The Global Economic Crisis—Part 3
A Canadian Dimension Roundtable
CD: The financial sector has been remarkably successful in shifting the debt burden into the public sector which also bears much of the cost of “recapitalizing” the banks. But what problems persist in the financial sector?
Sam Gindin: Before answering any of the questions, it’s important to clarify the role of finance within capitalism. Contrary to some populist understandings, finance is more than a speculative, greedy outlier to the “real” economy (though it is in fact also speculative, greedy and worse). Finance is basic to making a globalized capitalism work; in fact, one of the criticisms of capitalism is that it makes finance — and a wild finance at that — so necessary. Within capitalism, finance delivers cheap credit, a set of complex markets that essentially provide insurance for corporations trying to navigate fluctuating exchange rates and other uncertainties as they invest globally, and allocates capital in such a way as to discipline individual corporations, workers and governments to more rigidly adhere to a capitalist logic.
The continuing stagnation is rooted in four particular contradictions:
Financial vitality vs. financial volatility.
For the economy to take off again, the crisis in the banking sector must be resolved. But if regulations clamp down too hard on the volatility of finance, this might hamper finance’s ability to provide the services corporations in particular need but many workers have also come to depend on). States have not yet figured out how to come up with a new regulatory regime that provides economic stability without harming what they see as financial dynamism. In the interim, problems get worse.
Financial orthodoxy and austerity
Banks worry about the loans they make, especially whether their large loans to governments are “safe” — which means that particular governments won’t one day say that they ran out of money and can’t pay up, or that governments won’t pursue policies which might cause inflation and reduce the value of their assets or that they will get paid back in devalued currency. Since fixing the banking system includes restoring bank confidence, this leads to a bias in favour of the financial orthodoxy of austerity. But the result of austerity is slower growth and seems to also be leaving banks themselves worse off.
Conflicts internal to states
Even if certain states think they know what the answer is (right or wrong), the balance of class forces inside their country may block decisive action. The Greek state (and Greek capital) understood its “responsibility to global capital” but they could not go as far as they wanted because of popular internal resistance. In the US, President Obama had concluded that more stimulus was necessary but faced pressures from the Tea Party that limited how far he was ready to go. The German state knows it must contribute much more dramatically to save the euro and eurozone, but in the context of a Europe still fragmented into nation-states, Chancellor Merkel has feared a reaction over the transfer of funds to weaker states.
The weakness of the left (our contradiction)
If there were a mobilized left in Canada and the US, it could take advantage of the discrediting of Bay Street and Wall Street and the broader growth in inequality to fight for the kind of direct state intervention to build infrastructure and expand social services that might get us out of the recession (or go further and fight for converting the banking system into a democratic public utility). The weakness of the left, ironically, is part of capitalism not getting out of its own crisis (for example, during the crucial debates in the US over stimulus in the summer of 2011, rather than the Tea Party framing the agenda, unions should have been in the streets angrily demanding jobs for useful production).
Occupy Wall Street has given a real positive lift to the left in North America, and helped raise some important anti‑capitalist perspectives into wider discussion. But there is also persistent hope that more Keynesian fiscal stimulation will provide the foundation for an economic rebound. From your vantage, what would be the core positions in the alternatives you think the left should be advancing?
Even before the crisis, it was clear that given the power of capital, no “moderate” solutions could work — either we become more radical or we give up. Moreover, there is no longer any national capitalist class anywhere that people can ally with — they are too integrated into and often too indistinguishable from foreign capital and would be as opposed, if not more so, to any attempt to significantly shift course. The Occupy movement reflects that reality, but in spite of its impressive achievements and inspiration, it remains a relatively small protest movement hoping to spark a more general movement. That larger movement needs to put forth specific policy alternatives but with the following caveat: all alternatives must speak to people’s immediate needs but if they aren’t also inspired by a longer-term vision and aren’t building longer-term capacities and structures to transform capitalism, the effort will be wasted — to paraphrase Thatcher, there is no alternative but to become more radical.
It’s from this perspective that we should evaluate calls for Keynesian stimulus. Of course we need more stimulus, but not just any stimulus: we don’t want tax cuts and “incentives” but direct government job creation by way of supporting existing public-sector jobs and the massive development of an infrastructure so long neglected, including innovative affordable public housing and everything environmental sanity demands in restructuring our cities, transportation and utilities. In the private sector, we need to stop trying to strengthen “our” corporations through subsidies but start thinking of the conversion of industries no longer capable of expanding employment into facilities addressing social needs.
There has been extensive discussion of how the crisis also marks a fundamental decline in US (and European) power and the emergence of China and the other BRICS countries as new centres of the world market. How do you assess this phase of global capitalism?
It is clearly true that the American economy is in trouble and may stagger on in disarray for some time. But the trouble it’s in is that of global capitalism as a whole, not a specifically US problem. The US no longer has the share of global production it had a half century ago but if we assess that from the perspective of its role in the spread of global capitalism, the US has been remarkably successful, adding the former Soviet Union and China to the accumulation opportunities available to American capital as well as much-expanded opportunities in SE Asia, India and Latin America. Iraq and Afghanistan were costly blows to the US, but the empire proceeds with more bases and democratic revolutions in the Middle East have not yet led to any country considering leaving global capitalism.
And the US still stands at the pinnacle of the most strategic sectors in the global economy — hightech manufacturing, business services (consulting, engineering, accounting, legal) and of course finance. Rather than a collapse of the dollar as many predicted, we see a flight to the safety of the dollar. Whatever gloating there was in Europe when the American crisis hit, European diplomats now point to the American response to the crisis as the alternative to Europe’s stuttering response. And even where there is criticism of American policies, such as from China, the underlying message is not that a challenge to American dominance is imminent, but that the US should more responsibly carry out its taken-forgranted imperial leadership.
We should not look to American decline as undermining the US and opening the door to a breakthrough. We must develop our strategy on the basis that it is not a weak American capitalism but a still very strong one that we all face, especially of course the American working class. (And as long as the American working class remains as weak as it is, American capitalism retains the flexibility to restructure and strengthen itself at will.)