Tuesday, 19 October 2010

The Class War In France

The term class struggle is usually abused. Its used to describe any strike or similar action. Lenin in one of his earlier writings argued that a strike does not constitute an act of class struggle. In almost every case a strike is merely a sectional dispute between a particular group of workers and a single employer.
The only lesson the workers can learn from such a dispute he goes on, is the lesson to bargain within the system. It is only when workers generally are forced into a confrontation with the State, which acts as the representative of all Capital, that it can be described as a “class” struggle. On that criteria, the events in France at the moment constitute class struggle in the true sense.

Much has been made of the comparisons of Sarkozy's stand against the unions with Thatcher's stand against the Miners in 1984. The situations are not the same. In 1984, the global economy was entrenched in a new Long Wave downturn. Workers had experienced the Second Slump of 1974, and had been forced to engage in repeated defensive struggles for a decade leading up to 1984, in economic conditions, which were steadily turning against the working-class with rising job losses, and unemployment, as Keynesian stimulus led only to stagflation. The decrepit British economy was worse placed than most to deal with such conditions, particularly as the success of British workers in resisting changes and restructuring that would have raised productivity levels and competitiveness, meant that British Capital had less room for manoeuvre.
By the time the 1984 Miners Strike came along the workers were on the back foot, and also lacked a political leadership that had any workable strategy. Moreover, Thatcher was careful to only pick fights with one group of workers at a time. Each victory for the State, and every defeat of the workers strengthened the former and weakened the latter, as the Ridley Plan had envisaged. Even in terms of the attack on the State, Thatcher's rhetoric was not backed up by action. From Day One, opposition to Cuts came from within the Cabinet, and the Cash limits were breached in the first year. Workers were offered enhanced welfare payments if they were over 59 for agreeing to sign that they were happy not to look for work. Money from North Sea Oil was used to grease the wheels by allowing Welfare spending to rise alongside unemployment and other benefits. When Thatcher took on the Miners she was taking on a single group of workers apart from the support that could be mobilised for them by rank and file activists. She learned the lesson of Lenin, she limited it to a sectional rather than a class struggle – though it is the closest thing we have come to a real class struggle in Britain for a long time.

About five years ago I wrote a post describing the progress of the Long Wave. I produced another copy of that post a few years ago Prepare To Dust Off The sliding Scale. In it I wrote,

“I think all of these elements can be identified in the present conjuncture, and that should give confidence to Marxists that once more the conditions are developing for militant working class struggles. How these struggles manifest themselves will differ.
In China wages are rising by 10% plus per year, and there are clear signs that Chinese workers are beginning to become more organised. The same is true of workers in South Korea and other rapidly growing Asian economies. Under these conditions workers struggles are likely to take on increasingly an offensive nature. Yet in the US, the UK and Europe despite signs of economic growth it is anaemic compared to China and elsewhere. The reason is that these economies are hugely inefficient compared to China which combines the latest technology, with low wage labour. Consequently, we see Delphi declaring bankruptcy with GM looking to be not too far behind.

In Britain we see Peugeot closing Ryton etc. Britain and the US also have a problem with huge levels of public and private debt which has been run up as an alternative to their economies cratering during the downturn, but it now acts as a drag on recovery. As with the PCE in France, it is quite likely that workers struggles in these old economies are likely to have more of a defensive nature, but as the victory of the workers and students in France demonstrates, and following on from the victory against the neo-liberal EU Constitution, which no doubt also helped develop confidence for this current victory against neo-liberalism, there is an air of change beginning to sweep into the Labour Movement even in Europe. In the US too, the demonstrations against the regime’s attempts to bring in new Immigration Laws shows that within the lower depths things are beginning to stir.

Soon the nature of the struggles will noticeably change from being defensive to offensive struggles, and Marxists and Trade Union militants must be prepared to reorient to that situation, or there is a danger of being left behind the class.”
Not long after that was written we saw tanker drivers in Britain win a large pay rise, and we saw the disputes at LOR and elsewhere.
In China, in recent months, not only have workers been striking for 50% pay rises, but they have been demanding the right to establish independent Trades Unions. In its arguments against demands from the US to rapidly and radically revalue the Yuan, the Chinese Stalinists have said openly that if they take measures that threaten its economic growth, and ability to provide its workers with the kind of rising living standards they have started to expect, they would face widespread social unrest.

But, this is not 1984. We are not entering a Long Wave downturn but in the early stages of a Long Wave boom. That remains the dominant characteristic of the global economy. Two years ago when the Financial meltdown erupted I wrote,

“The problem that could arise given the scale is that the same causes of breakdown of trust and relations between Banks, which led to the Crunch could simply be transferred to the relations between States now acting as banks. We have already seen that to some extent. It was seen over the actions of the Dutch, Belgian and Luxembourg governments over Fortis. It was seen in the scramble for advantage when Ireland stepped in to guarantee all Bank deposits, threatening a stampede out of deposits in other EU countries. Most classically, it has been seen in the conflict between Britain and Iceland over deposits in Icelandic banks, and which was reminiscent of the 1970’s Cod War. It is certainly the case that some of these banks such as UBS of Switzerland have Balance Sheets bigger than the GDP of their host nations.

If this problem does begin to materialise – and it is clear even now that the huge sums put in by States will have to be increased – there are essentially only three solutions. The first is the Libertarian/Free Market solution, which I saw presented on TV the other day by Peter Schiff. It is essentially for the State to withdraw and allow the market to have its way. The argument is that the Banks that brought this on themselves by their actions will go bust – those that make this argument never consider that the biggest losers will not be the bankers who made the decisions, but will be the workers who lose their jobs, but who never had any say in the decisions that caused the crisis – and those Capitalists – in Banking or otherwise – who acted responsibly will do well and pick up the pieces. The Capitalist State will never adopt that position under current conditions. Were this at the beginning of a Long Wave downturn it might have no choice, and would prepare to promote fascism as it did in the 1930’s, to beat down the inevitable social eruption. For now, it has no need of so risky a strategy. Rather, it will either simply pump even more money into resolving the problem – a few years ago Ben Bernanke earned himself the nickname “Helicopter Ben”, because he argued that the Fed could defeat deflation by simpling printing dollars and dropping them from helicopters – or else it will seek to encourage the trillions of dollars held in various Sovereign Wealth Funds to come in and re-capitalise the collapsing financial system.

Both options have serious problems. In the main, Governments do not increase money supply by actually printing money. They achieve it by increasing the potential of the system to create Credit. In a severe Credit Crunch this option can be restricted precisely because the Banks and finance houses cannot be persuaded to create more credit – the analogy of “pushing on a string”. That problem is to some extent removed if those banks are State owned and controlled. But, if the problem becomes one of these State Banks themselves owing money to other State owned banks in other countries then, if the problem becomes severe it does become tempting to actually just crank up the printing press and pay these debts in devalued currency. That was what happened in the 1920’s in the Weimar Republic as a means of Germany repaying its commitments under the Treaty of Versailles. The consequence then, and now in Zimbabwe, of such a strategy is inevitable – hyperinflation.

Even without such a catastrophic likelihood, it is clear that the huge amounts of liquidity pumped into the world economy during this period will result in much higher levels of inflation – there is around a two year lag between changes in Money Supply and the effect on prices.... In order to avoid this problem, the better solution for Capital is to mobilise the trillions of dollars sitting in SWF’s around the globe, built up in economies with high savings rates, and which have prospered from a growing world economy as they have exported more than they have imported. But, there are problems with this too. Firstly, some of these SWF’s have already had their fingers burned. They already invested large amounts in US financial institutions and saw their investment collapse. In addition, the US over recent years has stepped in to block some foreign investments where it felt that they threatened US National or Strategic interest. Finally, in a situation where economic growth is slowing some SWF’s appear to be intent on ensuring they give precedence to putting money into their own economy and institutions.”

We've seen this in parts. The Banks were nationalised, in effect, but the State has refused to act in the way the Chinese Stalinists do, by directing investment.
So lending has not grown considerably. In part, also that is due increasingly to the fact that with the uncertainty created by Government policies, businesses are reluctant to make investment decisions. The only companies likely to want to borrow are those who need money to stay afloat, and those are not ones the banks are likely to lend to. We have seen the problem of inter state conflict, and that is essentially what the crisis of the PIIGS represents. Were these economies not constrained as a result of their membership of the Eurozone, they would have been free to devalue their currency, and print money to clear those debts. If the Eurozone actually operated as a single State then those problems would not have arisen in the first place. But, what we have seen over the last few months is precisely that process of a developing Currency War as each state or currency area seeks to devalue its currency, in order to repay its creditors with devalued currency, and in order to try to get out of its problems by cheapening its exports. Finally, in the last week or so we have seen China respond to pressure from the US, by making a public switch towards support for Europe. It has agreed to use its vast financial resources to support the Euro, and to buy Greek Government bonds.

But, as I have written several times, in a bourgeois democracy an overriding objective of parties is to get elected. The parties of the right, having lost the centre ground to parties like Labour have been forced to adopt a right-wing populist stance in order to get elected, and now they have become trapped by that. Having won elections on the basis of a programme of Cuts, they can't be seen not to be following through, partly because of the pressure from their base, and partly because such weakness would be punished by the markets.
The more likely option is like Thatcher to talk tough about Cuts, to attack the obvious and easy targets like Welfare, but to slide on the real long-term reductions on the size of the State. Given the increasing attacks on the policy of Cuts and the effect it will have on the economy and the profits of big business from the ideologists of the Big capitalists, and from people like Martin Wolf and Samuel Brittain in the FT, that seems increasingly likely.

But, the Falklands War showed that similar pressures can result in bourgeois government's becoming trapped in a course of action from which they cannot escape. It may be that the rhetoric from all of these Governments could become self-perpetuating, each being afraid to break ranks.

If the Democrats lose in the upcoming elections, and those Tea Partiers who share much of the Libertarian agenda of people like Peter Schiff, referred to above, become more influential, then that seems an increasingly possible scenario. In that case, Big Capital might have to respond by speeding up its restructuring in the West – I'm producing a blog post on this.

The short version of that is that if these governments send western economies into a renewed recession, then Big Capital will use it to carry through a restructuring. In the 1980's Capital began that process. Globalisation was part of it, but it also involved decentralisation of production in other ways, dividing its operation into a larger number of production centres, putting work out to contractors and so on. Big Capital reduced its risks by doing so. But, a more significant restructuring is necessary. During the downturn, Capital maintained western economies by moving into services in a big way. That label covers a multitude of sins. On the one hand it covers McDonalds and the like where unskilled, atomised, casual labour is employed in very low status, low paid jobs. At the other end, it includes Financial Services, which expanded massively, and absorbed significant numbers of people with high skills, high status, and high wages. But, this creates imbalances of the kinds we have seen. A reliance on one single sector such as Finance also poses risks for capital. The restructuring that is required is one in which labour in western economies moves into a whole range of new manufacturing industries based around high technology, high value added production. - at least until such time as global wage rates and living standards are more converged. The basic message is that this restructuring which could have occurred over the next twenty years, may happen over the next five. It will mean large numbers of redundancies in existing enterprises, and a rapid growth of these new industries. The new jobs created will be much smaller, but better paid – good news for all those unemployed graduates, not so good for those without skills or qualifications. But, the background will remain that of a Long Wave Boom. The higher profits of these new industries will speed up Capital Accumulation and growth, probably way beyond anything seen before.

This is the background to the current situation. It is also why it is important. If workers in France lose then that will have consequences for workers throughout Europe. It will mean that the right-wing populists will gain strength. If the French workers win that will give heart to workers throughout Europe, most particularly in Spain, Italy, Germany and the UK. If Sarkozy is forced to back down, it will demonstrate that the right-wing populist narrative does not have legs. If one European Government breaks ranks the others will follow, the pressure from Big Capital to avoid social unrest and economic dislocation will win out. If this were 1984 the prognosis would be poor. But, it is not. The economic reality is that by not withdrawing the fiscal stimulus the basic underpinning of the Long Wave Boom means that gradually economic growth will take hold, the steady restructuring of Capital will proceed, new industries with higher profit rates will develop, and new jobs for workers will be created. Growth and a measured fiscal tightening would resolve the problem for Capital along with an increase in inflation.

Unlike 1984, today Capital does have an alternative, and sustained pressure from workers can force Governments to take it.

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