Monday, November 24, 2008

Command Capitalism

China remains a one party state, not unlike Alberta, and the command economy has transformed into command capitalism. China's model of capitalism is an alternative to American style capitalism, and to prove its model to the world it is expanding its own form of Free Trade agreements with newly emerging capitalist economies. Welcome to 21st Century Imperialism.

This is why Bush and Harper have spent the last few weeks in international meetings defending American Capitalsim, China and Europe offer other models of capitalism, with China coming to the aid of countries abandoned by the Americans or in some cases like Costa Rica directly competing for market share with the Americans. China has embraced Free Trade in direct competition with the U.S. including in its own backyard. And depsite Bush's claims that free markets creat free people, China proves that democracy and freedom are not inherent to capitalism.

Capitalism in the west developed out of the collapse of autarchic fuedalism, not much differnt than the autarchy of command economies in the East. In fact all of Asia's capitalist development has been by autarchic state capitalsm, some under right wing military dictatorships, such as Korea and Taiwan, or through the Japanese model of an integrated Military Banking Industrial State complex or through the Chinese model.

And all ot the real growth in Asia has come about with fordist manufaturing and the creation of a proletariat.And with the development of a Chinese proletariat based on fordist manufacturing model comes the inevitable, workers organizing to improve their standards of living. And being tied into the international capitalist market place means that China too suffers when capitalism melts down. Forcing it to expend its mass of capital in promoting trade for its products and to speed up production for its own consumption.

Governments need to move fast, because this crisis, which has taken several forms already, is about to change form again. In the past few months, we've moved from a seizing up of credit markets to the collapse of economic demand in the mainstream economy. Soon we could see a string of sovereign defaults of poor and emerging economies that can't meet their debt obligations.
Even worse, hundreds of millions of previously poor people from Hungary and Turkey to India and China - recent arrivals in the global middle class who've benefited from an economic boom fuelled by endless quantities of cheap credit - are about to see their standard of living fall of a cliff. Around the world, Western-style capitalism will be discredited, as it's perceived to have wiped out people's jobs and life savings.


The United States' superpower status will wane over the next two decades as power spreads among several countries and moves from the West to the East, a report by the country's intelligence agency says.
The National Intelligence Council's Global Trends report, issued every four years to document looming problems, predicts a new global system will emerge where no single state dominates.
"By 2025, the U.S. will find itself as one of a number of important actors on the world stage, albeit still the most powerful one," the report by U.S. intelligence agencies says.
China is poised to have more impact than any other country, but the report also foresees a rise by India and Russia.
If trends continue, the report predicts China will have the world's second-largest economy by 2025, be a leading military power, while becoming the world's largest importer of natural resources and also the biggest polluter.
What is striking, the report notes, is that none of the three rising stars adhere to a Western liberal model but rather a system of state capitalism, under which the government takes a key role in economic management.
The transition will leave a world system "almost unrecognizable" in comparison to today, the report says.


Hu visit marks China's growing interest in Latin America
Chinese President Hu Jintao begins a Latin America tour on Monday, taking in Costa Rica, Cuba and Peru, as China tightens economic ties and the region hopes for help in tougher times.
The Asian giant has increased diplomacy and investment in Latin America in recent years, with an eye on its natural resources and developing markets for manufactured goods and even arms.
Many in Latin America hope for an investment boost to help ride out the economic crisis.
Exports from the continent to China include soya and iron ore from Brazil, soya from Argentina, copper from Chile, tin from Bolivia, and oil from Venezuela.
The trade is still only a small percent of the continent's total, but it is growing.
China's state-run Xinhua news agency reported this month that exports to Latin America grew 52 percent in the first nine months of 2008 to 111.5 billion dollars.
Hu will visit San Jose and Havana between a G-20 meeting on the global crisis in Washington on November 15 and an Asian Pacific Economic Cooperation forum summit in Peru on November 22.

"It's more than just symbolic that Hu Jintao has decided to come, because it is clearly making the point that it is no longer a Taiwanese stronghold," said Costa Rican analyst Luis Guillermo Solis.
Both Taiwan and China have been accused of using so-called "dollar diplomacy" to get nations to ally with them.
But China's economic might is hard to compete with, especially in tough economic times.
Part of China's incentives to Costa Rica came from China's enormous foreign exchange reserves with an offer to buy 300 million dollars in bonds.

Costa Rica, a major exporter of computer components, is now prepared to negotiate a free trade deal with China, the foreign trade minister said here this week, dismissing fears of an invasion of Chinese products into the tiny Costa Rican market.
China has expanded its high level missions to the whole continent in recent years, making investments and agreements with such oil producers as Venezuela, Ecuador, Colombia, Argentina, Brazil and Mexico.
"The fact is that China has been locked out of a lot of countries for energy deals" in the past, Brown said. "It's going to be going into these areas more and more."
China has also advanced to economic assistance and direct investment, sometimes taking over from the region's main commercial partner and neighbor, the United States.
The teaching of Chinese in schools and universities and scholarships to China, as in Costa Rica's deal, add to a charm offensive.
And although Latin American economies are in a stronger position to withstand financial setbacks than in the past, a strong economic partner such as China is more attractive than ever.


China is Costa Rica's second-largest trading partner -- although the amount of trade between the two countries is subject to interpretation. China claims it imported $2.3 billion in goods from Costa Rica in 2007, and exported $570 million. Costa Rican officials have said exports to China were valued at $848 million and imports at $763 million. Either set of numbers seems like small potatoes compared to Costa Rica's trade with the U.S.: $3.9 billion in exports last year, and $4.6 billion in imports, according to the U.S. Commerce Department.

A free trade agreement to be signed by China and Peru in March will go into effect in the second half of 2009, if everything goes as planned, the Chinese Ministry of Commerce announced. The agreement will benefit China’s light machinery industry as well as those of its electronics, domestic appliances, heavy machinery, automobile engines, chemical items, vegetables and fruit. Peru's fishmeal and aquatic products industry, as well as its mining sector, among others, will be reaping benefits from the accord, Reuters reports.

Tacos, Ugly Betty gain Mexico a foothold in China
MEXICO CITY — Armed with tortillas and telenovelas, Mexican companies that have relied on trade ties to the United States are heading to China, challenging old images of a country that many Mexicans consider a rival for foreign investment and jobs.
Mexican exports to China have jumped nine-fold since 2000, soaring from $ 204 million to $ 1. 9 billion in 2007. It’s the fastest growing market for and seventh-largest buyer of Mexican goods, according to Mexico’s government.
Some of Mexico’s most prominent companies have opened operations in China since 2006, expanding beyond their traditional trading turf in the Americas and Europe to vie for a foothold in what is expected to become the world’s biggest market. Even amid the current economic slowdown, China’s 2009 growth rate is projected to hover around 8 percent.
“This is a great signal that commercial relations between Mexico and China are on a good path,” said Juan Jose Ling, director of GDEM, a business development group that promotes Chinese-Mexican ties.

But Mexico relies more than its neighbors on manufactured exports, and many Mexicans saw the Asian giant as an economic enemy that diverted jobs and foreign capital. Since 2000, hundreds of thousands of Mexican jobs have been lost as foreign-owned assembly plants moved to China — which displaced Mexico as the secondlargest supplier of goods to the United States after Canada in 2003, U. S. Census Bureau data show.
China also was accused of flooding markets with low-cost toys and textiles. Even ubiquitous statuettes of Mexico’s iconic Lady of Guadalupe now bear the stamp “Made in China.” Yet more than a dozen big Mexican companies no longer see China as a financial foe, and have joined the global race to capture a slice of its $ 1. 3 trillion retail market.


In Beijing, well-planned modern infrastructure sits comfortably alongside historic monuments. Massive ring roads and modern high-rise apartments seem to be perfectly synchronised to ensure perfect movement of traffic and human beings.
This city of more than 11 million people lacks the chaos that is the hallmark of so many Asian megacities such as Mumbai. It also lacks the stern rigidity of cities of state-controlled countries.
China was not always like this. Free markets and capitalism were allowed to flourish in this communist country 30 years ago when the Chinese leader, Deng Xiaoping, introduced economic reforms that sought to modernise agriculture, industry, science and technology.
Known as the architect of China’s emergence as an economic powerhouse, Deng managed to unleash what the Lonely Planet guide refers to as “the long-repressed capitalist instincts of the Chinese” by reforming the agricultural sector, creating special economic zones and “growth poles” in urban areas that served as boomtowns and factories for China’s exports.
In the 1990s, China began intensifying its pro-urban development strategy by investing heavily in cities to boost economic growth.
The results have been remarkable. China’s economic growth has soared to 9 per cent a year and the country has been able to lift nearly 500 million people out of extreme poverty within one generation.
THE QUALITY OF LIFE FOR URBAN residents has improved with cities such as Beijing having the lowest levels of income inequality in the world. Shanghai now stands alongside Singapore and New York as a city with the tallest buildings.
More than 300 million rural migrants have moved to cities since 1980 and 60 per cent of the country’s population is projected to be urban by 2030.
Urbanisation has been one of the key pillars upon which China’s economic success rests.
But unlike other countries, particularly in Africa, rapid urbanisation has not led to the proliferation of slums. This is because China is still a command-and-control economy that can mobilise resources quickly to respond to changing demands.
According to James Adams, the vice-president of the World Bank’s East Asia and Pacific region, “China recognised early on that urban development is not possible on the cheap and that building ahead of demand makes lots of sense.”
He notes that Beijing and Tianjin spend more than 10 per cent of their GDP on roads, water and sewerage services, housing construction and transport, and that “China’s phenomenal ability to mobilise financial resources for urban development through domestic credit and foreign direct investment is what keeps the funds for cities coming.”
National policies that give Chinese municipalities the authority to implement regulations governing land use and transport and decentralised urban planning have also played a part in helping China’s cities to cope with rapid urbanisation more effectively than other middle-income countries such as Brazil and South Africa.
The cracks, however, are beginning to show. Sit-ins and protests by workers in China’s booming industrial cities are on the rise.
Rural-urban disparities are widening, and a growing urban middle class is beginning to ask difficult questions about democracy, freedom of expression and human rights.
The global financial crisis is also having an impact on the economic growth rate, which is projected to slow down.
Nonetheless, as I sipped a glass of Chinese Cabernet Sauvignon wine in a bookshop-cum-cafĂ© in Beijing, I found it hard to make a case against China’s development model.
I mean, does it really matter if the CEO of your bank is an official of the Communist Party? And what use is democracy when it can’t help put dinner on the table?


Warning from China's premier
"We must be aware that this year would be the worst in recent times for our economic development," Chinese Premier Wen Jiabao warned in the Communist Party magazine Qiushi on November 1."It is very difficult to maintain high growth and a low inflation rate in the long run. These unfavourable factors have already affected our country, and will continue to. There are also many pronounced problems in domestic economic activity," he wrote.As Minqi Li explained in an article in the April 2008 Monthly Review, China's economic growth in the late 1990s and 2000s depended heavily on it being a net exporter. The US alone accounts for 20 per cent of China's total export market, so a US recession alone would have a major impact. In 2007, Europe replaced the US as China's largest export market but Europe too has gone into recession.China's rapid economic growth also relied on Chinese capitalists (state and private) and foreign capitalists operating in China exploiting labour at a rate of about "one-twentieth of that in the US, one-sixteenth that of South Korea, one-quarter of that in Eastern Europe and one-half of that in Mexico or Brazil".While, a large, productive, and cheap labour force allows Chinese capitalists and foreign capitalists in China to profit from intense and massive exploitation, this places a brake on domestic demand making up for collapsing Western export markets.

The initial phases of the Free Trade Agreement between China and the Association of Southeast Asian Nations have brought significant benefits for both parties, helping to absorb external pressures at a time of slowing global growth.
On Oct. 22, Chinese Vice Premier Wang Qishan told the fifth China-ASEAN Business and Investment Summit that it is paramount for the two partners to accelerate their economic cooperation in the face of weakening global demand. Association of Southeast Asian Nations (ASEAN) officials also stated their wish for deeper economic ties with China, stressing the need to reduce the bloc's exposure to slowing demand from the U.S., Europe and Japan.

Structural shift. China's economy is moving away from traditional processing and assembly operations, sourcing more components domestically as its industries move up the value chain. Southeast Asia lacks the technology and skills to provide many of the required high-end imports and raw materials. It thus risks the prospect of a shrinking trade surplus with China and greater vulnerability to currency fluctuations.

Reform of financial system
(China Daily)Updated: 2008-11-15 17:07
As leaders of the 20 largest economies gather in Washington DC to discuss a coordinated plan to deal with the global financial crisis, it is necessary to reassess the existing US dollar-dominated international financial system. It is a speculation-rife, supervision-lacking system.
After the collapse of the Bretton Woods System in the early 1970s, the US rushed to introduce the Jamaica System, which is still in effect, in an attempt to carry forward its financial dominance. The Jamaica System, strictly speaking, is not new, and it has elements of Bretton Woods.
Under this financial structure, the US has excessively indulged itself in the benefits, but has tried to shrink from its responsibility as the world's largest economy. The superpower's unrestrained issuance of dollars to bolster its unrestrained domestic credit consumption and its efforts to maximize its national interests by adopting policies, such as transferring financial risk and crisis to other countries, has added vulnerability to the international financial system.
An absolute authority always leads to corruption. The unchallenged hegemony of the US has contributed to its abuse of power and conduct.
Long ago the European Union proposed that the international community strengthen supervision over hedge funds, which mainly stem from the US, and serves as an important source of its financial capital.
The EU's recommendation has repeatedly been ignored by Washington. As an important prop of the Bretton Woods System, the International Monetary Fund (IMF), has long been utilized by the US as a tool to push for neo-liberalism worldwide.
While offering aid to some crisis-plagued emerging economies, the lame-duck organization has never given up its interference in the economic jurisdiction of recipients in contravention of the UN. This has plunged some of these countries into a worse economic situation, sometimes resulting in political and social upheaval.
Since the exposure of the US financial crisis, the IMF has remained idle and other international financial bodies, such as the World Bank and the Bank of International Settlement, due to serious defects, have also been unable to play their roles as creditors and effective monitors.
The current defective international financial system has been widely criticized, but no country can ignore the dominant role of the US in it.
However, the unprecedented international financial tsunami in a century we are experiencing, and the summit on the crisis, have offered a rare opportunity for some competing players to change the existing international financial establishment to their advantage.
The hegemonic status of the US is now under challenge from its friend on the other side of the Atlantic Ocean, the EU. For many years, the expanded EU has pushed for market integration among its members and accordingly consolidated its strength to rival the US. That can be seen by the rising status of the euro in international markets.
It has been elevated to a major international currency, but admittedly it still has a long way to go before dethroning the US dollar as the world's leading reserve currency.
Behind the euro there is no unified capital market, military or fiscal policy. European countries have different economic development levels and political preferences.
At the same time, the regional community is plagued by problems of immigration, and an aging population. All this present hurdles to snatching the world's No 1 financial status from the US.
The EU has also been a beneficiary of the US-manipulated international financial order. So it is not difficult to understand why up to now it has not proposed major reforms.
We look forward to some positive measures from the Washington summit but should not pin our hopes too high.
The author Jiang Yong is a researcher with the China Institute of Contemporary International Relations




Crisis puts brake on sales of cars


By Patti Waldmeir Financial Times


It had to happen sometime: after several years of stratospheric growth, the Chinese vehicle industry has come back to earth with a bump - and found itself facing a grim reality of weak demand and cut-throat competition that could persist well into the future.Even before the western financial world imploded - stoking fears of a global recession that has chilled the hearts of car buyers, even in faraway China - industry analysts were expecting a slowdown in Chinese car sales this year. But by that, they meant 15 or 20 per cent growth (down from 34 per cent in 2006 and 24 per cent last year) - not low single-digits this year, and flat sales next year, as predicted recently by JD Power, the auto consultancy.Chinese car industry growth had defied gravity for so long - rising from only 5,000 cars in 1980 to 5.8m forecast for 2008, making it the world's second largest auto market - that it was hard to imagine anything could cause such a hard landing. But that was before the credit crisis.In many ways, Chinese car buyers ought to have been well insulated from the crisis: according to Mike Dunne of JD Power in Shanghai, 93 per cent of car purchases are still made with cash. But Li Shufu, chairman of Geely, one of China's largest automakers, says the effect is predominantly psychological. "If consumers think the global economic situation is bad, they also think maybe prices will fall," and they stop buying cars, he told the Financial Times recently in an interview. In China, no one wants to buy a car until the price is as low as possible.But China's car industry was already highly competitive, even before the threat of further price declines. According to Dieter Seemann, commercial executive director of Shanghai Volkswagen, one of VW's two carmaking joint ventures, China has 81 automotive brands compared with 47 in the US - the world's largest car market - and 47 carmakers compared to 16 in the US. VW says prices fell by a staggering 37 per cent from 2001 to 2007, and forecasts further price erosion of 8 per cent from 2008 to 2010. In the short term, says Joseph Liu, General Motors' Asia-Pacific head of sales and marketing, "everyone will suffer".But the medium- to long-term forecast is more cheerful. Nick Reilly, head of Asia-Pacific operations for GM, says market fundamentals remain strong. GM is still forecasting 10 per cent growth for this year and as much or more for next. "I don't see this as the start of a significant decline," he says.Jeffrey Shen, president of Changan Ford Mazda, one of Ford's Chinese joint ventures, says: "We see this as a shortterm adjustment. Long term the [growth] trend in the Chinese automotive industry will continue." Ford believes that when per capita GDP reaches $6,000, the industry will boom and carbuying "will get into every family", Mr Shen says.Ford acknowledges that car sales in China's richer, more export-focused east and south have slowed, but says sales in the interior are beginning to take up the slack - as China has shifted manufacturing production to cheaper regions.In the longer term, one basic fact remains paramount: only 20 out of 1,000 people in China own a car (compared wi th roughly 500 per 1,000 in the US and EU). That fundamental fact will drive the industry for many years to come.Most industry forces expect the Chinese government to stimulate demand in the short term, as a way of propping up the economy in difficult times. "The car industry can serve as a cushion for the overall economy," a senior official of Changan Motors, a large state-owned automaker, said recently. But in the longer term, Beijing's ambitions are much grander.China knows it missed out on decades of automotive technology, because of its Communist past. Now Beijing plans to leapfrog that gap to a new greener future: One plug-in hybrid electric car is expected on the Chinese market within weeks, from BYD, the upstart Shenzhen battery manufacturer that recently rose from nothing to become the biggest-selling Chinese auto maker. And nearly all of China's other leading auto companies say they are working on alternative fuel vehicles. They are counting on backing from Beijing - which has said that 10 per cent of China's cars must run on alternative fuels by 2012 - for everything from tax breaks to the massive infrastructure of charging stations needed for electric cars.China's peculiar brand of authoritarian semi-capitalism could even give Beijing an advantage in the battle, says Paul Gao, author of a recent McKinsey report on electric cars: democracies need to consult on such things as electric vehicles; but Beijing could just decide to support the technology, and it would happen."In China things can happen very fast, or very slowly," says Mr Liu of GM. If the past is any guide, change in the Chinese car industry will be fast-forward

China’s economy losing steam, workers losing jobs and wages
Guangdong province faces millions of job losses in coming months
Vincent Kolo, chinaworker.info
The global capitalist crisis has struck southern China’s export powerhouse Guangdong with the force of a super-typhoon. It is “the worst economic environment of our lives” exclaimed the chief economist of Hong Kong’s Chamber of Commerce. A domino effect of factory closures is rippling through industries such as toys, footwear, textiles and light engineering in Dongguan, Shenzhen, and other heavily industrialised cities in the Pearl River Delta. The Federation of Hong Kong Industries (whose members run their production from the delta) warns of 2.5 million job losses in the coming three months – 27,000 every single day! The same source said 20,000 Hong Kong-owned small and medium-sized enterprises could close down by the Lunar New Year (January 2009).“Depression”For years the world has marvelled at China’s spectacular growth figures, now it should prepare for spectacular figures of another sort! City leaders in Dongguan speak of a “depression” in the city of seven million people, mostly migrant sweatshop workers. Wang Zhiguang, vice chairman of the Dongguan Toy Industry Association, told Guangzhou Daily: “Of some 3,800 toy factories in Dongguan, no more than 2,000 are likely to survive the next couple of years.”Skyrocketing costs for fuel and raw materials, the Chinese currency’s rise, and shrinking export markets, have squeezed already narrow profit margins. “After the EU and the US changed the market thresholds for China-made toys, and because of recalls in 2007, our testing fees have gone up by about 25%,” a toy industry spokesman said.Several Hong Kong-owned factories have gone bust in the last week, including three run by the world’s largest toymaker Smart Union Group, which makes toys for Mattel and Hasbro. “It’s scary,” engineer Zeng Yangwen, 26, who worked for Smart Union for three years, told Reuters. “The companies that folded before were small. This is the first big one to go under.”Daily protestsThousands of workers have lost their jobs and many have taken to the streets to demand unpaid wages. Their former bosses in many cases have spirited away valuable assets and disappeared. Street protests and demonstrations at local government offices have been a daily occurrence in many townships in the region. In at least one case in Shenzhen, at the Xixian factory linked to luxury watch retailer Peace Mark, also Hong Kong-owned, more than 600 workers staged a sit-in for two days to demand their wages. More such protests are on the cards in coming weeks and months.Exporting regions like the Pearl River Delta are the first to be hit by the crisis, as their export markets wither under the impact of the global recession, while input costs have risen, and bank credit has become tighter. This is just the first phase of what is clearly a significant industrial slowdown in China, exacerbated by the simultaneous bursting of gigantic financial bubbles in the Chinese stock market and property sector. Added to this there is of course the global capitalist crisis, which is hammering export markets and threatens new financial upheavals. Asian stock markets sank to four-year lows this week on fears that growing difficulties in China and other ‘emerging markets’ will prolong the global recession. From being a possible ray of hope, China’s faltering economy is becoming another source of despair for the global capitalists.All the above factors mean the current industrial downturn can be far more serious than China’s leaders and most commentators publicly recognise. The Beijing regime continues to reassure the public how ‘basically strong’ the economy is. But in part these statements are tailored to avoid further frightening capitalist ‘investors’ (speculators) – who are more inclined towards panic from the global meltdown than they are to be calmed by recent market-supporting measures from the Chinese regime and central bank.“The slowdown in the Chinese economy so far is unexpectedly serious,” Li Wei of Standard Chartered Bank told China Daily. All the main economic data now point downward. China’s gross domestic product (GDP) growth slowed to 9% in the third quarter, the slowest rate since during the SARS crisis of 2003, and the fifth consecutive quarter of reduced growth. All the forecasts for 2008 and 2009 are being scaled down, and several economists now warn of growth dipping below the crucial 8% level in 2009. Morgan Stanley’s latest forecast is 8.2%, while CICC predicts just 7.3%. Li Wei of Standard Chartered forecasts 7.9% in 2009 and only 7% in 2010. Anything below 8% is a recession in the Chinese context, meaning rocketing unemployment and falling living standards for broad layers of the population.Investment slowsInvestment too, a key motor of GDP growth since the start of the century, has seen a sharp slowdown. The Chinese Academy of Social Sciences warns that real fixed asset investment (after compensating for higher producer prices) could grow by 15% overall this year, compared to 20% growth in 2007. This poses big problems for the central government: even its monetary easing (interest rates have been cut twice in the last month) and lifting of earlier credit restrictions on banks, may not have the desired effect if companies are reluctant to invest due to a sluggish market and huge levels of existing surplus capacity. Industries such as steel, coal, and power generation, have grown far beyond the limits of the Chinese economy in the course of a frenetic seven to eight year investment bubble, and are dependent on the country’s XXXL-sized export machine to sustain demand. If this machine fails, so do they. Steel and coal firms have announced production cuts for the first time in years in order to put the brakes on sharply falling prices brought about by lower demand and excess capacity. Coal prices are down 14% and steel by 30% since the summer. 23 of the nations 71 largest steel firms reported losses last month, and Beijing may reintroduce tax incentives for steel exports, despite opposition from the US and EU. Clearly, the slowdown is not confined to export industries or regions, although these are being hit first and hardest.While China’s overall GDP growth still seems impressive by global comparisons, its complex and fragmented economy can experience widely divergent processes at the same time. Guangdong and other coastal provinces are, because of globalisation (they trade more with the US and Europe than with the rest of China), showing clearer signs of recession at this stage than most Western economies. There has been a spate of suicides by capitalists in these provinces. All told perhaps 20 million workers have lost their jobs in 2008 as a result of business collapses. But as the overall economy is still growing, many of these worker (most are migrants) can be absorbed elsewhere. At a certain point in the downward cycle, however, this ability to soak up the new unemployed will likely break down and open unemployment will soar and, with it, the threat of serious unrest.Government measuresProperty markets – pumped up to fantasy levels in the speculative wave of recent years – have deflated sharply, by 40% in some cities such as Shenzhen. The coastal exporting regions that are suffering most from the crisis and the property meltdown are also the main launch-pad for the much discussed but yet to be seen “rebalancing” of the economy towards domestic consumption. Per capita GDP in the wealthiest coastal provinces is roughly twice the level in the north-eastern provinces, three times the level in the central provinces and five or six times the level in the poorest western provinces. Much greater consumption – close to double today’s level – would be needed to break the economy’s huge dependence on exports and avert a serious downturn. If increased consumption does not come from the wealthier provinces, then where? But the combined blows of falling property prices, factory closures and recession, migrants moving elsewhere, will serve to weaken rather than strengthen consumption in these regions. For the first time in modern Chinese history, since the pro-capitalist reform and opening process began 30 years ago, the coastal provinces may be headed for slower growth and greater dislocation than their poor relations in the interior. Already, coastal companies are gearing up for an assault on the markets of other provinces. The stage is being set for a dramatic increase in inter-provincial rivalries and economic disputes. Beijing may find itself in the role of referee at a dogfight!The central government has responded to the current slowdown with a series of measures that include even more investment in infrastructure, restoration of tax rebates to labour intensive export industries (these were cut two years ago as Beijing moved to soften US protectionism) and special rules to ease loan terms for small and medium-sized companies. The pace of currency appreciation will surely slow, if not reverse, and US protests over this fact may be bought off for a time with a Chinese commitment to keep up its lending to the US government’s huge state bailouts. Other steps have been taken to shore up the sinking stock market, to prevent the main CSI 300 index slipping below the psychologically important 2,000 mark. The market has plummeted 70% this year, but the latest measures – using state companies and the sovereign wealth fund, CIC, to buy up shares – have not prevented further falls (the CSI 300 is down on 1,833 points at the time of writing). The government will soon in all probability announce a stimulus package containing tax cuts and extra funds for public investment. It is rumoured that this package will be worth 400bn yuan ($58bn). That the plan has been delayed may reflect deep divisions inside the regime’s economic management team over what ‘mix’ of policies to adopt. Many CCP bigwigs now favour tax cuts, accepting the liberal economists’ argument that this is the fastest way to stimulate consumption. Less than one-third of China’s wage earners would benefit from a tax cut as the remainder do not earn enough to pay any tax. Fear of protestsWhat is the role of local-level governments in the Pearl River Delta and other export hubs in the rising wave of factory closures? There is of course a big risk of instability and even riots and the authorities are keen to diffuse this. At the same time the CCP local administrations have created an environment that allows corrupt capitalists to run their businesses into the ground and then abscond, leaving workers, creditors, and suppliers, in the lurch. Many of today’s fugitive bosses were well integrated with local officials and paid well for their services. Today the factories are being sealed for “immediate auction”, with workers allowed to remain temporarily only in the dormitories and canteens.At the same time the local governments are using public budgets to pay out unpaid wages to redundant workers, a fact that is drawing increasing criticism on similar lines to anger at bank bail-outs in the West. In order to clear the streets and prevent the anger of workers crystallising into a wider struggle across factory or township borders, governments are using the ‘carrot’ of compensation rather than the ‘stick’ of police repression – at least for the time being. The local government in Zhangmutou township, Dongguan, paid out more than 24 million yuan ($3.5 million) to compensate the 7,000 former workers of Smart Union Group, China Daily reported (23 October). This was the township’s entire budget for the coming year! Yet workers are owed four times this amount and may never receive the full amount. Once paid off and dispersed, the authorities hope migrant workers will move onto other jobs or other areas. Rival factories have been sending recruitment agents into the demonstrations in Dongguan and Shenzhen to fill their quota of vacancies.The main focus of workers’ protests has been to get part if not all of the wages they are owed. This is the still basic level at which the struggle stands today, not seeking to challenge the bosses’ right to turn thousands out onto the streets. The perspective of many migrant workers is that 1) they hope and believe that by moving again if necessary they can get new work, and 2) It is not really possible to challenge the bosses and officialdom: “They will do as they want, what can we do?”

The Challenge Of The New Statism
The liberal democracies have experienced financial shocks and reacted, but not as free market advocates expected. Adam Smith’s name is not being loudly heard in the world’s central banks. Instead we have western governments recommending federal interference in their poorly regulated economies and incorporating methods similar to those that guide New Statist nations, such as China and Russia. This phenomenon reveals that Francis Fukayama, who received commendation for his 1989 philosophical tract: The End of History, might have spoken too fast."What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of post-war history, but the end of history as such: that is, the end point of mankind's ideological evolution and the universalization of Western liberal democracy as the final form of human government."Fukayama repeated a thesis of often maligned Karl Marx that liberal democracy is an integral part of the capitalist system but refuted Marx's assertion that “capitalism would inevitably lead to increasing class polarization and class conflict,” and “through its own inherent processes of development it is destined to give rise ultimately to its own dissolution." It now seems that both of these scholars have erred and the more prescient is Azar Gat, Professor of National Security at Tel Aviv University. In a Foreign Affairs article: The Return of Authoritarian Great Powers, July/Aug 2007, Professor Gat argues that Fukuyama has not considered the emergence of imposing authoritarian nations, "which could 'end the end of history'." Gat proposes a challenge: “These authoritarian capitalist regimes could inspire other states to follow their model.”The New StatismIn a previous article, The New Statism, The Rise of Corporate States, Alternative Insight, Oct. 2007, the writer independently outlined a similar concept: "A new statism, in various prescriptions, exercises control over the political, moral, economic and social fabric of several nations and has the potential to control the destiny of the world."An earlier article, The Socialization of America, Alternative Insight, April 2005, stated: “The global economy has been pioneered by the United States but has not been a perfect fit for new pioneering nations. In order to provide prosperity for its people, the United States must implement policies that offset the deleterious effects of globalization. American history shows that private industry has never been the sole source of solutions to recurrent economic problems.”The former article described several nations that can be described as "authoritarian capitalist” regimes. China and Russia are the most prominent, but India, Israel, Venezuela, Bolivia and Vietnam, and several autocratic Arab nations can also be considered New Statist. Their institutions include significant New Statist characteristics:The government allows free enterprise but might invest in some industries (mixed economy) and control industries related to national defense, natural resources, communications and media. In some cases it also has extensive land ownership.The government, by direct or indirect mechanisms, partially regulates international money transfers, international trade, wages, prices, internal investment and segments of the labor market.The government promotes nationalism, reinforces chauvinism and allies the education system with these efforts.The government exercises powers that lessen opposition and prevent excessive dissent.With the liberal political and economic world suffering from an economic downfall, emerging nations might be less likely to adopt the free market model and more likely to consideration the autocratic Statist paradigm as an attractive alternative to liberal democracy. Even the free marketers are shelving their concepts and applying Statist solutions for private problems. Rather than an end to history, the liberal democracy movement has become only a stage in history. As predicted by rejected and non-conventional economists, a new stage of history is unfolding.




SEE:
The New Imperial Age
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There Is An Alternative To Capitalism

While the defenders of capitalism attempt to pose the solution to the crisis of their beloved capitalist system in terms of increasing Free Trade, opposing government regulations, transparency, social responsibility, but still promote the public bail out of private captial with no strings attached, the reality is that there is a spectre haunting capitalism today; the zietgiest of Marx.

The solution is not reforming capitalism, or creating statist capitalism, but worker self management the socialization of capital by the community in other words real authentic socialism.

Here are some recent commentaries on the return of spectre of Marx to haunt 21st Century Capitalism.

Friedman looks enviously and longingly at the public transport system in Europe, which helps in the reduced use of private vehicles and consequently in the reduction of carbon fumes, though on the other hand he favours free enterprise. The paradox seemingly stares the reader in the eye, though the recent collapse of capitalism has triggered the re-examination of a free market obsession, leaving no doubt that rampant privatisation is not the answer to global prosperity. And the spectre of Karl Marx returns to haunt the world again.

There will be one prominent gatecrasher at the G20 summit in Washington today: Karl Marx will be much in evidence, gleefully dancing on the grave of capitalism. With major American and European belly-up banks turning to their governments for rescue, capitalism does seem to have self-destructed in fulfilment of Marxian prophecy. The question facing the G20 meet is: What new geo-economics do we evolve, not only to tide over the current panic but to ensure that such crises of confidence do not recur? Conventional experience teaches us that competition makes for a better delivery system of goods and services than a monopoly, whether it is state-controlled or otherwise . Monopolies, by and large, don't work; competition, by and large, does. So what went wrong in the current scenario? One obvious answer is lack of transparency in the banking and financial sectors. Free market competition assumes free choice, which in turn presupposes access to reliable information on which to make that choice. If information is concealed, or falsified, as it was in the current case (where hugely leveraged trade in 'exotic derivatives'
created a soap bubble that burst), the 'free' goes out of the free market and the system collapses, requiring a bailout. Constant vigilance (caveat emptor) is the price we pay for a free market. So, far from being dead, capitalism needs to be more wide-awake than ever before. Instead of getting less competitive it needs to get more competitive, i.e. anti-monopoly. For far too long, the US has enjoyed a monopoly raj over the global economy thanks to its dollar which forms the basis of all international trade. Maybe it's time to think of a new unit of global exchange, based on a basket of currencies.

Business to hang itself on loan plan
Terence Corcoran, Financial Post Published: Wednesday, November 05, 2008
If we have learned anything about business and economics over the centuries, it is that we cannot look to business for our free market economic principles. Whether individually or in groups, known affectionately as associations and coalitions, we can be certain that the people who run business will always and everywhere pursue economic ideas that first suit their interests; all else is conveniently disposable ideological baggage. When the going gets tough, business gets weak on the core ideas that make business possible.
Adam Smith recognized the essential moral flabbiness of the individual business person or corporation. "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." Karl Marx had a wittier take on the nature of the beast: "The Capitalists will sell us the rope with which we will hang them."


Government by market gods or for the people?
Over the past 20 years of economic rationalist (neo-liberal) economic policies, western governments and third world governments (under duress from the International Monetary Fund) have pursued financial and economic deregulation, privatisation, unrestricted foreign investment and free trade policies. They have wound back the role — and with it the sovereignty — of governments, effectively leaving critical policy matters to the so-called free markets. This process has involved a significant transfer of power from elected governments to monopoly capital.Decisions regarding currency, interest rates, production, trade, provision of services, price of services, etc have been handed over to the markets. Every piece of deregulation hands over more power. But who or what are these markets? Who controls them? Where is this power being transferred to?It is being passed to the largest, most powerful transnational corporations and financial institutions. The most powerful of these monopolies are the financial conglomerates. They manipulate markets, they stand over and dictate to governments, they sit on the boards of central banks, they allocate credit, and so on, and in the case of the US, own the Federal Reserve.The investment banks, insurance companies, managed, hedge and other funds have gone in pursuit of fast and big profits, speculating on high risk products. They gamble on movements in prices on the stock exchange, they trade in debt, bet on profit results, and a myriad of other "products". They relied on ever expanding markets and endless growth, on bubbles that one day had to burst.Their empires were built on debt and much of the money they risked was not their own, but drawn from superannuation, retirement and other funds. In the process, the billions of dollars that they gambled with were withdrawn from the real economy. They were withdrawn from human needs, from social development, basic services, infrastructure, and from food production.Every dollar directed to speculation was a dollar less spent on consumption, reducing demand for the goods and services being produced. This massive withdrawal of money from circulation in the real economy of production, distribution and exchange exacerbates an already developing crisis of over production and recession.These crises are endemic to capitalism. They arise out of the exploitation of workers who are not paid the full value of the work they put in producing goods and providing services. The gap between the value of their labour and what they are paid is what Karl Marx called surplus value — profit. Employers never let up in their struggle to reduce the cost of labour by such means increasing output per worker, lower wages, and so on to increase their profits.

Politics keeps Left
WESTERN governments are nationalising industry to bail out the economy but you won't catch them calling it socialism.
Did Karl Marx get it right? Many will argue yes, especially in the wake of the most severe global financial crisis in seven decades, and after last week's Washington G20 summit at which governments pledged a greater interventionist role in economic affairs.
The Hard Left of politics, including in Australia, will say Marx – the 19th-century German political economist and father of modern communism – correctly predicted the failure of the capitalist free market.
After all, as Canadian publisher Martin Masse notes, Marx's fifth proposal in his 1848 Communist Manifesto calls for the centralisation of credit in the banks of the state.
Importantly, G20 has resolved to undertake further stimulatory spending to stabilise the financial system, and the reform of the IMF and World Bank as global financial instruments. And while the free-trade mantra was repeated, there's already talk in the US and elsewhere of a return to the most trenchant trade barriers since the 1970s.
All of this follows record government bailouts of banks and industry in the US, Britain, Germany, France and elsewhere that has been, for want of a better term, covert nationalisation. In Australia, Prime Minister Kevin Rudd has provided his government's own bank guarantee, and propped up ABC Learning and the car industry with yet more taxpayer dollars.
Some have quipped that Western capitalist leaders have done more for socialism in the past few weeks than communist parties have done in a century. That's probably hyperbole, but the free market, small government orthodoxy that has dominated Western politics for the past three decades, does appear to be over. At least for now, until the cycle again turns, and the stifling effects of big government again produce stagflation. The calls will then be for a return to the free market.
In that sense, Marx didn't get it right. But the global financial crisis inevitably will see a sharpening of the traditional Left-Right ideological divide, one blurred in recent decades as the old class politics gave way to the new politics of culture and environment.


Revenge of the Left across the world
No matter that statist policies were responsible for this global crisis in the first place. It was Western governments that set interest rates too low for too long, encouraging us all to abuse credit.
It was Eastern governments that held down their currencies to pursue mercantilist trade advantage, thereby accumulating vast foreign reserves that had to be recycled. Hence the bond bubble. This is the deformed creature known as Bretton Woods II. Protectionist Democrats are right to complain that the game is rigged. Free trade? Laugh on.
But at this point I have given up hoping that we will draw the right conclusions from this crisis. The universal verdict is that capitalism has run amok.
In any case the damage caused as credit retrenchment squeezes real industry is likely to be so great that Barack Obama may have to pursue unthinkable policies, just as Franklin Roosevelt had to ditch campaign orthodoxies and go truly radical after his landslide victory in 1932. Indeed, Mr Obama – if he wins – may have to start by nationalizing the US car industry.
For those who missed it, I recommend Edward Stourton's BBC interview with Eric Hobsbawm, the doyen of Marxist history.
"This is the dramatic equivalent of the collapse of the Soviet Union: we now know that an era has ended," said Mr Hobsbawm, still lucid at 91.
"It is certainly greatest crisis of capitalism since the 1930s. As Marx and Schumpeter foresaw, globalization not only destroys heritage, but is incredibly unstable. It operates through a series of crises.
"There'll be a much greater role for the state, one way or another. We've already got the state as lender of last resort, we might well return to idea of the state as employer of last resort, which is what it was under FDR. It'll be something which orients, and even directs the private economy," he said.
Dismiss this as the wishful thinking of an old Marxist if you want, but I suspect his views may be closer to the truth than the complacent assumptions so prevalent in the City.

How to save the economy
Marx, Joseph Schumpeter and Keynes shared one insight at odds with until-recent modern orthodoxy.
They all knew that capitalism is inherently unstable, that it soars and collapses – a mixture of "mania and panic" as we all now know too. There have been at least half a dozen such shocks in the past 25 years – the Thatcher-Reagan era, you might say – though this is the big one, as Vulcanologists might put it.


Global financial crisis is the “end of the era” for capitalism
Eric Hobsbawm, the 91-year-old Marxist historian, author and academic, told MSN Money the past two decades of unfettered capitalism had been as damaging as Soviet economic totalitarianism.

In his responses to MSN Money's questions, Hobsbawm predicted that far from being a hiccup or correction of the markets, "the present crisis is certainly the end of the era in the development of the global capitalist economy."
Hobsbawm's views on the present crisis present a radical counterpoint to mainstream financial journalism and uncover potential causes and repercussions that have not received much coverage.
The media and economic analysts have given many explanations of why the crash happened and who is to blame. Few have blamed free market capitalism itself as the cause of its own inevitable demise. Many point instead to elements within the system that could have been controlled better.
The New York Times, for instance, argued that Alan Greenspan's support for derivatives while Federal Reserve chairman from 1987 to 2006 "helped enable an ambitious American experiment in letting market forces run free. Now, the nation is confronting the consequences." It said that if Greenspan had acted differently "the current crisis might have been averted or muted."
Hobsbawm in contrast told MSN Money that he believed a "free market theology," a sort of blind faith in capitalism, was the root cause.
In the e-mail interview, Hobsbawm said that running global economies on an "effectively unregulated basis" is as doomed to failure as "the project of a totally state-run planned economy in the Soviet systems." He said he welcomed state intervention as a "return to common sense".
We might be entering a period when traditionally socialist principles hold sway, and if this means that the traditional aims of socialism - to create conditions for a good life for all people equally and to subordinate profit to human values - are adhered to, then so much the better for Hobsbawm.



Do recent events herald a fundamental change in the way markets are regulated and economies are structured or will they prove to be blips in the inevitable march of market capitalism? How do you think the world will remember the economic events of 2008 in years to come?


The present crisis is certainly the end of the era in the development of the global capitalist economy which began around 1973. While globalisation continues in most aspects of life except politics, it was always an error to suppose that it inevitably took the extreme, indeed pathological, form indicated by the free market theologians. I expect its rate to slow down somewhat in the next few years. However, forecasting is not the business of historians. The way markets are regulated and economies structured has too many unpredictabilities. I imagine it will take many years before a new pattern of the world economy will fully emerge. When it does it will probably be relatively stable for several decades until the next crisis of the economy. Nothing is forever in history.


In your collection of essays, Globalisation, Democracy and Terrorism you write that "Since 1997-8 we have been living in a crisis of the capitalist world economy," and of how America's economic problems might mean an end to their "foreign military adventures". Are recent events the most obvious signs yet of a shift in the world order away from US hegemony?


The United States remains, and will remain, a major world power. It is, after all, single handed the most populous country in the world after China and India and the present crisis shows that it remains the fulcrum of the world economy. However, the shift of economic power away from it and towards south and east Asia is clear and will not be reversed. It no longer dominates the world economy or is able to impose its own rules and conventions on world business and other governments' policies. The Iraq and Afghanistan wars have demonstrated that its overwhelming high tech military power is incapable of imposing its political solutions even on weak countries. The brief era when it thought it could exercise a single-handed hegemony over the globe is over, but it will remain an essential and important element in a more pluralist world order.

FREE TRADE DEPRESSION
In toto, what we are witnessing is no less that the greatest, involuntary, transfer of wealth and power in the history of the world – all due to a trade regime within which we are forced to trade with the greater slave, regardless of consequence or end result. In the corporate media, no one is asking trade with whom, on what terms, and to what end? In addition, no dismal result is ever ascribed to “free” trade - much like the Fed is never blamed for the Great Depression and the Smoot-Hawley bogeyman is touted as cause one. Indeed, it is Free Trade Uber Alles today, and for free traders their imagined ends justify their fascist, undemocratic, means which, as a result, mean endless social and economic cost. All in all, these “free” policies mean a demise resulting in the most expensive trade possible in which both economic benefit and social power are privatized to the few while all the immense costs are socialized upon the many. Current trade policies are neither intelligent economy nor the result of majority rule but, rather, reflect a religious-like absolutism - a naĂŻve and perfidious faith in the service of Capital alone. Despite ever-growing trade deficits, job losses, dependency upon imports, phony export statistics, doctored employment statistics, and willingness to undermine our currency "in order to compete," free traders go on pretending there is nothing wrong with our mounting deficits, loss of capacity, and all the myriad social costs on this paved road to depression. Indeed, free traders have no answers to growing deficits or the potential loss of nearly every industry, only a blind and irresponsible faith in a centuries-old English, imperial, dogma unfit for a still very disparate and dangerous world – i.e., one in which capital now moves at the speed of light. Even US intelligence agencies are now warning that globalization has become a serious threat to US security due to its unwanted, negative, effects on economies around the world. In other words, “free trade” and globalization are breeding global dissent, terrorism, oligopoly and oligarchy. Firstly, for trade to be truly free you have to be free not to trade, otherwise it is forced trade. Worse, no morality, freedom, justice, human rights, child labor, or ecological impacts are considered or calculated – meaning the regime is a clear recipe for universal loss. Under capital’s GATT/NAFTA, even our energy–efficiency standards are a crime, as are recycling laws, attempts to protect family farmers, and virtually any Buy-American effort or legislation. In short, in a still very disparate and dangerous world - wherein huge magnitudes of differences in wages, standards and human rights exist - to have virtually no incentives working to improve rather than reward the greater slave and their worse conditions, is simply to reward the criminal, the dictator, the terrorist, the Red Chinese generals, all the greater exploiters of mankind and the environment, and punish the free, democratic, and ecologically responsible. It is utter perversity to give away entry into our G7 markets and get nothing in return – except the promise of evermore lob loss, lower currency values, corporate hegemony, and endless rewards for the greater-slavemaster. Yet this is capital’s criminal nonsense, which is guaranteed to end in riot, revolution, and new pogroms against the rich… as Karl Marx predicted. To avoid depression, the concept of "comparative advantage" (i.e., a 250 year old amoral theory once appropriate for agricultural products in a world where capital was relatively stationary) must be re-mediated by truly free, democratic, and ecologically responsible countries and policies. Otherwise, neo-slavery, child labor, ecological ruin, and currency destruction are "advantages" which cannot be lost by economies forcibly turned into export machines - only to generate huge overcapacity, dependency, local and global ruin, and our complete capture and enclosure by capital. In my book Cap-Com, The Economics Of Balance, I propose a re-writing of GATT/NAFTA to give nations, and the great majority of wage-earning people, the freedom to define their 'free markets’ - as opposed to Capital having all the power to define the terms, dictate the legislation, and then extort the wage-earning majorities of every country. This despicable, undemocratic, regime is guaranteed to pervert economy, ecology, freedom, and lead to riot and revolution as the backlash to forced globalization gathers steam.



'Capitalism is Obsolete-Mao and Marx Will Soon Be Back'

Sitting on the shady patio of a seaside hotel in Colaba, Samir Amin speaks in fluent English with a French accent . It's difficult to imagine a more global citizen than this disarming economist. Born in Egypt, to Egyptian and French parents, and educated at the Sorbonne, Amin has worked in several African countries , and is now director of the Third World Forum in Dakar, Senegal. He is best known as co-founder of the "World Systems' ' school of thought, which produced landmark critiques of global capitalism

The latest financial collapse is symptomatic of a deeper crisis in the capitalist global structure, Amin said. "Capitalism is obsolete because it was patently superfluous. It believed in plundering natural resources and perpetuating a system which vested in a handful the authority to take political and economic decisions for mankind," he added.
A social system must integrate the common will and aspirations of the people , he said, adding, "If it fails to respond to the people, then it has to be changed, because it has turned obsolete... Marx and Mao will soon be back."
Amin warned that the superpowers would do everything to restore the financial system, to maintain their profits and continue the exploitation of cheap labour and natural resources. He said a constant journey to democratisation alone would strengthen developing countries . "Democratisation should mean social progress... upholding the right to food, education, shelter and health care." Trade, he added, should not be equalised with free trade. Responding to a question , Amin said the choice was not between socialism and capitalism, but between socialism and barbarism.


Liberal capitalism, Amin said, is as much an ideology as dogmatic Marxism. The conviction that markets are self-regulatory "should make anybody laugh today ," Amin said.

Building a Better World: A Dialectical Approach
That the world is sick is beyond doubt. But how sick is it? Moderately sick, as the champions of the Neo-Liberal Globalisation (NLG) proclaim? Or incurably, terminally, sick, as some extreme critics maintain? Or very sick, but probably not beyond saving, as I believe, based on the work that I have done in the last three years or so on this subject. So, in other words, that Human ‘Civilisation’ faces the most serious crisis in its ten to twelve thousand years History (since the invention of agriculture in the Fertile Crescent of Mesopotamia) is beyond doubt.
The risk that It could be destroyed, in large part or even completely, is quite substantial; moreover, the Planet on which It sits could suffer catastrophic damage that may take several centuries (if not millennia) to repair. Therefore, assuming (a fair assumption) that we are at a critical stage of our History, and that the appropriate question to ask is no longer ‘If’ disastrous events will occur, but ‘When’, Humanity’s most urgent task appears to be what to do to ‘deal with’ these inevitable disastrous events. Most experts agree that it is not too late to significantly diminish, if not entirely eliminate, the terrible consequences of these catastrophic events. They may be wrong. But we must hope – even if sometimes against hope -- that they are right, and roll up our sleeves, and put up the best fight we can to build a better and sustainable world.
What Can Be Done? -- What Should Be Done? I have come to believe, based on the work that I have done (and trusting my intuitive intelligence)[1] that a Dialectical Approach is the best one. Thus, the Thesis, Antithesis, and Synthesis that follow this Introduction. In the Thesis, I will be presenting the arguments of the proponents of the Reformist ‘Solution’; in the Antithesis, those of the Radical (or Revolutionary) ‘Solution’; and in the Synthesis, my final thoughts and opinions.
The proponents of the Reformist ‘Solution’ believe that Globalisation is basically Good, and that whatever problems it may have, can be ‘fixed’ or corrected. The advocates of the Radical ‘Solution’ try to demonstrate that NLG is basically Bad, because its problems are of a structural and institutional nature and cannot be ‘fixed’, or corrected; which means that NLG must be scrapped, and replaced. I will try to show that the correct solution, inevitably, must incorporate aspects of both. Moreover, we need a pragmatic solution which makes it necessary for the two sides to make concessions and compromises. That said, I must also underline that I believe the correct solution is much closer to the Radical one, than it is to the Reformist one.
Globally speaking, there are four Major Players: the Governments of the Rich and Powerful Countries (GRPCs);[2] the Large Multinational Corporations (LMNCs); the International Organisations (IOs); and the Civil Society Organisations (CSOs). The GRPCs and LMNCs are the proponents of the Reformist Solution; the CSOs, of the Radical Solution; and the IOs have positioned themselves between the two, trying to find constructive solutions and thus bring them together. The main difference, I believe, between the IOs and my solutions, is that the IOs’ solutions have a bigger Technocratic content, whereas I think that the Spiritual Dimension is essential.
The main problems are (not necessarily in that order; the following order reflects my personal sensibilities): the Persistence of Extreme Poverty; the (rapidly growing) Wealth and Power Gap between the rich and the poor; Global Warming and its catastrophic consequences, due to unlimited economic growth and unbelievable waste (especially in the United States); the sizeable risk of a Third (or fourth) World War, owing to the competition for scarce resources getting out hand; Nuclear Proliferation; International Terrorism; and Human Migration out of control.


The road away from Serfdom

In a world where Liberal usually means right of centre, non-Americans are astonished to hear "Liberal' launched as a cuss-word by people who believe that the world was created in seven days and that dinosaurs and humans once walked the earth at the same time.
A few days ago it was announced that Volkswagen had overtaken Exxon-Mobil as the world's most highly valued company. In a world where 'socialism' is an even more outrageous insult than 'liberal', it is startling to contemplate the fact that Volkswagen is a product of the post-war British Army of the Rhine directed by the 1945 British government of Clement Atlee- a bunch of socialist commissars who reinvented Hitler's 'People's Car' and put it on the road.
It was these same socialists who were responsible for civilising industrial relations in Germany by inventing the idea of Co-Determination, a system where the worker participates at every executive level of the German corporation and worker directors sit on corporate boards.
Co-Determination is an idea which has been so successful that it has transformed European social relations and flowered into the adoption of an EU social agenda - aimed at full employment and a more inclusive, participatory society. On December 9, 1989, the member states, with the historically ironic exception of the United Kingdom, adopted a declaration constituting the Community Charter of the Fundamental Social Rights of Workers.
Among the areas regulated in this charter are such matters as employment and remuneration, improvement of living and working conditions, social protection, freedom of association, collective bargaining, equal treatment of men and women, industrial health, the protection of children, elderly and disabled persons; and information, consultation and participation of workers in decision-making. Most of these principles are still, in the United States, subjects of bitter dispute.
A couple of weeks ago, President Bush, in a piteous appeal for a return to the wild, begged his fellow world leaders not to abandon the principles of laissez-faire when they come to remake the world in the aftermath of the current economic meltdown and the almost inevitable social catastrophe to follow.
The next president of the United States will need to come to terms with a world which no longer works according to American principles and rules. Free trade, globalisation, and the ideas behind the multilateral agreement on investment are obsolete.
This time, as in every crisis of capitalism, the pundits are dashing to the Internet and the libraries to reread Karl Marx. Marx was not a sentimentalist. He hated neither capitalism nor capitalists. They were objective realities and functioned according to certain principles. Capitalism was doomed to fail because of its fundamental internal contradictions - not because of the greed of its practitioners.
These contradictions include the antagonism between the social, collective nature of production on the one hand, and private ownership of the means of production on the other; and the antagonism between the world market and the limitations of the nation state. Capitalism is based on production for profit and not for social need. The working class creates new value but receives only a portion of that new value back as wages.
The capitalists take the rest - the surplus. As a result, the working class collectively cannot afford to buy back all the goods it produces. Capitalism destroys its own markets by pauperising its workers and by over-production. Marx predicted globalisation and the worldwide effects we now experience.
The opponents of socialism, the proponents of laissez-faire, tend to believe like Margaret Thatcher that "There is no such thing as society" and like Ronald Reagan that "Government is not the answer, Government is the problem." The ultra-capitalists and globalisers abhor what they call "the Nanny State" - the welfare state that attempts to guarantee a basic level of civilised existence for all.
In FA Hayek's "Road to Serfdom?" the problem is stated: "In place of individual liberty, socialism offers security. It promises protection from personal economic necessities and restraints, and an equality of economic well-being." Hayek was not a socialist.
The main architect of the latest disaster, Alan Greenspan, has proclaimed himself confounded by the turn of events. He had a set of rules which he says had always worked. Until now! He cannot understand the disaster over which he presided.
Greenspan is a disciple of Ayn Rand, one of recent history's most eminent false prophets. Rand's theory - so-called 'Objectivism' - holds that human beings must rationally be selfish, putting individual self-interest first. She therefore rejects the ethical doctrine of altruism - a moral obligation to live not only for one's self but for the sake of others. Since Rand took millions of words to define her philosophy, any summary of it is perforce crude. I do not think, however, that I have misrepresented her, or Hayek, or Greenspan, or Thatcher or Reagan or the millions of others to whom freedom is a purely personal attribute and life is every man for himself and the devil take the hindmost.
Some others of us think that none of us is free if any of us is unfree. The fascists believe that any sense of duty outside of self is a fetter, restricting real freedom. We believe that only by our mutual recognition of all our humanity are we human, and that our civilisation and survival depend on that. We are all in the same boat and on the same journey.
Individual liberty clearly means different things to different people. The International Republican Institute, headed by John McCain, no doubt believes that the people of Haiti are free, and free to starve to death, while the people of Cuba are enslaved by socialism, free education and the best health services in the world.
The IRI was one of the prime movers in usurping Haitian sovereignty to get rid of Jean Bertrand Aristide whom they consider a serious threat to real democracy as he was intent on building another socialist/welfare state alongside Cuba.


Now that the capitalists have established that the state - that is, us, we, the people - are the benefactors of last resort, it is time that we too discovered that truth. The billions we are spending to rescue banks and capitalists would be more efficiently and cost-effectively spent on rescuing our communities. If Obama becomes president, that is a discovery his constituents are likely to make sooner rather than later. In fact, some are already making it, demanding fundamental change and a new economic order.
The decay of imperial capitalism is bound to produce unforeseen byproducts, some beneficial, some toxic. Those who will survive need to be able to quickly choose between them.



Financial Crisis - Turning From Capitalism to Socialism
But both recent and historical experience shows an undeniable association between capital mobility and crises, especially when domestic institutions are weak and the harmonization of capital account liberalization and other policy reforms is inadequate.
In spite of the US government's bid to take more measures in order to prevent a total paralysis of the international economy, much of globalization and concomitant increases, in flows of capita and trade have led to high volatility in international financial markets.
Some of these have erupted into crises, in the form of runs and banks-both national and multinational-as well as attacks on currencies. The resultant effects have included the significant increase in contagion and the collapse of both venerable private banks as well as national institutions.
The public sector ( US government) therefore, had no choice but to work on a bailout plan of these institutions worth 700bn dollars, and recaptured state control of these institutions to keep the economy from the blink of collapse-one can be justified to call it nationalization in the face of capitalism failure.
Isn't this Socialism? The greatest socialist ideology of all times, KARL MARX had envisaged this trend of events in his communist manifesto on the chapter entitled "Historical Materialism", where the invisible hand as foretold by ADAM SMITH an architect of free market forces (Non-government intervention in the economy), had argued that the economy was self-regulating and self-sustaining.
That there was essentially nothing like market failure since the economy would correct itself. He says that law maintained that, "supply created its own demand". Therefore, there can never be a crisis in the real market.
All these people had it wrong; the current trend has demystified them and vindicated the great Karl Marx. I wish he could be present to witness his prophesy coming true.
Marx had prophesied that capitalism must eventually pave way to socialism as a matter of fact, due to the inevitable social forces of production because of surplus production (indicating exploitation of the proletariats by the bourgeoisie).
The gains from trade and economic reforms have to be lost now; it's a painful process to the monetary consensus (commonly referred to as the Washington consensus). Most predictions have been that, socialism is the end process of development.
The very reason why now governments are taking over the banking institutions is to recover from this mess of laissez faire ordinarily, government control (regulation) of the economy is a preserve of the socialist economies (in fact a major characteristic of socialist economies is government ownership of means of production).
The structural adjustment programs and the neo-liberal economic policies, no longer hold as we talk because they are based on the very market model of deregulation (what some called man eat man society), where market participants behave as if they are in a jungle paving way for survival for the fittest-Darwin's theory in retrospect.
We are beginning to see a shift in capitalist architects moving towards the left (embracing government control of the economy) due to the worst economic crisis since 1930's. The new world order ushered in after world war two may be heading for u-turn.


What remains from the Communist Manifesto in 2008, one hundred and sixty years after its publication? As David Harvey observes in his brilliant preface to this edition, the present financial crisis corresponds in an astonishing way to the predictions of Marx and Engels: “ the society of the ‘too much’, of ‘overproduction’ and excessive speculation, has plainly broken down and reverted, as it always does’ to a ‘state of momentary barbarism”.

In many respects, the Manifesto is not only current, but more current today than 160 years ago. Let’s take for example its diagnosis of capitalist globalisation. Capitalism, say the two young authors, is in the process of forging a process of economic and cultural unification of the world under its leadership: “The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country. To the great chagrin of Reactionists, it has drawn from under the feet of industry the national ground on which it stood. (...) In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal inter-dependence of nations. And as in material, so also in intellectual production.”
It is not only about expansion but also domination: the bourgeoisie “compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilisation into their midst, i.e., to become bourgeois themselves. In one word, it creates a world after its own image." Indeed, in 1848 that constituted much more an anticipation of future tendencies than a simple description of contemporary reality. It is an analysis which is much truer today, in the epoch of “globalisation", than 160 years ago, at the time of the editing of the Manifesto.
In fact, capital has never succeeded as it has in the 21st century in exerting a power so complete, absolute, integral, universal and unlimited over the entire world. Never in the past was it able, as today, to impose its rules, its policies, its dogmas and its interests on all the nations of the globe. International financial capital and multinational companies have never so much escaped the control of the states and peoples concerned. Never before has there been such a dense network of international institutions - like the International Monetary Fund, the World Bank, the World Trade Organisation - devoted to controlling, governing and administering the life of humanity according to the strict rules of the capitalist free market and of capitalist free profit. Finally, never at any time prior to today, have all spheres of human life – social relations, culture, art, politics, sexuality, health, education, sport, entertainment - been so completely subjected to capital and so profoundly plunged into the " in the icy water of egotistical calculation".
Add to this that the Manifesto is much more than a diagnosis - now prophetic, now marked by the limits of its time – of the global power of capitalism : it is also and above all an urgent appeal for international combat against this domination. Marx and Engels had perfectly understood that capital, as a world system, can only be vanquished by the world historical action of its victims, the proletariat and its allies.


The return of the prophet
In decades past, a crisis on this scale would have presented an immediate opportunity for the 'left'; but the 'left' as it is- defeated, tamed and fragmented- is in no position, as yet, to rise to the occasion. As Paul Gillespie observed:
Note that most of these leaders are from the centre right, not the centre left. Centrism is resurrected from the wreckage of radical right-wing deregulation, more than is the left. The argument is about re-regulation rather than redistribution, the public rather than the private interest, transnational against national sovereignty.So far, that is. The traditional left has had little operational purchase on the crisis other than I-told-you-so utterances about their inherently cyclical nature. Confronted with this international convulsion, "the Left" is for the most part as weak and tame as it certainly is in Ireland. Popular anger here and in the US, for example, is far more radical, but not expressed in such vocabularies. This is a real challenge and also an opportunity for the left - just as it was for Marx and Engels 150 years ago.But does the left refer to traditional social democracy, which accepts market capitalism but seeks to equalise it; to the "third way" variety popularised by Blair and Brown; or to the "democratic socialism" of post-Stalinist parties? What of more recent green socialism? How to classify the rump of traditional Stalinist parties in Europe, India and elsewhere? Should Chinese and Vietnamese one-state authoritarian capitalisms led by such communist parties be included? Where do the left of South Africa's ANC and the burgeoning variety of Latin American left-wing movements fit in? Is the US Democratic Party part of that family? How do all of these relate to the growing radical or far-left tendencies and social movements drawing on previous bottom-up revolutionary traditions such as Trotskyism and anarchism?
It is despite this present weakness and incoherence of the left that Gillespie makes a remarkable suggestion, implicit in which is the notion- fully supported by recent events- that the ideas of the 'free-market' right wing have been bankrupted by the capitalist crisis; hence the key ideological struggle of the near future will be between, on the one hand, socialists who utilise the ideas of Karl Marx and Friedrich Engels, and on the other hand, 'social democratic' supporters of a 'refounded', moderated version of capitalism, utilising the ideas of various other 'big names'. The Irish Times article concludes:
Big events revive these debates, but they need to be reinvented for new times. Conventional sociological post-industrialism accounts rendering left ideologies and movements redundant badly need revision in the light of falling living standards and growing inequalities. So does Fukuyama's notion of the end of ideology and the triumph of market capitalism - as he now admits. Big names too: Keynes, Polanyi, Kondratieff, Galbraith and now Paul Krugman are deployed by social democrats against those who want to resurrect Marx and Engels.
If it is true that the new main battle of ideas is to be fought between the social democrats (who wish to ressurect a moderated capitalism in order to save capitalism) and the Marxists (who wish to abolish capitalism), then the ideological success of the former will in large part depend on their practical ability to, in Gillespie's words, "create a 'refounded capitalism' more capable of withstanding such cyclical shocks by better global regulation"; as we shall see, not only better global regulation would be required in order for such a new-model capitalism to be better at withstanding 'cyclical shocks', but a reversal of the "falling living standards and growing inequalities" which characterise the contemorary model of capitalism would also be required if future crises on a similar scale to our current ongoing crisis- or even worse- are to be avoided.If such a radically different 're-founded capitalism' cannot be achieved, the Marx-inspired socialists will begin to make serious headway.So, is it possible that a new-model capitalism can arise in the course of, or subsequent to, the efforts of governments to cope with the current crisis? This is a matter on which a consideration of 20th Century history, and of the underlying causes of the present crisis, can both offer some guidance.Changing spotsFor proof that it could be possible to re-found capitalism on a different basis, we can look to the period following the catastrophic slump of the 1930s, particularly after World War Two, in the developed capitalist countries. For an extended period, the gap between rich and poor was steadily narrowed, the living standards and economic security of of working class people vastly improved, and cyclical shocks were minimised.
Marx had not predicted that such a development would be possible without the revolutionary overthrow of the capitalist system; and it seemed that the prediction of the non-Marxist social democrats, that capitalism could be reformed so thoroughly as to provide a much better and improving life for the majority of people, was vindicated.Then in the 1970s, a major economic crisis did occur; but it did not appear to resemble the 19th Century crises so vividly described by Marx, or indeed the crises of the early 20th Century, which broadly followed the same pattern. The main economic symptom of the crisis of the 1970s, as identified by the establishment experts of that time, was rising inflation (caused to some extent by rapidly increasing wages); and in order to defeat inflation (involving of course the defeat of the trade unions which had succeeded in raising wages faster than the increase in industrial productivity), the Western governments deliberately caused a rise in unemployment. That explanation of the economic disturbances of the time was far closer to the reality, which anyone could observe, than anything which could be found in the pages of Capital.Thus orthodox Marxism in the developed capitalist countries was already in ideological retreat, even before the events of 1989 to 1991. Since when, enthused by the defeat of inflation, the defeat of the trade unions and- that crown of glory- the defeat of the socialist regimes in Eastern Europe and the USSR; capitalism has returned, by leaps of privatisation, bounds of ending progressive taxation, and accelerating global deregulation- to a modernised, turbo-charged version of its former self.So, along comes the immense and frightening crisis; the basic nature of which- as anyone, even a president or a finance minister, can observe- can be understood with the help of volumes 1 to 3 of Capital. Indeed, Marx's dissections of the crises of the old-model capitalism of the 19th Century show remarkable similarities to the processes of our current debacle. Consider
this, for example:
In a system of production, where the entire continuity of the reproduction process rests upon credit, a crisis must obviously occur — a tremendous rush for means of payment — when credit suddenly ceases and only cash payments have validity. At first glance, therefore, the whole crisis seems to be merely a credit and money crisis. And in fact it is only a question of the convertibility of bills of exchange into money. But the majority of these bills represent actual sales and purchases, whose extension far beyond the needs of society is, after all, the basis of the whole crisis. At the same time, an enormous quantity of these bills of exchange represents plain swindle, which now reaches the light of day and collapses; furthermore, unsuccessful speculation with the capital of other people; finally, commodity-capital which has depreciated or is completely unsaleable, or returns that can never more be realised again. The entire artificial system of forced expansion of the reproduction process cannot, of course, be remedied by having some bank, like the Bank of England, give to all the swindlers the deficient capital by means of its paper and having it buy up all the depreciated commodities at their old nominal values. Incidentally, everything here appears distorted, since in this paper world, the real price and its real basis appear nowhere, but only bullion, metal coin, notes, bills of exchange, securities. Particularly in centres where the entire money business of the country is concentrated, like London, does this distortion become apparent; the entire process becomes incomprehensible; it is less so in centres of production.
On the political effect of capitalist crises, Marx noted:
Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells [...] It is enough to mention the commercial crises that, by their periodical return, put the existence of the entire bourgeois society on its trial, each time more threateningly.
Among the many very pertinent aspects of Karl Marx's work is his insistence that all value is created in the productive sectors of the economy- the sectors which, since the start of this present crisis, the commentators have begun to call the 'real economy'- and that the wealth which is supposedly 'created' in the stock exchange and the financial sector is a combination of: (a) value which is transferred into that sector from the 'real economy' (in Vols. 2 and 3 of Capital, Marx goes into some detail about the mechanisms by which this takes place), and (b) fictitious value, resulting from speculation, the illusory nature of which is suddenly exposed when the inevitable crisis ensues.

On 21st October, Chris Dillow, a columnist for the Investors Chronicle, was sufficiently emboldened by his passing aquaintance with the works of Karl Marx, and no doubt also by his equal knowledge of the backgound of our current crisis, to write a blog article on which sought to refute the applicability of Marx's analysis to the present debacle. The article, entitled 'Marx: less relevant' was duly promoted in the electronic editions of the Guardian and the Daily Telegraph.Dillow conceded that:
On many things, Marx was right. He was right to show that capitalism was a force for great growth and great instability; right to show that profits arose from exploitation; right to stress that technical progress determines social conditions; right on alienation and primitive accumulation.
But, he claimed:
To Marx, crises originated in the real economy [...]Instead, this crisis originates in the financial system. To Marx, however, finance was not so much a cause of capitalist crises - and for that matter of capitalist growth as well - but a mere accelerant of them. It’s the petrol, not the spark. Credit, he wrote (vol III, p572), “accelerates the violent outbreaks of this contradiction, crises…” Accelerate, note, not cause.
It is important to evaluate this claim. If the current crisis is purely or mainly the creation of the financial system, and the devastating effects on the 'real economy' are merely the fallout from the financial crisis, then one can at least envisage that a 'refounded capitalism', by enforcing stricter regulation on the financial sector, by repressing speculation and fraudulent dealings, could thereby- and without addressing the issues of 'real economy' production and the living standards of the masses- prevent the emergence, in future, of such major crises.So let's put to one side (only for a moment) what has been taking place in the financial sector, and look at what has been taking place in global 'real economy' production, and in the incomes of the masses of the people, in the period leading up to our current crisis, in terms of Marx's insistence that: "the ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit".What do we find? We find that globally, the production of goods for sale has been increasing, while the incomes of the majority of the people have been held down. How has that gap been bridged? It was bridged by the phenomenon of rising debt. Two great countries appear as opposite poles of the modern process of globalisation: so let us take them as our examples- China and the USA.China, the world's biggest country by population but a poor country by its per-capita income, has for almost three decades, by means of foriegn investment and the import of technology, been increasing its manufacturing production at a rate of between 10% and 15% annually. In a typical period, the five years from 1998 to 2003, China's output of manufactured products
rose by 91%. The average incomes of people in China have also been rising- but by a significantly lower rate. Advanced on the one hand by the country's huge trade union movement, depressed on the other hand by the influx of workers from the countryside, real wages in China have been rising at around 8% annually. In any case, too rapid a growth in wages would have made China a much less attractive destination for foreign investment, and would have undermined China's price advantage in selling its products abroad. During the nine years from 1997 to 2006, taking urban and rural incomes as a whole, the mean average household income in China rose by 72%- a very respectable figure, but far less than the increase in manufacturing output.Thus the vastly rising volume of goods made in China could not possibly be purchased by the Chinese; but this was not a problem, because a high proportion of the Chinese-made products were created in order to be sold abroad, to much richer countries. The biggest destination for China's exports was the world's most lucrative consumer market, and still, despite China's relative rise, the world's biggest producer of goods by dollar value, the United States of America. In 2007, approximately 20% of exports from China went to the USA.Now, the majority of people in the US can hardly be described as poor, or as suffering from restricted consumption, when considered against global average living standards. Yet, due to the decline in trade union power and various other factors including the re-location of industrial production by US corporations to other countries where the labour costs are much lower (China, for instance), the real hourly wage rate of the median average worker in the USA has been held down to such an extent that it is no higher now than it was in the mid 1970s. Yet production in the USA, despite the transfer of industry abroad, continued to increase with the introduction of new technology. In the non-financial corporate sector, productivity has been increasing by an average of between 2% and 4% annually, resulting in a cumulative increase of 45% in hourly production per worker in the United States between 1992 and 2005. During this time, production processes have of course become increasingly globalised, and not everything made in the USA has to be consumed in the USA- but it has to be consumed somewhere. To take for example the fastest growing sector of US industry, the computer and electronics sector: a high proportion of its products are components, which require for their manufacture very advanced levels of production technology and skill; these are sent to low-wage countries such as China, where they are assembled, combined with other components which require lower levels of skill and production technology- and the resultant finished products are then sent to the USA and other developed countries to be sold to the final consumers.And, despite the stagnation in their hourly pay, the masses in the United States have until very recently kept on increasing their spending, thus squaring the gap between production and consumption.
For a while, two means were available to achieve this. The first was by increasing the number of working hours per family: men began to have a longer average working week, there was a big increase in the number of women in the workforce, and it became common for people to hold two or even three jobs. But this, of course, raises the amount of material products and services which need to be sold. Also, in the end, there are physical and social limits to the average number of working hours per household. By the start of the 21st Century, the increase in working hours had come to a halt; and the continuing rise in mass consumption was facilitated exclusively by the second available means of increasing spending: rising debt. As Edward Luce
noted in the Financial Times:
Between 2000 and 2006, the US economy expanded by 18 per cent, whereas real income for the median working household dropped by 1.1 per cent in real terms, or about $2,000 (£1,280, €1,600). Meanwhile, the top tenth saw an improvement of 32 per cent in their incomes, the top 1 per cent a rise of 203 per cent and the top 0.1 per cent a gain of 425 per cent.
Edward Luce added:
According to Emmanuel Saez at the University of California, Berkeley, the distribution of income today almost exactly matches that of 1928 on the eve of the Wall Street crash. In 1928, the top 1 per cent of Americans took in 24 per cent of national income, compared with 23 per cent today. Between 1940 and 1984 their share never exceeded 15 per cent and it was in single digits for most of the 1960s and 1970s.
However, the big rise in incomes at the top could not compensate for the stagnation or decline in incomes at the middle and the bottom; because, unlike nearly everybody in the lower social strata, the richer people do not spend all their money: they invest much of their income; and that investment goes either into the 'real economy' locally or abroad (thus further increasing production) or into the various kinds of financial speculation.The debt bubbleIn an article entitled 'The Household Debt Bubble', published in the May 2006 issue of Monthly Review, John Bellamy Foster
observed:
...for households in the bottom 60 percent of the income distribution in the United States, average personal consumption expenditures equaled or exceeded average pre-tax income in 2003; while the fifth of the population just above them used up five-sixths of their pre-tax income (most of the rest no doubt taken up by taxes) on consumption. In contrast, those high up on the income pyramid—the capitalist class and their relatively well-to-do hangers-on—spend a much smaller percentage of their income on personal consumption. The overwhelming proportion of the income of capitalists (which at this level has to be extended to include unrealized capital gains) is devoted to investment. It follows that increasing inequality in income and wealth can be expected to create the age-old conundrum of capitalism: an accumulation (savings-and-investment) process that depends on keeping wages down while ultimately relying on wage-based consumption to support economic growth and investment.Under these circumstances, in which consumption and ultimately investment are heavily dependent on the spending of those at the bottom of the income stream, one would naturally suppose that a stagnation or decline in real wages would generate crisis-tendencies for the economy by constraining overall consumption expenditures.
But, even after the 'dot.com' stockmarket crash in 2000, that 'age-old conundrum of capitalism' did not manifest itself in a major crisis; following that stockmarket crash, the US government cut interest rates, after which, as John Bellamy Foster noted in 2006:
...overall consumption has continued to climb. Indeed, U.S. economic growth is ever more dependent on what appears at first glance to be unstoppable increases in consumption.
This was made possible by a huge increase in personal debt- some on credit cards, but the largest part through the mortgaging and re-mortgaging of houses; a seeming safe bet, given the steep rise in house prices (fuelled in large part by the low interest rates), and which also appeared to be unstoppable. Average outstanding consumer debt, which had crept up from 62% of consumer disposable income in 1975 to 96.8% in 2000,
splurged to 127.2% of disposable income in 2005.It has been made clear to all, since the credit first began to crunch in the summer of 2007, that the US government, by reducing interest rates, relaxing controls on lending, and allowing the financial sector to 'regulate' itself, had thereby facilitated the production of both the 'raw material' and the 'tools' by which an enormous volume of debt-based speculation was created in the financial sector. Less attention has been paid to the other main effect of these debt-inducing measures: that of delaying the onset of the crisis.We have taken the USA as our developed country example; and although it is the biggest and richest of the developed countries, it might be argued that it is an extreme example, given that hourly wages in the USA have been held flat for more than thirty years. However, a not dissimilar phenomenon has occurred in the other main rich countries. The average annual real wage increase in 13 OECD countries (as shown in figure 1.2 in Andrew Glyn's book 'Capitalism Unleashed') which had been running at between 3% and 5% through the 1960s and mid-1970s, fell by the 1980s to between 1% and 2% and has remained at those low levels; and the burden of personal debt in Britain, Germany, Japan and the other major developed countries has been rising inexorably.The jitters in the financial markets first appeared in August 2007, as the revenue streams which supported the values of the various debt-based financial instruments, in which the banks and hedge funds had invested trillions of dollars, began to be revealed as less reliable than had previously been surmised. And whence was this revenue supposed to stream? From the incomes of the increasingly indebted mortgage and credit card holders, particularly those in the USA- incomes which were stagnant or even declining, while their burden of debt, and the payments due on that debt, were rising steeply.
At the time it had been little reported in the mainstream press, especially outside the United States; but already by the spring of 2007, mortgage defaults in the USA, especially in the sub-prime sector, were increasing to an alarming scale. The enormous inevitable crash was beginning to emerge.And where could this crisis lead? On 28th October, one respected analyst, Martin Wolf of the Financial Times,
speculated on the possible medium-term consequences if further radical measures are not taken immediately to address the financial meltdown:
...the idea that a quick recession would purge the world of past excesses is ludicrous. The danger is, instead, of a slump, as a mountain of private debt – in the US, equal to three times GDP – topples over into mass bankruptcy. The downward spiral would begin with further decay of financial systems and proceed via pervasive mistrust, the vanishing of credit, closure of vast numbers of businesses, soaring unemployment, tumbling commodity prices, cascading declines in asset prices and soaring repossessions. Globalisation would spread the catastrophe everywhere.Many of the victims would be innocent of past excesses, while many of the most guilty would retain their ill-gotten gains. This would be a recipe not for a revival of 19th-century laisser faire, but for xenophobia, nationalism and revolution. As it is, such outcomes are conceivable.
Western governments, argues Martin Wolf, must- without delay- slash interest rates, increase state debt, insist that the banks lend money to those businesses which some chance of survival, provide financial assistance to the 'emerging economies' of the poorer countries, and pressurise countries in 'strong financial positions' to 'expand domestic demand'. He concluded with a swipe not only at those who do not endorse such immediate measures, but also at those who are already considering the lines of a new and improved global capitalist order:
Decisions made over the next few months may well shape the world for a generation. At stake could be the legitimacy of the open market economy itself. Those who view liquidation of past excesses as the solution fail to understand the risks. The same is true of those dreaming of new global orders. Let us first get through the crisis. The danger remains huge and time is short.
This is incorrect in terms of political tactics. The people are now witnessing the consequences of the current global order, and, even if the programme which Martin Wolf proposes is implemented in full, we will now undergo a period of seriously increased suffering. If the 'open market economy' (ie, capitalism) is not to lose further legitimacy, then the prospect must be held out of a 'refounded capitalism' which would be able to minimise and withstand economic 'cyclic shocks'.


And now for some refreshing Revolutionary Anarcho-Leftism
Hope in Common
by David Graeber

We seem to have reached an impasse. Capitalism as we know it appears to be coming apart. But as financial institutions stagger and crumble, there is no obvious alternative. Organized resistance appears scattered and incoherent; the global justice movement a shadow of its former self. There is good reason to believe that, in a generation or so, capitalism will no longer exist: for the simple reason that it’s impossible to maintain an engine of perpetual growth forever on a finite planet. Faced with the prospect, the knee-jerk reaction -- even of “progressives” -- is, often, fear, to cling to capitalism because they simply can’t imagine an alternative that wouldn’t be even worse.

The first question we should be asking is: How did this happen? Is it normal for human beings to be unable to imagine what a better world would even be like?
Hopelessness isn’t natural. It needs to be produced. If we really want to understand this situation, we have to begin by understanding that the last thirty years have seen the construction of a vast bureaucratic apparatus for the creation and maintenance of hopelessness, a kind of giant machine that is designed, first and foremost, to destroy any sense of possible alternative futures. At root is a veritable obsession on the part of the rulers of the world with ensuring that social movements cannot be seen to grow, to flourish, to propose alternatives; that those who challenge existing power arrangements can never, under any circumstances, be perceived to win. To do so requires creating a vast apparatus of armies, prisons, police, various forms of private security firms and police and military intelligence apparatus, propaganda engines of every conceivable variety, most of which do not attack alternatives directly so much as they create a pervasive climate of fear, jingoistic conformity, and simple despair that renders any thought of changing the world seem an idle fantasy. Maintaining this apparatus seems even more important, to exponents of the “free market,” even than maintaining any sort of viable market economy. How else can one explain, for instance, what happened in the former Soviet Union, where one would have imagined the end of the Cold War would have led to the dismantling of the army and KGB and rebuilding the factories, but in fact what happened was precisely the other way around? This is just one extreme example of what has been happening everywhere. Economically, this apparatus is pure dead weight; all the guns, surveillance cameras, and propaganda engines are extraordinarily expensive and really produce nothing, and as a result, it’s dragging the entire capitalist system down with it, and possibly, the earth itself.
The spirals of financialization and endless string of economic bubbles we’ve been experience are a direct result of this apparatus. It’s no coincidence that the United States has become both the world’s major military (”security”) power and the major promoter of bogus securities. This apparatus exists to shred and pulverize the human imagination, to destroy any possibility of envisioning alternative futures. As a result, the only thing left to imagine is more and more money, and debt spirals entirely out of control. What is debt, after all, but imaginary money whose value can only be realized in the future: future profits, the proceeds of the exploitation of workers not yet born. Finance capital in turn is the buying and selling of these imaginary future profits; and once one assumes that capitalism itself will be around for all eternity, the only kind of economic democracy left to imagine is one everyone is equally free to invest in the market -- to grab their own piece in the game of buying and selling imaginary future profits, even if these profits are to be extracted from themselves. Freedom has become the right to share in the proceeds of one’s own permanent enslavement.
And since the bubble had built on the destruction of futures, once it collapsed there appeared to be -- at least for the moment -- simply nothing left.

We are clearly at the verge of another mass resurgence of the popular imagination. It shouldn’t be that difficult. Most of the elements are already there. The problem is that, our perceptions having been twisted into knots by decades of relentless propaganda, we are no longer able to see them. Consider here the term “communism.” Rarely has a term come to be so utterly reviled. The standard line, which we accept more or less unthinkingly, is that communism means state control of the economy, and this is an impossible utopian dream because history has shown it simply “doesn’t work.” Capitalism, however unpleasant, is thus the only remaining option. But in fact communism really just means any situation where people act according to the principle of “from each according to their abilities, to each according to their needs” -- which is the way pretty much everyone always act if they are working together to get something done. If two people are fixing a pipe and one says “hand me the wrench,” the other doesn’t say, “and what do I get for it?”(That is, if they actually want it to be fixed.) This is true even if they happen to be employed by Bechtel or Citigroup. They apply principles of communism because it’s the only thing that really works. This is also the reason whole cities or countries revert to some form of rough-and-ready communism in the wake of natural disasters, or economic collapse (one might say, in those circumstances, markets and hierarchical chains of command are luxuries they can’t afford.) The more creativity is required, the more people have to improvise at a given task, the more egalitarian the resulting form of communism is likely to be: that’s why even Republican computer engineers, when trying to innovate new software ideas, tend to form small democratic collectives. It’s only when work becomes standardized and boring -- as on production lines -- that it becomes possible to impose more authoritarian, even fascistic forms of communism. But the fact is that even private companies are, internally, organized communistically.
Communism then is already here. The question is how to further democratize it. Capitalism, in turn, is just one possible way of managing communism -- and, it has become increasingly clear, rather a disastrous one. Clearly we need to be thinking about a better one: preferably, one that does not quite so systematically set us all at each others’ throats.
All this makes it much easier to understand why capitalists are willing to pour such extraordinary resources into the machinery of hopelessness. Capitalism is not just a poor system for managing communism: it has a notorious tendency to periodically come spinning apart. Each time it does, those who profit from it have to convince everyone -- and most of all the technical people, the doctors and teachers and surveyors and insurance claims adjustors -- that there is really no choice but to dutifully paste it all back together again, in something like the original form. This despite the fact that most of those who will end up doing the work of rebuilding the system don’t even like it very much, and all have at least the vague suspicion, rooted in their own innumerable experiences of everyday communism, that it really ought to be possible to create a system at least a little less stupid and unfair.
This is why, as the Great Depression showed, the existence of any plausible-seeming alternative -- even one so dubious as the Soviet Union in the 1930s -- can turn a downswing into an apparently insoluble political crisis.
Those wishing to subvert the system have learned by now, from bitter experience, that we cannot place our faith in states. The last decade has instead seen the development of thousands of forms of mutual aid association, most of which have not even made it onto the radar of the global media. They range from tiny cooperatives and associations to vast anti-capitalist experiments, archipelagos of occupied factories in Paraguay or Argentina or of self-organized tea plantations and fisheries in India, autonomous institutes in Korea, whole insurgent communities in Chiapas or Bolivia, associations of landless peasants, urban squatters, neighborhood alliances, that spring up pretty much anywhere that where state power and global capital seem to temporarily looking the other way. They might have almost no ideological unity and many are not even aware of the other’s existence, but all are marked by a common desire to break with the logic of capital. And in many places, they are beginning to combine. “Economies of solidarity” exist on every continent, in at least eighty different countries. We are at the point where we can begin to perceive the outlines of how these can knit together on a global level, creating new forms of planetary commons to create a genuine insurgent civilization.
Visible alternatives shatter the sense of inevitability, that the system must, necessarily, be patched together in the same form -- this is why it became such an imperative of global governance to stamp them out, or, when that’s not possible, to ensure that no one knows about them. To become aware of it allows us to see everything we are already doing in a new light. To realize we’re all already communists when working on a common projects, all already anarchists when we solve problems without recourse to lawyers or police, all revolutionaries when we make something genuinely new.


SEE
His Masters Voice
Auto Solution II
Stiglitz On Market Fundamentalism
FDR and the origins of State Capitalism
Business Unionism Offers No Solution To Capitalist Crisis
No Austrians In Foxholes



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Sunday, November 23, 2008

His Masters Voice


Two Lame Ducks. Harper and Bush. One has a minority government the other a lame duck administration. Bush will be leaving in less than sixty days. Harper will continue to listen to his masters voice and be the ventriliquists dummy for Bush. It is a strange case of political seance, Harper continues to channel his inner Bush promoting free trade as the solution to the capitalist crisis. In a unabashed and unashamed bit of historical revisionism he claims that protectionism caused the Great Depression, failing to mention that while this exasperated the capitalism melt down the real solution was state intervention rather after the so called free market failed to self correct.

"Removing protectionist barriers and easing trade restrictions was a big factor in ushering in this extraordinary era," said Harper, referring to recent years of unparalleled economic growth. "We cannot allow ourselves to turn back." Harper said the Great Depression was prolonged by poor managerial choices on the part of governments that included shrinking the existing banking systems, raising interest rates and building barriers in a failed attempt to save jobs. These are the kinds of practices that need to be avoided in the present economic climate, he said, and Harper also urged other countries to take a look at their pasts when making decisions on how to move forward. "As we enter a period we have not seen in the memory of virtually anyone alive today, we must be good students of history -- and not just recent history," he said.

Harpers decision to push for a Free Trade deal with Colombia is another example of continuing on the Bush agenda, despite his masters own failure to succeed in pushing a similar American deal through congress. And Harper will have a fight when he brings it to parliment for approval. Colombia's record of human rights violations, state attacks and murder of political and trade union activists, their support for right wing death squads cannot be reformed by bi-lateral trade deals. Colombia's largest export is cocaine, the irony of a free trade deal with the Law and Order Harpocrites is delicious.

"In a time of global economic instability free trade is more important than ever," Harper said in a statement.
"By expanding our trading relationship with Colombia, we are not only opening up new opportunities for Canadian businesses in a foreign market, we are also helping one of South America's most historic democracies improve the human rights and security situation in their country."
U.S. President George Bush, arriving in Lima Friday, has made a free trade agreement with Colombia a priority for his last two months in office.
Harper acknowledged that Colombia faces many challenges, particularly in security. Colombia is the world's biggest supplier of cocaine according to the CIA, despite efforts from both their government and the United States.

Colombia's ties with the US could be severely damaged if Congress does not approve a planned free trade deal, the country's vice-president has warned. Francisco Santos Calderon told the BBC that a US failure to sign the pact would be a "slap in the face" to a strong ally.
The trade deal was signed two years ago by leaders of the two nations.
But US Democrats oppose the deal and have used their Congressional majority to block its passage. Mr Santos told the BBC that he did not believe that the deal would be passed during the remaining days of the Bush administration - and that he was not optimistic for its future under President-elect Barack Obama.
He said it was critical that the incoming administration saw US-Colombia relations "not in the context of what special interest groups want but in the light of our long-term relationship".
"Not approving the free trade agreement would be certainly a slap in the face to the strongest strategic ally that the US has in the continent," he said.
But Mr Santos played down the significance of the "Plan Colombia" US military aid package - worth more than half a billion dollars annually - aimed at fighting drug production

And China too has signed a Free Trade agreement with Colombia, which simply proves bireds of a feather and all that, both regimes are autarchic, militarist. In China's case it is her imperialist objective to act as a trading partner with whomever the U.S. fails to or takes exception too.

China, Colombia agree to strengthen cooperation

And let us not forget that we have been through all this before. Free Trade exasperates the crisis of capitalism it is not a solution to that crisis as Herr Doctor Professor Marx explained 160 years ago.

ON THE QUESTION OF FREE TRADE

Public Speech Delivered by Karl Marx

before the Democratic Association of Brussels January 9, 1848

We have shown what sort of brotherhood free trade begets between the different classes of one and the same nation. The brotherhood which free trade would establish between the nations of the Earth would hardly be more fraternal. To call cosmopolitan exploitation universal brotherhood is an idea that could only be engendered in the brain of the bourgeoisie. All the destructive phenomena which unlimited competition gives rise to within one country are reproduced in more gigantic proportions on the world market. We need not dwell any longer upon free trade sophisms on this subject, which are worth just as much as the arguments of our prize-winners Messrs. Hope, Morse, and Greg. For instance, we are told that free trade would create an international division of labor, and thereby give to each country the production which is most in harmony with its natural advantage. You believe, perhaps, gentlemen, that the production of coffee and sugar is the natural destiny of the West Indies. Two centuries ago, nature, which does not trouble herself about commerce, had planted neither sugar-cane nor coffee trees there. And it may be that in less than half a century you will find there neither coffee nor sugar, for the East Indies, by means of cheaper production, have already successfully combated his alleged natural destiny of the West Indies. And the West Indies, with their natural wealth, are already as heavy a burden for England as the weavers of Dacca, who also were destined from the beginning of time to weave by hand. One other thing must never be forgotten, namely, that, just as everything has become a monopoly, there are also nowadays some branches of industry which dominate all others, and secure to the nations which most largely cultivate them the command of the world market. Thus in international commerce cotton alone has much greater commercial than all the other raw materials used in the manufacture of clothing put together. It is truly ridiculous to see the free-traders stress the few specialties in each branch of industry, throwing them into the balance against the products used in everyday consumption and produced most cheaply in those countries in which manufacture is most highly developed. If the free-traders cannot understand how one nation can grow rich at the expense of another, we need not wonder, since these same gentlemen also refuse to understand how within one country one class can enrich itself at the expense of another.”

SEE:

Colombia Deal Dead

Armes sans frontières

The New Market States

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