but really never as effectively as it was here under Labor's guardianship. We don't call it corporatism for nothing.

Nonetheless, the later economic changes that flowed from the 'collapse of communism' late in the eighties and into the early nineties I fear were perhaps misread.

The traditional viewpoint that the Soviet economies meant that in effect a (large)section of humanity was taken out of the capitalist orbit in way of consumption and production -- doesn't quite stack up to what then followed. If they were taken out, they haven't now been accepted back "in".

In effect most of these economies were then gutted such that only maybe in China has something else/something dynamic arisen - especially in way of competition (and the sheer size of the Chinese nation state package is maybe key to this and why a formality of "communism" survives there to keep that state in tact). Mandel's final academic interest -- Europe versus America -- seems a salient element,because in effect, the 'collapse of communism' has meant that the Third World has got larger -- NOT that there are so many extra keen and cashed up consumers to be had behind the old Iron Curtain or elsewhere.

But the irony is perhaps that the new consumability that this change supposedly promised -- in the imperialist countries -- was engineered via a massive burden of debt. So we western consumers are in effect a threatened species because we can afford less than we have become used to. I can/you can 'own' a TV set, computer, mobile phone or a car because they're cheap and one off consumables we can pay for on the Never Never -- but we are having immense difficulty paying for accommodation, schooling, food and health. So, in many ways, especially during the nineties and into this century so far the social wage has been parred back because what was once upon a time 'ours' to use and aspire to as a 'right' -- mediated by the state -- is now held hostage to God Profit.

While economies have grown, the largesse is not being shared around much at all. So if there has been economic expansion during the last 20-30 years where has it actually been located -- and who has it benefited?

In the new Third World -- in Russia, Latvia, Hungary and Estonia? I don't think so.Low wage workers are a dime a dozen. There's more of them than there was before 1989. Of course some low paid workers are paid lower than others so maybe your shirt is no longer produced in Nanking but in Hanoi and your shoes begin life in Phnom Penh rather than Jakarka.

But I can't help thinking that a core contradiction of capitalism is being called to account. It's chickens come home to roost.

The DSP program explains the core contradictions of capitalsim
http://www.dsp.org.au/node/31
and among those listed in this concise exploration is this one::

# The contradiction between the tendency towards unlimited expansion of production and the restrictions capitalism imposes on the individual and social consumption of the workers. Capitalism is obliged to impose these limits because the aim of capitalist production is to maximise surplus value, and this necessitates limiting the growth of real wages.#

I argue this way because a lot of the stuff I've read about the economic crisis in the US isn't very historical and seems to be caught up in the daily melodrama on Wall Street vis a vis a sort of 1929 bogeyman.

IF the question is to be about whats' crook with the US and indeed the world economy -- then WHY is the NSW government so dedicated keen to flog off the electricity industry in that state? I fear we Marxists have fallen victim to the ready shorthand e that it's a question of ideology. But it's not that shallow is it?

This is where a bit of Keynesian know how becomes useful. If you know your equations , all that is being engineered is a reduction in Governments' economic role (G) by handing it out to all comers as a source of productive investment (I). That's because the G is an open sesame place.

Behind the door: there's all these state jewels at sale prices..

The irony for the US capitalist, it seems to me, is that Daddy Warbucks doesn't have a large G to buy up. Here its a bargain basement sale of any number of utilities. But it doesn't ADD anything much to the collective pot. It's simply privatization of something that already exists. It doesn't boost anyone's economy, it only fills private pockets.

In the US I assume that war spending plays a similar role as government contracts serve a similar function.

This is why 'social democracy' has already reached its' use by date and is historically passe. Keynesianism pandered to classical social democracy and thats' why it was dropped 30 years ago from academic & journalistic discourse. Now with the parring down of economic interventionism our Marxist task, I think, is not to so much to explain how grievous or not the current economic juncture is but why the economies have not worsened precipitously these last 30-40 years given that the Post World War II boom had run its course.

The point being that the chickens always come home to roost but they may not all return at the same time.

dave riley

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