Saturday, February 04, 2006

Bureaucratic Collectivist Capitalism

Al Ahram has another brilliant essay in this weeks issue; Egypt and the ghost of Marx

It reminds me of Max Schactman's critique of State Capitalism in the USSR as being Bureaucratic Collectivism. In this case the Egyptian economy went from being a State Capitalist economy under Nassar to becoming a bureaucratic Collectivist capitalism under neo-liberalism.

The similarities are striking. Complete down to the New Class criticism of the Soviet Union and by the fact that social upheaval that had occurred in the Seventies and Eighties by the professionals, technocrats, artists, writers, workers and poor that led to Glasnost is now occurring in Egypt.

It was natural for this kind of situation to lead to the predominance of suppressed "social" grumbling among various sectors of the populace, particularly traditional professionals such as teachers, lawyers, doctors and engineers, in addition to the armies of the unemployed. It was possible for any organized power opposed to the ruling party to exploit this situation in its interest and reap its fruits without regard to its political or religious nature. This is what the second class -- the Muslim Brotherhood -- did. Over seven decades it has succeeded in securing its bases among large groups including the small bourgeois in the cities as well as low- ranking civil servants and a wide section of professional syndicate members and other marginalised groups that have suffered from the mistakes of development policies over the last three decades.



Except instead of occurring because of Bureaucratic Collectivism it is because of Collectivist Bureaucratic Capitalism. The political analysis in this article about why the ruling class lost the election, though they won the government, to the Muslim Brotherhood is because the State and its capitalist class have become disengaged from the needs of the people. Neo-Liberalism in the Non-G8 world has become bureaucratic Collectivist Capitalism with a New Class in charge of what the Economist would call crony capitalism.


From a capitalism led by the state in the Nasser era to a capitalism "practiced" by individuals in the Sadat era, the door was opened wide to monopolistic practices marred by financial and institutional corruption. In the end this resulted in a "catholic alliance" between capitalism and government bureaucracy, followed by the appearance of a new, uncontrolled class -- "bureaucratic capitalists" -- that does not embrace real capitalism as much as its slogans, and which is not led by any ethical or social framework in the practice of its economic activity. In its presence, the state appears to have become incapable of providing the most basic services to its citizens.

With the arrival of the third millennium it appeared as though a new class was being formed in the womb of the Egyptian regime. Its form resembled that of the "comprador bourgeoisie," so named by theorists of the dependency school. This elite relied on external support more than connections on the domestic front, the price of its incorporation into the global market paid by overlooking society's basic demands. Many of the economic laws that have been passed recently can be read in this context.

Since then, it has appeared as though the process of "disengagement" between the state and society that began in the mid-1970s has reached its fullest extent. It has become clear that the state is attempting to replace its social legitimacy with another that is class-based and which relies on wealth that has swelled over the last decade. This development resembles a deal in which the regime benefits from the extraordinary economic capabilities of the new class while shoring up foreign legitimacy through compliance with economic transformation programmes. The new rich, in turn, benefit from the inheritance of a centralized state by moving from the world of a shadow economy to the world of politics and legitimacy through the doors of parliament.

Now compare that with Djilas theory of the New Class in the old Soviet Union and the similarities are stunning.

Djilas' New Class

A theory of the new class was developed by Milovan Djilas, who participated with Tito in the Yugoslavian Revolution, but was later purged by him as Djilas began to advocate democraticegalitarian ideals (which he believed were more in line with the way socialism and communism should look like). The theory of the new class is in contradiction to the claims of certain ruling communists, such as Stalin, who argued that their revolutions and/or social reforms had resulted in the extinction of any ruling class as such. It was Djilas' observation as a member of a communist government that party members stepped into the role of ruling class - a problem which he believed should be corrected through revolution. Djilas' completed his primary work on his new class theory in the mid 1950s. and

Djilas claimed that the new class' specific relationship to the means of production was one of collective political control, and that the new class' property form was political control. Thus for Djilas the new class not only seeks expanded material reproduction to politically justify its existence to the working class, but it also seeks expanded reproduction of political control as a form of property in itself. This can be compared to the capitalist who seeks expanded value through increased sharemarket values, even though the sharemarket itself does not necessarily reflect an increase in the value of commodities produced. Djilas uses this argument about property forms to indicate why the new class sought parades, marches and spectacles despite this activity lowering the levels of material productivity.

Djilas proposed that the new class only slowly came to self-consciousness of itself as a class. On arriving at a full self-consciousness the initial project undertaken would be massive industrialisation in order to cement the external security of the new class' rule against foreign or alternative ruling classes. In Djilas' schema this approximated the 1930s and 1940s in the Soviet Union. As the new class suborns all other interests to its own security during this period, it freely executes and purges its own members in order to achieve its major goal of security as a ruling class.

After security has been achieved, the new class pursues a policy of moderation towards its own members, effectively granting material rewards and freedom of thought and action within the new class -- so long as this freedom is not used to undermine the rule of the new class. Djilas identified this period as the period of Khrushchev's government in the Soviet Union. Due to the emergence of conflicts of policy within the new class, the potential for palace coups, or populist revolutions is possible (as experienced in Poland and Hungary respectively).

Finally Djilas predicted a period of economic decline, as the political future of the new class was consolidated around a staid programme of corruption and self-interest at the expense of other social classes. This can be interpreted as a prediction of the Brezhnev era stagnation by Djilas.

How can capitalism be Bureaucratic Collectivist you ask. Well it is simple the IMF and World Bank as much as they are agencies of U.S. Imperialism, are in effect left overs of the post WWII Keynesian social welfare state. They fueled that dependency model of economics until the eighties when they shifted to a neo-liberal model of economic adjustment.

The World Bank in particular promoted the privatization of State Enterprises and attached funding strings that enforced the restructuring of national economies. The IMF used its clout to demand open markets, reductions in social spending and the further privatization of the economy.

The capitalist models they were using were not the existing sustainable local market economies, see my article on Africa, but rather they were opening up the existing state enterprises to investment by the local ruling classes and their bureaucracy, and allowing for international investment into these existing enterprises.

In the former Soviet Union this led to what we call Mafia Capitalism, where the old apparatchiks became the new bosses. The same thing occurred in Egypt. The bureaucracy became the new capitalist class. And since the WB and the IMF themselves are giant bureaucratic monopolies, they only understand dealing with large scale enterprises that are modeled on themselves.

The agenda of the WB and IMF was not to see the development of local sustainable economies but rather to open up closed economies to international investors and commodities.

As the article from Al Ahram shows this resulted in exactly the same collective bureaucratization that occurs under any form of State Capitalist model of development. It doesn't matter what the ideology is. In this case neo-liberal models of economics embraced by the U.S. and Britain impacted in these countries not as opening up the market place but actually closing the markets to the local communities and opening them up to the international capitalist corporations.

At the same time the IMF demanded that states reduce their obligations towards their citizens, claiming that privatization of water, utilities, public transit, and other services would allow for competition. The competition did not occur, rather state services become private monopolies. And reduced their social subsidization while searching for investment markets and investors to shore up their bottom line. Why build infrastructure in rural Egypt when you build housing and hotel developments in Israel or Saudi Arabia.

Egypt is not alone in suffering from this failed model of political economy. Bolivia, Argentina, Brazil, Venezuela, and all the newly developed capitalist economies of the South have suffered exactly from this same form of bureaucratic Collectivist Capitalism. It is apparent in the democratic uprisings in these Latin American countries. Venezuela is an excellent example of the same crony ruling class dominant class being out of touch with the people as Egypt now experiences.

Chavez mobilized those out of power to gain power. The ruling class he faced down and still faces as an opposition includes the wealthy and powerful, the union bosses and their members who benefited from the bureaucratic Collectivist capitalism of the monopoly gas and oil industry, and from the middle classes whose wealth comes from their privilege.

Ironically it is the Left in Latin America that now calls for an end to the power of the bureaucratic Collectivist classes, and is trying new models of social and economic development that is sustainable, locally based and based on worker and consumer collectives and cooperatives.

It is this model that can challenge the globalization model of the WB and the IMF and their crony capitalist class in Egypt.

Also see:

The Need for Arab Anarchism


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