The state and local government
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At this point it is important to stand back from the detail and re-emphasise the systemic character of the 2008 crisis. Irresponsible bankers played their part. But the crisis itself is not just a crisis of capitalism but capitalism in its current state monopoly phase. Clearly there was a crisis of overproduction and also over-accumulation of capital. This followed a decade and a half of very fast expansion and high profits following the dismantling of the Soviet Union and the resulting change in the balance of world forces – a change which allowed capital access to vast new resources across the world and which seriously weakened the working class movement in the capitalist countries. The evolution of state monopoly capitalism and the response to the preceding politico-economic crisis of the 1970s, moreover, involved a switch from an indirect, Keynesian, redistribution of income to finance capital, to a far more direct channelling of income. Thus neo-liberalism, according to Foster, has four main elements:
The bulk of capital in stock exchange listed public companies, insurance companies and high street banks now comes from these savings. These earn a low and sometimes negative rate of real interest. But, as noted earlier, around these listed companies and retail banks cluster an ever more complex array of financial vehicles for the very wealthy – merchant banks in the 1980s, hedge funds from the 1990s and private equity investors in the 2000s. These secure massive profits by effectively buying and selling listed public companies and advancing them short-term cash. They operate offshore. They do not pay tax. And they use the financialised savings of working people to lever up their profits.187 This neo-liberal transformation of the capitalist market happened first and most fundamentally in Britain and the United States but to some degree or other in all European countries. By the 2000s this state-sustained primacy of credit-based finance capital dominated the world economy. It was, however, no more immune from capitalism’s contradictions than its predecessors. The accelerated accumulation of capital placed pressure on the average rate of profit. The export of capital to countries like China and India generated immense imbalances in trade and currency reserves. Most fatally of all, the system fell prey to the poverty and inequality which it created. The real incomes of working people stagnated. Those of the worst off, particularly in the US, declined absolutely. Hence, in order to maintain demand, governments and banks colluded in the creation of massive levels of sanctioned debt, above all in mortgages.188 In the hands of finance capital’s investment specialists this became the credit required for one last round of leveraged speculation in property, commodities and private equity buy-outs. Then the bubble burst. Where does it leave Britain? Very dangerously exposed. Of all the major economies its production base is the weakest. Most of its advanced computing and electronics is externally owned and will be subject to corporate rationalisation as the world economy shrinks. The reputation of its banking sector has been badly damaged and the American investment banks that provided much of its business have suffered massive losses. The response of the British government revealed the sheer closeness of links between finance capital and the state. Brown’s rescue was first and foremost a bankers’ rescue - symbolised by the entry into the government in January 2009 of the chair of Standard Chartered Bank, Mervyn Davies, effectively as banking minister. All the government’s actions up to January 2009 have been related to sustaining bank credit. This was so for its economic stimulus in November 2008 - principally directed at maintaining the asset base of the banks by boosting spending and providing cheap credit. Money earmarked for direct infrastructure spending was miniscule: less than £2 billion out of a £20 billion package. There was virtually no allocation for direct government construction of council houses for rent – despite an acute and worsening housing shortage. Unlike Obama’s proposals, there was nothing at all for strategic government investment in the research and development for new production in sustainable development and energy saving. It was equally so with the twin rescue packages of January 2009. By then the bankers were petrified at the unprecedented levels of company debt: £72 billion had to be renegotiated and rolled forward almost immediately in 2009 – difficult even before recession struck. At this point the government could easily have nationalised the banks. But it chose not to do so. Instead it guaranteed inter-company transactions to the value of £20 billion and provided £200 billion bad debt insurance to the banks. In total the credit guarantees to both firms and banks exceed £700 billion - plus direct government spending of upwards of £180 billion on bank recapitalisation and another £20 billion on the fiscal stimulus. Combined with the cut in interest rates, this is leading to a long-term deterioration in international credit conditions for the Bank of England and the government. On any terms it represents a highly risky and dangerous strategy. But for British finance capital there was little alternative. Only the bankers know the real scale of the financial disaster. In Britain it was not a matter of two or three banks going broke. Virtually the entire British-based retail banking sector became insolvent. Four of the six big banks, Barclays, RBS, HBoS and Lloyds, required government guarantees of recapitalisation. Barclays later did its own deal with the royal family of Abu Dhabi, is now one-third owned from this source and is having to live with the consequences. But the three other big banks, now reduced to two, are dependent on government shareholdings. In stressing that this was a bankers’ rescue, specifically within the terms of state monopoly capitalism, it is equally important to note what the government has not done. Initially ministers echoed Obama’s words when he talked of the need to regulate shadow banking. But the government has done nothing. The British-controlled tax avoidance centres, providing over half the international venues for unregulated financial activities, have escaped unscathed. No significant proposals have emerged for the tougher regulation and taxing of foreign-owned financial companies in the City of London. Nothing has been done to control capital movements. Private equity investment firms and hedge funds continue as before. And that, of course, is the whole point. The retail banks and insurance companies are being rescued and their credibility restored precisely because they are the key conduits for collecting the savings of working people. Without them, and the public listed companies they finance, British finance capital, through its hedge funds, investment banks and private equity firms, could not secure super-profits. Nor would London be an attractive proposition for American investment banks. So what is the result? For British finance capital its parasitic dependence on others is intensified – particularly capital owners in the United States and the Middle East. In Britain the nexus between finance capital and the state has become even tighter. As a result of government-engineered mergers the banking sector is still more concentrated. And nothing has been done for the productive economy. Indeed, the position is worse than this. The credit guarantees simply perpetuate the existing orientation of the economy geared to the market patterns of 2007. These markets will never return. If there is to be a redevelopment of Britain’s productive base, it has to be led by the government. For, as Foster concludes: A fraction of the money squandered on successive bank rescues – instead of outright nationalisation from the beginning – would have transformed the productive economy. It would have funded the massive infrastructure development desperately needed in energy, transport and housing and at the same time provided the investment for the sustainable energy-saving technologies required to open up new areas of production. In the absence of such intervention we can already see the future. Capitalist crises are partly resolved by destroying marginal capital. Much of Britain industry is now of this character and many areas of our productive economy will shrink below critical mass. And when banking stabilises and the world economy recovers, the hedge funds and private equity companies will be back to organise a final car boot sale of what remains.189 Meanwhile the American Nobel prize-winning economist Joseph Stiglitz – in the International Herald Tribune, 2 April 2009 – demolished the financial and rescue plans of the American and British governments. Hurling billions in public money at bankrupt private banks was ‘the privatising of gains and the socialising of losses’; and there was no way in which such money could redeem the burden of toxic debt liability.190 Freefall – Stiglitz’s latest book – says that Larry Summers, formerly Bill Clinton's treasury secretary and now chief economic adviser to Barack Obama, was too accommodating to the demands of Wall Street in the 90s and is making the same mistake now. Stiglitz's argument is simple; the period of unchallenged American economic hegemony lasted a mere 19 years, from the demolition of the Berlin wall in the autumn of 1989 to the collapse of Lehman Brothers in September 2008. Swift action by governments – forced to abandon a hands-off approach to economic management by the scale of the crisis – has prevented a great recession from turning into a second great depression. Lessons need to be learned from this near-death experience; if they are not, if the warnings go unheeded as they did a decade ago, the future will be punctuated by systemic crises.191 The chances of that happening are quite high. Already, there is a whiff of business as usual as a receding sense of danger blunts the appetite for radical reform. Obama soft-pedalled on reform of Wall Street until goaded into action in January 2010 by the loss of the Senate seat in Massachusetts; in Britain the 2010 general election was dominated not by which party had the right policies to cut the City down to size but which could be trusted to cut the budget deficit. Revisionist versions of the crisis, suggesting the problem was too much government rather than too little, did the rounds. Yet, as Naomi Klein points out, Obama in a speech delivered six months before the Wall Street collapse had explained partly why the crash had happened: “Legalised discrimination…meant that black families could not amass any meaningful wealth to bequeath to future generations”, which was precisely why many turned to risky sub-prime mortgages. Home defaults occur three times as often in mostly minority census tracts as in mostly white ones; and in New York City, for instance, unemployment has increased four times faster among blacks than among whites. Hence, as Klein concludes: If Obama traced the Wall Street collapse back to the policies of redlining and Jim Crow, all the way to the betrayed promises of 40 acres and a mule for freed slaves, a broad sector of the American public might well be convinced that finally eliminating the structural barriers to full equality is in the interests not just of minorities but of everyone who wants a more stable economy.’192 But the White House is only interested in ‘race neutral’ projects. Conversely, Ohio State University’s ‘Fair Recovery’ project shows what an economic stimulus programme would look like if eliminating the barriers to equality were its overarching idea. For example, massive investment in public transport to address the fact that African Americans live farther away than any other group from where the jobs are; energy-efficient home improvements in low-income neighbourhoods; investment; the requirement that contractors hire locally; and reaching those who have never had a job.193 The Global Plan for Recovery and Reform agreed by the Leaders of the Group of Twenty on 2 April 2009 stated that: The agreements we have reached today, to treble resources available to the IMF to $750 billion, to support a new SDR194 allocation of $250 billion, to support at least $100 billion of additional lending by the MDBs195, to ensure $250 billion of support for trade finance, and to use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries, constitute an additional $1.1 trillion programme of support to restore credit, growth and jobs in the world economy. Together with the measures we have each taken nationally, this constitutes a global plan for recovery on an unprecedented scale.196 The $1 trillion of ‘new money’ in the press headlines to save jobs and companies, therefore, was actually only $250 billion special drawing rights from the IMF. Moreover, an annex to the main communiqué shows that the £250 billion was actually only $3-4 billion, when it states that the new International Finance Corporation (IFC) Global Trade Liquidity Pool should provide up to $50 billion of trade liquidity support over the next three years, with significant co-financing from the private sector (as part of the global effort to ensure the availability of at least $250 billion of trade finance over the next two years). In order to reach this objective, we agreed to provide $3-4 billion in voluntary bilateral contributions to the IFC Pool. We also welcomed the steps taken by other MDBs to increase support for trade finance, and medium and long-term project finance through our export credit and investment agencies.197 Yet five months later most of this money ‘had yet to materialise.’198 Hence the G20 meeting resembled what J.K. Galbraith characterised as the meeting which is called not because there is business to done, but because it is necessary to create the impression that business is being done. Such meetings are more than a substitute for action. They are widely regarded as action…The no-business meetings of the great…depend for their illusion of importance on….a solemn sense of assembled power…Even though nothing of importance is said or done, men of importance cannot meet without the occasion seeming important.199 This G20 meeting, as The Sunday Times columnist Dominic Lawson notes, ‘was designed to instil confidence that those in power were all agreed on what must be done; and that as a result things would get better’.200 But, despite the media hype in The Guardian, the Daily Mail and BBC Online describing the outcome as ‘Brown’s new world order’, there was no…decisive break with the post-cold war consensus that free markets alone can bring the greatest economic benefits to the greatest number…the G20 leaders demonstrate with great clarity that they have nothing to replace the principles that have dominated politics since the Regan-Thatcher era, despite all sound bites to the contrary.201 Indeed, as the opening preamble of the G20 final communiqué declares: We believe that the only sure foundation for sustainable globalisation and rising prosperity for all is an open world economy based on market principles…202 Subsequently, as Mark Weisbrot et al at the Washington-based Centre for Economic and Policy Research showed, the IMF’s lending agreements have made the recession worse for low income countries where net private capital inflows dropped from a $1.2 trillion peak in 2007 to $707 billion by the end of 2008 and a projected $363 billion in 2009.203 They found that 31 of the 41 agreements for low and middle income countries contain pro-cyclical macroeconomic policies: These are either pro-cyclical fiscal or monetary policies – or in 15 cases, both – that, in the face of a significant slowdown in growth or in a recession, would be expected to exacerbate the downturn. In some cases, the Fund subsequently relaxed the original conditions; sometimes (as in Hungary, Latvia, Republic of Congo, and Haiti) this appeared to be the result of social unrest or other pressures on the borrowing government.204 Moreover: In many cases the Fund’s pro-cyclical policies were based on over-optimistic assumptions about economic growth. For example, of the 26 countries that have had at least one review, 11 IMF reports had to lower previous forecasts of real GDP growth by at least 3 percentage points, and three of those had to correct forecasts that were at least 7 percentage points overestimated. Most likely there will be more downward revisions to come.205 Over the past year or two the IMF has been a strong supporter of the use of government fiscal stimulus to counter-act the world recession, and it has long supported expansionary monetary policies, for example in the European Union, as well. Hence, as Weisbrot et al conclude: It may then seem paradoxical that so many of the IMF’s agreements concluded during this recession have been pro-cyclical. But there has long been a double standard for low-and-middle income countries, in that Fund policy does not allow or encourage the same types of expansionary macroeconomic policies as it recommends for the high-income countries.206 And, as they also show, ‘in many poor countries the agreements focus on reducing the public wage bill, privatisations, and liberalisation’.207 Moreover, the global downturn in what used to be known as the Third World, as Jan Breman notes, has ‘taken a disproportionately higher toll on the most vulnerable sectors: the huge armies of the poorly paid, under-educated, resourceless workers that constitute the overcrowded lower depths of the world economy’.208 A communiqué on 5 June 2010 issued by the G20 summit of finance ministers and central bankers in Busan, South Korea, drew attention to ‘the importance of sustainable public finances’ and said nations ‘with serious fiscal challenges need to accelerate the pace of consolidation" (code for further massive cuts). The meeting also scrapped plans for a universal global bank tax following opposition from Japan, Canada and Brazil, whose banks did not need to be bailed out by taxpayers. This declaration marked a significant change in tone from the G20’s April 2010 meeting, when it said governments should maintain support for their economies until the recovery was firmly entrenched. Moreover, Britain's chancellor, George Osborne said the statement was a G20 seal of approval for his plans to bring forward spending cuts: "I think we've achieved a significant success by getting the endorsement of the G20 for the fiscal position we adopted just three weeks ago".209 The final communiqué of the G20 summit in Toronto on 27 June 2010 – summed up as 'do your own thing' by Larry Elliott – showed that: The Americans cannot persuade the Europeans to hold off from fiscal tightening until the recovery is assured; the Germans and the British think the risks of a sovereign debt crisis are far more serious than the possibility of a double-dip recession.210 Elliott, moreover, thinks that a 'second crisis could already be brewing' due to their 'austerity programmes' and predicts 'a sharp slowdown...in the second half of 2010': Pressure on heavily indebted banks intensifies as deflation becomes a reality in the first half of 2011. Second leg of the financial and economic crisis in the second half of 2011. G20 get serious in early 2012.211 Similarly, as Paul Krugman argues, we may be in 'the early stages' of a depression that 'will probably look more like the Long Depression' of the late 19th century'; and 'primarily' be due to 'a failure of policy'. Around the world – 'most recently' at the June 2010 Toronto summit – governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending'; and 'over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy'. Hence Krugman concludes that: 'It is...the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times'; and the 'tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again' will 'pay the price for this triumph of orthodoxy'.212 Alternative political and economic strategies to deal with the crisis of both British state monopoly capitalism and local government are therefore discussed in Chapter 14. Trade Chapter Four Other British Marxist and radical theories This Chapter focuses on other British Marxist and radical theories of the state and local government from the late 1960s to New Labour. The theories discussed are: Ralph Miliband’s ‘containment of class conflict and pressure from below’ theory; Cynthia Cockburn’s ‘structuralist’ theory; Peter Saunders and Alan Cawson’s ‘dual state’ theory; Simon Duncan and Mark Goodwin’s ‘social relations and uneven development’ theory; Christopher Stoney’s critique of ‘strategic management’ in local government; and Dexter Whitfield’s ‘marketisation’ theory.213 Ralph Miliband’s ‘containment of class conflict’ theory Ralph Miliband’s most famous and important intellectual contribution was The State in Capitalist Society published in 1969; and his ensuing debate with the Althusserian Marxist Nicos Poulantzas.214 However, as Michael Newman argues: Their most fundamental differences were not in their conclusions, but in their methods, their approaches, and their underlying attitudes. Miliband took both the theory and practice of liberal democracy seriously, but aimed to demonstrate empirically that a broadly Marxist interpretation of capitalist society was valid. Poulantzas was not primarily interested in liberal democracy or empirical evidence. His purpose was to establish a theory of the political, which was based on a specific reading of Marx and which was wholly separate from ‘bourgeois’ approaches. Yüklə 5,87 Mb. Dostları ilə paylaş:
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