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An Untold Marxist Story of Financial Crises: Japan, the United States, and the European Union

This is the story that Marxists haven't told yet. In my view, though, this story is perfectly consistent with not only most Marxists' theories of capitalism but also their traditional (usually implicit) policy preferences.

Let's evaluate policy responses in the wake of the most recent financial crises of Japan, the United States, and Europe, beginning not in 2008 but in 1991, with the ranking based on policy impacts on the overall economy and more importantly on the working class.

Central Banks

1. The Fed: Could have been better, but it's clear Bernanke knew what he needed to do and was determined to do it
2. BOJ: Confused and feckless
3. ECB: OMG, WTF

Stimulus and Output

1. Japan: The sum total of public spending for this purpose is respectable, and so is per capita GDP (as opposed to total GDP) growth
2. US: Way too small, ending too soon, leaving the US infrastructural deficit intact, though it's not as if it did nothing to sustain GDP and consumption as the Right claims
3. EU: Terrible squeeze of the periphery from Day 1, disaster capitalism par excellence

Composition of Fiscal Policy + Labor Market Policy + Budget Financing Method

Here there is no ranking. It's a story of "every unhappy family is unhappy in its own way." This is basically where the Japanese working class were done in: even as the government spent a great deal on contingent public works, structurally it made (by the standard of rich nations already small) social benefits smaller, especially for old people, while facilitating the rise of contingent labor without establishing a new social safety net for the precariat; and moreover taxes on corporations were cut while those on workers were raised. The same is now being done to American and European workers, though exactly how it's done politically varies.

Conclusion

Don't make it sound like a Great Depression is what the working class should fear facing a financial crisis; if you do, you are only defending a Maginot Line and motivating workers to turn to bastard Keynesians rather than Marxists. A modern state knows how to avoid a Great Depression, by breaking up a panicked financial crowd by a big monetary water cannon, except in cases where it wants to deliberately inflict a depression on workers for the purpose of effecting structural change, as the ECB is doing to the euro periphery.

Make sure the working class bark, and bark up the right tree. The right tree in the case where the state has its own money and controls its own monetary policy, with little to no pressure from foreign creditors, (as in the cases of Japan and the United States), is people determining the composition of fiscal policy, the labor market policy, and the budget financing method. To get the working class to bark up the right tree, Marxists must fight against right-wing populist mystification about "always uniformly bad and morally hazardous bailouts," (bailouts are not at all alike in their impacts on workers -- it all depends on how they are done and how they are financed; and, if workers are well organized, politically conscious, and militant, they can turn them into opportunities to assert social control over the bailed-out enterprises and/or sectors), without leaving that battle to Keynesians.

No Green Goddesses

Here is an important intervention by Janet Biehl, published in the latest issue of Le Monde diplomatique: "No Green Goddesses: Ecofeminism Isn't Feminist or Eco Either." Unfortunately, the English version is for subscribers only, and the French version won't be available till next month. But the Portugese and Italian versions are already online. A funny thing is that people who wouldn't put up with the god of the Abrahamic religions often love Pachamama. One reason is that Pachamama is cast as female while the God of Jews, Christians, and Muslims is commonly cast as male. Goddesses can be useful for reactionary, patriarchal thought, though. Amaterasu is female and kind of cool in the original tellings of the myth about her, but Japan's ruling class at one time successfully built patriarchal capitalism and imperialism in part using an ideology based on the claimed kinship with her. Another reason is that there are two kinds of "otherness": one (e.g., Muslims, hijab) is cast as frightening; the other (e.g., indigenous peoples of the Americas, Indian saris) is cast as cute. A deeper reason, though, lies in what Janet Biehl touches on in her article: the Left's neglect of the questions of the gendered division of labor and social reproduction. Given that most struggles on the Left today are defensive rather than offensive, there is a tendency to employ the rhetoric of uncommodified = good versus commodified =bad and adopt the posture of defending the remaining space of the former against the encroachment of the latter. But a lot of oppression of women takes place in the sphere of uncommodified relations, which gets scant attention in the aforementioned rhetoric.

Kucinich to the Left of All Too Many Socialists

Dennis Kucinich isn't a socialist and doesn't claim to be one, but his position on Libya is more sensible and also more in keeping with socialist activism than the kind of argument we have heard, and are still hearing sometimes, from all too many US and other socialists about the Libyan debacle ("revolution" in their lingo). The way the US government went to war against Libya was undemocratic and is now illegal too, and that's the point that Kucinich is focusing on, unlike those socialists who think that democracy begins with uncritical support for other people's rebellions far from home, regardless of the political character of their leadership.

Kucinich's resolution got voted down 148-265. It's noteworthy, though, that more Republicans (87) than Democrats (61) voted for his resolution, too, not just John Boehner's counter-resolution (presented to weaken support for Kucinich's) which only criticized the POTUS without committing the USG to withdrawing troops from the Libya war.

It all says a lot about the state of the left-of-center side of US politics, from Trotskyists to Democrats.

Embedding Environmentalism in Marxist Theory of Development

Environmentalism should be embedded in a Marxist theory of socioeconomic development like Kalecki's, revisited by Jayati Ghosh in "Michal Kalecki and the Economics of Development." The main question underlying Kalecki's theory, as Ghosh sums up, was this: "which groups in society (or outside) would bear the burden of increasing capital formation through reductions in consumption"? This question can and should be supplemented by anthropocentric environmental concerns, i.e. quality of life questions: Which groups in society (or outside) would bear the burden of increasing capital formation through reductions in the environmental quality of life? Which groups in society (or outside) would bear the burden of increasing the environmental quality of life through reductions in consumption? Explicitly asked thus, the fact that it's all a matter of politically determined trade-offs becomes clear. Such an approach would be more useful to leftists actively involved in governments, political parties, and social movements than an approach that seeks to develop an enviro-Marxist crisis theory.

Not an Arab 1848

The 2010-2011 Arab revolts have been compared to many historical events. One of the analogies brought up by pundits is the 1848 wave of revolutions in Europe. But it doesn't look like an Arab 1848 in one crucial respect. Not a single monarchy has been toppled, and, with the exception of Bahrain, monarchies have so far faced far less challenges than republics, allowing the former to regroup and work with the empire for counter-revolution.

What Youth Revolt?

The 2010-2011 Arab revolts were billed as youth revolts, a kind of belated sixties for the Arab world so to speak, but the new leaders that they are likely to bring into power -- including in Tunisia and Egypt, the most successful cases -- will be all older than Bashar al-Assad. Very ironic.

How Secular Is Post-revolutionary Tunisia?

Not very, according to Graham Usher's dispatch: "The Reawakening of Nahda in Tunisia" (MERIP, 30 April 2011). A few days before the publication of this article, moreover, the Financial Times reported: "Politicians . . . agree that the Islamist party [Nahda] could well emerge as the single largest in the assembly. Secular parties, both liberal and leftist, are fragmented while traditional parties are just learning how to run for genuine elections." Tunisia is said to be among the most secular countries in North Africa and West Asia. But even here the balance of ideological and organizational forces does not appear to favor secular leftists after the revolution.

"Overpaying the Poor"

I submit what the empire likes the least about the Islamic Republic of Iran is not its nuclear program but its being prone to "overpaying [sic] . . . the poorer members of Iranian society." Cf. Najmeh Bozorgmehr, "Iran's Handouts Prove Costly" (Financial Times, 28 April 2011):

Iran's populist government is backing away from a plan to phase out subsidies on energy and other basic commodities, analysts say. Instead, it is overpaying cash compensation to the poorer members of Iranian society to maintain political support.

Official estimates admit that for decades Iran spent $100bn a year on subsidising basic commodities -- although the support was widely viewed as unsustainable and distorting supply and demand signals.

In December last year, Mahmoud Ahmadi-Nejad, the president, embarked on a parliament-approved plan under which subsidies on energy products and foodstuffs were to be phased out gradually over a five-year period.

The plan was backed by all Iranian political groups as well as the International Monetary Fund and was viewed as a much-needed reform to the country's state-dominated economy.

However, economic analysts believe the government's populist approach has ended up inflicting a heavier burden on the economy and say that the government is moving away from the initial goal of making prices more realistic.

Under the plan, half of the government's savings from the cuts in subsidies were to be redistributed to those who registered to receive financial assistance, regardless of means. Now every man, woman and child can receive IR445,000 ($42.30) a month.

The remainder of the savings were to go to the industrial, agricultural and services sectors as well as state-owned organisations to help them cope with higher costs.

But analysts say the only section of the scheme which has been implemented is the cash payment to people.

Now, about 70m out of Iran's 75m-strong population is in receipt, which is generally considered to cost more than the old subsidies.

"People now receive cash two times more than their consumption which means our goal of managing consumption of energy products is not being achieved," Jamshid Ansari, a reform-minded parliamentarian, tells the Financial Times.

The cash payments have so far been benefiting up to 30m mainly rural poor.

They and their counterparts in the cities are even net winners because the per capita consumption of their populous families is low.

"The government is buying political support through an uneconomic and illogical way of extra subsidies payments despite the budget deficit this policy has been creating," says an analyst, who asked not to be named.

Akbar, a janitor in an affluent neighbourhood in northern Tehran, says he has not yet spent his family's payments which are almost equal to half of his monthly salary. "We have saved it so far," he says.

However, the middle class who are estimated to be also about 30m in number usually live in apartments equipped with gas and electricity for heating and cooling systems. They may own at least one car and do not have many children.

Officially, the price of gas has risen fivefold, electricity and water by three times, flour by 40 times and petrol between four and seven times.

Deterrence

Many critics of the Libya war, as was the case in the Iraq and Afghanistan wars, are seeking to explain the empire's motive by looking at what the target country has (especially natural resources), which the empire might want to have, and what the target country does, which the empire might want to stop.

In my view, rather than trying to explain each case of the empire's military invasions with ad-hoc explanations, it's better to emphasize as a given the fact that within the power elites of the Western powers, especially the United States, there is an influential bloc that is constantly advocating military "solutions" to states that those power elites regard as "problems." Let's call them "militarists."

The rest of the power elites, sometimes called "realists," also generally share the same goal -- regime change -- as militarists but they prefer "soft power" (support for in-country and in-exile "civil society" opposition + propaganda), economic sanctions, covert actions, military coups, proxy wars, etc. to the direct use of their own armed forces (mainly due to concerns about political and financial costs).

Sometimes the militarists get their way as in Iraq, Afghanistan, and Libya; other times they don't, as in Cuba, Iran, Syria, North Korea, etc. so far in recent decades. The difference is that the latter are tougher nuts to crack, for various reasons (such as the strength of the spirit of independences, the extent of political cohesion and the depth of ideological commitment, the number and power of international allies and supporters . . . and the demonstrated possession of nuclear weapons in the case of North Korea in particular). In other words, the question to be asked is which state in the South enjoys the power of deterrence and which doesn't.

Pax Sinica for the Beijing Consensus

Theoretically, China can pursue global Keynesian policy in addition to domestic Keynesian policy, which would go some way toward countering austerity in the US and Europe and be good for China as well as the rest of the world. China says that "By the end of 2009, China had provided a total of 256.29 billion yuan in aid to foreign countries, including 106.2 billion yuan in grants, 76.54 billion yuan in interest-free loans and 73.55 billion yuan in concessional loans" (the figures are cumulative -- unfortunately no annual figure is given). For such a global Keynesian purpose, China should give away 5% of its GDP in grants.

Then, China would also have to learn to veto all Western wars, so that what it helps build won't get bombed. Pax Sinica based on the Beijing Consensus would be welcomed by the axis of resistance in the Middle East, North Africa, and Latin America; the rest of BRIC, Turkey, and South Africa; and anyone else who prefers peace for profit to war for power.

Intelligence Failure Due to Wishful Thinking

In an article posted on 19 April 2011, Simon Assaf of the SWP (UK) says that "accepting the deployment of Western ground forces remains a line that no [Libyan] rebels are yet prepared to cross." On Libya, this organization has so far distinguished itself among left-wing voices by being consistently at odds with the real world, due to a combination of intelligence failure and wishful thinking (the latter, imho, is the cause of the former). On the same day as Assaf's statement above, the Wall Street Journal reports: "Rebels in Misrata Call for Foreign Troops."

Leftists for Chaos?

There is an opinion like this on the left side of the blogosphere:

Arab regimes (and Iran) often warn against change and revolutions: they try to scare us by warning of the potential for chaos. I say: we should work for the overthrow of all those regimes (Arab regimes and Iran) because chaos is far superior to those regime. At least, under chaos there is a stronger chance for change and sabotage (sabotage of oppression and injustice and occupation and conspiracies).

But I doubt that most leftists in the oppositions in Iran and the Arab world are looking for "chaos." In any case, they are too few in number and too unorganized to take advantage of it if that's the idea. Instead, such leftists as exist there are looking to establish better governments than they have and wish to lead organized mass action for that purpose, though in most cases they end up following rather than leading rebellious largely-non-left-wing crowds when such arise.

If you want chaos, you can find it in Somalia, for instance, and increasingly in Libya as well, but Libya and Somalia (unlike Egypt and Tunisia), if anything, are in all likelihood disincentives, not incentives, for would-be left-wing revolutionaries elsewhere.

Are the Libyan Rebels for Us or against Us?

Here's a comic footnote to the Libya war: Neither side of the Libyan conflict was actually looking for any real solidarity with leftists (least of all Marxists), but somehow one side (the regime) got a lot of gratuitous, undeserved Latin American leftist support and the other side (the rebels) got a lot of gratuitous, undeserved Western leftist as well as (both secular and religious) Arab and Iranian support.

As a matter of fact, both the regime and the rebels were looking for Western imperialist support, and they didn't hide it either. The Western imperialists -- unlike the world Left, the Arabs, and the Iranians, who all jumped into the Libyan fray without examining what they were jumping into -- first took a good, hard look at both sides and then decided to back the rebels.

The rebels got what they wanted, and that's that.

In recent days, though, I have noticed that the propaganda machine of the Islamic Republic of Iran began to change tack. Maybe the IRI establishment finally realized that the Libyan rebels aren't pro-Iranian -- in fact, the rebels are as likely to be against Shia Muslims as against Africans, Marxists, and so on. Hezbollah and Trotskyists, perhaps more selflessly idealistic than IRI officials, apparently have yet to ask a crucial question of international solidarity, which unlike charity is a two-way street: Are the rebels for us or against us?

Japan

I did what I could for my family and other people in Japan.

I managed to contact my brother on the 11th and persuaded my sister-in-law and nephew to leave for Kyushu (my brother, a Japanese Red Cross worker, refused to leave because he got "work to do"). I got through to my parents on the 12th and talked them into heading south, either to stay with my favorite aunt (my mother's sister) in Iwakuni, Yamaguchi, or to head further south. Those were the last phone calls, and since then I have not been able to get in touch with them. I hope by now they got where they needed to go, far away from Chiba (where they normally live, only about 150 miles from the Fukushima Nuclear Power Plants).

The clock is ticking, and there is little time left to do more.

Post-Vanguard

First Ben Ali, and now Mubarak. The empire has failed to stop the momentum of the Arab revolt that started in Sidi Bouzid. It is a time of great transition in West Asia and North Africa. What kind of transition will it be?

Samir Amin fears that, in the case of Egypt and perhaps elsewhere if not in Tunisia, it may result in the ascent of religious obscurantists into power, bringing about a new alliance of religious forces with the military establishment, a kind of Pakistanization so to speak. Aijaz Ahmad, on the other hand, hails the revolutionary wave as an upsurge of "secularity" as well as of democracy. Both appear to miss the most striking feature of what is going on: the absence of any vanguard ideology or vanguard party, religious or secular.

Some have named this absence "post-ideological," but that does not quite capture the fluidity of the moment. Ideologies are at work in the intifadas in the region today -- what is clear is that none is in hegemony. No single ideology is in the vanguard, nor is any political party seeking to be the vanguard party of the kind that led 20th-century revolutions. Competing political currents all appear to sense that people are not looking for a charismatic leader, a new Lenin or a new Khomeini. There is a refreshing absence of the quintessential iconography of past revolutions: larger-than-life images of the leader of the revolution.

The question is if the leaderless revolts, without any vanguard party or ideology, can fully dismantle the ancien regimes, which are decapitated but are otherwise more or less intact, establish new ones, and defend and develop them.

The Tunisian Revolution: Views from Iran

The biggest front page story of Kayhan on Monday, 17 January 2011 is headlined thus: "80% of People in the Middle East: Repeat of Tunisia Phenomenon in Store for Arab Governments."

By way of not-so-subtle contrast, Kayhan features a story of happy Iranian children right next to the Tunisian story: "Joyful Winter Day across Iran: Yesterday, Kids, Instead of Studying, Played with Snow."

Raja News,¹ for its part, notes five similarities between the deposed Shah of Iran and the deposed Tunisian president: promoting secularism with an iron hand; supporting and being supported by the West; looting national wealth during escape; attempting to impose lifelong rule; and getting driven out from home and getting discarded by the West.

A note of general satisfaction, in short, is unmistakable among the oficialistas in Iran.  The revolution in Tunisia, in their eyes, confirms their strategic assessment that "a major shift in the regional balance of power" underway favors the axis of resistance:

In Tehran, there is a strong belief that the region is changing dramatically in favor of Hezbollah, the Palestinians, and the Resistance.  The rise of an independent Turkey, whose government has a worldview very different from that of the U.S., German, British, and French governments, along with the relative decline of Saudi and Egyptian regional influence, signals a major shift in the regional balance of power.  Saudi military incompetence during the fighting with Yemeni tribes along the border between the two countries, the general decline of the Egyptian regime in all respects, and the almost universal contempt among Arabs as a whole for the leaders of these two countries and other pro-western Arab regimes and their corrupt elites, are seen as signs that the center cannot hold.  The fact that the Iranian president and the Turkish prime minister are so popular in Arab countries, while most Arab leaders are deeply unpopular, is a sign that the region is changing.

Meanwhile, the Web site of the embattled Green Path Movement features Nader Marzban's opinion reflecting on "Iran and Tunisia: Superficial Similarities and Substantial Differences between the Two Movements."  What is the main difference?  Marzban highlights the difference between the Iranian movement's reform strategy and the Tunisian movement's revolutionary strategy.  What is more important, however, is that in Tunisia the movement first began with, and has organically grown from, a protest against unemployment,² a class battle, an aspect notable for its absence at the height of the Green Path Movement.³  As the tenth government of the Islamic Republic implements controversial subsidy reform⁴ in Iran, both defenders and opponents of the nezam of Iran today will have opportunities to revisit similarities and differences between Iran and Tunisia.

1  Raja News, by the way, is giving big play to the news of exiled Renaissance Party leader Rashid Ghannoushi's return to Tunisia.  Its editor has apparently failed to canvass informed Arab sources such as this: "Aljazeera has [to] stop promoting Rashid Ghannushi and stop announcing his travel to Tunisia as if his impending arrival is analogous to that of Khumayni's return to Iran.  No one cares about Ghannushi, from what I have seen, although I won't rule out the likelihood of the emergence of an Islamist current later on."

2  Rising youth unemployment, plus relative deprivation felt by educated youth, resulting from a combination of a youth bulge due to demographic transition, economic liberalization making decent jobs in the public sector scarcer, and slower growth of the world capitalist economy after the end of the post-WW2 boom, is a common story in the Middle East.  What is peculiar to the Iranian case is both the rise and the fall of the youth bulge are sharper than in any other country: "As noted above, the current group of Iranian youth is the largest in the country's history.  In 2005, the age group 20-24 was 62 percent larger than it was 10 years earlier, 9.1 million compared to 5.6 million, pushing the ratio of youth, which we define as ages 15-29, to total  population to 35 percent, the highest recorded ratio in any country.  Figure 1 shows that Syria has the second highest youth ratio (32 percent) while Turkey's is considerably lower, about 27 percent, having passed its peak of near 30 percent in the 1990s.  By 2020, youth ratio will decline considerably, to less than 25 percent, the level observed in advanced countries.  This is because the youth population is predicted to fall in absolute terms; for example, the 20-24 age group is expected to shrink by 75 percent in 2015, to 5.2 million.  The reason for Iran's high youth ratio and its fluctuations is a baby boom in the early 1980s, when the revolutionary government was pro-natal, followed by a sharp decline in fertility in the 1990s, when it reversed this policy" (footnotes omitted, Djavad Salehi-Isfahani, "Iranian Youth in Times of Economic Crisis," September 2010).

3  E.g., "Iran has witnessed several spirited labor actions in recent years, well-known examples being the wildcat strikes of Tehran bus drivers and schoolteachers.  But these actions have not crystallized into what can be called a coordinated, militant labor movement.  Furthermore, militancy has not yet appeared in the most sensitive sectors of the economy, oil and transportation of freight. . . .  These trends of diffusion of protest and relatively small-bore economic demands have held during the Ahmadinejad presidency. . . .  [T]he core of the Green Movement leadership is devoted to an Iranian version of trickle-down economics, according to which the masses will eventually enjoy the good life but only if the elites prosper first and furiously.  The Green Movement has offered little in terms of a redistributive vision that could motivate the working class to flex its muscles" (Mohammad Maljoo, "The Green Movement Awaits an Invisible Hand," Middle East Report, 26 June 2010).

4  Two contrasting views of the subsidy reform: Djavad Salehi-Isfahani, "Iran: Goodbye to Energy Subsidies, Hello to Price Controls?" (Tyranny of Numbers, 19 December 2010); Kevan Harris, "Iran's Subsidy Reductions: Upon Whom Will the Costs Fall?" (MRZine, 27 December 2010).  It would be instructive to comparatively study Iran's subsidy reform juxtaposed with the aborted energy price reform in Bolivia and the ongoing economic reform in Cuba.