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Friday, October 26, 2012

Where have All the Profits Gone?

Mid September marked the fourth anniversary of the Lehman Brothers bankruptcy, widely viewed as the final trigger of the global economic collapse, a shock that remains the dominant factor in global economic life. Friday, October 19 brought a dramatic drop in US equity values, caused, commentators speculate, by dismal reports of US corporate earnings. The most observant of these commentators did not fail to point out that Friday was also the twenty-fifth anniversary of the largest US one-day percentage drop in stock values. The fact that such an anniversary came to mind reflects a general and widespread fear that more economic turbulence is forthcoming.

The growing gloom overshadows the glowing September report of retail sales released earlier in the week. Despite stagnant or slipping incomes, the US consumer turned to the credit card to boost purchases at retail stores, online, and in restaurants. Signs of an improving housing market also fueled optimism.

Opinions change quickly. A week earlier---Tuesday, October 9---the International Monetary Fund released its World Economic Report. While raising fears of a global downturn, the report cut the probability of a US recession by nearly a quarter from its April forecast!

Taken together, the sentiments of the last two weeks demonstrate widespread confusion and uncertainty.

Big Problems, Little Ideas

Most of the conversation about the global economy, about capitalism, is shaped by ideological bias, academic dogma, distorted history and wishful thinking.

The global economy has never “recovered” from the shock of 2008. Nor does it teeter on the edge of another recession. In fact, it is fully in the grip of a profound systemic crisis, a crisis that has no certain conclusion. In this regard, the crisis is very much like its antecedent in the 1930s. The popular picture of The Great Depression as a massive collapse followed by the New Deal recovery is myth. Instead, like our current economic fortunes, it was like climbing a metaphorical grease pole— repeatedly advancing a few feet and then slipping down. Serious students of the Great Depression understand that its “solution” was World War II, with its state-driven, planned, military “socialism.”

Of course war itself is no solution, but the organized, collective, and social effort that capitalism only countenances for violence and aggression is a solution. Similarly, the success of the People’s Republic of China in sidestepping the harsh edges of the 2008 collapse is due to the remaining features of socialism—public ownership of banks, state enterprises, and economic planning. Never mind that much of the PRC leadership hopes to jettison these features, the advantages are there for all to see. Yet few see.

Distorted history begets foolish theory. The two ideological poles that dominate economic discussion—classical liberalism and Keynesianism—both owe their claimed legitimacy to favored, but mistaken views of the source and solution to the Great Depression. While expressions of these poles are found across the political policy spectrum, classical liberalism—often called neo-liberalism—is generally associated with the political right. 

Political liberals and the left, on the other hand, often advocate for the analyses and prescriptions of the school associated with the views of John Maynard Keynes.

Since classical liberalism has been the dominant economic philosophy governing the global economy for many decades, common sense would dictate that, after four years of economic chaos and general immiseration, neo-liberalism would be in disrepute. But thanks to the tenacity of ruling elites and the profound dogmatism of their intellectual lackeys, the market fetish of neo-liberalism still reigns outside of Latin America and a few other outliers. 

But Keynesianism—broadly understood as central government intervention in markets—enjoys a growing advocacy, particularly with liberals, leftists, and, sadly, “Marxists.” Centrist Keynesians advocate intervention in markets from the supply side, most often through credit mechanisms and tax cuts that encourage investment and corporate confidence. Liberal and left interventionists argue for stimulating economic recovery and stability by generating consumption and expanding demand from government-funded projects or government-funded jobs.

The panic of 2008 turned most policy makers toward flirtation with supply-side intervention and generally meager demand-based stimulus, a fact that liberal Keynesians like Paul Krugman are fond of pointing out. Only China adopted a full-blown demand-oriented stimulus program. Yet that tact also brought a host of new contradictions in its wake.

Austerity versus Growth

Pundits like Krugman and politicians like Francois Hollande posture the theoretical divide as one between austerity and growth, a choice between rational growth stimulation and the irrationality of shrinking government spending to reduce debt. In an idealized classless world, this point would be well taken—austerity is an enemy of growth. However, it is naïve and misleading to fantasize such a world.

In our era of global capitalism, the idea of cutting government spending and lowering taxes makes all the sense in the world to the ownership class. The resultant transfer of value counts as a significant element in restoring profit growth and expanding accumulation. In a real sense, the popular and apt anti-austerity slogan-- “we will not pay for your crisis”-- tells only half the story. The other half should be “we will not pay for your recovery.”

In the end, it is profit that determines the success and failure of the capitalist system. Accumulation of economic surplus—the value remaining after the bills are paid--is the engine of capitalism, necessary for its motion and its trajectory. The dramatic drop in the Dow Jones industrial stock averages resulting from poor earnings this past Friday only underscores this point. Those who see consumption as the critical element in growth and recovery should recognize that this loss of momentum is independent of, as well as more decisive than, the September report of strong retail demand. 

The Tendency of the Falling Rate of Profit

The central role of profit, its growth and momentum in understanding capitalism and its recurrent structural crises has been overshadowed, even among most Marxists, by the infection of left thought with Keynes’ crisis theory. Theories of crisis that rest on underconsumption, overproduction, or imbalances reflect this infection and reduce political economy to the study of business cycles and avoidable and terminable economic hiccups—consumption can be expanded, production can be regulated, and balance can be restored. These are the assumptions of social democratic theory and what divides it from revolutionary Marxism.

Marx saw crisis as fundamentally embedded in capitalism’s structure. Processes in the capitalist mode of production unerringly bring on crises. And he locates the most basic of these processes is the mechanism of accumulation, a process that tends to restrain the growth of the rate of profit.

While it is good to see a rebirth of interest in and advocacy of Marx's law of the tendency for the rate of profit to fall, most of its worthy supporters remain needlessly confined to Marx’s expository formulae that serve well in revealing the anatomy of capitalism, but less so in exposing its disorders.

Yet the intuition behind Marx’s law is easily grasped. When unmediated by the encroachment of working class forces, the capitalists’ accumulation of surplus results in the extreme concentration of wealth, a concentration that reduces the opportunities to gather the expected return in the next and each successive cycle. Whether restrained by the physical limitations of workers, the potential length of the work day, diminished return on physical investment, rapacious competition, super-inflated investment reserves, or the myriad other possible forces or factors, the rate of profit is under constant and persistent duress.

Leading up to the 2007 economic slowdown that presaged the 2008 collapse, the enormous pool of capital available for profitable investment was acknowledged by all reporters. Its sheer volume alone depressed interest and profit rates in the face of limited productive investment opportunities. The desperate search for a rate of return drove investors toward riskier and riskier ventures that generated the financial collapse which has been well documented. It was the pressure on profits—an expression of the tendency—that drove the investor class to a lemming-like indulgence in arcane financial wizardry.

The neglect of Marx’s tendential law since the popularity of Keynes and underconsumption/overproduction crisis theories has retarded Marxist and Communist understanding of capitalist crisis while bolstering reformist policies within the Communist movement. Happily, there is a renewed interest in Marx’s law, though a full and satisfactory understanding of its application to and operation within contemporary capitalism is yet to be given.

At any rate, the decline of earnings now emerging in the latest financial news indicates that counter-crisis and counter-tendency measures are now exhausted in the US. Despite the euphoria of rising consumption spending and housing sales, the profit-driven engine of US capitalism is slowing, likely allowing the US economy to drift closer to the whirlpool already drowning the European economies.

Tough times are ahead, but a fertile period to plant the seeds of socialism. 

Zoltan Zigedy   

Tuesday, October 2, 2012

Hypocrisy, Cynicism, Corruption and the Persecution of the Cuban Five

Toronto, Canada in late September was the setting for a Peoples’ Tribunal established to secure justice for the five Cuban patriots victimized by the US criminal justice system. Appropriately dubbed “Breaking the Silence,” the tribunal sought to bring attention to a gross injustice largely ignored or distorted by the North American media.

Held over the September 21-23 weekend, the tribunal drew several hundred participants to a review of the bogus case brought against five Cuban agents planted in the midst of the virulently anti-Communist, Miami-based Cuban defector community. As instruments of Cuban State Security, the Cuban Five were charged with ferreting out violent plots concocted to overthrow the Cuban government and harm the Cuban people and their friends. Necessarily operating clandestinely, they were essential counterweights to the US government's long established and deep engagement with organized criminal elements freely operating out of South Florida with CIA support.

To not employ all available means, including infiltration, would have been tantamount to abandoning the Cuban revolution. No honest person could but see the intervention of the five Cubans in the Miami cesspool of reaction and crime as anything other than an act of national defense and internationalist vigilance.

The Peoples’ Tribunal drove these points home. Speakers developed a detailed case supporting the existence of a dangerous nest of violent, reactionary ex-Cubans organizing in the Miami area with the knowledge and support of US security agencies. Reports to the tribunal established a long history of subversion and assassination on the part of Miami-based paramilitary organizations with the complicity of US officials. Testimony left little doubt of both the reasonableness and urgency of infiltrating these organizations. Nothing underscored the unchecked violence of the Miami murderers more movingly than the testimony of Livio Di Celmo, the brother of Italian tourist, Fabio Di Celmo, who was killed in a brutal bombing of a Havana hotel. The attack was orchestrated by the US government agent and career assassin, Luis Posades Carriles. Carriles bragged openly to the media that “The Italian was in the wrong place at the wrong time.” 

Further, tribunal witnesses exposed the hand of the US government in railroading these patriots with exaggerated charges, a polluted political atmosphere, extra-judicial pressure, and corrupted evidence. A clear picture emerged that nothing even approaching a fair trial landed the Five in Federal penal facilities, an unjust incarceration that has taken 14 years of freedom from them.

Speaker after speaker stressed the necessity of building an international campaign for their freedom. As Elizabeth Labañino, wife of imprisoned Ramón Labañino, stated so eloquently, “We don’t trust in this system, we trust in solidarity.”

Serving on a panel of “magistrates of conscience”-- de facto jurors-- in the proceedings were fourteen distinguished figures including leading US anti-war activist, Cindy Sheehan, and noted US filmmaker, Saul Landau. Adding gravity to the panel were leaders of the Canadian labor movement: Marie Clarke Walker (Vice-President of the Canadian Labor Congress), Denis Lemelin (National President of the Canadian Union of Postal Workers), Ken Neumann (National Director for Canada of the United Steelworkers), and Naveen Mehta (General Council of United Food and Commercial Workers Canada). Joining the panel from the UK was Tony Woodley (Former Joint General Secretary and current Head of Organizing of the 1.5 million members of UNITE the UNION). 

The panel asserted that “…this Peoples’ Tribunal concludes that the Cuban Five were unjustly detained, unjustly prosecuted, and unjustly sentenced, all contrary to international and U.S. domestic law including the U.S. Constitution.  This Peoples’ Tribunal proposes the convictions be quashed, and that Gerardo Hernández, Ramón Labañino, Antonio Guerrero, Fernando González Llort and René González be set free immediately, without any restrictions on their liberty.”

But the tribunal served as more than an urgent call for solidarity with the Cuban Five; it also exposed the corruption, hypocrisy and cynicism of the US government.

Judicial Corruption: The collusion of the highest levels of government with the judicial frame-up demonstrated what should be in no need of demonstration, namely, that the US judicial system answers to the needs of the rich and powerful. There are no broad interests of the US people served by maintaining a nest of violent anti-Communist thugs in Southern Florida. Nor do the US people support them anymore than they support an internationally abhorred, legally unsanctioned blockade of Cuba. Judicial rulings are fitted to conform to the interests of the US ruling class, just as they were in the Citizens United vs Federal Election Commission Supreme Court decision.

The Hypocrisy of “Terrorism”: The term “terrorism” has been appropriated by colonial and imperial powers to demonize the resistance of subjugated or weaker peoples. Whenever the oppressed rise up, they are labeled “terrorists.” Whether it was the anti-colonial Mau Mau movement, the Algerian National Liberation Front, or the African National Congress in South Africa, those audacious enough to defy British or French imperialism or colonial settlers were tagged as agents of terror. Perhaps the original “terrorists” were the aboriginal peoples of the New World who refused to acquiesce to those stealing their lands.

It is deemed “unsporting” of the weak to use extreme or unorthodox methods in the face of the powerful, overwhelming killing machines of bullies. Hence, they are guilty of terror!

It is another story when powerful states or their agents slaughter defenseless civilians or political adversaries. The North American and European media never saw terrorism when the Indonesian military killed over a million civilian Communists and their supporters. Nor do they see terrorism in the daily violence against Palestinian civilians by the Israeli Defense Force. And, of course, the capitalist media is incapable of finding terrorism in the acts of the Miami mafia and their bombings, assassinations, and intimidation at the behest of US security agencies. It was left to the Cuban Five to expose these dangers and work to prevent their realization. Every day the fear-mongering of a hypocritical “War on Terror” justifies another act of terror inflicted on innocent civilians in some far-away country by the US military.

The Cynicism of Human Rights: One of the most inviolable of rights is the right of self-defense, a right that applies equally to a person or a state. Through most of the twentieth century, aggression against another country, regardless of how illegitimate the government or how odious the country's internal policies, was recognized as a violation of the country’s sovereign rights. Conversely, any victim of aggression had a right to respond in self-defense. While Western “democracies” often fell short in aiding those exercising this right against aggression (Abyssinia, Spain, etc), they enshrined the doctrine as an essential condition of peace in both the League of Nations and the United Nations. Recently—especially since the demise of the Socialist bloc as a counter force—the US and its NATO allies have openly and often violated the right under the cynical and illegal excuse of “humanitarian intervention.” At the same time, the US shamelessly embraces its own right of self-defense with its global and perpetual “War on Terror,” a war that has brought death and destruction throughout Asia, Africa, and the Middle East.

But the violations of sovereignty in the former Yugoslavia, Libya, and Syria and other victims of Western “humanitarianism” are preceded by the example of Cuba. Since the revolution, the US and its Cuban-renegade mercenaries have used invasion, infiltration, bombings, assassinations, sabotage, and other forms of aggression to undermine and destroy the revolutionary government. The US and its allies have trampled Cuba’s right of self-defense, but the revolution has persevered. The judicial persecution of the Cuban Five is another instance of the denial of Cuba’s right to self-defense against outside aggression.

There is no excuse for the North American media silence or popular hesitation in defense of the Cuban Five. These brave, selfless and principled fighters have suffered 14 years of imprisonment for values that any fair-minded person would acknowledge. Their honor is secure, standing up to the corruption, hypocrisy, and cynicism of a ruthless imperial power.

Zoltan Zigedy