The
reality of this reliance of big industrial capital on
social-democracy lies behind Obamacare, just as it lay behind the
expansion of welfarism in the US in the 1960's, under Johnson's
“Great Society” measures, and before that with Roosevelt's
“New Deal”. If US big capital is to overcome its current
malaise and the challenges the US faces from rising economies in
Asia, and elsewhere, it will require something equally sizeable, and
to ensure the election of social-democratic governments to implement
them, it will need to offer adequate incentives to workers to vote
for these parties to bring it about.
The
outlines of what big capital in the US requires, to meet these
challenges, can be seen, and as in the past, some of these
requirements also offer the potential to provide the necessary
incentives to workers to vote for parties proposing measures to bring
them about.
For
example, US capital has gained a considerable competitive advantage,
in the last year or so, as a result of the development of fracking,
which has made available large supplies of oil and gas, at much
reduced prices, thereby reducing the cost of constant capital in many
industries. This may also explain the more recent shift in US
foreign policy in the gulf away from the gulf states.
But,
this advantage may be short-lived. The costs of oil extraction from
fracking may rise quickly, and the ultimate supplies may not be that
great. The US, as with other economies, needs a revolution in energy
production that will require large scale investment in research and
development. That level of investment in development usually comes
only from the state, until its outcome can be shown to be profitable.
(The example of space technology is classic here, where it is only
now 60 years after the first space programmes, that private capital
is beginning to take over the development of space ports, space
tourism and so on.)
The
US, like most of Europe, requires considerable amounts of capital
expenditure to repair and upgrade its social capital. Almost every
week, there are reports, in the US, of bridge failures, for example,
This is just a manifestation of the fact that during the period of
long wave downturn, the policy of conservative governments was to
seek to rebuild the rate of profit on the basis of low wages and high
levels of private debt. The increase in public debt arose, not
because of large scale borrowing to finance investment, but because
of tax cuts for the rich, and to cover increased revenue spending on
welfare as unemployment and poverty rose, and as low-paying small
employers were subsidised out of the public purse via the extension
of in-work benefits.
Global
interest rates are starting to rise, as a result of the shift in the
Long Wave cycle from the Spring to Summer phase. But, they are still
at historically low levels, as they were after WWII. This provides
an historic opportunity for governments to undertake long-term
borrowing, issuing 30 year and even 50 year bonds with interest rates
on them locked in to these low rates, to cover specific
infrastructure investment.
In
the US, that would cover a nationwide programme of rebuilding
bridges, roads, and rail; the complete refurbishment of its
electricity distribution, to provide a smart grid; the development of
the kind of 21st century communication network an economy
like the US requires. In many ways, this is the kind of programme
that Roosevelt implemented with the New Deal. But, Truman and
Eisenhower were thereby also locked into this social democratic
framework. In fact, that social-democracy was given its
international aspect first as a result of the agreements reached at
Bretton Woods, though some of the necessary basis was also laid at
Potsdam and Yalta, by locking in western communist parties to a
reformist function where they simply acted as a left-wing pressure
groups on the main social-democratic parties.
In
Britain, despite the debt to GDP ratio being at 250%, the same
approach was taken, borrowing to finance the development of the
welfare state, and to nationalise bankrupt staple industries, so as
to provide the necessary social capital for investment and
restructuring. And again the incoming Tory government in 1951, had
to operate within this social-democratic framework. Leading to the
term Buttskillism. Expenditure on the welfare state increased, and
the majority of nationalised industries were retained in state
ownership to ensure the required investment continued to be made.
In
Western Europe, a similar effect was achieved by the first major
example of social democracy and Keynesianism at an international
level, via the Marshall Plan. So, even when conservative governments
were elected, they could only be so by acting as social democrats.
If social-democratic parties are able to learn the lessons of
history, then in the US and Europe, they will seize the historic
opportunity that current low levels of interest rates provides, to
draw up big bold plans for such large scale investment. Labour
should join with other EU social democrats to propose such a
programme across the EU, that would reinforce its growing
integration, at a material level. But, an ideological struggle by
social-democracy globally is required to defeat attempts of
reactionary and conservative forces to prevent further progress by
their insistence on austerity and similarly backward looking
solutions. This is all the more necessary as forces like the
conservative parties are not the most reactionary forces that have to
be addressed. More reactionary forces such as those of religious
fundamentalism of all sorts, feed off the success of other
conservative forces, and present an even greater threat.
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