There's an intriguing discussion on MRZine, between Sam Gindin and Robert Brenner, about the potential implosion of neoliberalism in the context of the brewing crisis of the global economy. Prefacing the discussion, Vivek Chibber remarks that socialists have been a bit too good at predicting global meltdown given the slightest sign of a problem. I have to say that this while this is true, it is also true of the business press (see The Economist's hysteria throughout the South-East Asian crisis, for example). Still, let's take the cue and re-examine our assumptions. Because the media are conveying doom and gloom doesn't mean that the economy is necessarily in big trouble. As Larry Elliot points out, this could indeed by the big one, the perfect, the global alluvion that changes all equations, but there are many analysts who, with some good grounds for saying so, maintain that there will be a technical recession but no more than that. Let's have a look at the UK stats. Unemployment doesn't seem to be rising - in fact it fell a little bit in the last quarter of the economic cycle to 1.64 million (on the ILO measurement). Indeed, year on year results show that employment grew faster than unemployment fell, suggesting a boost in many quarters of the economy from immigrant labour. As Stumbling and Mumbling suggests, consumer spending also looked reasonably healthy in November. Profit rates look very healthy:
One might at this point be inclined to think that Sam Gindin has half a point when he maintains that capitalism has never looked healthier or more dynamic, despite its cyclical slumps and increasingly frequent financial crises. There have been a few of those big stock market crises, and each one has led to a powerful rebound (usually involving a welfare package from the state). But that is only the UK, and those figures are misleading. Here's the catch - those profit figures exclude the financial sector and are based on the state of affairs before the crisis started to bite. Consumer spending is expected to slump in 2008 particularly as banks start reining in credit, and high street stores are already reporting a fall over the Christmas period. Insolvencies are expected to increase, and it is estimated that 9 million individuals in the UK are going to have difficulty repaying their existing debts. Everyone from Gordon Brown to the CBI, and the Financial Times survey of top economists, is sounding the alarm - and you can be damned sure it's a crisis for capital, because they aren't in the least worried about us.
Globally, the IMF expects a downturn, and this will surely be driven in the main by the US slide. The subprime crisis means that "millions of American households will lose their homes and as much as $164 billion due to foreclosures". The manufacturing sector has contracted even worse than in recent years, and a slump in demand means imports are falling, a fact that will hurt China which has until now been one of the major motors of global expansion. Global oil prices hit an unprecedented peak yesterday, due to low stocks - a fact which will result in higher inflation even while jobs and incomes disappear. The mere whiff of stagflation will tempt central bankers to raise interest rates ruthlessly to curb wage demands and consumption, but businesses are already hurting from deflationary policies. It doesn't do to second-guess the global economy. Capitalism is intelligible, but not so predictable that its short-term future yields to even the most subtle marxist analysis. Yet, while a big crisis may be averted once again, the structural imbalances continue to accrue. In particular, the neoliberal measures implemented to control wage demands and reduce the bargaining power of labour may enhance capitalist class power, but it doesn't do away with the problem of the long-term tendency of the rate of profit to fall. These are the US profit figures supplied in Dumenil and Levy:
The overall share of economic output going to profit has increased in most advanced capitalist countries. That means that the capitalist class partially overcame its crises by transferring the costs to us, so that our relative or absolute income has declined - average wages being lower in the US today than in 1970. This brings us back to Sam Gindin's argument. Notably, he and Leo Panitch have argued that the neoliberal solution to capitalist crisis has decisively reinvigorated capitalism under an American hegemony that is now unchallenged. The US empire, they maintain, is rather like the British 'Free Trade Empire' of the 19th Century, with its emphasis on informal relations of domination as opposed to the costly and burdensome colonial relations. The main difference is that while Britain could not successfully rope the emerging capitalist powers such as Germany and France into its hegemony, the US has successfully neutralised all serious competitors. Wherever its influence is felt, it bankrolls and enforces a blueprint of property rights. (Perry Anderson would seem to agree with the analysis of Panitch and Gindin, since in his jottings on the conjuncture, he maintains that the current global order more closely resembles the Concert of Europe after 1815 than the world in the first half of the twentieth century.)
The problems with this argument are various. In the first instance, it makes no sense for Sam Gindin to say, as he does, that the capitalist class doesn't need a healthy rate of return. The sole basis for future health and wealth is the current income from previous investments. The successful reproduction of the system depends on it. Secondly, the comparison with the British Empire of the 19th Century fails on several counts. The 'Free Trade Empire' is a myth. In the first half of the 19th Century, the UK acquired among other territories Singapore, Hong Kong and Burma. It also expanded its Canadian and Australian possessions. In 1838, its Indian subordinates were placed in charge of Aden. In 1857, well before the Scramble for Africa, Britain assumed direct rule of India, and even the occupation of Egypt in 1882 preceded (and perhaps precipitated) the era of 'formal' or 'late' imperialism. In short, the British Empire in the 19th Century was a mixed affair, with flexible arrangements for rule (albeit organised along racial lines), depending on the circumstances. That is a flexibility that the US lacks, precisely due to the success of anticolonial struggles. It cannot hold down long-term large-scale troop commitments, and the costs of the current overreach are staggering. Usually, a quick success pays for itself many times over, but the US has not had a quick success in either Iraq or Afghanistan. It is true that the US enjoys unprecedented hegemony despite a small cluster of states that do not specifically seek a breach, but don't wholly accept American tutelage either: Russia, Iran and Venezuela in different ways fit into this category. And even in those states, there are substantial segments of the elite that would very much like to adopt the neoliberal programme and get under the star-spangled marquee. In this respect, the only real counterpower to the empire is that constituency identified by the New York Times in the build-up to the Iraq war: world public opinion. Only popular constituencies can be relied upon to challenge the regnant property paradigm, and that requires a lasting reconstitution of left-wing political culture and labour organisation: a process that is germinally underway in the advanced capitalist countries. However, it is not true that American capitalism in securing that hegemony has overcome its internal imbalances. On the contrary, the financialisation of the empire has made it more unstable, and has internationalised its weaknesses to an unprecedented degree. Further, even close allies may be reluctant to help out with the bills or the head count when it comes to risky imperial adventures. And states are increasingly demonstrating the ability to assert their own interests and form regional alliances against US domination, whether in Latin America or between China and South Asian partners. Finally, Gindin and Panitch underestimate the ad interim nature of the neoliberal transformations and overstate its coherence. While it now has the character of a fully developed growth formula, in real time it has often been a post hoc response to crisis rather than a carefully elaborated solution to it.
None of this guarantees that the kind of agency that is capable of providing an alternative to neoliberalism will emerge, and the fact is that neoliberalism is fully capable of integrating some orthodox Keynesian solutions (renationalising Northern Rock for a while, cutting interest rates etc) while coming back even stronger for it. But there is a reason why the anticapitalist movement has been subsumed into the urgent antiwar response to the 'war on terror', and why the antiwar movement contains an implicit, radical critique of neoliberalism. It is precisely that the success of neoliberalism cannot be understood without an understanding of the successful wielding of imperial power on behalf of the American capitalist class - a point David Harvey and, recently, Naomi Klein have been at pains to make. Whether it takes the IMF or the USAF, America will get the job done. The 'war on terror' has taken this doctrine to its most grotesque extremes in Iraq. The Iowa caucus results suggest that the next battle for the executive may be between a hawkish neoconservative Republican and a hawkish neoliberal Democrat. Huckabee wants to stay the course with some minor alterations; Obama wants to gradually turn Iraq over to America's allies, focus the military on Afghanistan and Pakistan, canvas the pro-American wing of the Iranian elite, and return to Clinton-style neoliberalism. These are choices with real consequences, but they are choices within the very narrow spectrum permitted by America's political elite, and they both seek different ways of conserving the existing order. This underlines the importance of building an independent radical force capable of challenging that consensus in the US both in and beyond presidential elections. The Democrats have already proven how craven they are in office since the 2006 mid-terms, so nothing is to be gained by allowing them to believe they are automatically entitled to the anti-Bush vote. Resistance movements in countries under direct attack, as well as those under American-funded lockdown such as Egypt, can undermine the empire but not without radical movements in the imperial countries that aren't afraid to raise the social cost and aren't prepared to be coopted by the pro-war parties.