The Staying Power of Neoliberalism and U.S. Unipolarity

Krugman was in Athens recently to survey the damage the troika has wrought and to offer his idea for a solution.

No keen insight will be found in reading "Greece on the Brink." Krugman, one of the preferred thinkers of the Democrats, begins his column tut-tutting the perception held by Greeks that a bloodsucking neoliberal establishment is out to get them:

"Don’t you think they want us to fail?” That’s the question I kept hearing during a brief but intense visit to Athens. My answer was that there is no “they” — that Greece does not, in fact, face a solid bloc of implacable creditors who would rather see default and exit from the euro than let a leftist government succeed, that there’s more good will on the other side of the table than many Greeks suppose.

Krugman then basically performs a somersault and acknowledges that Greeks have a point: a way forward is clearly visible; Greece recently achieved a budget surplus; all that needs to be done is to freeze the implementation of further austerity measures -- cuts to pensions and labor rights -- and let the country stabilize; but the troika appears to be in no mood to bargain in good faith:

The shape of a deal is therefore clear: basically, a standstill on further austerity, with Greece agreeing to make significant but not ever-growing payments to its creditors. Such a deal would set the stage for economic recovery, perhaps slow at the start, but finally offering some hope.

But right now that deal doesn’t seem to be coming together. Maybe it’s true, as the creditors say, that the new Greek government is hard to deal with. But what do you expect when parties that have no previous experience in governing take over from a discredited establishment? More important, the creditors are demanding things — big cuts in pensions and public employment — that a newly elected government of the left simply can’t agree to, as opposed to reforms like an improvement in tax enforcement that it can. And the Greeks, as I suggested, are all too ready to see these demands as part of an effort either to bring down their government or to make their country into an example of what will happen to other debtor countries if they balk at harsh austerity. 

To make things even worse, political uncertainty is hurting tax receipts, probably causing that hard-earned primary surplus to evaporate. The sensible thing, surely, is to show some patience on that front: if and when a deal is reached, uncertainty will subside and the budget should improve again. But in the pervasive atmosphere of distrust, patience is in short supply. 

It doesn’t have to be this way. True, avoiding a full-blown crisis would require that creditors advance a significant amount of cash, albeit cash that would immediately be recycled into debt payments. But consider the alternative. The last thing Europe needs is for fraying tempers to bring on yet another catastrophe, this one completely gratuitous.

So in the end Krugman obliquely endorses the Greek belief that their country is being sacrificed on the altar of neoliberal orthodoxy.

A particularly good read from this past weekend but one sure to depress those who like myself see a fast-approaching collapse to the U.S. neoliberal global hegemony is Tariq Ali's "The New World Disorder: They Knew Exactly What They Were Doing."

Ali argues that U.S. unipolarity has more staying power than is commonly acknowledged and "declinism" as a school of thought is superficial and overrated; he then takes the reader on a brief  yet magisterial global tour to emphasize that U.S. leadership while maybe not waxing is certainly not waning.

Towards the end of his essay he comes to Europe:

What is the situation in Europe? The first point to be made is that there isn’t a single country in the European Union that enjoys proper sovereignty. After the end of the Cold War and reunification, Germany has become the strongest and strategically the most important state in Europe but even it doesn’t have total sovereignty: the United States is still dominant on many levels, especially as far as the military is concerned. Britain became a semi-vassal state after the Second World War. The last British prime ministers to act as if Britain was a sovereign state were Harold Wilson, who refused to send British troops to Vietnam, and Edward Heath, who refused to allow British bases to be used to bomb the Middle East. Since then Britain has invariably done the Americans’ bidding even though large parts of the British establishment are against it. There was a great deal of anger in the Foreign Office during the Iraq War because it felt there was no need for Britain to be involved. In 2003, when the war was underway, I was invited to give a lecture in Damascus; I got a phone call from the British embassy there asking me to come to lunch. I thought this was odd. When I arrived I was greeted by the ambassador, who said: ‘Just to reassure you, we won’t just be eating, we’ll be talking politics.’ At the lunch, he said: ‘Now it’s time for questions – I’ll start off. Tariq Ali, I read the piece you wrote in the Guardian arguing that Tony Blair should be charged for war crimes in the International Criminal Court. Do you mind explaining why?’ I spent about ten minutes explaining, to the bemusement of the Syrian guests. At the end the ambassador said: ‘Well, I agree totally with that – I don’t know about the rest of you.’ After the guests had left, I said: ‘That was very courageous of you.’ And the MI6 man who was at the lunch said: ‘Yeah, he can do that, because he’s retiring in December.’ But a similar thing happened at the embassy in Vienna, where I gave a press conference attacking the Iraq war in the British ambassador’s living room. These people aren’t fools – they knew exactly what they were doing. And they acted as they did as a result of the humiliation they felt at having a government which, even though the Americans had said they could manage without the UK, insisted on joining in anyway.

The Germans know they don’t have sovereignty, but when you raise it with them they shrug. Many of them don’t want it, because they are over-concerned with their past, with the notion that Germans are almost genetically predisposed to like fighting wars – a ludicrous view, which some people who should know better have expressed again in marking the anniversaries of the First World War. The fact is that – politically and ideologically and militarily, even economically – the European Union is under the thumb of the global imperial power. When the Euro elite was offering a pitiful sum of money to the Greeks, Timothy Geithner, then US secretary of the treasury, had to intervene, and tell the EU to increase its rescue fund to €500 billion. They hummed and hawed, but finally did what the Americans wanted. All the hopes that had been raised, from the time the European idea was first mooted, of a continent independent of the other major powers charting its own way in the world, disappeared once the Cold War ended. Just when you felt it might be able to achieve that goal, Europe instead became a continent devoted to the interests of bankers – a Europe of money, a place without a social vision, leaving the neoliberal order unchallenged.

The Greeks are being punished not so much for the debt as for their failure to make the reforms demanded by the EU. The right-wing government Syriza defeated only managed to push through three of the 14 reforms the EU insisted on. They couldn’t do more because what they did push through helped create a situation in Greece which has some similarities with Iraq: demodernisation; totally unnecessary privatisations, linked to political corruption; the immiseration of ordinary people. So the Greeks elected a government that offered to change things, and then they were told that it couldn’t. The EU is frightened of a domino effect: if the Greeks are rewarded for electing Syriza other countries might elect similar governments, so Greece must be crushed. The Greeks can’t be kicked out of the European Union – that isn’t permitted by the constitution – or out of the Eurozone, but life can be made so difficult for them that they have to leave the euro and set up a Greek euro, or a euro drachma, so that the country keeps going. But were that to happen conditions would, at least temporarily, get even worse – which is why the Greeks have no choice but to resist it. The danger now is that, in this volatile atmosphere, people could shift very rapidly to the right, to the Golden Dawn, an explicitly fascist party. That is the scale of the problem, and for the Euro elite to behave as it’s doing – as the extreme centre, in other words – is short-sighted and foolish.

And then there’s the rise of China. There’s no doubt that enormous gains have been made by capitalism in China; the Chinese and American economies are remarkably interdependent. When a veteran of the labour movement in the States recently asked me what had happened to the American working class the answer was plain: the American working class is in China now. But it’s also the case that China isn’t even remotely close to replacing the US. All the figures now produced by economists show that, where it counts, the Chinese are still way behind. If you look at national shares of world millionaire households in 2012: the United States, 42.5 per cent; Japan, 10.6 per cent; China, 9.4 per cent; Britain, 3.7 per cent; Switzerland, 2.9 per cent; Germany, 2.7 per cent; Taiwan, 2.3 per cent; Italy, 2 per cent; France, 1.9 per cent. So in terms of economic strength the United States is still doing well. In many crucial markets – pharmaceuticals, aerospace, computer software, medical equipment – the US is dominant; the Chinese are nowhere. The figures in 2010 showed that three-quarters of China’s top two hundred exporting companies – and these are Chinese statistics – are foreign-owned. There is a great deal of foreign investment in China, often from neighbouring countries like Taiwan. Foxconn, which produces computers for Apple in China, is a Taiwanese company.

The notion that the Chinese are suddenly going to rise to power and replace the United States is baloney. It’s implausible militarily; it’s implausible economically; and politically, ideologically, it’s obvious that it’s not the case. When the British Empire began its decline, decades before it collapsed, people knew what was happening. Both Lenin and Trotsky realised that the British were going down. There’s a wonderful speech of Trotsky’s, delivered in 1924 at the Communist International, where, in inimitable fashion, he made the following pronouncement about the English bourgeoisie:

Their character has been moulded in the course of centuries. Class self-esteem has entered into their blood and marrow, their nerves and bones. It will be much harder to knock the self-confidence of world rulers out of them. But the American will knock it out just the same, when he gets seriously down to business. In vain does the British bourgeois console himself that he will serve as a guide for the inexperienced American. Yes, there will be a transitional period. But the crux of the matter does not lie in the habits of diplomatic leadership but in actual power, existing capital and industry. And the United States, if we take its economy, from oats to big battleships of the latest type, occupies the first place. They produce all the living necessities to the extent of one-half to two-thirds of what is produced by all mankind.

If we were to change the text, and instead of the ‘English bourgeois character’ say the ‘American bourgeois character has been moulded in the course of centuries … but the Chinese will knock it out just the same,’ it wouldn’t make sense.

Ali does not provide much in the way of hope other than the assertion that when people get truly fed up with neoliberalism there will be change. But how many lives will be lost in the process? All we need do is look to Yemen to see that the U.S. and its client states are more than willing to embrace genocide to maintain full-spectrum dominance.

Ali concludes his piece with some fine words from third century BC Sparta:

It’s a mixed and confused world. But its problems don’t change – they just take new forms. In Sparta in the third century BCE, a fissure developed between the ruling elite and ordinary people following the Peloponnesian Wars, and those who were ruled demanded change because the gap between rich and poor had become so huge it couldn’t be tolerated. A succession of radical monarchs, Agis IV, Cleomenes III and Nabis, created a structure to help revive the state. Nobles were sent into exile; the magistrates’ dictatorship was abolished; slaves were given their freedom; all citizens were allowed to vote; and land confiscated from the rich was distributed to the poor (something the ECB wouldn’t tolerate today). The early Roman Republic, threatened by this example, sent its legions under Titus Quinctius Flamininus to crush Sparta. According to Livy, this was the response from Nabis, the king of Sparta, and when you read these words you feel the cold anger and the dignity:

"Do not demand that Sparta conform to your own laws and institutions … You select your cavalry and infantry by their property qualifications and desire that a few should excel in wealth and the common people be subject to them. Our law-giver did not want the state to be in the hands of a few, whom you call the Senate, nor that any one class should have supremacy in the state. He believed that by equality of fortune and dignity there would be many to bear arms for their country."