Contradictions In the Global Economy
I have outlined on many occasions the background to the situation we have today. It can be summarised as follows.
1. The world economy moves in Long Wave Cycles of approximately 50 year duration.
2. A 25 year long upwave began in 1949, and began to come to an end in the late 1960's, ending around 1974.
3. During the post-war period the relative increase in demand for labour enabled workers to become more confident, and similar to the description provided by Engels above of the boom period he was describing, the conditions favoured rank and file direct action, and organisation.
4. As the boom came to an end Capital had to take a more resolute approach, but the residual workers organisation and militancy meant they were also prepared to resist the bosses attempts to attack their pay and conditions. The workers were not adequately armed politically. The same conditions which increased their confidence and militancy led them to believe that these tactics could continue to succeed. It led to the ideas of reformism, and syndicalism.
5. After a period of stalemate lasting most of the 1970's, the ability of workers to resist only exacerbated the contradictions facing Capital, and, particularly in the older more decrepit economies like Britain, meant that Capital accumulation was even less than it would have been, competitiveness was hampered even more, and those very economic conditions weakened the position of workers to resist. With no Political Strategy to deal with such a situation, the door was left open for Capital to impose its solution.
6. By the 1980's Capital had found a number of economies in Asia where the conditions it required to make profits from available labour supplies existed. A process of real imperialist expansion began, as foreign Capital came in to develop large scale industrial production. It should be noted that this process is not that described by the Leninist theory of the necessity for Capital to expand overseas due to the build up of huge amounts of Money Capital, unable to find a home in monopolised domestic markets. This is merely, a reflection of the fact that the global economy proceeds on the basis of a combined and uneven development, and the natural inclination of Capital to move to where it can maximise profit, the process implicit in the notion of an Average Rate of Profit, and its continual formation as a dynamic process. By the same token this process does not require that the Capital so moving abroad is the Monopoly Capital of the Leninist theory. Although, the multinational is the classic form that enables such expansion, by this stage, even medium sized Capitals can and do locate production where the highest profits can be made. Again, this reflects the difference between Capitalism and Feudalism, precisely because Capital is a highly (and increasingly so) mobile form of property.
7. At the same time that a process of “de-industrialisation” occurred in the West, a process of industrialisation occurred in the East. Having defeated the working-class, Capital pumped liquidity into western economies and Japan, creating asset price inflation, and having removed regulation of credit, created the conditions of a debt-fuelled consumer boom, which disguised the fact that real income levels were falling or stagnant. In short, workers made up for stagnant incomes with increasing levels of debt, financed on the back of rising property prices. Contrary to Tory myths this began in the late 1980's, and led to the Crash of 1987 as markets took fright at the US twin deficits. It also led to the response to such crises with increasing amounts of liquidity and incentive to borrow more. This was the so called “Greenspan Put”.
8. This was an application of that same “Social-Democratic” ideology. The 1980 Brandt Report was an example of that. In a review of it in Capital & Class 16 (Spring 1982) Diane Elson commented, "...there should be a new institution, the World Development Fund, which would act as a kind of internationalisation of the Welfare State." The use of cheap money smoothed over the contradictions, and avoided the kind of deep recession, and social conflict of the 1930's. Though attention has focussed, quite rightly, on the role that the State played in defeating organised labour in the 1980's (though not so much in much of Europe where that Social-Democratic ideology had created a far more Corporatist regime, Italy was probably an exception, where the autonomist movement and syndicalist traditions had led to workplace accomodations, which ultimately resulted in Capital restructuring to undermine Labour, as the defeat of workers at Fiat demonstrated) it should also be remembered that the other side of this was the huge increase in Welfare spending by the State that fulfilled that very role described by Hayek of providing a minimum level of security. It was only possible, because of the simultaneous industrialisation of Asia, and the mobilisation there of vast reserves of labour, to produce waves of cheap commodities that flooded western markets, and helped to reduce the Value of Labour Power, such that the stagnant or falling nominal wage levels produced rising real living standards, particularly into the 1990's, as the downturn began to end, and a new vibrant boom got under way.
9. Asia built up huge surpluses, as did many very large multinational companies. These surpluses were mobilised to finance western debt, which in turn went to purchase commodities from these companies, and Asian countries. The consequence is the creation of the contradictions in the world economy that exist today.
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