The Making of Global Capitalism

Posted on Jan 31, 2013

Verso Books

(Page 3)

It was clear by this time that all the heady talk between Russia, China and other emerging market states about using ‘SDRs’ (the IMF’s ‘special drawing rights’), let alone the Euro, to displace the dollar as the international reserve currency had amounted to little more than rhetoric. Rumours that the Middle East’s oil exporting states would abandon the dollar vanished with the 2011 ‘Arab spring’, just as May ’68 put a stop to expectations that France might lead a return to the gold standard. The dollar’s continuing central global role certainly produced problems for rapidly growing emerging market economies, which experienced high capital inflows and currency appreciation as a result of the Fed’s low interest rates and quantitative easing policies. This stoked real estate and stock market bubbles in these countries, and threatened to undermine their competitiveness and bring back hyper-inflation. But criticisms such as those repeatedly heard in 2011 from Brazil, that US policy might lead to ‘currency wars’, amounted to nothing like a challenge to US hegemony.

The notion that the G20 would effectively become the linchpin of crisis management and policy coordination appeared mere window dressing by the time of the Cannes summit in the fall of 2011, with the BRIC countries left to insist that whatever financial contributions they might make to the European bailout would be channelled through an IMF still dominated by the G7 and especially the US Treasury. The most significant change from the pattern of crisis management in the 1980s and 1990s was that whereas it had earlier been the developing states that were required to practise austerity, the prescription for a capitalist cure for this structural crisis was reversed: the G7 states now committed themselves to austerity, while encouraging the emerging market states to stimulate their economies. This reflected the fact that the major developing states were now so much more an integral part of global capitalism, so the issue was no longer just to restructure them so as to facilitate free trade but also to make them more responsible for sustaining global demand. Yet the rising purchasing power of the developing countries could hardly make up for stagnation in the developed ones (US consumption expenditure alone remained some five times that of China and India combined).

The real issue was less about changing consumption patterns than whether any other state would be capable of playing the crucial role in the reproduction of global capitalism played by the American state. Claims that this would be a European supra-state now looked threadbare indeed. And amidst all the talk about the impending dominance of China, the crucial question rarely posed was whether the Chinese state had the capacity to take on extensive responsibilities for managing global capitalism. No one seriously imagines Russia, even with its admission to the WTO, could readily develop such capacity, but even China is manifestly still a very long way off from being able to do so. To this point, far from displacing the American empire, China rather seems to be duplicating Japan’s supplemental role in terms of providing the steady inflow of funds needed to sustain the US’s primary place in global capitalism.

Were this to change, it would require deeper and much more liberalized financial markets within China, which would entail dismantling the capital controls that are key pillars of Communist Party rule - at a time, moreover, when its own banking system is under severe stress. Furthermore, a major reorientation of Chinese patterns of investment and production away from exports towards domestic consumption would have incalculable implications for the social relations that have sustained China’s rapid growth and global integration. It would involve a restructuring of the country’s coastal industries, which would come up against powerful vested interests among Chinese capitalists and regional officials. And getting households to spend their savings on current consumption would also involve developing a welfare state as well as ongoing increases in wages. Given the redistribution of income that this would entail, which could only happen through a substantial shift of power to the working class, all of this - while certainly possible in the long run - would meet resistance that would go well beyond just those firms involved in exporting low-wage goods.

The current conflicts in which Chinese workers are engaged, as seen in the strike wave of 2010 which yielded some large wage increases but no clear organizational transformation in Chinese trade unionism, pose increasingly sharp choices for the whole of Chinese society. It cannot be known in advance whether working class struggles in China will lead to the emulation of the West’s individualized consumerism or whether they will lead to new collectivist claims. What is clear is that the outcome cannot but impinge on, and possibly even be affected by, the direction working classes elsewhere take out of the current crisis.

While the first global capitalist crisis of the 21st century was rooted in the volatility of finance, not in a crisis of production, an important factor in generating the conditions that led to it was what had happened with the world’s working classes since the crisis of the 1970s. The massive growth of the global proletariat that has been the sine qua non of capitalist globalization produces tendencies towards the equalization of wages and conditions at a global level, and the continuing travail of trade unionism in the developed capitalist countries has partly been a reflection of this. The very financialization through which global capitalism was realized was also the means through which workers were disciplined, and the political and organizational defeats they had suffered since the 1980s were closely linked to the recovery of corporate profitability – albeit a recovery characterized by new vulnerabilities, above all that so much consumption was dependent on credit.

The severity and extent of the current crisis has once again exposed how far the world’s states are enveloped in capitalism’s irrationalities. Even when states committed in 2009 to stimulate their economies, they felt impelled at the same time to lay off public sector workers or cut back their pay, and to demand that bailed-out companies do the same. And while blaming volatile derivatives market for causing the crisis, states promoted derivative trading in carbon credits in the hope that green capitalism would provide a two-for-one remedy for the global climate and economic crises. In the context of such readily visible irrationalities, a strong case can be made that to really save jobs and the communities that depend on them in a way that converts production and distribution to conform with ecologically sustainable priorities, there needs to be break with the logic of capitalist markets rather than the use of state institutions to reinforce them.

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