I have written before of the trend towards economic nationalism that systemically follows a major and deep crisis like the one currently gripping the world economy. Until recently, this tendency has been largely overlooked or ignored. Despite the moralizing reassurances of unity postured by the world leaders assembled at the April G20 conference, symptoms of economic independence and national self-interest are springing up throughout the world with an accompanying friction between the leaders of various economic powers. These frictions are not merely reflections of diverse ideologies, but features deeply embedded in the genetic code of capitalism. In other words, the dynamics of capitalism spawn outbreaks of nationalism, including economic nationalism, when the system comes under great stress. In the worst case, aggression and war may ensue.
Few have noted this because of the same theoretical poverty that seduced so many into believing that the “globalization” of the last few decades constituted a new, qualitatively different stage of capitalism. The hasty conclusion that expansion of global markets along with universal homage to a new global community constituted an irreversible change in capitalist relations is now thoroughly discredited by the realities of imperialist aggression and economic crisis. In fact, the “globalization” moment coincided with the vast inclusion of new economies  the former socialist community  and the absolute hegemony of a capitalist power  the US. History has known other moments, but theorists  including many on the left  were too awed by capitalist triumphalism, drawn to knee-jerk anti-Communism, and desirous of facile answers to recognize this continuity with the logic of state monopoly capitalism. Well before World War I, a similar moment occurred with the massive expansion of markets under the global hegemony of the British Empire, a period followed by economic decline spurring extreme nationalism. A devastating critique of the globalization model was offered by Linda Weiss in her book, The Myth of the Powerless State, but few bothered to heed it.
To simplify greatly, a healthy, expanding capitalist order tends to promote intervals of global cooperation  enforced by a hegemonic power  and trade expansion, while a wounded, shrinking capitalist order tends towards autarky and economic nationalism. The Great Depression was a clear example of heightened nationalism and economic self-absorption. Most commentators acknowledge this fact, but attributed it to the predilections of national leaders. It was said that Roosevelt “sabotaged” the London Economic Conference, for example. Earlier, he said: “Our international trade relations, though vastly important, are in point of time and necessity secondary to the establishment of a sound economy.” It is my contention, and I believe essential to a Marxist understanding, that Roosevelt’s reaction was an expression of the logic of capitalism under stress; the structural development that led to intense nationalism throughout Europe, especially in Germany and Italy, and ultimately to war.
I made the following projection in November of 2008 (The Deepening Crisis and the Socialist Option):
The economic crisis has reversed the post-Soviet process of international integration  so-called “globalization.” As with the Great Depression, the economic crisis strikes different economies in different ways. Despite efforts to integrate the world economies, the international division of labor and the differing levels of development foreclose a unified solution to economic distress. The weak efforts at joint action, the conferences, the summits, etc. cannot succeed simply because every nation has different interests and problems, a condition that will only become more acute as the crisis mounts. In the past, the most economically powerful country, the US, could impose a solution to regional problems, as it has before, in Asia and South America. With the US economy the most seriously wounded, this is now highly unlikely.
Let’s see how well these projections stand five months later.
The US, Structural Diversity, and the Global Economy
The position of the US is unique, shared, in part, by only a few European countries, including Iceland, the UK, Ireland, Spain – to a lesser extent – and many of the countries of Eastern Europe. For lack of a more precise term, we might characterize US capitalism as the exemplar of “Cowboy Capitalism.” De-regulation, quasi-legal market behavior, extreme income and wealth disparity, pillaging of public institutions, emphasis on financial speculation over productive activity, and tremendous creation and accumulation of debt are all features of the US model in the last two and a half decades. In the post-Soviet period, the US took on the role of world financial center, shedding productive activity to low wage countries. This division of labor suited the US well, following the path of gathering and manipulating most of the world’s wealth – a stature enjoyed by previous imperial centers. The lack of domestic resistance  principally, a weak labor movement unable to re-establish militancy after the purging of the left in the nineteen fifties  opened the door to the most complete execution of the neo-liberal vision, even more rigidly than its radical incarnation imposed on Pinochet’s Chile. Little is left of the welfare state measures installed in the New Deal. And what is left  Social Security and Unemployment Insurance  is constantly assailed and eroded.
It was no accident that the deep flaws in the neo-liberal model were expressed first and most sharply in the US. Cowboy Capitalism produced a profound financial crisis followed quickly by a spiraling crisis of weak demand and unemployment in the real economy. This two-pronged crisis proves to be particularly intractable and specific to the US and the other countries that depended heavily upon the financial sector(Iceland, UK), real estate valuation (Spain), and massive debt (most of Eastern Europe).
Genetically and willfully (to restore profitability, to maintain US standards of living, and from ideological backwardness), the US remains firmly committed to Cowboy Capitalism. This hard and fast refusal to jettison the old way stands behind the sometimes curious, always outrageous determination to bail out the thoroughly corrupted financial sector. US elites will not accept that we cannot go back to the “golden era” of obscene profits and lavish wealth concentration  an experience largely fueled by the explosive growth of the financial sector. For the same reasons, then Federal Reserve chairman, Alan Greenspan, dogmatically refused to allow a deflation of expectations after the NASDAQ crisis at the turn of this century US Cowboy Capitalism is the ultimate source of the frictions that are growing dramatically between the US and the EU. Ostensibly, the disputes are about policy: the US favors drastic economic stimulus, while the EU is urging regulation of the financial sector. But EU insistence upon regulation actually expresses the Union’s rejection of US Cowboy Capitalism. While EU countries, to a greater or lesser extent, adhere to the neo-liberal ideology, most stop short of US extremism, maintaining a greater engagement in productive activity, supporting a substantially larger public sector, and containing the growth of public and private debt. The EU members are the homesteaders to the US cowboys and outlaws. Understandably, the European policy makers are more concerned to reign in the wild bunch than they are willing to be cooperative in enabling them. This difference in perspective, rooted in differing economic realities, promises to fuel national differences even more.
These differences were underscored when EU President, Mirek Topolanek, in a moment of extraordinary candor, referred to US economic policies as “a way to hell”.
Similarly, the People’s Republic of China, a leading economic actor in the global economy, has national interests jeopardized by Cowboy Capitalism. Unlike the US, the PRC has no banking crisis. The state-run banks (publicly-owned banks!) are pumping out credit in record amounts. Loans in January 2009 were over twice in value of any preceding month in the prior two years (over 1.5 trillion yuan versus. 0.75 trillion yuan in January 2008). Over 1 trillion yuan in new loans were extended in February.
But the PRC does have an enormous problem in demand and a consequent emerging problem of mass unemployment. Betting that the PRC could hitch its economy profitably to global trade, Communist Party leadership restructured the economy into a quasi-capitalist engine of commodity production for international trade. Those of us who thought such a move was inadvisable and far from a Marxist approach, can draw little joy from the retarded growth of industrial output in the PRC. the PRC leadership now finds itself trapped by the collapse of global trade (PRC exports declined 26% in January and 28% in February against the same months in 2008). Understandably, leaders in the PRC are scrambling to stimulate their domestic economy to make up for the decline in international demand. Thus, it is not surprising that their stimulus package surpasses the US in relative size (roughly 2% of GDP).
But the prior decision to cast the economy’s fate with global markets forces a difficult choice upon PRC Communists: should they continue the same approach, hoping to weather the economic crisis? Or should they shift the focus inward and nurture the potentially vast domestic demand?
Making the decision even more difficult, the PRC holds huge reserves of US dollars as a result of their previous successes in global trade (the dollar equivalent of two trillion in reserves, predominantly US Treasury notes). Both the security and use of these reserves are of great concern to the PRC. Dollars  trusted as supremely secure in better times  are now viewed by trading partners as unstable at best. Of course, the continued US commitment to Cowboy Capitalism only stirs these fears.  Â
PRC officials have been sending strong signals of these fears in recent months. They have appeared to retreat from the strategy of simply, and persistently, buying US Treasury notes regardless of the yield. Previously, they had an unspoken agreement to protect their reserves in dollar-denominated Treasuries, a move that also subsidized the enormous debt piling up in the US. The PRC cared little about the return offered on Treasuries, but a great deal about the safety of Treasuries and their role in propelling the further importing of products from the PRC. Today, they are concerned about the safety and yield on Treasury investments. They have begun to diversify their reserves into other currency denominations.
But even more striking, the PRC Central Bank Governor, Zhou Xiaochuan, has called for the creation of a “super-sovereign” reserve currency that would replace the unofficial US dollar as the preferred currency in international exchange. In this demand, the PRC joins Russia in a strong move away from the dollar and its dominance in global markets. This move is nothing other than a dramatic vote of no-confidence in the dollar  a move that challenges the ability of the US to finance its exploding debt. Lukewarm responses in Treasury bill auctions have underscored this growing lack of confidence (the UK pound-sterling is in even more dire shape given the full failure of a recent government auction of Bank of England notes).
But the PRC faces great obstacles regardless of its policy decisions. By linking economic development mechanically and singularly to global trade, the PRC faces the full brunt of a shrinking world demand. The World Trade Organization estimates that global trade will shrink 9% in 2009, probably an optimistic projection.
Should the leadership seek to expand the domestic market, as they seem to desire, they face the prospect of a population accustomed to savings rather than consumption. After the Party dismantled the public health system, Chinese citizens expanded their already frugal habits to include the possible cost of future health care. Thus, they currently have one of the highest savings rates in the world; there is no guarantee that domestic stimulus will generate growth in the face of a public both unaccustomed to spending and fearful of the future.
Efforts to expand trade run up against the efforts of other countries to promote their own domestic agendas as well as competition from other export-driven nations. India for example, is accusing the PRC of “dumping” what it can’t sell in Western markets. Indian Commerce Secretary Gopal K. Pillai has said “Â we have a problem with a surge in exports that hurt Indian industry.” And the Socialist Republic of Vietnam has aggressively sought a greater part of the PRC export trade with lower labor costs.
Japan, still suffering from long-term stagnation, faces an even sharper decline in exports  the backbone of its economy. February export figures show an astounding drop of 49% from a year ago! The prospects for mass unemployment are almost beyond imagination, with hundreds of thousands of Japanese workers  especially, vulnerable temporary workers – scheduled for layoffs. With the country mired in a political crisis, the prospect of agreement on a stimulus package is dim indeed.
While I regard the European Union as the most formidable opponent of US Cowboy Capitalism, the EU is plagued by enormous centrifugal forces that threaten to disrupt it, if not break it apart. The same forces that beset the global market are stressing the European common market – a creature that its founders hoped would mature into a viable political entity. The diverse cultural, political, and developmental elements that constitute the initial members were stressed further by the absorption of the former socialist states of Eastern Europe.
The EU old guard, led by France and Germany, has adamantly refused to expand financial support for the Eastern European members. The limited aid to the newer members has been mainly exhausted by assistance to Latvia and Hungary. Germany, along with France, the dominant members of the EU, oppose additional EU-wide stimulus. It’s not only Eastern Europe, newly capitalist states that thrived on international loans, but many of the original EU states that are left to their own devices. Spain suffers from the implosion of the construction industry with delinquent loans and unemployment provoking a banking crisis. A 19% unemployment rate is projected for next year, the highest in the EU. Italy suffers continued stagnation, huge debt, and a broken, corrupted political system  a system that seems incapable of even generating a modest response to the crisis.
Germany has been only too anxious to accept the role as the “big dog” in the EU, dictating most of the terms of Union-wide economic policy. Much as the US assumes that role in the global economy, Germany uses its economic might and relative health to impose its will upon the EU. But some of the German single-minded arrogance has been tarnished by the latest economic data. Industrial production fell 19% in January against the prior year, exports dropping 20%. New manufacturing orders were down 35% in the same month with export orders shrinking by 40%. On this basis, Commerzbank projects a 2009 annual GDP decline of 6-7% against the official estimate of 2.25%. A debate has begun over further economic stimulus (currently earmarked at 1.5% of GDP).
France, despite President Sarkozy’s neo-liberal restructuring plans, remains the European country with the most balanced economy and, so far, best prospects to weather the crisis. The large state sector and social securities  long ridiculed by US Cowboy Capitalists  has proven to be a buffer from the worse blows of the economic upheaval. Moreover, French labor militancy and public solidarity have forced the Sarkozy government to link any corporate relief to job and workplace preservation (see ZZ’s blog for more on this), a goal neither sought nor achieved in other countries with less class-conscious movements.
Brazil, the leading economy in South America and one of the global giants in international trade, depends less upon finished products and more on raw materials than other major players. Among exporting nations, a division of labor has evolved between countries producing technologically advanced products, investment goods, machine tools, etc. (Germany, Japan) employing skilled, high-cost labor and countries producing mass consumer goods and services (China, India) engaging low labor costs. But there is a third division: raw materials and energy. Brazil leads in exporting raw materials such as sugar, coffee, iron ore, beef, and chicken, and is becoming a significant producer of oil. To date, the Brazilian financial sector is healthy and the export mix has been less affected by the decline in demand (though undoubtedly it will be!). Brazilian President Lula da Silva has become arguably the world’s most vocal critic of protectionism, sensing the potential harm to his country’s economy.
This concern over protectionism exposes the power relations that stand behind so-called “free and equitable” trade agreements. Like most compacts in a capitalist world, the posture of freely given consent masks the asymmetries of power. Lula knows that his most powerful trading partner  the US  can easily engage in product or source substitution in ways that a less powerful nation cannot. Barriers can be placed to Brazilian imports in ways that may well bolster the US economy (or EU economies). Thus, he hopes to pre-empt the exercise of this power through moral appeals to the sanctity of free trade.
We see this power exercised in the recent case of Mexico. The US unilaterally cancelled a component of the 1994 NAFTA agreement under the guise of safety concerns and for openly racist fears. A pilot program to allow Mexican trucks and drivers to make deliveries in the US was shelved, allowing deliveries in the US only by US firms and drivers. As a result, the Mexican government retaliated with tariffs on 90 US industrial and agricultural products. The Mexican government, like the Brazilian President, understands that an agreement like NAFTA affords the greatest advantage to the more powerful signatory. The weaker nation signs on nonetheless in order to attain a lesser advantage. In other words, trade agreements may appear “win-win,” but some  the more powerful  win more than the others. And during a time of economic stress, the more powerful signatory often enjoy even greater gains at the expense of the lesser by reneging on the agreement. While in good times the more powerful trading partners advocate forcefully for trade agreements, when the economic weather changes, the weaker signatories may well find themselves joined with a less than enthusiastic partner. Behind every “free trade” agreement are less than free and equitable relations. The economic crisis will produce more and more stress on these compacts.
To summarize these results crudely: No nation will deign to weigh long term goals and relations over the short term need for recovery. As with a capitalist enterprise, every nation engaged in the global capitalist economy is compelled to place self-interest over the interests of the rest of the world. This contradiction between individual and collective interests makes a common solution unlikely and will only amplify the devastation of the economic crisis.
Internationalism
Working class internationalism  the expression of solidarity, mutual support, and common interest among working people regardless of nationality  has long been a fundamental principle of the struggle against capitalism. Since Marx’s time, this tenet has served as a bulwark against national chauvinism, racism, imperialism and destructive wars. On the positive side, internationalism has brought workers together in common struggle for rights, economic gains, and in defense of progressive and socialist governments. As a moral principle, there is no greater working class value. And as a practical matter, internationalism is essential to achieve the unity necessary to restrain global capital and, ultimately, to remove it from human affairs.
But it is important to say what it is not.
Internationalism is not merely the bargaining between one organization of working people with another for cooperation over some matter viewed as mutually beneficial. Internationalism is not negotiated; it’s a matter of principle. We support workers everywhere whether they reciprocally support our causes or not. Â
Internationalism is not tempered by concerns of ideological purity, status, or cultural and social identity. Jewish workers support the economic demands of Muslim workers, impoverished farmers support the strikes of better paid steel workers, and communist workers support the struggles of anarchist peasants. Internationalism is never compromised by petty differences.
Internationalism is not  is never  collaboration with national capital or a national capitalist ruling class. Siding with the class enemy in its struggle with other “foreign” capitalist enterprises is international scabbing  an affront to class brothers and sisters in other countries. Moreover, in an era of trans-national capital, identifying “foreign” capitals is a colossal delusion.
We have known lofty examples of internationalism: the world-wide support for the Vietnamese people against US imperialism, the Cuban defense of African liberation against colonial powers and apartheid South Africa, and the current effort to create a network of progressive, socialist-oriented countries in Central and South America. All demonstrate a fine example of working people sacrificing across borders for other working people.
The post-war material assistance to other socialist and non-aligned countries on the part of the Soviet Union was one of the most exemplary chapters in the history of internationalism, allowing millions of people to chart a course independent of the designs of imperialism. Â
And we have equally known the erosion and denial of internationalism: the deeply ingrained anti-Communism that thwarts expressions of solidarity with movements for socialism; the dogmatic liberalism that stifled support for anti-imperialism in the Balkans, Iraq, Afghanistan, Lebanon, and Palestine; and the vulgar anti-immigrant positions generated by crass opportunism.
In truth, internationalism is a struggle  a struggle to strip away the temptations and confusions offered by the consumerism and self-centeredness so deeply rooted in the Western “democracies.”.Every effort, no matter how feeble, to promote a sentiment of common cause among working people deserves encouragement.
The recent statement by the International Trade Union Confederation prior to the G20 meeting represents one such step. The Confederation which represents 170 million workers in 157 countries made the following five demands:
 a coordinated international recovery and sustainable growth plan to create jobs, ensure public investment and tackle world poverty.
 help for insolvent banks and new financial regulations (stated as “nationalize insolvent banks” in the actual London Declaration!).
 action to combat the risk of wage deflation and reverse decades of increasing inequality.
 far-reaching action on climate change.
 a new system of global economic governance, involving reform of the global financial and economic institutions (IMF, World Bank, OECD, WTO), and a central role for the International Labor Organisation.
The very fact that the organization sought to influence the G20 is positive. The emphasis upon job creation, alleviating poverty, reversing inequality, and addressing climate change, though modest and vague, is commendable. Less desirable are the unqualified calls for public investment and reform of institutions that are capitalist dominated. Allowing workers’ organizations a place at the table of capitalist organizations promises little change in their role in promoting profit, the free flow of capital, the suppression of labor costs, and governmental austerity. The wholesale engagement of public investment for recovery with no guarantee of workplace or employment retention or expansion is a disservice to working people. And the equivocation on the bank nationalization option is a disappointment. Though welcome, the ITUC statement falls far short of the militancy owed to the world’s workers.
As demands, they are timid and weak, though welcome. With the G20 meeting concluded, the ITUC shares an unwarranted optimism and undeserved self-satisfaction with the assembled world leaders. They draw attention to the following accomplishments:
●A major emphasis on saving and creating jobs, with a key role for the International Labor Organisation in monitoring developments and setting future global economic policies.
●Regulation of financial markets and action on tax havens and executive pay.
●Further support for developing and emerging economies, reform of the international financial institutions and a reaffirmed commitment to the Millennium Development Goals.
●Policies to avoid “boom and bust” economic swings and support for counter-cyclical economic activity.
●A renewed commitment to tackling climate change with a pledge to reach agreement at the Copenhagen climate summit in December 2009.
●Work on a new charter for sustainable economic activity.
Given the economic forces working against cooperation and integration as outlined above, these goals will require more than conference statements and press releases. Verbal concession of these modest demands on the part of G20 leaders far from guarantees that any real change will follow, especially without the action of the 170 million workers that the ITUC represents.
Missing from the ITUC initiative is recognition of the vastly different interests of working people and the global economic system: capitalism. Recovery is not and cannot be a joint, cooperative project when the conditions for restoring capitalist profitability  the life blood of the capitalist system  must come at the expense of working people. Whether it is public funds, plant closings, or unemployment, every answer to the crisis offered by policy-makers inordinately calls for sacrifices from the working class.
Contrast this class collaborative stance with the militancy of French workers who have met the crisis with both actions and militant demands  demands that forced the French government to heed the interests of the working class. In the last month, the French working class, with popular support, has organized a general strike to preserve jobs and services, occupied plants, and directly confronted management. Though little reported, these actions have earned the French working class major concessions from a rightist government bent only months ago on harshly disciplining labor. Through action rather than policy statements and appeals, the French working class has forced the Sarkozy government to guarantee jobs in return for auto industry bailouts. Contrast this with the US where the Obama administration  through its auto restructuring team and the new GM CEO – has pressed the US auto industry to extract even more concessions from US autoworkers. The Wall Street Journal reported on March 31, 2009 that key ingredient in the Obama plan “is getting the UAW to agree to an entirely new contract, including major reductions in health care benefits.” Obama is quoted “It will require unions and workers who have already made extraordinarily painful concessions to do more.” The Obama Auto Task Force is specifically targeting retiree benefits, according to The Journal. This assault upon the US working class has generated little more than mild disappointment.
At the same time, French workers are occupying plants and corralling management to “demand concessions from high-earning business leaders and help for victims of the recession,” a militancy attributed by The Wall Street Journal to France’s “strong tradition of egalitarianism” and “strong reaction when people appear to flaunt their wealth at a time of general hardship.” An admirable tradition indeed!
“Pressure from labor unions and opposition parties to raise taxes on the rich and cap executive pay” forced the Sarkozy government to ban stock options for executives of companies receiving government aid, effective April 7. The WSJ reported that “Union leaders said Monday [March 30, 2009] the temporary ban on stock options for companies that receive state aid was a step in the right direction but wasn’t enough.” Bernard Thibault, head of the CGT, the largest labor confederation, added, “the level of pay, the golden parachutes and the bonuses are totally out of proportion with the salaries of ordinary workers.” Clearly, the French labor movement sees the crisis not as a time of retreat and sacrifice, but as a moment of class struggle and pressing the interests of the working class.
Internationalism at this moment requires solidarity with and emulation of the French working class and others prepared to stand up to international capital. Where workers are prepared to confront capital and fight for class interests, we must demonstrate our support. We must point to these actions as the proper response to a class offensive waged by those determined to resurrect the world capitalist system on the backs of workers. That is the way forward.
