Why The Solution To The Great Recession Cannot Be Nationalistic?

Much Of The Radical Left Want To Save Capitalism.

the perspective of David North’s is a narrow nationalist one. It limits the problem to one of the decline of US capitalism as opposed to the decline of capitalism as a world economic system. This means that for the WSWS the problems of capitalism are solvable within a merely nationalist framework. Such a framework only requires a mere restructuring of global capitalism. In contrast for communists the authentic solution is the elimination of capitalism through social revolution.

In a piece called “The Capitalist Crisis and the Return of History” David North, of the World Socialist Web Site, provides an outline of the financial led economic recession of 2008. For him the root cause of the crisis is located within the parasitic character of declining US capitalism. This decline is briefly outlined by David. However his analysis falls into the pit of nationalism. By circumscribing the crisis within US conditions he is espousing a nationalist ideology. For David the solution (following his logic) is to be found by replacing the leading role of the US in the capitalist system by another capitalist economic bloc such as the EU. Essentially it thereby confines the solution to the paradigm of the nation-state. The necessity of social revolution is not, then, for North a social necessity. He shares his nationalism with many other radical left organisations such as the Socialist Workers Party.

It is true that in the aftermath of World War Two the US economy was objectively the strongest economy in the world. As David says: “In 1952, nearly 60 percent of all industrial production in the advanced capitalist countries was located in the United States. On a per capita basis, total economic output in the United States was nearly double that in the United Kingdom and France, nearly three times that in Germany, and four times that in Italy. As late as 1957, 43 percent of the largest 50 companies in the world were based in the United States. Its dominant position found expression in its ability to maintain substantial trade and payment surpluses, even as the United States financed European and Japanese reconstruction.”

This meant that it produced surplus value to a greater extent than any other national economy. Because of the appalling condition of the rest of the world economy, in the immediate aftermath of the war, it was necessary, for economic reasons alone, that the US assisted in the recovery of these economies. Had the US not assisted these countries it was more than likely that their weakened state would eventually lead to the decline of the US economy and the total collapse of capitalism as a political and economic system. For political reasons too this assistance was necessary. If the US was to stave off the threat from an insurrectionary working class it was necessary that the US come to the assistance of other important countries such as France, Germany and Britain.

Eventually due to US assistance and the internal dynamic of West European and Japanese capitalism itself these economies recovered and expanded on such a scale that they became growing competition for US capitalism. As West European and Japanese capitalism increasingly expanded US capitalism started to relatively decline. David informs us that while “the United States remained the dominant industrial power well into the 1970s, it steadily ceded ground to its rivals in Europe and Japan throughout the late 1950s and 1960s. Second, the change in corporate structure and investment strategies within the United States was closely related to the rate of profit.”

This is why North draws attention to “the deterioration of the US balance of payments, the collapse of the Bretton Woods system on August 15, 1971, when the Nixon administration, without warning, suspended convertibility of the dollar into gold. This act represented a turning point in the post World War II history of capitalism. It unsettled the financial equilibrium that had made the post-war expansion of global capitalism possible. In the aftermath of August 1971, world capitalism became increasingly susceptible to destabilising shocks. Indeed,... the present crisis is in many respects the culmination of the process of disequilibrium that has been under way for the last 37 years or so

At a certain point West European and Japanese capital started declining too. Substantiating the above North claims that “the profit rate in the advanced capitalist countries fell one-fifth in the business and manufacturing sectors between 1968 and 1973. Many factors contributed to this process, of which the most significant was the massive (over)accumulation of capital in the aftermath of the war...By the 1960s the technologically advanced industries of Europe and Japan were competing effectively with the United States for position in global markets, including within the American domestic market itself. Growing pressure on global profit rates, increasingly apparent by the mid-60s, intensified international competitive pressures, which further weakened the global standing of US industry.”(bracketed part mine)

The result was sustained slowdown in the global capitalist economy as a whole. This development was a result of the laws of capitalism. The tendency of the general rate of profit to fall became increasingly more pronounced with the continuing accumulation of capital. The impact of this law increasingly diminished the scale of surplus value production. This forced capital to feverishly struggle to resist the falling rate of profit by increasing the technical composition of capital, the intensity of labour while pushing down wages, working and social conditions. The outcome of the impact of this capitalist law are cyclical crises of one sort or another leading to increased productivity entailing, among other things, further technological development. The cyclic character of capitalism is the secret of the capitalist mode of production’s inherent dynamism. If capitalism could exist in the absence of its life-cycle, brought about as a result of the law of the tendency of the general rate of profit to fall, nothing would exist to cause capitalism to technologically, politically and culturally develop. Consequently, assuming this possibility, capitalism would be inherently infected with stasis and thereby cease to be.

Now the life-cycle of capital is modified by the actions of the big capitalist countries at its core. The outcome is the persistence of cycles of a more irregular character. Historically capitalism’s cyclical nature undulates relentlessly through the system in one form or another. Capitalism’s cyclical nature means that capital consecutively undergoes crash, recovery upswing, boom, overheating and crash. It is an inevitable law of capitalism irrespective of the particular forms that capitalism may assume. A modification of the capitalist life-process by economic policies has mistakenly led many contemporary capitalist economic ideologues to declare that the cyclical pattern of capitalist development had been eradicated. Capitalism’s cyclical nature can only disappear when capitalism disappears.

David points out that the last merger waves (1984-89 and 1992-2008) “have been socioeconomic phenomena of decline, decay and extreme parasitism. The last waves have been powered by massive debt, the growth of which proceeded alongside, and demanded, the destruction of the real productive forces. The essential purpose...has been to destroy social wealth in the interest of investors’ profit and private wealth accumulation.” “Parasitic capitalism”, as David argues, “is not interested in creating value but in reallocating value” to itself.

Contemporary parasitic capitalism has a criminal aspect too.

As David points out:

“The phrase shareholder value is a social euphemism that is employed to conceal and justify the brutally exploitative, socially destructive and essentially criminal character of these financial transactions...”

David North is qualitatively on track in making the foregoing remarks. But he is off course by confining them to US capitalism. His remarks also apply to European and Japanese capitalism. And indeed should I say indigenous Irish capitalism too –builders, property developers and banks?

North later adds:

“The repeated occurrence of economic disaster cannot be explained as unfortunate accidents, which might have been avoided had investors been less greedy, executives more responsible, administrators more responsible, administrators more watchful, etc. Every five years or so, since the 1980s, there has been a major disaster. In the 1980s, the so-called “Decade of Greed,” there was the Savings and Loans scandal, the junk bond mania and the 1987 Wall Street crash. In the 1990s, there was the Mexican peso crisis, the dot.com bubble, the Asian crisis, the rouble crisis, and the collapse of Long Term Capital Management. In 2001 Enron collapsed almost overnight, when its fraudulent bookkeeping, in which prestigious accounting firms acted as accomplices, was exposed. Then, abetted by the decision of the Federal Reserve to cut interest rates to their lowest levels in decades, the housing boom developed. Underlying all these speculative operations is the decay of the real productive foundations of ...capitalism, the separation of the process of the ruling class’s self-enrichment from the processes of production and the creation of real value.”

The devastating nature of the 2008 crisis is a testament to the inability of capitalism to provisionally recover unless capitalism is radically restructured as both an economic and political system. This must involve savage attacks on the working and living conditions of the working class. It is questionable as to whether the capitalist class shall succeed in realising such a radical agenda. This is because of the matter of both the objective strength of the working and its cultural quality. Furthermore such a radical agenda means the destruction of the weaker sections of the capitalist class thereby raising serious doubts as to whether the capitalist class will possess the unity to realise successfully such a challenging plan. But the point is that demands posed by capitalism’s relentless cyclical nature will force the capitalist class to struggle feverishly to restructure capitalism in its class interests and against the interests of the working class. Intense class struggle will ensue. The outcome of this struggle is a function of the ideological and political character of the working class.

In short, despite the merits of his piece, the perspective of David North’s is a narrow nationalist one. It limits the problem to one of the decline of US capitalism as opposed to the decline of capitalism as a world economic system. This means that for the WSWS the problems of capitalism are solvable within a merely nationalist framework. Such a framework only requires a mere restructuring of global capitalism. In contrast for communists the authentic solution is the elimination of capitalism through social revolution.