Sunday, 11 September 2016

FT Article on Chinese Communist Party by Jamil Anderlini

http://www.ft.com/cms/s/0/628b36a2-7667-11e6-b60a-de4532d5ea35.html#axzz4JwH3ryWq

This great article can be found via the link above. Or else here. Worth reproducing litterarim with apologies to the FT:

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While he was still alive, Chairman Mao Zedong’s greatest worry was that a capitalist revival would take hold in China and wipe away his utopian vision of communism.
As China marks 40 years since his death on September 9 1976, it is clear his worst fears have been realised.
Mao is still officially regarded as the founding father of modern China but the stark contrast between his egalitarian economic ideas and today’s freewheeling capitalism make the ruling Communist party extremely wary of too much sentimentality.
Commemorations this year have been tightly curtailed and state media warned on Friday against anyone holding “extreme views” of the former dictator.
This reflects the fact that Mao is more popular now than at any other time since his death, which brought an end to the disastrous decade of turmoil known as the Cultural Revolution.
Historians estimate that Mao was responsible for between 40m and 70m deaths in his numerous political purges and a famine in the late 1950s caused by his “Great Leap Forward” economic policies.
But for many in China, especially young people who are not taught about these “mistakes”, Mao represents a fairer and less corrupt age.
“A lot of today’s societal problems in China were all caused by departures from the spirit of ‘Mao Zedong Thought’,” said Sima Nan, a celebrity blogger and devout “neo-Maoist”. But “in contrary to the wishes and efforts of those who vilify Mao, Mao now increasingly possesses a kind of divinity.”
In recent years Taoist-style temples devoted to Mao have sprung up across the country, an ironic development given that Mao was a staunch atheist who sought to stamp out religion and “superstitions”.
On Friday, tens of thousands of ordinary people flocked to Mao’s home village in rural central China to bow and pray before his statue under the watchful eye of a large police presence.
Meanwhile Alibaba, the US-listed ecommerce group, has incurred the wrath of neo-Maoist groups for scheduling an “alcohol festival” on Friday to promote online liquor sales. The Mandarin Chinese pronunciation of “nine” is the same as that of the word for alcohol.

“Only those soulless counter-revolutionaries and traitors celebrate the day of the passing of the Chinese people’s great leader Chairman Mao so what on earth are you doing [Jack Ma, Alibaba’s founder and executive chairman]?” said an article posted on two of China’s leading neo-Maoist websites.
The tension over how to remember the “great helmsman” extends beyond China’s borders. In Sydney and Melbourne local governments cancelled planned concerts commemorating Mao’s death after Chinese Australians complained that the content venerating the dictator was insensitive.
Experts on the neo-Maoist phenomenon say China’s current leaders regard this movement as the most potent challenge to their rule, precisely because Mao is still honoured as the founder of the nation even as his political and economic ideas have been abandoned.
As the chairman himself said in 1963: If “the landlords, rich peasants, counter-revolutionaries, bad elements and monsters are all allowed to crawl out . . . then it will not be long before a counter-revolutionary restoration on a national scale inevitably occurred, the Marxist-Leninist party would undoubtedly become a revisionist party or a fascist party.”

Sunday, 31 July 2016

Achilles's Heel: The Coming Collapse of Global Capital

Capitalists are good at selling things. Long before the wealth they controlled was applied to the expropriation of the English peasantry and then to the alienation of their living labour for the purpose of industrial production to cover expanding consumption – long before that time, the industrial bourgeoisie was a class of merchants who profited from moving or trading merchandise between different ‘markets’. Indeed, the earliest definition of ‘entrepreneur’ was given by Cantillon and it referred exclusively to merchants, not to ‘producers’ who in his time were still predominantly artisans.

Even to this day, when we think of capitalists we think almost exclusively of ‘businessmen’ – in other words, we think of either managers and bankers or of merchants ‘cutting deals’ or trading merchandise. We never think of engineers, for instance. The notion of capitalist is thus identified with that of someone ‘selling a product’. The most important aspect of capitalism is not that of producing for need but rather that of creating artificial ‘needs’ or wants, and specifically needs and wants that do not emancipate workers but instead ensure that workers remain chained to or enslaved by wage labour.

Capitalism therefore has the overwhelming intrinsic tendency to present its products and its industries in the most appealing light. That is why the ‘reality’ that we see in advertising is so different from the daily reality most of us must face. And now that capitalist enterprise has come to dominate the entire world of information (which is now ‘misinformation’ and explains why no-one trusts ‘experts’ any longer), even the so-called ‘news’ is entirely removed from reality. This dis-connection or discrepancy between social reality and the image that capitalism promotes (from cigarettes called ‘fresh’ to cars filmed on mountain hills to ‘smartphones’ used to play Candy Crush, to the Republican and Democratic Conventions) is something that is now finally coming back to bite the bourgeoisie very hard. The bourgeoisie reaps what and where it sows.

This discrepancy between capitalist image and human reality was once easy to hide from view – for the simple reason that national bourgeoisies could use the nation-state to export, as it were, all their ‘contradictions’ to other regions of the world, from India to Australia, or even to the American mid-West or to Central and South America and, more recently, to China. Indeed, as Hannah Arendt acutely reminded us (see the first volume of The Origins of Totalitarianism called ‘Imperialism’), in its early phase the capitalist bourgeoisie’s most important export were its angry young leaders who may otherwise have caused havoc at home. This operation was easy in the past because the capitalist West, through its nation-states and their armies and navies, could easily impose control over “the Third World” through either ‘formal’ or ‘informal’ imperialism. As we know, this task is well-nigh impossible now for obvious reasons, the most important of which is that such attempt would run against the very ‘consumerist-pacifist’ (quiet and private enjoyment) ideology of capitalist societies; but also because the Western population has fallen dramatically as a percentage of global population; and finally because the very selfish individualism promoted and sanctified by the bourgeoisie is simply inconsistent with the effort and sacrifice that empire, formal or informal, always entails and engenders.

The mythology of liberalism was built in part on the notion that a ‘liberal’ nation-state was also a ‘minimalist’ nation-state in the sense that it was reduced to the bare essentials to ensure social order. But in reality capitalist or ‘liberal’ nation-states have always been militarily very powerful and extremely aggressive – although now in an increasingly ‘mercenary’ manner through technological superiority and paid professional armies. Were it not for this, it is hard to imagine how the cravenly selfish capitalist bourgeoisie could ever convince its populations to fight for its “liberal democracy”. Thus, not only was the notion of “liberal democracy” a total antithetical myth, but also that of “the liberal State” and of “laissez faire” was an utter lie. As Franz Neumann established (in The Democratic and the Authoritarian State), it was never the case that the Western-capitalist ‘liberal’ nation-state was ‘weak’ in this military and repressive sense.


What has changed after World War II where the Western-capitalist nation-state is concerned is that formal empire has become impossible and even informal empire has grown more difficult in the sense that it can be imposed only through minimal and targeted military interventions but far more often through financial flows (the capital mobility that Benjamin Constant confused with ‘democracy’), through espionage and ‘destabilisation’ or else through various forms of political, economic and military pressure from “the international community”. But this very ‘mobility’ of capital which in the days of capitalist imperialism could be used in a mercenary way to exert direct economic pressure on capitalist populations themselves and above all on “the Third World” – this very mobility of capital that Constant thought was the greatest political asset of modern capitalism – this very mobility of capitalist financial flows now constitutes the biggest threat to the political stability of capitalist liberal regimes. We shall turn to this crucial new development in the historical dynamic (or ‘logic’) of capitalism in the next intervention.

Tuesday, 26 July 2016

Lex Luthor and the Joker: The Cultural Contradictions of Capitalism



We use the word “contradiction” in relation to capitalism not in the literal sense that capitalism contradicts itself: it cannot do that because no historical event or agency can ever contra-dict itself. In this sense, both Hegel and Marx abused the literal meaning of the word, although mostly they intended it in the “dialectical” sense. We use it rather in the sense that there are historical tendencies or forces that capitalism unleashes that work in historical, political and socio-economic directions that threaten not just the institutions of capitalism but also and above all its “society”. For we no longer have a “society” – which itself would be an abstraction – but rather a social formation that we have called “the society of capital” in the sense that capitalism has gradually and relentlessly come to dominate every aspect of social life and indeed of global life.

In the narrative of Superman, Lex Luthor constitutes the fifth column, the traitorous internal foe that threatens the very society that nurtures and promotes it. Lex Luthor represents an expression of greed, of rapacity in a purely monetary form that comes to threaten the existence of capitalist society itself. Luthor is not interested in this or that aspect of material wealth: he is interested in wealth in its most ethereal and abstract form - in the form of money. Of course, what is “evil” about Luthor is the fact that in his pursuit of abstract wealth he is prepared to betray the very society that produces the wealth to which he aspires and in which indeed wealth has any significance whatsoever. Luthor is prepared to break the law and any other social norm in order to obtain wealth and, consequently, social power. In this sense, his wealth-seeking constitutes an infringement of “legitimate” laws and social norms. And yet, it is quite clear that the supreme goal of capitalist enterprise and its society is precisely that – the attainment of infinite or indefinite wealth. Clearly, therefore, from the outset and at its very core, capitalist society involves this “contradictory” tendency: namely, that its essential goal is the destruction of social norms and ultimately of the social fabric itself.

Lex Luthor is a “disruptor” – he might as well be a Schumpeterian “innovator” or entrepreneur – a Steve Jobs or a Mark Zuckerman or a Musk or a Bezos. The fact remains that he is not the only one to embrace disruption or transgression of social norms and laws to attain abstract wealth and real power. The horrifying reality is that he represents the extreme version of what every other “citizen” in capitalist society is aiming to achieve – the pursuit and attainment of indefinite and infinite material success. It follows that all of capitalist society is complicit in this insane pursuit – a pursuit that turns every citizen into a cowardly philistine desperate to hold on to her or his possessions and therefore ultimately reliant on Superman to rescue her or his society from total destruction.

Superman or Batman. Superman and Batman. The “complicity” of all citizens in capitalist society in this cowardly pursuit of abstract wealth and power – of what we call “success” – is illustrated quite explicitly by Lex Luthor’s evil counterpart in the Batman cartoon epic. Here the Joker defies Batman’s defense of “law and order” and of the citizenry by pointing out that the crimes or “disruption” he is perpetrating are not motivated by money or wealth but are meant singularly to expose the inveterate and insatiable greed of the very citizenry that Batman so gallantly endeavours to protect. Protect from whom? Asks the Joker. Not from me! You can’t protect them even from themselves! For in their quotidian pursuit of self-interest they have already torn apart the “community” that they pretend exists.

This is nothing more than a prosaic version of Schopenhauer’s and Nietzsche’s invective against the State: Folly! To think that the State and society constitute the sharing of common and agreed values and interests. Madness! To fail to see that the State exists solely with the purpose of keeping its “citizens” from devouring one another like beasts! The State is not Society: the State is Police, and that’s that!


So here is the central cultural contradiction of capitalism: that so long as capitalist society and its citizenry are enriching themselves, they are prepared to defend it. But once what we call “economic growth” begins to wane, few are prepared to defend the society of capital. One of the enduring ideological myths of capitalism – a myth that becomes reality once its propagation of greed spreads to the entire “citizenry” – is that every social formation will eventually and “naturally” follow in the path of capitalist accumulation – the path of secularism and “rationalism”. That is why capitalist societies are naively and perversely incapable of dealing with social formations whose real fabric is composed of religious or military beliefs. We are referring, of course, to Islam and to Chinese and Russian nationalist militarism. For the sake of preserving our own “Western” civilization, it is high time that we looked beyond “economic interests” in the Middle East and in Eurasia and started to confront the true Evil that is threatening our very existence – and capitalism with it.

Sunday, 24 July 2016

The Meaning of Globalisation

Perhaps the greatest theoretician of liberalism, Benjamin Constant, failed to perceive that “liberal democracy” is an antithetical expression – in other words, he failed to see that liberalism and democracy are incompatible – because he confused “democracy” with the ability of “citizens” to move their property across national boundaries and thereby counter any deviation by national governments into policies contrary to their economic interests. But of course, democracy and self-interest based on property ownership are necessarily conflicting interests. (Further elucidations of this important thesis are in N. Bobbio, Liberalismo e Democrazia.)

Constant failed to see that, far from being an equilibrating or countervailing power in the maintenance of democratic regimes, the mobility of property – in fact, the mobility of capital – constitutes one of the most destabilizing threats to national governments and indeed to nation-states and their citizenry, and to society itself. This ability of capital to divorce or separate itself from the real industrial process of production and its ability as 'finance capital' to move freely and seamlessly across 'national boundaries' poses the entire problem of the role of nation-states in the circulation and concentration of capital.

Capitalist society is founded upon the essential separation between the moment of 'investment' of social resources that are privately owned (means of production and objectified labour to be paid as wages), the ensuing pro-duction ('bringing forth') of goods and services through the intervention of human living labour, and finally the realization (or 'verification') of the profitability of this production through the sale of goods and services in the 'marketplace'. This separation is the source of “investment risk”. And this separation gives rise also to the possibility of 'speculation' or 'gambling' because the monetary value of investment assets and of the goods and services produced through them may or may not be realized in the process of sale. As Keynes put it, “money is a bridge between the present and the future”; but “there’s many a slip twixt the cup and the lip” – by which he meant that capitalist investment is always risky because there can be no guarantee of a “return on capital” or indeed of a “return of capital”, again because of the ‘separation’ , a gap or ‘slip’ between the ‘cup’ of investment and the ‘lip’ of the successful sale - that is, between what we have just described as the processes of valorization and realization. Thus we can say with George Soros that finance capital has the ability "to create imaginary value out of thin air". But only for short periods of time, while the delusion that capital has a “natural rate of growth” (something invented by morons like the Norwegian economist Knut Wicksell) lasts. Once the ‘speculative' moment of capital or 'finance capital' becomes far removed institutionally from the real 'pro-ductive' moment of 'industrial capital', the resulting 'financial pyramid' eventually collapses under its own weight. This is the “Minsky moment” or, if you prefer, the Wile E. Coyote moment. As Warren Buffett put it, that is the moment "when the tide recedes and we find out who has been swimming naked"!! This is really what was at the heart of the recent global financial crisis (GFC).

The essential requirement for capital to be able to move “freely” across national boundaries, from one corner of the globe to another, is that it be in the form of 'liquidity' as finance capital, as money. What stands in the way of this freedom are three major obstacles: first, the real resources involved in the process of pro-duction, which include industrial plant, offices and so on; second, and most important for human societies, human living labour or 'workers'; and third, the nation-states. This question brings into play the role of nation-states in the circulation of capital and with this also the overwhelmingly important analysis of the political economy of capitalist 'speculation' or 'investment' as the case may be. It is exceedingly obvious, and we have argued this below, that the real effective cause of the current ‘crisis’ was internal to capitalist social relations. The fact that it was not due to ‘external’ or exogenous causes raises the broader question of what remedies are available to deal with the causes and with the consequences of the crisis.


We have seen that finance capital, in response to social antagonism and its wish to avoid it, needs and uses its own ‘liquidity’ and ‘mobility’ as well as its ‘fungibility’ (that is, its ability as money or monetary equivalent to take any physical shape or form that social wealth can take) – that it uses these ‘properties’ to force upon ‘nation-states’ conditions that it deems to be favourable to its accumulation (both through ‘speculative’ or ‘industrial’ investments). Nation-states and societies ravaged by these ‘capital flows’ seek to protect themselves through a variety of strategies. There are capital controls and financial market regulations. One other strategy is for different ‘nation-states’ to seek ‘to co-ordinate’ economic policies. Of course, some members of the European Community decided to embark on a European Monetary Union with a common currency precisely for this reason, that is, to avoid the devastating effects of capital flows across national boundaries. What is loosely called ‘globalisation’ must be seen as the effective result of the mobility of capital across national boundaries. It is not the phenomenon itself that is new: Karl Marx referred to it as “the world market” as a tendency of capitalist industry. What is new, rather, is simply the scale of the phenomenon and its systemically devastating effects on social institutions such as the nation-state.

Thursday, 14 July 2016

Globalisation or, The 'Freedom' of the Bourgeoisie

We have seen how Constant mistakes the unimpeded circulation of capital across nation-states, and hence liberalism, with democracy. This confusion is the reason why Constant fails to perceive the evident antithesis between these two historico-political concepts. Not only is liberalism not democracy, but in reality liberalism is antithetical to democracy.  For the very freedom of capital under liberalism to move across political boundaries entails the inability of those who do not own capital to control the social resources owned by the owners of capital as the central aspect of social wealth in a capitalist society. 

Constant cannot see that the separation of capital in its most emancipated and therefore “liquid” form from its real material conditions of production can only be fictitious and that every attempt to separate capital as “value” – as money – from its real productive existence must end up in the separation of workers from the object of their activity. Not only is this undemocratic, but it infringes against the very essence of political life, which is the ability of a community to determine its mode of existence, cultural and productive. Hence, the freedom of capital to circulate, if on one hand it entails the political emancipation of the bourgeoisie from a particular political order, at the same time decrees the instability of capitalist industry against all forms of political society or association. This is the Ungeselligkeit (Unsociability) of bourgeois “society” to which Kant perceptively referred; here lies the schism and chasm between bourgeois and citoyen that Marx so keenly denounced. Constant was hoping to identify the interests of the bourgeois with those of the citizen, without noticing that bourgeois interests are “private” whereas those of the citizen are necessarily public and political. The “freedom” of the bourgeoisie consists in its ability to move capital across international boundaries: as such, this mobility of capital not only is inconsistent with the political freedom of democratic societies, but it actually serves to undermine their political stability by giving absolute priority to the interests of the bourgeoisie - by blackmailing nation-states through capital mobility.


Does this mean that we ought to oppose the internationalization of capital – what people call loosely “globalization”? Not at all. After all, if our ultimate aim is to unite humanity under one banner, the removal of barriers to capital mobility and to trade are absolutely essential because they bring about the harmonization and homogenization of productive processes that are indispensable to political harmony and therefore to global democracy and peace. But what this means is that we ought to fight on two fronts – one internal and the other external. Internally, we ought to fight against the dilution and reversal of political and living standards; externally, we must push for homogeneous political and working conditions across countries. We must impede the capitalist strategy of setting off one nation-state against another – that is, precisely that competitive tension between countries and peoples that Constant perhaps unwittingly sought to foist upon us in the guise of liberalism or “modern liberty”.

Sunday, 10 July 2016

Bravo Gavyn Davies!

With apologies to Gavyn Davies, I simply had to reproduce his outstanding latest contribution to the Financial Times:


The German balance of payments quandary


Germany’s surplus on the current account of its balance of payments surged to a record level last year, reaching $285bn, or 8.5 per cent of gross domestic product. It is now overtaking the Chinese surplus as the largest trade imbalance in the world. Although the term “crisis” is normally confined to trade deficits, not surpluses, this imbalance is clearly causing major headaches, both inside the eurozone and globally.
Not least, the surplus is causing problems for Germany itself. Nevertheless, the Merkel administration follows a longstanding German tradition in viewing it largely as a symptom of economic success, not failure. Both the government and the Bundesbank are resistant to lectures from foreigners on how to fix something that is not, in their view, broken.
There is growing pressure from the IMF and the European Commission to take steps to reduce the surplus but, in the main, this has fallen on deaf ears in Berlin. The consequences of ignoring this quandary could be profound.
Germany’s balance of payments was in small deficit when East Germany was being absorbed during the 1990s, but since then the surplus has been persistent. During the 2000s it increased sharply with the rest of the eurozone, largely because of improvements in German competitiveness following the Hartz labour reforms, and because of the unsustainable booms in peripheral eurozone economies.
After the euro crisis, the German surplus with other eurozone economies shrunk, but the surplus with the rest of the world increased further. In 2015 the increase to record levels was driven by the fall in oil prices and the depreciation of the euro, which Germany says are temporary factors.
However, we can also view the surplus through a definitionally identical prism, which is the gap between domestic investment and domestic savings. Here, it has been driven by very high private savings (caused by the ageing of the population), and very low corporate investment (caused by weak growth prospects in Germany compared to those overseas). The unusually large financial surplus of the corporate sector is the counterpart of half of the current account surplus. This looks persistent.
Why is this a problem? Let us start from the global perspective. The German surplus is often viewed by New Keynesian economists such as Paul Krugman and Ben Bernanke as a detriment to aggregate demand in the rest of the world. This is increasingly difficult to eradicate through lower interest rates, which are already at the zero lower bound, or ZLB. Put simply, Germany’s net exports add to German GDP, while subtracting from GDP elsewhere. In a world characterised by secular stagnation, this can contribute to low global growth rates.

One way out of this dilemma in normal circumstances would be for interest rates in the rest of the world to be cut, causing the German exchange rate to rise, and eliminating the trade surplus. But this is being prevented by the ZLB, and also by the existence of the euro, which prevents the German exchange rate from rising as much as it would have done in the old days under the Deutsche Mark.
The IMF reckons that Germany’s real exchange rate is now 15-20 per cent undervalued, which is at the heart of the “problem”. Without the euro, Germany’s export sector would already have been hit very hard by a huge rise in the D-Mark.
Now let us look inside the eurozone itself. The German view is that the surplus is the result of the underlying competitiveness of its trading sector, rather than from economic distortions that need to be eliminated. The implication is that other eurozone economies have a responsibility to correct their deficits by following Germany’s example on labour market reforms, and economic restructuring. There are some signs that this is working, with the halving of Germany’s surplus with other eurozone economies since 2006. Spain and Italy, for example, have now moved into surplus positions.
The optimistic view is that this process of rebalancing within the eurozone can simply be allowed to continue until it is fully successful. But there are two major problems here.
The first is that the rebalancing is happening mainly because domestic demand (and GDP) growth is being held down to very low rates in much of the eurozone, which restrains their imports from Germany. The trade rebalancing would look much less successful if all eurozone economies were at full employment. And the willingness of European electorates to tolerate subdued economic activity forever is questionable.
The second issue concerns the financing of the trade imbalance within the eurozone. Much of this has been accomplished not by “healthy” private sector capital flows, but by official flows within the balance sheet of the European Central Bank. These flows, known as Target 2 flows, imply that the Bundesbank is building its assets (ie, lending money) versus the ECB as a whole, while the national central banks in countries such as Italy and Spain are building liabilities to the ECB.
For as long as the euro remains intact, these Target 2 imbalances are irrelevant, but if the euro were to disintegrate, the German central bank would need to worry about potential defaults on Target 2 assets. And they are now very large, amounting to more than €600bn on the Bundesbank’s balance sheet. This has already become a political issue within Germany, and recently Target 2 imbalances have been rising despite a narrowing in the trade imbalances. Capital outflows from the eurozone periphery into Germany have more than offset the improvement in trade imbalances.
So what can be done about all this? Both the IMF and the European Commission argue that Germany should now be taking action to reduce its external surplus. The proposals made by these and other agencies are mind-numbingly familiar to international economists: increased infrastructure spending to use the fiscal space in Germany’s budget; labour market reforms to expand the labour supply and increase long-term growth, thus boosting private investment; pension reform to reduce the need for precautionary private savings; deregulation of the services sector to increase productivity; and more rapid wage increases that would reduce Germany’s trade competitiveness with the rest of the eurozone.
But Germany does not share the diagnosis, and is therefore unenthusiastic about the proposed solution. Despite increasing strains, the German authorities have expressed scepticism about whether the suggested reforms are either essential or effective in solving the trade imbalance. With only partial implementation of the reforms, the IMF still sees many years ahead in which the German current account surplus will exceed 7 per cent of GDP.
This weekend the stricken Italian economy seems to be facing another serious banking crisis, which could result in further increases in Germany’s implied loans to the periphery, hidden within the central bank balance sheet. Some of these issues can be traced, directly or indirectly, to the German trade surplus. The peripheral countries in the eurozone have done a lot to correct their deficits, but they need more help from Germany before it is too late.

Saturday, 11 June 2016

THE PARADOX OF LIBERAL DEMOCRACY





Even in its highest, most sophisticated expression, liberalism points to its own dissolution. It was Benjamin Constant who best summarized the historical process whereby the State had been transformed from Antiquity to Modernity. To be sure, Constant fails to identify the specific role of the social production of wealth – from slave labour to serfdom (feudalism) through to wage labour (capitalism). Nonetheless, he catches admirably the key “political” difference between the ancient polity and the modern nation-state. The reason that he fails to identify the crucial difference between the capitalist mode of production and that of Antiquity is, of course, that from within his liberalist theoretical perspective, the economy is scientifically separate from the Political – and therefore the Political transformation of the State can be traced independently of the process of production.



Yet there is one aspect of economic activity – that of “commerce” – that Constant isolates as the crucial catalyst in this transformation. According to him, what has made possible the transfer of political power from the associated citizen to the liberal State is the rise of commercial activity whereby individual citizens have been induced to focus on their own private gain rather than on the standing of their nation against other nations and on the daily conduct of public administration.



Because commerce has made possible the overcoming of war over scarce resources through the exchange of goods, individuals within nations have preferred to pursue commercial activities rather than support their nation-states in wars aimed at wresting control over wealth from other nations by military means. Because of this, all individuals within nation-states have an interest in preserving social and international peace and indeed they have as great an interest in ensuring that their nation-state does not interfere with their private property as they have in ensuring that other nation-states do not confront their own State. Thus, commerce works in two ways – internationally, by ensuring that commerce replaces war as a means of obtaining and maximizing individual wealth, and nationally by limiting the power and function of the State to preserving private property. It turns out therefore that it is the market economy that ensures both the national liberties of individual citizens and international peace.



But commerce also has one essential function: by turning the energies of individual citizens inward toward the maximization of their personal wealth, commerce also favours the transfer of the exercise of political freedom from the direct involvement of individual citizens to “elected representatives” who are entrusted with running the machinery of State and, in turn, appropriate the political power and energy of citizens in exchange for the granting of maximum “liberties” to each citizen.



Thus, first of all, commerce replaces exchange with war, both nationally between individuals, and internationally between nation-states. Second, because of its emphasis on exchange and wealth maximization, commerce involves “calculation” and therefore it encourages citizens to require a rational State and also to delegate their freedom to the State through representatives because commerce and its calculation require much more complex social relations and services that individual citizens cannot oversee directly – hence the need for “bureaucracy” (cf. Weber’s cognate theory of the State as the product of capitalist Kalkulation and Rationalisierung in Parlament und Regierung).





Two developments, then, have conspired to remove democratic control by citizens over the State since Antiquity: the first is the rise of commerce which has reduced the power of nation-states in military conflict whilst at the same time it has turned citizens “inward” toward protecting their individual “private property” and to entrust the “elected representatives” and the State bureaucracy with the power to administer society and protect their “rights”. The second is the sheer size of nation-states which, unlike the ancient republics from Athens to Rome to Geneva, no longer lend themselves to individual citizen involvement in day-to-day politics.



Thus, from “active freedom” in the sense of participatory democracy, modern-day citizens have moved to minimizing their engagement in Politics but at the same time maximizing their “passive liberties” that the State is called to guarantee.



But what happens if the State fails to maintain such guarantees over the liberties of individual citizens? Two problems immediately arise in Constant’s theory of the liberal State. And these are problems that show conclusively why liberalism and democracy, far from being synonyms or even cognate terms, are in fact contradictory concepts, and why therefore “liberal democracy” is an oxymoron. The first problem that the liberal State, far from being neutral, is in fact bound to act to protect the private property of individuals – and therefore its social role is functional to the protection of the “rights” of wealthy citizens. As George Orwell might have put it, all citizens are equal under the law; but some are “more equal” than others – depending on their property holdings.



The second and related problem is that, depending on the “type” of property held by individual citizens, some citizens might find it easier to escape the control of the State – or, obversely, they may have more control over the State – simply by virtue of the fact that these citizens may hold the State to ransom as against other States! This danger is particularly acute and virulent in capitalist societies because the widespread existence of money and markets makes wealth particularly “liquid” and “mobile”. Here is Constant acknowledging in his own ideological liberalist terms the tremendous importance of this point!



Le commerce rend l'action de l'arbitraire sur notre existence plus vexatoire qu'autrefois, parce que nos spéculations étant plus variées, l'arbitraire doit se multiplier pour les atteindre; mais le commerce rend aussi l'action de l'arbitraire plus facile a éluder, parce qu'il change la nature de la propriété, qui devient par ce changement presque insaisissable. Le commerce donne à la propriété une qualité nouvelle, la circulation: sans circulation, la propriété n'est qu'un usufruit; l'autorité peut toujours influer sur l'usufruit, car elle peut enlever la jouissance; mais la circulation met un obstacle invisible et invincible à cette action du pouvoir social. Les effets du commerce s'étendent encore plus loin: non seulement il affranchit les individus, mais, en créant le crédit, il rend l'autorité dépendante.

L'argent, dit un auteur français, est l'arme la plus dangereuse du despotisme, mais il est en même temps son frein le plus puissant; le crédit est soumis à l'opinion; la force est inutile; l'argent se cache ou s'enfuit; toutes les opérations de l'État sont suspendues. Le crédit n'avait pas la même influence chez les anciens; leurs gouvernements étaient plus forts que les particuliers; les particuliers sont plus forts que les pouvoirs politiques de nos jours; la richesse est une puissance plus disponible dans tous les instants, plus applicable a tous les intérêts, et par conséquent bien plus réelle et mieux obéie; le pouvoir

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menace, la richesse récompense: on échappe au pouvoir en le trompant; pour obtenir les faveurs de la richesse, il faut la servir: celle-ci doit l'emporter.

Par une suite des mêmes causes, l'existence individuelle est moins englobée dans l'existence politique. Les individus transplantent au loin leurs trésors; ils portent avec eux toutes les jouissances de la vie privée; le commerce a rapproché les nations, et leur a donné des moeurs et des habitudes à peu près pareilles: les chefs peuvent être ennemis; les peuples sont compatriotes.





In other words, as Constant’s wily analysis makes plain, it is the very spread of capitalist industry and therefore also of finance – it is the “world market” of capitalism that allows capitalists to play off, to establish a competitive tension, between different nation-states for investments so as to subtract themselves from any sort of “political” control, regardless of whether this control is democratic or not!

So in his own words, Constant is saying that the capitalist world market allows capitalists to elude the checks and balances that nation-states can impose on them by establishing a coalition of capitalist interests that run counter to the interests of the individual nation-states!



[L]e commerce a rapproché les nations, et leur a donné des moeurs et des habitudes à peu près pareilles: les chefs peuvent être ennemis; les peuples sont compatriotes.



The utterly and devastatingly anti-democratic bearing of Constant’s liberalist position could not be any more frightfully evident! The kind of “freedom” or “liberties” that Constant champions are to be subjected not to the “neutral” political control of the nation-state but rather to the control of capitalists by means of the nation-state! It is not the democratic nation-state that controls private property; instead, it is private property that controls the nation-state in accordance with “liberal” principles: liberalism and democracy could not be more starkly opposed! This is the true and devastatingly terrifying implications of Constant’s liberalism, and therefore the theoretical endpoint of all liberalist political theory. Here is Constant again:



Que le pouvoir s'y résigne donc; il nous faut de la liberté, et nous l'aurons; mais comme la liberté qu'il nous faut est différente de celle des anciens, il faut à cette liberté une autre organisation que celle qui pourrait convenir a la liberté antique; dans celle-ci, plus l'homme consacrait de temps et de force a l'exercice de ses droits politiques, plus il se croyait libre; dans l'espèce de liberté dont nous sommes susceptibles, plus l'exercice de nos droits politiques nous laissera de temps pour nos intérêts privés, plus la liberté nous sera précieuse.

De la vient, Messieurs, la nécessité du système représentatif. Le système représentatif n'est autre chose qu'une organisation à l'aide de laquelle une nation se décharge sur quelques individus de ce qu'elle ne peut ou ne veut pas faire elle-même. Les individus pauvres font euxmêmes leurs affaires: les hommes riches prennent des intendants. C'est l'histoire des nations anciennes et des nations modernes. Le système représentatif est une procuration donnée à un certain nombre d'hommes par la masse du peuple, qui veut que ses intérêts soient défendus, et qui néanmoins n'a pas le temps de les défendre toujours lui-même. Mais a moins d'être insensés, les hommes riches qui ont des intendants examinent avec attention et sévérité si ces intendants font leur devoir, s'ils ne sont ni négligents ni corruptibles, ni incapables; et pour juger de la gestion de ces mandataires, les commettants qui ont de la prudence se mettent bien au fait des affaires dont ils leur confient l'administration. De même, les peuples qui, dans le but de jouir de la liberté qui leur convient, recourent au système représentatif, doivent exercer une surveillance active et constante sur leur représentants, et se réserver, à des époques qui ne soient pas séparées par de trop longs intervalles, le droit de les écarter s'ils ont trompé leurs voeux, et de révoquer les pouvoirs dont ils auraient abusé.





Notice how in the quotation above, Constant constantly and surreptitiously shifts from “les hommes riches” to “les masses” and “les peuples” as if these entities were one and the same thing! In reality, of course, the interests of the wealthy (capitalists in a capitalist economy) and those of “the masses” (mainly wage labourers in capitalism) hardly ever coincide – and certainly they cannot coincide where the democratic operation of Constant’s “representative government” is concerned: because such a government will obviously represent the interests of “les hommes riches” (capitalists) well before it protects those of “les masses”! And the interests of capitalists and workers cannot coincide for the very reason that Constant himself reveals – that “les individus pauvres” (workers) are too busy “working” for a living to be able to oversee and monitor the work of their “representatives”! As we have argued again and again here, the essence of capitalism is the violent enforcement of the wage relation whereby capitalists force workers to give up their political freedom as living labour “in exchange for” the product of their living labour – what we call “dead labour” or “wages” which are the monetary equivalent of dead labour.



(Wages cannot stand immediately for products – that would amount to barter and would nullify the essential role of money in capitalism, that is, to separate workers from the product of living labour so that they do not have any say into how their living labour is applied – what is produced, how and when – except, of course, as “consumers” who “choose” products imposed on them by the owners of the means of production – capitalists – at a “price” that perpetuates their subordination to capital.)