Originally published in The Bullet.
Part 2 of 3
Sasha Lilley: Various Marxist critics have argued that the financialization of the economy is capital’s means of addressing the underlying stagnation of the “real economy,” of industry in decline. The argument goes that the current crisis is part of a long downturn starting in the 1970s and capitalism’s ill-health has been masked by a shift into profit-making through all sorts of incomprehensible derivatives and forms of speculation. You three see things quite differently. How so?
Sam Gindin: To elaborate a little more on what Leo was saying: part of the role of finance – once you see it in terms of capitalism – is to discipline and restructure the so-called real economy. It's been fundamental to that, imposing discipline on every factory to be more competitive or finance will go somewhere else, to reallocate capital across several sectors, venture capital, but much more generally. So finance has been fundamental to that.
The other way that finance has been absolutely crucial too, is to understanding capitalism in terms of its imperial dimension. It's been fundamental to capitalism actually penetrating other countries, imposing certain conditions if they want the finance, putting the United States in a position where the American state is responsible for managing capitalism more generally; and for integrating the working class – in addition to them using credit in the macro sense that it keeps the economy going – the involvement of workers in the circuits of capitalism in terms of housing and pensions and their assets rising. It’s also been a socialization of workers.
Now in terms of specifically the question of decline, if you leave aside looking at specific numbers for a second and just think about what's happened over the last quarter of a century, it actually looks like one of the most dynamic periods from a capitalist perspective – not from a worker perspective, but from a capitalist perspective. It's a period in which you've penetrated China. You've penetrated the former Soviet Union. You're now penetrating the enormous potential of the Indian market. You've seen a powerful commodification of things that used to be seen as part of the Commons. Part of what government provides has been privatized as sources of accumulation. You've seen very radical breakthroughs in technology over this period in terms of that kind of dynamism.
And when you actually look at the numbers, what you do see is that profits have actually recovered from the lows that they were. They're not at the peak they were at in the 1960s, but that was a unique period. And the restructuring of the economy has been very dramatic across sectors. If you're looking at the American economy, it has restructured geographically. It has restructured in terms of what sectors are dominant right now. The importance of business services has become a very fundamental part of the economy, especially in terms of the American global role. High tech in the U.S. has grown dramatically. The U.S. has been importing a lot but it has also been exporting a lot.
So I don't think there's been a lot of credibility to the argument of the American economy having declined. The real problem we have is that all this restructuring has gone on and workers have basically been pretty passive victims. They've accepted this. They haven't in any way been acting as a barrier in terms of putting other social goals or social values on the agenda. And that's allowed capitalism – American capitalism in particular – to restructure at will. And it's done really well in terms of accumulation.
Sasha Lilley: You mentioned that finance has allowed the U.S. to play a particularly imperial role. How does the U.S. exercise its imperial hegemony, as you see it?
Sam Gindin: The way we've been trying to think about it is, yes, there's direct involvement in terms of occupation, there's direct involvement in terms of transforming so-called failed states when there's no other mechanism of doing this. But the crucial point about the American empire is that unlike national empires of the past, which actually carved up the world, this empire is trying to create a global capitalism and is acting on behalf of global capital and penetrating through capitalist institutions. That's the important element of this empire's penetration.
If more American investment is going abroad and less is in the U.S., if the U.S. share of global production is going down, that's often interpreted as a symbol of decline. But in fact what it is signifying is the spread of capitalism, its penetration into other societies, transforming social relations in those societies, transforming the states in those societies so those states actually take on responsibility for supporting global accumulation, including American accumulation within their own borders. You're creating a global capitalism within which the American state and American capital have a structural power. The structural power comes from the fact that the U.S. is still the dominant country in terms of technology. It's increasingly playing a crucial role in terms of what I raised before – business services, accounting, legal consulting, engineering, and of course finance. There's more concentration of American power in finance then there is in other sectors. So it's very important not to see imperialism as being only about territorial intervention. And it’s very important to understand that this kind of empire grows through actually spreading production, in a sense sharing production globally in a particular way.
Sasha Lilley: Clearly, the type of economic regime of the last quarter century is now in crisis. Is the neoliberal model, in which the U.S. was in some ways the lead player, now dead?
Greg Albo: I think it's very hard to claim, given the way that the crisis unfolded, that neoliberalism is over or dead. Certainly we're entering another phase of it where many of the contradictions that have been internal to neoliberalism from the beginning have compounded and are now taking on a different form. One could begin, of course, with financialization and the role of financialization in neoliberalism from the beginning and financial crises being one of the elements of the developmental model of neoliberalism. And clearly the way that some of those characteristics of finance had developed in the last decade, some of the unregulated forms of collateralized debt obligations are mutating into something quite different and we're likely to see some new regulatory forms in and around many of those markets. But we're unlikely to see those markets abandoned. We can see the way that the regulatory reform issue in Congress is going forward that these aren't radical interventions in overturning the forms of financialization that have been central to neoliberalism. I think that's one contradiction or problem that has been present that is still there.
We see the same thing with inequalities. Wage inequalities, income inequalities, the lowering of transfers to people on welfare, and so on have been another aspect of the developmental model of neoliberalism. In many ways, that's at a crisis with the rates of unemployment higher, the rates of people on welfare are higher, and the income inequalities keep on expanding. There are some pressures from below to address those. But as a whole, without a larger political movement we can see also the way that the crisis is unfolding that that is also not fully on the agenda – it's not on the political agenda to start overturning the income distribution dynamic of neoliberalism. In fact, the way the austerity packages are moving through the various capitalist states of the world, the workers and the poor are the key people who are paying for the crisis.
Similarly, we can see some of the tensions in and around the balance of payment issues and current account differences. There are some tensions that have been always internal to neoliberalism between the current account surpluses of certain zones of the world and the current account deficits of other parts of the world, particularly the U.S., and there's some tension in and around that. There has also been no real route out of it as of yet, with Europe in problems and not being able to move into a major importing zone and the countries of East Asia not wanting to reverse themselves either. It's likely the situation of the current account deficit of the U.S. will be continuing and some of the asymmetries in the world payment system, those are likely to continue. So in many ways, we're definitely in another phase of neoliberalism as a result of this crisis. Certainly, its clear that the political forces in no part of the world have been able to break out of the neoliberal political policies or the balance of power that has backed neoliberalism, that is, the way that finance and industry have supported neoliberal policies at the level of the state.
Sasha Lilley: So is this, then, an impasse based on a crisis of ideas on the part of elites? Or has neoliberalism still not yet run its course as a viable engine of accumulation?
Greg Albo: Neoliberalism is linked to a particular policy framework within capitalism toward a certain balance between the state and market, but as Leo was pointing out, not necessarily a withdrawal of the state, but the market playing the leading role in the determination of where investment is allocated and how incomes are formed. And within that general framework the ideas of neoliberalism can adapt to a new moment, particularly if there are no other political forces on the agenda, the ideas will be generated and something will come up and this model of capitalism will continue.
I think there's a real bankruptcy of ideas among liberals and social democrats. I think that's where the key flaw is – in the hopes that somehow state power can simply be reasserted over and finance constrained as a key way that an alternative of reform could come forward and, alongside that, an expansion of various regulatory structures. I think modern social democracy has failed not only at the political level, but also fails to understand many of the dynamics of contemporary capitalism.
I think the problem on the left actually is not a question of ideas as many people often put forward. I think there are many ideas on the left on how to address the crisis – from work-time reduction to various ideas about green conversion, the traditional ideas on the left on expansion of the social sector. There are many, many interesting new ideas about restructuring the state and planning. The problem really on the left is one of political and organizational capacities right now. That it is just not present, so the left really isn't on the political stage as a political force, both at the level of unions and social movements. Certainly in North America, we're nowhere near having an adequate political force that is capable of offering an alternative vision, an alternative agenda, especially being inventive about how new social forces might be organized.
Sasha Lilley: As you are suggesting, there’s clearly more than one route out of the crisis. How would you envisage a route that would benefit the working class? I was going to ask what route would not benefit them, but presumably that’s what we're seeing right now.
Greg Albo: Why don't I start with the route that is not benefiting them? Clearly, the route that is being put forward right now is that of the capitalist class and the existing states have had a complete sway in setting the agenda. The initial responses that had emerged with some strike responses, some housing occupations, have largely fallen to the side, although I'll come back to the Greek case in a second. They've had a quite wide swath to cut in setting a new agenda and they're doing this with minor reforms around regulatory structure. Particularly, what they're managing to do is paying for the financial crisis and offloading so much of the bad debt into the state sector and the state sector's emergency response in terms of expansion are now focused on what the International Monetary Fund has called for as a decade of austerity. Meaning that transfers to the poor are to be cut back. Public sector wages are being cut back in the order of 5-10 per cent. Income transfers are being cut back. Other forms of social programs are being cut back. And this is being backed around the world by both conservative governments and social democratic governments. They've had complete opening to set that agenda.
There has been little response. The only response that has occurred has been in the Greek case so far, which has generated a large number of walkouts and general strikes, days of action, and in some of the other Mediterranean countries as well. But they haven't been able to push aside the move by those governments to implement these really draconian austerity packages. Right now the route out of the crisis is particularly being set by the capitalist class, in our view within the framework of neoliberalism – although neoliberalism has taken many forms, maybe we'll want to call it something different – but it was within that agenda.
It is very difficult to see any social democratic response at the moment emerging, that is, some alternative reflationary strategy that would have the tax burden shift more onto the capitalist class through various kinds of crises taxes or taxes on financial speculation of a major kind; not the small transaction taxes being discussed as basically a backstop for future financial crises.
So what you're left with is largely the question of whether you can begin engaging the union movement, the social movements, and radical political parties in a new project of organization and challenging capitalism. In an initial sense, I think that's a big question more along the lines of organizing, than per se a reform response to the crisis. It has a lot to do with new forms of attempting to organize unions and allowing much participation of workers in unions. A whole range of issues is involved there.
There are policies of reform that could be put forward now; there's all kinds of things that could be for it in the context of building such a counter movement: one could be arguing for campaign around free public transit, as a way to respond to the crisis in terms of a green alternative that would have the popular resonance among both ecologists and workers and poor people. Work time reduction should be on the agenda as another response. It would be relatively easy to begin campaigns for a crisis tax – that is, a special levy on high-income groups and on the financial sector – and so on. It's easy enough to come up with a range of programs or reforms that we could struggle for. Many of our movements are putting forward some of those across North America, particularly in the major cities where there are a lot of struggles around urban reform and the whole range of housing issues as a consequence of the crisis. The question really is building a renewed left with a much different political capacity.