World crisis or new expansionary long
* New Economy
URING the last 25 years, the bourgeoise, at least in North America, has been able to restore the rate of profit to the level of the postwar period. It has developed a panoply of emergent new technologies, which have begun to develop on a big scale in some sectors, above all in the United States. One can then say that the economic and technological conditions of the ascendant phase of a new long wave are partially met inside the strategic center
CAN the new economy (remote access computing, bio-technology, of world capitalism and its imperialist energy efficiency and alternative energies, new materials) form the periphery.
basis of a new expansionary long wave? Or are we heading for world
The recent growth of productivity in economic crisis following a major stock market crash?
the United States demonstrates it. Let us remark that the prior creation of a final solvent demand (in other words of increased popular consumption) is not one of these
MARC BONHOMME* conditions (contrary to what the the industrial potential which exists there, tal towards the stock market bubble and Keynesians think). This latter is rather the consequence of the wave of initial investment and its breadth is a function of the ability of the proletariat to impose redistribution.
Note in passing that it is generally at the beginning of the expansionary (and recessionary) phase that the question of "reform or revolution" is raised. Emerging from the suffering of the long recessionary phase of the preceding wave and the individual struggle for survival that it involves, the proletariat again becomes combative, liberating a long suppressed anger. Whether this leads to revolution depends to a great extent on the accumulation of ideological and organizational forces in the course of the preceding phase.
### Appropriate conjuncture
A very favorable relationship of forces in an appropriate conjuncture could lead at least to big reforms, which at the same time would prolong the ascendant phase of the new long wave. Although the history of capitalism does not endlessly repeat itself, the passage from recessionary to expansionary phase has been accompanied in the past by a destruction/devalorization of capital (as witnessed by the depression of the 1930s and the Second World War last time round).
Such a devalorisation/destruction of capital is necessary to allow an enlargement of markets and then a wave of investments, which is sufficient to support a high and prolonged accumulation of capital. The very partial opening of the markets of the East (from the GDR to China), accompanied by a significant devalorisation of 22 International Viewpoint #322 June 2000 could play this role. It will undoubtedly be accompanied by new large-scale physical destructions of capital in the industrialized countries of the periphery, of which the Gulf and Balkan wars constitute the prototypes.
Even if the economic-technological conditions of a change of phase are practically in place, this is far from the case for the politico-institutional conditions, which are the more determinant. The current situation of the US economy illustrates the contradiction. The economy is functioning at full capacity but on the basis of, on the one hand, financing by world capital, as shows it an increasingly big trade deficit now running at nearly 4% of US GDP, and on the other, a record deficit in the US private sector (income less expenditure of companies and consumers) which reached 6% of GDP in 1999 (a record for the post1945 period). It is moreover remarkable to note that in both the US and Canada the 1990s saw the private deficit substituting for the public deficit and the inflation of financial assets substituting for the inflation of products and services.
### World chaos
Bill Gates and co. are enjoying their prosperity, then, thanks to the world chaos provoked by the free circulation of the US dollar (supported by a military threat and a Hollywoodian commercial culture) and a stock market bubble which, by creating virtual wealth in the richest households, encourages them to spend while the least wealthy households borrow more as a result of relatively low rates of interest which are necessary to attract money capisupport consumption. Thus the circle is closed.
The least economic or political shock could burst this bubble, the most likely such shock being a drying up of external financing. As many companies hold financial assets as collateral for their loans, the financing of working capital and investments would be affected. The bursting of the bubble would also have a significant effect on consumption following a sharp increase in saving to compensate for the disappearance of financial assets directly or indirectly possessed by around half of households (the wealthiest), without counting the growing proportion of small timers borrowing on the margins in order to speculate.
### Major crisis
A major crisis would probably ensue and this in turn could spread to the rest of the world, at least if the US Central Bank did not make a 180 degree turn and adopt a very lax monetary policy which would involve running up a large budget deficit.
But public and private indebtedness, already at record levels, would be accentuated. The US economy would become more unstable, which would push the US bourgeoisie to seek a more durable solution on the basis of its hegemonic strength, both monetary and military. Fearing this scenario like the plague, or anticipating it, the US bourgeoisie has enjoined its Japanese counterpart to deepen yet further its public deficit, in order to become again the motor of the East Asian economy (an upturn through lowering short term interest rates having become impossible, with a
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wave?
rate of 0.04%!).
And so as to be certain that the Japan's enormous savings continue to irrigate the
US, the US bourgeoisie has asked the Bank of Japan to finance the Japanese deficit through monetary inflation (technically by direct loans from the Bank of Japan to the
Japanese government). Not bad for the neoliberal champions of anti-inflationary struggle and zero deficits!
Because of its military weakness and its prolonged recession, Japan is vulnerable to US pressures in a zone of strong military tensions. On the contrary the US does not have the same power of pressure on the European Union (EU) with its GDP which is higher than that of the US, its modest growth, its nuclear arms and now three quarters unified in the same monetary zone.
### Internal divisions
There are internal divisions within the EU and a greater popular resistance to neoliberal policies, which prevents it from becoming a hegemonic force to equal the US. However, the bourgeoisies of the EU are not unhappy with the external disequilibria of the US. Europe's balance of payments surplus allows its banks and transnationals to constantly strengthen themselves worldwide, including in the US. The most patent examples are the Daimler-Chrysler merger to the profit of the German multinational and that of BP-Amoco to the profit of the British giant.
What political-institutional conditions are lacking, finally, for capitalism to embark on the expansionary phase of a new long wave? It would be necessary first to unify capitalism under an undisputed hegemonic leadership. The most obvious candidate, the US, must reacquire its capacity to lead the process underway of accelerated concentration and centralization of capital (mergers and acquisitions), that is settle its structural balance of payments problem which has festered for 30 years.
Either that, or the US bourgeoisie must impose a dose of stiff austerity on its people, particularly the so-called middle classes, to cut imports, which would also entail tough methods to contain social tensions; or it must strengthen and use its military power to a still greater extent to impose a permanent cheap financing, not only of its balance of payments deficit but also of its capital exports, on the backs of the world's peoples. Even this second option would suppose in any case a stabilization of the balance of payments and a reallocation of resources towards more military expenditure, as has already started
In order for it to become hegemonic, the European Union would have to succeed in unifying itself in a strong European state, capable of both inflicting a historic defeat on the proletariats of the continent, particularly in Germany and France, and re-militarizing itself to compete with and ultimately vanquish the US. This road involves big social conflicts and large-scale confrontations with the US.
As to Japan, the relative narrowness of its internal market, its relative military weakness, its incapacity to institutionalize a zone of influence under its control, will force it to continue to accept US domination, at least until the emergence of a European hegemony with which it can ally itself. Whatever hegemonic power imposes itself (undoubtedly through significant regional wars) there remains the problem of generating a wave of investments capable of supporting a high and prolonged accumulation of capital. The key to this possible wave resides less in privatization and modernization inside the current imperialist countries than in the massive equipment in privatized infrastructures of the
Let usa, in es and som
tant countries in their immediate periphery (Vietnam, Pakistan, Bangladesh, Ukraine).
Surfing on the new wave
Initially, this wave could be financed by pension funds and the common investment funds of the so-called middle classes, on which the capital of the imperialist and national bourgeoisies could surf. The proletariat of the imperialist countries could be offered a social pact of the Japanese kind based on the paradigm: save today, consume in retirement (while prepared to devalue these savings in the style of Russia if things turn out badly). The savings of the immense masses of the Third World could also play a significant role.
What prevents the deployment of this strategy (in addition to the inter-imperialist contradictions already mentioned) are the politico/economic leaderships of significant countries of the Third World. These
New Economy * and to obtain from imperialism a satisfying share of the spoils.
### Crony capitalism
The Indonesian transition from a crony capitalism of the cold war period, enjoying a margin of maneuver for national accumulation, is still far from a done deal and the growth of inequality and poverty following the crisis of 1997 renders any stabilization of a capitalism with a democratic facade very difficult. The full integration of India in the world market will not be easy either, as shown by the present rise of ethnicism in response to the IMF attempt to progressively dismantle a very bureaucratized national capitalism with heavy state involvement.
As for Russia, mired in the transition from a mafia capitalism resulting from a decomposition of the bureaucracy, its new leadership seems to aspire to assure to its nascent bourgeoisie an imperial status, which implies future confrontations. The Chinese bureaucracy, for its part, has reestablished a process of basic auto-accumulation, in both countryside and cities, a process completed by significant support from external capital and which the regime defends through increasingly repressive methods. But can this bureaucracy conclude its transition by privatizing the big state industries, at the price of heavy unemployment, thus becoming a pure capitalist class?
These countries, which account for nearly half of the world population, do not constitute a stable environment of law and order guaranteeing enjoyment of private property and respect for contracts, or full integration into the world market and unrestrained opening to the free circulation of capital. Certainly, at the price of strong repression and bloody regional wars, which would engender more poverty and inequality, perhaps even a social regression following ecological or nuclear catastrophes, capitalism could once again resolve its problems. Will the working and popular classes consent to this — or will they unify to create a world democratic and socialist government on the basis of equality of nations and sexes? The role of the proletariat in the imperialist countries appears to be the deciding factor in how this burning question will be resolved. * *Marc Bonhomme is an economist, a member of the Quebecois section of the Fourth International and the executive of the Parti de la démocratie socialiste (PDS) of Québec. International Viewpoint #322 June 2000 23