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After the Great Financial Crisis and the Great Recession, What Next?

John Bellamy Foster is editor of Monthly Review and author of The Great Financial Crisis (2009, with Fred Magdoff) and The Ecological Revolution (2009) — both from Monthly Review Press.  This interview was conducted from Dhaka by Farooque Chowdhury (editor of Micro Credit: Myth Manufactured, 2007) for MRzine and Bangla Monthly Review.  It is part of a set of interviews to be published in book form in Bangla and English tentatively entitled, What Next?: After the Great Financial Crisis; A Collection of Interviews of John Bellamy Foster.  The interview was completed on January 26, 2010.

FC: Is capital’s primary engagement with speculation, under what you have called the “monopoly-finance capital” of today, evidence of capital’s degeneration?  Does capitalism in rich economies such as the United States have a dwindling capacity to produce commodities?  Does this put the survival of productive capital in question?

Similarly, does the state’s intervention to bail out the capital mean that the extraction of increased surplus value from the workers is possible in this phase only with active state intervention to keep the process going?  If yes, is this a further sign of decadence?  Is capital, through this process, ultimately undermining the legitimacy of the state in the eyes of working people?

JBF: The question of economic decadence under monopoly-finance capital is complex, since it is more about the social relations than the social forces of production.  If by such decadence you actually mean “a dwindling capacity to produce commodities” then I would say definitely not.  The system’s productivity, and its capacity to produce commodities of all kinds, keeps on expanding.  Indeed, there is a growing gap between the economic potential to produce and actual production.

The important thing to understand is that the limits of the system under monopoly capital — and this is still true of monopoly-finance capital — lies not in too little but rather in too much productive capacity in relation to effective demand, visible in saturated markets.  Investment demand is hindered by the existence of large amounts of excess capacity: it makes no sense to invest in new plant and equipment, if very large proportions of existing plant and equipment are standing idle.  “The tragedy of investment,” Michael Kalecki wrote in his Theory of Economic Dynamics, “is that it is useful.”  This tragedy can be traced to a system with such a systematically distorted distribution of income and wealth that it regularly generates vast surpluses to reinvest, while the potential of absorbing these surpluses is obstructed by the fact that investment is not normally self-propelling and is dependent on consumption or final demand.  This is particularly a problem for mature, monopolistic economies where productive capacity has been built up throughout the society as a result of a long process of industrialization and is superabundant.  Hence, accumulation becomes stop-and-go, constantly coming up against the limits of overproduction, overaccumulation, and overcapacity.

Where a kind of economic decadence definitely enters in is in the means that monopoly capital (or monopoly-finance capital) uses to counter this stop-and-go accumulation process.  Paul Baran and Paul Sweezy argued in Monopoly Capitalin 1966 that the chief means that the system had of expanding the enormous and growing surplus (value) it generated was waste in its various forms: particularly, military spending, the sales effort, and speculative finance.

Although each of these forms of effective-demand generation through the promotion of economic (and social and environmental) waste remains operative today, military spending (even with the wars in Afghanistan and Iraq) and the sales effort are insufficient at present to counter the stagnationary forces of the system, and consequently the economy has become increasingly dependent on financialization (mounting speculation leveraged by debt) to keep it going.  A system that requires such irrational forms of expenditure in order to grow is a system that exhibits an enormous impetus to decadence and destruction.  With deepening economic crisis tendencies and the rapid accelerating of planetary ecological crisis we are certainly facing what could be called the “degeneration” of an entire social order.

The role of the state in supporting the accumulation of private capital is of course the source of all sorts of social and economic contradictions, whether it is related to spending on the U.S. war machine, aimed at imperial ends (but also subsidizing private capital), or in the form of bailouts of large financial and non-financial corporations.  The long-term financialization of the economy, or the phase of monopoly-finance capital, as I have called it, depends on the central banks and the other organs of state finance such as the treasury departments of states being prepared to provide at a moment’s notice liquidity and capital as “lenders of last resort.”  In the current crisis, the U.S. state provided trillions of dollars in capital infusions and various subsidies and guarantees to the banks.  The toxic wastes of banks were “swapped” for liquid assets at taxpayer risk.  As a result, a little over a year after the financial system was on the brink of complete collapse, bank profits are ostensibly up (though this is partly a mirage because of state relaxation on the rules for reporting profits) and bankers are walking off with enormous bonuses.

Needless to say, this is occurring at the same time that the U.S. population is experiencing more than 10 percent official unemployment and approaching 20 percent real unemployment.  Everywhere wages are dropping, people are losing their homes, poverty levels are up.  And it is in this overall context that financial capital is once again celebrating its expanding wealth.  Under these circumstances, the working class in the United States (and in the other advanced capitalist states as well) has every reason to be critical of a state that operates invariably in the ruling class interest.  In this respect, it should be noted, nothing has changed under the Obama administration.

Since the costs of the bailout (which amounts to socializing the losses of the most important financial entities) ultimately fall on the working population and are used to justify cutting costs in social services across the society, you are perfectly right in saying that the state in this crisis (and more generally) has become a means of increasing the effective rate of surplus value (exploitation) in the society as a whole.  Meanwhile, the absence of a strong left and the stranglehold of right-wing corporate media constantly push working people in reactionary directions, making the state itself rather than the capitalist class, which controls it, the primary culprit.

The ruling class and its state — not just in the United States but also in the entire advanced capitalist world — have no answer to economic stagnation but renewed financialization.  So fast is finance growing at present while the “real economy” (i.e. production) is in shambles that fears are expressed in the financial press every day of the development of a gargantuan bubble that will burst sooner rather than later.  It would be hard to imagine a more irrational and exploitative system within the framework of a so-called “free economy.”

FC: Are not current mainstream statements on a stagnating economy nullifying the generations-old position of orthodox economic thought and confirming the analysis that Paul Baran, Paul Sweezy, Harry Magdoff, Fred Magdoff, and you were putting forward all along?  And, is not this an evidence of the correctness of the methodology applied by all of you in analyzing capitalist economy?

JBF: Yes, there is some irony in the fact that the mainstream has finally come to embrace the issue of economic stagnation.  On January 2nd, the Washington Postran an article that said: “But beyond these dramatic ups and downs [of the economy] lies an even more sobering reality: long-term economic stagnation.”

I recall that sometime in the late 1980s, in New York, I mentioned to Sweezy that there were increasing complaints from radical political economists that Monthly Review was being too repetitive in its continually beating away at the stagnation tendency and that some left economists doubted the correctness of this view.  He replied with a gleam in his eye, “Well, then we will have to just repeat it more.  They’ll find out.”  Magdoff and Sweezy said something similar in the introduction to Stagnation and the Financial Explosion, where they replied to those who doubted the reality of stagnation by stating: “There is a temptation to say: just wait and see, you’ll find out soon enough.  Unless backed up by actual experience, explanations often matter very little.”  But they did not stop there, of course, but went on and did their best to explain the nature of the problem.  At about the same time (in 1988 or 1989), the MR editors (Magdoff and Sweezy) were sharply criticized in an article in Science and Society as “bubble theorists” for their emphasis on developing finanicalization and financial bubbles.  They were not, however, deterred by this at all.  It was simply a question of continuing to focus on the empirical tendencies and what they said about the real contradictions for the system.

I believe that anyone today who was to look back, not just at Baran and Sweezy’s Monopoly Capital, but also at the five books that Magdoff and Sweezy did on the developing contradictions of the U.S. economy, based on their Monthly Review articles — The Dynamics of U.S. Capitalism(1972), The End of Prosperity(1977), The Deepening Crisis of U.S. Capitalism(1981), Stagnation and the Financial Crisis(1987), and The Irreversible Crisis(1988) — would find it difficult not to be impressed.  In contrast to nearly all other running commentaries on current economic developments over the last half-century, theirs is not dated, but points on every page to the very fault lines that are now widening before our eyes.  Add to that the series of short articles that Sweezy did in the 1990s, particularly “The Triumph of Financial Capital” (1994), “Economic Reminiscences” (1995), and “More (or Less) on Globalization” (1997), and one has a critical argument that is far ahead of today’s mainstream analyses in understanding the contradictions in which we are now caught.

If this reflects a superior methodology, it is not so much one of technique but of critique.  As John Cassidy has stated in his book How Markets Fail(2009) the ability of Sweezy and Hyman Minsky “to see, well before many mainstream economists, that a new model of financially driven capitalism had emerged” was due to “their highly developed critical faculties.”  In Sweezy’s case, this arose out of a historical materialist frame of analysis and an acute sense of “the present as history.”

During the period 2000-2006, when I was coeditor of Monthly Review, along with Harry Magdoff and, for most of this time, Robert McChesney, we continued to push this critical economic analysis forward, based on further empirical enquiries.  (Fred Magdoff too played a major role in this research.)  Aside from addressing stagnation itself (and the question of job stagnation) we focused primarily on the two main bubbles of this period: the New Economy (or high tech) bubble and the housing bubble.  From this we developed a more general analysis of financialization as a secular trend (arising in response to stagnation in production), building, in particular, on Sweezy’s explorations in his last few years.  We first began to look specifically at the contradictions in household debt in 2000, took account of the housing bubble itself and its danger of bursting in 2002-2003, and analyzed the problem thoroughly, including the household mortgage problem and subprime lending in 2006, in articles that later went into The Great Financial Crisis (2009) by Fred Magdoff and myself.  Naturally, we missed some details of what was to transpire but the larger picture was clear.  Michael Yates, whose economic writings for MR were also crucial in this process, has since coauthored with Fred Magdoff The ABCs of the Economic Crisis (2009).

In many ways there was nothing remarkable about this tradition of inquiry.  It required only close attention to what was in fact happening and a critical-historical framework of political-economic analysis arising from Marx, Kalecki, Keynes, and Sweezy.  What is extraordinary, however is that reality has finally forced its way into the mainstream, making it give way in its ideology and recognize the economic stagnation that is now too apparent to deny.

FC: The wealthiest 10 percent of Americans making more than $138,000 each year earned 11.4 times the roughly $12,000 made by those living below or near the poverty line in 2008, according to the census figures coming from the Current Population Survey and the American Community Survey.  That ratio was an increase from 11.2 in 2007.  Poverty in the United States jumped to 13.2 percent, an 11-year high.  Use of food stamps jumped 13 percent last year to nearly 9.8 million U.S. households.  The number of poor residents increased in many U.S. communities.  Howard Davidowitz, the veteran retail industry consultant and chairman, Davidowitz & Associates, said in mid-February, 2009 that Americans’ standard of living was undergoing a “permanent change” as a result of negative wealth effects of an $8 trillion from declining home values, a $10 trillion from weakened capital markets, and a $14 trillion consumer debt load.  The U.S. Labor Department said in early-November (2009) that productivity surged at a 9.5 percent annual rate, the quickest pace since the third quarter of 2003.  Increased productivity is reducing necessary labor time and widening the surplus labor time as companies squeeze out more from workers in the time of widespread unemployment.  Do these changes signify intensified class war by capital against labor?

JBF: From a long-run perspective, a one-sided class war from above, directed at workers, has been developing in the United States since the 1970s.  We usually give this class war nowadays the name “neoliberalism,” since it takes the form of a return to classical liberal notions of competition, survival of the fittest, and a self-regulating market.  The goal has been to weaken or break unions, remove state supports for the poor, cut back on social services generally, push down real wages, free up capital movements, etc.  Jesse Jackson, I believe, was to call this “Robin Hood in Reverse” in his famous 1984 presidential campaign.  Neoliberalism, which also had its international aspect of course (in what we call neoliberal globalization), was in fact capital’s response to the stagnation of the system and marked as well the whole shift toward financialization.  For decades we have gotten used to capital introducing more repressive measures with each passing year.  Part of this was to squeeze out additional surplus (or cash flow) that could feed the speculative beast.  With the deepening of stagnation and severe financial crisis the expectation is that this class struggle from above will become even more intense.  There is simply no other way for capital at present.  With slow growth profit levels can only be maintained by redistribution.  If the pie is a given size, in other words, the only way you get a bigger slice is by taking from someone else.  Capital insists on its normal “rate of return,” so everyone else gets a smaller slice.

It is important to recognize that the United States has perhaps the strongest ruling class in history.  The wealth and power of those on the top relative to those on the bottom is immense, even in a rich society that purports at least to have democratic foundations.  We can see this in the fact that in 2007 the 400 wealthiest individuals in the United States (the so-called Forbes 400) had a combined wealth approximately equal to the bottom half of the population, 150 million people.  In such circumstances of concentrated power, in which a plutocracy rules the society, there are of course enormous opportunities to pass the costs of a crisis on to the underlying population.  Already this is happening on a much bigger scale in the present crisis, with falling real wages, cutbacks in government spending at the state and local levels, unpaid furloughs, intensified work, etc.  The productivity of the remaining workers, who are being forced to work harder, is going up.  Yet, the gains of this increased productivity are not going to the workers.  There are no crumbs to be had.  They are all going to the corporations who are experiencing falling unit labor costs: the product of rising productivity coupled with stagnant, indeed falling, real wages.  This means widening profit margins for firms.

FC: What are the effects of the financial crisis on the structure of class power and the class struggle?  Does the collapse of the financial institutions of the system signify an inner weakness of the system and of the class that owns the system?  Is there a rift within the ruling elite over the political responses to the crisis of monopoly-finance capital?

JBF: One of the big class-related questions associated with financialization, quite apart from the financial crisis itself, is to what extent financial capital has moved into the dominant position within the U.S. capitalist class.  This is of course a difficult question to answer.  Hannah Holleman and I decided to take up this question by looking at data on the Forbes 400 over time, building on an article that James Petras and Christian Davenport did for Monthly Review in 1990.  Using a fairly rigorous methodology, based on Forbes 400 data, we discovered that that while in 1982 the percentage of Forbes 400 capitalists with their main source of wealth in the financial industry was 9 percent (24 percent for finance plus real estate), by 2007 this had soared to 27.3 percent (34 percent for finance plus real estate).  Over the same period the percentage of the Forbes 400 obtaining their wealth predominantly from the manufacturing sector fell from 15.3 percent in 1982 to 9.5 percent in 2007.  Although the capitalist class as a whole is much larger than the Forbes 400, which only accounts for about 7 percent of the wealth of the top 1 percent of wealth holders, there can be little doubt that this, as the elite within the elite, represents the trend for the U.S. capitalist class as a whole.  (Our article, entitled “The Financialization of the Capitalist Class” is in a book in honor of James Petras, edited by Henry Veltmeryer and published by Brill, entitled Imperialism, Crisis and Class Struggle — forthcoming, I believe, in April 2010.)

One might expect increasing conflicts to have emerged between industrial and financial capital in these circumstances.  But this doesn’t seem to have occurred.  In fact, manufacturing and other sectors in production appear to have been progressively financialized, with their own financial arms, so that the distinction between nonfinancial and financial corporations and interests is increasingly blurred.  This shift toward finance within the capitalist class is of course a reflection of the relative growth of financial profits during this whole period and the general phenomenon of financialization, i.e. the shift in the center of gravity of the economy to finance.  It means that financial capital more and more calls the shots and is more fully ensconced as the headquarters of the system.

We can see this in the financial crisis itself.  The economic-financial crisis can be traced to stagnation.  But the bursting of the household bubble was an amplifying factor and soon became the center of a perfect storm of financial crisis and worsening economic conditions.  Out of this, financial capital appears to have emerged in many ways stronger, with the remaining big banks more powerful than ever.  Twenty years ago the ten largest financial institutions in the United States owned 10 percent of all financial industry assets; now they own 60 percent.  They are truly too big to be allowed to fail.

If stagnation is centered in production, the economy is more and more dependent on the financial balloon to lift it off the ground.  Yet, the balloon deflates periodically with disastrous results.  This is the paradox of monopoly-finance capital.

FC: There is report that financial speculation bosses took up top posts in the U.S. government, and top public servants have joined finance speculation houses, with some having a foot in both.  McClatchy in months-long investigation found “Goldman’s failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws.”  Now, according to McClatchy, Goldman has taken the “new role” of “taking away people’s homes.”  While Goldman Sachs Group was peddling more than $40 billion in securities in 2006 and ’07, it “never told the buyers that it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.”  Facts are now being exposed that at least “one of the Wall Street’s proudest and most prestigious firms helped create a market for junk mortgages . . . that’s cost millions of Americans their jobs and their homes.”  There are reports of inside trading, corruption, etc.  Senator Dick Durbin told a Chicago radio station in late April that banks are “still the most powerful lobby on Capitol Hill.  And they frankly own the place.”  Do these revelations show: (a) the improper, undemocratic, unruly, rogue, corrupt, hypocritical, brutal, ugly face of dominating capital that always propagates, like its religion, rule of democracy, law, accountability, and many other fine-sounding terms; (b) private property is appropriating private property; (c) intense competition between parts of the concerned capital; and (d) capital’s command over dominating politics?

JBF: Well, the greed and one might say corruption — though it is hard to determine where corruption begins and ends in a society where everyone is supposed to grab whatever they can by virtually any means they can, as long as this is not definitely designated as illegal — are so pervasive as to be beyond comprehension.  This, as you say, leads to all sorts of brutal, ugly, undemocratic, inhumane aspects.  This is a doubly and triply alienated society.  People are alienated from humanity, from their own class, often from their own family.  As the fictional character Gordon Gekko said in Oliver Stone’s film Wall Street,”Greed is Good.”  In October 2009, Brian Griffiths, adviser to Goldman Sachs International declared with a straight face at the pulpit in St. Paul’s Cathedral in London: “The injunction of Jesus to love others as ourselves is a recognition of self-interest.”  When I read that I was speechless.  In attempt to defend outrageous bonuses as rewards for no less outrageous profits fed by public bailouts, bankers are going out of their way to tell us that that inequality is the basis of moral community, social prosperity, and religious faith, while hundreds of millions, even billions, of people around the world languish in abject poverty, degradation, and alienation.  Juan Cole of Informed Comment pointed out on January 13, in response to the earthquake in Haiti, that the latest round of bank bonuses of the biggest banks in the U.S. was many times the GDP of Haiti.  If the banks (taking into consideration only Goldman Sachs, Morgan Stanley, and JP Morgan) offered a reasonable share, say half of their current yearly bonuses, to Haiti, it would be more than 100 times the foreign aid that the United States normally gives to Haiti in a year, about equal to all the foreign aid given out annually by the United States to the entire world.

There is no doubt that the top economic advisers in the Obama administration are almost all linked directly to Wall Street, and to Goldman Sachs in particular.  Treasury Secretary Timothy Geithner and Obama’s chief economic adviser, Lawrence Summers, both worked under Clinton’s first Treasury Secretary Robert Rubin who was employed for twenty-six years by Goldman Sachs (after the Clinton administration Rubin became director and senior counselor at Citigroup).  Geithner was close to Sanford Weill, previous head of Citigroup.  Summers received $5.2 million in compensation from a hedge fund in 2008 as well as hundreds of thousands of dollars in speaking fees from Wall Street corporations.  None of this was a surprise.  During the election campaign Obama surrounded himself with top Wall Street figures.  This was a key element in the financial support for his campaign and also in his acceptability as a candidate to the U.S. ruling class.  It was particularly important in terms of the financial crisis.  The moment he was elected he redoubled the federal government’s efforts to bail out financial capital, with only minor, rhetorical, criticisms of capital in the process.  A very good article on this, entitled “The Quiet Coup” was published by Simon Johnson in the Atlantic in May 2009.

FC: The U.S. budget gap reached 10 percent of GDP in fiscal 2009.  Unless hard decisions on cutting spending or raising taxes are taken, some economists warned, the deficit carries seeds of another economic crisis.  Is there any relationship between stagnation, dominance of the monopoly-finance capital, and the increasing budget deficit?

JBF: In Keynesian terms, budget deficits are not at all times bad.  It is of course important for the U.S. government, along with other national governments, to run a budget deficit in the context of the current crisis, and it makes economic sense.  The priority under these circumstances is to get the economy going again and employ people.  The federal government should be spending more, not less, on jobs, which means, under present circumstances, a big deficit.

Yet, deficits are a problem for the system in various ways.  Under monopoly-finance capital it can’t live without them and it can’t live with them.  This is a growing contradiction of the system.  Deficits are of course related not just to the size of spending in relation to revenue but also to what the government is spending on.  In the United States in 2007, 4 percent of GDP ($553 billion) was spent on the military, according to the usually quoted acknowledged figures.  This of course helped prop the economy by soaking up excess capacity, but it also meant expanding budget deficits.  Much of this in the current period is related to fighting the wars of aggression and occupation in Iraq and Afghanistan.  According to these acknowledged figures, the U.S. is spending almost as much on the military as the rest of the world put together.  But real U.S. spending, based on government data, including hidden military expenditures, was $1 trillion in 2007, over 7 percent of GDP.  Actual military spending as a percentage of federal spending (minus transfer payments) was in excess of 50 percent in 2007.  Obviously, then, this is where the bulk of the deficit comes from.  Of the remainder of the federal budget minus transfer payments, a very large portion goes to direct and indirect subsidies to capital.  Only a relatively small portion of U.S. government spending is thus devoted to support for the population.

Right now, the deficit is expanding enormously as a result of the successive bailouts of financial capital and capital in general.  The costs of this of course fall on the general public.  As Marx observed in Capital, “The only part of the so-called national wealth that actually enters into the collective possession of a modern nation is — the national debt.”

FC: What are the economic roots of the “War on Terrorism”?  Why, in other words, is the United States now directly engaged in Iraq, Afghanistan, and Pakistan?  Is it only related to oil, and other strategic resources, and retaining hegemony over these strategic resources?  Or, along with these, are there also causes having roots in imperialism’s body-socio-politic?  How is this related to inter-imperialist rivalry between advanced capitalist states?  Has peak oil entered in to further complicate the story that you told in your 2006 book Naked Imperialism?

JBF: The so-called “War on Terrorism” is a misnomer.  One can’t have war on terrorists the way one can on nation states, as if a handful of scattered groups and individuals constitute a war opponent for the most powerful military force in history.  In fact, such an objective, even if we were to take it seriously, quickly mutates into a war against whole peoples and nations, feeding imperial aspirations, which are always there.  True there are real terrorists, guerrilla fighters, opponents of the United States, in the countries that Washington is struggling to control by means of militarism and imperialism.  But here we come to a chicken and egg issue.  To what extent are the terrorists (real or so-called) themselves the product of the prior assertion of U.S. imperial power and ambitions?

On why the United States has devoted so many resources of late to controlling this region of the world, one cannot avoid what in foreign policy circles is euphemistically referred to as its “vital strategic resources” — namely oil and natural gas.  As Alan Greenspan said in his book The Age of Turbulence: “I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil.”

The war in Afghanistan can of course be connected more directly to “terrorism,” or more precisely a terrorist falling out: a terrorist movement created by the CIA as a weapon in the U.S. system of imperial terror (and its combat with the Soviets), which then resulted in blowback, as Washington’s former allies refused to accept growing U.S. dominance in the Middle East and struck back with the very terrorist methods that they had been taught.  But the real issues lie not with terrorism but with the objectives that led to U.S. involvement in the region in the first place: the new Great Game.  These objectives can all be explained in geopolitical terms: “containing” (i.e. surrounding) Russia and Iran; controlling Central Asian natural gas and oil (and their pipelines); restricting Chinese access to the region; further enveloping the adjacent Middle East in U.S. power; asserting control over South Asia, particularly Pakistan, but also India.  Afghanistan has been understood since the days of the British Empire to be a loose stone at a point where major civilizations converge.  U.S. strategic planners like to look at maps.  Afghanistan borders the unstable petroleum states in Central Asia (formerly part of the Soviet Union), Iran, Pakistan, and even China.  For the imperial mind, it is therefore of great strategic significance.  The United States could not have even considered expansion into this region while the Soviet Union was at its height.  Now it is viewed as one of the key strategic regions left open by the Soviet collapse, and the United States has been struggling to secure it ever since (indeed struggle over this region played a key role in the Soviet collapse).

The degree to which imperialist views are openly paraded in the United States should not be underestimated.  One prominent U.S. writer, a regular contributor to the Atlantic, Robert Kaplan, glorifies U.S. militarism and imperialism in the following way in his book Imperial Grunts: “By the turn of the twenty-first century the United States military had already appropriated the entire earth, and was ready to flood the most obscure areas of it with troops at a moment’s notice.”  Such “appropriation of the earth” is indeed what it is all about.  In this respect, though the United States is not all alone, it also has the support of its junior allies with NATO.  There is little doubt at this point that the world is controlled by the “triad” (sometimes called “the international community”) of the United States/Canada, Europe, and Japan.  In this, Richard Haass, formerly of the Bush administration, now head of the Council of Foreign Advisers, tells us, the United States plays the role of the sheriff, Britain is its deputy, and the rest of the triad makes up the posse.  At times of course, the posse would like to depose the sheriff, and they object when the sheriff and the deputy ride off without their prior consent to lynch populations, as with the George W. Bush administration and Tony Blair’s Labour Party.  But mostly they work together, giving an air of unity.  There is no doubt that this system of imperial control is becoming tighter, that the triad is becoming more unified, as a result of the rise of competing powers elsewhere, particularly China.  Inter-imperialist rivalries exist within the triad, but they are largely in abeyance, and they together control financial, technological, and military power — and, primarily as a result of the U.S. empire, world resource flows.  It is hegemony over the triad that has become the main means through which the United States seeks today to maintain its larger global hegemony despite its stagnant economic growth and waning status.  One recent development was France‘s giving up of the Gaulist strategy of a separate military.  This meant tighter welding together of NATO, which under U.S. leadership is expanding its global role and directly challenging the United Nations’ peacekeeping role.

Peak oil, which no one in positions of economic, political, and military power now doubts (the debate is about whether it is coming soon or sooner), has tended to drive these points home, making it clear to both the sheriff and the posse how important it is to control the major world, geographical center of crude oil reserves.  The financial crisis has placed a strain on the structure of U.S. world power, visible for example in signs of Japanese ruling class rapprochement with China, and the lowered voice in international affairs of the greatly weakened U.S. “deputy” Britain.

FC: In the wake of the Great Financial Crisis, is the United States still in a position to unilaterally decide global economic, environmental, political, and geopolitical issues?  And, is the world still U.S.-centric?  What about the dream of a “New American Century” now?

JBF: I was interested in an article, “An Empire at Risk,” that Niall Ferguson, a professor of history at Harvard wrote for Newsweek (December 7, 2009).   Ferguson is a British historian of imperialism and finance who moved to the United States.  He has specialized in rehabilitating (and promoting) British and U.S. imperialism.  Ferguson trades on his British perspective and takes as a basis for all of his writings on imperialism that the British were a lot better at running their world capitalist empire than the United States is at running its.  He claims that the United States is Janus-faced, confused and generally inept on the subject of empire.  As a result of its own origins as a colony, it has never been entirely comfortable with imperialism and thus does it, but does it badly.  There is no imperial educated elite trained specifically to run the empire.  The British, in comparison, were true imperial masters.  Ferguson has made a whole career of this, which sells well in elite circles in the United States, and has contributed to his being one of the highest-priced, most vocal U.S.-based historians.  He was a particularly strong proponent of the U.S. wars in Afghanistan and Iraq (see my Naked Imperialism).  He is also a financial historian, author of The Ascent of Money, and trades on the glories of financial capitalism.

In his piece “Empire at Risk” in Newsweek, Ferguson argues that the U.S. financial crisis is generating a U.S. fiscal crisis, as the government seeks to bail out Wall Street, and that this fiscal crisis is endangering the long-term future of the U.S. empire.  Ferguson says, comparing the fiscal situation today to 1942, that “We are, it seems, having the fiscal policy of a world war, without the [world] war.”  (He notes that the United States is at war in Afghanistan and Iraq but claims this is of relatively little fiscal significance.)  He worried that Obama’s decision over whether to send tens of thousands of additional troops to Afghanistan (which Ferguson strongly supported) was being affected by this fiscal crisis, thereby threatening the U.S. empire.

He shouldn’t have worried too much.  Obama sent the additional soldiers to war and accepted the Nobel Peace Prize at the same time.  And U.S. imperialism seems more aggressive than ever, threatening Iran.

Still, Ferguson says that the empire is being jeopardized as a result of the fiscal effects of the Wall Street bailout, which he also supports.  What does he think should be done?  He suggests that the main targets should be Medicaid and Social Security, which he claims are increasingly “unfunded liabilities.”  The implication is that these social programs need to be cut back for the sake of the U.S. empire.  Americans, he implies, should be willing to sacrifice for the greater good of the empire.

There is no doubt that Ferguson is right in some regards.  The U.S. empire is unstable and at risk.  The long-term threat to the hegemony of the dollar represented by growing financial instability is real.  Empire angst is one of the dominant issues in the centers of power in the United States today.  The United States is more and more in the position of a wounded elephant — wounded but more dangerous as a result.  The “New American Century” is uncertain.  But this is given as the reason for a more, not less, active imperialist stance.  This hasn’t changed under Obama, who is expanding the war in Afghanistan while not withdrawing from Iraq; building seven new military bases in Columbia, next door to Venezuela and Ecuador; supporting the coup plotters in Honduras; and squeezing Iran.

FC: What are the reasons behind the disputes/disagreements in the climate crisis diplomacy?  What role should the people-oriented ecological movements play in the post-Copenhagen chapter in climate crisis diplomacy?  Is there a possibility that the climate crisis will lead organizations related to people, including peasants and fishermen, to take a stronger anti-imperialist position?  Do the people-oriented ecological movements carry seeds that ultimately turn into movements against elites whose lifestyle thrives on squandering public resources?

JBF: That the Copenhagen climate negotiations would be a failure was well known in advance of the summit.  Washington set the stage for failure by producing legislation in the House that was “worse than nothing” — as James Hansen, the leading U.S. climatologist, put it — and then with the Senate refusing to go forward with even that.  Washington’s position internationally on climate change has been to do little, to reject legally-binding agreements on emissions reductions, and to promote almost total reliance on cap and trade (i.e. carbon emissions trading).  The advanced capitalist states, even Europe which has gone the furthest, have not managed to reduce emissions in the almost twenty years since the Kyoto Process began.  Indeed, emissions in the rich countries taken as a whole have continued to rise rapidly, particularly in the United States and Japan.  The emerging economies, such as China and India, are also not taking the problem seriously enough, although it is easy to see why these states think leadership should come from the advanced capitalist countries, with their historic responsibility and their much higher per capita emissions.  Contraction and convergence based on equal per capital emissions globally, which is the only rational international response, is not even on the table, due to what we could call the whole structure of ecological imperialism.  Meanwhile, the climate problem (and the environmental problem as a whole) is getting far worse.  In terms of climate diplomacy the one bright spot right now is Evo Morales’ call for climate talks in Bolivia, which is an attempt to promote a world ecological solution starting from a global South (and indigenous) perspective.

As always, the problem with radical change leads to the question of agency.  In Monthly Review we have long argued that the most revolutionary forces in the world emanate from the third world — and that in a sense this is where Marx’s “proletariat” in its most alienated sense is now to be found.  In my January 2010 article in MR entitled “Why Ecological Revolution?” I floated the idea of an “environmental proletariat.”  To repeat what I said there:

Looking at this today, I think it is conceivable that the main historic agent and initiator of a new epoch of ecological revolution is to be found in the third world masses most directly in line to be hit first by the impending disasters.  Today the ecological frontline is to be found in the inhabitants of the Ganges-Brahmaputra Delta and of the low-lying fertile coast area of the Indian Ocean and China Sea — the state of Kerala in India, Thailand, Vietnam, Indonesia.  They, too, as in the case of Marx’s proletariat, have nothing to lose from the radical changes necessary to avert (or adapt to) disaster.  In fact, with the universal spread of capitalist social relations and the commodity form, the world proletariat and the masses most exposed to sea level rise — for example, the low-lying delta of the Pearl River and the Guangdong industrial region from Shenzhen to Guangzhou — sometimes overlap.  This, then, potentially constitutes the global epicenter of a new environmental proletariat.

In Bolivia we see the rise of an indigenous-based environmental and socialist movement, which has responded to growing environmental conflicts: water conflicts, coca conflicts, hydrocarbon conflicts.  The fact that Bolivia’s socialist president Evo Morales is now perhaps the strongest international voice for world climate stabilization is a product of new material conditions and relations.  It seems possible that such an environmental proletariat (which I would argue is not antagonistic to Marx and Engels’s classic notion of the proletariat — but that is a different story for a different time) could emerge as a major revolutionary force.  This would not exclude, as you say, the role of peasants and fishing communities in such change.

Of course one might say that this smacks of pure fantasy; that there are few indications of this at present.  Here, though, I think people are too inclined to generalize on past material conditions, without sufficient attention to the way in which material conditions are rapidly changing.  Science now tells us that the world is undergoing an intense period of climate change, which will alter conditions of material production and material environmental conditions generally.  Even if we were able to slow down the rate of climate change (and this is a necessity for the planet and its inhabitants), it is now too late to stop very serious changes from occurring.  When I was in Vietnam recently there was a lot of discussion of the sea level rise and how it is already beginning to affect the Mekong Delta and Ho Chi Minh City.  Droughts seem to be spreading globally.  Both floods and water shortages are growing problems in the Andes due to melting glaciers.  The world’s rice crop appears especially vulnerable to climate change.  And we are at only the beginning of an accelerating problem (which environmentally goes beyond climate change itself).  Moreover, the hardest hit, both because of geography and due to the lack of economic resources, are likely to be the populations of the third world, who are already superexploited.  I believe that people will be driven to more intense struggles as a result.  Thus out of these conditions we may see something like an environmental proletariat emerge worldwide.  Surely, these worsening environmental conditions are going to make the “wretched of the earth” more acutely aware — as you suggest — of the lavish squandering of resources by ruling elites and classes.

However, you use the word “inevitable.”  I don’t think there is anything that could be called inevitable about the kinds of possibilities I am describing.  Necessary, yes, but not inevitable.  There is no certainty.  Humanity has to struggle for its freedom and for a sustainable relation to the earth.  Marx talked about the “common ruin of the contending classes,” i.e. barbarism, as a possible outcome.  Not only is this a possible result of the current capitalist civilization, I think that the environmental problem suggests that it may very well be the most likely result.  All existing trends point in that direction.  An actual environmental collapse (by which we mean the collapse of world ecosystems and civilization) is not, in my view, a road to socialism.  It is a road to barbarism, even extinction.

The point is to effect a radical change of course of world society, which could only occur by revolts from below.  It may seem far-fetched and overly optimistic at this point to think this possible, but revolutionaries are usually optimists.  Where human beings are concerned, trend is not destiny.  I do believe that hundreds of millions of people will be drawn into the defense of the planet, in the process of defending their homes and their local environments.  How could they not be?  The only real defense in these circumstances is a revolutionary one, which recognizes that the issue is the mode of production, our metabolic relation to the earth.

FC: How is the “renewal of the classic concept of political economy (with its class perspective),” as you told Mike Whitney, to be made?  How could we effect a changed in perspective, from “economics” to political economy?  You said, in the interview with MRZine (on your book Naked Imperialism), that we were seeing the “end of any possibility for a ‘rational capitalism’.”  Has not that end been confirmed after the Great Financial Crisis?  Then, what is the alternative path?  You also noted in your interview with Whitney: In this “historical moment . . . radical forces have the possibility of moving forward.”  How far are there signs of this forward movement since the Great Financial Crisis?

JBF: Here we are moving back to the advanced capitalist context, and the social changes possible as a result of the Great Financial Crisis.  I do think that things have changed in the sense that the economic ideology of the system has been fractured.  In the wake of this crisis, there is much less reference to such absurd notions as the “free market economy” or the “self-regulating market” as realities, or to globalization as a system.  Protesters in Europe have moved from simply attacking neoliberal policy; in the streets there is an increasing recognition that capitalism itself is the problem.  “Anti-globalization” has been replaced much more by “anti-capitalism.”  The economics profession is rightly held up to scorn.  There has been a big move toward political-economic discussions; to the recognition that the economy does not exist as a self-contained, market entity, moving by way of the “invisible hand,” but that it is a class-based and class-directed system, rooted in exploitation within production, and overseen by the state.

At the same time, there is a popular politicization of economic issues.  You hear now, even in the conservative United States, such issues as nationalization of the banks, taxing bankers, redistributing wealth to the population, controls on what the Federal Reserve can do, the need to have massive New Deal-style job programs, aid to distressed homeowners, and so on.  This is a big step because the economy was so sacrosanct, so beyond political reach, in the heyday of neoliberalism.  It suggests a break in the tight ideological control of the system.

Having said all of this, though, the situation remains grim.  Ideologically, the system is moving into high gear to explain that this was a Great Recession, but still only a recession, and that everything will soon get back to normal.  So most people, even those desperate at the bottom, simply cling to that hope of change around the corner.  Organized labor confronted by the worst economic crisis since the Great Depression and double-digit unemployment has shown itself to be devoid of initiatives and concerned more about organizing its own orderly retreat than figuring out how to advance.  It is still operating under a “business union” ethos based on some kind of mythical social contract with capital that — to the extent that it was ever a reality — disappeared long ago.

Does this mean that there won’t be a popular mutiny from below in the present hard times?  It is too early to tell.  I think that once it penetrates to those at the bottom of the economic pyramid that this is not just a temporary situation that will go away with the financial crisis and the recession, but that the reality is one of deepening, long-term economic stagnation, then it is conceivable that we will see all sorts of protests and a growing organized radical response in the United States along with the rest of the advanced capitalist world.

Parallels with the 1930s are somewhat misleading, since nowadays the whole “structural crisis of capital” as István Mészáros calls it, is even more serious, and demands more radical solutions.  As Grace Lee Boggs has suggested, organized labor is weak and co-opted.  The struggle this time might have to rely more on communities.  Ultimately, we need something like an organized environmental proletariat in the United States too, which combines revolts within production with revolts associated with diminishing community and environmental conditions.

The dream of a “rational capitalism,” as I suggested years ago in my article, “The End of Rational Capitalism,” was associated particularly with Keynesianism and social democracy (what you might call social liberalism in its U.S. version).  The historical period of such social democracy/social liberalism has now waned.  If things look particularly bleak for the left in the United States at the moment, it is because social liberals dominate in the Democratic Party.  They want to couple virtually unqualified support for capital with a mildly affirmative government (and token regulation of industry) that also provides minimal welfare services and the like (a far cry even from social democracy).  They want capitalist growth but without its necessary accoutrements: class war, poverty, racism, sexism, crises, unemployment, inequality, financial excesses, etc.  They also are in favor of a “kinder and gentler” imperialism, which means less direct intervention and more “counterinsurgency.”

Obama, who exemplifies the pro-capital, pro-finance, social liberal, mild welfarist, “benign imperialist” positions, has been undermined by the end of the possibility of a social democratic alternative and the consequent growth of the right.  This has led just in the last week to the shift of Edward Kennedy’s old seat in the U.S. Senate to the Republicans, something that almost no one thought possible.  All of this has to do with the two-party system in the United States, which continually works against any progressive-radical solutions and seeks to enlist the working class in one bourgeois project or the other.

All of which is to say that material conditions are never enough.  What is required is the development of an organized radical revolt from below, and anything like that is still missing in the core capitalist nations, and especially the United States.  That doesn’t mean that it won’t happen — and the shift may occur when we hardly expect it.  But it will be a huge struggle.  Indeed, the main impetus for revolt will come from outside the United States, as a result of struggles in other parts of the world, and from the added fissures that this creates in the United States — the center of the imperialist world system — itself.

Near the end of the film Burn! by Gillo Pontecorvo, the revolutionary leader Jose Delores is quoted by one of his followers as saying (as I recall): “It is better to know where you are going and not know how, than to know how and not know where.”  The question where we are going in late capitalist society is seldom truly asked — the insistence is simply on the fact that we know how to go (i.e. via capital and the market).  But it should be clear to anyone who thinks about it that we are headed as a result of these very relations of productionin the wrong direction: toward greater inequality and greater social and environmental destruction, indeed toward ecological collapse.  Even the so-called “development” taking place in part of the global South is clearly the wrong kind of development since it is rooted in deep inequality and cannot be sustained.  It is based to a large extent on the idea that the mythical golden age of capitalism can be recaptured (even made better) and globalized; that with economic expansion all things become possible.  It should be clear to anyone who looks at the current crisis of capitalism as a system — evident in deepening global economic and ecological contradictions — that this is a great delusion.  Where we must go, even if we don’t know yet the mechanics of how to get there, is evident: the creation of a world of substantive equality and sustainability with the earth.  This is the real historic struggle of humanity, which we must now finally embrace or risk our own extinction.




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