Anti-Imperialism then & now: On the principles of anti-imperialism in view of changes in world capitalism

Michael Pröbsting
14 June, 2024


It is an axiom for Marxists that imperialist powers, their rivalry, and their wars are one of the key characteristics of the final stage of capitalism, which has been consequently called “the epoch of imperialism”. It is therefore only coherent that the struggle against imperialist aggression and wars has always been an elementary feature of the revolutionary program in modern times.

While this has been true since the onset of the imperialist epoch at the beginning of the 20th century, it would be mistaken to imagine that the concrete application of these principles and the relevance of its individual elements remain always one and the same. In fact, the concrete application of this program depends on the specific characteristics of a given historic period within this epoch.

In this essay we shall, after a brief summary of the principles of anti-imperialism, elaborate how these principles were applied in different periods in the past and, most importantly, how they need to be applied today. Finally, we will discuss the underlying changes in modern capitalism that influence the concrete application of the anti-imperialist program and the consequences of these changes for Marxist strategy.
Principles of anti-imperialism

Here, we will limit ourselves to briefly summarise the principles of anti-imperialism, since we have elaborated on this in detail in two books and other works.1 Since imperialism is a central feature of modern capitalism, the struggle against it is an elementary feature of working-class policy. In other words, it is the application of the Marxist program and the general methods of the class struggle to the terrain of anti-chauvinist and anti-militarist struggle.

The Marxist program against imperialism is based on the axiom that the working class is by its very nature an international class. As such, its interests are in sharpest contrast to those of the imperialist bourgeoisie. Just as the workers of a given enterprise have no common interests with their boss, so the working class has no common interests with the ruling class of a given imperialist state. Quite the opposite: just as workers want to weaken, defeat and expropriate the owners of “their” corporation, so too do workers of a given imperialist country desire to weaken, defeat and overthrow their ruling class. At the same time, workers in one enterprise share common interests with their colleagues in other companies, which is why they jointly organise in trade unions. The same is the case with workers in one country, as they fundamentally share the same class interests as their colleagues abroad.

Marxists recognise that imperialist capitalism is characterised by the global domination of a handful of Great Powers as well as a number of monopolies. Such a system contains irreconcilable contradictions that necessarily provoke crises, tensions and wars. We therefore refute the pacifist illusion that capitalism could somehow overcome such antagonisms and establish a peaceful capitalist world order — a concept first elaborated by Karl Kautsky and later adopted by social democrats and Stalinists. The only way to abolish death and destruction at the hand of poisonous militarism is to smash the Great Powers, overthrow the ruling capitalist and establish a world federation of workers and peasant republics via the socialist world revolution.

For these reasons, workers in imperialist countries utilise every conflict in which their class enemy is involved to advance their interests and strengthen their fighting power. Historically, this program has been associated with the formula of revolutionary defeatism2 which the Left Opposition, led by Leon Trotsky, once defined as follows: “What is meant by the term defeatism? In the whole past history of the party, defeatism was understood to mean desiring the defeat of one’s own government in a war with an external enemy and contributing to such a defeat by methods of internal revolutionary struggle.”3

In the epoch of imperialism, Marxists differentiate between three categories of states: imperialist, (semi-)colonial and (degenerated) workers states. Without understanding the existence of these three fundamental types of class states, it is impossible for socialists to find a correct orientation in the imperialist epoch: “To teach the workers correctly to understand the class character of the state — imperialist, colonial, workers’ — and the reciprocal relations between them, as well as the inner contradictions in each of them, enables the workers to draw correct practical conclusions in situation.”4

Corresponding to such different categories of states, Marxists basically differentiate between two types of wars: wars of oppression and wars of liberation. Wars of oppression are conflicts between two reactionary camps in which the working class does not support either side. Examples for such are conflicts between imperialist states or reactionary civil wars. Wars of liberation can be the struggle of a (semi-)colonial country against an imperialist power; of a nationally oppressed people against the dominating nation; of a progressive camp in a civil war; or of a (degenerated) workers state. In such conflicts, socialists unambiguously support the anti-imperialist or anti-reactionary camp:


Capitalist brigands always conduct a 'defensive' war, even when Japan is marching against Shanghai and France against Syria or Morocco. The revolutionary proletariat distinguishes only between wars of oppression and wars of liberation. The character of a war is defined, not by diplomatic falsifications, but by the class which conducts the war and the objective aims it pursues in that war. The wars of the imperialist states, apart from the pretexts and political rhetoric, are of an oppressive character, reactionary and inimical to the people. Only the wars of the proletariat and of the oppressed nations can be characterized as wars of liberation.5

Different types of wars require different strategies. In conflicts between imperialist states (as well as in conflicts between equally reactionary camps), the principles of international working-class solidarity require socialists to oppose both camps. They must refuse to side with their own ruling class as well as with that of the opposing imperialist camp. Likewise, socialists totally reject any chauvinist propaganda of the ruling class. Instead of supporting their “own” ruling class, they propagate intransigent class struggle (following the famous phrase of Karl Liebknecht in World War I “The main enemy is at home”). This strategy implies in the case of war, as formulated by Vladimir Lenin and the Bolshevik Party in 1914, that revolutionaries strive for the “transformation of the imperialist war into civil war”; that is, advance the proletariats’ struggle for power under the conditions of war. Such a program is the only way to unite the international working class on an internationalist basis and break any “patriotic” unity of workers with “their” imperialist bourgeoisie as well as their lackeys inside the workers movement.

In conflicts between the imperialist bourgeoisie and oppressed peoples, Marxists call on workers and popular organisations around the world to act decisively in the spirit of revolutionary anti-imperialism and working class internationalism. They must unconditionally support the oppressed people against the imperialist aggressors and fight for the defeat of the latter. They need to apply the anti-imperialist united front tactic — this means siding with the forces representing these oppressed people, without giving political support to their respective leaderships (usually petty bourgeois nationalists or Islamists; sometimes even semi-colonial bourgeois states). Socialists in imperialist countries are obligated to fight merciless against the social-chauvinist supporters of Great Power privileges as well as the cowardly centrists who abstain from actively supporting the struggle of the oppressed. Socialists support the Anti-Imperialist Patriotism of the oppressed and help them to develop a socialist, internationalist consciousness. Only on the basis of such a program is it possible for socialists to create the conditions for trust and unity of the workers and poor peasants of the oppressed people with progressive workers in the imperialist countries. Only on such a fundament is it possible to unite the international working class on an internationalist basis. Only with such a strategy is it possible for communists to replace the vacillating petty-bourgeois leaderships of the oppressed masses.6
The relevance of different aspects of the anti-imperialist program in different historic periods

While the above-mentioned principles of anti-imperialism are always relevant in the epoch we are living in, their concrete application depends on the concrete form of the capitalist world order and its inner contradictions. Let us give a brief overview.

In the first period of the imperialism epoch before 1914, tensions between imperialist powers (mainly Britain, France, Germany, Russia, US and Japan) were the dominating feature of the world situation. As is well known, these tensions resulted in the devastating World War I between 1914-18. While the large majority of the Second International capitulated and failed to fight consistently against all imperialist powers, the Bolsheviks led by Lenin organised an internationalist minority — which became the nucleus of the Communist International founded in March 1919 — on the basis of the program of revolutionary defeatism.

Another feature of the pre-1914 period, albeit less pronounced as it would become later, were colonial wars of the imperialist powers — mainly but not exclusively by Britain and France — against the popular uprisings of people of the South. As examples we refer to the anti-British insurrections by the Dervish Movement in Somalia and the Mahdist rebels in Sudan in late 19th century; the uprising of the Herero and the Namaqua against the German rulers in 1904-07; and the so-called Boxer Rebellion in China in 1899-1901.

In the period 1914-45, all types of conflicts took a particularly sharp expression. This period saw two world wars — the first being a conflict between imperialist powers while the second was a combination of inter-imperialist conflicts (US, Britain and France against Germany, Italy and Japan), a conflict between an imperialist power and a degenerated workers state (Germany against the Soviet Union), and national liberation wars (for example, China against Japan and the partisan wars in German-occupied Europe). In addition, there were also a number of other national liberation wars (the Rif War led by Abd el-Krim against Spain and France in 1921-26, the Great Syrian Revolt in 1925, Japan against China from 1931, Italy against Ethiopia in 1935-36) as well as civil wars (Spain 1936-39) in this period.

In all these conflicts, revolutionaries — first the Bolsheviks and the Communist International, and later its successor, Trotsky’s Fourth International — took a defeatist position in inter-imperialist conflicts against both camps but supported the oppressed nations, the Soviet Union and anti-fascist Spain in their wars of liberation.

The period after World War II — more precisely, from the onset of the Cold War in 1947/48 — until the collapse of Stalinism in 1989-91 bore several different features compared with the previous period. While inter-imperialist rivalry did not disappear, it became a secondary feature. The reasons for this were, on one hand, the Cold War between the imperialist powers and the Stalinist states (most importantly the USSR) that pushed the former to join forces; on the other, because WWII had resulted in the clear and undisputed absolute hegemony of US imperialism within the capitalist camp. In addition, this period also saw a number of anti-colonial and national liberation struggles that resulted in some important defeats for the Western powers (Vietnam War, Algeria).

The period between 1991 and 2008 — the year of the Great Recession — was characterised by the disappearance of Stalinist workers states and the absolute hegemony of US imperialism. Other imperialist powers — Western Europe, Japan and reemerging Russia under Putin — were too weak to effectively challenge Washington. However, this period — in particular in its late phase — saw the beginning of the decline of the US hegemony. The most important wars in this period were national liberation struggles, such as those of the Iraqi and Afghan people against the US and its allies as well as of the Chechen people against Russia. Other important wars were those in the Balkans in the 1990s. In all these wars, Marxists supported the wars of liberation against imperialist and reactionary aggressors.

The current historic period, which started in 2008, is characterised by the decay of capitalism reflected in economic stagnation, humanitarian and ecological catastrophes, wars and revolutionary crises. In such a period we see basically two types of conflicts: on one hand, there has been a massive acceleration of inter-imperialist rivalry, mainly as a result of the rise of China and Russia as imperialist powers challenging the old Western imperialists; on the other hand, national liberation wars (for example in Afghanistan until 20217, the Ukraine’s war of national defence since February 20228 or the current Gaza War against Israel’s genocide9) or progressive civil wars (in Syria against the Assad tyranny since 2011,10 in Burma/Myanmar since the military coup in 202111) are crucial features of the world situation.12

Important changes in the social-economic physiognomy of imperialist capitalism

There have been several important changes in the social-economic physiognomy of imperialist capitalism in the last hundred years that Marxists have to take into account to understand the character of the current period and the corresponding tasks for the class struggle. Since we have already analysed these developments in much detail we limit ourselves to a brief summary and references to our studies.

First, there has been a dramatic shift of capitalist value production and, correspondingly, of the international working class. At the time of Lenin and Trotsky, the (semi-)colonial countries in the South were still capitalistically backward and industrial production was mostly located in imperialist countries in North America, Western Europe and, to a lesser degree, in Japan. Correspondingly, most of the international working class lived in these imperialist states. However, this has massively changed in the past decades. In 1950 34% of the global industrial workers lived in the South; in 1980 this share has risen to about 50%; and in 2013, 83.5% of all industrial workers lived in semi-colonial countries and emerging imperialist China. In total, about three-quarters of global wage labourers live outside of the Western imperialist countries.13

Correspondingly, the majority of capitalist value production no longer takes place in Western imperialist countries, as the ruling class painfully noticed with all the disruptions of global supply chains in the past years. While the US, Japan, Germany, France, Britain and Italy accounted for about 55% of world’s manufacturing in 1985, this share had declined to less than 30% by 2018.14 (See Table 1)

Table 1. Regional Shares of Global Industrial Value Added in 201915



Region Share

China 24.9%

United States 16.6%

Northeast Asia 8.8%

Japan 6.4%

South Korea 2.4%

Western Europe 8.7%

Southeast Asia (ASEAN) 4.8%

Oceania 1.6%



This changes basically reflect two processes. On one hand, China has emerged as a new imperialist power which is challenging the long-term hegemony of the US.16 This is manifested in the fact that China has become the leading country — together with the US — in the global ranking of the largest corporations in the world (as calculated by the Fortune Global 500 list in Table 2). We see the same picture when it comes to the global ranking of billionaires. (See Table 3) And while China is still behind the US in military expenditures, it has already become the world’s No. 2 (U.S. 916 vs. China 296 billion U.S. Dollar).17

Table 2. Top 10 Countries with the Ranking of Fortune Global 500 Companies (2023)18



Rank Country Companies Share(in%)



1 United States 136 27.2%

2 China (without Taiwan) 135 27.0%

3 Japan 41 8.2%

4 Germany 30 6.0%

5 France 23 4.6%

6 South Korea 18 3.6%

7 United Kingdom 15 3.0%

8 Canada 14 2.8%

9 Switzerland 11 2.2%

10 Netherlands 10 2.0%



Table 3. China and U.S. Lead the Hurun Global Rich List 202119



2021 Share of “Known” Global Billionaires 2021



China 1058 32.8%



U.S. 696 21.6%



On the other hand, this process reflects the increasing dependence of imperialist powers on industrial production in the Global South. Hence, the super-exploitation and control of semi-colonial countries becomes increasingly important for Great Powers. This is even more the case than official figures suggest (usually calculated in US dollars) because these distort the picture as through various mechanism — unequal exchange, currency manipulation, internal calculations within multinational corporations, etc. — the value produced in imperialist countries is overestimated while the share produced in semi-colonial countries is underestimated.20

Another important difference between the period in which Lenin and Trotsky were living in and the period after WWII is the transformation of most colonies into semi-colonies; that is, countries which are formally political independent but continue to have a dependent and super-exploited position in the imperialist world order.

Furthermore, there has been a massive process of globalisation in terms of the global integration of production and trade. Between the end of WWII and the Great Recession in 2008, the ratio of goods trade to global output (Gross Domestic Product) had constantly increased from about 10% to nearly 50%. Since then, this share has slightly decreased but still vacillates between 41% and 48%.21

However, with the acceleration of inter-imperialist rivalry, trade between the Western and Eastern Great Powers is decreasing while it increases within the respective blocs. A recently published study of leading economists of the IMF writes:


We find that, like during the Cold War, trade and investment between blocs is decreasing, compared to trade and investment within blocs. While the decoupling remains small compared to that earlier episode, it is also in its early stages and could worsen significantly if geopolitial tensions persists and restrictive trade policies continue to mount.22

We already predict this development more than a decade ago when we noted:


As a result there will be a tendency towards forms of protectionism and regionalisation. Each Great Power will try to form a regional bloc around it and restrict access for the other Powers. By definition, this must result in numerous conflicts and eventual wars.23

Finally, another important change in the period since WWII has been the expansion and consolidation of the labour aristocracy in the imperialist countries. As Lenin explained, this is the top layer of the working class (certain sectors of highly-paid skilled workers) which has been bribed by the bourgeoisie with various privileges. The financial sources to pay off the labor aristocracy in the imperialist countries, and thereby to undermine its working-class solidarity, are derived from the extra profits which the monopoly capitalists obtain by super-exploiting the semi-colonial countries as well as migrants in the imperialist metropolises. Unfortunately, the labour aristocracy — along with its twin, the labor bureaucracy — plays a dominating role inside the trade unions and the reformist parties in the imperialist countries. On an ideological level, these layers play an important role in transmitting aristocratic prejudices (Islamophobia, chauvinism, support for Zionism, etc) to wider layers of the popular masses directed against oppressed people and the lower strata of the proletariat, such as migrants. We call this phenomenon aristocratism.24
Consequences for Marxists

In this final chapter, we shall summarise some consequences of these changes for Marxist strategy.

1) Revolutionary anti-imperialism is of crucial importance in the current period since both inter-imperialist rivalry as well as imperialist aggression and national liberation struggles are key features of the world situation. It is impossible to be a communist without a consistent position of revolutionary defeatism against all Great Powers and without unconditional support for the struggles of the oppressed peoples.

2) Internationalism in theory and practice is essential for Marxists because the world economy is more integrated than ever and because major challenges of humanity — from the climate crisis to armament and migration — are by their very nature global issues. Advocating cross-border class struggles and the international organisation of the working class are therefore imperative to fight catastrophic capitalism. Most importantly, Marxists have to advance the unification of the proletarian vanguard and build a revolutionary world party.

3) Those building the international workers movement and a new revolutionary world party must not be content with working in the old imperialist countries in Western Europe and North America. We must rather have a focus on the semi-colonial countries and new powers, such as China, since it is these regions where the vast majority of the global proletariat is located.

4) Revolutionary work in the old imperialist countries in Western Europe and North America must have a focus on the masses of the working class in contrast to the privileged and aristocratic layers at the top or the academic middle class milieu. This includes in particular migrants who face a double oppression (as workers and as a national minority) and who are also transmitting belts to the countries of the Global South. Revolutionaries need to work within the labour movement for unity of native and migrant workers and advocate an anti-imperialist program of solidarity with the struggles of the oppressed.

5) Such an orientation goes hand-in-hand with the conscious struggle of revolutionaries against aristocratic prejudices within the workers movement and the so-called left. Such a struggle must not be waged only on a theoretical-propagandistic level but also, and more importantly, by advocating concrete practical solidarity with anti-imperialist struggles in the south and anti-chauvinist resistance in the imperialist countries.

These are some conclusions which we can draw from comparing the conditions of anti-imperialist struggles in past and present. We look forward to exchanging views with other socialist organisations and activists on this issue and joining forces in the common struggle to bring down the imperialist monster.

Michael Pröbsting is a socialist activist and writer. He is the editor of the website http://www.thecommunists.net/ where a version of this article first appeared.1

See Michael Pröbsting: Anti-Imperialism in the Age of Great Power Rivalry. The Factors behind the Accelerating Rivalry between the U.S., China, Russia, EU and Japan. A Critique of the Left’s Analysis and an Outline of the Marxist Perspective, RCIT Books, Vienna 2019, https://www.thecommunists.net/theory/anti-imperialism-in-the-age-of-great-power-rivalry/ (see chapter XII to XXII); by the same author: The Great Robbery of the South. Continuity and Changes in the Super-Exploitation of the Semi-Colonial World by Monopoly Capital Consequences for the Marxist Theory of Imperialism, RCIT Books, 2013, https://www.thecommunists.net/theory/great-robbery-of-the-south/ (see chapter 12 and 13)
2

For a summary of the Revolutionary Communist International Tendency’s (RCIT) understanding of revolutionary defeatism see e.g. Theses on Revolutionary Defeatism in Imperialist States, 8 September 2018, https://www.thecommunists.net/theory/theses-on-revolutionary-defeatism-in-imperialist-states/
3

L. Trotsky, G. Zinoviev, Yevdokimov: Resolution of the All-Russia Metal Workers Union (1927); in: Leon Trotsky: The Challenge of the Left Opposition (1926-27), pp. 249-250
4

Manifesto of the Fourth International on Imperialist War: Imperialist War and the Proletarian World Revolution. Adopted by the Emergency Conference of the Fourth International, May 19-26, 1940, in: Documents of the Fourth International. The Formative Years (1933-40), New York 1973, p. 327, http://www.marxists.org/history/etol/document/fi/1938-1949/emergconf/fi-emerg02.htm
5

Leon Trotsky: Declaration to the Antiwar Congress at Amsterdam (1932), in: Trotsky Writings 1932, p. 153
6

For an overview about our history of support for anti-imperialist struggles in the past four decades (with links to documents, pictures and videos) see e.g. an essay by Michael Pröbsting: "The Struggle of Revolutionaries in Imperialist Heartlands against Wars of their 'Own' Ruling Class. Examples from the history of the RCIT and its predecessor organisation in the last four decades", 2 September 2022, https://www.thecommunists.net/theory/the-struggle-of-revolutionaries-in-imperialist-heartlands-against-wars-of-their-own-ruling-class/
7

We have compiled a number of RCIT articles on the imperialist defeat in Afghanistan on a special sub-page on our website: https://www.thecommunists.net/worldwide/asia/collection-of-articles-on-us-defeat-in-afghanistan/
8

We refer readers to a special page on our website where numerous RCIT documents on the Ukraine War and the current NATO-Russia conflict are compiled: https://www.thecommunists.net/worldwide/global/compilation-of-documents-on-nato-russia-conflict/.
9

We refer readers to the special pages on our website where all RCIT documents on the 2023-25 Gaza War are compiled, https://www.thecommunists.net/worldwide/africa-and-middle-east/compilation-of-articles-on-the-gaza-uprising-2023/ and https://www.thecommunists.net/worldwide/africa-and-middle-east/compilation-of-articles-on-the-gaza-uprising-2023-24-part-2/.
10

The RCIT has published a number of booklets, statements and articles on the Syrian Revolution which can be read on a special sub-section on our website: https://www.thecommunists.net/worldwide/africa-and-middle-east/collection-of-articles-on-the-syrian-revolution/.
11

We refer readers to a special page on our website where all RCIT documents on the military coup in Burma/Myanmar are compiled: https://www.thecommunists.net/worldwide/asia/collection-of-articles-on-the-military-coup-in-myanmar/.
12

See also Michael Pröbsting: Marxist Tactics in Wars with Contradictory Character. The Ukraine War and war threats in West Africa, the Middle East and East Asia show the necessity to understand the dual character of some conflicts, 23 August 2023, https://www.thecommunists.net/theory/marxist-tactics-in-wars-with-contradictory-character/
13

For a discussion of the shift in the global proletariat with sources see e.g. Michael Pröbsting: Marxism and the United Front Tactic Today. The Struggle for Proletarian Hegemony in the Liberation Movement in Semi-Colonial and Imperialist Countries in the present Period, RCIT Books, 2016, https://www.thecommunists.net/theory/book-united-front/ (chapter III); by the same author: The Great Robbery of the South. Continuity and Changes in the Super-Exploitation of the Semi-Colonial World by Monopoly Capital Consequences for the Marxist Theory of Imperialism, RCIT Books, 2013, https://www.thecommunists.net/theory/great-robbery-of-the-south/ (pp. 69-80)
14

Marceli Hazla: The trap of industry-driven development, Poznan University of Economics 2023, p. 15
15

Wing Chu, Yuki Qian: RCEP: Asia as the Global Manufacturing Centre, Hong Kong Trade Development Council, 2 December 2021, p. 1
16

For our analysis of capitalism in China and its transformation into a Great Power see e.g. the book by Michael Pröbsting: Anti-Imperialism in the Age of Great Power Rivalry. The Factors behind the Accelerating Rivalry between the U.S., China, Russia, EU and Japan. A Critique of the Left’s Analysis and an Outline of the Marxist Perspective, RCIT Books, Vienna 2019, https://www.thecommunists.net/theory/anti-imperialism-in-the-age-of-great-power-rivalry/; see also by the same author: “Chinese Imperialism and the World Economy”, an essay published in the second edition of The Palgrave Encyclopedia of Imperialism and Anti-Imperialism (edited by Immanuel Ness and Zak Cope), Palgrave Macmillan, Cham, 2020, https://link.springer.com/referenceworkentry/10.1007%2F978-3-319-91206-6_179-1; "China: An Imperialist Power … Or Not Yet? A Theoretical Question with Very Practical Consequences! Continuing the Debate with Esteban Mercatante and the PTS/FT on China’s class character and consequences for the revolutionary strategy", 22 January 2022, https://www.thecommunists.net/theory/china-imperialist-power-or-not-yet/; "China‘s transformation into an imperialist power. A study of the economic, political and military aspects of China as a Great Power" (2012), in: Revolutionary Communism No. 4, http://www.thecommunists.net/publications/revcom-number-4; "How is it possible that some Marxists still Doubt that China has Become Capitalist? (A Critique of the PTS/FT), An analysis of the capitalist character of China’s State-Owned Enterprises and its political consequences", 18 September 2020, https://www.thecommunists.net/theory/pts-ft-and-chinese-imperialism-2/; "Unable to See the Wood for the Trees (PTS/FT and China). Eclectic empiricism and the failure of the PTS/FT to recognize the imperialist character of China", 13 August 2020, https://www.thecommunists.net/theory/pts-ft-and-chinese-imperialism/; "China’s Emergence as an Imperialist Power", in: New Politics, Summer 2014 (Vol:XV-1, Whole #: 57). See many more RCIT documents at a special sub-page on the RCIT’s website: https://www.thecommunists.net/theory/china-russia-as-imperialist-powers/.
17

Stockholm International Peace Research Institute: Trends in World Military Expenditure, SIPRI Fact Sheet, April 2024, p. 2
18

Fortune Global 500, August 2023, https://fortune.com/ranking/global500/2023/ (the figures for the share is our calculation)
19

Hurun Global Rich List 2021, 2.3.2021, https://www.hurun.net/en-US/Info/Detail?num=LWAS8B997XUP
20

See on this The Great Robbery of the South, p. 67
21

Gita Gopinath: Geopolitics and its Impact on Global Trade and the Dollar, IMF, 7 May 2024, https://www.imf.org/en/News/Articles/2024/05/07/sp-geopolitics-impact-global-trade-and-dollar-gita-gopinath
22

Gita Gopinath, Pierre-Olivier Gourinchas, Andrea F. Presbitero, and Petia Topalova: Changing Global Linkages: A New Cold War? IMF Working Papers WP/24/76, April 2024, p. 14
23

The Great Robbery of the South, p. 390
24

For a discussion of the issue of aristocratism see e.g. our book by Michael Pröbsting: Building the Revolutionary Party in Theory and Practice, (Chapter III, iii), https://www.thecommunists.net/theory/rcit-party-building/

Russia’s delinking from the West: The great equalizer

Dmitry Pozhidaev
13 June, 2024


Russia is becoming more equal, at least as far as the income inequality is concerned. To remember, during and after its transition to the market economy in the 1990s, Russia scored the dubious record of being one of the most unequal countries in the world, second to only to South Africa and on par with (or sometimes even ahead of) the US. Yet, Russia started diverging from the US around 2014, steadily reducing its inequality measured by the Gini coefficient.

This trend has accelerated since 2022, the real incomes of the poor deciles growing faster than those of the rich deciles. In fact, real incomes grew inversely to the position of the income decile: the poor the decile, the higher its income growth. Analyzing this trend, Ekaterina Kurbangaleeva of the Carnegie Foundation writes that among those who are “winning” from the current situation are the millions of Russians in blue-collar and gray-collar jobs whose professions were long considered low paid and low status.

It is difficult not to notice that this income equalization trend coincides with the Russian annexation of Crimea in 2014, the start of the full-blown war in Ukraine in February 2022, and the introduction of massive Western sanctions. So, what has been causing this drive to greater income equality in Russia?
War Keynesianism

The most frequent explanation among mainstream economists is the transition to a war economy (also known as war Keynesianism), which started in Russia around 2014. Surely, the sanctions (or the threat of sanctions) did play a role and hastened this transition, but this is not the whole story. The traditional story of war Keynesianism goes like this. During wartime, governments often implement significant fiscal and monetary measures to mobilize resources, fund military operations, and maintain economic stability. Increased government spending and mobilization of resources often lead to higher employment and wages, particularly for lower-income groups. The US during World War 2 is a textbook example: Wartime spending and mobilization led to significant economic growth and a reduction in income inequality. The period saw increased wages for many workers and a narrowing of the income gap.

These developments are well documented and analyzed in the recent CEPR brief “Russian economy on war footing: A new reality financed by commodity exports” authored by Yuriy Gorodnichenko, Iikka Korhonen and Elina Ribakova. The study notes increased public procurement in the regions with large concentrations of machine-building industries; an increase in transport infrastructure investment in some poor regions in Russia’s Far East, as Russia tries to redirect its foreign trade more towards China; a rise in bank deposits in the poorer regions, which have sent proportionally more people to the military; and an increase in real salaries, first in sectors receiving state orders and then in other sectors as they have struggled to attract workers.

But the question that is not adequately addressed is not why the poor are getting more (this is somewhat obvious) but why and how the rich are getting less. Why all of a sudden has the Russian growth turned pro-poor?
Russia’s delinking from the capitalist center

Viewed from the Marxist perspective, the Russian war economy represents a clear case of a peripheral country delinking from the center. Whereas the Western sanctions are usually hailed as a (relatively) effective mechanism to isolate Russia from the world economy, their other side is not discussed as much. Decoupling Russia from the capitalist center (represented by the “collective West”) also implies decoupling the West from Russia. The Marxist economist Samir Amin writing 50 years ago stressed that a break with the world market is the primary condition for development. Developing the periphery requires setting up self-centered national structures that break with the world market. More recently, the Russian Marxist Boris Kagarlitsky argued the same point in the context of Russian history after 1917: its meteoric rise in the 1920-30s was due to its decoupling from the world markets and its gradual decline from the 1970s onwards due to its reintegration in the world economy.

The relations between the center of the system and its periphery are relations of domination, unequal relations, expressed in a transfer of value from the periphery to the center. This transfer of value, governed by the fundamental law of capital accumulation under capitalism, makes possible a larger improvement in the reward of labor at the center and reduces, in the periphery, not only the reward of labor but also the profit margin of local capital. The main channel of this transfer is unequal exchange when higher values produced in the periphery (as determined by the socially necessary amount of labor) are exchanged for lower values produced in the center.

There are three main channels of surplus transfer (including surplus value and nonproductive incomes and state revenues). This channel operates, firstly, through a system of the international division of labor and foreign trade rigged by the center to ensure maximum surplus transfer. The center keeps the periphery further from the technology frontier, causing the periphery to engage in production with low value addition (often raw materials, such as minerals), in relation to which the center usually exercises monopsonistic power. At the same time, in collusion with the comprador bourgeoisie, the center keeps the rewards of the peripheral labor below its productivity, which allows higher rates of profit for foreign capital as well as part of the domestic bourgeoisie. Secondly, in addition to transfers via unfavorable (for peripheral countries) terms of trade, the center transfers the surplus produced in the periphery via profit repatriation and purchases of advanced technologies in the metropole to continue its extractive economic activities in the periphery. This is helped by the purchase of economic values below their value in the course of privatization in the periphery. Third, because foreign capital takes the commanding heights in the periphery, domestic capital does not find enough economic application in the home country, resulting in significant outflows of capital to the center where it is invested. The last channel of value extraction is the international financial system, which is rigged against the periphery. The center uses cheap credit at home to extend expensive loans to the private and public sectors in the periphery. The cost of these loans is above the normal risk premium, incorporates the higher rates of labor exploitation, and results in a debilitating loan service burden for developing countries.

After the collapse of the Soviet Union in 1991, Russia became a textbook case of a peripheral country. It demonstrated the explicit characteristics of dependence one by one: current account deficit, deindustrialization, almost total dependence on Western exports (not only luxuries and technological goods but also foodstuff and basic necessities), foreign investments (mostly in extractive industries), massive outflows of domestic capital to foreign jurisdictions, high private and public indebtedness, and ultimately a decrease in the labor share of national income and pauperization of the working class.

Living standards started improving in the early 2000s. This improvement, which laid the foundation of Vladimir Putin’s legitimacy is believed to be largely due to two factors: (1) increased world prices of oil and gas (which jumped from $17 per barrel in 1999 to $50 in 2005 and $109 in 2012) and (2) improved political stability, economic reforms and better security conducive to increased economic activity. The latter development also included a transition from laissez-faire crony capitalism to a more tightly controlled state capitalism as will be discussed below. Yet, Russia’s structural dependence on the West continued without much change.

How has the situation changed after 2014, particularly since February 2022? As a result of Russia’s disconnection from international financial markets in 2022, the flow of foreign loans has dried up. But consequently, as reported by the Russian Central Bank, Russia’s external debt (on a decreasing path since 2014) decreased in 2023 even further by 17.7%, since the end of 2022. Indebtedness of general government to non-residents decreased by 29.1% as a result of the decrease in debt on sovereign debt securities denominated in both Russian rubles and foreign currency.

As foreign companies started closing their operations and withdrawing from Russia with the start of the war in Ukraine, profit repatriations reduced significantly. In 2023, according to the Russian Central Bank, the negative balance on investment income has halved: both income accrued in favor of non-residents and income received by residents from foreign investments have decreased. The largest role was played by the negative balance of income on direct investment, including as a result of a reduction in the degree of participation of direct investment investors in domestic business, as well as a reduction in the amounts of dividends declared by Russian companies. Net incurrence of liabilities by residents, after experiencing a negative shock in 2022, in 2023 shrank to the lowest level since 2015.

Delinked from the international capital markets and subject to international sanctions and expropriations, Russian capitalists started repatriating their foreign investments. In addition, the volume of cross-border transfers from Russia in 2023 decreased by 35% compared to the previous year. According to recent research by Frank RG, 2023 saw approximately $35 billion of “new money” returned and retained in the economy. For comparison, $35 billion is as much as the net profit of the entire banking sector last year. And that’s double the projected federal budget deficit for 2023.

According to the Central Bank, the amount of rubles held in Russian bank accounts climbed 19.7 percent to 7.4 trillion in 2023 (nearly three times what it was in 2022), buoyed by high interest rates. In particular, there has been growth in the category of deposits worth between 3 million and 10 million rubles (both in terms of their total value and in the number of people holding such deposits).

All these developments minimize surplus transfer to the center and result in higher capital accumulation inside Russia. But it does not automatically imply an improvement in the lot of the poor and less inequality: capitalists may horde the new money or use it for luxury consumption. Yet, Russian capitalism is subject to the same law of accumulation as global capitalism in general. With the closure of investment outlets abroad and the uncertainty about domestic monetary trends (growing inflation), Russian capitalists are encouraged to invest in the domestic economy. The new investment opportunities are the result of two developments: the departure of foreign capital, which reduces the competition, and increased military contracts, which include not only military hardware but also all kinds of essentially non-military equipment used by the military.
Transition to state capitalism

This notwithstanding, capitalists theoretically could still appropriate the same (or even greater) amount of surplus value (although the latter is obviously difficult in a very tight labor market). Here comes the other trend, briefly mentioned above, the transition to state capitalism, which offsets this possible behavior. As is known, one of the defining characteristics of state capitalism is a high share of state-owned enterprises. Since Putin flagged the return of strategic enterprises to state control as a priority for prosecutors in January 2023, the number of re-nationalizations has already ticked into double digits. According to the Russian Prosecutor General, in the military-industrial complex alone, 15 strategic enterprises with a total value of over 333 billion rubles (about $4 billion) have been returned to the state by March 2024. In several cases, these re-nationalizations involved assets privatized over 30 years ago. Old safeguards, like Western sanctions or friends in high places, no longer work.

These court-mandated asset seizures are not isolated cases, but part of a broader strategy impacting the oil and gas sector, infrastructure facilities, enterprises related to the military-industrial complex, the chemical industry, and agriculture. But even when enterprises continue to function as nominally private, the status of their owners has changed as a result of “soft” re-privatization. In such cases senior management of companies are removed and replaced by a new generation of Putin allies without the use of courts – de-privatizing the organizations in all but name. As Chatham House’s expert Nikolai Petrov argues, oligarchs and other members of the economic elite are being reduced to roles equivalent to that of “red directors” during the Soviet Union – that is, managers rather than owners of property, and without independent political power. These “directors” have but a limited claim on the profits of enterprises under their management, and their personal consumption is monitored and controlled much more tightly than during the age of laissez-faire capitalism.

True, Russia’s foreign trade is still based on the export of hydrocarbons (a large share of which is still destined for the Western core via intermediaries, such as India and Turkey). Russia’s pivot to China is much discussed and often derided as a new vassal dependence. Yet, being part of the periphery itself, China may look favorably at Russian attempts at self-centered development in areas other than extractive industries. Indeed, Russia has technologies, experiences and information that China may value. China, through initiatives like the Belt and Road Initiative (BRI) and the Asian Infrastructure Investment Bank (AIIB), could offer alternative sources of finance and investment. Russia’s pivot does not mean switching one dominant center (the West) for another (China). As Mikhail Korostikov of the Carnegie Foundation argues, the relationship between Russia and China is by no means perfect, but the shared interests of both countries’ leaderships and the strategic logic of the confrontation with the West create a solid foundation for reasonably equal cooperation.

State capitalism does not automatically imply pro-poor development. But in the case of Russia, it is coupled with de-linking from the center, which offers more opportunities for capital accumulation. At the same time, the surplus accrued to capitalists decreases and the surplus available to the state increases through “hard” and “soft” re-nationalization. State capitalism is not inherently superior to market capitalism when it comes to the allocation of resources or income redistribution. But it does have a better potential to mobilize and direct resources to a limited number of objectives in a crisis situation (to serve as a mission-oriented government, to borrow Marianna Mazzucato’s term). This is what happens now in Russia as the country mobilizes more and more for the achievement of its war objectives.

The new tax reform announced by Putin envisages a progressive personal income tax scale to replace the flat 13% PIT tax. The tax rate will increase from 15 to 22 percent depending on the income. The reform is expected to bring the state an additional 16.8 trillion rubles (about $190 billion) in the next 6 years. During the same period, the state intends to collect another 11.1 trillion rubles (approximately $125 billion) from the business as the corporate income tax will increase from 20% to 25%. The Russian Left insisted on these changes for many years. Ironically, it has happened now, triggered by the war. Be as it may, until now Russia remained the only G20 country with a flat income tax rate. This reform would have been hailed as an important step to greater income equality if it had happened in any other country and under different circumstances. Whereas the immediate objective of the reform is to increase the fiscal space for the war effort, it will also contribute to better equality between the regions and different income groups as the current trend indicates.

At the same time, the current level of Russian economy’s militarization remains limited. According to the US Central Intelligence Agency, the military burden on the Soviet economy, reckoned as a share of GNP, rose from 12 percent in 1970 to 18 percent in 1980 and probably reached 21 percent by the end of its existence. The Swedish Peace Research Institute (SIPRI) estimates Russia’s total military expenditure in 2024 at 7.1 percent of GDP in 2024 (for comparison, it was 5.4 percent in 2015). It is nowhere near the Soviet level and the Russian economy is more resilient and less dependent than the Soviet economy. Russia’s delinking from the imperialist center plays an important role in strengthening this resilience due to increased capital accumulation and decreased value transfer. Hence, Russia has the potential to run this kind of military Keynesianism for many years in a symbiotic relationship with state capitalism. Keynes himself wrote about his General Theory that the book’s argument was “much more easily adapted to the conditions of a totalitarian state” than to a democracy. Hence, Russia has the potential to run this kind of military Keynesianism for many years in a symbiotic relationship with state capitalism. Keynes himself wrote about his General Theory that the book’s argument was “much more easily adapted to the conditions of a totalitarian state” than to a democracy.
Uncertain future

But this future is not without a challenge in the long run. While state capitalism facilitates and enables the war economy, Marxists argue that military expenditures only temporarily boost capital accumulation through demand creation. Military spending can exacerbate the contradictions within capitalism by increasing the state’s role in the economy without addressing underlying issues of surplus value extraction and capital accumulation. Janos Kornai argued many years ago that state intervention “softens” budget constraints. As a result, unproductive activities can persist because there is external support to cover deficits. These activities do not necessarily add real value to the economy. In addition, Moscow needs crude prices to stay around the current $90 a barrel; a slump to, say, $60 could make things difficult. Ultimately, the possibility of a significant military escalation with the West is looming larger than life and can totally change the calculus. The future is uncertain: as we have observed, the redlines are set and crossed again and again in this war.

One thing is known: we don’t really know what will happen in the long run, except that we’re all dead, as Keynes quipped (and this may happen even sooner than we think in case of a sharp escalation leading to the use of nuclear weapons). One can reasonably suggest however that the situation of decoupling and reorientation will persist, at least in the medium run. Russian Foreign Minister Lavrov recently said that there would be no cooperation with the West for at least one generation. In economics, the exact time span for a generation can vary, but it is often considered to be around 20 to 30 years.

Dmitry Pozhidaev has spent the past 25 years as a development practitioner in the Balkans, former Soviet Union, Africa and Asia. He blogs at Elusive Development.

What went wrong with capitalism? – Michael Roberts

15th June 2024Leave a Commenton What went wrong with capitalism? – Michael Roberts

“Most Americans don’t expect to be “better off in five years” — a record low since the Edelman Trust Barometer first asked this question more than two decades ago.”

By Michael Roberts

Ruchir Sharma has a book out called What Went Wrong with capitalism? Ruchir Sharma is an investor, author, fund manager and columnist for the Financial Times. He is the head of Rockefeller Capital Management‘s international business, and was an emerging markets investor at Morgan Stanley Investment Management.

With those credentials of being ‘inside the beast’ or even ‘one of the beasts’, he ought to know the answer to his question. In a review of his book in the Financial Times, Sharma outlines his argument. First, he tells us that “I worry about where the US is leading the world now. Faith in American capitalism, which was built on limited government that leaves room for individual freedom and initiative, has plummeted.” He notes that now most Americans don’t expect to be “better off in five years” — a record low since the Edelman Trust Barometer first asked this question more than two decades ago. Four in five doubt that life will be better for their children’s generation than it has been for theirs, also a new low. And according to the latest Pew polls, support for capitalism has fallen among all Americans, particularly Democrats and the young. In fact, among Democrats under 30, 58 per cent now have a “positive impression” of socialism; only 29 per cent say the same thing of capitalism.

This is bad news for Sharma as a strong supporter of capitalism. What has gone wrong? Sharma says that it’s the rise of big government, monopoly power and easy money to bail out the big boys. This has led to stagnation, low productivity growth and rising inequality.

Sharma argues that the so-called neoliberal revolution of the 1980s that supposedly replaced Keynesian-style macro management, reduced the size of the state and deregulated markets was really a myth. Sharma: “the era of small government never happened.” Sharma points out that in the US, government spending has risen eight-fold since 1930 from under 4 per cent to 24 per cent of GDP — and 36 per cent including state and local spending.  Alongside tax cuts, government deficits rose and public debt rocketed.

As for deregulation, the result was actually “more complex and costly rules, which the rich and powerful were best equipped to navigate.” Regulatory rules actually increased. As for easy money, “fearful that mounting debts could end in another 1930s-style depression, central banks started working alongside governments to prop up big corporations, banks, even foreign countries, every time the financial markets wobbled.” So there was no neoliberal transformation freeing up capitalism to expand, on the contrary. 

But is Sharma’s economic history of the period after the 1980s really right? Sharma tries to portray the post-1980s period as one of bailouts for banks and companies during crises in contrast to the 1930s when central banks and governments followed the policy of ‘liquidation’ of those in trouble. Actually, this is not correct, saving corporate capital and the banks was the driving force of the Roosevelt New Deal; liquidation was never adopted as government policy.  Moreover, the 1980s were mostly a decade of high interest rates and tight monetary policy imposed by central bankers like Volcker, seeking to drive down the inflation of the 1970s. Indeed, Sharma has nothing to say about the ‘stagflation’ of the 1970s – a decade, according to him, where capitalism had small government and low regulation.

Sharma makes much of the rise in government spending including ‘welfare spending’ in the last 40 years. But he does not really explain why. After the rise in spending and debt during the war, much of the increased spending since has been due to a rise in population, particularly a rise in the elderly, leading to an increase in (unproductive for capitalism) spending on social security and pensions. But the rise in government spending was also a response to the weakening of economic growth and investment in productive capital from the 1970s.  As GDP grew more slowly and welfare spending grew faster, then government spending to GDP rose.

Sharma says nothing about other aspects of the neo-liberal period. Privatisation was a key policy of the Reagan and Thatcher years. State assets were sold off to boost profitability in the private sector. In this sense, there was a reduction in the ‘big state’, contrary to Sharma’s argument. Indeed, starting as early as the mid-1970s, public sector capital stock was sold off. In the US, it has been halved as a share of GDP.

Source: IMF investment and capital stock database, 2021

Similarly, post the 1980s, public sector investment as a share of GDP has been nearly halved while the private sector share has risen 70%. 

It’s not the ‘big state’ that is in control of investment and output decisions, it is the capitalist sector. This hints at the reason for reducing the role of the public sector. The problem for capitalism in the late 1960s and 1970s was the drastic fall in the profitability of capital in the major advanced capitalist economies. That fall had to be reversed. One policy was privatization. Another policy was the crushing of the trade unions through laws and regulations designed to make it difficult if not impossible to set up unions or take industrial action. Then there was the move of manufacturing capacity out of the ‘Global North’ to the cheap labour regions of the Global South, so-called ‘globalization’. Combined with weakening trade unions at home, the result was a sharp drop in the share of GDP going to labour along with cheap labour abroad; and a (modest) rise in profitability of capital.

Sharma admits that “globalisation brought more competition, keeping a lid on inflation in consumer prices” against his thesis of monopoly stagnation, but then argues that globalization and low imported goods prices “solidified a conviction that government deficits and debt don’t matter.” Really? Throughout the 1990s onwards, governments tried to impose ‘austerity’ in the name of balancing budgets and reducing government debt. They failed, not because they thought that ‘deficits and debt don’t matter’ but because economic growth and productive investment slowed. Public sector spending cuts were significant, but the ratio to GDP did not fall.

Sharma reckons that ‘recessions were fewer and farther between’ in the post-1980s period. Hmm. Leaving out the huge double slump of the early 1980s (another key factor in driving down labour power), there were recessions in 1990-1, 2001 and then the Great Recession of 2008-9, culminating in the pandemic slump of 2020, the worst slump in the history of capitalism. Maybe fewer and farther between, but increasingly damaging.

Sharma notes that after each slump since the 1980s, economic expansion has been weaker and weaker. This appears as a mystery for proponents of capitalism. “Behind the slowing recoveries was the central mystery of modern capitalism: a collapse in the rate of growth in productivity, or output per worker. By the outset of the pandemic, it had fallen by more than half since the 1960s.”

Sharma presents his explanation: “a growing body of evidence points the finger of blame at a business environment thick with government regulation and debt, in which mega-companies thrive and more corporate deadwood survives each crisis.”  The bailouts of the big monopolies (‘three of every four US industries have ossified into oligopolies’) and ‘easy money’ have kept a stagnating capitalism crawling along, breeding ‘zombie’ companies that only survive by borrowing.

Sharma puts the horse before the cart here. Productivity growth slowed across the board because productive investment growth dropped. And in capitalist economies, productive investment is driven by profitability. The neo-liberal attempt to raise profitability after the profitability crisis of the 1970s was only partially successful and came to an end as the new century began. The stagnation and ‘long depression’ of the 21st century is exhibited in rising private and public debt as governments and corporations try to overcome stagnant and low profitability by increasing borrowing.

Sharma proclaims that social “immobility is stifling the American dream.”  Whereas, in the rosy past of ‘competitive capitalism’, through dint of hard work and entrepreneurial drive, you could go from rags to riches, now that is not possible.  But the ‘American dream’ was always a myth.  The majority of billionaires and rich people in the US and elsewhere inherited their wealth and those that did become billionaires in their lifetime did not do so without sizeable start-up funds from parents etc.

And let me add, Sharma’s thesis is entirely based on the advanced capitalist economies of the Global North. He has little to say about the rest of the world where most people live. Has social mobility been stymied or never existed? Is there a big state with massive welfare spending in these countries? Is there easy money for companies to borrow?  Are there domestic monopolies squeezing out competition? Are there bailouts galore?

That brings us to Sharma’s main message about what is wrong with capitalism. You see, for Sharma, capitalism as he envisages it no longer exists. Instead, competitive capitalism has morphed into monopolies bolstered by a big state. “Capitalism’s premise, that limited government is a necessary condition for individual liberty and opportunity, has not been put into practice for decades.”

The myth of a competitive capitalism that Sharma projects sounds similar to the thesis of Grace Blakeley in her recent book, Vulture Capitalism, where she argues that capitalism has never really been a brutal battle between competing capitalists for a share of the profits extracted from labour, but instead a nicely agreed and planned economy controlled by big monopolies and backed by the state. 

In effect, both Sharma and Blakeley agree on the rise of ‘state monopoly capitalism’ (SMC) as the reason for what went wrong with capitalism. Of course, they differ on the solution. Blakeley, being a socialist, wants to replace SMC with democratic planning and workers coops. Sharma, being ‘one of the beasts’, wants to end monopolies, reduce the state and restore ‘competitive capitalism’ to follow its ‘natural path’ to provide prosperity for all. Sharma: “capitalism needs a playing field on which the small and new have a chance to challenge — creatively destroy — old concentrations of wealth and power.” 

You see, capitalists, if left alone to exploit the labour force, and freed of the burden of regulations and for having to pay for welfare spending, will naturally flourish. “The real sciences explain life as a cycle of transformation, ashes to ashes, yet political leaders still listen to advisers claiming they know how to generate constant growth. Their overconfidence needs to be contained before it does more damage.” So, according to Sharma, capitalism will be fine again, if we let the capitalist cycles of boom and slump play out naturally and not try to manage them. 

“Capitalism is still the best hope for human progress, but only if it has enough room to work.” Well, capitalism has had plenty of room to work for over 250 years with its booms and slumps; its rising inequalities globally; and now its environmental threat to the planet; and the increasing risk of geopolitical conflict. No wonder 58% of young Democrats in the US would prefer socialism.

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• Michael Roberts is an economist and author, you can follow Michael Roberts’ blog on Facebook and YouTube.
• This article was originally published by Michael Roberts’ blog The Next Recession on May 27th, 2024. You can find out more about Michael Roberts here.

 

Climate change adaption – the pernicious impact of the US blockade on Cuba

13th June 2024Leave a Commenton Climate change adaption – the pernicious impact of the US blockade on Cuba

“The effect of the blockade is felt in all efforts to address climate change. While Cuba has high levels of expertise in the field of solar energy, it lacks the hard currency to import materials to build solar panels”

Dr Lauren Collins explains how the US sanctions hold back Cuba’s efforts to confront climate change

In his final week as President of the United States, Donald Trump placed Cuba on the US ‘State Sponsor of Terrorism’ list: an arbitrary designation in the gift of the US president. This came on top of 243 additional sanctions that the Trump administration had imposed on Cuba, further tightening the economic, commercial, and financial blockade which is designed to cause unnecessary hardship to the Cuban population and to put an end to Cuban sovereignty and hence to its Revolution.

These sanctions also impact on Cuba’s efforts to adapt to climate change, which is already causing a rise in temperatures and sea levels, and more frequent hurricanes, floods, and drought on the island.

Climate finance

Climate plans and action are conditional on securing the necessary finance, but the US blockade has a direct impact on Cuba’s ability to adapt to climate change by blocking or obstructing access to it.

Climate finance can be local, national, or transnational, drawn from public, private and alternative sources, including national and development institutions and multilateral development banks. Various financial instruments are used: amongst them grants, low-cost project debt, project-level market rate debt, project-level equity, and general borrowing.

As of 2021, most climate finance (61 per cent) had been raised as debt, of which only 12 per cent was low-cost or concessional, and grant finance was a mere 6 per cent of the total. Three-quarters of global climate investments were for East Asia and the Pacific, Western Europe, and North America, revealing gross inequality marginalising Africa, Latin America, and the Caribbean Small Island Developing States (SIDS).

Most developed countries channel their largest climate finance contributions through Multilateral Development Banks, such as the World Bank, African Development Bank and Asian Development Bank, in which they are shareholders with significant influence. Unsurprisingly, Multilateral Development Bank finance favours private sector ‘market solutions’, often with onerous conditions attached.

This data demonstrates that the problem of fair access to climate finance is not confined to Cuba – but Cuba faces extra challenges.

Cuba’s challenges

The World Bank, of which the United States is the largest shareholder, provided $38.6 billion in climate finance in fiscal year 2023. Cuba does not have access to this funding. Following its re-designation as a SSOT, no fewer than 45 international banks ceased all business with the country. Many other national banks did the same, as Cuba now falls foul of the risk assessment procedures applied by many banks. 

The implications of this isolation from the banking system are profound. Any willing partners are confronted by the challenge of transferring money to Cuba, and all but the most determined and committed are likely to give up.

Cuba has calculated that it requires $13.8 billion to fund climate adaptations, 31 per cent to be sourced domestically and 61 per cent needing international contributions. However, current funding stands at $208 million. To address this large shortfall, Cuba developed a Climate Finance Access and Mobilisation Strategy (2022-2030). The aim is to identify effective and appropriate financing for climate action by attracting climate-friendly investment and promoting conditions conducive to mobilising and diversifying climate finance. It also aims to strengthen the governance and implementation of projects, to ensure maximum efficiency in the use of funds.

The strategy came about after many months of work by national experts and a consultation process involving those with experience of accessing funds for climate projects. As Cuba faces changing goalposts, planning and strategising is extremely difficult. Trump’s hardening of sanctions and President Biden’s reluctance to reverse them have reduced the scope and opportunities that the Climate Finance Access and Mobilisation Strategy envisioned.

Cuba has many friends throughout the world who recognise the country’s scientific excellence and want to work with it to exchange and co-produce new knowledge which benefits all. However, would-be research partners also face barriers. For example, working with Cuba can prevent future travel to the US where researchers may be engaged in other international collaborative projects. Universities may be risk-averse and be disinclined to support their staff in travelling to Cuba because of insurance guidelines, banking problems, lack of experience in overcoming such barriers, or unwillingness to challenge their own institution’s bureaucracy as it relates to these obstacles.

Following the Paris Agreement in 2015, the Multilateral Climate Funds, the Green Climate Fund and the Adaptation Fund were mandated to finance climate action. Although Cuba is not barred from accessing these grants, it does face other challenges in meeting funder requirements.

Applications for climate funding require sound evidence of starting conditions, for example the quality of air, measurements of water contamination, and collecting, collating, and analysing data. While Cuba carries out many assessments of the environment, and gathers large amounts of data on health, it does so without the benefit of the most sophisticated technology. For example, the accuracy of measurement may not be acceptable to climate funding providers, and while Cuba collaborates with international partners who may be willing to provide or loan measuring equipment, the US forbids the entry into Cuba of anything that has components that have been manufactured in a US-owned company.

Similarly, the ability to gather and crunch serious amounts of data, which is held in different places all over the island, requires a huge effort to gather records (which are often hand-written) and enter them onto computer systems to make the necessary analyses. Obtaining the software and hardware to do the number-crunching can also be an issue. Such exercises do take place, but it is not always possible to do them in real time, so the data may not be as current as required for successful funding applications.

The effect of the blockade is felt in all efforts to address climate change. While Cuba has high levels of expertise in the field of solar energy, it lacks the hard currency to import materials to build solar panels and access to the appropriate packaging materials to avoid breakages during transportation. Combating drought requires expensive irrigation systems, and moving coastal communities to safer ground requires costly construction materials. Creating the infrastructure for the collection, sorting and recycling of domestic and industrial waste, and building disposal facilities, is also prohibitively expensive.

Cuba’s successes

Despite these, and many other impacts of the blockade, Cuba has developed a comprehensive plan to confront climate change, known as Tarea Vida (Project Life). Approved in 2017, it is closely aligned to Cuba’s National Programme for Economic and Social Development and has short- (2020), medium- (2030), long- (2050) and very long-term (2100) objectives. All are regularly reviewed based on research and feedback from experts and public consultation. Key goals include the conservation and recovery of the island’s beaches, water conservation in response to increasing drought, adapting agricultural land use in response to sea level rises and drought, and reforestation to help protect soil. The plan also identifies the need for environmental education for sustainable development.

Following extensive research, specific coastal regions have been identified as priority areas due to the predicted impact of rising sea levels. In 2021, Cuba was successful in obtaining funding from the Green Climate Fund totalling $62 million to fund two projects:

• Mi Costa: A project to improve coastal resilience through ecosystem-based changes including the restoration of mangroves, swampland, and improving the health of seagrass beds and coral reefs.
•  Training 60 per cent of the population of seven municipalities on how to protect ecosystems to enhance climate adaptation.

Despite blockade restrictions, several countries including Switzerland, Canada, and Finland are supporting sustainable development and innovation projects in Cuba. The UK could be doing much more in this regard. The UK has blocking statutes which aim to protect legitimate trade with Cuba affected by the extraterritorial application of US law, and these could be used to encourage British companies, universities and other organisations to build mutually beneficial partnerships with Cuba to work towards a more resilient future.

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•  You can follow the Cuba Solidarity Campaign on Facebook, Twitter/X and Instagram.
• This article was originally published in the May edition of the Cuba Solidarity Campaign magazine.