Tuesday, April 07, 2009

Crisis and accumulation

There is simply no controversy about it. The Obama administration is using this crisis to transfer wealth and power to the already wealthy and powerful. Even Jeffrey Sachs can see it. This is no surprise. As I said before, the aim of leading capitalist states at the moment is to restore the neoliberal system intact, with a further concentration of power and wealth at the top. Neoliberalism has been an extraordinary success story for the rich, so far. The raw data demonstrates it: the top 0.1% of US income earners held 2% of national income (not wealth) in 1978, but this had risen to 6% by 2000. The ratio of wages to CEO salaries rose from 30:1 in 1970 to 500:1 in 2000, as the financialisation of the economy boosted (inflated) the value of ruthless CEOs capable of delivering high short-term profits. As for wealth distribution, check out my candy-coloured bar charts. The share of the top 0.5% of wealth owners rose to 31.4% by 1989. As for financial holdings, in 2007 it was estimated that the top 10% of Americans possessed 80% of all financial assets, while the bottom 90% held 73% of all debt.

The question is, can they fix it? Can it work this time? The commitment to the existing model means firefighting an horrendous financial crisis, which could be as bad as 1929/1930. Just consider the consequences of this breakdown for a moment. The credit system, at its most functional, temporarily repairs the disparities in production created by competition. If, in pursuit of profit share, a producer splurges on capital investment in a way that is dysfunctional for the overall economy, then the credit system can partially iron out that imbalance. It can ensure a quantitative balance between production and consumption, in the short run. It can be used to accelerate production and consumption simultaneously, directing investment toward structurally important areas of the economy etc. When profit rates are reduced, it can make up the shortfall by providing the means of investment, and when wages are down, it can stimulate demand.

For the capitalist class, it also operates as another means by which workers' wages are further modified and reduced, just like all rentier activity, through the payment of interest on mortgages and loans. The financialisation of the economy just meant that this logic would be intensified and extended to hitherto 'neglected' areas of society. Even better than this, if they can get their hands on our deferred wages through the privatization of pensions, benefits and social security, they can take a nibble off that as well. In the meantime, we are encouraged to believe that those deferred wages will magically expand because of the Rumplestiltkin-like value creation of the stock markets. Sadly, the one thing the credit system can't do is produce goods, or 'use values' - if it could, we wouldn't have to work. Still, people are conditioned to behave as if that the appropriation of their income is actually a form of added wealth - their debt equals stuff. The mortgage is a house, with a perpetually soaring price, which can be repeatedly borrowed against. Politically, for as long as this project is successful, it deepens the hold of neoliberal ideology among a layer of workers as well as in the middle class. Being indentured to interest-bearing capital also inculcated a kind of small-c conservatism, to the extent that a house cost more than six times the average salary, and thus a person had more to lose by engaging in resistance. Remaining in paid work is, for the mortgage-holder, at least a thirty-year commitment and the basis of building a family. Accepting pay cuts, being recruited to productivity drives, putting up with longer hours, tolerating abuse, and so on, becomes an essential part of staying alive. It can also contribute to large-C conservatism to the extent that tax cuts are experienced as a pay rise rather than part of a means of undermining public services (which no longer appear to function very well).

So, when that system breaks down, as it eventually must, the abnormally high profits, the artificially high growth rates, the booming consumer markets, the relative political stability in spite of polarised social conditions - all of this is in mortal peril. Profitability has already taken a nose-dive, investment is shrinking, house prices plummeting, unemployment rising at record levels and set to reach 3.2m in the UK by next year, and the viability of neoliberal capitalism is in doubt even at elite levels. So, to the previous question: can they fix it? We know what Obama's answer to questions of that kind is - but we also know that he plagiarised it from Bob the Builder, which means it can't be taken too seriously.

Realistically, the only way they could possibly restore even an attenuated neoliberalism would be to hammer the working classes, plunder public spending, and savagely repress wages. This would definitely do the trick. It would restore profitability to the system, and open up vast new avenues for exploitation and stock market capitalisation. The main difference between the two parties at the moment is not whether to do this, but how. The Tories intend to tear up existing public sector pay agreements (already so miserly as to have produced the highest levels of strike action since the early 1990s), cut public spending and hasten privatization (one of their rising stars has openly called for the privatization of the NHS). New Labour's plan is to keep the public sector working for now, allow manufacturing to continue to slump, sell off public assets piecemeal (parts of the Post Office, and the UK atomic energy agency are the latest on Mandelson's list), and then drastically slash public spending in a couple of years time. Either approach involves a confrontation with the organised working class of a kind that we have not seen since the 1980s. The left may be historically weak, and union organisation lower in density than in previous periods of crisis, but does the ruling class have the organisation and unity for a battle of that intensity? The kind that, for example, they had in 1979? It is unlikely. It feels as if we are in for a protracted period of crisis and struggle, in which, because neither side has decisive strength, subjective factors will have exaggerated importance. At the moment, the main form of resistance that is appearing in the UK is that of mostly unionised workers renegotiating the terms of their dismissal. Other forms of ideological radicalisation are evident, over Gaza for example. And the anticapitalist protests showed that young people are generalising about their own experiences of being laid off, subject to demeaning work for low pay, and being treated like shit at the benefits office. But the resistance that will have force will come from those who are as yet confronting 'economic' problems (as if there was a purely economic issue) such as pay cuts or redundancies. It is their latent social power that can turn protests of thousands being beaten in the streets into mass strikes and protests of millions. It's happening on the continent: it can happen here as well.