A Tale Of Contradictions - Part 7

The Specific Contradictions

b) The Political Contradictions

It is not impossible, under such conditions, for a resolution to be achieved. The US, indeed, could do so, and in part, the recession that arose on the back of the 2008 Financial Crash, has assisted in that process. The recession, forced a restructuring of some sections of US Big Capital, such as the automakers. The Capital released can now move to alternative production where the US is able to compete globally, and where the Rate of Profit is higher. The State has intervened directly as part of that restructuring process. As the Asian economies continue to develop, a market for those high-tech products produced by the US, is also created, such that the potential for a self-reinforcing increase in global trade, and growth is established. The State is being forced to intervene in other ways, consistent with that Social-Democratic ideology, to attempt to reduce the frictions and uncertainties of the necessary transition period towards this new production function. But, this involvement demonstrates the limitations, and contradictions of that approach. A clear illustration of that contradiction, is provided in relation to Obama's attempts to restructure Healthcare. Basing itself on its own interpretation of the Social-Democratic consensus – the interpretation in which the statist, welfarist policies of the Capitalist State are somehow concessions wrung from the bourgeoisie by “class struggle” - much of the Left has so viewed the healthcare debate in the US. Any rational analysis, of course, should have wondered why Obama, as the leader of an openly bourgeois Big Business party, with little to distinguish it from Cameron's Tories, would be wanting to wring any such concession from business. It should have wondered why so many US workers, who enjoy generous company financed Health Insurance, were suspicious of the changes, and should have wondered why it was that in recent years large sections of US Big Business had been calling for change, and pointing to the huge disadvantage that they faced in providing such Health Insurance, compared with their competitors in Europe where socialised healthcare systems existed.

The problem is outlined in this article, from 2005, in Fortune Magazine.

“Then we'd find ways to guarantee coverage for all while reengineering health-care delivery to lower costs in the long term (without the price controls that stall innovation abroad). Easier said than done, you may say. But seen in this context, the prescription-drug bill last year was the first step in the Republican-led socialization of health spending. Companies have been clobbered funding retiree health plans. The GOP felt their pain, and presto, $750 billion over ten years moved from private to public budgets...

The bigger hurdle may be stereotypes. Business's sensible drive to get Uncle Sam to take on more of the health burden will run into the nihilistic (but potent) "big government" rhetoric of the GOP--plus the party's delusion that we can keep federal taxes at 17% to 18% of GDP as the boomers retire. If Republican pols want to help Republican CEOs solve their biggest problems, this caricature of a political philosophy will have to give way to something more grown-up. Just as the Nixon-to-China theory of history says it will ultimately take a Democratic President to fix Social Security, it may take a Republican President to bless the socialization of health spending we need. ..Ask yourself: When we're on the cusp of decades of wrenching challenges from places like China and India, doesn't American business have enough to do without managing health care too?”

But, it is proving that the biggest hurdle IS that “nihilistic (but potent) 'big government' rhetoric”. And more of a hurdle, and even more potent now that there is an Obama, not a GOP Government. And having set the hare running the hounds of the Tea Party, are snapping at the heels of Republicans who do not adhere strictly to that rhetoric. In other words, the very policies of the Social-Democratic consensus that US Big Capital needs to resolve its problems, are in danger of being frustrated by the other main party of the Big Bourgeoisie! If that picture seems familiar it is precisely because it is exactly the picture we see in the UK, and other European countries, where right-wing parties have rushed to assert the Conservative orthodoxy of fiscal restraint, not because such policies are in any way what Big capital actually needs, or desires, but because with parties of the centre-Left, already occupying the Centre ground of politics, the only basis upon which they have been able to mobilise the necessary electoral coalition has been to consolidate their traditional core vote – that of the small business, the aspiring middle class, and the backward sections of workers – around a populist programme that appeals to the “common sense” that debt has to be reduced, and failure to do so will lead to catastrophe, and for part of that core vote, what appears the same thing, much higher taxes.

Its ironic that in the same way that the Left often talks about the working-class needing a Party that more vigorously pursues its interests, Big Capital, too at the present time might be suffering from the same problem, or that where such a Party is doing that in the US, it is frustrated by the more traditional party of business. The difference is that even if Big Capital is unable to impose its will on these governing parties, its interests will be only temporarily impeded. That is so, because any recession that results from this economic mismanagement by right-wing populist Governments, even of the worst variety, such as some kind of Depression, can, in the context of a global Long Wave Boom, only be of limited duration. In reality, Government policies can only have marginal effects on the way the laws of a global capitalist economy play out. Even though, these marginal effects can be significant in relation to the short run consequences for any particular economy. Clearly, if a particular strand of economic policy is adopted more widely the consequence will be more marked than if it is only one or a few minor economies that pursue a particular course.

At the moment, the US, is pursuing policies consistent with that Social-Democratic consensus. It has initiated Federal fiscal stimulus on a huge scale. One reason it has not had the effect it might have had appears to be the sclerotic nature of the US State bureaucracy, and the division between Federal and State government. It is the States who have to spend much of the money, and the States are hampered because many of them are suffering big deficits already, and lack the means by which to get the money for federal projects employed. Its also possible that Republican officials are frustrating spending at State level, in the same way that Republicans have been frustrating developments in Congress, for party political reasons with mid-term elections coming up in November. The same policies were pursued in Europe, Asia and Latin America at the height of the crisis. Where they were employed vigorously, such as in China, and Brazil they have had a marked effect in stimulating growth, thereby providing the basis for paying for the stimulus. Even in the US, the initial effect has been positive. The US has been active in the global fora in trying to get such policies extended. The responses again demonstrate the contradictions that exist, which again stem from the material conditions of the global economy, and their reflection within imperialist social relations.

Just as different fractions of Capital share certain interests within a national economy, whilst at the same time having varying and competing interests, so fractions of Capital have a similar relation on a global scale. In the conditions existing after WWII the US was able to exert its particular interests, as against the interests of other national fractions of Capital. I referred to that earlier in relation to the ability of the US to impose new global relations, including the break-up of the old Colonial empires, and establishment of the dollar as world currency. Yet, in part, the arrangements agreed upon, whilst benefiting the US as against the old European economies, were also to the benefit of that European Capital too. In shaping a global economy, those economies lost the old colonial relations, but gained the conditions under which industrial Capital could expand, gained from a more stable global economy in which Capital Accumulation could proceed, and also gained in terms of a strong military force to confront the USSR and its satellites, with a consequent effect on global class relations.

European Capital has as much reason to desire the continuance of those benefits today as it did then. But, today is not 1945, and European Capital is no longer in the devastated condition it was then, whilst US Capital is no longer in the hegemonic position it was then either. European Capital has every reason to attempt to secure its own particular interests as against those of the US, and for that matter Asia too. Marx commented that every Capitalist wants the wages of all workers other than his own to be as high as possible, because that is the best means of him securing a growing market for his goods. In the same way European Capital has an incentive to see the US stimulate its economy, and thereby to continue its role as a major market for their consumer goods, whilst keeping down the wages (including the social wage) of its own workers, in order to be able to be competitive, and maximise its profits from sales into that market. That is particularly the case in respect of Germany, which was only recently been overtaken by China as the world's largest exporter. High levels of saving in Germany, combined with those high levels of exports meant that its economy was less badly affected by the Financial Crisis, and subsequent recession than other economies. Moreover, since WWII, the dominance of that ideology of the “Social-Democratic Consensus”, meant that German workers were incorporated into the system in a way that facilitated the introduction of new technologies and work processes that raised labour productivity in return for quite high levels of wages and social welfare. Its automatic stabilisers kicked in quickly once the economic slowdown began. But, Germany also has another reason for advocating “austerity” within Europe. That is quite simply that if Europe is to hang together, then ultimately the cost of keeping it together will fall on Germany itself! That is part of the reason it has been so insistent that Greece, Spain, Portugal and Ireland resolve their budget deficits themselves.

Yet, such a policy is likely to be counter-productive, and to be as dangerous for Germany as it is for the PIIGS. In part, Germany's export success has been built upon its role as the manufacturing hub of Europe. It has directly benefited from the profligacy of Southern Europe, which has used the period of easy money to buy German goods. The evidence already appears to be that the spending cuts in Greece, and Ireland and Spain and Portugal, are not resulting in a renaissance of private sector entrepreneurship – how could it, such businesses do not develop overnight even in a rising economy, and most of these economies (apart from Ireland) have been built on tourism, and the development of a property sector aimed at Northern Europeans (now itself in collapse) which cannot benefit from exports – but in a worsening of economic conditions. The obvious solution, as I have set out elsewhere, is for the debts of Southern Europe, and the UK, to be effectively monetised. That is print money, and basically give it to those states to pay off their debts. But, some new State structure would then be needed to prevent each State from simply racking up debts again. It requires not just a single currency, but a single European State. For the reasons set out above, the contradictions within Capitalism, both at an economic and a political level, make such a solution impossible, at least in the short term. For one thing, that monetisation of debt, would lead to inflation, which would ultimately have to be reigned in through higher interest rates. The major loser from that would be Germany. Although, Big Capital might see the necessity, or at least the benefit of such a solution, obtaining an electoral majority for such policies is unlikely. In short, the failure to tackle the question from the beginning of the nature of the EU, the failure to establish it as a democratic State, and to undergo the necessary political debates and struggles to achieve that, and to establish the necessary State Structures to control fiscal as well as monetary policy, and instead to fudge the issues, to arrive at bureaucratic solutions behind closed doors that achieved some aspects of that Social-Democratic consensus, but only at a superficial level, and with no democratic mandate, has made resolving the current contradictions almost impossible.

The imperialist Social-Democratic consensus does require as Elson put it in relation to the Brandt Report, “a kind of internationalisation of the Welfare State." Just as within the national Welfare State, any period of retrenchment sees hostility from not only the middle classes, but also from many workers, to the idea of paying more money, in taxes, to be handed over to the unemployed, so those same layers are unlikely to vote for similar reductions in their wealth and living standards when applied at an international level.

The US does not face, these levels of political contradictions. It fought a Civil War to resolve the basic issues and consolidate its Federal State. The issues for the US are, therefore clearer. A continuation of the fiscal stimulus to ensure that the current period of economic weakness is overcome – particularly if such stimulus were continued and co-ordinated on an international level – would give it time to proceed with the restructuring of its economy, and the movement of Capital into those areas of high-technology, high value added, where it has a comparative advantage. If Europe were to follow suit, it could follow a similar path. In both cases, such a transition would only act to lessen the relative decline in living standards against the East, which is inevitable, but might be sufficient to cover a period during which living standards in the East would also be rising – incidentally a process which is already sowing the seeds for the next expansion into selected African Lion economies. As world hegemon, the US does not want to see a new severe recession or depression, because the consequence of that would be a dramatic rupture of the imperialist, Social-Democratic consensus. It would mark a sharp reduction in US global power – and consequent upon it also of European power – and a sharp rise in the economic and political power of China, and Asia.

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