Thursday, 18 November 2010

A Momentous Change - Part 3

Herein lies the problem. Most western societies have been built up on a diet, over the last 30 years, of the idea that the State is bad, even though, in reality, the State continued to grow over that period, and continued to intervene in the economy via Monetary policy to support Big Capital. Now, Big Capital needs that Big State in a number of respects. It needs that Big State to stand behind a failing private financial sector, it needs it to provide continued fiscal stimulus to prevent western economies from sinking into recession, in Europe it needs it to exert some kind of centralised State control over the Eurozone economies as the crisis in Ireland, Greece etc. is demonstrating, and indeed it needs it on a wider global scale in order to try to avoid an escalation of the existing Currency War into Protectionism. The latter is probably not likely outside the platitudes of the G20, but would be less of a problem if the kind of co-ordinated fiscal stimulus policies being advocated by the US were in place, and reducing the strains arising from deteriorating economies each trying to resolve their problems by exporting it to someone else.

But, the problem is, as Paul Mason sets out in his blog, Big Capital, and the unelected Bankers, and Civil Servants that represent its interests, and who can push for such solutions, do not have the problem that the elected politicians, they theoretically are accountable to, have – the problem of needing to be elected. It is that problem that Big Capital has to square, because, at the moment, the politicians being elected are trapped in their own right-wing ideology. The tradition within Leninism is to minimise the importance of this, and to see bourgeois democracy almost as a conspiracy, a complete charade masking the actual rule of Capital – the Dictatorship of the Bourgeoisie. On one level, of course, that is true. But, as Lenin himself was fond of saying, the truth is always concrete. Big Capital is tied to the State – the permanent Civil Service and State Bureaucracy, the Judges, the Military Top Brass, the top Police Chiefs, the important levers in the media, and the higher echelons of the Educational Establishment – by a thousand golden threads of family, social, educational, economic and other relations. By these methods its views are reflected and echoed in the corridors of power. Ultimately, as Allende discovered in Chile, if a Government goes too far in threatening the interests of Capital that State can simply sweep the Government aside. Usually, that is not needed. Various forms of pressure can be applied to Governments to shape their policies from inside and out of the State. The State itself can obfuscate, and frustrate Government policy by a myriad of means.

But, that does not mean that Governments are powerless and mere puppets of the State. They have to have a degree of autonomy or else the State would be organising coups all the time, and that would shatter the illusion of bourgeois democracy. In fact, one of the means of bourgeois democracy working for Big Capital, is that when the politicians are allowed to pursue a course that can be seen, or made to be seen, as a mistake, this enables a different course of action to be pursued, which strengthens the illusion of bourgeois democracy. The question becomes whether the course to be pursued so threatens the interests of Capital as to require vigorous opposition.

It is becoming likely, as Paul Mason sets out, that the rise of right-wing populists be they those like Cameron, or the more dangerous variety such as the Tea Party, could achieve sufficient momentum to get elected on policies that would seriously threaten the interests of Big Capital on a global scale. At the very least, the implementation of aspects of those policies around the notion of austerity and balanced budgets are increasingly likely to drive western economies into a serious financial crisis and recession, as Ireland is demonstrating. Yet, it is difficult to see what Big Capital can do to prevent that short of a serious overt intervention, which is unlikely. The increasing media coverage of the problems of Ireland, which was the Tories poster child of how to deal with the deficit, the coverage of the affects already of the Cuts on services and unemployment, the repeated mishaps of Ministers whose policies appear rushed and badly drafted to say the least, and the fact that a large demonstration was able to walk into Tory HQ unopposed, only weeks after police chiefs had warned that Cuts would mean they could not guarantee to adequately police such events, suggest that the State is already working behind the scenes. But, the Tories have already done damage to the UK economy, and Cuts of some sort are inevitable, and will make it worse. Republicans in the US have already undermined the Federal stimulus policies at a local level for purely electoral advantage, and it seems difficult to see how they will be able to avoid blocking Obama's policies further in the new Congress with the Tea Party snapping at their heels.

Big Capital is pushing Ireland to accept a bail-out from the EU, and that will open the door to an enlargement of the EU State, as it exerts greater centralised control over member states budgets and economic policies within the context of an amended Lisbon Treaty. But Irish politicians are resisting, and Cameron and other politicians will be under pressure from their right-wing to use any such change to call a referendum on Europe. Merkel is losing support, and may have difficulty getting support for changes, and Sarkozy has so lost support that it's difficult seeing him getting support for anything. Once again Paul Mason has blogged about this, suggesting that this restructuring of the EU might come about as a result of politicians being forced into it at the point of a serious crisis that threatens to blow apart European economies and the EU with it. As he says,

“The result of this will be a scale of economic centralisation, and loss of national sovereignty, not dreamed of by the discreet nabobs who signed the Treaty of Rome.”

Its important to realise the scale of what is involved here. Unless, that centralisation occurs that Big Capital requires, and which is being represented politically by Germany, then the resolution of these economic crises within peripheral Europe is impossible. Austria is leading the way in opposing further payments to Greece, because Greece is already failing to meet the requirements of its austerity measures. The more its austerity measures did get implemented the lower its growth would be, and already the effect of that is being seen in the fact that the percentage of its debt to GDP is rising! The same is happening to Ireland. That is despite the conducive economic environment of the last 2 years when massive money printing and fiscal stimulus has been in place on a global scale. Even if Ireland gets the bail-out, the hope that this will stem the fear in the Bond Markets is forlorn. The next target is already identified. It is Portugal, and after that Spain, and after that there are even rumours of France! As Paul Mason points out, this is not a matter of speculators. The traders in the Bond Markets are like sharks. They seek out weakness, and can only be successful in betting against a currency if there is real weakness. Ireland, Portugal, and Spain will be next in line for the simple reason that there is real weakness in the underlying fundamentals of their economies arising from a misallocation of Capital within them.

If the kind of crisis develops that I envisage, arising from the continuation of policies of austerity, then the attack on these economies will continue, because there is no solution to their problems, within the short term, outside a massive devaluation of their currencies, which could only occur outside the Eurozone. But, that level of crisis would have much wider consequences. As I blogged the other day, we are already seeing centrifugal forces within Spain's regions. It may not just be Spain. Given the increase in Nationalism in the UK following on from devolution, and given the concentration of population, wealth and income in the South-East corner of the UK, and given that the Tories have already shown that they are prepared to decimate the other regions of the country, it would be surprising if these kinds of tensions did not arise in the UK, and provide fodder for all kinds of reactionary demagogues. Under such conditions, the centrifugal forces within the EU itself would become pretty irresistible. The EU President, Von Rompuy,is almost certainly correct in his statement the other day that if the Eurozone breaks up, the EU will collapse too. It would probably not be a complete collapse, but a restructuring to comprise only its core members whose economies can remain within the Euro, that is Germany, France, Benelux, and Scandinavia. Already, Turkey has looked at the problems in the EU, and the reluctance of some EU countries to admit it, and has turned its face in the other direction, seeing the Middle East as a more potential partner, especially given its proximity to Iraq, where it sees considerable scope for expansion and investment. Under such conditions, it is not at all unlikely that the countries of Central and Eastern Europe, might form a discreet bloc, which in turn turned its face eastwards towards a developing bloc between Russia, China, and Central Asia.

But, the implications do not end there. As Paul Mason pointed out from his discussions with people on the million strong demo in Barcelona a few months ago, young people in Spain – amongst whom there is 40% unemployment – are already saying “Democracy isn't working”. This is a country which within my lifetime was a fascist dictatorship. But, this is no longer a matter which can be confined to Spain. There are now millions of Northern Europeans who live in Spain, and Portugal and other Southern European countries. The political pressure on Northern European governments from the families of those people facing everything that would go with the imposition of such rule, would be overwhelming, to intervene. Unlike the Spanish Civil War, Northern European democracies would be unable to simply sit on their hands. It makes no sense for the interests of Capital, big or small, to allow things to deteriorate that far, yet that is the inevitable dynamic of the process now in place. The advantages of intervening now are overwhelming.

Back To Part 2

Forward To Part 4

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