Ruling Class Angst

There is a profound difference between the economic crisis of 2007-2009 and the evolving crisis of 2022. In 2007, capitalists feared the collapse of their own enterprises, but they had no doubt that the system was salvageable, albeit at costs that might prove difficult to impose. They knew that if the politicians could be won over to endorsing Wall Street’s prescriptions, if the people kept their pitchforks tucked away, and if the capitalists, in their greed, could be kept from devouring each other, then there was a good chance that an elite economic version of an “EMS” rescue team could save capitalism from further decline. Sure, the executives at Lehman Brothers, Bank of America, AIG, and many other firms had every right to fear for the future of their companies. But few capitalists imagined an existential threat to the system; few failed to believe in a way out.

This time is different.

Stagflation is a different kind of beast and that beast has the bourgeoisie, its friends, and its hangers-on terrified. The problem is that economic “science,” as they know it, only offers one possible escape and it has dire economic and political consequences. Once they recognized that inflation was not simply a momentary speed bump (as I predicted nearly a year ago), Central Bankers and economic gurus who have studied the 1970s-- the long, painful decade of stagflation-- prescribed a drastic remedy of slamming on the brakes of economic growth to contain inflation. Some nonetheless fear a long period of inflation and stagnant growth.

The 1970s taught that cheerleading, patience, and half-measures would not work. The Whip Inflation Now (WIN) campaign, price controls, and other approaches failed until the then-Federal Reserve chair, Paul Volker, boldly imposed draconian interest-rate increases that threw the economy into deep recession. Inflation tamed. Lesson learned. 

Certainly, no political regime wants to be associated with income-and-wealth-devouring inflation. But neither would it want to suffer through a job-devouring, wage-declining recession. Voters and subjects seek to punish the politicians in office when either situation arises. 

Thus, politicians and rulers are caught on the horns of a dilemma. If they ignore inflation, they pay a political price. If they attack inflation and bring on economic decline, they also incur the wrath of the electorate or their subjects. Either option taken constitutes a deep threat to the incumbent party or the ruling regime. 

Recently, some politicians have chosen to ignore the lesson that bourgeois economists have drawn from the 1970s bout with stagflation. Turkish president Erdogan decided to defy the convention by coercing the country’s central bank into lowering interest rates in the face of growing inflation, betting that the benefits of economic growth would outweigh any increase in inflation. He was wrong. Inflation has soared with devastating results on the people’s living standards and security.

Even more recently, the newly selected Conservative UK prime minister, Liz Truss, out of sheer arrogance or a profound economic ignorance, offered a budget based upon promoting growth (predictably through tax cuts for the rich!) and ignoring the anti-inflation moves of the Bank of England (BOE). Financial markets immediately reacted violently, forcing the BOE to go on a corrective bond-buying spree, and earning a rare rebuke of European government policy from the International Monetary Fund. Once again, the lesson of the 1970s stagnation crisis was harshly driven home.

With an interim election only weeks away, the ruling party in the US fears a severe beatdown from the angry electorate, devastated by sharp price increases imposed by profit-hungry monopoly corporations, declining incomes, and exploding interest payments on loans. At best, President Biden can only browbeat his Saudi allies for sustaining high energy prices in a global market disrupted by US corporate interests and US-instigated war, while the Federal Reserve slams on the economic brakes.

Liberal and social democratic labor leaders, party leaders, and pundits correctly object to the frequent blaming of inflation upon “greedy” workers or bloated union contracts. Even a cursory glance at the Bureau of Labor Statistics demonstrates that throughout this inflationary period income growth trailed and did not lead the growth in prices. That said, what do they think caused this persisting inflation? What can they offer in response to the bitter pill prescribed by bourgeois economists and the Central Banks?

Hell bent on saving capitalism from itself, some liberal and left thinkers like Dean Baker and Richard Wolff see price controls, ration cards, or public commissions as possible approaches (I refute these solutions here). Even if these fixes were likely to be enforced by governments thoroughly captured by capitalism, it would be unlikely that they could even be adopted in today’s volatile political atmosphere. The impending severe crisis cannot be met by wishful bromides or failed tactics.

More seriously, some on the left point to “financialization” as the cause of capitalism’s ills today. While the much-abused term begs many questions, it does describe one side of the restructuring of roles assumed by the leading capitalist countries as a response to the previous, 1970s version of stagflation. That is, so-called “financialization” was the new role of some advanced capitalist countries that deindustrialized after the stagflation of the 1970s. The flight of industry to low-wage countries was part of the answer to 1970s stagflation, stabilizing global capitalism and restoring the rate of profit for most of the next two decades. 

“Financialization” was the accompanying new role for those capitalist countries that surrendered their industries to emergent low-wage countries.

The stagflation of the 1970s caused the demise of the Keynesian consensus that had come to dominate economic policy since the Great Depression. That toolbox contained nothing to fix what was over a decade of roaring inflation. Indeed, many orthodox economists blamed the Keynesian tools for creating the conditions that led to that round of stagflation. In any event, it was the “financialization” era that superseded 1970s stagflation and was then believed to restore capitalist accumulation after its assault by stagflation. Therefore, it’s difficult to envision “financialization” as both a solution and cause of stagflation. 

While it is fashionable, since the crisis of 2007-2009, to see the dramatic rise of financial engineering and activity-- centered on the development of the many new financial instruments-- as the sand in the gears of capitalism, there is no reason to believe that it is any more than another adaptive stage in a resilient, but constantly crisis-plagued socio-economic system. 

It is difficult to foresee an easy, relatively painless capitalist solution to stagflation. That is not to discount the durability of capitalism. But the history of the 1970s teaches that any answer comes with enormous pain. We are only beginning to experience the rising costs from interest payments on top of the rising consumer prices. We are only beginning to feel the effects of galloping inflation compounded by stagnant incomes and growing unemployment. We are only beginning to recognize the strain on retirement funds and 401k’s. The lessons of the 1970s are distant and poorly remembered. But they are there for those who wish to heed them.

It should not be lost to anyone studying those lessons that hourly wages in the US adjusted for inflation have remained stagnant since the 1970s. More families now have two or more earners to compensate. Household debt has risen to counteract the loss in earning power. And income and wealth inequality has exploded, topping any other historic period. 

With a lost decade to stagflation and forty subsequent years of a tepid, crisis-ridden “recovery,” it is hard to imagine how people can endure another round of stagflation. It is hard to imagine how people can fail to explore the alternative to the capitalist system that brings so much unnecessary pain and misery.

Of course, part of the reason for ideological stagnation lies with the political parties, institutions, and misleaders that are so deeply invested in seeing capitalism persist. There would be no “social justice” industry-- the tens of thousands of foundations, NGOs, and charities-- without capitalism. Their criticism of capitalism ends, when the subject of socialism arises. Similarly, educators, writers, and media figures cannot risk alienating those who guarantee their stature and incomes. It goes without saying that both major US political parties are entirely invested in capitalism.

Yet their cynicism and hypocrisy would evaporate if it weren’t for the enormous material resources that capitalism makes available to those who safeguard the system's future. That will not change until the masses of the people use the power of their numbers to change it.

Whatever joy we may derive from the ruling class’s fears and anxiety over the current crisis is overshadowed by the hardships yet to disrupt the lives of millions of working people. 

Socialism is the alternative.

Greg Godels

zzsblogml@gmail.com

Could We Reconsider Socialism?

We swim in a sea of obfuscation, confusion, and fabrication.

We are bombarded by academics, commentators, consultants-- experts of every type-- who build their brands on telling us what our rulers want us to hear. Through calculated ruses, they penetrate our entertainment, even our escapism, with embedded messages that strengthen conformity and consensus.

The purveyors of this conformity-- the messengers-- are given the stolid image of trustworthy tradition or the superficial appearance of daring nonconformity or diversity, depending on the sensibility of the audience, though the message is the same in all cases.

Some on the left like to dress this domination of the field of ideas-- a relentless, ongoing process-- with the sexy Gramscian notion of ruling class “hegemony,” but it has long been a part of the leftist legacy of Marx-- “The ruling ideas of each age have ever been the ideas of its ruling class” -- and recognized, but undoubtedly unspoken even before Marx.

But today’s bourgeois society has utilized previously unimaginable advances in communication and technology to achieve even more unimaginable control over the thinking of the people. This is what Edward Herman and Noam Chomsky so insightfully called “manufacturing consent.”

There is, and will always be, resistance to this conformity-- the attempt at mass hypnosis. From Marx’s time, it has mostly been aimed at the ruling class-- then understood almost universally as the capitalist class and its courtiers. 

But two related events have changed the character of this resistance. First, the dissolution of the Soviet Union and the collapse of its role as an alternative model to capitalism. Since 1991, the idea of a radical departure-- a complete rupture-- with capitalism has been shattered, replaced by tactical attacks on aspects or types of capitalism: disaster-capitalism, neoliberal capitalism, racial-capitalism, carbon-fueled capitalism, and a host of other hyphenated capitalisms. The hyphens tell us that it is not capitalism, per se, that must be rejected, but variants of an otherwise benign economic system. Countless activists and organizations propound anti-capitalism, but never tell us what they think should replace capitalism. The word “socialism” never appears in their narrative.

And second, the retreat of social democracy, which was once understood as a socially more egalitarian alternative to raw capitalism, and yet an alternative that paradoxically retained the capitalist class at the summit of economic and political activity. The once popular social democracy abandoned the program of leveling the effects of capitalism for a promissory note of expanded opportunity and the inherent justice of markets. In place of wealth and income redistribution and welfarism, the new social democracy subscribes to the clever maxim that a rising tide lifts all boats, so let’s unleash the tide and let the boats fend for themselves!

Nothing more clearly demonstrates that classic redistributive social democracy is not merely ill, but in its death throes than the swift, unprincipled, and complete destruction of the Jeremy Corbyn program in the UK Labour Party or the stealth undermining of the progressive wing of the US Democratic Party by party conservatives and the wing’s own ready capitulation.

The left suffers from a foreign policy disconnect as well. Where Marxism and real-existing socialism insisted that capitalism and imperialism were intrinsically tied, the vast majority of the left today drink from the capitalist goblet, associating global social justice with the moral crusades of the advanced capitalist powers. A carefully groomed notion of human rights-- rights anchored in petty bourgeois interests-- and a long-soiled, class-biased, strictly formal concept of democracy seduce the weak-tea left. 

Unfortunately, those seduced by these views side with the US and its allies or occupy the sidelines in aggressions aimed at Cuba, Venezuela, the former Yugoslavia, Iraq, Syria, Libya, and today’s war in Ukraine, among others.

Fortunately, there is a small, but dedicated segment of the left that staunchly and consistently opposes Great Power imperialism, though many of them myopically see it as solely the adventures of the US and its NATO allies. They fail to recognize the Leninist thesis that imperialism is the inevitable product of mature capitalism. And all capitalist powers-- big and small-- engage with imperialism; they have no choice in the matter. Whether they have a dominant capitalist sector or a robust public sector, capital will pursue its expansion within the imperialist system and compete with other capitals within that system. Invariably, capital influences states on a local, regional, national or international level, everywhere that capital seeks profit. In the era of imperialism, capital does not influence the state, it typically is the state.  With the demise of the Soviet-centered socialist community, there is no place uninfected by capital. 

The long dominance of US-based capitalism-- just as the long dominance of British capitalism before it-- has led some to believe that the logic of capitalism is not relevant to countries with weaker or fewer monopolies or less integrated finance capital. In a sense, they believe that because the less powerful national capitals fail to compete successfully, because they are restricted in markets, denied financial resources, barred from resources, sanctioned, threatened, or otherwise pressed into a dependent or subordinate role by US capital and its enormous, powerful coercive structures, both the people and their rulers alike-- and their battered capitalist enterprises-- are, therefore, equally victims of US capital.

Indeed, the people are victims, but they are victims of capitalism, not solely US capitalism.

In today’s imperialist game of capitalist competition, US monopoly capital is the big winner, but if they weren’t, someone else would be. And if some other state monopoly capitalist great power replaces the US, everyone else would, in some way or another, be losers. That is the essential feature of capitalist competition since its origin; it is the heart beat of capitalism.

Of course, US capitalism and its predatory ways must be exposed and resisted. The people of Europe must understand that the sacrifices that they are being told to make to maintain a war in Ukraine are extorted by US capitalism’s plan to wrest the European energy market from Russia. 

But the pain that they will experience from tenacious inflation and government-induced recession must be laid at the capitalist system’s doorstep and not only that of the US empire.

The tragedy unfolding in Europe is a consequence of imperialist competition, imperialist alliances, and the instability of capitalism, none of which can be completely overcome without a full-scale attack on capitalism and its replacement with a cooperative, profit-free social system. 

Capitalism, exploitation, and its associated oppression constitute the ultimate source of the misery and suffering that afflict a world that produces unprecedented wealth-- wealth sufficient to eliminate most of that suffering endured by humanity. 

When the left forgets that intimate connection between capitalism, imperialism, and war, it tragically takes sides in the war in Ukraine. Lenin, who best articulated the connection, called for ending all imperialist war or --should it break out-- turning war into civil war to overthrow capitalism; he saw no other choice that served the working class and its interests.

Consider Iran. Today, we may see the recent rising in Iran depicted as a feminist revolution liberating Iranian women from the tyranny of a moral police; we may see the opposition as a sign of the stirrings of oppressed people, both religiously and nationally oppressed; we may rightly warn of the always present stealth hand of hostile outside forces working to create a more pliable regime, specifically the US security services.

Yet there is no complete picture without noting the class question-- the matter of social inequality under capitalism. Today’s Iran has social inequality rivaling the US (World Bank). Iranian figures show the bottom 10% getting 2% of gross national income while the top 10% get 31%. The afflictions of global capitalism such as rampant inflation strike Iran hard.

While economic aggression by the US and the EU affects the Iranian economy and must be opposed, the economic system and its supporters are the ultimate enemy of the people. The left must recognize this reality and applaud and encourage the Iranian people’s resistance to capitalism and all of its symptoms. Solidarity with the working class is not negotiable.

For many decades, the left has experienced a “retreat from class,” to borrow Ellen Meiksins Wood’s deeply insightful words. The left must not misjudge this moment; it must halt the retreat and recognize the enemy: capitalism.

Greg Godels

zzsblogml@gmail.com