Tuesday, 31 July 2012

Is The US Preparing To Ditch Israel?

That is a question that will be considered heresy by large sections of the Left for whom the two countries are not only seen as joined at the hip, but for whom there is also an implication that it is Israel that is the dominant partner; a very small tail, wagging a huge dog. For a Left, much of which has not come to terms with the fact that large numbers of former colonies have won political independence, and which searches after some straw to grasp, to justify its belief that these countries are still in some sense “Neo-Colonies”, Israel plays a central role, in the Middle East, of acting as an enclave for “Imperialism”, and a means by which its “Neo-Colonial” rule is implemented throughout the region. However, its on the question of just how much the US needs Israel today that this turns.

After WWII, the US set about applying pressure to ensure that the old European Colonial Empires were broken up. During the War, Roosevelt, who considered Churchill a drunken, old Colonialist, had even proposed to Stalin, that they should form an alliance to bring about such a break up. Of course, although the US had some historical and philosophical grounds for opposing Colonialism, having fought its own War of Independence against Britain, its real reason for wanting to see that break up was not altruistic. Colonialism was a political form appropriate to the overseas rule of parasitic forms of Capital – Merchant and Money Capital, and Landlordism. Each derived their income by draining Surplus Value created in production, and in doing so impeded the expansion of Capital. But, the US was the home of productive Capital par excellence. Its most developed form was the multinational corporation that sought the right and freedom to settle anywhere in the globe, to build plants and exploit new, cheap sources of labour, and to sell its products. The Colonial Empires and their feudal monopolies on trade were an impediment to that development.

But, we shouldn't forget that in 1945, the US did not have, and certainly was not as confident in, its position of hegemony as we might think it to have been today. In the 1920's, when the US was still only a rising power, like China is today, it believed that the next global war would be between itself and Great Britain. The US, began a massive program of building its navy, in order to challenge the position of the British Navy, on the high seas, which gave it global reach. In 1945, the US authorities, and economists, still believed that the ending of War production would cause the economy to go into a massive Depression. They had not counted on the effects of the Long Wave Boom, which, in fact, lifted, not just the US, but economies throughout the globe. In part, the Marshall Plan was geared as a piece of international Keynesianism to assuage that fear of Depression, in the US, as a result of ending war production. In part, it utilised what the US had lots of – Money Capital, and Capital Goods – to both restart markets in Europe, and to ensure its economic dominance over them.

At the same time, its position was challenged by the USSR. In the 1930's, whilst Europe and North America had been mired in Depression, the USSR was growing like topsy. Economists like Mises and Hayek had begun by claiming that economic planning was impossible. By the 1930's, when that had been disproved, they changed tack to argue that economic planning necessarily led to totalitarianism, an easier line to advance given what was obvious in the USSR and Germany. Its interesting, though, that at the time, they did not even make the case about lack of efficiency of planning, because that certainly could not have been claimed at the time. On the contrary, their general belief was that the democracies were going to be economically overhauled by the centrally planned economies of the USSR and Germany.

The strength of that planning was demonstrated during the War. It allowed Germany to construct a hugely powerful military-industrial machine, that swept across most of Europe in a matter of weeks. It was only because Hitler continued to hold out hope of doing a deal with the British ruling class via Lord Halifax and others that he refrained from chasing the British Expeditionary Force across the Channel during the fiasco of Dunkirk. He was content to leave Britain holed up in its island prison, while he turned to his main target, the USSR. But, the even more effective planning system of the USSR, together with its huge expanse, its huge manpower resources, and the lingering beliefs of a people who had thrown of their class oppressors, and still believed the state to be theirs, was an even more powerful force than that of Germany, despite Stalinist bungling.

The Tank Battle at Kholkin Gol in 1939 was one of the
biggest in history.  The Japanese were heavily defeated.
That bungling allowed Hitler to spring Operation Barbarossa on an unprepared USSR. The consequences were dire. The USSR lost 25% of its territory, and production capabality. But, it managed to physically move factories and workers across the country to safety, and quickly restart production. The USSR, several years before, had massively defeated Japan in a huge tank battle, at Khalkin Gol which is why Japan decided the US would be an easier target. That left the USSR free to move men and equipment to the western front, and in December 1941, to turn back Hitler's forces from outside Moscow, and to keep pushing them back until the end of the War.

The US saw, this power of the USSR, and its ability to roll over countries in Europe and Asia. According to General MacArthur, the reason Japan surrendered to the US was not the atom bomb, but fear that they were about to be overrun by Soviet forces! When Khruschev announced in the 1950's that the USSR would overtake the US, he wasn't kidding, and the US at the time thought it possible. They thought it even more possible as the USSR conquered space, and continued to lead the US in the space race for the next decade or so.

So, there was every reason for the US not to consider its position hegemonic at the time. It had every reason to try to enhance its position against potential enemies and rivals. Breaking up the Colonial Empires was a part of that. When Britain, France, and Israel invaded Egypt in 1956, to regain control of the Suez Canal, the US saw an opportunity. It ditched its wartime allies, and aligned itself with the Arabs who had been the former subjects of those states. Britain and France were mortally wounded in the region, whilst the US was provided with the opportunity to strike up its own arrangements, with Arab rulers, for the provision of oil, and for the expansion,, of the US oil companies, into the area. At the same time, the message was made clear to Israel, that the time for the European Colonial powers had passed. If it wanted security, it had to look to the US. As the USSR gained strategic advantage, in its relations with Nasser, and other Arab Nationalist leaders, in North Africa, the role of Israel for the US became more significant.

The idea that US policy is driven by Israel is nonsensical. It is a form of anti-semitism, a version of the worldwide Jewish conspiracy. There is a powerful Jewish lobby in the US. Its power comes from the fact that the Jewish Community has traditionally, within the diaspora, held together as a community. Given that, some members of that community, over the centuries, have specialised in trading, and money dealing - often arising from Medieval Christian limitations on such activities that did not apply to non-Christians – that is backed up by the power of money. In a country where Money talks louder in politics than in many other countries, that is not an unimportant fact. But, there are lots of people with lots of money in the US. Jews are only a tiny proportion of them.

The consequences are being drawn out more clearly in the current Presidential Election. Mitt Romney is courting the Jewish Lobby, whereas its being argued that Obama has not given the attention and support to Israel that previous Presidents have done. Obama, clearly has little time for Netanyahu. Romney has to court the Jewish Lobby. He has little chance of winning over social liberals, who have been turned off by the extreme right-wing shift of the Republican Party, on social issues, such as Abortion, and its growing dominance by the Religious Right. If Romney is to win over any of Obama's former support, it will be amongst those blue collar workers that Obama's economic policies have failed, and who generally speaking tend to be more socially conservative.

At the same time, Romney has a problem with his own Party and supporters. For the Tea Party Right, Romney is too liberal on economic policy. For the religious Right he has the disadvantage of being a Mormon, which is for some of them close to being a Devil Worshipper. It is an odd feature of US politics that the biggest supporters of Israel come not from the Jewish Community, but from the 7 million or so, extreme Christian Fundamentalists, the end timers, who honestly believe every word of the Bible and look forward to the day when the world will be destroyed at Armageddon. These nutters, actually want to see a full scale war in the Middle East, because they believe this is part of the Plan for the Second Coming.

If, Romney wants to win over these people – and Bush did, he tried to win over this Constituency, and McCain did. He appointed Sarah Palin as his running mate, who reportedly attends a Church run by these nutters – he has to be an ardent supporter of Israel. That is what he is doing. But, what Romney is doing to win an election is not likely to determine what he does in that regard were he to win the election. Still less does it tell us the direction in which the US State is moving.


Prince Al Waleed Bin Talal is one of the
 largest investors in the US.  He frequently appears
 on US CNBC.  Here he gives Giuliani a
$10 million cheque for 9/11, and also
 used the occasion to call for the US
to adopt a different attitude in the Middle East,
 particularly in regard Palestine.
Over the last twenty years or so, an increasing centre of economic power has been the Gulf States. Not in the sense that these economies are themselves huge centres of industrial or high-tech production. Mostly they are not. Most of them, even to run their oil industry rely on huge numbers of foreign rather than domestic workers. Nearly half of Saudi Arabia's 27 million population is made up of foreign workers. Some of them such as Dubai, have become regional trading hubs, and financial centres, but mostly they continue to rely on extracting Rent from their oil wells. No, their economic power has come from the ability of a tiny ruling group to amass fantastic amounts of this oil wealth, and to use it to invest in the global financial markets, and to buy up foreign Capital, particularly in the US. If it was Jewish Money that formerly ensured a hearing for the Jewish Lobby, then the much larger amount of Gulf Monarchy money, is obtaining an even greater hearing in Washington. The links between George Bush, and the Bin Laden family, are just one indication of that.

The US strategy in the region for a long time rested on two pillars. Its relation with Israel in the North, and with the Gulf States in the South. That strategy began to fall apart with the downfall of the Shah, a situation the US quickly tried to reverse by supporting Saddam, and promoting the Iran-Iraq war. The US had a problem in trying to replace Saddam with someone more reliable and effective. The most likely forces capable of overthrowing him were the Shia in the South, and the Kurds in the North. Neither were acceptable option for the US, which is why they refused to support them after the 1991 Gulf War, and left them to their fate. As, has, in fact happened, if the Shia were to come to power, they would inevitably gravitate to their brethren in Iran. That is the very opposite of the strategic solution the US desires. Moreover, they would be likely to oppress the Sunni Minority in the country, a situation the Sunni Gulf Monarchies had set their face against. If the Kurds won, even independence, that would set an example to Kurds in Turkey, the US's other important ally in the region and a member of NATO. The Kurds are the world's largest nation without a state of their own. To prevent them obtaining one, Turkey has waged a long war against them, including bombing them in Turkish and Iraqi Kurdistan, without any condemnation from the West.  Already, Kurds in Iraq have established a high degree of autonomy.  Just today the Iraqi Government has imposed sanctions on French Oil Company Total, for having signed a separate deal with Kurdistan.  At the same time, as Syria falls apart into warring sectarian areas, the Syrian Kurds have taken advantage to establish their own area, to protect themselves against potential attacks from incoming Sunni clerical-fascist forces.

Having lost Iraq to Iran, the US is left with another cleft stick. It needs even more to rely on Israel, but also upon its Gulf Allies. The main strategic goal of the US is to overthrow the regime in Iran, and to prevent it from becoming a regional power, more than it already is. Certainly, the US wants to ensure that it is not able to develop that position on the basis of a strategic alliance with Russia and China, which represent the main global challengers to US power. The US would settle for chaos in Iran, as opposed to instituting its own dictator, so long as it prevented Iran acting as a regional power. In this the interests of the US with its Gulf allies are symbiotic.

The Gulf States apart from Bahrain, are overwhelmingly Sunni – about 80% of their population. But, compared to Iran, Iraq, Syria,, these Gulf States have tiny populations. They are at risk if ever a war began between them, and Iran and Iraq. The recent conflict in Bahrain, where the Sunni regime attacks, Shia protesters, and the outbreak of fighting in Shia dominated areas of Saudi Arabia itself, as the regime opens fire on protesters, are an indication of how such a conflict could begin. Any, attempt by the US to simply open hostilities against Iran would be likely to provoke a conflagration of Shia revolts across the Gulf, and to re-open conflict by Shia forces such as Hezbollah. The US needs to isolate Iran, and to cripple it, hoping to promote revolt from inside. That, of course, what it hoped would have happened in Iraq, a coup from forces within the regime itself.

In order to isolate Iran, the US has sought to weaken those forces and regimes connected with it. A price of that is to place a heavier reliance on the forces of the Gulf Monarchies. In some ways, what we have is a situation rather like the way wars were fought in Europe during the Middle Ages, where the Catholic Church sat in Rome, and enlisted mercenary armies to go and fight its battles. The US plays a similar role to the Catholic Church, making alliances first with this, then with the other Prince. Given the importance of Gulf Oil to the US, given the importance of Gulf Arab Money in bankrolling US debt, and their investments in major US companies, given their strategic role in opposing Iran, it is no wonder that the US has shifted its emphasis away from Israel, which costs its billions of dollars a year to support, and whose actions in refusing to come to a settlement with the Palestinians continues to create political problems for the US, with its other allies within the region.

The influence of Russia in North Africa has long since gone, except for Syria. It is this crescent running up from Iran, through Iraq, and Syria that now poses the strategic problem for the US to solve. It appears to be solving it, by throwing its eggs all into the basket of the Sunni Gulf Monarchies, and their ability to mobilise clerical-fascist militias, such as Al Qaeda, to go and fight wherever they are required with money and weapons provided by the Gulf States, alongside their own Special Forces, and more advanced weapons and logistics provided by the US via the CIA.

Just as they did in Afghanistan where they used the clerical-fascist Mujaheddin fighters like Bin Laden to oppose the USSR, or as they did in Kosovo, where they used the clerical-fascist, and Mafia type gangs of the KLA to whip up ethnic violence, so that seems to be the chosen route of the US in North Africa. The gamble appears to be that these clerical-fascist forces, be they the Muslim Brotherhood in Egypt, or even the Salafis, or even as in Libya and Syria, the Al Qaeda linked groups, can be used to overthrow the existing regimes, and can then be reigned back, and controlled by their paymasters in the Gulf. Well good luck with that idea, given the experience of Afghanistan!

Yet, the US, seems prepared to risk that strategy in order to break apart Syria, and thereby using its remaining bases in Iraq, to isolate Iran, before finding some pretext to begin yet another bombing war. There are already plenty at hand, including the potential nuclear capacity. In that process, Israel has effectively been sidelined. In fact, its likely that Israel was told NOT to bomb Iran, precisely because it would have provided a pretext for Sunnis and Shia to unite against it. But, there is good reason then for Israel to be worried. If the US has thrown its lot in with the Gulf Monarchies, then a price to be paid may well be that Israel is left to its own devices. Al Qaeda began not as an opposition to the US, but to those very Monarchical regimes, which it argued were corrupt. In order to preserve themselves, those Monarchies will need to continually find the mercenaries another target. The most obvious target is Israel itself.  All in all Israel may have felt its position more secure with Mubarak, Assad and Gaddafi as neighbours.

Sunday, 29 July 2012

A Reply To Paul Smith - Part 3

Paul continues,

Thus he is more optimistic about the future of capitalism than most bourgeois commentators today and thinks that financial crises can occur with no harmful effects on industry or employment.”

Which bourgeois commentators are these? Where am I supposed to have said that financial crises occur with no harmful effects on industry or employment? When I predicted accurately the Financial Meltdown of 2008, - Severe Financial Warning - I said the exact opposite! I have repeatedly said that unless the Eurozone politicians deal with the Debt Crisis, the consequence could be a Depression in Europe!

Nor have I said that Trotsky agreed with Kondratiev's theory of the Long Wave. I have said that Trotsky did argue that Long Waves existed, which can be seen by reading Flood Tide , and even more clearly in The Curve Of Capitalist Development.

Trotsky's position as set out in the latter is far closer to that of Kondratiev than Paul or Mike McNair suggest. Moreover, there are clear contradictions in Trotsky's argument in relation to those points where he does differ, as well as misrepresentations of Kondratiev's actual argument. For example, Kondratiev never said that the Long Wave was a fixed 50 year period, as Trotsky says, but said it varied in length between 40-60 years. In fact, the proportionate degree of variation in the Long Wave Cycle is less than that of the shorter cycle which historically varied between 7-10 years. Trotsky begins by quoting Engels,

So here the materialist method has quite often to limit itself to tracing political conflicts back to the struggles between the interests of the existing social classes and fractions of classes caused by economic development, and to demonstrate that the particular political parties are the more or less adequate political expression of these same classes and fractions of classes.

It is self-evident that this unavoidable neglect of contemporaneous changes in the economic situation, the very basis of all the processes to be examined, must be a source of error.”

In the diagram, Trotsky indicates the course of economic development mapped against Kondratiev's long wave trend line indicating clearly the periods where there is Long Wave Boom and decline relative to the trend. On it, Trotsky also maps the great historical events. The whole point of Trotsky's argument against both the Opportunists and the Ultra-Lefts with whom he was arguing within the Comintern was that it is precisely the conjuncture, and indeed the sharpness of conjuncture between these two types of periods that is the stimulus for wars and revolutions, a conclusion that Kondratiev would not disagree with.



Oscillations of the economic conjuncture (boom-depression-crisis) already signify in and of themselves periodic impulses that give rise now to quantitative, now to qualitative changes, and to new formations in the field of politics. The revenues of possessing classes, the state budget, wages, unemployment, proportions of foreign trade, etc., are intimately bound up with the economic conjuncture, and in their turn exert the most direct influence on politics. This alone is enough to make one understand how important and fruitful it is to follow step by step the history of political parties, state institutions, etc., in relation to the cycles of capitalist development.

By this we do not at all mean to say that these cycles explain everything: this is excluded, if only for the reason that cycles themselves are not fundamental but derivative economic phenomena. They unfold on the basis of the development of productive forces through the medium of market relations. But cycles explain a great deal, forming as they do through automatic pulsation an indispensable dialectical spring in the mechanism of capitalist society.”

It is clear given the political conditions under which Trotsky was writing why he would want to distance himself from the Menshevik Kondratiev, and from the charge of Economism. But, his argument that the turns of the Long Wave had to be viewed in terms of political and other superstructural events sits oddly with the thrust of his argument, and his quote from Engels with which he began. Indeed, he writes himself,

There has been no lack of caricature conclusions drawn from the Marxist method! But to renounce on this account the above indicated formulation of the question (”it smells of economism”) is to demonstrate complete inability to understand the essence of Marxism, which looks for the causes of changes in social superstructure in the changes of the economic foundations and not anywhere else.”

So, on what basis can he argue in relation to the long wave fluctuations,

The acquisition by capitalism of new countries and continents, the discovery of new natural resources, and, in the wake of these, such major facts of “superstructural” order as wars and revolutions, determine the character and the replacement of ascending, stagnating or declining epochs of capitalist development.”

The Long Wave Boom that accompanied the Industrial
Revolution prompted a drive for new resources.  Today's
Long Wave Boom has prompted a Gold Rush in C. Asia.
Was Colonial expansion entered into out of a whim? Was it responsible for a growth of Capitalism, or was it that the growth of trade, led to the development of a Merchant Class, that was led to find new markets and sources of new materials. That a Landlord Class reaching the limits of Rent income at home within the confines of Feudalism, saw the potential of aligning with this Merchant Class for Colonial expansion? Did, new natural resources just happen to be found by accident, which then prompted economic development? Or was it that rising trade, and then rising economic activity, drove the prices of raw materials, foodstuff higher, which in turn created the economic conditions, which encouraged a search for new sources of materials etc. Is it wars and revolutions, which are the primary factor, which determine these changes in conjuncture, or as Trotsky himself says, within the same article, the sharp changes in conjuncture that create the conditions for War and Revolution?

An Historical Materialist analysis demonstrates that Trotsky had it the wrong way around, and Kondratiev the correct interpretation. The discovery of new resources occurs because, rising demand for them arising from rising economic activity drives the price higher and encourages exploration and development, as well as more efficient means of production. That has been quite clearly witnessed during the current Long Wave Boom. In 1999, primary product prices had reach a low point not because of new sources of Supply, but because of the effects of the Long Wave decline for the previous quarter century depressing demand. When the new boom started, it created huge new demand, and sent primary product prices soaring. That in turn prompted a massive new round of exploration and development of new resources. That has been the typical sequence in past Long Wave cycles too.

Of course, this is a dialectical not a mechanical relation. That is why each Long Wave is different. Its rather like the role of the individual in history. Marxists do not claim that say the Russian Revolution occurred because of Lenin. The conditions in Russia created a Lenin, but that does not change the fact that this particular Lenin was a specific unique individual, who put his mark on events in a way that some other Lenin would not have done.

Lenin, was quite clearly wrong in what he said in 'Imperialism', it has all the hallmarks of a provisional analysis written as it was, largely for propagandistic purposes, at a time of Imperialist War. It has been a pretty useless guide to the development of Imperialism during the last century. In fact, Kautsky's Theory Of Super-Imperialism has been a closer match to actual developments.

If Trotsky and Lenin were correct, then there would not have been the Long Wave Boom from 1949 to 1974. Then too, the Stalinists, and many Trotskyists were proclaiming that the Boom was not real, that it was based on appearances, that it was just a temporary upward blip and so on. Ironically, they only realised they were wrong, at the point in the late 60's when it was coming to an end. By that time they had convinced themselves that Capitalism had become crisis-free, which led them to become Keynesians.

Similarly, Marx and Engels for much of the adult life experienced Capitalism during that period of Long Wave decline, which is manifest in the First Great Depression of the 19th Century. It is not surprising that having witnessed the Revolutions of 1848, and witnessed this long period of stagnation and decline that they should see the potential for Capitalism as being limited, and the likelihood of a Proletarian revolution following on close behind the Bourgeois revolution as much greater than it was. In fact, Engels admitted later in life that they had grossly over exaggerated that possibility. Engels, did not live long enough to witness the full effects of the Long Wave Boom that began around 1890, and which created the economic conditions that led to the growth of new trades unions, and the establishment of mass workers parties.

The Post War Boom was based on
development of a range of new industries
and products, using new technologies.
 Contrary to Stalinist claims, Capital grew, and
workers living standards rose.
When that Long Wave Boom ended and created the conditions for WWI, and the rash of European revolutions and upheavals of the next decade, it is not surprising that Marxists saw the return of those conditions as heralding once more the limits of Capitalism, and the inevitability of revolution. That was the conditions which framed the narrative set out by Trotsky above. But, likewise, it was those very economic conditions, which, when the workers failed to secure power, led to a diminution of the strength of workers, and created the conditions under which Capitalism could re stabilise itself, before entering a new period of rapid economic growth and dynamism, as a new Long Wave Boom commences.

Paul argues,

If capitalism is in decline, then greater socialisation and politicisation of the economy will be an observable tendency. I have cited the dependency of Chinese accumulation on Stalinist bureaucratic and political controls over workers as an example of this.”

In fact, what Paul originally claimed was that Britain had seen an increase in bureaucratic control over the Labour Movement in the post-war period. Quite clearly wrong, because that was the period of growth of the Shop Stewards Movement! Actually, the Stalinists in China have been forced to agree to higher wages for workers as labour shortages arise. The massive rise in investment in China clearly has little to do with such controls by Stalinism, and everything to do with the fact that Capital has found both a massive new source of available cheap labour power to exploit, along with the potential on the back of such development for the creation of a vast new market into which it can sell its products, and thereby realise Surplus Value. If anything, what is being seen in China, as elsewhere, when such development occurs, is workers increasingly asserting their independence and creating their own organisations! China is now developing a Welfare State, to assist in the reproduction of Labour Power, and to ensure that Chinese savings can be mobilised for consumption. Paul argues that the increasing role of the Capitalist State is yet another sign of the decline of Capitalism. But, how then does Paul view the increasing privatisation of State Capitalist provision? In fact, what we see is that the development of the productive forces is now proceeding to such an extent that Capital is no longer reliant on Fordist mass production of things such as Health Care and Education, which could only previously be delivered effectively via the State. New productive forces and relations mean that these commodities can now be effectively produced privately. A development that Aglietta forecast twenty years ago.

Paul claims that State capitalist workers produce neither Value nor Surplus Value, which contrary to his statement is not at all compatible with what Engels says in the quote I provided.

The modern state, no matter what its form, is essentially a capitalist machine, the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers - proletarians. The capitalist relation is not done away with. It is rather brought to a head” (p360).
State workers in Health or Education produce those commodities in exactly the same way that identical workers in the private sector of those industries do. All that is different is the method of payment for the commodities produced. They are commodities sold to workers, and paid for out of society's wage fund. It is even called “The Social Wage”! Alan Freeman in 1991, in “Quantitative Marxism” shows that in the UK during the whole post-war period, the Social Wage was negative. In other words, workers were paying more in “taxes” for these various services than they received back in Value from them, emphasising once again that the State Capitalist produces them as commodities, and extracts Surplus Value from the workers it employs to provide them.

But, what is this “increased sense of solidarity between workers from below”, he is referring to? Trade Union membership is down, industrial action is down, there are widening divisions between workers in the private and state capitalist sectors! How on Earth from any perception of current conditions can he conclude “Workers are therefore more powerful”! And that process began not as a result of Capitalism growing, as it is now, but precisely from the period of its defeat, which was in turn made possible by the end of the previous Long Wave Boom, and the downturn that began in the mid-1970's! In fact, Paul's argument in this regard is precisely the kind of nonsense that Trotsky attacked in “Flood-Tide”. It is precisely the fact of capitalism developing the productive powers that makes Socialism possible, and the more it develops them the more easily Socialism can be constructed, which is why Marx believed it would happen first in Britain as the most developed economy. Far from it being decline that strengthens workers position as Paul believes, it is growth as Trotsky says,

The Long Wave Boom in China and other parts of Asia,
has raised workers confidence and consciousness.  As in
the past, such development sees, new independent workers
organisation at the grass roots.
But a boom is a boom. It means a growing demand for goods, expanded production, shrinking unemployment, rising prices and the possibility of higher wages. And, in the given historical circumstances, the boom will not dampen but sharpen the revolutionary struggle of the working class. This flows from all of the foregoing. In all capitalist countries the working-class movement after the war reached its peak and then ended, as we have seen, in a more or less pronounced failure and retreat, and in disunity within the working class itself. With such political and psychological premises, a prolonged crisis, although it would doubtless act to heighten the embitterment of the working masses (especially the unemployed and semi-employed), would nevertheless simultaneously tend to weaken their activity because this activity is intimately bound up with the workers’ consciousness of their irreplaceable role in production.”

The Stalinist amalgam sought
to avoid dealing with arguments
or providing facts.  It relied on
demonising the opponent by linking
them with known hate figures.
In his final paragraph it seems Paul cannot decide whether he wants to agree with me, or to attack me! On the one hand he agrees Capitalism is not about to collapse. He believes that in the absence of that all that is possible is for workers to create Co-ops, which might ameliorate their condition. He argues that an alliance to build such Co-ops is needed, but then has to jump back, and argue that my natural allies would be anarchists and liberals, who also advocate Co-ops (I'm only surprised that in order to make this Stalinist amalgam complete he didn't add David Cameron to this list of ne’er do wells), and protecting himself with garlic, rushes to add that a Marxist Party would try to win over people from this perspective. Of course, he doesn't tell us what perspective it would try to win them to! What perspective does Paul propose? The kind of Economism of Trade Union struggle to ameliorate their condition, that Marx argued against, when he argued instead for creating Co-ops, perhaps. The same Trade Union, Economism that reproduces bourgeois ideology. Or perhaps, Paul would have this “Marxist” Party, win them over to the Fabian policy he seems so attached to of building the power of the Capitalist State. In that case, they may as well just join the CPB or the Bennites.

Back To Part 2

A Reply To Paul Smith - Part 2

Paul claims,

Bough agrees with Kondratiev that it is technological change (such as the invention of computers) that triggered this wave.”

I have said no such thing. The causes of the beginning of a new Long Wave are manifold, technological change being only one of them. As I pointed out to Tony Clark in another reply it is also down to the length of time required to develop new sources of raw materials etc. A fundamental aspect is the development of whole new industries, and products, some of which can be based on technological changes from a long time before. For example, the steam engine was based on a technological discovery back in ancient Greece. Yes, I do believe that if Capitalism were no longer able to develop the productive forces then it would be in decline. It is no different than Marx's statement that no Mode of Production leaves the stage of history until, it has exhausted its potential to develop the productive forces!

Paul says,

For Bough, ‘decline’ would only make sense if research into science and technology ceased and the tendency towards greater automation reversed.”

Why? There could be increased research, but nothing new coming out of it. The number of workers employed across the globe, and the level of their consumption could reach such a level that it was no longer possible for capital to create new Use Values that could be sold profitably to them, which would mean Capital would have no reason to invest in trying to do so. Why would it require the tendency to greater automation to be reversed? In fact, one of the greatest developments of higher value production by Capital in recent years, has been in knowledge based production, and in other forms of high value production that relies on highly skilled, often highly paid, complex labour rather than on automation! In fact, some of the development in Financial Services (by no means all of which is unproductive in a Marxist sense) fits this description.

Paul asserts,

In other words, it would mean an absolute collapse of the system leading to mass impoverishment.”

Why? Such a situation could simply lead to stagnation, or low growth. If it were accompanied with falling population growth, then stagnant productivity growth, which is the concomitant of no development of the productive forces, could actually lead to higher per capita living standards for workers.

Paul's accusation that my description of decline is “Stalinist” is laughable. As Mandel points out the Stalinists continually tried to “prove” that living standards were really falling in the West, when it was obvious they were rising. The Stalinists believed that Lenin's pronouncement in “Imperialism”, that Capitalism was in decay, required denying that any real progress was being made. In other words, it is the Stalinists who made exactly the same arguments that Paul is making today! It is Paul who treats Lenin's 'Imperialism' as though it were some Holy Manuscript. But, sine the 1980's, at least, many, if not the majority, of Marxist economists have recognised that Lenin's “Imperialism”, was theoretically flawed, and factually incorrect even at the time it was written. As Bill Warren points out in “Imperialism: Pioneer of Capitalism”, for Lenin it is a pretty shoddy piece of work that relies heavily on the analysis of the British Liberal Economist Hobson for the role of Monopolies, and their activities in the Colonies, and on Hilferding's “Finance Capital”, which was a phenomenon particular to Germany.

The Human Genome was decoded by a private
 company.  It is already leading to many new
treatments that will replace existing drugs,
 more cheaply and effectively.
As Warren states, many of the comments that Lenin makes, and which today's faithful repeat, are so hedged around with caveats as to make them meaningless. Unfortunately, today's believers, like Paul, always forget to consider or to mention the caveats, a process that began with Stalinism in the late 1920's. For example, Lenin gives examples of various inventions that were supposed to have been invented that Monopolies prevented from being introduced. Stories of this kind have always abounded, and Marxist economists in later years have found that most of them are untrue. In general, Monopolies have an incentive in cornering the market of any new wonder product. Having provided these examples, Lenin continues,

Certainly, monopoly under capitalism can never completely, and for a very long period of time, eliminate competition in the world market (and this, by the by, is one of the reasons why the theory of ultra-imperialism is so absurd). Certainly, the possibility of reducing the cost of production and increasing profits by introducing technical improvements operates in the direction of change. But the tendency to stagnation and decay, which is characteristic of monopoly, continues to operate, and in some branches of industry, in some countries, for certain periods of time, it gains the upper hand.”

Even in high value production like surgery
technology is intervening via robots, to reduce
costs, and boost profits.
Just look at all the provisos! Monopoly cannot, either completely or for any length of time eliminate competition. A fact that Marx had made clear in the Poverty of Philosophy against Proudhon. As Marx puts it, Monopoly begets Competition, which begets Monopoly, which begets Competition at a higher level. Lenin recognises that the potential for reducing costs and raising profits by introducing technical improvements works in exactly the opposite direction of the decay he had just described! And, what have we seen in the period since WWII, is precisely that Monopoly Competition has raised the level of competition to ever new heights. Not competition to lower prices, though that has been a necessary consequence of the massive increases in productivity – but one of the roles of Central Banks has been to ensure that it is only real rather than nominal prices that fall – but precisely what Lenin describes here. These large Monopoly firms have competed by seeking to continually raise productivity through large scale investment, economies of scale, the introduction of better machines and systems such as Taylorism, and Toyotism etc. It has been precisely this competition to reduce costs, and extract Relative Surplus Value, that has driven rapid technological change of the kind that Lenin hedges his statement about decay with here! But, Lenin ends the paragraph about decay with the provisos of all provisos. This decay is neither ubiquitous, nor permanent! Rather it may only operate “in some branches of industry”, and only in “some countries”, and then only “for certain periods of time”!!!! It is on this theoretical rock that Paul builds his church!

Paul in one of his previous letters had also used Lenin's work to claim that Imperialist states had only been able to develop their Welfare States because of the super exploitation of their Colonial possessions. As Warren points out Lenin's theory in relation to the connection between Colonisation and Monopoly is obviously factually flawed. The country with the largest Colonial Empire was Britain, but its economy was the least dominated by Monopolies. The country whose economy was more Monopolised and characterised by Hilferding's “Finance Capital” i.e. Germany, essentially had no Colonies to speak of. The other economy that was dominated by large industrial monopolies, the US, had no Colonies. In fact, under the Munroe Doctrine, it also warned European Colonial powers to keep their hands off Latin America. Worse still, the development of these huge Monopolies could hardly be an explanation of the carving up of the world, because the development of these large monopolies that Lenin describes did not occur until the end of the 19th century, and by that time the world had already been carved up!!!

There undoubtedly was exploitation of Colonies on the basis of unequal exchange, because the Colonies were the product of European Landlordism and Merchant Capital. That is how both these forms of Capital extract surplus. But, Imperialism, the expansion of industrial Capitalism is not Colonialism. Contrary, to Lenin's expectations, based on an analysis of Colonialism, the world was not carved up into a series of Colonial possessions, but the very opposite happened. The Colonial Empires were broken up, with a good degree of urging from the US, and capitalism expanded not through the combination of Monopolies and their own domestic State, via military conquest, but through the global expansion of multinational and transnational companies that increasingly had no particular allegiance to any one State, and which encouraged all states within the system of states to create international state bodies, and legal structures, to facilitate their operation throughout the globe.

Contrary, to Lenin, in many of the colonies, which were dominated by Landlordism and Merchant and Money Capital, there was no major investment of Capital. The largest Capital flows by far went not to these economies, but to other developed “Imperialist” economies. Only when some of these ex-colonies achieved a minimum standard of infrastructure, and other basic requirements, did industrial Capital begin to invest in them in a large way, and by and large the consequence has been progressive. Instead of super exploitation, these economies have been able to industrialise rapidly, to an extent that many of them now challenge the “Imperialist” states themselves in global markets.

Fordist Education Factories mass produce
new workers to meet the needs of Capital.
So Paul's claim that the development of Welfarism as only possible on the back of super exploitation of the Colonies is as baseless as his other arguments. Germany, which had no Colonies to speak of, developed elements of a Welfare State (in Prussia) in the 1820's. It was the first to have a National Insurance Scheme by the end of the 19th Century. The US, which had no Colonies developed free State Education at a fairly early stage, to meet the needs of US Capital, which was developing on the basis of a rapid development of technology. But, Paul also argues that the most rapid growth in Welfarism occurred after WWII. But, that is precisely the period when the Colonial Empires were being dismantled! In the US, which again still had no Colonies, Fordism developed on the basis of Company provided Welfarism, and did so not because of super exploitation of Colonies, but through the rapid expansion of Relative Surplus Value made possible by Taylorism, and mass production techniques! Precisely, the basis upon which Welfarism was expanded after WWII across Europe. Once again, Welfarism is not the product of Capitalist decay, and the decline of Exchange Value as Paul would have us believe, but was the product of rapid technological change by Capital, making possible the rapid growth of Relative Surplus Value, which funded Welfarism, which in turn provided the essential commodities (Health and Education) to workers via mass production (Fordist) methods that were both the most efficient for Capital at the time, and which met its needs for the reproduction of labour-power.

Was it Really?
Instead of seeing this development of State Capitalism for what it is, Paul instead sees it once again as an indication of decay, and yet at the same time sees in it something socialist, representing the replacement of the market with some form of planned production of Use Values. Oddly, he views it as being, therefore, unproductive! Once again, these are ideas that have come down through Stalinism and Fabianism. In what sense does a miner go from being a productive worker one day, to becoming an unproductive worker the next, just because the Capitalist State has become his employer? Clearly he does not. The same is true for steelworkers, railworkers, nurses, doctors, teachers etc. All of these workers are involved in producing commodities, which are sold to the working-class. They may provide them being employed by a private employer or by a State capitalist employer. In either case they are employed by Capital, they produce commodities, and they produce Surplus Value. Whether that Surplus Value is appropriated by their own employer (be it a private employer or the State) is irrelevant, because as Marx demonstrates in his Transformation of Values into Prices of Production, the total Surplus Value produced by all workers is shared out by Capital in accordance with the Capital employed via market prices. In reality, the existence of Monopoly power, and the way in which Capital uses the State to meet its needs means that the actual allocation of Surplus Value is more complicated than that.

All Capital, be it small scale Capital or State Capital produces Use Values, because as Marx says, nothing can be a commodity unless it is also a Use Value. Someone must want it. All Capital is, therefore, forced to organise its production to produce to meet the needs of consumers, because unless they do so, they do not sell their products, and they do not realise their profits. To claim there is something different about State Capitalist production because it produces Use Values rather than things to sell is simply wrong. Moreover, what the Capitalist State does in relation to commodities like Education and Health, is that it uses its monopoly position to sell these commodities to workers as a captive market, in the same way that 19th century Capitalists did via the Truck System. It is not at all true to say that these Use Values are produced to meet needs of, or that they are provided free to workers. The only needs they are produced to meet are the needs of Capital, which is why they are reduced whenever Capital experiences a prolonged or serious economic crisis, which reduces its needs for labour-power.

They are merely important commodities required for the reproduction of labour-power, and as such Capital forces workers to buy them in sufficient quantity and quality to meet its needs, and to pay for them via taxes. The situation was even clearer in regard to State owned industries such as Coal, Energy and Steel, where market prices to domestic private industries were set at such low levels as to ensure a direct transfer of the Surplus Value created by State workers to private Capital.

As Engels puts it in Anti-Duhring,

The modern state, no matter what its form, is essentially a capitalist machine, the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers - proletarians. The capitalist relation is not done away with. It is rather brought to a head” (p360).

Back To Part 1

Forward To Part 3

A Reply To Paul Smith - Part 1


This blog post is a reply to Paul Smith's letter in the weekly worker (19th July 2012). This follows a prolonged series of letters between us that started after I took issue with some of the points he made in an article - The Politics Of Fear & Despair.  Unfortunately, that discussion has followed a well worn path. Paul makes a number of statements about the global economy being in crisis, without producing any actual data to back up that claim. Then, when I do provide data, showing that no such decline is occurring, Paul, again without providing any data to back up his claims, merely responds by saying well the facts you have provided might mean something else.

I feel a bit like Richard Dawkins in a discussion with an evangelical. The problem with any such discussion is that it is always more difficult, and more tedious, to prove your case, with resort to the facts, and to present such a complete and indisputable set of facts, than it is for someone, who simply bases their case on dogma, to simply reiterate their articles of faith, and to question the data you have provided without providing any data of their own to demonstrate that it is, in fact wrong!

Replying to Paul's latest letter adequately would have taken up more space than could reasonably have been done in a letter, so I have agreed with the comrades at the WW, instead to provide my response here, with a letter to their paper, referencing it instead. In order to make the whole debate intelligible without recourse to searching out and reading all the preceding correspondence, I have tried here to summarise the main points of the debate. I agree with Paul when he says that it is important to have this debate, because the question of whether Capitalism is in fact in decay, is important. What is also important is the question of what consequences such decay have for socialists and their strategy. I have, therefore, expanded that discussion to look at what Trotsky had to say about the role of the Long Wave, and its consequences for political action. In order that this extended response is in more manageable pieces I have divided it into three parts.

It is important also for what the continual search for such crises, and collapses, says about the mentality of the Left itself. As I have stated before, the psychological roots of this kind of Catastrophism are the same whether it is manifest in the form of religious prophecies, predictions of Environmental Calamity, or Economic Crisis. Psychologically it represents a sort of defeatism and demoralisation. Those predicting, and in reality hoping for some kind of catastrophe are really admitting that they have given up trying to exert control, and have instead come to rely on some external force coming to their rescue. For the religious it is the Second Coming. For Environmentalists it is a combination of a hope that predictions of some calamity will lead to people changing behaviour, or in its worst form, seeing such a catastrophe as the means by which industrial development etc. is brought to a halt. For, the Left its a hope that such a catastrophe will lead to some miraculous process whereby the working-class rise up, having become class conscious, overthrow Capitalism and proceed to Socialism. It is of course, absolute nonsense and nothing to do with Marxism.

The extent that that is the case can be judged by the fact that such a collapse is also looked forward to by those on the Far Right of various stripes. UKIP are making the most of the current European Crisis to argue for a return to Nationalism, and autarchy. The BNP are doing the same, and see any serious collapse as precisely the conditions in which in the past Fascism has prospered. The Anarcho-Capitalists seek such a collapse because they see it as the means of destroying “phoney Capitalism”, and bringing about a return to some kind of 18th Century economy based on a myriad of small, essentially peasant owners. In reality, those on the Right have far more reason to hope for such a collapse than the Left. Any prolonged period of economic weakness will, as it has in the past, act to weaken workers organisations further, weaken workers solidarity and ability to resist, and promote all of the individualist notions of a war of all against all, that such conditions necessarily create, as well as bringing to the fore all of those baser human instincts that go with it, and which are the feeding ground for the Far Right. For all those reasons this debate is important.

Paul Smith says,

Bough’s science conforms to the inductive method. It relies on generalisations from observable facts or data. These consist of growth and trade statistics.”

My science relies on the same method as Marx, which is to begin with the facts and then try to analyse them honestly. By contrast, Paul's method is to begin with a preconception based on faith, and then trying to use any argument you can to deny the facts, without actually providing any factual evidence yourself, to prove that those facts are invalid! I have not at all relied on generalisations from observable data, but have provided extensive data on both a global and national basis showing that not only is Capital not in decline, but is growing at a very rapid pace. Moreover, that pace measured by global GDP, by the growth of trade, by the growth in the global labour force by around a third in the last decade, by the growth in capital accumulation, and by the extent of new technological developments, has markedly increased in the last ten years, indicating the power of the current Long Wave Boom. Paul does not actually provide any evidence to back up his argument that the massive growth in output is not really an indication of vibrancy, he is content to simply try to find some possible explanation for the facts not fitting his religious belief.

Let us look at the actual economic data I have presented that Paul refuses to accept proves that, not only is Capitalism not in decline, but Global Capitalism is experiencing the most powerful Long Wave Boom in its history.

  1. Of all the goods and services produced in Man's entire history, almost 25% have been produced in the last ten years alone!

  2. From 1999 on, Commodity Markets turned sharply upwards, as demand for all raw materials, and foodstuff increased sharply as the new Long Wave Boom began. It has seen steady increases in the prices of Copper, Oil, Corn and almost every other commodity, as global demand, fuelled by rising economic activity in China, and other BRIC economies, as well as the rising demand of millions of new consumers in those economies rose sharply

  3. The extent of the new Boom starting from 1999 can be seen in the change in the figures for world trade. Between 1980 and 1990 global trade rose from around $4,000 billion to around $6,000 billion, remaining flat until around 1994 (i.e. 50% rise in 14 years). Between 1994 and 2000 it rose from around $6,000 billion to $12,000 billion (i.e. 100% rise in 6 years). But, the sharpest rise has most notably been since 2002 where it rose from around $12,000 billion to around $28,000 billion by 2007 133% rise in just 5 years!). (Source: WTO Thomson Datastream)

  4. In 2007, Bridgewater Associates in its comprehensive survey found that for the first time since 1969, not one single economy in the world was in recession.

  5. It was not just the BRIC economies that were experiencing rapid growth like China's growth of around 10-12%. On the back of its demand for food and raw materials, economies in Latin America were growing rapidly, and for the first time economies in Africa and Central Asia were beginning to grow rapidly too. Azerbaijan grew at around 26% as did Angola, whereas Mauritania grew at around 18%.

  6. Even after the Financial Meltdown of 2008 caused western economies to freeze, the economy in China continued to grow at around 8-10%, and many of the other BRIC economies, as well as the economies in Latin America and Africa, and Central Asia, providing them with foodstuffs and raw materials continued to grow strongly too.

  7. Those economies that adopted Keynesian stimulus measures quickly recovered from the Financial Meltdown, as the Banks were nationalised, and liquidity put into the system. The US at one point was growing at an annualised rate of 5%. It is still growing at around 2% p,a, The UK was growing at around 2.5% p.a. before the Liberal-Tories crashed the economy with their Austerian economic madness. Even with the Eurozone Debt Crisis, the Eurozone, and the EU as a whole has largely not fallen back into recession. Some of its economies have grown rapidly.

  8. Until recently, Germany was growing at around 3% p.a., whilst Sweden was growing even faster.

  9. World GDP has risen from around $41 trillion in 2000, to around $70 trillion in 2011.

  10. According to the ILO, the world labour force has grown by around a third in the last ten years. The number of workers employed in industry has risen by around 30% or about 150 million workers, the number employed in services has risen by 35%.
Despite all of this data, Paul believes that any increase in economic activity is really just a mirage, which can be accounted for by the growth of Financial Services or other unproductive activity!

He then says,

As far as I know, there is no statistical evidence that can distinguish between growth rates and capital accumulation.”

I find that an astonishing comment for anyone who considers themselves an Economist to make. If Paul is so ignorant of basic economic data, its no wonder he relies on his faith, and repeating ideas put forward by Lenin 90 years ago (which were wrong even then). The World Bank amongst others produce lots of such freely available data. Its website provides the data on Fixed Capital Formation, for instance, a standard measure used by economists to gauge capital accumulation. It shows that FCF rose from around $7 Trillion in 2002, to $14 Trillion in 2010. That is, not only did World Output double in the last decade, but Capital Accumulation also doubled.

Paul has tried to claim that the growth in output has been all down to the growth of Financial Services, though, of course, he has provided not one single piece of actual data to back up this assertion. The data on FCF shows this to be false. The data on growth in goods and services shows it to be false, and what is more the growth in the number of additional industrial workers (up 30% or around 150 million workers) shows it to be false. The only figure in this respect that Paul has given is the growth in the value of derivatives. But, these do not figure in the calculation of trade or GDP figures. The only aspect of this that would so figure, is the earnings of Financial Institutions involved in the trade.

He says,

I contend that growth rates do not distinguish between prices and value.”

But, according to Marx from the perspective of Capital in General, prices equate to values! He continues that the data “show nothing of growth in productivity or in job creation.” But, I have provided the data showing that the global working class grew by around a third in the last decade, or around 500 million workers, a fact he seems to have completely ignored. The majority of that growth has been in developing economies, precisely where the majority of industrial production has been concentrated, whereas it is in developed economies like the UK and US, where Financial Services are located. And, of course, during that period we have also seen a considerable growth in productivity as a consequence of the introduction of computers, robots etc. The combination of rapidly rising productivity, and of rapid growth of the labour force, is itself a powerful indication of the extent of growth, and of Capital Accumulation.

Paul continues,

He seems to be unaware that rapid growth can be an expression of decline.”

Ask those tens of millions of workers in China, or India who have been “rescued from the idiocy of rural life”, and have seen their living standards rise dramatically whether this rapid growth looks like decline to them! Of course, other than referring to a rather tenuous link with the expansion of a star before it goes into supernova, he provides no explanation of what he means by this claim. The only basis of it in Marx, is his statements about how a crisis of overproduction arises. But, there is no indication that there is any such crisis of overproduction. As Engels recognised towards the end of his life, the establishment of large Trusts and Monopolies had removed the element of planlessness within Capitalism. The linking of those Trusts and Monopolies to a large interventionist Capitalist State, has further removed the element of planlessness. Crises of overproduction today manifest themselves not in the way they did in Marx's time, but by Capital running up against the limits of consumption. That is, Monopolistic Competition drives large firms to seek to win market share by continually improving quality, and reducing costs of production through innovation. Continual reductions in costs, bring about continual reduction in Exchange Value. Meanwhile, workers consumption needs are increasingly satisfied for the range of available Use Values. That is particularly true of the period of Fordism that accompanies the last Long Wave Boom, whereby large firms operated on a basis of “mutuality agreements” with Trades Unions, providing annual rises in real wages linked to even larger rises in productivity.

In order to sell these Use Values, firms are forced to reduce prices to levels that do not ensure the reproduction of the Capital consumed in their production. Monopolies, slow down, and then cease large scale investment, and during periods of more serious downturn, actually reduce their Capital, sacking workers and so on, which acts to further reduce Aggregate Demand, adding a further downward twist to the spiral. Only when a new Long Wave Boom starts to form, and new types of Use Values are developed to be sold, at a profit, which provide an outlet for capital investment, does it become possible to begin increasing Capital Accumulation at a rate that creates the conditions for sustained growth. Given that what we see at the moment is vast new ranges of Use Values being produced, and even more on the horizon to be produced (3D TV's, whole new ranges of medicines, biotechnology etc.); given that we see rates of profit, both at a global, and enterprise level continuing to rise, from already high levels; given that we see Capital with no shortage of profitable productive outlets either at an industry or at a geographical level; given that we see technological developments on such a scale as to ensure that not only is there an increasing number of new products to be produced, but also the potential for massively increasing productivity; given that Capital Accumulation in fixed capital formation is increasing; given that Global GDP is growing; and given that global trade flows are increasing it is clear that there is no such problem of production exceeding potential consumption.

In fact, a look at the rapidly growing levels of consumption in China and elsewhere indicates how far from the truth that is.

Forward To Part 2