The second prediction made for 2017 was,
“The EU fights back.”
This follows on from the first prediction, and as already stated, the last year has seen this prediction already more than confirmed. Not only have we seen right-wing populists heavily defeated across the EU, but the EU itself has responded, as predicted, by moving forward to closer integration, on a whole range of issues and institutions. Trump's election, and his attitude to Europe, and to NATO have incentivised Europeans to look more intently on the need to promote their own interests separate from those of the US and NATO, and Brexit, given Britain's close relation to the US, has given an extra twist to that dynamic.
The assertion of the EU's interests, are not only being seen in relation to things such as the Paris Climate Agreement, where Trump's retreat is simply being ignored, whilst he is also by-passed with Europe and other world leaders relating to US business leaders, and local politicians, but is being asserted, more immediately, as against Britain, in relation to Brexit negotiations over Ireland, and Gibraltar. It is also being asserted in relation to EU warnings to Trump over his tax plans, where these might be seen to breach previous international agreements. In so doing, the EU also sends out a warning to British Tories who might see Brexit as a means of instituting some large tax haven in a post-Brexit Britain, that, the reality of a global economy, is that whatever illusions they might have in relation to “taking back control”, individual nation states never have real control over their economic affairs, and ultimately have to concede to global economic and financial realities. Greece realised that, in deciding that, however harsh and unfair the austerity treatment dished out to it, by conservative politicians, across Europe, life outside the EU and Eurozone would be much worse.
As I said last year,
“Global capitalism – imperialism, the most dynamic phase of capitalism – has progressed from being a system of states, however, to being a system of regional economic and political blocs, and a series of para state global bodies, e.g. IMF, World Bank, WTO etc.
The EU, and these global para-state bodies were expressions, in the post-war period, of the dominance of big socialised capital, and of the development of the social-democratic state as the political expression of its needs and interests. The rise of conservatism and nationalism, in the last thirty years, represents a reflection of the temporary, conjunctural weakening of that socialised capital, as part of the long-wave cycle, and an assertion of the interests of the owners of fictitious capital – shares, bonds, property – whose political representatives the conservatives are and have always been.”
Brexit, and the rise of right-wing populism and nationalism in the last decade, is swimming against the tide of history, and was facilitated by the particular long wave conjuncture that existed for the last thirty years. But, that conjuncture has now shifted. The period of global stagnation associated with the long wave, ran from around 1987 to 1999. The global financial crisis of 2008, was, in fact, as much a product of the start of a new period of long wave boom, as it was of the build up of debt, and its corollary, the massive asset price bubbles in bonds, shares, and property. The political power of the capitalist class, that globally holds the majority of its wealth, now, in the form of this fictitious capital, rather than in the form of real capital, meant that, after the financial crisis, it was able to exert that political power, to try to reflate the prices of all those financial assets, at the expense of the real economy, and the accumulation of real capital.
Those who see the actions of central banks over the last ten years, via policies of QE etc., being an attempt to bolster the real economy, are totally mistaken. Their actions in undertaking QE were deliberate attempts to keep asset prices inflated, whilst the implementation of policies of austerity were geared to restrict economic growth, which, prior to 2008, was causing the demand for money-capital to rise relative to its supply, as well as causing global inflation to rise, both of which were causing global market rates of interest to rise, and thereby causing the prices of fictitious capital to fall, as those prices are based upon capitalised revenues of rents, dividends and interest. As Marx once put it,
“The credit system, which has its focus in the so-called national banks and the big money-lenders and usurers surrounding them, constitutes enormous centralisation, and gives to this class of parasites the fabulous power, not only to periodically despoil industrial capitalists, but also to interfere in actual production in a most dangerous manner — and this gang knows nothing about production and has nothing to do with it. The Acts of 1844 and 1845 are proof of the growing power of these bandits, who are augmented by financiers and stock-jobbers.”
(Capital III, Chapter 33)
It has not been easy, therefore, for those of us who have argued that the global economy entered a new long wave boom period, after 1999, in the face of all the doom mongers, and catastrophists, who since 2008, and particularly after 2010, have claimed that the world was in a period of long depression, or secular stagnation. Yet, the fact is that the global economy, during all that period, has continued to grow, rather than to be in recession, and in parts of the world has even been growing rapidly. Chinese growth continued apace, and in the most dynamic economies in Africa, that have been joining in the process of industrialisation, growth has continued to be around 10% p.a.
The US, under Obama, also continued to grow, despite attempts by Republicans to frustrate his policies of fiscal stimulus, and to inflict repeated political crises, over the debt ceiling and so on. And, in both the US, and in Europe, the policy of QE, inflated asset prices to ever more astronomical levels, sucking money out of general circulation, and draining potential money-capital away from investment in productive-capital, so as to fuel speculation.
It is an indication of the strength of that new global long wave boom that, despite all of these attempts to drain money-capital into such speculation, despite all of the conservative policies of austerity, not only did growth continue, but across the globe it is now accelerating. The economic reality is asserting itself. The attempt to inflate asset prices was necessarily a process that sowed the seeds of its own destruction, because ultimately those asset prices can only grow sustainably on the basis of a growing mass of profit (and its division into rents, and interest/dividends, and taxes). But, by diverting potential money-capital into speculation, and holding back real capital accumulation, the basis of expanding the mass of profit was itself undermined. Real capital accumulation has continued despite the attempts to hold it back, and the mass of profit has thereby increased, but not at the same rate as the growth of speculation, and the rise in asset prices, which inevitably thereby meant, a continued squeeze on yields, which ultimately undermines the asset prices themselves. Those asset prices are based on little more substantial than the current huge bubble in worthless Bitcoins.
The economic reality is that the dominant form of capital is socialised capital, and its interests ultimately dominate. That domination is now asserting itself. EU GDP, for 2017, is forecast as 2.9%, and the latest ISM and other survey data for the EU show growth accelerating even faster, particularly for the EU's economic power house Germany.
This situation is rather like that described by Lenin in relation to Tsarist Russia. The political regime was that of Tsarism, which reflected the political power of the Tsar, and the old landed aristocracy, and yet, the reality was, from the latter part of the 19th century, the Russian state was a capitalist state, and its permanent bureaucracy was forced to promote the interests of society as a whole, including the interests of that landed and financial aristocracy, by defending and promoting the interests of productive-capital. Today, the global landed and financial aristocracy still exerts its political power, but the reality of modern global capital is that it is dominated by huge, socialised, multinational capital, that requires for its efficient operation, large scale planning and regulation of its activities, and of the economy in which it functions, and it increasingly requires that to happen on an international scale.
The reassertion of the dominance of this socialised capital, is the underlying material condition, which now creates the conjuncture within which the reassertion of progressive social democracy, at the expense of conservative social-democracy takes place, and which will push the reactionary forces into the background.
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