How Canadians Are Losing Medicare

Dr. Susan Rosenthal describes the rise of Canada’s public health system during labor’s rebellious postwar period and the corporate profiteering by which it is now being destroyed.

By Susan Rosenthal

March 17, 2023

Source: Consortium News


Ontario’s Bill 60 has delivered a potential death blow to public Medicare. If it becomes law, the provincial medical system will no longer operate as a public service but as a profit-taking business managed by the private sector.

While defenders of public Medicare blame Conservative Premier Doug Ford, British Columbia, Quebec and Saskatchewan are going down the same road.

If we hope to reverse this disaster, we need to know how Canadians won Medicare in the first place, and why they are losing it.

World War II saw a global upsurge of labor protest. Union membership more than doubled in Canada, and the number of strikes tripled. During the early 1940s, one-third of all workers in Canada were on strike. To calm the rise in worker rebellion, governments agreed to fund social programs like Medicare.

At the time, Canada had virtually no public medical system. Doctors charged whatever they pleased and bankruptcy from high medical bills was common.

The Canadian Labour Congress pushed for a comprehensive public medical system available to all. The corporate class pushed back, opposing any government control over medicine. Insurance companies feared losing business. Drug companies feared losing profits. And doctors were horrified at the thought of losing their elite status as independent entrepreneurs.

On July 1, 1962, Saskatchewan launched North America’s first government insurance plan to cover hospital care and doctor visits. That same day, 90 percent of Saskatchewan’s doctors went on strike. The doctors’ strike was deeply unpopular and collapsed after 23 days.

The 1964 federal Royal Commission on Health Services suggested a class compromise. For the working class, it recommended government-funded medical insurance. For the business class, it recommended the right to deliver medical services “free of government control or domination.”

Class Compromise


The Saskatchewan Legislative Building. (Stonedan, CC BY-SA 3.0, Wikimedia Commons)

The business class and the working class have opposite interests. For the working-class, medical care is a human right and a vital necessity. For the business class, healthy profits take priority. This class conflict shapes the quality and accessibility of public programs.

Workers in Canada were strong enough to win public funding for medical care, but not strong enough to kick out the profiteers and win the fully public system they wanted.

The federal Medical Care Act of 1966 was based on class compromise. It established government funding for hospital care and doctors’ visits, while excluding essential medical services such as dentistry, eye care, home care, long-term care and prescriptions. These exclusions enabled insurance companies to continue selling policies to cover such services. (The insurance industry is exempt from human-rights legislation and can legally deny coverage on the basis of a person’s age, past medical history and current state of health.)

Another class compromise was to maintain private-sector control over out-patient care. Doctors were allowed to remain independent contractors charging for each service they provide.

From the start, Canadian Medicare was designed as a two-tier system that gave the private sector room to grow. And grow it did.

Funding Cuts

When Medicare began, Ottawa agreed to pay half the cost of all medical services performed in hospital. This did not last.

In response to the 1970s’ global recession, governments boosted profits by cutting corporate taxes.

Canadian corporations contributed more than half of all tax revenue in the 1950s. Today, they contribute around 12 percent. To offset the loss of corporate revenue, governments cut spending on public programs.

“From the start, Canadian Medicare was designed as a two-tier system that gave the private sector room to grow. And grow it did.”

In 1977, the Trudeau Liberals reduced the federal share of medical funding from 50 percent to 20 percent, forcing the provinces to also reduce their spending. The federal share has varied since then, and currently stands at 22 percent. Less funding for public Medicare enabled private corporations to step in to fill the need.

The 1984 Canada Health Act reassured nervous Canadians that Medicare was safe. Behind the scenes, politicians continued to advance the privatization agenda.

The Drive to Privatize

Business and government view public-sector spending as a drain on the economy. While public facilities can deliver social services more effectively, this costs money. The same services delivered for profit in the private sector make money, and that is seen as a benefit for the economy.

In Caring for Profit (1998), Colleen Fuller documents how plans to open Medicare to the private sector date back to the 1990s’ push to integrate the world economy (“globalization”).

Corporations need a profitable home base on which to grow into global players. Governments provide that base by, among other measures, opening public services to the private sector.

A 1994 Report to the Ontario Ministry of Health advised expanding the domestic for-profit medical industry to help it compete in the global market. The federal government was on the same track. As a 1997 Report for Industry Canada stated, promoting Canadian companies as global health-keepers is the main objective driving the strategies and plans of the government for the medical devices, pharmaceutical and health-services sector.

The Canada Health Act compels government to pay for all medical services provided in hospital. It does not prevent those services from being removed from hospital and handed to the private sector.

Every medical service that can be removed from hospital has been removed or soon will be. The only services left in the public sector will be those too unprofitable to privatize.

Loblaw Companies Ltd. is Canada’s largest food and drug retailer, with more than 2,400 retail outlets across Canada, including its Shoppers Drug Mart subsidiary. Ninety percent of Canadians live within 10 km of one of those outlets, enabling Loblaw to position itself as a major private provider of medical services.

In 2006, Loblaw purchased MediSystem Pharmacy. In 2020, it launched the PC Health app that offers live chats with registered nurses and dietitians. In 2021, it purchased a top chain of physiotherapy clinics. New grocery and pharmacy locations will include clinic spaces and older locations are being retrofitted to offer medical services.

Hospitals themselves are being privatized through Public Private Partnerships (P3s). A P3 hospital is built with public funds and managed by a private corporation. There are more than 50 P3 hospitals across Canada, and the Canadian Council for Public-Private Partnership is pushing for more P3s in medicine, education, transportation and public utilities.

P3s are a prime investment for the private sector. Governments put up the money and take all the risk, while corporations take all the profit. It’s a familiar story: we pay and they profit.

Working Conditions

Doug Ford campaigning in Sudbury during the 2018 Ontario general election. (CC BY-SA 2.0, Wikimedia Commons)

Whenever the private sector take over a public program, we see a consistent pattern of higher cost, lower quality service and deteriorating working conditions. A 2021 report comparing public and private sector workers in Ontario found,Workers in the government sector (federal, provincial, and local) earn 11 percent higher wages on average than their private-sector counterparts.
84 percent of government workers are covered by a registered pension plan, compared to just 25 percent of private-sector workers.
Government workers retire about 2.5 years earlier.
Private sector workers are more than four times more likely to lose their jobs.

Schedule 2 of Bill 60 allows government to reduce spending in the public sector by creating new categories of lesser-skilled, lower-waged medical workers to perform duties currently performed by registered doctors, nurses and medical technicians.

Poor quality working conditions result in poor quality service.

“Governments put up the money and take all the risk, while corporations take all the profit. It’s a familiar story: we pay and they profit.”

For-profit facilities invest the minimum in patient care so they can maximize dividends to shareholders. That is why the Covid death rate in Ontario’s for-profit nursing homes was four times higher than it was in public municipal nursing homes. Yet these same for-profit corporations, who are responsible for the deaths of 4,000 Ontario residents, were granted 30-year licenses and permission to add 18,000 more long-term-care beds.

Burden the Family

Social services distribute the cost of caring across society. Loss of public support for medical care, childcare, home care, disability support and long-term care shifts the burden of care onto unpaid family care-givers, who are mostly women.

Employers generally pay women less because of their family and care-giving responsibilities. When public care is not available, the person with the lowest wage typically stays home to provide it. The result is a vicious circle that traps women in lower-waged jobs and also in the unpaid work of domestic care-giving.

Globally, it would cost $11 trillion annually to provide the socially necessary care that women provide for free in the home. That’s more than triple the size of the world tech industry. The system saves a ton of money, while 42 percent of all women cannot get waged work because of care-giving responsibilities.

British Columbia Family Day 2016.

 (Province of British Columbia/Flickr, CC BY-NC-ND 2.0)

The increasing loss of public programs is increasing the need for home-care and for women to be home to provide it. Restricting or eliminating access to abortion is one way to do this.

Women rely on abortion care so they can stay in waged work, support their families and leave violent partners. Loss of access to abortion is driving vulnerable women out of waged work and trapping them in the family.

Growing economic reliance on the family is also driving horrific attacks against trans people, gender rebels, drag artists, cross-dressers — any behavior that challenges traditional family and gender roles.

Damage Control, Not Health Care

It used to be that women could get secure, well-paid, union jobs in the medical industry. No longer. In the 1990s, Ontario adopted a cost-saving, “just-in-time” staffing system pioneered by the auto industry.

In Saskatchewan, hospital managers followed nurses around with stopwatches to track and time every movement, from turning around (one second) to checking supply rooms (three seconds).

“The loss of public programs is increasing the need for home-care and for women to be home to provide it. Restricting or eliminating access to abortion is one way to do this.”

Just-in-time staffing relies more on casual workers than on permanent full-time staff. The result is rising costs, more overtime, more stress-related leave and thousands of nurses leaving hospital work.

Just-in-time staffing crippled the ability of hospitals to respond to the 2003 SARS outbreak and the Covid pandemic. Nevertheless, it is still in use, while governments demand even more cost-cutting measures.

Treating staff as replaceable widgets is stirring systemic violence. So is making people wait too long for the care they need, when they get it at all. No wonder patients lash out in desperation.

Hospitals have become dangerous workplaces where staff suffer beatings, sexual assault and racist attacks every day. In British Columbia, incidents of physical violence directed against medical staff more than tripled between 2015 and 2022.

Medical workers are seven times more likely than manufacturing workers and 45 times more likely than construction workers to be injured from violence on the job. Instead of making work safe, managers post signs warning, “abuse towards staff will not be tolerated.”

When cost-cutting results in fatal medical errors, hospitals are never held responsible for creating conditions that raise the risk of such errors. Instead, individual medical workers are blamed and criminally prosecuted.

A system that violates the health of its workers and those they serve should not be called a “health-care” system. It is a system of damage-control. Employers are free to sicken, injure, and kill workers, and the medical system manages the resulting damage.

Backlog

In The Shock Doctrine, the Rise of Disaster Capitalism (2007), Naomi Klein explained how the business class exploit social crises for profit.

While populations are reeling and disoriented, their economies are pillaged in a capitalist feeding frenzy. Public wealth is handed to the private sector and private debt is transferred to the public sector. A few become fabulously wealthy, and the majority are impoverished. By the time the population recovers, the economy has been looted and the theft sanctioned by law.

When the Covid pandemic overwhelmed public hospitals, governments promised to “build back better.” They did not mean better for the majority; they meant better for the profiteers.

The Ontario government insists that the pandemic-related backlog of more than 200,000 surgeries can be cleared only by doing them in private medical clinics. To promote this transition, the province under-spent its budget on public Medicare and overspent its budget on private clinics.

The public medical system could easily clear the surgical backlog if it had enough staff. In 2022, 158 emergency rooms in Ontario had to close for lack of staff, and hospital operating rooms remain underused for the same reason.

On a per-capita basis, Ontario has the lowest hospital funding, the fewest hospital beds, and the fewest nurses in the country. Fifteen thousand registered nurses and registered practical nurses have left Ontario because of low wages and abysmal working conditions, including the outrageous demand to work while sick during the pandemic.

The province insists that moving hospital surgeries to private clinics will reduce patient wait times. It will do the opposite.

No one can work in two places at the same time. Pulling medical staff away from public hospitals to work in private clinics will decimate the public system. Any reduction in wait times in the private sector will be offset by even longer wait times in the public sector.

To maximize profits, private clinics will do simple surgeries such as cataracts and hip-and-knee replacements, leaving more difficult, complex surgeries in the public system. When clinic surgeries become complicated, patients will be off-loaded to the public system, along with the cost of treating their complications (assuming patients survive the transfer).

The loss of simple surgeries will devastate small and rural hospitals. Complex surgeries were moved to larger centers some time ago. Without income from simple surgeries, smaller hospitals will have to close, reducing access in already under-served areas.

Private surgical clinics will not produce more family doctors. Last year, more than 2 million Ontarians did not have a family physician, 24 percent more than two years ago. The shortage of family doctors across Canada is predicted to more than double over the next seven years. Overwhelmed with patients, some Ontario doctors are offering rapid access to a nurse practitioner, for $30 a month.

The province says patients will not have to pay out-of-pocket in private facilities, but they will.

The Ontario Health Insurance Plan (OHIP) pays only a base rate. To meet shareholder demands for maximum profit, the province allows private clinics to “upsell” by charging patients a fee for premium or upgraded services. While politicians call this “patient choice,” those who cannot pay will have no choice. Those who can pay will be milked.

The push for maximum profit inevitably leads to fraudulent billing. As the Office of the Auditor General warned, the ministry has no oversight mechanism to prevent patients from being misinformed and being charged inappropriately for publicly funded surgeries.

Finally, the Canada Health Act does not compel government to pay for out-of-hospital care, so public funding will be reduced to the absolute minimum, returning us to pre-Medicare conditions.

Which Way Forward?

Downtown Ottawa, 2012. (Tullia, CC BY-SA 3.0, Wikimedia Commons)

How can we stop the profiteers, revitalize public programs and improve working conditions in the public sector?

The Ontario Health Coalition (OHC) is a prominent research and advocacy organization that opposes profit-taking in medicine, lobbies for public Medicare and is mobilizing public opposition to Bill 60.

In 2016, the OHC launched a referendum campaign at 1,000 polling stations in 40 communities across the province. Almost 94,000 people voted, with 99.6 percent demanding that government stop cutting hospital funding and services.

The OHC is launching another referendum campaign to send the government an even stronger message to reject privatization and invest in the public system. Why would this referendum be more effective than the previous one?

Politicians already know that the majority want fully funded public services. A 2022 poll revealed that 92 percent of Canadians oppose funding cuts to healthcare, education, and other social programs, and 88 percent favour a wealth tax to fund these programs.

Public mobilization campaigns are based on the assumption that politicians will respond if enough people pressure them to do so. When such campaigns fail, blame is directed at a presumably uncaring or apathetic public, as recently expressed by one OHC representative.

There may not be a great impact as a result of the referendum, but it will inform Canadians who think they’ve got public health care. That Canadians are just unaware, completely zombie-like in their perspective is a grave misunderstanding. After decades of setbacks and defeats, most people feel powerless to improve things at work or in society. Their lives are getting harder, and they see no way forward.

Politicians lie (the Ontario premier campaigned on a promise not to privatize Medicare). Unions have failed to deliver real on-the-job improvements. And past public campaigns have proved ineffective. Discouraged people need a real win, not more campaigns that raise their hopes and deliver defeat.

No Democracy

Democracy literally means rule of the people. If Canadians lived in a democracy, they would have a fully public medical system, because the majority want it. The fact that they do not have such a system proves they do not live in a democracy.

There is no democracy in the economy. The majority get no say over what is produced, how it is produced, and for whom. The result is toxic pollution, deforestation, species extinction and global warming.

There is no democracy in foreign policy. Canadians did not vote to send troops to Haiti to put down a popular rebellion (again). They did not vote for Canada to sell weapons to Saudi Arabia or build military bases around the world. And they certainly did not vote for World War III.

There is no democracy at work. Workers have no say over what they do or how they do it, even though they know best what needs to be done and how to do it well and safely.

There is no democracy when it comes to spending the social surplus. Canadians do not get to vote on whether to invest in war or in the environment, in police or social supports, or in private or public services.

In a democracy, the business class would be forced to share their profits, which have never been higher.

In 2022, the Shell oil company posted a record profit of $40 billion, more than double what it raked in the previous year. Chevron reported a similar record-breaking profit. You could make $53,000 every single day for over 2,000 years and still not have that much. Nevertheless, every year, Canada gives $4.8 billion in subsidies to the fossil-fuel industry.

Shell station in Canada. (Raysonho, CC0, Wikimedia Commons)

Capitalism is the enemy of democracy. Any form of collectivism (prioritizing public need) is considered a threat to private enterprise, because it is. Premier Doug Ford calls government-funded or socialized Medicare “communism” and privatized medicine “freedom” — freedom for the few to profit at the expense of the many,

Capitalist Dictatorship

Modern technology could enable everyone to vote on every issue that affects their lives and society. However, capitalism is based on depriving the majority of what they need, and who would vote for that? To maintain capitalist rule, people are not allowed to vote on anything that might disrupt the flow of profit.

The entire social system is structured to transfer wealth from the working class to the business class. Every human activity is treated as an opportunity for profit-taking.

“We live in an anti-democratic, authoritarian, capitalist dictatorship. The entire social system is structured to transfer wealth from the working class to the business class.”

The dismantling of Medicare can only be understood in this context. Capitalism is based on the conversion of common property into private property. From the 18th century enclosure of common lands, to the current privatization of public services, capitalists strive to transform what belongs to all into what belongs exclusively to them. Their wealth is built on deprivation and their power on subjugation. Their greatest fear is a working-class rebellion that could end their rule.

Class Power

The quality of public programs does not depend on what the majority want or who they vote for but on the balance of class forces, that is, on which class is using its power to make the other back down.

Decision-makers respond to majority demands only when their power is threatened. When workers exercise power on the job, when they make the bosses back down, politicians get scared and deliver pro-worker reforms in hopes of buying labor ‘peace.’

Canada’s first Royal Commission to study government-funded health insurance was launched in 1919, the year of the Winnipeg General Strike.

Britain’s National Health Service (NHS) was established in 1948 to calm a post-war workers’ rebellion. As a Conservative member of the British Parliament warned, “If you don’t give the people reform, they will give you revolution.”

Canada’s Medicare system was consolidated in the context of rising workers’ struggles that peaked in the Quebec General Strike of 1972.

Picket line during the 1972 Québec general strike.

 (Michel Giroux, CC BY-SA 4.0, Wikimedia Commons)

Since the mid 1970s, the working class have suffered decades of setbacks and defeats, losing much of what they won in the past, including solid union jobs, the 40-hour week, and robust public services.

The more workers retreat, the more the business class push their agenda, regardless of which political party is in office. The process of dismantling Medicare began in the 1970s and has continued under every form of government: Liberal, Conservative, and NDP (social democratic).

Experience shows that the problems created by capitalism cannot be solved by electing different politicians or parties to office. No matter who is in charge, a social system that is structured to exploit humanity and nature for profit cannot be made to do the opposite — promote the well-being of people and the planet.

Social systems are structured to achieve specific goals. The goal of capitalism is capital accumulation, which it does extremely well. The call to prioritize human need is a call to change the goal of society. This is no easy task. A different social goal requires a fundamentally different social system, one that only the international working-class can construct.

All Strikes are Political

All strikes are political battles over what matters more, human need or corporate greed.

Strikes are not merely means by which workers achieve gains in the workplace. Rather, they are moments in the process by which workers constitute themselves as a class — building solidarity, raising class consciousness, creating their own norms and institutions and discovering their own forms of class power. (Class Struggle Unionism, p.59)

When factory workers reject forced overtime, when education workers demand smaller classes, when nurses demand staff-to-patient ratios and when anyone demands higher wages, they are challenging the primacy of profit, the foundation of capitalism.

The outcome of these battles depends on which class uses their power to make the other back down.

The power of the capitalist class lies in their control over social institutions including the legal system, the courts, the police, and the media. However, the power of the working class is greater.

Workers are the vast majority, and nothing moves without their effort. Stopping work stops the flow of profit. When workers stand together, they can defeat the bosses and make governments change course. To keep workers down, the ruling class must block effective strikes.

Governments justify anti-strike legislation by insisting that strikes are not in the public interest. The opposite is true. Business-as-usual is not in the public interest. Successful strikes raise living standards, which is very much in the public interest.

Playing by the enemy’s rules is a sure way to lose a battle. To strike effectively, workers must be willing to violate restrictive labor laws and make them unenforceable.

After launching a solid, 17-day, illegal strike, Canadian postal workers won the legal right to strike in 1965.

That same year, Ontario hospital workers were denied the legal right to strike in order to hold down the wages of a predominately female, immigrant and under-paid workforce. (This same strategy is still used against public-sector workers.)

“Playing by the enemy’s rules is a sure way to lose a battle. To strike effectively, workers must be willing to violate restrictive labor laws and make them unenforceable.”

In 1981, 13,000 hospital workers across Ontario launched an illegal strike to protest wage cuts and degraded working conditions. They held out for nine days against hospital management, the provincial government, the courts, the police, and the media.

Initially, union officials for the Canadian Union of Public Employees (CUPE) opposed the strike. When workers struck anyway, union officials issued a statement of support, but failed to mobilize other CUPE locals to build the strike. Isolated, the strike crumbled in defeat.

Weak Unions

University of Toronto, 2015. (OFL Communications Department/Flickr, CC BY 2.0)

Why do union officials collapse strikes, as CUPE did recently with the education workers, instead of broadening them? Why did the Ontario Federation of Labour (OFL) surrender to wage-busting Bill 124 instead of mounting a mass public-sector strike to force the province to back down?

While union officials vigorously object to the loss of public services, they refuse to organize the class power of workers to make governments reverse course.

Union officials are committed to bargaining with the business class, not challenging their rule. To protect their relationship with the employer, union officials hold workers back, mounting ineffective strikes that typically end in defeat.

Unwilling to do what it takes to deliver real on-the-job improvements, union officials launch toothless public-mobilization campaigns. Instead of leading class rebellions, they pin their hopes on electing a labor-friendly government that will pass pro-labor laws, meaning, make capitalism work in their favor.

These are safe strategies for union officials. Lobbying campaigns make it appear that they are fighting for workers’ rights, without challenging the social order that violates those rights.

For workers, this has been a losing strategy. The social order must be challenged in order to win meaningful reforms.

Centering Work

Pandemic Physician: one of the doctors in Toronto who joined a protest at the conditions of homeless shelters during the Covid pandemic, April 15, 2022. (michael_swan/Flickr/CC BY-ND 2.0)

Public-pressure campaigns appeal to all social classes to exert moral pressure on authorities to do the right thing. Such mobilizations can be powerful when linked with workplace battles. In the absence of workplace action, they can only threaten to vote for different politicians or parties. An electoral focus limits what can be achieved to what capitalism allows.

Public Medicare could be rebuilt if hospital workers won good contracts that a) pull money back into the public system and b) improve working conditions to attract and keep qualified staff. They cannot do this on their own, nor should they have to.

The labor movement is based on the principle that an injury to one is an injury to all. When any group of workers is attacked, all are at risk. When any group of workers win, it is easier for the next group to win. Workers have tremendous power when they stand together. Fighting separately is a recipe for defeat.

“Workers have tremendous power when they stand together. Fighting separately is a recipe for defeat.”

To build a fighting labor movement that can win real improvements, workers must be willing to challenge the existing order, including defying anti-worker laws. They must be willing to fight together, as a class. That means all-out support for every strike.

All-out support means public-sector workers striking together: medical, education, library, clerical, postal workers, all together. They all have the same employer – the government!

All-out support means public and private sector workers supporting each others’ strikes, not merely in words, but by swelling picket lines and mounting solidarity strikes. A strike that gains momentum day-after-day is the bosses’ worst nightmare. They will concede whatever they must to prevent a workers’ rebellion from growing beyond their control.

Who Can We Count On?

Covid exposed capitalist priorities for all to see. We saw corporations profit from the pandemic while doing nothing to protect their workers. We saw politicians accept millions of Covid deaths instead of legislating paid sick leave and making schools safe. In contrast, we saw ordinary working people risk their lives and those of their loved ones to serve the public.

Who can we count on to protect our public services? Corporations are not required to protect the public interest. Their only legal obligation is to deliver profits to shareholders.

Politicians will not protect the public when doing so means angering the business class and losing corporate donations.

The only people we can really count on are those who work in public services, because their job conditions directly affect the quality of our services.

Who would you rather manage a hospital? Executives and bureaucrats obsessed with the bottom line? Or medical and support staff who actually do the work? I will take my chance with workers in charge, any day.

It is useless to blame the loss of public Medicare on any particular politician or political party. All over the world, people are facing the same problem — a global capitalist system that values profit over human lives. The profiteers are taking everything away from us, and they will not stop until there is literally nothing left.

Last month, a million people marched in Madrid to protest the dismantling of their public medical system. Tens of thousands of nurses in the U.K. went on strike because they know that quality care cannot be delivered without quality working conditions. And in 2021, half of all strikes in the United States were strikes of medical staff.

Power on the job means power in society. A strong labor movement can win strong public programs. The loss of public programs signals a weak labor movement.

Class struggle won public services like Medicare, and class struggle is the only way to win them back. To succeed, workers must not allow the class enemy to dictate what is and is not acceptable. They must exercise their right to fight effectively, and not back down until they win.

 

MMT: A Bankrupt Theory for a Bankrupt Capitalism

Review: The Deficit Myth: Modern Monetary Theory and How to Build a Better Economy⁽¹⁾ by Stephanie Kelton (published by John Murray, 2020).

Stephanie Kelton, a professor of economics and public policy, formerly chief economist on the US Senate Budget Committee with the endorsement of Bernie Sanders, is a leading proponent of modern monetary theory (MMT). Since the 2008 global financial crisis which finally put paid to monetarism, in practice if not in theory, the overseers of the capitalist economy have been without a credible policy framework. To the horror of some commentators MMT is gaining ground amongst university and political circles alike, including many on the capitalist left, as Sanders’ endorsement of Kelton testifies. The Deficit Myth, which came out at the beginning of 2020, is clearly Kelton’s attempt to gain MMT a wider following. Without a single graph or algebraic equation, she adopts a chatty, anecdotal style and uses down-to-earth “parables” to get across the essence of the MMT message to the “ordinary” reader. It doesn’t always work (at least for this reviewer) and her key tale about a disgruntled parent trying to persuade his lazy kids to contribute to the household chores is particularly opaque. (He ends up dishing out some of his own business cards to each of his kids who are then persuaded to return them to him bit-by-bit each time they complete a chore. He, in turn, rewards them from time to time with a special treat. Apart from the naive middle class assumption that a story based on a dad with business cards will conjure up a familiar situation that will make her message easy to understand, it’s not clear what the rewards are or indeed why the kids don’t just continue as before.) Never mind. Anyone reading the book cannot escape the central message that, unlike you or I, or businesses or local governments, who are “users” of money, the Federal/central government — or rather the Federal Reserve Bank (the model of course is the USA) — is alone the “issuer” of currency. While the rest of us have to think about balancing a budget, not spending more than our income or fretting about the cost of borrowing and repaying loans when we do, there are no such constrictions on the state Bank, the sole currency issuer, which has no need to worry about repaying the debt it has issued to itself. In other words, there is no need for officialdom to be concerned about a mounting national debt or how to repay it. There is a caveat to this. To truly reap the advantages unlocked by MMT, a government must enjoy monetary sovereignty. Here, being a currency issuer is a necessary but insufficient condition. There are two other conditions, as Kelton explains:

To take full advantage of the special powers that accrue to the currency issuer, countries need to do more than just grant themselves the exclusive right to issue the currency. It's also important that they don't promise to convert their currency into something they could run out of (e.g. gold or some other country's currency). And they need to refrain from borrowing … in a currency that isn't their own. … Countries with monetary sovereignty, then, don't have to manage their budgets as a household would. They can use their currency-issuing capacity to pursue policies aimed at maintaining a full employment economy.

pp.18-19

At first glance this is simply pared-down Keynesianism but Kelton points to MMT’s roots in chartalism and its dubious argument on the historical origin of money in ancient society (exactly which ancient society varies with the theorist). The chartalist argument goes that money was created by the state in order to impose taxes on the working population and thereby get them to labour at least part of the time directly for the state. It is fashionable to argue that money has its historical origin in anything but the exchange that developed out of barter on the fringes of communities. (See our review of the late David Graeber’s book Debt the First 5,000 Years, which argued that money developed both as a means of enslaving and avoiding enslavement.) The truth is that it is all more or less conjecture. Kelton is not really concerned whether MMT is grounded in credible historical evidence or not, she just wants to hammer home her argument that since the state is the sole creator of the currency which it can issue at will, it can’t run out of money. Therefore, when it runs a deficit, i.e. issues dollars that are “added to people’s pockets without subtracting (taxing) them away” (we’re back to the Federal Reserve again) then this is no burden while the famous clock ticking up the national debt in New York City is really a US dollar saving clock, an index of how many dollars are not being spent!

In truth the consensus of capitalist economic thinking on the build-up of national debt has not always been that it spells a dangerous threat to national economic stability. On the contrary, in the first volume of Capital Marx observes wryly:

The only part of the so-called national wealth that actually enters into the collective possessions of modern peoples is — their national debt. Hence, as a necessary consequence, the modern doctrine that a nation becomes the richer the more deeply it is in debt.

Marx, Capital vol 1, Ch 31: Genesis of the Industrial Capitalist

And even the sceptics were proved wrong, as the English Liberal historian Lord Macaulay famously boasted in 1855:

At every stage in the growth of that debt it has been seriously asserted by wise men that bankruptcy and ruin were at hand. Yet still the debt kept on growing; and still bankruptcy and ruin were as remote as ever.

And so it was throughout the nineteenth century when the British pound sterling was the currency of international trade and Britain was the world’s largest creditor state, thanks, from the 1850s onwards, to “invisible earnings” from financial assets. It took two world wars for the US to take over as the world’s dominant power. In the process Britain’s (later UK) national debt grew from about 30% of GDP (gross domestic product) at the beginning of the twentieth century to more than 150% percent in the aftermath of the First World War. By the end of the Second World War the debt was around 250% of GDP and the revival of the ruined British economy was prompted by US Marshall Aid. In 1956 Harold Macmillan, then Chancellor of the Exchequer, used the same Macaulay quote in his budget speech to downplay the significance of the national debt which by then stood at 146% of GDP. Sure enough, as the post-war boom picked up the deficit was reduced as a percentage of a bumpily growing though steadily slowing down GDP. Well, that’s one side of the coin, so to speak.

The other side is the continuing decline of the UK currency in the global economy. No longer the major currency of international trade or financial wheeling and dealing, the pound sterling was officially replaced by the US dollar in the Bretton Woods system brokered by the United States towards the end of the Second World War. The aim was to secure rules to ensure an international economy no longer beset by trade wars with their tariff barriers and competitive currency devaluations. But the US was adamant about rejecting Keynes’ proposal for an independent currency medium to be set up for international transactions. The compromise solution was for the newly-established IMF to establish the exchange rate of each currency in relation to the US dollar which itself would be pinned to gold (at $35 per ounce). Instead of go-it-alone currency devaluations, the IMF rules provided for the possibility of “revaluation” of a currency in the case of a fundamental balance of payments “disequilibrium” and after prior consultation. In fact the UK could not maintain the nominal wartime value of sterling against the dollar and as early as September 1949 negotiated a 30.5% devaluation so that the pound exchanged for $2.80. This put another nail in the coffin of one of the UK’s legacies of empire: the “sterling area”, as several ex-British colonies also devalued against the dollar. By the 1960s sterling was under pressure from speculators selling pounds for dollars and in November, 1967 after a brief consultation with the IMF, the Labour government devalued sterling by 14.3% to $2.40, famously prompting prime minister,Harold Wilson to announce:

It does not mean that the pound here in Britain, in your pocket or purse or in your bank, has been devalued.

Less than four years later, in August 1971, Richard Nixon unilaterally announced the “temporary” cancellation of direct convertibility of the United States dollar to gold on the grounds that there wasn’t enough gold in Fort Knox to cover the dollar reserves held by foreign central banks. (There were more dollars in banks outside the USA than in the Fed.) This problem might have remained a technical aspect of the growing demand for dollars as global trade increased in the Sixties. But as inflation edged up towards the end of the 1960s those dollars were increasingly being converted to gold. The “Nixon Shock” spelled the beginning of the end of the Bretton Woods economic frame for the world economy. By the time Nixon confirmed the permanent end to a fixed exchange rate with gold in 1973 the price of gold had reached $100 per ounce. The equivalent price today is around $1,900. Clearly there can be no going back. Which brings us again to Stephanie Kelton and MMT.

Far from seeing the collapse of the Bretton Woods system as an historic disaster which dramatically disproved the idea that capitalism could be managed both domestically and globally to provide steady economic growth and full employment, Kelton argues that it gave the United States the monetary sovereignty it had previously lacked to manage its own economic destiny. (With a fiat currency it’s impossible for Uncle Sam to run out of money.) Although they don’t take full advantage of it, she claims other states “like the United Kingdom, Japan, Canada and Australia” also enjoy “a high degree” of monetary sovereignty and “are able to run their fiscal and monetary policies without fear of painful backlash from financial or foreign exchange markets.” (p.142) That’s not how the architect of the “new economic policy”, Nixon's Treasury Secretary John Connally, saw it when he famously remarked that “it’s our currency and your problem”. Nor was there much sign of British monetary sovereignty when, in the face of rising global inflation (as commodity prices reflected the devaluation of the dollar) and the danger of another run on sterling, the UK was obliged to submit to IMF-imposed public spending cuts in return for a loan. Prime Minister James Callaghan famously told the Labour Party conference:

We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step.

In truth this had also become the situation in the United States and the whole of the advanced capitalist world. Except that the trade-off between increased spending to maintain jobs and the inflationary consequences of printing the money turned into more than a decade of rising inflation and increasing unemployment: this was termed “stagflation”, a combination of stagnant industrial production and inflation. At the time most of the blame for inflation was put down to a dramatic rise in the price of oil as a consequence of interruptions to supply, first by OPEC’s oil embargo (1973-74) during the Arab-Israeli war and then the disruption to supplies during the Iranian Revolution in 1979. This "first oil shock" saw the price of oil on the world market rise from $3 per barrel to nearly $12. (US domestic prices were considerably higher.) The "second oil shock" was even bigger with the world market price doubling to almost $40 per barrel. By this time the US position in the world was threatened by the declining value of the dollar as inflation reached a new height. The priority for the new head of the Federal Reserve, Paul Volcker, was to bring down inflation. Volcker was a follower of Milton Friedman who advocated restricting the money supply to tame inflation and thus he instigated a major rise in interest rates which were echoed worldwide. By 1982 interest rates had reached 21.5%. The sky-high rate pulled inflation down (from a high of 13.5% in 1980 to 6.2% in 1982) but GDP shrank by 3.6% and during the 16-month recession which followed unemployment (officially) went beyond 10%.

US manufacturing and industrial production were decimated, especially round the old industrial heartlands whose empty factories and de-populated cities conjured up the term "rust belt". But the "Volcker shock" revived confidence in the dollar and, industrial restructuring notwithstanding, during the following decades the US economy became increasingly dominated by an array of financial and so-called business services which now account for around a third of “economic growth”. Many of these services have little to do with providing the capital to finance productive industry. They can make a profit simply by wheeling and dealing in a sector where an original outlay of money capital is deployed to generate more money (M-M1) without having anything to do with the production of commodities. So long as the dollar holds up against other currencies this is fine for the financiers and their hangers-on. Thus as financialisation proceeded US governments have made it their priority to pursue policies which ensure the dollar maintains its pivotal role in world trade. Above all, the US aims to ensure that the bulk of the world’s oil continues to be priced in dollars and, as the fate of Saddam Hussein and the decimation of Iraq after two US invasions (1991 and 2003) show, is prepared to use its military might to prevent the dollar being replaced by any other currency.

In 1999 the Glass Steagall Act was revoked, allowing retail banks to sell a host of financial services direct to the public. A legacy of a lesson learned from the Wall Street Crash, the Act had separated investment banking from retail banking and was designed to protect Main Street (the ordinary household saver) from losing their savings in a crash. It was only a matter of time before the financial house of cards built on the "slicing and dicing" of sub-prime mortgages (loans primarily to working class households who could not afford to keep up payments) collapsed. As everyone knows, it provoked the deepest economic recession since the Great Depression and the biggest banking bail-out in history. All over the world unemployment shot up. As well as people losing their jobs, many also lost the roof over their head. It gave birth to the Occupy movement and a palbable sense of injustice worldwide as the central banks of the "first world" conjured up trillions of dollars, euros, pounds … to bail out the banks. In the United States the Federal Reserve cut its interest rate (the federal funds rate) to near zero and began the process of so-called "Quantitative Easing": creating money to buy up the duff mortgage-backed securities, prop up most of the failing banks (although over 140 went bust) and injecting a monthly financial stimulus (more than $1.5 trillion) which had not entirely been wound down when the impact of Covid-19 struck in March this year.

Quantitative Easing spelled the end of monetarism and its key idea that excessive expansion of the money supply leads to a dangerously steep rise in inflation. Since 2009, consumer price inflation in the United States has hovered mainly between 1% - 2% per cent and the Federal Reserve has been unable to reach its general inflation target of 2%.

Step in Modern Monetary Theorists with their argument that through a targeted increase in state spending “we can build an economy that provides a good life for all.” The arguments are often dodgy. Here is Kelton:

As we teach our first year students, excessive spending manifests as inflation. A deficit is only evidence of overspending if it sparks inflation. Since prices weren’t accelerating, the deficit couldn’t possibly be too big.

p.42

A clear example of the logical fallacy of affirming the consequence as taught to first year logic students. Still Kelton, is oblivious and continues with her argument that when there is no inflation (or very low) then the Fed could and should issue dollars to finance what appears to be a social quantitative easing programme, a kind of super New Deal where fiscal deficits are used to “channel resources more equitably”. She starts with a Federal jobs guarantee programme where workers would be assured a fairly low minimum wage but which would undermine the equation of cheap foreign imports = loss of US jobs. No need to worry about the balance of trade. Since the dollars the United States spends on imports are mainly returned to the US by exporters who buy US Treasury bonds, these can be used to finance, amongst many other things, a global Green New Deal which would help reduce the 200 million of globally unemployed and provide more people with what should “be a human right” — “employment”. For the most part though the argument revolves round the potential benefits and opportunities for restructuring the United States economy as a result of “the special position of the US dollar”. Essentially she wants a fairer capitalism and seeks to redress the growing wealth divide where “the global one per cent has captured as much growth as the bottom 50 per cent” and in the US “Just three people—Bill Gates, Jeff Bezos, and Warren Buffett—own more wealth than the bottom half of Americans, some 160 million people.” A good part of the book is devoted to outlining reforms for redressing the various social deficits: pensions, health care, “good jobs”, education (“retire student debt”), climate (“We have a little less than twenty-six years to solve our climate deficit.”) And finally the “democracy deficit” must be addressed on both the political and economic front by … reforming the tax system, removing the economy from “irresponsible bankers” and strengthening the unions so that they can “drive up wages and benefits” and sustain “the kind of tight labor markets we saw during World War II”! When it comes down to it MMT/Kelton’s proposals for reform are part of a familiar litany repeated by radical reformers since the 2007-8 financial crash.

The main difference is the perpetual hammering home of the message that “gold standard thinking still dominates”; if only policy makers would recognise that there is no lack of financial ability to pay since there is “is no financial constraint on a currency-issuing government like the US” and what the Federal Government really lacks “is not the financial ability to pay but the legal authority to pay.” (p.164)

Kelton’s book was published at the beginning of the year, shortly before the impact of Covid-19 sent stock markets tumbling as lockdowns paralysed much of industry and global trade. In the weeks and months that followed the Federal Reserve was called on to redress the dollar shortage that ensued. For two weeks in April the Fed was “buying” $1m worth of financial assets per second. Technically, the Treasury issues the bonds which are auctioned off to prospective buyers and the money is then credited to the Fed. So the Federal Reserve’s account of its purchases are actually a record of the number of dollars created by the Treasury. By July the situation had eased somewhat and the demand for the Fed’s “dollar swap lines” had reduced to around $7.1tn per week! Estimates vary, but a plausible calculation is that the US deficit will grow from 106% of GDP to around 136% by the end of the year. In percentage terms this is not the biggest. Japan’s national debt has been over 200% of GDP for over a decade and every country in the world has seen a relative increase its national debt since the Covid pandemic hit. In the case of the United States, however, its global role means the Federal Reserve cannot focus exclusively on domestic funding requirements and the amount of dollars released onto the world market dwarfs the $3tn approved by Congress to deal with the consequences of coronavirus. (Which, by the way, has hardly been put to practical use.)

If ever the time was ripe for MMT to gain a wider sway this is it. But it doesn’t mean that it can provide a new way forward for capitalism, or rather United States capital because that is really what Kelton’s book is about. In any case she tacitly admits that the proposition at the heart of the theory — that the state can create as much money as it likes — breaks down when she admits the possibility of inflation … as a result of a decline in unemployment. While she quibbles over whether there is such a thing as “the natural rate of unemployment” (and Keynesian policy-makers’ search for the Non-Accelerating Rate of Unemployment) she accepts the premiss that at some, unpredictable, point the “full employment wall” will be hit and any additional spending will be inflationary. Unemployment will cause inflation. In other words, like the Keynesians, she assumes that higher wages resulting from the increased "bidding power" that full employment brings workers will lead to inflation. Not bad for someone who argues that everyone has the fundamental human right to a well-paid job. As long ago as 1865 Karl Marx demonstrated the falsity of this argument in his response to Citizen Weston’s assertion that a rise in wages leads to a general rise in prices by demonstrating that what this really leads to is a reduced rate of profit.

Yet MMT theory is more fundamentally flawed by the chartalist theory of money lying at its heart. In a capitalist society it is simply untrue that the main function of money is to enable the state to collect taxes from the population. Workers need money in order to buy the means to live and in order to do that they need to work for a wage. Capitalists need money to invest in equipment and to pay the wages of their workforce. Marx points out that in all cases:

Once the capitalist mode of production is given and work is undertaken on this basis and within the social relations which correspond to it, that is when it is not a question of the process of formation of capital, then even BEFORE the production process begins money as such is CAPITAL by its very nature, which, however, is only realised as such in the process and indeed only becomes a reality in the process itself. If it did not enter into the process as capital it would not emerge from it as capital, that is, as profit-yielding money, as self-expanding value, as value which produces surplus-value.

In other words, money is “latent capital” or potential capital. …

What makes it capital before it enters the process so that the latter merely develops its immanent character? The social framework in which it exists. The fact that living labour is confronted by past labour, activity is confronted by the product, man is (i.e. human beings are) confronted by things, labour is confronted by its own materialised conditions as alien, independent, self-contained subjects, personifications, in short as someone else’s property and, in this form, as “employers” and “commanders” of labour itself, which they appropriate instead of being appropriated by it. ...

Theories of Surplus Value Vol 3 p.475-6, Lawrence and Wishart edition

We cannot expect a modern economist like Kelton to adhere to the labour theory of value. However, MMT’s cranky theory is completely oblivious to the crisis of profitability that has been bugging capitalism for around fifty years. For all the examination of deficits, Kelton does not tackle the most glaring one of all: the mounting company debt and the growing portion of zombie companies that exist in a semi-morbid state, relying on low interest rates to reduce some of their loan payments. Even less is she in a position to explain, never mind come up with a palliative, to the problem of the declining profitability of manufacturing and industrial capital which is at the heart of capitalism’s economic woes today.

Anyone who thinks MMT has anything in common with Marxism should think again. As the subtitle of Kelton’s book makes clear, Modern Monetary Theory is about how to make the existing economy work better. In plain words that should include how to increase profit rates, how to extort more unpaid labour from the working class. Instead Kelton focusses on how the existing state can conjure up more revenue to fund palliative measures to relieve the social effects of the crisis. If anything, this means widening the power of the capitalist state, certainly not a step towards a new society of freely associated producers who are in control of what is produced. Clearly Stephanie Kelton has no such agenda. But for someone who decided the owl would make a good mascot for MMT “because people associate owls with wisdom and also because owls’ ability to rotate their heads nearly 360 degrees would allow them to look at deficits from a different perspective”, the book is remarkably blinkered about the extent of the crisis that is facing capitalism. Perhaps another kind of owl, the owl of Minerva (Wisdom), which Hegel noted only spreads its wings once dusk has fallen, would be more appropriate for a theory which is unable to see that capitalism today is facing an existential crisis.

E. Rayner

October 2020

(1) In the USA the title’s subclause is “the Birth of the People's Economy” (New York: Public Affairs, 2020).

Friday, October 30, 2020

 

Only the World's Workers Can Save Us from a Capitalist Cataclysm

Editorial for Revolutionary Perspectives 18 (Series 4).

Capitalism has brought the world to the edge of an abyss. Hundreds of millions, if not billions had already fallen into it, even before Covid-19 appeared. Despite the “boosterism” of the British bourgeoisie, the vaccines have not brought the pandemic under control even in the richest countries in the world (and less than one in six of the global population has currently had two jabs). As we go to press, all legal safety measures are being lifted in England despite a rising infection rate. Their gamble is that the profit-making machine can get back to “normal” soon.

For most of us the previous “normal” was hardly paradise. Before the pandemic much of humanity was already subject to various forms of imperialist violence, with wars in Afghanistan, Syria, Yemen, Central African Republic, Congo, Sudan (where the war in Darfur goes on), Somalia, Mozambique, and all across the Sahel, not to mention the insurgencies in Burma, Indonesia and the Philippines. Add to that the continuing police violence in places too numerous to list, but includes Colombia, Peru, Brazil, Philippines etc. Throw in too the perilous fate of refugees forced to flee this violence and the hunger it engenders, who end up in North Africa (especially Libya), Mexico and Europe.

Despite the selective Panglossian propaganda of the Stephen Pinkers of this wonderful world, the reality for over 2 billion of the planet’s people is literally not knowing where the next meal is coming from. Scientific advance contrasts dramatically with social atavism. We have recently seen dramatic protests against attempts to make the population pay for economic failings in Colombia and Cuba, but as the fallout from the pandemic continues, we can be certain that these will not be the last.

Debt and its Consequences

Even in the relatively comfortable “democracies”, increasing numbers were seeking help from food banks before the pandemic. The numbers have increased manifold over the last 15 months. Whilst the lowest paid workers struggle to survive, governments have created billions in payments to businesses to keep the economy afloat. As a result the Wall Street Journal (WSJ) tells us:

The pandemic has pushed global government debt to the highest level since World War II, surpassing the world’s annual economic output. Governments, especially in rich countries, are borrowing still more, partly to erase the damage of Covid-19.⁽¹⁾

And, as the same article points out, the global capitalist system seems a lot more relaxed about ever-increasing debt since the quantitative easing programme saved the system after 2008. But these debts still exist. The WSJ goes on to tell us that:

The U.S. government is on course for a budget deficit of $3 trillion for the second year in a row. Despite that and fears of inflation, 10-year Treasury bonds are yielding only around 1.33%, partly because of the Federal Reserve’s caution about raising its interest rates.

Though the ruling class are playing it cool (perhaps due to having no idea what to do?), the system is in a bind. If the fears of inflation which are already apparent (especially in global “commodity”, i.e. raw material, markets) come to pass then the system will have to raise interest rates (in the US, and in other rich states, they remain historically low, between 0 and 0.25% in the US). If that happens debt repayment will suddenly become unsustainable, especially for the now substantial numbers of “zombie companies”, who survive only by paying interest without making a profit. They would not be the only ones in danger. Given the global hegemony of the US dollar, the consequences of higher interest rates would spell disaster for so-called “emerging markets”. They cannot simply issue currency without it having drastic inflationary consequences at home. Here, some countries which are already experiencing high inflation (like Argentina), will be faced with hyperinflation, and unsustainable debt repayments.

Even before the pandemic, UNICEF were telling us that in 2019, 25 countries — most of them in Africa and South Asia — were spending more on debt payments to financial institutions in wealthy nations than on education, health care and support programmes for the poorest. Zambia’s external debt payments took 2% of government revenue in 2011 but 34% this year. Pakistan’s external debt payments have soared to 35% from less than 10% over the same period.⁽²⁾ Paying more for vaccines will only drive these debt levels even higher but, as we show in this issue, the pharmaceutical companies are only interested in the health of humanity (or lack of it), as far as it registers profits for themselves. This can only mean mass misery and more social explosions of the type mentioned above. Even in some of the wealthy capitalist countries, the ruling class are already refining the tools of oppression, with France, the UK and Australia leading the way in either giving enhanced powers (and indemnity) to the police, or militarising still further the forces of law and order.

Imperialist Rivalry

Some things do carry on as “normal”. Imperialist rivalry does not abate just because millions are sick and dying. The USA is now re-mending the fences torn down by Trump to revitalise a Western alliance against Chinese ambitions to dominate the whole of Eurasia, via its Belt and Road project. As our Italian comrades show in this issue, the response is for China to draw closer to Iran, and any other state that has fallen foul of the US. But the rivalry does not stop there. China increasingly threatens Taiwan with a whole series of military manoeuvres as it builds up its navy in preparation for an eventual confrontation in the Pacific with the US.⁽³⁾ The Chinese leadership under Xi Jinping make no secret of the fact that they want to be the world’s dominant power by 2049, exactly 100 years after the “Chinese Revolution” brought the Chinese Communist Party to power. And part of that nationalist resurgence demands the full integration of Hong Kong, Macao and Taiwan into the People’s Republic of China.

The new “normal” also now includes imperialist rivalry in the Arctic where global warming has reduced the ice to its second-lowest levels ever in October 2020. This has opened up a new contest. Russia, Canada, the US and the UK are vying to control the area. China sent its second icebreaker, Snow Dragon 2, there whilst

Beijing-based Cosco is the only one of the five major container shipping companies sending vessels through the Northern Sea Route each year as part of the “Ice Silk Road” initiative with Russia.⁽⁴⁾

All this in addition to the impetus for imperialist confrontation over increasingly scarce water resources (in the Sahel, the Blue Nile between Ethiopia and Egypt or the Jordan, Euphrates and Tigris in the Middle East) which climate change has created. Indeed capitalist-created climate change is what links pandemics, imperialist competition and the overall environmental threat to humanity’s future.

Capitalist Climate Change

As we go to press 500 people are feared dead from an unprecedented heatwave in Canada whilst, by contrast, 200 are dead and hundreds more missing in Belgium and Germany, due to floods brought about by massive concentrated rainfall not seen before. Both are consequences of human-made global warming which has already cost the lives of 150,000 people a year for 3 decades. This is expected to double in the decade ahead (according to WHO and other scientific estimates).⁽⁵⁾ And all that has been agreed are pious promises to reduce emissions but as the WSJ advised in 2017 this should not cost more than 0.1% of world GDP growth! We are actually living through a mass extinction which is developing faster than any in global (and not just human) history with species vanishing at a rate far in excess of that of the Permian extinction of just over 250 million years ago.⁽⁶⁾ The root cause of all of these issues (or the failure to deal with them) is a system based on nothing but the pursuit of profit, which creates excessive wealth at one pole, and unbelievable poverty at another. It is comforting, for some, to think that there is nothing much wrong with the world that a few reforms cannot solve, but we have already gone too far for that. Unless the system of production is changed so that it is dedicated to producing goods that people need, and not commodities aimed solely at financial profit and whose production entails massive waste and destruction, humanity faces a planet which will only support about an eighth of the world’s current population by the end of the century.⁽⁷⁾ It would be good if the capitalists agreed that their game is up, but we know that is about as likely as the Second Coming.

From the point of view of the controllers of capital there is no serious crisis just a series of “problems”. They are still getting richer, the working class globally is hardly responding, and lacks a coherent project of its own, so our masters and mistresses are not being pushed into a corner by the class war (which they are currently winning). As the article on the collapse of Bretton Woods in this issue shows, world capitalism has been facing a crisis of profitability for half a century now. It is unprecedented and the longest such crisis in capitalist history. The system really needs a massive devaluation of capital before it can start a new cycle of profitable accumulation like the post-war boom after 1945. Indeed, only some devastating event like a world war can bring this about. Naturally they will do everything in their power to avoid it as the consequences are too dire to be contemplated. As long as no other pressures come to bear (from a rising working class movement or an intensification of the imperialist rivalries already analysed), inertia and muddling through will be the primary policy drive. Great hopes will be raised about a “green industrial revolution” (on the capitalist right) or a Green New Deal (on the capitalist left). A chimera in both cases. The one thing that is certain is that the working class, and the populations of the poorest countries in general, will pay yet again for the follies of the system. How the working masses respond will be key.

… there is One Hope

In the social turmoil that will accompany the inevitable dash to extinction, the extent to which the revolutionary programme is taken up will be crucial. A movement that sets its sights on a new global way of living, not based on fighting for this or that local or immediate issue (e.g. abolition of the police without abolition of the capitalist state is meaningless), which will not be based on “identity” (an ideological game to divide humanity), but the common class position we hold in the system of production. We have a clear political alternative furnished by the history of past generations of workers’ struggles (a world human community based on the direct democracy of workers’ councils). We have an alternative to the profit-driven road to disaster in the shape of a community of freely associated producers who exchange to meet each other’s needs. Of course, a programme propagated only by revolutionaries is not enough. What is also needed is a mass movement of the working class which is already the majority of the world population. Our task is to get across the ideas we have gleaned from the history of class struggle so far so that this time capitalism everywhere is overthrown. Capitalism cannot be overthrown by decree but only by the actions of the mass of the class taking up its own programme of emancipation. Humanity has never needed that initiative so much as it does today.

CWO

Notes

(1) wsj.com

(2) Peter S. Goodman and Alan Rappeport “This Is the Plan to Rescue Poor Countries From the Pandemic” New York Times, June 24, 2021

(3) news.usni.org China may now have more ships that the US Navy but it also has not fought a war since 1979 when it tried to invade Vietnam – and lost.

(4) theguardian.com

(5) scientificamerican.com

(6) un.org

(7) nymag.com

Tuesday, August 31, 2021

Revolutionary Perspectives

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