Low-Growth/Low-Wage Horizon of Nasty, Brutish "New Imperialism of Globalized Monopoly-Finance Capital"

Binyamin Appelbaum had a story in yesterday's paper, "Leaked Fed Staff Forecast Reflects Gloomier Expectations for U.S. Economy," about a dour assessment of the U.S. economy by Federal Reserve analysts that was inadvertently posted online. This is a newsworthy item since the Fed is signalling a rate increase in the near future; yet the Fed's own economists are telling Fed leadership that growth will remain low as will inflation:

The Fed published the minutes of its June meeting on July 8, in keeping with its normal procedures, including a summary of the staff forecast. 

The minutes said the staff moved its forecast for 2015 growth “a little lower.” The detailed data showed the staff predicted the economy would expand by 1.55 percent in 2015. 

The minutes also described the staff forecast as predicting that inflation will return to a 2 percent annual pace by 2018. The staff actually forecast that inflation would average 1.92 percent in 2018, and that it would not reach the Fed’s 2 percent target in the next five years, rising to 1.97 in 2020. 

Fed officials serving on the policy-making Federal Open Market Committee have said that they plan to raise interest rates later this year, and investors are eager for information about the exact timing. Analysts cautioned that the new disclosures reflected the views of staff members, and that the forecasts of Fed officials, published in June, were more optimistic.

The super-rich are doing smashingly well in this low-growth/low-inflation economy. To get a feel for how it all works, consult John Bellamy Foster's "The New Imperialism of Globalized Monopoly-Finance Capital" in the current July-August issue of the Monthly Review.

It is a depressing picture of global labor arbitrage where cost savings are vacuumed up by corporate monopolies in the capitalist industrial core creating "dynastic" wealth for a fraction of the 1%. This imperial system is precariously enforced by five monopolies enumerated by Samir Amin (see below): technology, financialized markets, resource extraction, media, and weapons of mass destruction:

Economically, the outward movement of generalized-monopoly capitalism is propelled primarily by the competitive struggle for low cost position via global sourcing of labor and increasingly scarce raw materials, and the monopoly rents that all of this generates. The result, as we have seen, is enormous cost savings in production for individual monopolistic enterprises, generating widening profit margins, which, coupled with more traditional forms of tribute, leads to a continual inflow of imperial rent to the center of the system. The full extent of extracted surplus is disguised by the enormous complexity of global value chains, exchange ratios, hidden accounts, and above all by the nature of capitalist GDP accounting itself.46 A part of the imperialist rent remains in the peripheral country and is not transferred to the center, but constitutes rather a payment to local ruling classes for their roles in the globalization game. About $21 trillion of this global tribute, meanwhile, is currently parked abroad in tax-haven islands, “the fortified refuge of Big Finance.”47

At the center of the capitalist economy the tendency to economic stagnation has been increasingly asserting itself since the mid-1970s. This induced repeated attempts to stimulate the system through military spending, with the United States as the engine.48 This strategy proved to be limited, however, since a big enough boost to the capitalist economy by these means in today’s environment would need to assume the dimension of a world war. 

Under these circumstances, as corporations in the 1970s and ’80s sought to hold onto and expand their growing economic surplus in the face of diminishing investment opportunities, they poured their massive surpluses into the financial structure, seeking and obtaining rapid returns from the securitization of all conceivably ascertainable future income streams. Increased concentration (“mergers and acquisitions”) and its attendant new debt, securitizations representing the income stream of already-existing mortgages and consumer debt that piled new debt on old, and new issues of debt and equity that capitalized the potential future monopoly income of patent, copyright, and other intellectual property rights, all followed one another. The financial sector provided every sort of financial instrument that could arguably be serviced by a putative income stream, including from the trading in financial instruments themselves. The result, as Magdoff and Sweezy already documented in the early stages of the process from the late 1970s to the ’90s, was a vast increase in the financial superstructure of the capitalist economy. 

This financialization of the economy had three major effects. First, it served to further uncouple in space and time—though a complete uncoupling is impossible—the amassing of financial claims of wealth or “asset accumulation” from actual investment, i.e., capital accumulation. This meant that the leading capitalist economies became characterized by a long-term amassing of financial wealth that exceeded the growth of the underlying economy (a phenomenon recently emphasized in a neoclassical vein by Thomas Piketty)—creating a more destabilized capitalist order in the center, manifested in the dramatic rise of debt as a share of GDP. Second, the financialization process became the major basis (together with the revolution in communications and digitalized technology) for a deepening and broadening of commodification throughout the globe, with the center economies no longer constituting to the same extent as before the global centers of industrial production and capital accumulation, but rather relying more and more on their role as the centers of financial control and asset accumulation. This was dependent on the capture of streams of commodity income throughout the world economy, including the increased commodification of other sectors—primarily services that were only partially commodified previously, such as communications, education, and health services. Third, “the financialization of the capital accumulation process,” as Sweezy called it, led to an enormous increase in the fragility of the entire capitalist world economy, which became dependent on the growth of the financial superstructure relative to its productive base, with the result that the system was increasingly prone to asset bubbles that periodically burst, threatening the stability of global capitalism as a whole—most recently in the Great Financial Crisis of 2007–2009. Given its financial ascendancy, the United States is uniquely able to externalize its economic crises on other economies, particularly those of the global South. As Yanis Varoufakis notes in The Global Minotaur, “To this day, whenever a crisis looms, capital flees to the greenback. This is exactly why the Crash of 2008 led to a mass inflow of foreign capital to the dollar, even though the crisis had begun on Wall Street.”49 

The phase of global monopoly-finance capital, tied to the globalization of production and the systematization of imperial rent, has generated a financial oligarchy and a return to dynastic wealth, mostly in the core nations, confronting an increasingly generalized (but also highly segmented) working class worldwide. The leading section of the capitalist class in the core countries now consists of what could be called global rentiers, dependent on the growth of global monopoly-finance capital, and its increasing concentration and centralization.50 The reproduction of this new imperialist system, as Amin explains in Capitalism in the Age of Globalization, rests on the perpetuation of five monopolies: (1) technological monopoly; (2) financial control of worldwide markets; (3) monopolistic access to the planet’s natural resources; (4) media and communication monopolies; and (5) monopolies over weapons of mass destruction.51 Behind all of this lie the giant monopolistic firms themselves, with the revenue of the top 500 global private firms currently equal to about 30 percent of world revenue, funneled primarily through the centers of the capitalist system and the core financial markets.52 As Boron points out with respect to the world’s 200 largest multinational corporations, “96 percent…have their headquarters in only eight countries, are legally registered as incorporated companies of eight countries; and their boards of directors sit in eight countries of metropolitan capital. Less than 2 percent of their boards of directors’ members are non-nationals…. Their reach is global, but their property and their owners have a clear national base.”53

The internationalization of production under the regime of giant, multinational corporations thus follows a pattern first explained by Stephen Hymer, and recently underscored by Ernesto Screpatini, who writes that “the great multinational companies” are characterized by “decentralized production but centralized control…. As a consequence the process of expansion of foreign direct investments involves a constant flow of profits from the South to the North, that is, from the Periphery to the Center of the imperial power of multinational capital.”54

Today the threatened implosion of this system is everywhere apparent. U.S. hegemony in the military sphere—in which it retains the power to unleash untold destruction but has a diminishing power to control geopolitical events—is receding along with its economic hegemony. This is so well understood today within U.S. foreign policy circles that some of the sharpest establishment thinkers emphasize that U.S. global preeminence is giving way to an imperium based on the combined force (military, economic, and political) of the triad of the United States/Canada, Western Europe, and Japan. The United States, although still retaining global preeminence, is increasingly able to exercise its power as a “sheriff” only when backed up by the “posse” (represented by Western Europe and Japan)—as famously articulated by Haass in The Reluctant Sheriff and subsequent works.55 It is thus the U.S.-led triad, and not Washington itself directly, which increasingly seeks to establish itself as the new governing power, through such institutions as the G7 and NATO. The goal is to promote the interests of the old imperial powers of the capitalist core through political, economic, and military means, while containing threats to its rule by a rising China, a recovering Russia, emerging economies generally, and the global anti-neoliberal revolt based in Latin America’s movement toward socialism.

Haass describes the current world situation as “The Unraveling.” As evidence he points to the U.S. role in destabilizing the Middle East and North Africa, the rise of the Islamic State of Iraq and al-Sham (ISIS), the growing conflicts of the United States with China over the South China Sea and Africa, the return of Russia as a world power (manifested in the dispute over the Crimea and the Ukraine), the misdirection (in his terms) of states such as “Brazil, Chile, Cuba, and Venezuela,” as well as a whole failed set of regime changes initiated by Washington. He concludes: “The question is not whether the world will continue to unravel but how fast and how far.”56

All of this highlights, as István Mészáros tells us, “the potentially deadliest phase of imperialism.”57 It is perhaps a reminder of the seriousness of the world situation today that Soviet and U.S. climatologists alerted the world in the 1980s to the fact that a full-scale nuclear war would generate a nuclear winter, reducing the temperatures of whole continents by several degrees and possibly several tens of degrees, destroying much of the biosphere itself and with it humanity. It was this type of scenario that E.P. Thompson had in mind in his “Notes on Exterminism, the Last Stage of Civilization.”58 A war between the great powers does not appear to be an imminent danger at present. However, the instability generated by the hyper-exploitative and expansionist imperialist world system of today, led by the United States, which is now engaged in simultaneous military interventions and drone warfare in a half dozen countries (and which is planning to spend $200 billion dollars in the next decade modernizing its massive nuclear arsenal), suggests any number of ways in which a deadly confrontation could emerge. Climate change itself, with the continuation of business as usual, is expected to destabilize civilization, heightening the threat of a world war, which would quickly lead to a planetary level of destruction.59

The responsibility of the left under these circumstances is to confront, in Lenin’s terms, the “contradictions, conflicts, and convulsions—not only economical, but also political, national, etc.”—that increasingly characterize our era. This means fostering a more “audacious” global movement from below in which the key challenge will be the dismantling of imperialism, understood as the entire basis of capitalism in our time—with the object of creating a more horizontal, egalitarian, peaceful, and sustainable social-metabolic order controlled by the associated producers.60 

Our future is not bright. Electoral politics -- democracy -- has not been able to right the ship. Syriza's Alexis Tsipras proved to be another Barack Obama: in the end, one more glib salesman of the status quo.

We could very well hit the Hobbesian trifecta of "nasty, brutish and short." We've already realized the first two; whether our present savagery is going to be a drawn out or brief is still up in the air.

Why Afghanistan is Important

Picking my through a morning paper choked with stories on Ebola -- now that the virus has arrived in the wealthy West, the column inches devoted to the outbreak have ballooned -- there is not much that jumps out. Azam Ahmed has a useful recapitulation, "Ambush by the Taliban Kills 14 in Afghan Forces," of the Taliban's increased military activity over the last year in the context of a recent spate of terror bombings and attacks on Afghan forces:

The Taliban have waged heavy offensives this year, deeply cutting into Afghan security forces who for the first time have full responsibility for the country’s security. Many areas that had once been considered safe have been roiled, especially in the north. And in traditional areas of insurgent strength, mostly in the south and east, the Taliban have made many gains.

Driving the insecurity in many areas is the lack of international forces, who have completely handed over security to their Afghan counterparts. For the first time in years, there are widespread reports of insurgents massing in large groups to attack, banking on the international coalition’s limited ability to conduct airstrikes. 

In response, American forces have stepped up airstrikes, conducting more in August than they had over the past two years in total, according to the United States Central Command.

For example, officials in the southeastern province of Paktia claimed that such strikes had killed seven civilians, including a child, who were collecting firewood on a mountaintop near the provincial capital, Gardez. 

The International Security Assistance Force rejected that account, however, saying in a statement that the airstrike “resulted in the death of eight armed enemy combatants.”

President Ashraf Ghani’s office released a separate statement saying, “The president is looking at every civilian casualty incident with much importance, and has asked for a full investigation of this unfortunate incident.” 

Taliban violence has been especially heavy around the country in recent days. 

In the highly secure city of Mazar-i-Sharif, the financial capital of northern Afghanistan, attackers dressed as policemen detonated suicide vests at the provincial police headquarters on Sunday, killing at least two officers and wounding nine others. And a mix of bombs, rockets and ambushes in the provinces of Wardak, Nangarhar, Kunduz, Kunar and Laghman, as well as in the capital city, Kabul, resulted in the deaths of at least 18 others in the last two days.

I've been trying to keep up with the news coming out of Afghanistan because like the Iranian Revolution, the civil war in Afghanistan, stoked for decades by foreign powers, is ontologically connected to our currently exhausted globally dominant neoliberal paradigm. Neoliberalism spreads its tentacles at the same time -- the late-1970s -- that Afghanistan is destabilized, becoming a Petri dish for the use of jihadi proxies against communism.

Paying attention to which way Afghanistan is trending, I believe, offers insight into the dialectical path of an enervated neoliberalism. For instance, if the Taliban is successful, routs the Ashraf Ghani government in Kabul, which right now certainly seems a possible outcome, then I think this presages an attempt to maintain neoliberalism by means of a brutal, medieval religious fundamentalism.

In a way, I think we are already there. This is what Islamic State is. Whipped up by the U.S., Turkey and oil-rich Gulf emirates, ISIS seeks to remake boundaries of the Middle East at the expense of the Kurds and the Shia without in anyway questioning the legitimacy of the global neoliberal order.

As Samir Amin notes in a recent article, "The Return of Fascism in Contemporary Capitalism," the "Islamization" of politics in the contemporary South is an acknowledgement by leaders within the U.S. that neoliberalism can only be maintained through chaos:

Can there be a possible return to the national popular model of the Bandung era, maybe with a hint of democracy? Or a more pronounced crystallization of a democratic, popular, and national front? Or a plunge into a backward-looking illusion that, in this context, takes on the form of an “Islamization” of politics and society? 

In the conflict over—in much confusion—these three possible responses to the challenge, the Western powers (the United States and its subaltern European allies) have made their choice: they have given preferential support to the Muslim Brotherhood and/or other “Salafist” organizations of political Islam. The reason for that is simple and obvious: these reactionary political forces accept exercising their power within globalized neoliberalism (and thus abandoning any prospect for social justice and national independence). That is the sole objective pursued by the imperialist powers. 

Consequently, political Islam’s program belongs to the type of fascism found in dependent societies. In fact, it shares with all forms of fascism two fundamental characteristics: (1) the absence of a challenge to the essential aspects of the capitalist order (and in this context this amounts to not challenging the model of lumpen development connected to the spread of globalized neoliberal capitalism); and (2) the choice of anti-democratic, police-state forms of political management (such as the prohibition of parties and organizations, and forced Islamization of morals). 

The anti-democratic option of the imperialist powers (which gives the lie to the pro-democratic rhetoric found in the flood of propaganda to which we are subjected), then, accepts the possible “excesses” of the Islamic regimes in question. Like other types of fascism and for the same reasons, these excesses are inscribed in the “genes” of their modes of thought: unquestioned submission to leaders, fanatic valorization of adherence to the state religion, and the formation of shock forces used to impose submission. In fact, and this can be seen already, the “Islamist” program makes progress only in the context of a civil war (between, among others, Sunnis and Shias) and results in nothing other than permanent chaos. This type of Islamist power is, then, the guarantee that the societies in question will remain absolutely incapable of asserting themselves on the world scene. It is clear that a declining United States has given up on getting something better—a stable and submissive local government—in favor of this “second best.”

But there is also the possibility that the medievalism being forced upon us will fail. Possibly Ashraf Ghani is as great a man as Ralph Nader says he is, and he will clear a new path for Afghanistan. Maybe the Marxist-inspired YPG will triumph over the Islamic State in Kobani, showing us that populist humanism is not dead yet.

U.S. Plans Preventive War Against China

Samir Amin's article, "China 2013," in March's Monthly Review is worth checking out. I think whether you're on the Left or the Right there is a tendency to automatically reject the Chinese state as a totalitarian capitalist monstrosity. Amin, while possibly a little too sanguine about the nature of China's leadership, provides some excellent perspective. Here's an example:

China entered globalization in the 1990s by the path of the accelerated development of manufactured exports possible for its productive system, giving first priority to exports whose rates of growth then surpassed those of the growth in GDP. The triumph of neoliberalism favored the success of this choice for fifteen years (from 1990 to 2005). The pursuit of this choice is questionable not only because of its political and social effects, but also because it is threatened by the implosion of neoliberal globalized capitalism, which began in 2007. The Chinese government appears to be aware of this and very early began to attempt a correction by giving greater importance to the internal market and to development of western China. 

To say, as one hears ad nauseam, that China’s success should be attributed to the abandonment of Maoism (whose “failure” was obvious), the opening to the outside, and the entry of foreign capital is quite simply idiotic. The Maoist construction put in place the foundations without which the opening would not have achieved its well-known success. A comparison with India, which has not made a comparable revolution, demonstrates this. To say that China’s success is mainly (even “completely”) attributable to the initiatives of foreign capital is no less idiotic. It is not multinational capital that built the Chinese industrial system and achieved the objectives of urbanization and the construction of infrastructure. The success is 90 percent attributable to the sovereign Chinese project. Certainly, the opening to foreign capital has fulfilled useful functions: it has increased the import of modern technologies. However, because of its partnership methods, China absorbed these technologies and has now mastered their development. There is nothing similar elsewhere, even in India or Brazil, a fortiori in Thailand, Malaysia, South Africa, and other places. 

China’s integration into globalization has remained, moreover, partial and controlled (or at least controllable, if one wants to put it that way). China has remained outside of financial globalization. Its banking system is completely national and focused on the country’s internal credit market. Management of the yuan is still a matter for China’s sovereign decision making. The yuan is not subject to the vagaries of the flexible exchanges that financial globalization imposes. Beijing can say to Washington, “the yuan is our money and your problem,” just like Washington said to the Europeans in 1971, “the dollar is our money and your problem.” Moreover, China retains a large reserve for deployment in its public credit system. The public debt is negligible compared with the rates of indebtedness (considered intolerable) in the United States, Europe, Japan, and many of the countries in the South. China can thus increase the expansion of its public expenditures without serious danger of inflation.

An article by Mike Whitney on the Counterpunch web site this weekend, "China's Shadow Bankers and the Vampire Squid," raises doubts about the extent to which China "has remained outside financial globalization." Whitney says, "The industrial powerhouse has succumbed to the same problems as its trading partners in the West who were thrust into crisis by soaring real estate prices, reckless credit expansion, and an out-of-control shadow banking system." In China money is increasingly flowing into wealth management products (WMPs) because they pay out better than bank deposits. The problem is that these products are largely opaque, unregulated and tied to development projects that might not pan out, making it all sound a lot like our last bubble.

But we've been hearing about China being a bubble ready to burst for years now, and so far the PRC has managed to manage things. Today there was a story by David Barboza, "2 Chinese Cities Move to Cool Overheated Housing Market," showing that Chinese policymakers are far more active than our captured politicians ever proved to be:

In the nation’s capital, the Beijing municipal government said that unmarried individuals would now be allowed to purchase only one residence. The city also increased the minimum down payment for buyers of a second home and imposed a 20 percent capital gains tax on owners’ selling a residence.

In Shanghai, an identical capital gains tax was announced and took immediate effect, and city officials pledged to install and enforce other measures aimed at stabilizing housing prices. The stiffer capital gains taxes take the place of a 1 percent to 2 percent transaction tax that was previously assessed on the final price of the property being sold.

The announcements came weeks after China’s State Council, or cabinet, said the government would take stronger action to ensure that property prices do not continue to soar, fueling what many analysts believe is a real estate bubble that could seriously damage the economy and exacerbate social tensions between the rich and the poor.

Property prices in China have been rising sharply in the last year, with housing prices in many big cities up an average of 3.1 percent in February, according to a government survey. In many cities, the cost of buying a new home has doubled in the last five years.

In a country where investment options can be limited, property is considered a good store of value.

Returning to Amin's piece, one passage that caught my attention is the declaration that Washington has preventive war plans with China:

The objective of U.S. political strategy is military control of the planet, the only way that Washington can retain the advantages that give it hegemony. This objective is being pursued by means of the preventive wars in the Middle East, and in this sense these wars are the preliminary to the preventive (nuclear) war against China, cold-bloodedly envisaged by the North American establishment as possibly necessary “before it is too late.” Fomenting hostility to China is inseparable from this global strategy, which is manifest in the support shown for the slaveowners of Tibet and Sinkiang, the reinforcement of the U.S. naval presence in the China Sea, and the unstinting encouragement to Japan to build its military forces. The practitioners of China bashing contribute to keeping this hostility alive.

It's worth keeping this in mind as the "Pivot to Asia" commences and we send F-22s and B-2s to cow the North Koreans.