Globalization

2
Dec


 

By JERRY HARRIS

Race and Class

Abstract: The Russian invasion of the Ukraine is a powerful assertion of geopolitical power and conflict. But Russia’s nationalist and expansionary drive takes place within the context of transnational economic ties. Such ties help define the nature of the war, and both the Russian and western response. The contradictory pressures of nationalist desires conflicting with transnational integration is an underappreciated complexity of the war that this article will explore.

 Keywords: energy resources, finance capital, nationalism, oligarchy, Russian invasion, sanctions, transnational capitalist class, Ukraine.

 Introduction

The invasion of Ukraine is seen by most as a geopolitical conflict between the West and Russia. Nationalist ideologies and power competition do play a significant role, but such competition takes place within the context of transnational relations that also define the nature of the struggle. Unlike the invasion of Czechoslovakia, which took place during limited economic and cultural ties between the West and Soviet Union, the current war is deeply affected by mutual economic relationships between transnational capitalists and links between transnational corporations. Exploring how the contradictions between national and transnational elements structure the character of the war is the purpose of this article.

Global capitalism has gone through tremendous change over the past forty years, building a system of transnational integration characterised by global financial flows and production. This has profoundly changed a world built around nation-centric power. The emergence of the transnational capitalist class (TCC) reshaped domestic economies and social relations by restructuring state institutions and rules to serve the new forms of global accumulation. Major trade arrangements were ratified, banks bailed out, corporate taxes cut, transnational corporations promoted and social contracts undermined. And yet the old forms of power, habits, identities and privileges still fight to maintain their existence. This mixture of national structures overturned by transnational forces creates a powerful vortex of tensions.

In Russia, this process took place first under Yeltsin and then Putin, turning the country into a neoliberal state. As the new ruling class sought a capitalist identity outside the Soviet experience, it linked to its imperial past. As a result, Russian national concepts of power rooted in Tsarist imperialist expansion reasserted their influence, even as the oligarchy made use of transnational accumulation. Neither did Great Power concepts fully fade in the West, as NATO’s eastward expansion shows. As globalisation entered a sustained period of economic, environmental and social turmoil, transnational hegemony was opened to greater challenge, particularly from authoritarian state capitalism, which finds inspiration in fascism and empire. As the globalist project of a fully integrated economic world floundered under the weight of its own excess, nationalist ideology and power projections re-emerged.

Mike Davis hits home when he describes the Putin government as one that hates Lenin and the Bolshevik position on self-determination, a government drenched in Great Russian chauvinism and supported by the reactionary religious hierarchy of the Eastern Orthodox Church. A government that invites the backing of pan-Slavic neo-fascists, that idealises the Tsarist empire, with Putin himself an iconic hero of far-right nationalists throughout Europe and the US.[1]

And yet it is a government that has structured its economy to serve and benefit from transnational capitalism. That contradiction, between nationalist ideology and its transnational model of accumulation, is the Russian trap. And it works both ways, for Russia and for its global partners.

Global capitalism and Russia

In Russia, the creation of a TCC took place primarily through the privatisation of state assets, in combination with private/state ownership arrangements in energy and finance. The state did not represent a national capitalist class, nor was its primary concern building a modern industrial base. Rather, the state played a central role in integrating the key sectors of the Russian economy into global capitalism. Russian oligarchs also rushed to integrate into elite cultural and financial networks. They sent billions into offshore havens, spent hundreds of millions on London and New York real estate, lived on their yachts, and sent their children to elite western schools.

But the full political integration of the Russian state was stymied by the western architecture of power. NATO’s expansion eastward clashed with Russia’s intent to re-establish its own sphere of influence. This was an uneven process, unfolding over a period of three decades. The G7 became the G8 as Russia was given a seat at the elite table. But tensions never fully resolved. Political, social and environmental problems continued to sharpen, giving rise to security concerns and a renewal of nationalist rhetoric to regain state legitimacy. In turn, rivalries became more aggressive, and the balance between globalism and nationalism began to shift.

To explore the above process, we begin with Russia’s internal transformation and the creation of its transnational capitalist class.

Scholar Oleg Komolov describes the Russian economy primarily as a supplier of resources, with the TCC deeply integrated into global capitalism. He points out how the ruling class that emerged from the privatisation of state assets occupies primarily the role of an intermediate seller of Russian commodities on world markets and is not interested in improving the efficiency of the economy, developing competitive manufacturing industries and technological progress. [Moreover] the export economy was developed with large-scale participation of foreign capital in all sectors of the economy, the artificial devaluation of the ruble and net capital outflow to countries of the center.[2]

Between 1997 and 2017, the outflow of capital exceeded inflows, with offshore havens the destination for 70 per cent of capital exports. The two most prominent outflow years were during the global crash of 2008 and the Russian seizure of Crimea in 2014, with a combined total of $285 billion.[3] Outside the flight to offshore havens, Russian energy TNCs had made foreign direct investments of $335.7 billion by 2017.[4]

The Russian state and private oligarchy worked together in the outflow of capital, which reduces the amount of held dollars and keeps the value of the rouble low. In turn, this helps the export of fossil fuels and minerals. According to the World Bank, the rouble is one of the world’s most undervalued currencies.[5] Oil and gas make up 65 per cent of Russian exports, but minerals and wheat also play an important role. The state has supported this process by increasing its overseas holdings in US Treasury bonds from $8 billion to $164 billion between 2007 and 2013.[6]

Keeping the value of the rouble low meant undercutting investments in the modernisation of manufacturing. The results being high import prices for machinery and agricultural inputs, as well as high consumer prices for foreign goods. In 2017, machinery and equipment made up 47 per cent of imports, and chemical products 18 per cent.[7] Thus, a low-valued rouble drove up the cost of tractors, combines, transport and machine tools, fertilisers and chemicals – a typical pattern among transnational petro-states. Privileging globalist accumulation over the national market marked the Russian ruling class with a transnational character and strategy.

Another aspect of Russia’s integration was creating an attractive market for foreign speculative capital. During the 2005–08 financial frenzy, capital flowed into Russia, benefiting from liberalisation of currency regulations. During these years, transnational capitalists sank $325 billion into Russian corporations, with large amounts going to state-owned entities like Sberbank and the energy giant Gazprom. Among the biggest investors were financial giants JPMorgan, BlackRock and Pimco.[8] Loans were also made, reaching $400 billion from some of the biggest global banks including Citigroup, HSBC, BNP Paribas and Deutsche Bank. The benefits for finance capital were double: debt from loans and earnings from investments meant profits for transnational investors the world over. The outflow of profits over a twenty-year period reached $1.2 trillion, and taking on foreign liabilities certainly didn’t support the rouble.

Energy, transnational capital and sanctions

Key to the Russian economy, and indeed the world economy, are energy resources. Russia’s fossil fuel industry has been largely exempt from the sanctions in 2022, as it was in 2014. In both cases, transfer payments for energy continued to flow through the SWIFT computers, and in 2022 these were worth about $350 million per day. Between 24 February and 24 March 2022, Russia sold $19 billion in fossil fuels. The links between western oil majors and Russian TNCs deeply influences the limits and impacts of sanctions, and so deserves attention.

First, we can review the degree of joint ventures between Russian and transnational energy majors. Rosneft emerged as Russia’s largest oil producer when Putin dismantled Yukos, and sold its $90 billion in assets for just $2 billion. Western banks rushed to loan Rosneft $22 billion as it became Russia’s dominant energy company. Financial backing came from ABN Amro, Barclays, BNP Paribas, Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley. Rosneft then raised $10.7 billion in an IPO on the London Stock Exchange with BP taking a 20 per cent stake. Other strategic investors included Petronas (Malaysia) and CNPC (China). Russian oligarchs joined in, with Roman Abramovich, Vladimir Lisin and Oleg Deripaska each investing $1 billion. As Hans-Joerg Rudloff, chairman of Barclays and Rosneft board member, noted, Russia was ‘on the track of international economic integration’.[9] In 2006 Rosneft turned east, joining with China’s Sinopec in a $13.7 billion buyout of TNK-BP’s Udmurtneft Oil. In a key deal after the 2014 imposition of sanctions, Rosneft signed a thirty-year contract with the state-owned China National Petroleum Corporation worth about $400 billion. Furthermore, Exxon had a $3.2 billion Arctic offshore drilling deal with Rosneft in which the Russian TNC obtained minority stakes in the Gulf of Mexico and oil fields in Texas. Rex Tillerson, chief executive of Exxon Mobile and future Secretary of State, received the Order of Friendship award from Putin in gratitude for Exxon’s commitment.[10]

Gazprom also has a significant level of transnational integration. In developing Shtokman, one of the world’s largest gas fields, Gazprom partnered with Total from France and StatoilHydro of Norway. Total has a close relationship with the Russians. The French oil major has investments in two other Russian oil fields, and a 16 per cent stake in Novatek, the country’s largest gas producer after Gazprom. The largest foreign investment project in Russia, the Sakhalin-2 oil field, involved the British and Japanese. Although Gazprom retains majority ownership, Shell held 27.5 per cent, Mitsui 15 per cent, and Mitsubishi 10 per cent.[11]

Overall, more than 400 foreign financial institutions have provided $130 billion to Russian energy companies, $52 billion in investments and $84 billion in credit. A total of 154 US financial companies hold almost half of these investments at $23.6 billion. JPMorgan is the largest with investments and loans of $10 billion. Other major investors include Qatar’s sovereign wealth fund with $15.3 billion invested in Rosneft. The UK was the third largest investor, where 32 financial institutions contributed $2.5 billion. Other important investors come from Italy, Netherlands, Norway, Switzerland, Japan and China.[12]

To understand how sanctions disrupted these transnational relations, we need to investigate sanctions from 2014 and 2022. In 2014, companies weren’t banned from conducting business with Russian state-owned energy giants, although banks were sanctioned from making loans. The policy allowed protection for transnational institutional investors. But the US did move to sanction Rosneft’s president, Igor Sechin. This prompted Jack Ma, founder of China’s Alibaba, and John J. Mack of Morgan Stanley, to resign from the Rosneft board; while Donald Humphreys, former chief financial officer of Exxon Mobil, and BP chief executive Bob Dudley continued to serve. As western sanctions tightened, they did cause some difficult problems, forcing Eni, Exxon and Statoil to withdraw from a $20 billion Rosneft Arctic exploration project. But to replace the loss of advance drilling technology, Rosneft took a 30 per cent stake in North Atlantic Drilling, a subsidiary of Seadrill, the world’s largest offshore driller controlled by Norway’s richest man, John Fredriksen. Rosneft also faced problems when sanctions cut access to foreign capital markets. To counteract the sanctions, it arranged a series of prepayment deals with some of the largest western oil traders including Glencore, Trafigura and BP. Furthermore, Rosneft bought Morgan Stanley’s global oil trading business, obtaining an international network of oil tank storage contracts, supply agreements and freight shipping contracts, as well as a 49 per cent stake in Heidmar, a manager of oil tankers. So, while the 2014 sanctions caused a number of real problems, Rosneft’s transnational relationships provided important avenues to avoid major disruptions.[13]

Overall, the 2014 sanctions did hurt Russia. FDI inflows fell from $69 billion in 2013 to $21 billion in 2014. But the Obama administration also faced stiff resistance not only across Europe, but in the US as well. Hostility to the sanctions came from the two most influential US business groups, the National Association of Manufacturers and the US Chamber of Commerce. Both lobbied and took out critical ads in national newspapers, insisting that sanctions should not hurt financial institutions that held significant Russian debt. Among the corporations who lobbied against the sanctions were Exxon Mobil, BP, American Petroleum Institute, Amway, Caterpillar, Chevron and GM.[14]

In implementing sanctions, the US believed Russia would view its global business ties as too valuable to lose, and so economic pressure would force a retreat from eastern Ukraine. But from the other side of the mirror, Putin believed global business’s ties to Russia were too valuable and would undercut western sanctions. In important ways both were right, and the same dynamic is at play in 2022. In the recent crisis the US Chamber of Commerce has again lobbied Congress arguing sanctions should be ‘as targeted as possible in order to limit potential harm to the competitiveness of U.S. companies’.[15]

The magnitude of the 2022 invasion has caused the current sanctions to be deeper and broader. What Russian Marxist Boris Kagarlitsky pointed out in 2014 is even more true today:

The situation confronting our elites … is more or less straightforward, they cannot enter actively into confrontation with the West without dealing crushing blows to their own interests, to their own capital holdings and to their own networks, methods of rule and way of life.[16]

But this is a two-way street – the West can’t sanction Russia without hurting itself, so the question becomes who hurts the most. For example, the world’s largest asset manager BlackRock took a loss of $17 billion on their Russian exposure.[17]

Because Russia is the main supplier of oil and gas to Europe, its energy industry is a major focus of new sanctions. ExxonMobil is beginning steps to exit the Sakhalin-1 project and cease operations it carries out on behalf of a consortium of Japanese, Indian and Russian companies. Shell also announced plans to leave Sakhalin and ‘withdraw all involvement in Russian hydrocarbons’.[18] BP has moved to offload its 20 per cent stake in Rosneft and may take a hit estimated at $25 billion. BP’s move comes after thirty years of joint venture. Additionally, the Singapore-based trading company Trafigura is threatening to opt out of its 10 per cent shareholding of Vostok Oil, a vast gas project led by Rosneft. And Norway’s Equinor will also begin to exit its joint ventures. But TotalEnergies, the large French transnational, while committing to no new investments, is holding on to its nearly 20 per cent of Novatek.

Yet none of these companies may end up leaving. Exxon, BP and Shell need to find someone to buy out their interests. That will not be easy in the present circumstances, and they may have to appeal to their Russian counterparts to take their shares. Furthermore, oil tankers continue to transport millions of barrels of oil from Russian ports, estimated to be worth $700 million per day. These include tankers from Greece, and those chartered by US oil giant Chevron.[19] And SWIFT payment transfers for energy continue at the above-mentioned $350 million per day. Consequently, for all the difficulties of the sanctions, global energy integration affords Russia significant amounts of capital, which helps to finance the war.

India’s case is yet another example of the complexity of transnational production. Obtaining about a 33 per cent discount from Russia, India’s oil imports have surged by 700 per cent.[20] Some of these imports go to Reliance Industries, which has the world’s largest refinery complex, and also to an affiliate of Rosneft, Nayara Energy. Using Russian crude, Indian refineries produce diesel and jet fuel, which is sold to Europe, whose imports from India have jumped. As Shell’s chief executive explained, oil substantially treated or changed loses it national origin. ‘We do not have systems in the world to trace back whether that particular molecule originated from a geological formation in Russia, [therefore] diesel going out of an Indian refinery that was fed with Russian crude is considered to be Indian diesel.’[21]

One particularly ironic aspect of transnational relations is that Russian gas flows through pipelines running through Ukraine to Italy, Austria and eastern Europe. Russia pays transport fees to the government, thus supplying funds to Ukraine even as the war raged. And, of course, gas reaching the EU means more money for Russia. It wasn’t until May 2022 that Ukraine stopped the Sokhranovka pipeline that operates from the Russian-controlled Luhansk region. The value of the gas is about $1 billion each month. But Sudzha, Russia’s main pipeline, is, at the time of writing, still in Ukrainian-held territory, allowed to operate, and expected to take on some of the lost capacity.

Another example of the complexity of transnational production is how the invasion impacted Rusal, the world’s second-largest aluminium producer, owned by Oleg Deripaska and listed on the Hong Kong market. Rusal has a joint venture with Australian mining giant Rio Tinto. But because of sanctions, their joint refinery, Queensland Alumina, will not ship products to Russia. The result is that Rusal had to halt production at its Nikolaev refinery located in Ukraine, which accounts for 23 per cent of its annual production. Nikolaev is one of the most modern refineries in the world and employs about 1,500 people. To make up the shortfall Rusal may divert production from its Aughinish refinery in Ireland to feed its Russian smelters.[22] In turn, that will reduce supplies in Europe where materials are already short. The end result is higher unemployment in Ukraine, higher prices in Europe, and a lower stock price for Rusal.

Data compiled by the Yale School of Management reported 253 TNCs are making a clean break with Russia, essentially leaving no operations behind. Some of these include Uber, Shell, Salesforce, Reebok, McKinsey, Nasdaq, eBay, Delta, Deloitte, BP, BlackRock, American Airlines and Alcoa. Another 248 companies have suspended their operations without permanently exiting or divesting. Among these are Adidas, American Express, Burger King, Chanel, Coca-Cola, Dell, Disney, GM, Hewlett Packard, Honeywell, Hyundai, IBM, McDonalds, Mastercard, Nike, Oracle, Starbucks, UPS, Visa and Xerox. Some seventy-five companies have suspended a significant portion of their business. These include Caterpillar, John Deere, Dow, GE, Goldman Sachs, JPMorgan, Kellogg’s, Pepsico and Whirlpool. Pausing new investments are ninety-six companies. This is different from JPMorgan and Goldman Sachs who, while suspending some operations, continue to snatch up depressed Russian securities at very low prices. Among those pausing new investments are Cargill, Colgate-Palmolive, Credit Suisse, Danone, Johnson & Johnson, Siemens and Unilever. The total so far is 672 companies taking various forms of action. Yale reported 162 companies staying the course, including Acer, Alibaba, International Paper, Koch, and Lenovo.[23]

Some funds not appearing in the Yale report include the important financial centres in Singapore, which has halted any new economic activity with four major Russian banks. And Singapore’s large sovereign wealth funds, which have about $6 billion invested in Russia, have also suspended activity.[24] Two of China’s largest state-owned banks are limiting loans for purchases of Russian commodities.[25] The New Development Bank, established by Russia, China, Brazil and South Africa, put new transactions on hold. And the Asian Infrastructure Investment Bank, whose major shareholder is China, stopped its projects in Russia and Belarus. As of the middle of March 2022, there were more than 3,600 sanctions on Russian individuals and companies.

Table 1: Estimated and potential losses of companies leaving Russia[26]

Companies Leaving Russia

Estimated and Potential Loss (US$ million)

BlackRock $17,000
Bank of America $700
BNY Mellon $200
Citigroup $1,900
Ericsson $95
Goldman Sachs $300
JPMorgan $1,000
Nokia $109
Shell $5,000
Société Générale $3,300
Volvo $423

 

The rush to boycott Russia reminds one of the corporate rush to endorse Black Lives Matter; essentially a marketing strategy to stay in front of popular politics. And while the costs are disruptive, transnational corporations are large enough to swallow such losses. For example, as the price for oil rose, Shell increased its early quarterly profits by 300 per cent to $9.1 billion – already enough to cover its projected $5 billion loss. Most of these sanctions will only harm the Russian people without having any real effect on the ruling class or the invasion. Russian citizens are already experiencing a dramatic decline in purchasing power and may soon face growing unemployment and a lack of consumer goods. The larger developing crisis is in world food supplies as Russia and Ukraine export a significant amount of the world’s wheat, corn, barley and sunflower oil. Shortages and price increases will hit the poor in the Global South the hardest.

Financial institutions and the TCC

Because of the integration of the global financial system, Russian capital was exposed to severe sanctions in 2022 that constituted a geo-economic break. There has been a general belief in the sanctity of foreign reserves. The US often talks about a ‘rules-based world order’. This includes open capital markets and accounts, deeply integrated financial markets, and benchmark assets in US dollars. Putin counted on all of this to keep the Russian economy functioning during the invasion. But seven of the largest Russian banks have been removed from the SWIFT interbank system. This severely limits the ability to pay for imports or receive payment for exports, as SWIFT is used to link funds for transnational deals. Russia’s central bank also kept about half its $630 billion dollars and euro reserves in foreign institutions residing in London, New York, Paris and Tokyo, and from $86 to $140 billion in Chinese bonds. Except for the Chinese holdings, these funds are now frozen, causing the rouble to lose about 40 per cent of its value, although with capital controls the rouble regained most of its value. Moreover, the collapse of Russian corporate stocks triggered the multi-week closure of the Russian stock market. And both Moody and Fitch downgraded Russian sovereign debt to ‘junk’. Russia is moving towards its first foreign currency debt default in one hundred years, but, as of May 2022, was still making payments using money from energy exports.

The severity of the economic sanctions is a radical step. Even during the second world war, relations between the Bank of England and the Reichsbank continued into the 1940s. And the Bank of International Settlements continued to allow the German central bank access to its clearing and settlement facilities throughout the war.

As Dominik Leusder points out:

More than any armed conflict, the current international monetary system has laid bare the folly of this romantic liberal portrait of globalisation. The sanctions against Russia are the clearest manifestation yet of a distinct undercurrent of financial globalisation … the West’s ability to coerce states has only increased as a function of their integration [so] as Russia became a central node [of] the global economy, it became more vulnerable.[27]

 

And yet western investors and companies are also in danger, as sanctions over the transfer of funds may mean Russia defaults on billions in loans. Facing such problems, US authorities gave the okay to JPMorgan to process interest payments due on dollar bonds from the Russian government. Citigroup is another payment agent for about fifty corporate bonds tied to Russian TNCs like Gazprom and MMC Norilsk Nickel. [28] Furthermore, the important financial institution Gazprombank is spared from sanctions and continues to be a conduit for commodity transactions. For example, working with Citibank it helped Brazil purchase Russian fertiliser, which is not sanctioned. Thus, the flow of capital continues, at least in part, despite sanctions.

Again, Leusder provides insightful analysis:

As globalization underwrote Putin’s militarism and his increasingly hostile posture toward Russia’s neighbors, it simultaneously rendered the country’s economy fatally reliant: on the net demand from other countries such as Germany and China; on imports of crucial goods such as machinery, transportation equipment, pharmaceutical and electronics, mostly from Europe; on access to the global dollar system to finance and conduct trade … This is one way to construe the deceptively simple insight of Henry Farrell and Abraham L. Newman’s theory of weaponized interdependence: the logic of financial globalization that generated Russia’s trade surplus and gave Putin room to maneuver also provided the economic and financial weaponry that was turned against him.[29]

Thus, a nationalist strategy to reconstitute the Russian empire, using the profits and ties that come with globalisation, is undercut by the contradiction of those same ties and relationships.

Weaponised interdependence is a good description of the financial markets in metals. Alongside Russian fossil fuels are its exports of metals, including copper, alumina and nickel, which is used in making stainless steel and batteries for electric cars. Here are the complications of transnational capitalism. Tsingshan Holding Group in China is the world’s largest nickel producer, China’s second largest steel producer, and is involved in electric vehicle batteries. Tsingshan made an enormous $3 billion bet shorting the price of nickel, counting on its own increased production in creating an abundance of supplies. This bet was made on the London Metal Exchange (LME), which is a unit of Hong Kong Exchanges and Clearing Limited. With the Russian invasion, although nickel was not sanctioned, fear took hold of the market and prices jumped 250 per cent. The short bet based on lowering cost was a disaster. Trade chaos took hold, leaving Tsingshan with two choices. Either deliver tons of nickel or pay for margin calls, which means coming up with the cash or securities to cover potential losses. But Tsingshan only held 30,000 tons of its 150,000-ton bet. The remainder was held by JPMorgan, BNP Paribas, Standard Chartered and United Overseas Bank. On the cusp of a global financial disaster, LME suspended trading and retroactively cancelled $3.9 billion of trades, blaming banks for preventing efforts to create greater transparency that could have revealed the interconnected problem.[30] Consequently, the Russian invasion set off a financial crisis that punished transnational capitalists that have no part in the war.

Facing sanctions, oligarchs can’t be happy with the war, and a number have stated their opposition. Nevertheless, the global financial system has been built to safely hide their money, as well as the wealth of others in the TCC. It’s estimated that oligarchs have hidden about half their wealth offshore, amounting to some $200 billion. Somewhere between 10,000 to 20,000 Russians hold more than $10 million each in offshore assets and havens.[31] Still, that is significantly less than their American counterparts who have an estimated $1.2 trillion in offshore tax havens. Much of the Russian money is in US, UK and EU assets. Transparency International has estimated about $2 billion just in UK property.[32]

But much of this wealth is difficult to discover because the TCC has structured international laws to hide wealth in complex trusts and shell corporations.[33] Global accounting firms PwC, KPMG, Deloitte and EY helped oligarchs move money to offshore shell companies for years before currently withdrawing services. Rosneft, VTB, Alfa Bank, Gazprom and Sberbank have been represented by leading US law firms, including White & Case, DLA Piper, Dechert, Latham & Watkins and Baker Botts. And Baker McKenzie, one of the world’s largest law firms, continues to represent some of Russia’s largest companies, including Gazprom and VTB.[34] Concord Management specialised in serving ultra-wealthy Russians, helping them invest in hedge funds, private equity and real estate. Since 1999, Concord has channelled billions to BlackRock, Carlyle Group and others. Wall Street banks such as Credit Suisse, Goldman Sachs and Morgan Stanley often acted as intermediators, linking Concord to hedge funds.[35] Such well-worn networks tie the Russian TCC to global capitalists and financial institutions in a mutually beneficial relationship, and creates a shared culture that exalts the privileges of wealth and common ideas about how the world economic system works.

Capitalists the world over make use of sophisticated accountants, bankers and lawyers to hide their assets. An agent will set up an offshore shell company in a country with little transparency. This company then creates more shells in other low-transparency jurisdictions – about forty-two exist across the world, including the US states of Delaware and South Dakota. This allows the ‘ultimate beneficial owner’, often unknown, to have multiple bank accounts and the ability to move money and invest without any scrutiny. Government investigators in both the US and the UK regularly ignore suspicious banking activity. In 2018, the EU passed regulations demanding access to information on the ownership of European companies nested in shell companies. Yet in 2022 no such registry exists. Congress passed a transparency law in 2021 with a $63 million budget, but never provided the money to the Treasury Department. Consequently, the effort to sanction oligarchs is undercut by the global financial system built to the demands of the TCC, of which Russian capitalists are members. While some pressure is being directed on the oligarchs, the system of hidden cross-border capital flows is too valuable to end, allowing the Russian TCC to escape greater harm.

A good example of how shell corporations function is the effort to sanction Arcady Rotenberg. Rotenberg is worth about $3 billion with an estimated $91 million invested in the US and a $35 million mansion outside London, bought through an entity in the British Virgin Islands. He has at least 200 companies located across dozens of countries. Even after coming under sanctions in 2014, Rotenberg became the owner of two additional companies located in Luxembourg, well known as a haven for billionaires. Although senate investigators found countless bank filings on suspicious Rotenberg activities, none of them have been investigated by the Treasury Department.

As Cihan Tuğal reminds us, Putin and his cronies

are a solid part of world capitalism, and their apparently insane actions are intended to produce a better place at the table. They want to be recognized as legitimate imperialists in the new, post-Wilson and post-Lenin world of the 21st century … [Putin] is not only serving his ego, but a capitalist class fostered by post-1991 reforms, which were selective appropriations of free market ideas. The gang of cronies is not Putin’s creation alone. It is an outcome of transnational dynamics. This class is hungry for markets, and it cannot help but look for ways to burst out of Russia.[36]

German/Russian economic relations

Moving from a picture of transnational markets, industries and finance, we can explore the specific relationship between Germany and Russia. Germany as the largest European economy is also the most integrated with Russia. For Russia, it’s their most important economic partner alongside China. In 2021, German exports to Russia were worth more than $28.4 billion, and it invested a further €25 billion in operations.[37] Germany still depends on Russia for about 55 per cent of its natural gas, 35 per cent of its oil, and half its coal.

Before 2014, there were 7,000 German companies inside Russia representing some of the largest TNCs in the world, such as Adidas, BASF, Siemens, Volkswagen, Opel and Daimler. On the financial side, all major German commercial banks were active in Russia. In terms of oil and gas, Germany’s biggest energy group Eon was the largest foreign shareholder in Gazprom, which, alongside BASF, was building the $6.6 billion Baltic Sea pipeline. The Germans held 20 per cent of the Nord Stream joint venture, with former chancellor Gerhard Schröder as chairman and Matthias Warnig of Dresdner Bank its chief executive. Even after the seizure of Crimea, Siemens CEO Joe Kaeser confirmed its commitment to Russia to sell trains, energy infrastructure, medical technology and manufacturing automation technology. Cross-border deals also continued, with RWE selling its oil and gas subsidiary to Russia’s LetterOne for over $7.5 billion. But, with the 2014 sanctions, German trade with Russia dropped by 35 per cent, and German firms investing in Russia dropped to just under 4,000 by 2020.[38]

Now the invasion of Ukraine has shaken the German/Russian relationship in a very significant manner, particularly in the auto and energy industries. Wintershall Dea, an oil and gas TNC, will stop payments to Russia and write off its €1 billion investment in Nord Stream 2. Additionally, it will not receive revenues from its Russian operations, which accounted for about 20 per cent of its 2021 profits. The company issued a statement on the turmoil caused by the invasion lamenting,

What is happening now is shaking the very foundations of our cooperation. We have been working in Russia for over 30 years … We have built many personal relationships – including in our joint ventures with Gazprom. But the Russian war of aggression against Ukraine marks a turning point.[39]

Nord Stream 2 has been a contentious issue between the US and Germany for years. The pipeline running through the Baltic goes directly to Germany. The US has pressured Germany to end the project, but Angela Merkel refused to do so. The project, worth $11 billion, is registered as a Swiss firm whose parent company is Gazprom. Gazprom owns the pipeline and paid half the costs, the rest shared by Shell, Austria’s OMV, France’s Engie, and Germany’s Uniper and Wintershall DEA.[40] The invasion has prompted Germany to halt the project. The suspension of Nord Stream 2 may not be permanent, but even a temporary suspension is a huge shift.

Russia exports fifty-six billion cubic metres of liquefied natural gas to Germany yearly. Inside Germany, Gazprom owns and operates thousands of miles of pipeline, key storage facilities, and the largest underground storage tank for natural gas in western Europe. Russia also supplies German refineries with a third of their oil, a number with long-term contracts that Russia is not willing to cancel. Particularly ironic are the weapons sent by the German government to Ukraine that use steel produced in German factories powered by coal coming from Russia. As Putin has stated:

Let German citizens open their purses, have a look inside and ask themselves whether they are ready to pay three to five times more for electricity, for gas and for heating … You can’t isolate a country like Russia in the long run, neither politically nor economically. German industry needs the raw materials that Russia has. It’s not just oil and gas, it’s also rare earths. And these are raw materials that cannot simply be substituted.[41]

Turmoil has also hit the auto industry. Volkswagen, Mercedes-Benz and BMW halted production in Russia, and also suspended all vehicle exports. But the invasion has had an even bigger impact because of the coordination of production between Ukraine and European auto companies. With its low labour costs and educated workforce, Ukraine became a manufacturing centre of systems which connect electronic components, like tail lights and car entertainment systems. The work, done by hand, requires a large number of skilled workers. The fighting brought production to a sudden halt, and within days the lack of parts shut down European factories. BMW shut several plants in Germany, Austria and Britain, while VW was brought to a standstill at multiple locations, including its main site in Wolfsburg. Electric vehicle production at Zwickau stopped, including its SUV exports to the US, and Porsche idled manufacturing the Cayenne sport utility vehicle in Leipzig. As Jack Ewing noted:

No car can operate without wiring systems, which are often tailor-made to specific vehicles. So-called wiring harnesses are among the first components to be installed in a new vehicle, and their absence brings assembly lines to a standstill.[42]

Furthermore, Ukraine is also a major source of neon, a gas used for high-performance lasers required for production of scarce semiconductors, adding more woes to the industry.

None of these economic disruptions are welcomed by the TCC. But the German government has taken a major step away from its previous positions. At first opposed to banning Russia from SWIFT, and refusing to send arms to Ukraine, it has now reversed on both those issues. And the sizeable increase in its military budget surprised everyone. Although transnational links are deep, for now geopolitical tensions are riding roughshod over economic concerns. But such concerns have not gone away. The New York Times observes that ‘multiple cracks’ have already occurred over ‘lost trade, higher energy prices, slimmer profits and lower economic growth’, as well as lower employment.[43] As Martin Brudermüller, the chief executive of the chemical giant BASF stated, ‘Cheap Russian energy has been the basis of our industry’s competitiveness’.[44] And again, ‘Do we want to blindly destroy our entire national economy? What we have built up over decades?’[45] What is true for BASF is true for the German economy, whose success is built upon cheap gas from Russia and exports to China.

Conclusion

There are a number of questions not explored in this article. NATO’s eastward expansion, Great Russian chauvinism, fascist forces in both Russia and Ukraine, the meaning of independence and self-determination, US hypocrisy on foreign interventions, China’s role, and growing debates within the Left over the war. All these topics already have a growing and substantial body of literature. Also, events continue to rapidly develop and so the article has some time limitations. But the deeper issues on the intersections between national geopolitics and transnational economics, and how the resulting contradictions affect the war, will continue. What is clearly evident is that global capitalism has plunged the world into yet another crisis. A crisis that ignores a pandemic that threatens the health of every human on the planet, and an environmental crisis that threatens every species. The failure is staggering in its ignorance.

What the new global configuration will look like is difficult to tell. Much depends on how the conflict ends. A long-term occupation will freeze Russia’s transnational links, a rapid conclusion may mean the easing of sanctions. The invasion is a further deconstruction of the global capitalist system built over the past forty years of neoliberal hegemony. But there are still many trillions of dollars in cross-border accumulation, and global assembly lines continue to churn out commodities in a coordinated system of production and trade. The current problems in logistics and supplies are not because of too little demand, but because of too much, with the infrastructure of ports, shipping and transportation actually too limited. Such problems might call for an expansion of globalisation, which is at the heart of China’s Belt and Road strategy. But economic, political and social disruptions cause states to look to their own national security. As a result, the contradictions between national and transnational forces continue to be the nexus for world events, changing the balance of forces into new configurations of struggle.

This complex relationship between nationalism and globalism needs to be understood through historical materialism, which defines the world as a continual process of movement. Marx saw everything in motion – production, distribution, environmental metabolic relationships, the class struggle, and all human interactions. Change was driven by the balance between opposing forces, and the results were defined by the power between the aspects. How much of the old that remained, and how much of the new that was asserted, continually set the conditions for the movement to continue. This process of motion and change results in contradictions unfolding in many different forms. There is no historic queue in which socialism waits its turn to appear at the front of the line.

In the current capitalist world, neither nation-centric nor transnational relationships exist in isolation from the other. They exist in the same institutions and continually define and determine each other within a changing balance of forces. This unity of opposites in tension and conflict is what produces the historic transformation towards a new synthesis. No outcome is predetermined, but produced by the dynamic itself. Consequently, what aspects of nation-centric relationships survive or re-emerge depend on the agency of political struggle. Under pressure of globalist economic and environmental crisis, nationalist antagonisms have rematerialised, but within the context of transnational relationships. Globalisation didn’t create the ‘end of history’ because the past continues to exist in the present.[46]

We can see this contradiction in the balance between national and transnational forces in the Russian invasion. A balance in which nationalism and inter-state conflict has grown stronger as the forty-year hegemony of neoliberal globalisation has faced a series of economic, environmental and social crises. As the balance of power shifts, aspects of the old system reassert themselves, but deeply affected and redefined by the changes globalisation engendered. Old ideas and conflicts may re-emerge, yet they are never the same, but contextualised through the new forces that have asserted themselves. So, in analysing the Russia/Ukraine/NATO conflict, we must be careful not to place it in the world of the 1960s, but a world deeply restructured by transnational capitalism.

References

 Jerry Harris is national secretary of the Global Studies Association of North America. He is the author of over 100 journal and newspaper articles, and his latest book is Global Capitalism and the Crisis of Democracy (Atlanta, GA: Clarity Press, 2016).



[1] M. Davis, ‘Thanatos triumphant’, New Left Review (Sidecar), 7 March 2022.

[2] O. Komolov, ‘Capital outflow and the place of Russia in core-periphery relationships’, World Review of Political Economy 10, no. 3 (2019).

[3] Komolov, ‘Capital outflow’.

[4] UNCTAD (United Nations Conference on Trade and Development), 2017 Foreign Direct Investment: Inward and Outward Flows and Stock, 1970–2016 (NY: UNCTAD, 2017).

[5] World Bank, ‘PPP conversion factor, GDP (LCU per international $)’, 11 October 2018, https://data.worldbank.org/indicator/pa.nus.ppp.

[6] US Department of Treasury, ‘Major foreign holders of Treasury securities (in billions of dollars)’, 9 July 2019, http://ticdata.treasury.gov/Publish/mfh.txt.

[7] Federal Customs Service of the Russian Federation, ‘Foreign trade of the Russian Federation on Goods, Federal Customs Service of the Russian Federation’, 27 November 2018, http://www.customs.ru/index.php?option=com_newsfts&view=category&Itemid=1978.

[8] L. Thomas Jr, ‘Foreign investors in Russia vital to sanctions debate’, The New York Times, 17 March 2014, https://dealbook.nytimes.com/2014/03/17/foreign-investors-in-russia-vital-to-sanctions-debate/.

[9] S. Wagstyl, ‘Russian boom will end in pain, says banker’, Financial Times, 24 April 2007, p. 5.

[10] D. Filipov, ‘What is the Russian Order of Friendship and why does Rex Tillerson have one?’, The Washington Post, 13 December 2016, https://www.washingtonpost.com/news/worldviews/wp/2016/12/13/what-is-the-russian-order-of-friendship-and-why-does-trumps-pick-for-secretary-of-state-have-one/.

[11] C. Chyong and V. Tcherneva, ‘Europe’s vulnerability on Russian gas’, European Council on Foreign Relations, 17 March 2015, http://www.ecfr.eu/article/commentary_europes_vulnerability_on_russian_gas.

[12] D. Carrington, ‘UK and US Banks Among Biggest Backers of Russian ‘Carbon Bombs”, Data Shows’, The Guardian, 24 August 2022. https://www.theguardian.com/environment/2022/aug/24/uk-and-us-banks-among-biggest-backers-of-russian-carbon-bombs-data-shows.

[13] J. Harris, Global Capitalism and the Crisis of Democracy (Atlanta, Clarity Press, 2016).

[14] Open Secrets, ‘Clients lobbying on H.R. 5859: Ukraine Freedom Support Act of 2014’, https://www.opensecrets.org/federal-lobbying/bills/summary?cycle=2021&id=hr5859-113.

[15] H. Tabuchi, ‘How Europe got hooked on Russian gas despite Reagan’s warning’, The New York Times, 23 March 2022, https://www.nytimes.com/2022/03/23/climate/europe-russia-gas-reagan.html.

[16] B. Kagarlitsky, ‘Crimea annexes Russia’, LINKS International Journal of Socialist Renewal, 9 April 2015, http://links.org.au/node/3790.

[17] Daily Business Briefing, ‘Here’s how much it is costing companies to leave Russia’, The New York Times, 11 April 2022.

[18] S. Reed, ‘The future turns dark for Russia’s oil industry’, The New York Times, 8 March 2022, https://www.nytimes.com/2022/03/08/business/russian-oil-industry.html.

[19] H. Tabuchi, ‘Citing a Chevron tanker, Ukraine seeks tougher restrictions at Russian ports,’ The New York Times, 16 March 2022; I. Ouyang, ‘LME nickel mayhem: London to resume trading after Chinese ‘Big Shot’ Tsingshan lines up bank credit to forestall market chaos over its short positions’, South China Morning Post, 15 March 2022, https://www.scmp.com/business/banking-finance/article/3170570/lme-resume-nickel-trading-after-chinese-short-seller; J. Farchy and M. Burton, ‘LME boss says banks are partly to blame for nickel short squeeze’, Bloomberg, 18 March 2022, https://www.bloomberg.com/news/articles/2022-03-18/lme-boss-says-banks-are-partly-to-blame-for-nickel-short-squeeze.

[20] H. Tabuchi and B. Migliozzi. ‘A tanker’s giant U-turn reveals strains in the market for Russian oil’, 2 April 2022, The New York Times, https://www.nytimes.com/2022/04/02/climate/oil-tankers-russia.html.

[21] S. Reed, ‘Shell reports a record $9.1 billion profit’, The New York Times, 5 May 2022, https://www.nytimes.com/2022/05/05/business/shell-earnings-record-profit.html

[22] E. Ng, ‘Ukraine conflict: Hong Kong-listed aluminium giant Rusal’s shares plunge after Australia bans export of key materials to Russia’, South China Morning Post, 21 March 2022, https://www.scmp.com/business/article/3171224/ukraine-conflict-hong-kong-listed-aluminium-giant-rusals-shares-plunge.

[23] J. Sonnenfeld and S. Tian, ‘Some of the biggest brands are leaving Russia. Others just can’t quit Putin. Here’s a list’, The New York Times, 7 April 2022, https://www.nytimes.com/interactive/2022/04/07/opinion/companies-ukraine-boycott.html.

[24] Sovereign Wealth Fund Institute (SWFI), ‘GIC sovereign wealth fund and Temasek turn their backs to Russia over Ukraine invasion’, 7 March 2022, https://www.swfinstitute.org/news/91630/gic-sovereign-wealth-fund-and-temasek-turns-their-backs-to-russia-over-ukraine-invasion.

[25] Bloomberg, ‘Ukraine crisis: crude oil price soars as sanctions on Russia spur fear of a global energy crisis’, South China Morning Post, 28 February 2022, https://www.scmp.com/business/commodities/article/3168654/ukraine-crisis-crude-oil-price-soars-sanctions-russia-spur.

[26] Daily Business Briefing, ‘Here’s how much it is costing companies to leave Russia’, The New York Times, 11 April 2022.

[27] D. Leusder, ‘The art of monetary war’, 12 March 2022, https://www.nplusonemag.com/online-only/online-only/the-art-of-monetary-war/.

[28] Bloomberg, ‘Russia default averted for now as JPMorgan processes bond payments’, 17 March 2022, https://www.businesslive.co.za/bloomberg/news/2022-03-17-russia-default-averted-for-now-as-jpmorgan-processes-bond-payments/.

[29] D. Leusder, ‘The art of monetary war’.

[30] I. Ouyang, ‘LME nickel mayhem’.

[31] R. Reich, ‘We aren’t going after Russian oligarchs in the right way. Here’s how to do it’, RSN.org, 9 March 2022, https://www.rsn.org/001/we-arent-going-after-russian-oligarchs-in-the-right-way-heres-how-to-do-it.html.

[32] Transparency International UK, ‘Stats Reveal Extent of Suspect Wealth in UK Property and Britain’s Role as Global Money Laundering Hub, 18 February 2022, https://www.transparency.org.uk/uk-money-laundering-stats-russia-suspicious-wealth.

[33] M. Apuzzo and J. Bradley, ‘Oligarchs got richer despite sanctions. Will this time be different?’, The New York Times, 16 March 2022, https://www.nytimes.com/2022/03/16/world/europe/russia-oligarchs-sanctions-putin.html.

[34] M. Goldstein, K. P. Vogel, J. Drucker, M. Farrell and M. McIntire, ‘How western firms quietly enabled Russian oligarchs’, The New York Times, 9 March 2022, https://www.nytimes.com/2022/03/09/business/russian-oligarchs-money-concord.html.

[35] M. Goldstein and D. Enrich, ‘How one oligarch used shell companies and Wall Street ties to invest in the U.S.’ The New York Times, 21 March 2022, https://www.nytimes.com/2022/03/21/business/russia-roman-abramovich-concord.html.

[36] C. Tuğal, ‘Putin’s invasion: imperialism after the epoch of Lenin and Wilson’, LeftEast, 6 March 2020, https://lefteast.org/putins-invasion-imperialism-after-the-epoch-of-lenin-and-wilson/.

[37] M. Eddy, ‘For German firms, ties to Russia are personal, not just financial’, The New York Times, 6 March 2022, https://www.nytimes.com/2022/03/06/business/germany-russia-companies.html.

[38] M. Eddy, ‘For German firms’.

[39] M. Eddy, ‘For German firms’.

[40] J. Mason, ‘U.S. slaps sanctions on company building Russia’s Nord Stream 2 pipeline’, Reuters, 23 February 2002, https://www.reuters.com/business/energy/us-plans-sanctions-company-building-russias-nord-stream-2-pipeline-cnn-2022-02-23/.

[41] K. Bennhold, ‘The former Chancellor who became Putin’s man in Germany’, The New York Times, 23 April 2022, https://www.nytimes.com/2022/04/23/world/europe/schroder-germany-russia-gas-ukraine-war-energy.html.

[42] J. Ewing, ‘Car industry woes show how global conflicts will reshape trade’, The New York Times, 7 March 2022, https://www.nytimes.com/2022/03/07/business/cars-russia-china-trade.html.

[43] K. Bennhold and S. Erlanger, ‘Ukraine war pushes Germans to change. They are wavering’, The New York Times, 12 April 2022, https://www.nytimes.com/2022/04/12/world/europe/germany-russia-ukraine-war.html.

[44] K. Bennhold and S. Erlanger, ‘Ukraine war pushes’.

[45] M. Eddy, ‘Why Germany can’t just pull the plug on Russian energy’, The New York Times, 5 April 2022, https://www.nytimes.com/2022/04/05/business/germany-russia-oil-gas-coal.html.

[46] J. Harris, Global Capitalism.

Category : Capitalism | Globalization | Hegemony | Russia | Theory | Blog
12
Sep

By Ian Angus

Climate & Capitalism

Sep 07, 2022

In Part Eight of Capital, titled “So-called Primitive Accumulation,” Marx describes the brutal processes that separated working people from the means of subsistence, and concentrated wealth in the hands of landlords and capitalists. It’s one of the most dramatic and readable parts of the book.

It is also a continuing source of confusion and debate. Literally dozens of articles have tried to explain what “primitive accumulation” really meant. Did it occur only in the distant past, or does it continue today? Was “primitive” a mistranslation? Should the name be changed? What exactly was “Marx’s theory of primitive accumulation”?

In this article, written for my coming book on The War Against the Commons, I argue that Marx thought “primitive accumulation” was a misleading and erroneous concept. Understanding what he actually wrote shines light on two essential Marxist concepts: exploitation and expropriation.

This is a draft, not my final word. I look forward to your comments, corrections and suggestions.

+ + + + +

On June 20 and 27, 1865, Karl Marx gave a two-part lecture to members of the International Workingmen’s Association (the First International) in London. In clear and direct English, he drew on insights that would appear in the nearly-finished first volume of Capital, to explain the labor theory of value, surplus value, class struggle, and the importance of trade unions as “centres of resistance against the encroachments of capital.”1 Since an English translation of Capital wasn’t published until after his death, those talks were the only opportunity that English-speaking workers had to learn those ideas directly from their author.

While explaining how workers sell their ability to work, Marx asked rhetorically how it came about that there are two types of people in the market–capitalists who own the means of production, and workers who must sell their labor-power in order to survive.

How does this strange phenomenon arise, that we find on the market a set of buyers, possessed of land, machinery, raw material, and the means of subsistence, all of them, save land in its crude state, the products of labour, and on the other hand, a set of sellers who have nothing to sell except their labouring power, their working arms and brains? That the one set buys continually in order to make a profit and enrich themselves, while the other set continually sells in order to earn their livelihood?

A full answer was outside the scope of his lecture, he said, but “the inquiry into this question would be an inquiry into what the economists call ‘Previous, or Original Accumulation,’ but which ought to be called Original Expropriation.”

“We should find that this so-called Original Accumulation means nothing but a series of historical processes, resulting in a Decomposition of the Original Union existing between the Labouring Man and his Instruments of Labour.… The Separation between the Man of Labour and the Instruments of Labour once established, such a state of things will maintain itself and reproduce itself upon a constantly increasing scale, until a new and fundamental revolution in the mode of production should again overturn it, and restore the original union in a new historical form.”

Marx was always very careful in his use of words. He didn’t replace accumulation with expropriation lightly. The switch is particularly important because this was the only time he discussed the issue in English–it wasn’t filtered through a translation.

In Capital, the subject occupies eight chapters in the part titled Die sogenannte ursprüngliche Akkumulation–later rendered in English translations as “So-called Primitive Accumulation.” Once again, Marx’s careful use of words is important–he added “so-called” to make a point, that the historical processes were not primitive and not accumulation. Much of the confusion about Marx’s meaning reflects failure to understand his ironic intent, here and elsewhere.

In the first paragraph he tells us that ‘ursprüngliche’ Akkumulation is his translation of Adam Smith’s words previous accumulation. He put the word ursprüngliche (previous) in scare quotes, signaling that the word is inappropriate. For some reason the quote marks are omitted in the English translations, so his irony is lost.

In the 1800s, primitive was a synonym for original–for example, the Primitive Methodist Church claimed to follow the original teachings of Methodism. As a result, the French edition of Capital, which Marx edited in the 1870s, translated ursprüngliche as primitive; that carried over to the 1887 English translation, and we have been stuck with primitive accumulation ever since, even though the word’s meaning has changed.

Marx explains why he used so-called and scare quotes by comparing the idea of previous accumulation to the Christian doctrine that we all suffer because Adam and Eve sinned in a distant mythical past. Proponents of previous accumulation tell an equivalent nursery tale:

Long, long ago there were two sorts of people; one, the diligent, intelligent and above all frugal elite; the other, lazy rascals, spending their substance, and more, in riotous living. … Thus it came to pass that the former sort accumulated wealth, and the latter sort finally had nothing to sell except their own skins. And from this original sin dates the poverty of the great majority who, despite all their labour, have up to now nothing to sell but themselves, and the wealth of the few that increases constantly, although they have long ceased to work.

“Such insipid childishness is every day preached to us in defense of property,” but when we consider actual history, “it is a notorious fact that conquest, enslavement, robbery, murder, in short, force, play the greatest part.” The chapters of So-called Primitive Accumulation describe the brutal processes by which “great masses of men [were] suddenly and forcibly torn from their means of subsistence, and hurled onto the labor-market as free, unprotected and rightless proletarians.”

These newly freed men became sellers of themselves only after they had been robbed of all their own means of production, and all the guarantees of existence afforded by the old feudal arrangements. And this history, the history of their expropriation, is written in the annals of mankind in letters of blood and fire.

Marx’s account focuses on expropriation in England, because the dispossession of working people was most complete there, but he also refers to the mass murder of indigenous people in the Americas, the plundering of India, and the trade in African slaves–“these idyllic proceedings are the chief moments of primitive accumulation.” That sentence, and others like it, illustrate Marx’s consistently sarcastic take on primitive accumulation. He is not describing primitive accumulation, he is condemning those who use the concept to conceal the brutal reality of expropriation.

Failure to understand that Marx was polemicizing against the concept of “primitive accumulation” has led to another misconception–that Marx thought it occurred only in the distant past, when capitalism was being born. That was what Adam Smith and other pro-capitalist writers meant by previous accumulation, and as we’ve seen, Marx compared that view to the Garden of Eden myth. Marx’s chapters on so-called primitive accumulation emphasized the violent expropriations that laid the basis for early capitalism because he was responding to the claim that capitalism evolved peacefully. But his account also includes the Opium Wars of the 1840s and 1850s, the Highland Clearances in capitalist Scotland, the colonial-created famine that killed a million people in Orissa in India in 1866, and plans for enclosing and privatizing land in Australia. All of these took place during Marx’s lifetime and while he was writing Capital. None of them were part of capitalism’s prehistory.

The expropriations that occurred in capitalism’s first centuries were devastating, but far from complete. In Marx’s view, capital could not rest there–its ultimate goal was “to expropriate all individuals from the means of production.”2 Elsewhere he wrote of big capitalists “dispossessing the smaller capitalists and expropriating the final residue of direct producers who still have something left to expropriate.”3 In other words, expropriation continues well after capitalism matures.

We often use the word accumulation loosely, for gathering up or hoarding, but for Marx it had a specific meaning, the increase of capital by the addition of surplus value,4 a continuous process that results from the exploitation of wage-labor. The examples he describes in “So-called Primitive Accumulation” all refer to robbery, dispossession, and expropriation–discrete appropriations without equivalent exchange. Expropriation, not accumulation.

In the history of capitalism, we see a constant, dialectical interplay between the two forms of class robbery that Peter Linebaugh has dubbed X2–expropriation and exploitation.

Expropriation is prior to exploitation, yet the two are interdependent. Expropriation not only prepares the ground, so to speak, it intensifies exploitation.5

Expropriation is open robbery. It includes forced enclosure, dispossession, slavery and other forms of theft, without equivalent exchange. Exploitation is concealed robbery. Workers appear to receive full payment for their labor in the form of wages, but in fact the employer receives more value than he pays for.

What Adam Smith and others described as a gradual build up of wealth by men who were more industrious and frugal than others was actually violent, forcible expropriation that created the original context for exploitation and has continued to expand it ever since. As John Bellamy Foster and Brett Clark write in The Robbery of Nature:

Like any complex, dynamic system, capitalism has both an inner force that propels it and objective conditions outside itself that set its boundaries, the relations to which are forever changing. The inner dynamic of the system is governed by the process of exploitation of labor power, under the guise of equal exchange, while its primary relation to its external environment is one of expropriation.6

In short, Marx did not have a “theory of primitive accumulation.” He devoted eight chapters of Capital to demonstrating that the political economists who promoted such a theory were wrong, that it was a “nursery tale” invented to whitewash capital’s real history.

Marx’s preference for “original expropriation” wasn’t just playing with words. That expression captured his view that “the expropriation from the land of the direct producers–private ownership for some, involving non-ownership of the land for others–is the basis of the capitalist mode of production.”7

The continuing separation of humanity from our direct relationship with the earth was not and is not a peaceful process: it is written in letters of blood and fire.

That’s why he preceded the words “primitive accumulation” by “so-called.”

Notes:
1 Quotations from Marx’s 1865 lectures, “Value, Price and Profit,” are from Marx Engels Collected Works, vol. 20, 103-149. Quotations from “So-Called Primitive Accumulation” are from Marx, Capital vol. 1 (Penguin, 1976) 873-940.
2 Marx, Capital vol. 3, (Penguin, 1981) 571.
3 Ibid, 349.
4 See chapters 24 and 25 of Capital vol. 1.
5 Linebaugh, Stop Thief! (PM Press, 2014), 73.
6 Foster and Clark, The Robbery of Nature (Monthly Review Press, 2020), 36.
7 Marx, Capital vol. 3 (Penguin, 1981) 948. Emphasis added.

About Ian Angus
Ian Angus is a socialist and ecosocialist activist in Canada. He is editor of the ecosocialist journal Climate & Capitalism. He is co-author, with Simon Butler, of Too Many People? Population, Immigration and the Environmental Crisis (Haymarket, 2011), editor of the anthology The Global Fight for Climate Justice (Fernwood, 2010); and author of Facing the Anthropocene: Fossil Capitalism and the Crisis of the Earth System (Monthly Review Press, 2016). His latest book is A Redder Shade of Green: Intersections of Science and Socialism (Monthly Review Press, 2017).

Category : Capitalism | Globalization | Marxism | Slavery | Terror and Violence | Working Class | Blog
24
Jun

 

How Hegemony Ends: The Unraveling of American Power

By Alexander Cooley and Daniel H. Nexon
Foreign Affairs July/August 2020

Multiple signs point to a crisis in global order. The uncoordinated international response to the COVID-19 pandemic, the resulting economic downturns, the resurgence of nationalist politics, and the hardening of state borders all seem to herald the emergence of a less cooperative and more fragile international system. According to many observers, these developments underscore the dangers of U.S. President Donald Trump’s “America first” policies and his retreat from global leadership.

Even before the pandemic, Trump routinely criticized the value of alliances and institutions such as NATO, supported the breakup of the European Union, withdrew from a host of international agreements and organizations, and pandered to autocrats such as Russian President Vladimir Putin and the North Korean leader Kim Jong Un. He has questioned the merits of placing liberal values such as democracy and human rights at the heart of foreign policy. Trump’s clear preference for zero-sum, transactional politics further supports the notion that the United States is abandoning its commitment to promoting a liberal international order.

Some analysts believe that the United States can still turn this around, by restoring the strategies by which it, from the end of World War II to the aftermath of the Cold War, built and sustained a successful international order. If a post-Trump United States could reclaim the responsibilities of global power, then this era—including the pandemic that will define it—could stand as a temporary aberration rather than a step on the way to permanent disarray.

After all, predictions of American decline and a shift in international order are far from new—and they have been consistently wrong. In the middle of the 1980s, many analysts believed that U.S. leadership was on the way out. The Bretton Woods system had collapsed in the 1970s; the United States faced increasing competition from European and East Asian economies, notably West Germany and Japan; and the Soviet Union looked like an enduring feature of world politics. By the end of 1991, however, the Soviet Union had formally dissolved, Japan was entering its “lost decade” of economic stagnation, and the expensive task of integration consumed a reunified Germany. The United States experienced a decade of booming technological innovation and unexpectedly high economic growth. The result was what many hailed as a “unipolar moment” of American hegemony.

But this time really is different. The very forces that made U.S. hegemony so durable before are today driving its dissolution. Three developments enabled the post–Cold War U.S.-led order. First, with the defeat of communism, the United States faced no major global ideological project that could rival its own. Second, with the disintegration of the Soviet Union and its accompanying infrastructure of institutions and partnerships, weaker states lacked significant alternatives to the United States and its Western allies when it came to securing military, economic, and political support. And third, transnational activists and movements were spreading liberal values and norms that bolstered the liberal order.

Today, those same dynamics have turned against the United States: a vicious cycle that erodes U.S. power has replaced the virtuous cycles that once reinforced it. With the rise of great powers such as China and Russia, autocratic and illiberal projects rival the U.S.-led liberal international system. Developing countries—and even many developed ones—can seek alternative patrons rather than remain dependent on Western largess and support. And illiberal, often right-wing transnational networks are pressing against the norms and pieties of the liberal international order that once seemed so implacable. In short, U.S. global leadership is not simply in retreat; it is unraveling. And the decline is not cyclical but permanent.

THE VANISHING UNIPOLAR MOMENT

It may seem strange to talk of permanent decline when the United States spends more on its military than its next seven rivals combined and maintains an unparalleled network of overseas military bases. Military power played an important role in creating and maintaining U.S. preeminence in the 1990s and early years of this century; no other country could extend credible security guarantees across the entire international system. But U.S. military dominance was less a function of defense budgets—in real terms, U.S. military spending decreased during the 1990s and only ballooned after the September 11 attacks—than of several other factors: the disappearance of the Soviet Union as a competitor, the growing technological advantage enjoyed by the U.S. military, and the willingness of most of the world’s second-tier powers to rely on the United States rather than build up their own military forces. If the emergence of the United States as a unipolar power was mostly contingent on the dissolution of the Soviet Union, then the continuation of that unipolarity through the subsequent decade stemmed from the fact that Asian and European allies were content to subscribe to U.S. hegemony. continue

Category : China | Fascism | Globalization | Hegemony | Rightwing Populism | Russia | USSR | Blog
4
Apr

Women bang pots and pans to show their support for the emergency services dealing with the coronavirus outbreak © Atul Loke/Panos Pictures

 

The novelist on how coronavirus threatens India — and what the country, and the world, should do next

By Arundhati Roy
Financial Times

April 3, 2020 – Who can use the term “gone viral” now without shuddering a little? Who can look at anything any more — a door handle, a cardboard carton, a bag of vegetables — without imagining it swarming with those unseeable, undead, unliving blobs dotted with suction pads waiting to fasten themselves on to our lungs?

Who can think of kissing a stranger, jumping on to a bus or sending their child to school without feeling real fear? Who can think of ordinary pleasure and not assess its risk? Who among us is not a quack epidemiologist, virologist, statistician and prophet? Which scientist or doctor is not secretly praying for a miracle? Which priest is not — secretly, at least — submitting to science?

And even while the virus proliferates, who could not be thrilled by the swell of birdsong in cities, peacocks dancing at traffic crossings and the silence in the skies?

The number of cases worldwide this week crept over a million. More than 50,000 people have died already. Projections suggest that number will swell to hundreds of thousands, perhaps more. The virus has moved freely along the pathways of trade and international capital, and the terrible illness it has brought in its wake has locked humans down in their countries, their cities and their homes.

But unlike the flow of capital, this virus seeks proliferation, not profit, and has, therefore, inadvertently, to some extent, reversed the direction of the flow. It has mocked immigration controls, biometrics, digital surveillance and every other kind of data analytics, and struck hardest — thus far — in the richest, most powerful nations of the world, bringing the engine of capitalism to a juddering halt. Temporarily perhaps, but at least long enough for us to examine its parts, make an assessment and decide whether we want to help fix it, or look for a better engine.

The mandarins who are managing this pandemic are fond of speaking of war. They don’t even use war as a metaphor, they use it literally. But if it really were a war, then who would be better prepared than the US? If it were not masks and gloves that its frontline soldiers needed, but guns, smart bombs, bunker busters, submarines, fighter jets and nuclear bombs, would there be a shortage?

Night after night, from halfway across the world, some of us watch the New York governor’s press briefings with a fascination that is hard to explain. We follow the statistics, and hear the stories of overwhelmed hospitals in the US, of underpaid, overworked nurses having to make masks out of garbage bin liners and old raincoats, risking everything to bring succour to the sick. About states being forced to bid against each other for ventilators, about doctors’ dilemmas over which patient should get one and which left to die. And we think to ourselves, “My God! This is America!”

The tragedy is immediate, real, epic and unfolding before our eyes. But it isn’t new. It is the wreckage of a train that has been careening down the track for years. Who doesn’t remember the videos of “patient dumping” — sick people, still in their hospital gowns, butt naked, being surreptitiously dumped on street corners? Hospital doors have too often been closed to the less fortunate citizens of the US. It hasn’t mattered how sick they’ve been, or how much they’ve suffered. continue

Category : Capitalism | Globalization | India | Blog
24
Mar

 

 

 

 

 

 

 

 

 

 

 

 

Members of the Wayuu ethnic group watch as a U.S. army helicopter arrives for a joint exercise in the “Tres Bocas” area in northern Colombia on March 13, 2020. JUAN BARRETO / AFP VIA GETTY IMAGES

By William I. Robinson
Truthout

March 23, 2020 – What does a virus have to do with war and repression? The coronavirus has disrupted global supply networks and spread panic throughout the world’s stock markets. The pandemic will pass, not without a heavy toll. But in the larger picture, the fallout from the virus exposes the fragility of a global economy that never fully recovered from the 2008 financial collapse and has been teetering on the brink of renewed crisis for years.

The crisis of global capitalism is as much structural as it is political. Politically, the system faces a crisis of capitalist hegemony and state legitimacy. As is now well-known, the level of global social polarization and inequality is unprecedented. In 2018, the richest 1 percent of humanity controlled more than half of the world’s wealth while the bottom 80 percent had to make do with just 4.5 percent of this wealth. Such stark global inequalities are politically explosive, and to the extent that the system is simply unable to reverse them, it turns to ever more violent forms of containment to manage immiserated populations.

Structurally, the system faces a crisis of what is known as overaccumulation. As inequalities escalate, the system churns out more and more wealth that the mass of working people cannot actually consume. As a result, the global market cannot absorb the output of the global economy. Overaccumulation refers to a situation in which enormous amounts of capital (profits) are accumulated, yet this capital cannot be reinvested profitably and becomes stagnant.

Indeed, corporations enjoyed record profits during the 2010s at the same time that corporate investment declined. Worldwide corporate cash reserves topped $12 trillion in 2017, more than the foreign exchange reserves of the world’s central governments, yet transnational corporations cannot find enough opportunities to profitably reinvest their profits. As this uninvested capital accumulates, enormous pressures build up to find outlets for unloading the surplus. By the 21st century, the transnational capitalist class turned to several mechanisms in order to sustain global accumulation in the face of overaccumulation, above all, financial speculation in the global casino, along with the plunder of public finances, debt-driven growth and state-organized militarized accumulation.

Militarized Accumulation

It is the last of these mechanisms, what I have termed militarized accumulation, that I want to focus on here. The crisis is pushing us toward a veritable global police state. The global economy is becoming ever more dependent on the development and deployment of systems of warfare, social control and repression, apart from political considerations, simply as a means of making profit and continuing to accumulate capital in the face of stagnation. The so-called wars on drugs and terrorism; the undeclared wars on immigrants, refugees, gangs, and poor, dark-skinned and working-class youth more generally; the construction of border walls, immigrant jails, prison-industrial complexes, systems of mass surveillance, and the spread of private security guard and mercenary companies, have all become major sources of profit-making.

The events of September 11, 2001, marked the start of an era of a permanent global war in which logistics, warfare, intelligence, repression, surveillance, and even military personnel are more and more the privatized domain of transnational capital. Criminalization of surplus humanity activates state-sanctioned repression that opens up new profit-making opportunities for the transnational capitalist class. Permanent war involves endless cycles of destruction and reconstruction, each phase in the cycle fueling new rounds and accumulation, and also results in the ongoing enclosure of resources that become available to the capitalist class.

Criminalization of surplus humanity activates state-sanctioned repression that opens up new profit-making opportunities for the transnational capitalist class.

 
The Pentagon budget increased 91 percent in real terms between 1998 and 2011, while worldwide, total defense outlays grew by 50 percent from 2006 to 2015, from $1.4 trillion to $2.03 trillion, although this figure does not take into account secret budgets, contingency operations and “homeland security” spending. The global market in homeland security reached $431 billion in 2018 and was expected to climb to $606 billion by 2024. In the decade from 2001 to 2011, military industry profits nearly quadrupled. In total, the United States spent a mind-boggling nearly $6 trillion from 2001 to 2018 on its Middle East wars alone.

Led by the United States as the predominant world power, military expansion in different countries has taken place through parallel (and often conflictive) processes, yet all show the same relationship between state militarization and global capital accumulation. In 2015, for instance, the Chinese government announced that it was setting out to develop its own military-industrial complex modeled after the United States, in which private capital would assume the leading role. Worldwide, official state military outlays in 2015 represented about 3 percent of the gross world product of $75 trillion (this does not include state military spending not made public).

But militarized accumulation involves vastly more than activities generated by state military budgets. There are immense sums involved in state spending and private corporate accumulation through militarization and other forms of generating profit through repressive social control that do not involve militarization per se, such as structural controls over the poor through debt collection enforcement mechanisms or accumulation opportunities opened up by criminalization.

The Privatization of War and Repression
The various wars, conflicts, and campaigns of social control and repression around the world involve the fusion of private accumulation with state militarization. In this relationship, the state facilitates the expansion of opportunities for private capital to accumulate through militarization. The most obvious way that the state opens up these opportunities is to facilitate global weapons sales by military-industrial-security firms, the amounts of which have reached unprecedented levels. Between 2003 and 2010 alone, the Global South bought nearly half a trillion dollars in weapons from global arms dealers. Global weapons sales by the top 100 weapons manufacturers and military service companies increased by 38 percent between 2002 and 2016.

Global weapons sales by the top 100 weapons manufacturers and military service companies increased by 38 percent between 2002 and 2016.

 
The U.S.-led wars in Iraq and Afghanistan precipitated the explosion in private military and security contractors around the world deployed to protect the transnational capitalist class. Private military contractors in Iraq and Afghanistan during the height of those wars exceeded the number of U.S. combat troops in both countries, and outnumbered U.S. troops in Afghanistan by a three-to-one margin. Beyond the United States, private military and security firms have proliferated worldwide and their deployment is not limited to the major conflict zones in the Middle East, South Asia and Africa. In his study, Corporate Warriors, P.W. Singer documents how privatized military forces (PMFs) have come to play an ever more central role in military conflicts and wars. “A new global industry has emerged,” he noted. “It is outsourcing and privatization of a twenty-first century variety, and it changes many of the old rules of international politics and warfare. It has become global in both its scope and activity.” Beyond the many based in the United States, PMFs come from numerous countries around the world, including Russia, South Africa, Colombia, Mexico, India, the EU countries and Israel, among others.

Beyond wars, PMFs open up access to economic resources and corporate investment opportunities — deployed, for instance, to mining areas and oil fields — leading Singer to term PMFs “investment enablers.” PMF clients include states, corporations, landowners, nongovernmental organizations, even the Colombian and Mexican drug cartels. From 2005 to 2010, the Pentagon contracted some 150 firms from around the world for support and security operations in Iraq alone. By 2018, private military companies employed some 15 million people around the world, deploying forces to guard corporate property; provide personal security for corporate executives and their families; collect data; conduct police, paramilitary, counterinsurgency and surveillance operations; carry out mass crowd control and repression of protesters; manage prisons; run private detention and interrogation facilities; and participate in outright warfare.

Meanwhile, the private security (policing) business is one of the fastest growing economic sectors in many countries and has come to overshadow public security around the world. According to Singer, the amount spent on private security in 2003, the year of the invasion of Iraq, was 73 percent higher than that spent in the public sphere, and three times as many persons were employed in private forces as in official law enforcement agencies. In parts of Asia, the private security industry grew at 20 percent to 30 percent per year. Perhaps the biggest explosion of private security was the near complete breakdown of public agencies in post-Soviet Russia, with over 10,000 new security firms opening since 1989. There were an outstanding 20 million private security workers worldwide in 2017, and the industry was expected to be worth over $240 billion by 2020. In half of the world’s countries, private security agents outnumber police officers.

As all of global society becomes a highly surveilled and controlled and wildly profitable battlespace, we must not forget that the technologies of the global police state are driven as much, or more, by the campaign to open up new outlets for accumulation as they are by strategic or political considerations. The rise of the digital economy and the blurring of the boundaries between military and civilian sectors fuse several fractions of capital — especially finance, military-industrial and tech companies — around a combined process of financial speculation and militarized accumulation. The market for new social control systems made possible by digital technology runs into the hundreds of billions. The global biometrics market, for instance, was expected to jump from its $15 billion value in 2015 to $35 billion by 2020.

Criminalization of the poor, racially oppressed, immigrants, refugees and other vulnerable communities is the most clear-cut method of accumulation by repression.

 
As the tech industry emerged in the 1990s, it was from its inception tied to the military-industrial-security complex and the global police state. Over the years, for instance, Google has supplied mapping technology used by the U.S. Army in Iraq, hosted data for the Central Intelligence Agency, indexed the National Security Agency’s vast intelligence databases, built military robots, co-launched a spy satellite with the Pentagon, and leased its cloud computing platform to help police departments predict crime. Amazon, Facebook, Microsoft and the other tech giants are thoroughly intertwined with the military-industrial and security complex.

Criminalization and the War on Immigrants and Refugees

Criminalization of the poor, racially oppressed, immigrants, refugees and other vulnerable communities is the most clear-cut method of accumulation by repression. This type of criminalization activates “legitimate” state repression to enforce the accumulation of capital, whereby the state turns to private capital to carry out repression against those criminalized.

There has been a rapid increase in imprisonment in countries around the world, led by the United States, which has been exporting its own system of mass incarceration. In 2019, it was involved in the prison systems of at least 33 different countries, while the global prison population grew by 24 percent from 2000 to 2018. This carceral state opens up enormous opportunities at multiple levels for militarized accumulation. Worldwide, there were in the early 21st century some 200 privately operated prisons on all continents and many more “public-private partnerships” that involved privatized prison services and other forms of for-profit custodial services such as privatized electronic monitoring programs. The countries that were developing private prisons ranged from most member states of the European Union, to Israel, Russia, Thailand, Hong Kong, South Africa, New Zealand, Ecuador, Australia, Costa Rica, Chile, Peru, Brazil and Canada.

Those criminalized include millions of migrants and refugees around the world. Repressive state controls over the migrant and refugee population and criminalization of non-citizen workers makes this sector of the global working class vulnerable to super-exploitation and hyper-surveillance. In turn, this self-same repression in and of itself becomes an ever more important source of accumulation for transnational capital. Every phase in the war on migrants and refugees has become a wellspring of profit making, from private, for-profit migrant jails and the provision of services inside them such as health care, food, phone systems, to other ancillary activities of the deportation regime, such as government contracting of private charter flights to ferry deportees back home, and the equipping of armies of border agents.

Undocumented immigrants constitute the fastest-growing sector of the U.S. prison population and are detained in private migrant jails and deported by private companies contracted out by the U.S. state. As of 2010, there were 270 immigration jails in the U.S. that caged on any given day over 30,000 immigrants and annually locked up some 400,000 individuals, compared to just a few dozen people in immigrant detention each day prior to the 1980s. From 2010 to 2018, federal spending on these detentions jumped from $1.8 billion to $3.1 billion. Given that such for-profit prison companies as CoreCivic and GEO Group are traded on the Wall Street stock exchange, investors from anywhere around the world may buy and sell their stock, and in this way, develop a stake in immigrant repression quite removed from, if not entirely independent, of the more pointed political and ideological objectives of this repression.

Every phase in the war on migrants and refugees has become a wellspring of profit making.

 
In the United States, the border security industry was set to double in value from $305 billion in 2011 to some $740 billion in 2023. Mexican researcher Juan Manuel Sandoval traces how the U.S.-Mexico border region has been reconfigured into a “global space for the expansion of transnational capital.” This “global space” is centered on the U.S. side around high-tech military and aerospace related industries, military bases, and the deploying of other civilian and military forces for combating “immigration, drug trafficking, and terrorism through a strategy of low-intensity warfare.” On the Mexican side, it involves the expansion of maquiladoras (sweatshops), mining and industry in the framework of capitalist globalization and North American integration.

The tech sector in the United States has become heavily involved in the war on immigrants as Silicon Valley plays an increasingly central role in the expansion and acceleration of arrests, detentions and deportations. As their profits rise from participation in this war, leading tech companies have in turn pushed for an expansion of incarceration and deportation of immigrants, and lobbied the state to use their innovative social control and surveillance technologies in anti-immigrant campaigns.

In Europe, the refugee crisis and EU’s program to “secure borders” has provided a bonanza to military and security companies providing equipment to border military forces, surveillance systems and information technology infrastructure. The budget for the EU public-private border security agency, Frontex, increased a whopping 3,688 percent between 2005 and 2016, while the European border security market was expected to nearly double, from some $18 billion in 2015 to approximately $34 billion in 2022.

The Coronavirus Is Not to Blame

When the pandemic comes to an end, we will be left with a global economy even more dependent on militarized accumulation than before the virus hit.
As stock markets around the world began to plummet starting in late February, mainstream commentators blamed the coronavirus for the mounting crisis. But the virus was only the spark that ignited the financial implosion. The plunge in stock markets suggests that for some time to come, financial speculation will be less able to serve as an outlet for over-accumulated capital. When the pandemic comes to an end, we will be left with a global economy even more dependent on militarized accumulation than before the virus hit.

We must remember that accumulation by war, social control and repression is driven by a dual logic of providing outlets for over-accumulated capital in the face of stagnation, and of social control and repression as capitalist hegemony breaks down. The more the global economy comes to depend on militarization and conflict, the greater the drive to war and the higher the stakes for humanity. There is a built-in war drive to the current course of capitalist globalization. Historically, wars have pulled the capitalist system out of crisis while they have also served to deflect attention from political tensions and problems of legitimacy. Whether or not a global police state driven by the twin imperatives of social control and militarized accumulation becomes entrenched is contingent on the outcome of the struggles raging around the world among social and class forces and their competing political projects.

William I. Robinson is professor of sociology, global studies and Latin American studies at the University of California at Santa Barbara. His most recent book is Global Capitalism and the Crisis of Humanity. This article draws on the author’s forthcoming book, The Global Police State, which will be released by Pluto Press in July 2020.

Category : Capitalism | Ecology | Fascism | Globalization | Marxism | Neoliberalism | Blog
16
Sep

 

 

 

 

 

 

 

 

 

By John Ross
Learning from China

June 2017 – The Hamburg G20 summit was a further stage in a process that has been developing strongly during the  2017: a recognition that a new stage in China’s international ‘thought leadership’ has developed.  For decades China had the world’s most rapidly growing economy, the world’s fastest increase in living standards, and was responsible for over 80% of the reduction of the number of people in the world living in poverty.

But now, as Edward Luce, the chief Washington correspondent for the Financial Times, noted: ‘ It was during Obama’s second term that China overtook the US as the world’s largest economy on a purchasing power parity basis. It is likely to overtake the US in dollar terms within the next presidential term, regardless of who is in office.‘ This gigantic economic development inevitably produced a growing global impact. But  the new stage, as confirmed below, is even Western analysts note that China, or to be more precise the Communist Party of China (CPC) and President Xi Jinping, are winning in the global ‘battle of ideas’. It is therefore important to analyse the reasons for this.

Such examination illustrates not only individual issues but demonstrates clearly the superiority of Xi Jinping’s Marxist analysis over Western thinking. This can be particularly clearly demonstrated by examining the wide international discussion which has contrasted China’s key recent global initiatives, such as Xi Jinping’s speech at the Davos World Economic Forum and the One Belt One Road summit in Beijing, with US attempts to articulate a general alternative foreign policy framework to China’s. Such analysis has the advantage it clearly demonstrates the way these concepts put forward by Xi Jinping both flow from Marxist ideas and simultaneously develop them in a new international situation – and why they can be clearly understood by a non-Marxist audience. In summary, as will be shown, the wide ranging international discussions in 2017 have clearly demonstrated the superiority of the CPC’s Marxist thinking over Western ideas.

China rising

Immediately following Donald Trump’s inauguration as US President his Chief Strategist, Steve Bannon, admitted in practice what were the two most influential global views today: ‘I think it’d be good if people compare Xi’s speech at Davos and President Trump’s speech in his inaugural…. You’ll see two different world views.’

Indeed, it is widely understood in the Western media that the last period has seen a major shift internationally in both practical policy initiatives and ‘thought leadership’ towards China. Martin Wolf, chief economics commentator of the Financial Times, and one of the West’s most influential journalists, stated bluntly at the end of May that the question now being discussed in all countries was: ‘Would it not be wiser, they wonder, to move closer to China?’ Ian Bremmer, President of the Eurasia Group, the most influential Western ‘risk analysis’ company, noted regarding one of the key indicators of China’s success in projecting not only practical power but also ideas: ‘Davos reaction to Xi speech: Success on all counts.’

Merely to take in chronological order some of the landmarks of China’s sharply rising influence:

China’s initiative to establish the Asian Infrastructure Investment Bank (AIIB) was highly successful – with even close United States allies, such as the UK and Germany, participating and refusing to support US calls to boycott it.
Xi Jinping’s speech at Davos World Economic Forum was almost universally analysed in the West as encapsulating a major strategic success. In addition to Bremmer’s conclusion already cited, Hans-Paul Buerkner, chairman of the Boston Consulting Group, noted: ‘President Xi emphasized the importance of continued globalization, growth and equity, which impressed me the most.’ Khalid Al Rumaihi, chief executive of the Bahrain Economic Development Board concluded: ‘President Xi’s insistence to deepen globalization, to strengthen economic growth, and his warning against isolationism are extremely comforting and a strong endorsement.’

The recent Beijing One Belt One Road (B&R) summit’s significance was well understood in the West. The Financial Times, under a self-explanatory headline ‘Europe must respond to China’s Belt and Road initiative’, analysed: ‘Beijing is using the laws of economic gravity and physics to shape the global economy… The gravity metaphor is well established in the so-called “gravity models” of international trade, which relate the size of trade flows to the “mass” (economic size) and distance between trading partners. The indisputable finding is that physical distance remains monumentally important in international economics… as international supply chains have grown over recent decades, the most complex ones are regional more than global… As for physics metaphors, the relevant concept is friction. Gravity affects all bodies equally in a vacuum; friction, however, can change the speed at which they fall. So, too, in economics, where the frictions are the costs of trade. These can be physical — in the case of landlocked countries with poor infrastructure, say — and man-made. The most significant man-made trade costs are no longer border tariffs but regulatory, administrative and cultural barriers to doing business across national borders. They remain high…China… understands both concepts very well. The Belt and Road aims to overcome the bounds of gravity by reducing frictions, and to use the forces of attraction this unleashes to centre a growing part of global economic activity on China.’

China has long been influential among developing countries but the Financial Times has now noted that China’s overall influence is extending even into traditional US allies. EU officials noted for example: ‘the establishment of a 16-nation bloc of central and eastern European countries — many of them EU members. The bloc is sometimes used to frustrate EU decisions that could disadvantage China, said the officials.’ Regarding Singapore, another traditional US ally, the FT analysed reporting the recent Shangri-La dialogue,: ‘Ng Eng Hen, Singapore’s defence minister, was keen to build bridges with Beijing when he spoke to the assembled generals, diplomats and policy wonks at the Shangri-La hotel at the weekend. He made no mention of… the South China Sea and fawned over the Belt and Road project… “China has stepped on the pedal to push ahead with its plans to be a leader for trade in the Asia Pacific region, if not the world.”‘ Regarding Australia, another traditional US ally, Edward Luce noted: ‘Long before Trump’s victory, Australians were also debating whether their country should distance itself from the US to accommodate a rising China — a more important economic partner than the US. Now such arguments have gone mainstream. Former prime ministers, such as Paul Keating, make the case that Australia should hedge its bets.“’

China’s sharply rising international influence was certainly further aided by self-inflicted US wounds such as Trump’s virtually universally internationally condemned decision to withdraw from the Paris Climate Accord. Even within the US this latter decision was attacked as weakening the United States – a pillar of the US establishment such as Goldman Sachs CEO Lloyd Blankfein taking to Twitter for the first ever time to declare: ‘Today’s decision is a setback for the environment and for the U.S.’s leadership position in the world.’ But, as is clear from the facts already noted above, the further weakening of the US’s international position by Trump’s position on the Paris Climate Accord simply followed from a period when China’s global position was already strongly strengthening. As Edward Luce summarised:

‘The world was already making adjustments before Trump… Almost two years before the UK’s Brexit referendum, David Cameron, Britain’s then prime minister, rolled out the red carpet for Xi Jinping on a state visit to the UK. Britain also enraged Obama’s White House by rushing to join China’s Asia Infrastructure Investment Bank… Others, such as Australia and Germany, hesitated but then followed suit. Almost every western power sent delegations, among them 29 heads of state, to China’s recent “One Belt, One Road” summit in Beijing. When China speaks, foreign governments listen.’

The shifting of the centre of global initiatives and thinking to China, analysed from the point of view of internal Chinese development in Wang Wen’s analysis is therefore fully confirmed by the analysis in the Western media itself.

A ‘Trump doctrine’?

Almost certainly in reaction both to the rise in China’s impact noted above, and to increased scepticism regarding US foreign policy views, immediately after President Trump’s first foreign trip, his National Security Adviser McMaster and his Director of the US National Economic Council Cohn jointly authored a Wall Street Journal article systematically setting out the principles of US foreign policy. The significance of this joint article, which could not have appeared from such high placed figures without approval of the President, was immediately recognised – CNN’s Fareed Zakaria, one of the US’s most important foreign policy commentators, noted: ‘We now have a Trump Doctrine.’ continue

Category : China | Globalization | Marxism | Blog
29
Aug

The challenge of Amin’s call for an Internationale of workers and peoples

By William I. Robinson
Globalizations

Samir Amin, a leading scholar and co-founder of the world-systems tradition, died on August 12, 2018. Just before his death, he published, along with close allies, a call for ‘workers and the people’ to establish a ‘fifth international’ [https://www.pambazuka.org/global-south/letter-intent-inaugural-meeting-international-workers-and-peoples] to coordinate support to progressive movements. To honor Samir Amin’s invaluable contribution to world-systems scholarship, we are pleased to present readers with a selection of essays responding to Amin’s final message for today’s anti-systemic movements. This forum is being co-published between Globalizations [https://www.tandfonline.com/rglo], the Journal of World-Systems Research [http://jwsr.pitt.edu/ojs/index.php/jwsr/issue/view/75] and Pambazuka News [https://www.pambazuka.org/]. Additional essays and commentary can be found in these outlets.

Aug 27, 2019 – Samir Amin’s call for an ‘Internationale of workers and peoples’ could not be timelier. If we are to face the onslaught of the neo-fascist right, the left worldwide must urgently renovate a revolutionary project and a plan for refounding the state. It must do so across borders under an umbrella organization that puts forth a minimum program around which popular and working-class forces can unite, and that establishes mechanisms for transnational struggle. While I concur with much of Amin’s call I also have some significant differences as well as specifications with respect to the call that I will attempt to explicate below.

Global capitalism is facing a spiraling crisis of hegemony that appears to be approaching a general crisis of capitalist rule. In the face of this crisis there has been a sharp polarization in global society between insurgent left and popular forces, on the one hand, and an insurgent far right, on the other, at whose fringe are openly fascist tendencies (Robinson, 2019 Robinson, W. I. (2019). Global capitalist crisis and twenty-first century fascism: Beyond the Trump hype.). Yet the far-right has been more effective in the past few years than the left in mobilizing disaffected populations around the world and has made significant political and institutional inroads. It would seem that Rosa Luxemburg’s dire warning at the start of the World War I that we face ‘socialism or barbarism’ is as or even more relevant today than when she issued it, given the magnitude of the means of violence worldwide and the threat of ecological holocaust. If left, popular, and working-class forces are to regain the initiative and beat back barbarism they need a transnational umbrella organization with a minimum program against global capitalism around which they can coordinate national and regional struggles and transnationalize the fightback.

The international of capital and the specter of 21st century fascism

The theme of transnational struggles from below has been discussed at great length for several decades now. Capital has achieved a newfound transnational mobility yet labor remains territorially bound by the nation-state. In the wake of the structural crisis of the 1970s, emergent transnational capital went global as a strategy to reconstitute its social power by breaking free of nation-state constraints to accumulation, to do away with Fordist-Keynesian redistributive arrangements, and to beat back the tide of revolution in the Third World. continue

Category : Capitalism | Fascism | Globalization | Hegemony | Blog
11
Jun

Washington Squandered the Unipolar Moment

By Fareed Zakaria
Foreign Affairs, July-August 2019

Sometime in the last two years, American hegemony died. The age of U.S. dominance was a brief, heady era, about three decades marked by two moments, each a breakdown of sorts. It was born amid the collapse of the Berlin Wall, in 1989. The end, or really the beginning of the end, was another collapse, that of Iraq in 2003, and the slow unraveling since. But was the death of the United States’ extraordinary status a result of external causes, or did Washington accelerate its own demise through bad habits and bad behavior? That is a question that will be debated by historians for years to come. But at this point, we have enough time and perspective to make some preliminary observations.

As with most deaths, many factors contributed to this one. There were deep structural forces in the international system that inexorably worked against any one nation that accumulated so much power. In the American case, however, one is struck by the ways in which Washington—from an unprecedented position—mishandled its hegemony and abused its power, losing allies and emboldening enemies. And now, under the Trump administration, the United States seems to have lost interest, indeed lost faith, in the ideas and purpose that animated its international presence for three-quarters of a century.

U.S. hegemony in the post–Cold War era was like nothing the world had seen since the Roman Empire. Writers are fond of dating the dawn of “the American century” to 1945, not long after the publisher Henry Luce coined the term. But the post–World War II era was quite different from the post-1989 one. Even after 1945, in large stretches of the globe, France and the United Kingdom still had formal empires and thus deep influence. Soon, the Soviet Union presented itself as a superpower rival, contesting Washington’s influence in every corner of the planet. Remember that the phrase “Third World” derived from the tripartite division of the globe, the First World being the United States and Western Europe, and the Second World, the communist countries. The Third World was everywhere else, where each country was choosing between U.S. and Soviet influence. For much of the world’s population, from Poland to China, the century hardly looked American.

The United States’ post–Cold War supremacy was initially hard to detect. As I pointed out in The New Yorker in 2002, most participants missed it. In 1990, British Prime Minister Margaret Thatcher argued that the world was dividing into three political spheres, dominated by the dollar, the yen, and the deutsche mark. Henry Kissinger’s 1994 book, Diplomacy, predicted the dawn of a new multipolar age. Certainly in the United States, there was little triumphalism. The 1992 presidential campaign was marked by a sense of weakness and weariness. “The Cold War is over; Japan and Germany won,” the Democratic hopeful Paul Tsongas said again and again. Asia hands had already begun to speak of “the Pacific century.”

U.S. hegemony in the post–Cold War era was like nothing the world had seen since the Roman Empire.

There was one exception to this analysis, a prescient essay in the pages of this magazine by the conservative commentator Charles Krauthammer: “The Unipolar Moment,” which was published in 1990. But even this triumphalist take was limited in its expansiveness, as its title suggests. “The unipolar moment will be brief,” Krauthammer admitted, predicting in a Washington Post column that within a very short time, Germany and Japan, the two emerging “regional superpowers,” would be pursuing foreign policies independent of the United States.

Policymakers welcomed the waning of unipolarity, which they assumed was imminent. In 1991, as the Balkan wars began, Jacques Poos, the president of the Council of the European Union, declared, “This is the hour of Europe.” He explained: “If one problem can be solved by Europeans, it is the Yugoslav problem. This is a European country, and it is not up to the Americans.” But it turned out that only the United States had the combined power and influence to intervene effectively and tackle the crisis.

Similarly, toward the end of the 1990s, when a series of economic panics sent East Asian economies into tailspins, only the United States could stabilize the global financial system. It organized a $120 billion international bailout for the worst-hit countries, resolving the crisis. Time magazine put three Americans, Treasury Secretary Robert Rubin, Federal Reserve Chair Alan Greenspan, and Deputy Treasury Secretary Lawrence Summers, on its cover with the headline “The Committee to Save the World.”

THE BEGINNING OF THE END

Just as American hegemony grew in the early 1990s while no one was noticing, so in the late 1990s did the forces that would undermine it, even as people had begun to speak of the United States as “the indispensable nation” and “the world’s sole superpower.” First and foremost, there was the rise of China. It is easy to see in retrospect that Beijing would become the only serious rival to Washington, but it was not as apparent a quarter century ago. Although China had grown speedily since the 1980s, it had done so from a very low base. Few countries had been able to continue that process for more than a couple of decades. China’s strange mixture of capitalism and Leninism seemed fragile, as the Tiananmen Square uprising had revealed. continue

Category : Globalization | Hegemony | US History | Blog
1
Dec


 

October 2018:An exchange prompted by the essay 

The Precariat: Today’s Transformative Class? 


A headshot of Bill Fletcher

Bill Fletcher
Taking a long view of precariousness as an inherent feature of capitalism can shed light on the contemporary debate on “the precariat.”
 Read


A headshot of Nancy Folbre

Nancy Folbre
The focus on “the precariat” is useful but limited: the fight over distribution isn’t just between labor and capital.
 Read


A headshot of Azfar Khan

Azfar Khan
A universal basic income is key to delivering security and autonomy to people in a precarious world. 
Read


A headshot of Alexandra Köves

Alexandra Köves
Beyond policies like a universal basic income, a transition to a equitable and sustainable society requires the redefinition of well-being, needs, and work itself.
 Read


A headshot of George Liodakis

George Liodakis
There is no “precariat,” per se—the working class as-a-whole remains the necessary agent for transformation.
 Read


A headshot of Ronaldo Munck

Ronaldo Munck
Work in the Global South has always been precarious, but the resurgence of global labor organizing offers a way forward.
 Read


A headshot of William I. Robinson

William I. Robinson
The “precariat,” rather than a new class, is part of the global proletariat, on whose struggle with transnational capital our fate depends.
 Read


A headshot of Pritam Singh

Pritam Singh
A basic income alone is not transformative, but a feature of a broader ecosocialist vision of dismantling capitalism. 
Read


A headshot of Eva-Maria Swidler

Eva-Maria Swidler
Workers in the Global North have a lot to learn from the past struggles of workers in the Global South (as well as in their own countries). 
Read


A headshot of Evelyn AstorA headshot of Alison Tate

Alison Tate and Evelyn Astor
Labor unions must continue to play an important role in the fight for economic justice and against precariousness. 
Read



A headshot of Guy Standing

Author’s Response
Guy Standing addresses points raised by the contributors to this roundtable. Read
 

Category : Capitalism | Globalization | Hegemony | Marxism | Organizing | Strategy and Tactics | Theory | Working Class | Youth | Blog
25
Nov

By Guy Standing

October 2018

Since 1980, the global economy has undergone a dramatic transformation, with the globalization of the labor force, the rise of automation, and—above all—the growth of Big Finance, Big Pharma, and Big Tech. The social democratic consensus of the immediate postwar years has given way to a new phase of capitalism that is leaving workers further behind and reshaping the class structure. The precariat, a mass class defined by unstable labor arrangements, lack of identity, and erosion of rights, is emerging as today’s “dangerous class.” As its demands cannot be met within the current system, the precariat carries transformative potential. To realize that potential, however, the precariat must awaken to its status as a class and fight for a radically changed income distribution that reclaims the commons and guarantees a livable income for all. Without transformative action, a dark political era looms.

Introduction

We are living in a painful time of turbulent economic change. A global market system continues to take shape as the United States petulantly threatens the international order that it helped to create and from which it has gained disproportionately. This era, which began around 1980, has been dominated institutionally by American finance and ideologically by the economic orthodoxy of “neoliberalism.” A hallmark of this transformation has been the increasing redistribution of wealth upwards as rents to those owning property—physical, financial, and “intellectual.” As “rentier capitalism” has risen, working classes have foundered, as those relying on labor have been losing ground in both relative and absolute terms.

In brief, during the past forty years, the global economy has been shaped by neoliberal economics, which, accentuated by the digital revolution, has generated two linked phenomena: global rentier capitalism and a global class structure in which the precariat is the new mass class. Rentier capitalism is making the hardships borne by the precariat much worse.

Industrial capitalism produced a property-owning bourgeoisie and the proletariat; contemporary capitalism is roiling this class structure. Today, the mass class is the precariat, characterized by unstable labor, low and unpredictable incomes, and loss of citizenship rights. It is the new “dangerous class,” partly because its insecurities induce the bitterness, ill-health, and anger that can be the fodder of right-wing populism. But it is also dangerous in the progressive sense that many in it reject old center-left and center-right politics. They are looking for the root-and-branch change of a new “politics of paradise,” rather than a return to a “politics of laborism” that seeks amelioration within dominant institutions and power structures.

The precariat’s needs cannot be met by modest reforms to the existing social and economic system. It is the only transformative class because, intuitively, it wants to become strong enough to abolish the conditions that define its existence and, as such, abolish itself. All others want merely to improve their position in the social hierarchy. This emergent class is thus well-placed to become the agent of radical social transformation—if it can organize and become sufficiently united around a shared identity, alternative vision, and viable political agenda.

The key to understanding the precariat’s transformational position lies in the breakdown of the income distribution system of the mid-twentieth century. To succeed, a new progressive politics must offer a pathway to an ecologically sustainable system that reduces inequalities and insecurities in the context of an open, globalizing economy.

The Rise of Rentier Capitalism

Between 1945 and 1980, the dominant socioeconomic paradigm in industrialized countries outside the Communist Bloc was social democratic, defined by the creation of welfare states and labor-based entitlements. Although there were modest falls in inequality coupled with labor-based economic security, this was no “golden age,” as some historians label it. The period was stultifying and sexist. Putting as many people as possible (mainly men) in full-time jobs under the banner of Full Employment was hardly an emancipatory vision worthy of the Enlightenment values of EgalitéLiberté, and Solidarité.

As the social democratic era collapsed in the 1970s, an economic model emerged now known as “neoliberalism.” Its advocates preached “free markets,” strong private property rights, financial market liberalization, free trade, commodification, privatization, and the dismantling of all institutions and mechanisms of social solidarity, which, in their view, were “rigidities” holding back the market. While the neoliberals were largely successful in implementing their program, what transpired was very different from what they had promised.

The initial outcome was financial domination. The income generated by US finance, which equaled 100% the size of the US economy in 1975, grew to 350% in 2015. Similarly, in the UK, finance went from 100% to 300% of GDP. Both countries experienced rapid deindustrialization as the strength of finance led to an overvalued exchange rate that, by making exports uncompetitive and imports cheaper, destroyed high-productivity manufacturing jobs. Financial institutions, most notably Goldman Sachs, became masters of the universe, their executives slotted into top political positions in the US and around the world.1

Finance linked up with Big Pharma and Big Tech to forge a global architecture of institutions strengthening rentier capitalism, maximizing monopolistic income from intellectual property. The pivotal moment came in 1995 with implementation of the World Trade Organization (WTO)’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), in which US multinational corporations helped secure the globalization of the US intellectual property rights system. This shift gave unprecedented rent-extracting capacity to multinationals and financial institutions.

Patents, copyright, protection of industrial designs, and trademarked brands have multiplied as sources of monopolistic profit. In 1994, fewer than one million patents were filed worldwide; in 2011, over two million were filed; in 2016, over three million. By then, twelve million were in force, and licensing income from patents had multiplied sevenfold. Growth was similar with other forms of intellectual property.

The rent-extracting system was enforced by over 3,000 trade and investment agreements, all entrenching property rights, topped by a mechanism (Investor-State Dispute Settlement) that empowers multinationals to sue governments for any policy changes that, in their view, negatively affect their future profits. This has had a chilling effect on policy reform efforts, notably those seeking to protect health and the environment.

Rentier capitalism has also been bolstered by subsidies, a financial system designed to increase private debt, privatization of public services, and a plunder of the commons. But it contains two possibly fatal flaws. First, the rentiers have been winning too much by rigging the system, raising questions about social and political sustainability. Second, the architects proved mistaken in thinking this framework would bolster the US economy, along with other advanced industrial economies to a lesser extent, at the expense of the rest of the world.

In particular, they underestimated China. When TRIPS was passed, China was inconsequential as a rentier economy. After it joined the WTO in 2001, it started to catch up fast. In 2011, China overtook the US in patent applications; by 2013, it accounted for nearly a third of global filings, well ahead of the US (22%). In 2016, it accounted for 98% of the increase over 2015, filing more than the US, Japan, the Republic of Korea, and the European Patent Office combined.

The main outcome of rentier capitalism, exacerbated by globalization and the digital revolution, is an inexorable erosion of the income distribution system of the twentieth century—the implicit sharing of income between capital and labor that emerged after the Second World War, epitomized by the 1950 pact between the United Auto Workers union and General Motors known as the Treaty of Detroit. Now, all over the world, the share of income going to capital has been rising; the share going to labor, falling. Within both, the share going to forms of rent has been rising.

The social democratic consensus was based on implicit rules. When productivity rose, so did wages. When profits rose, so did wages. When employment rose, so did wages. Today, productivity and employment are rising, but wages remain stagnant or falling.

One factor depressing wages has been the growth of the global labor force, which has expanded by two billion during the past three decades, many of whom have a living standard that is a tiny fraction of what OECD workers were obtaining. Downward pressure on real wages will continue, especially as productivity can rise faster in emerging market economies and the technological revolution makes relocation of production and employment so much easier. Meanwhile, the rentiers will be protected. Antitrust legislation will not be strengthened to cut monopolistic rent-seeking, since governments will continue to protect national corporate champions.

Without transformative changes, those relying on labor will continue to lose; no amount of tinkering will do. Average real wages in OECD countries will stagnate, and social income inequalities will grow. Progressives must stop deluding themselves. Unless globalization goes into reverse, which is unlikely, trying to remedy inequality by forcing up wages, however desirable, will not do much. Raising wages substantially would merely accelerate the displacement of labor by automation.

A Global Class Structure

Just as industrial capitalism ushered in a new class structure, so, too, has rentier capitalism. The emerging structure, superimposed on old structures, is topped by a plutocracy, made up of a small group of billionaires who wield corruptive power. Although mostly in the West, a growing proportion of plutocrats are in Asia and other emerging market economies. Under them is an elite, who serve the plutocracy’s interests while making substantial rental income themselves. Together, these comprise what is colloquially known as the 1%, but, in fact, is much smaller than that.

Below them in the income spectrum is a salariat, a shrinking number of people with labor-based security and robust benefits, from health care to stock ownership. In the post-1945 era, economists predicted that by the end of the twentieth century, the vast majority in rich countries would be in the salariat, with growing numbers in developing countries joining them. Instead, the salariat is shrinking. It will not disappear, but its members are increasingly detached from those below them in the class spectrum, largely because they too gain more in rentier incomes than in wages. Still, their politics may be shaped by what they see happening to their sons and daughters, as well as their grandchildren.

Alongside the salariat is a smaller group of proficians, freelance professionals, such as software engineers, stock traders, lawyers, and medical specialists operating independently. They earn high incomes selling themselves frenetically, but risk early burnout and moral corrosion through excessive opportunism. This group will grow and are influential beyond their number, conveying an image of autonomy. But for the health of this untethered, hard-driving group—and society’s—they need social structures to enforce moral codes.

Below them in income terms is the proletariat, the epitome of the “working class” in the European sense, the “middle class” in the American sense. In the twentieth century, welfare states, labor law, collective bargaining, trade unions, and labor and social democratic parties were built by and for this group. However, it is dwindling everywhere and has lost progressive energy and direction.

Those who pine for the proletariat should reflect on the downside of the proletarian life and what most had to do just to survive. There should be respect for what it achieved in its heyday, but nostalgia is delusional. In reality, many are falling into the emerging mass class, the precariat, which is also being fed by college graduates and dropouts, women, migrants, and others.

Understanding the Precariat

The precariat consists of millions of people in every advanced industrial country and in emerging market economies as well.2 It can be defined in three dimensions: distinctive relations of production (patterns of labor and work), distinctive relations of distribution (sources of social income), and distinctive relations to the state (loss of citizenship rights). It is still a “class-in-the-making” in that it is internally divided by different senses of relative deprivation and consciousness. But in Europe at least, it is becoming conscious of itself as a coherent group opposed to the dominant power structure (a “class-for-itself”).

The distinctive relations of production start with the fact that the precariat is being forced to accept, and is being habituated to, a life of unstable labor, through temporary work assignments (“casualization”), agency labor, “tasking” in Internet-based “platform capitalism,” flexible scheduling, on-call and zero-hour contracts, and so on. Even more important is that those in the precariat have no occupational narrative or identity, no sense of themselves as having a career trajectory. They also learn they must do a lot of work-for-labor, work-for-the-state, and work-for-reproduction of themselves.3 The need to adapt capabilities in a context of uncertainty leads to the precariatized mind, not knowing how best to allocate one’s time and thus being under almost constant stress.

The precariat is also the first mass class in history in which their typical level of education exceeds that required for the kind of labor they can expect to obtain. And it must work and labor outside fixed workplaces and standard labor hours as well as within them.

The precariat exists in most occupations and at most levels within corporations. For example, within the legal professions, there are elites, a squeezed salariat, and a precariat of paralegals. Similar fragmentation exists in the medical and teaching professions, with paramedics and “fractionals” (i.e., those remunerated for only a fraction of full-time). The precariat is even spreading into corporate management with a concept of “interim managers,” some of whom are well-paid proficians (depicted by George Clooney in Up in the Air), others of whom fall in the precariat.

Along with the rise of unstable labor, the second dimension is distinctive relations of distribution, or structures of social income.4 The precariat relies mainly on money wages, which have been stagnant or falling in real terms for three decades, and which are increasingly volatile. The precariat’s income security has fallen correspondingly. Also, as many must do much unpaid work, the wage rate is lower than it appears if only paid labor time is taken into account. This trend will only intensify with the spread of “tasking” through online platforms.

Further, the precariat has been losing non-wage forms of remuneration, while the salariat and elite have been gaining them, making the growth of social income inequality greater than it appears in conventional income statistics. The precariat rarely receives paid holidays, paid medical leave, subsidized transport or accommodation, paid maternity leave, and so on. And it lacks the occupational benefits that came with belonging to a professional or craft guild.

The precariat has also lost entitlement to rights-based state benefits (welfare). The international trend towards means-testing and behavior-testing has hit them hard and engulfed many in regimes of workfare. Means-testing creates poverty traps, since benefits are withdrawn when earned income rises. Going from low state benefits into low-wage jobs on offer thus involves very high marginal “tax” rates, often over 80%. The precariat also faces “precarity traps”: obtaining benefits takes time, so if you succeed in obtaining them, it would be financially irrational to leave for a low-paying short-term job alternative.

The precariat has also been losing access to family and community support, as well as to commons resources and amenities, all of which have been underestimated sources of income security for low-income groups throughout the ages. For the precariat, they are just not there. Instead, many are driven to food banks and charities.

Key to the precariat’s income insecurity is uncertainty. Uncertainty differs from contingency risks, such as unemployment, maternity, and sickness, which were core focuses of welfare states. For those, one can calculate the probability of such events and develop an insurance scheme. Uncertainty cannot be insured against; it is about “unknown unknowns.” The social security part of the distribution system has also broken down, and social democrats should stop pretending it could be restored.

The precariat also suffers from an above-average cost of living. They live on the edge of unsustainable debt, knowing that one illness, accident, or mistake could render them homeless. Needing loans and credit, they pay much higher interest rates than richer folk.

The third defining dimension consists of the precariat’s distinctive relations to the state. The proletariat went from having few rights to having a rising number—cultural, civil, social, political, and economic. By contrast, the precariat is losing such rights, often not realizing so until need for their protection arises. For instance, they usually lack cultural rights because they cannot belong to communities such as occupational guilds that would give them security and identity. They lack civil rights because of the erosion of due process and inability to afford adequate defense in court; they often lose entitlement to state benefits on the whim of unaccountable bureaucrats. They lose economic rights because they cannot work in occupations they are qualified to perform.

The loss of rights goes with the most defining feature of the class: the precariat consists of supplicants. The original Latin meaning of precarious was “to obtain by prayer.” That sums up what it is to be in the precariat: having to ask for favors, for help, for a break, for a discretionary judgment by some bureaucrat, agent, relative, or friend. This intensifies uncertainty. To be in the precariat, it has been said, is like running on sinking sand.

Experience of supplicant status leads to the precariat’s growing consciousness. Chronic insecurity induces anxiety, but as with all emerging classes, there are different forms of relative deprivation. The precariat is split into three factions, which has hindered its becoming a class-for-itself and is challenging for those wishing to develop and organize a progressive response.

The first faction is the Atavists. They have fallen out of the proletariat, or come from old working-class families or communities whose members once depended on full-time jobs. Some are young; many are older, looking back wistfully. Their deprivation is about a lost Past, whether real or imagined. Having relatively little schooling or education in civics, history, or culture, they tend to listen to the sirens of neo-fascist populism.

They have been voting for the likes of Trump, Putin, Orban, Marine Le Pen, Farage and other Brexiteers, and the Lega in Italy. It is not correct to call them the “left behind,” since they are expected to function inside a new labor market. But they are bitter, eager to blame others for their plight. Those they demonize comprise the second faction of the precariat, the Nostalgics. This group is composed of migrants and minorities, who feel deprived of a Present, with nowhere to call home. For the most part, they “keep their heads down,” doing whatever they can to survive and move forward.

The third faction is best described as the Progressives, more educated and mainly young, although not exclusively so. Their defining sense of deprivation is loss of a Future. They went to university or college, promised by their parents and teachers that this would lead to a defining career. They emerge without that, often with debt stretching into that future. Beyond their own future, more and more despair about the planet’s ecological future.

A challenge for aspiring politicians is to build a broad policy strategy for bringing all three factions together in common cause. That is beginning to happen, so it is unnecessarily pessimistic to think a new progressive politics cannot be forged for the precariat as a whole.

The Dangerous Class

The precariat is today’s “dangerous class,” because it is the part of the emerging class system that could carry forward social transformation. For Marxists, the term “dangerous class” is associated with the “lumpen-proletariat,” those cut off from society, reduced to crime and social illness, having no function in production other than to put fear into the proletariat. But the precariat is not a lumpen. It is wanted by global capitalism, encapsulating new norms of labor and work. continue

Category : Capitalism | Globalization | Strategy and Tactics | Theory | Working Class | Youth | Blog