Thursday, 24 November 2016

Financial Claims on the World Economy

Fran├žois Chesnais, Finance Capital Today: Corporations and Banks in the Lasting Global Slump, Brill, Leiden, 2016
This book is well worth reading. It is written in a clear and accessible style and discusses key points about the limitations of capitalism and the role of contemporary finance. Perhaps its most important point is how the financial system has accumulated vast claims on the current and future output of the world economy – in the form of interest payments on loans and bonds, dividend payments on equities, etc. These claims have outgrown the ability of the capitalist system to meet them, but government policy has so far managed to prevent a collapse of financial markets with zero interest rate policies, quantitative easing, huge deficits in government spending over taxation, and so forth. The result is an unresolved crisis, a ‘lasting global slump’, in which economic growth remains very weak and vast debts remain in place.
There are two related points in his approach to the world economy and finance that distinguish Chesnais from many other writers, and for which he deserves to be commended. Firstly, he states clearly that we are in a crisis of capitalism tout court (pp1-2), not a crisis of ‘financialised’ capitalism – the latter being one that could presumably be fixed if only the evil financiers were dealt with by a (capitalist) reforming government. Secondly, he takes ‘the world economy as the point of departure’ for his analysis, although that is ‘easier said than done’ (p11). While he shows the central role of the US, he avoids the wholly US-centred analysis common to radical critics of contemporary capitalism, and instead highlights how the other powers also play a key part in the imperial machine.
Finance Capital Today helps the reader’s understanding of the realities of contemporary global capitalism by providing a wealth of material evidence. It also helps one to clarify views about what is going on by discussing the theoretical context. In this review I will highlight the key points raised in the book and also discuss where I have a number of differences with Chesnais. These differences are sometimes merely of emphasis, or what may look like simply an alternative definition of a commonly used term. However, poor formulation of an argument can also lead to theoretical problems.
Chesnais begins by outlining the origins of the 2008 crisis, arguing that this had been postponed since 1998 by the growth of debt in the US and elsewhere, and by the surge of growth in China. In 2008, ‘the brutality of financial crisis was accounted for by the amount of fictitious capital accumulated and the degree of vulnerability of the credit system following securitisation’. The backdrop to the latest phase of crisis was also one that has made this crisis a global one to a degree unknown to previous crises (p25). It involved a far more integrated world economy, following the break up of the USSR and the incorporation of many more countries into the world trade and financial system. The crisis is one characterised by ‘over-accumulation of capital in the double form of productive capacity leading to overproduction and of a “plethora of capital” in the form of aspiring interest-bearing and fictitious capital’. But major governments tried to prevent the crisis from running its course in the way that occurred in the 1930s (p35).
Within the global set up, Chesnais has an interesting view of China, which he characterises as not suffering national domination by the major powers (p43). He notes its subordinate position in the world division of labour, having offered its cheap labour workforce up to the world market, but includes this as part of the development of the world market rather than being a sign of its oppression in the Leninist sense. This reflects the mixed dimensions of China’s economic and political status, and one that I would also characterise as being in transition to the premier league of major powers (China is actually number three in my ranking of countries by global power).[1]
Chapter 3 is titled ‘The Notion of Interest-Bearing Capital in the Setting of the Present Centralisation and Concentration of Capital’. This is an important topic, but one in which Chesnais’s commendable approach is let down by his exposition. He starts by arguing that ‘the channelling of surplus value in contemporary capitalism, through both the holding of government loans and the possession of stock, by a single small group of highly concentrated financial and non-financial corporations and private high-income-bracket asset holders, requires that several features of interest-bearing capital that were treated partly separately by Marx now be approached in toto’ (p67). I would certainly agree with this, especially since the relevant section in Capital, Volume 3, is a complete mess, one that Engels found extremely difficult to edit and to try and salvage. However, Chesnais does little to develop the argument at this point, and he tends to keep it focused on banks. Only later in the book does he explain better how interest-bearing capital is a more universal phenomenon for modern capitalism. Even then, I would argue that the forms it takes, especially in proprietary trading, are not fully or well explained by taking interest to be the source of revenue, or, as he notes from Hilferding, by taking one speculator’s gain as a loss to another speculator.[2]
This chapter also contains a discussion of two issues of Marxist theory on finance. One is the difference of opinion between myself (and others) and Costas Lapavitsas on the question of banks ‘exploiting’ workers through the charging of interest on loans, etc (pp76-77). He correctly notes that this interest is, in any event, only a small portion of bank profits, not the big event claimed by the ‘exploiting’ school. However, citing Rosa Luxemburg, he comes down on the side of the view that these deductions are a reduction of the value of labour-power. I disagree, and not only because Luxemburg’s judgements in matters of economic theory, let alone political strategy, leave very much to be desired. My argument, which Chesnais cites, is that the charging of interest does not by itself suggest a lowering of the value of labour-power. If this interest deduction became a significant part of workers’ incomes, then wages would tend to rise to offset this, making it effectively a deduction from corporate profits. This is not to exclude that the value of labour-power can be forced down, but it is in the febrile imagination of the anti-finance populists that this process results from banks charging workers interest on loans.
A second issue of theory raised in Chapter 3 is on the question of bank lending. In contrast to many other Marxists, Chesnais recognises that banks can themselves create new deposit assets. However, he confusingly calls these ‘fictitious capital’ (p84). This is a relatively common perspective, as seen also in David Harvey’s The Limits to Capital, but it is not consistent with Marx’s definition. A bank loan can be created out of thin air by a bank, and is not dependent upon a ‘real’ deposit of cash, so in that sense it is indeed fictitious. But it should then simply be called a ‘fictitious’ deposit or asset of the bank. Fictitious capital, by contrast, can most easily be described as a financial security that is traded in the market and which has a price that is a function of interest rates and future expectations of returns to the buyer of that security.[3] That is not true of bank deposit or loan assets, which remain on the bank’s books. Only if the loan assets later became securitised – that is, when the loans are the basis for payments made to owners of a tradeable security – would they become fictitious capital This was the gist of Marx’s definition of fictitious capital, although one that was not clearly spelled out in Capital (and neither was his view of bank loans/deposits). To call bank loans or deposits ‘fictitious capital’ can only lead to confusion when analysing developments in contemporary financial markets.
Chapter 4 is my favourite of the whole book. Titled ‘The Organisational Embodiments of Finance Capital and the Intra-Corporate Division of Surplus Value’, it does not bend to media demands for a snappy one-liner, but it does provide the reader with valuable information and analysis. Chesnais discusses the different forms of the evolution of capitalism in today’s major powers, focusing on Germany, the US, the UK and France. He examines the relations between the state, private corporations, banks and imperial power. While noting the importance of pension funds from the 1990s as major equity owners of big corporations, he argues that ‘rather than bankers, it is industrialists with financial connections that form the core of the European corporate community’ (p108). Despite some views that there is an ‘international’ capitalist class, his view, with which I agree, is that the main groups of ‘finance capitalists’ are domiciled within single countries.
One important point he makes, and one that he could have developed more, is how in contemporary capitalism, by contrast to the views of Marx and Hilferding, merchant capital (essentially commercial capital and finance) is not subordinate to industry, although it is dependent upon industrial profit, (p113). However, he does discuss the role of large commodity traders and retailers. In my view, this reflects the way in which the major powers have used the financial/commercial system to consolidate their economic privileges, something that was true for the UK even from the mid-late nineteenth century. Today, as most people should be aware, it is the poorer, subordinated countries that do most of the producing, at least in the non-monopolised fields of production.
In Chapters 5 and 6, Chesnais covers global oligopolies and the operations of international companies. He reviews theories of monopolisation and how the development of the European single market was favourable both for European and for US corporations. There is some overlap in this material with that covered by John Smith’s book, Imperialism in the Twenty-First Century (Monthly Review, 2016), with a predatory appropriation of value by the ‘buyer-driven global commodity chains’ of the major corporations (p161). However, Chesnais disagrees with Smith’s earlier work on a number of points, and argues that China, India and Brazil are not in the classical position of being oppressed countries, having a different, and higher, status in the world market. On a separate, important point regarding data on the global economy, Chesnais notes UNCTAD’s estimate that about 80% of global trade is linked to the international production networks of international companies, and that it would be wrong to focus on foreign direct investment data as giving a complete picture of international investment. This is due both to the blurring of lines between FDI and portfolio investment and to the importance of offshore centres as the apparent location of the headquarters of many companies.
Chapter 7 discusses the globalisation of financial markets and new forms of fictitious capital. This is a useful review of the growth of financial markets, although it relies very much on secondary sources, so the data is already several years out of date, and his coverage of financial derivatives misleadingly characterises them as being ‘claims on claims’, when derivatives are better described as difference contracts based on the price of the underlying security to which they refer. The fundamental point he makes is nevertheless that the apparent diversion of investment to financial markets has been prompted by the decline in profitable investment opportunities (p174). The chapter concludes with a review of financial and (foreign) debt developments in Ecuador, Brazil, Argentina and South Africa, including the role of ‘vulture funds’ dealing in Argentina’s defaulted debt.
Chapters 8 and 9 discuss contemporary developments in financial markets, focusing on banking and credit. This is well-covered ground, but is useful for those who are less familiar with recent history, and especially so in explaining the development of mortgage-backed securities, ‘universal banks’ in Europe, the monopolisation of banking, shadow banking, etc. There is also a discussion of how ‘leverage’ – ie borrowing to fund the growth of assets – rose to extreme levels due to the decline in profitability among financial companies (pp221-). I would note, however, the publisher’s poor proofreading: ‘over-the-counter’ (OTC) securities dealing is described as ‘off the counter’ in Chapter 7 and here has the designation ‘ODT’.[4]
Chapter 10 highlights ‘global endemic financial instability’ and points out that there is a ‘plethora of capital in the form of money capital centralised in mutual funds and hedge funds, bent on valorisation through the holding and trading of fictitious capital in the form of assets more and more distant from the processes of surplus value production. Financial profits are harder and harder to earn’ (p245). I would go further and also note how asset managers, pension funds and insurance companies – far more important investors in financial markets than hedge funds or mutual funds – are now finding their mountain of assets unable to generate the returns they have, implicitly or explicitly, promised, although Chesnais does mention this later in the chapter.
The ‘plethora of capital in the form of money capital’ is related to the declining profitability of capitalist investment. Chesnais notes how official reports, from the Bank for International Settlements, for example, allude to this problem, but also how they also mix in a description of low productivity growth and low economic growth in general. He correctly makes the point that the fall in interest rates long preceded the ‘quantitative easing’ policies that occurred after 2008.[5]
It is difficult to spell out these relationships empirically, given the available data, and Chesnais does not try to do this. It is also important to distinguish the rate of interest from the rate of profit on capital investment, which are two different things. However, I would suggest a measurement of how much global financial assets have accumulated – meaning principally equities, bonds and bank loans – against some measure of absolute global profitability over time. This would measure how far the financial claims on social resources have grown, in the form of interest and dividend payments, compared to the surplus revenues available to pay off these claims. My initial work on this suggests a decline in the rate of return from 2007 to 2014, whatever the more distorted profitability figures available for the US alone might say, data that are often used by people wanting a ready calculation of the ‘rate of profit’. The rate of return I suggest is not a ‘Marxist rate of profit’, as traditionally understood, but it would better reflect the malaise of the global capitalist system, especially from the perspective of the major claimants upon its resources, the ones based in the rich powers!
Chesnais finishes his book with two themes. One is a lament on the lack of Marxist study in universities and the lack of journals in which Marxist studies of capitalism can be published. This is true enough, and I am glad not to have been an undergraduate university student in the past few decades! Even apparently radical journals such as the UK’s Cambridge Journal of Economics are basically rather conservative in outlook, and are dominated by a facile Keynesian approach that dismisses a Marxist perspective out of hand if it upsets their advocacy of ‘progressive’ policies for the capitalist state to consider. Repeating radical consensus nonsense will get a pass; revealing the imperial mechanism of power has to jump a hundred hurdles to be an acceptable journal article. Such is the almost universal climate in academia today, despite the evidently destructive outcomes from the system they claim to be analysing.[6] Ironically, this is why the most trenchant and incisive critiques of capitalism today – at least from a descriptive point of view – often come from analysts working in the financial markets. They have to tell their clients what is really going on!
Friends have suggested to me that the situation for critical academics is even worse in the US, something I find easy to believe. I have some knowledge of, and better hope for, the development of a more critical intellectual climate coming from outside the Anglosphere. This should not be too difficult to achieve.
The second concluding remark by Chesnais is the question of how a new phase of capital accumulation might emerge. There is the plethora of (fictitious) capital with its claims on social revenue that cannot be met, but which, on the other hand, has not been devalued in a crisis collapse, because the major governments have done their best to prevent it, fearing the consequences. Chesnais discusses technical innovation to some extent, but sees this as being overshadowed by capital’s degradation of the environment. One is left with the ‘notion of barbarism, associated with the two World Wars and the Holocaust’ (p267). That is a downbeat but telling point about the progress of opposition to imperialism today. In the main imperial countries, the answer to the question of ‘Socialism or Barbarism’ is biased in favour of the latter.
Finishing on a more general comment, my own preference is to avoid the term ‘finance capital’ completely, whereas the book is titled Finance Capital Today. The term is associated with Hilferding and used by Lenin, but the definition is too bound up with Hilferding’s notion that banks control industry. This was not a good description of the situation in the early 20th century, and is far less true today. Chesnais would accept this and instead defines ‘finance capital’ as the ‘simultaneous and intertwined concentration and centralisation of money capital, industrial capital and merchant or commercial capital as an outcome of domestic and transnational concentration through mergers and acquisitions’ (p5). He explains how the different forms of finance capital evolved in different countries, making an important distinction between the privileges of the major powers and the subordinate position of others. I would go along with this definition, but I would argue for putting fictitious capital at the centre of attention, not ‘finance capital’. This would show more clearly that what Marx called the ‘law of value’ is today mainly expressed, or at least expressed more directly, via the markets for financial securities, rather than in the markets for commodities, although the latter are of course important. A company’s ability to access funds and at what cost, via the equity market or bond market, or a government’s ability to borrow and spend, is each signalled by the markets for their securities. These markets show what is good, bad and acceptable in the imperialist world economy today.

Tony Norfield, 24 November 2016

[1] See my book, The City: London and the Global Power of Finance, Verso, 2016, p111.
[2] The City, pp144-147.
[3] For an explanation, see The City, pp83-92.
[4] The book is expensively priced, so order it for your library! The book will be cheaper when later published in paperback, however.
[5] See the note on this blog from a Bank of England report here.
[6] It works like this. Academic journals are graded according to their supposed value, and getting an article published in a highly ranked journal is the objective of all academics. Think what you like about the journal’s real worth, these grades are important for the scores achieved by contributors in the assessment they get from their universities, and, most importantly, in the assessment of their universities for government funding purposes. Over recent decades, this has led to a small group of mainstream, conservative, uncritical journals becoming the favoured destination for research articles, which in turn means that academics orient their work to what these journals will accept. It is a machine for generating very little worth reading, and also a system for maintaining a conservative status quo. That system is further maintained by a journal editorial board and a group of ‘peer reviewers’ with the same general outlook. A similar mechanism also leads academics to have absurdly long bibliographies and excessive citations in their articles, since citing their friends will encourage the return favour, and citations are another means by which academic value is assessed.

Wednesday, 16 November 2016

Corbyn’s National Welfarism

In the days, even weeks, leading up to Remembrance Sunday on 13 November, all public figures in the UK must wear a poppy. This is not actually obligatory; it is just the way things are done. Some 45 million poppies were attached to clothing this year, a total that far outweighs the number of celebrities. If you are not seen wearing one, then perhaps you forgot, perhaps it is on a different jacket, perhaps your mum or dad did not buy you one and your pocket money was insufficient, perhaps you are a household pet, or, heaven forbid, you might have some questions about this totem for honouring/remembering the war dead in their sacrifices for ‘Britain’, otherwise known as British imperialism. Just to make sure he was not numbered among the latter persona non grata, Labour Party leader Jeremy Corbyn made sure that he was wearing a poppy when he appeared on the BBC’s Andrew Marr show that day.[1] To reinforce his patriotic credentials, Corbyn also made sure to note that he would be standing at the Cenotaph later on Remembrance Day with a 92-year old friend, a Labour party supporter and veteran of World War Two. Thus began his exposition of how Labour’s policies would meet the demands of the UK electorate.
The interview with Andrew Marr covered lots of questions. Corbyn came out clearly against racism, responding to recent political developments in the US and Europe. In the aftermath of the UK’s Brexit vote, he also stressed the importance of keeping its access to the EU single market and the provisions for workers’ rights existing in the EU. But my main focus here is on how Corbyn’s comments illustrated a common feature of leftwing views in many rich countries, national welfarism.

National welfarism

National welfarism is somewhat different from simple nationalism, which can be summed up as demanding that government policies should benefit the people of a particular country (usually meaning the corporations). Instead, national welfarism cloaks a nationalist policy in progressive phrases and proclaims the need to protect the common people from the depredations of the market. In all cases, national welfarism amounts to a call for the capitalist state to implement such policies, not for a struggle of people to protect themselves from such depredation. Furthermore, it avoids naming names. Rather than singling out capitalism as the problem, and the capitalist state as the enemy’s enforcer, it is a demand for different government policies. It is the stance taken by those who do not like capitalism’s impact on people’s lives, but who do not want to make a fuss about opposing capitalism. One might think this is just letting discretion be the better part of valour, but it is more than that. It is a facile belief that good bits of capitalism can be salvaged from the bad bits of capitalism.
Worse than this, national welfarism pays no attention to whether the state in question is one of the major powers in the world that spends its time oppressing others, either directly, or indirectly in making sure that the general system of oppression and privilege for the major powers remains in place. The reason is that this oppression by their own powerful state is something from which, implicitly at least, the national welfarists would like to benefit.

Answering the questions

Andrew Marr, a pillar of the BBC’s establishment opinion making elite, asked some pertinent questions. Corbyn answered clearly.
Why has there been a political shift to the right in many (rich) countries, and why has the left failed to channel popular anger? Corbyn thought that the previous New Labour agenda was mistaken and could not meet popular concerns, because it ignored the deindustrialisation of Britain and focused on globalisation. This was how he introduced his alternative Labour Party policy.
While Trump in the US and Marine Le Pen in France were in favour of trade protectionism, to stem the loss of domestic jobs, Corbyn countered with the view that there should be new investment in industry and ‘fair trade agreements’. He did not openly endorse tariffs and protectionism, but was very open to other forms of trade control – to make it ‘fair’, of course – which would go back to the Labour left and British Communist Party ‘alternative economic strategy’ programmes of the 1970s and 1980s. In this, he ends up posing foreign countries as the barrier to economic welfare for the Brits, not the market system, and still less capitalism. So the capitalist state should take measures against those who are not playing by the rules that the major powers, such as Britain, have introduced. Environmental concerns were also used to bolster his position. This is the common fashion among radicals these days – and is essentially a dig at China, in line with major power policy – despite the fact that the major powers have done by far the most to destroy the global environment.
Corbyn later criticised Donald Trump for demonising foreign workers, but, despite his anti-racism, he still managed to point to migrant labour as a problem for British workers. Even from his own perspective, he could have more simply said that migrant labour is not the problem, it is the capitalist labour market, and that he would demand the same conditions for all workers, whether migrant or not.

Immigration and UK politics

It was on the explosive popular issue of immigration that Corbyn was most evasive. He posed regional investment as a solution! The implicit logic was that if the state could encourage investment in those areas that were most anti-immigrant (basically, in England, and probably also in Wales), then such sentiment would fade away. This stepped aside from the post-Brexit issue of who is meant to benefit from the national investment policy, while his statement would, of course, be taken as meaning the ‘national’ working class. When asked about whether he agreed with the view of Keir Starmer, Corbyn’s Shadow Secretary of State for Exiting the European Union, who has argued that immigration should be lower, Corbyn said:
‘I think it [immigration] will be lower if we deal with the issues of wage undercutting, deal with exploitation, but we should also recognise that the migrants that have come to this country work and contribute, and pay taxes, and the NHS would simply not survive without the level of migrant labour, doctors, etc, because we have not invested enough in high skills in our own economy.’
So, migrants are justified on the basis of their economic contribution, but there is also the hope that training domestic workers, and enforcing higher wages, will cut immigrant job applications! This is the national welfarist’s solution to the anti-immigration outlook of his electorate. Just in case you thought that Corbyn was ignoring the demand from a sizeable chunk of that electorate for immigration to be checked, even reversed, he wants to stress that his policies will help do just that.
In a final, summary comment, Corbyn makes the broader points that his economic policy is for ‘left behind, broken Britain, poverty Britain’, one that will oppose the Conservative government’s policies on the National Health Service, etc, and appeal to the electorate that there really is an alternative that the Labour Party under Corbyn can implement. But there’s the rub. How to reconcile the predatory demands of capitalism and imperialism with the social welfare outlook of the reformer, while not giving too much ground to popular reactionary nationalism that the middle class, for now, still finds unacceptable?

Tony Norfield, 16 November 2016

[1] Corbyn’s interview with Andrew Marr starts around the 16-minute mark in this video.

Tuesday, 15 November 2016


I did not think that Trump could win the US election because an electoral base made up of the ‘disgruntled and angry white working classes’ is too narrow. But it is now obvious that Trump has wider popular support. Clinton did gain more of the popular votes by a slim margin, but there is no hiding the significance of Trump’s victory.
So, some thoughts.
A Trump presidency will not mean immediate significant changes on the world stage. The imperialist governance of the world is grounded on the Atlantic agreement, the order based on the US-UK-EU. But these are hard times. An unresolvable crisis, which makes each component of this triptych look more narrowly to its own domestic interests, and more watchful of the clamour of its own populations – particularly since none of the three is capable of providing a solution, or even the illusion of one. The British Brexit, and now the American ‘Brexit’ which Trump represents, will however provoke a slow disintegration of the dominant Anglosphere.

A not so special relationship

On the morning after Trump’s election victory I watched a chirpy TV journalist ask rhetorically ‘Will a Trump presidency lead to better relations with the Soviet Union?’ It was a slip of the tongue as revealing as it was understandable: the US is still milking the Cold War for all it can and that is the propaganda framework most Western journalists work inside. The idea that since both Trump and Putin are plain speaking, tough-talking ‘real men’ they are better placed than Clinton to ‘do business’ is a silly media fantasy. Relations are determined by three factors that still hold true and will do so for some time, whatever politicians may fancy. Firstly, the US is still the most powerful nation on earth and the whole of the privileged West benefits from its hegemonic role. Secondly, Russia is one of the weakest of the powers, economically and militarily. Thirdly, any serious move against Russia would unleash such turmoil between Western nations that it would significantly undermine the first point. So, lots of clacking and clucking, but no attempt to significantly alter the architecture of world politics. The rest is just games.
Trump’s victory is an immense blow for Britain’s Brexit, which looks increasingly unlikely to happen, though this will take some time to sink in. At the heart of the Brexit gamble is the popular illusion that the UK, on the basis of its world power, and other nations’ commercial self-interest, would be able to renegotiate its world trade and financial relationships. Trump is a businessman who thinks he can further American interests by negotiating like a businessman. That is also the militant understanding of his electoral support. Both have some learning to do. So, on the face of it, his presidency should provide a better practical and pragmatic framework for the UK to renegotiate its economic relationships outside the EU.
Yet, as in so many cases, the devil is in the detail. Trump’s negotiating policy, and that of the economic nationalism that has brought him to power, is to drive a very hard bargain that yields tangible benefits for the American people. This will make it very much harder for the UK to negotiate a favourable deal, and certainly makes an early trade settlement virtually impossible. But the UK needs something quick! This will be a significant blow to the UK because a settlement with the US would have been key to achieving trade settlements with other nations (the billboard effect).
The irony of the Brexit mentality is that, if every nation and trade block adopts a hard-line economic nationalist stance, it works for no one. Every nation declares that it wants to avoid the bad old protectionism of the 1930s, but the crisis is making them all inch in that direction. The idea that the UK can cut loose from the EU, sail for the open seas, towards the sunny uplands of a new world trade order, is dead.

Working class politics

Both the British Brexit and now Trump’s victory have put the revolt of the Western working class at the very centre of politics – though not in the way socialists would have liked. Next year will be the tenth year of the crisis. Across the advanced Western world the working class has experienced a significant decline in its prospects. Yet it has opted – everywhere – for economic nationalism and has shifted politically 10% to 20% to the right.
In each advanced imperialist Western country the only radical shift is within a small and embattled current of the middle class still committed to social liberalism and the Atlantic world order. Both the Corbyn and Sanders phenomena are examples of this. In not a single privileged country has there been even a smidgen of working class radicalism. Not even a warming up.  The revolutionary left, far from ‘making hay’ at a time when the truths of Marxism are pounding ever harder on the door, is in tatters.
This raises the question: why does the revolutionary Left in advanced imperialist countries persist in basing its strategic outlook on the future emergence of a revolutionary working class when all the evidence, and all the reasoning, is in the opposite direction? Partly, this is due to the fact that the Western left is ossified and has relegated itself to blindly repeating the mantra of ‘one day the workers will rise up and …’ It must be something human. Two thousands years of experience have demonstrated the inefficacy of Christian prayer, but people still pray to God.
There is also a personal motive. Blind and obstinate adherence to something that will never happen, and which every day becomes more obviously so, is the only way many socialists have of personally remaining true to their Socialist ideals and prevent themselves from being absorbed by bourgeois society, as so many have. In the face of never-ending defeat and disappointment, of a popular revolt that never materialises, the important thing is never to give in, never to succumb, and go to the grave in obdurate affirmation of what one has fought for all one’s life. Sadly, such people fail to realise that their stoicism, while morally laudable, only serves to blind them to the many things happening in non-imperialist countries. These show that things are indeed ‘going our way’. The non-imperialist world is not on the brink of revolution, but it is warming up nicely everywhere.
But the main reason why the Western radical left clings to the chimera of proletarian revolution in the West is that its politics and activities are exclusively direct towards the brittle and transient radicalism of the petit-bourgeoisie – the only milieu it can really operate in because there is no other available. Both the left and the radicalized petit-bourgeoisie know in their bones that, however worthy their campaigns, without working class support there is nothing real or lasting. So, the putrefied political corpse of the Western working class has to be kept alive – at least somewhere in the background or hoped for in the distant future – though never directly or honestly analysed. The moment one states the obvious – that the Western working class is thoroughly and irredeemably imperialist, colonialist, arrogant and capitalist, that a working class that continually and substantially benefits from the exploitation of ‘lesser peoples’ can never set itself free – one is dismissed as a hopeless or doctrinaire ‘Third Worldist’ or ‘Maoist’.  Never mind that ‘the Third World’ is today the ‘the First World’ in proletarian terms.


In contrast, in those countries with no popular imperialist tradition, politics has shifted significantly and quickly to the left. Last week, an in-depth poll of public opinion in Spain put Podemos at 21% in terms of ‘voting intention’, ahead of the Socialist Party with 17%. The Socialist Party has been the architect of modern capitalist Spain and has governed for most of the last 35 years. It is a seismic shift. Podemos has been in existence for barely two years. The poll showed that most Spanish people are ‘left-leaning’. The top four ‘voter issues’ were identified as unemployment, corruption, the lack of a government and the economic crisis. Even though Spain has a similar level of immigration as other EU countries (10-12%), and even though explicit and politically incorrect racism is widespread,[1] immigration, the key issue in British and American politics, came in at the 33rd position in order of popular concerns.
Trump’s victory also destroys the left’s self-serving explanation of its own continual marginalization as grounded in the capitalist media’s grip on the popular mind. Trump won against the hostility and opposition of practically the whole of the media – in addition to the establishment, and world opinion. Trump, although a billionaire, also had far less election funds than Clinton. The left needs to wake up to the reality that if Western workers for decades have voted for, and consciously supported, bourgeois nationalist and imperialist politics it is because they know on which side their bread is buttered – not because they have been duped by the media.
But the best thing about Trump is he doesn’t conceal what he means: Marxists should welcome how explicit he is. Since Teddy Roosevelt, can you think of a president who in words and in his persona better expresses the realities of American capitalism and imperialism than Trump? That has to be a damn good thing. Of course, the danger is that wiser counsels will eventually prevail and Trump will go all ‘social democratic’ and ‘caring’ on us. Trump is a narcissist and narcissists love to be loved. So, make the most of it while it lasts.

Susil Gupta, 15 November 2016

[1] Racist attitudes among even left-wingers in Spain are often quite shocking and would be unthinkable in the British left, for example.

Wednesday, 9 November 2016

Regime Change

A friend pointed out to me today that the main benefit of the Trump victory in the US presidential election is that the left will no longer be able to blame ‘the media’ for its lack of support in the main imperialist countries. Despite near universal ridicule and rejection by the established pundits, especially those outside the US, The Donald has won. More importantly, the result reflects broader developments.
Even before the election result, Trump was seen as having voiced the concerns of the (white working class) mass of the electorate in the US, and of taking votes from those who were understandably less than enthused by Madame Clinton. But for him to claim basically half the electoral vote on a programme that was fronted by building a wall on the Mexican border, protecting US jobs against the nefarious schemes of domestic capitalists and foreign countries, and to ‘Make America Great Again’, reveals more than a little about the political outlook of the voters. More than half of the voters, one would have to say, given that Clinton also felt the need to shadow some of Trump’s policies. It is an outlook that will support the revival of economic nationalism by the US as an imperialist power, and it will encourage others to do the same.
In that respect, the US election has similarities with the Brexit vote in the UK. It is not so much that the incumbent political class has ‘lost touch’ with the masses, and must move aside or reconnect, although this view is supported by the presence of dumb elites who have still not really figured out that their comfortable maxims no longer work as the capitalist crisis becomes entrenched. It is more that a political system only works if votes can be accumulated to support particular policies. But maintaining the previous policies has less and less political support. In north-west Europe and in the US, the masses are revolting – in both senses of the term, as far as the elites are concerned. The politicians must, and will, adapt. Yet, they will be adapting not to a burgeoning protest about the evils of capitalism, but to a demand that privileges must be protected in a stagnant world economy. In other words, they will respond to reactionary popular sentiment.
It should be little surprise that the Brexit vote is seen as a marker by many commentators. After all, Britain is a key part of the existing structure of world power – of trade, financial and security arrangements – despite weighing far below the US. Another interesting, historically more distant, marker is the devaluation of sterling on 18 November 1967, an event that was a watershed in the later collapse of the Bretton Woods world financial system of fixed exchange rates. Ironically, the 14% or so devaluation then is similar to the devaluation of sterling after the 23 June 2016 Brexit vote! This also reflects the pressures on the system of world power and the trouble faced by the Anglosphere today.

Tony Norfield, 9 November 2016

Sunday, 6 November 2016

Limits, Barriers and Borders

On Thursday 10 to Sunday 13 November, you will be able to take a break from the aftermath of the US presidential election at the Historical Materialism Annual Conference, 'Limits, Barriers and Borders'. It is held at:

SOAS, University of London
10 Thornhaugh Street
Russell Square
London WC1H 0XG

The full programme is available here. It is likely subject to some later modifications, but this will give you a good idea of the schedule and contents.

It is best to pre-register for the conference on the HM website. This ends on Tuesday 8 November, but it should also be possible also just to turn up and register then.

I will be giving a presentation on Saturday, 12 November, 9.15-11am, Room G3, in a panel on 'Capitalist Crisis and Government Policy'. The papers presented in this panel are:

Maria Ivanova – The Limits of Unconventional Monetary Policy
Michael Roberts – Corporate cash, profitability and the Marxist Multiplier
Tony Norfield – Debt, Stagnation and Political Decisions

Tony Norfield, 6 November 2016

Tuesday, 1 November 2016

Trouble in the Money Machine

Since 2008, the world’s major central banks have adopted extraordinary measures to stop a slump in the economy and to try and rescue the financial system from collapse. But while ultra-low, even negative interest rates, and quantitative easing (buying securities from the financial system) have stabilised the system for now, such policies have done little to generate growth. The economy has managed to get up from the floor, but is still staggering around and cannot climb the stairs. Meanwhile, the monetary ‘medicine’ is generating its own problems for banks and causing dislocation in the money markets.
Consider what, in recent years, has been a little noticed feature of the financial system: the ‘velocity of money’. This concept was key for simple versions of monetarist economic theory, ones that tried to explain the growth in nominal output (the money value of GDP, for example) by the growth in the money supply. I will leave aside discussion of that theory here, and just note that the monetarists usually assumed that the velocity of money was stable, in other words a given percentage rise in the money supply would lead to the same rise in the value of nominal output.[1] The fundamental equation was:
M is the money supply, however defined
V is how fast the given money supply circulated in the economy (its velocity)
P is the average price level and
T is the volume of transactions.
So, if V is fixed, a rise or fall in M feeds directly into the nominal value of transactions PT. The T term is often also taken to be the volume of output or income.
Apart from other problems with the theory – there are many – the biggest and most evident problem is that the V term is not fixed. In fact, it has been declining steadily during the crisis in all major countries! This indicates that rather than there being a stable, functioning monetary system, instead it is one that has been seizing up.
The next chart shows the pattern of moves in the velocity of money for the US, the euro area, the UK and Japan over the past 16 years or so.[2] Velocity is measured as nominal GDP divided by the most common definition of money supply in each area. Different definitions give different ratios, so the numbers have been standardised to equal 100 for each in Q1 1999.
In each area, the money supply has risen over the period shown, but the nominal value of GDP has risen by much less, so that the velocity measure has fallen. Japan’s nominal GDP did not even rise at all between 1999 and 2016! Only in the UK has nominal GDP risen by more than the money supply (since the end of 2009), but the velocity of money is still 20% below its level in 1999.[3]

Velocity of Money (nominal GDP/M): US, euro area, UK & Japan (Index Q1 1999 = 100)

The velocity of money is a summary measure of many things that happen in the capitalist economy, since it compares the aggregate of GDP, a measure of total output, with the aggregate of diverse components of cash in circulation, bank deposits, etc. It is a useful index, nevertheless, and the general decline in the velocity of money is a clear sign that central bank monetary policy has less ability to have an impact on the nominal growth of the economy, despite their efforts to ward off the threat of deflation.

Tony Norfield, 1 November 2016

[1] The basic monetarist idea was that a rise in money supply only led to higher prices, with no lasting change in real output, and that nominal output rose only because of the higher prices.
[2] Data for the US are for M2, M3 for the euro area, M4 for the UK and M2 for Japan. Available numbers only go up to 2013 for Japan, mid-2015 for the UK and early 2016 for the US and the euro area.
[3] I’m not sure why the UK velocity number has risen since 2009, whereas others have fallen, and may look into it further.