Wednesday, 17 August 2011

Capital Controls, Flows and Inter-Capitalist Rivalries - the Case of the Euro

Capital flows in and of themselves DO NOT cause ‘crises’, but they are symptoms of deeper social antagonisms over the distribution and production of social wealth. It is essential to understand that the Global Financial Crisis was occasioned by the speculative efforts of finance capital to appropriate social wealth upon the ‘reflux’ of capital from its enormous accumulation in Asia under the virulent exploitation of workers subjected to dictatorial regimes, either extant as in China or of the recent past as in Japan, South Korea and Taiwan. The Chinese (Communist!) dictatorship deserves especial infamy for the way in which it has permitted the unprecedented exploitation of its workers at its own hands (state-owned enterprises) and foreign corporations whilst taking good care ‘to re-plough’ its accumulated foreign reserves into the ‘safety’ of US Treasuries (!) rather than expanding domestic consumption and social welfare to emancipate its own people!!

As Ben Bernanke established in his academic research (presented in Congressional hearings), this enormous accumulation of capital (or, as he labels it, “excessive savings”) together with the ‘laxity’ of Western governments in avoiding their ‘speculative investment’ gave rise to ‘speculative bubbles’ in Western capitalist economies whose ‘bursting’ has resulted in an almost unprecedented transfer of wealth to finance capital in the form of public debt taken over by ‘nation-states’ to rescue and protect the very finance capitalist institutions that caused the ‘crisis’ in the first place!!

As I have sought to explain below, ‘capital flows’ are really attempts by capital in its ‘liquid’ or ‘financial’ form TO ESCAPE the antagonism of the wage relation and to acquire ‘value’ speculatively (in the words of George Soros, by “creating imaginary value out of thin air”!). This ‘capital flight’ is not so easy or even possible for ‘industrial’ and ‘long-term financial’ capitalists who often have to suffer the ravages and the loss of wealth caused by ‘speculative bubbles’ with the rest of society.

The ‘crisis’ in Europe has different origins. In the EU the capital flows from the Franco-German ‘core’ to the ‘Mediterranean periphery’ was a result of the greater productivity (‘competitiveness’) of German industry which, in turn, was a historical legacy of the ‘social pact’ between a German working class that was thoroughly vanquished in the Nazi period and the German bourgeoisie.

This initial advantage was then cemented in the artificial undervaluation of the Deutschemark disguised by the Bundesbank as a steadfast technocratic “defence” (Verteidigung) of the DM against ‘wage explosions’ and ‘imported inflation’ and justified pathetically as a legitimate attempt to avoid a repeat of the Weimar ‘hyperinflation’ (see Karl Otto Pohl’s book on “The Defence of the DM”).

The reason why the German bourgeoisie agreed to European Monetary Union was precisely to cement the ‘chronic undervaluation’ of the DM and its export surpluses as well as to prevent ‘imported inflation’ from the Mediterranean ‘periphery’ with their periodic “competitive devaluations” under the post-Bretton Woods flexible exchange-rate regime. (This much is conceded by Padoa-Schioppa in his ‘diplomatic’ defence of the eurozone in today’s FT.)

As you may appreciate, we now have TWO LEVELS of social and international conflict over WHO BEARS the ‘burden of adjustment’ of the crisis. The first level is at the ‘national’ level where an increasingly cohesive EU government and the US government seek to negotiate and mediate the payment of debt obligations to ‘lenders’ (finance capital) by ‘borrowers’ (workers). Whereas financial capitalist elites are calling for “fiscal responsibility”, that is the timely repayment of their ‘private debt’ by governments through higher taxes and ‘austerity’, the task will be made difficult by the antagonism of workers (who will seek to maintain the ‘nominal’ value of wages and of employment) and of industrial capital keen to maintain effective demand through monetary expansion and perhaps ‘inflation’.

The most c r u c i a l   role in the resolution of this ‘conflict’ will be played by the European Central Bank that is ALREADY under enormous social pressure (from workers and industrial capital) to act as ‘lender of last resort’ and MONETISE the sovereign debts of member states whilst, on the opposite side, conservative forces and finance capital pressure it to maintain its (technocratic, ‘non-political’, independent’!) ‘credibility’ by keeping inflation targetting as its one and only raison d’etre. (This conflict is being played out DAILY in the pages of the FT itself. See stories on Trichet and Axel Weber.)

At the SECOND level, we are witnessing rising conflicts between ‘dominant’ nation-states from the US to Germany (representing the EU – note that President Obama called Kanzler Merkel last weekend at the height of the European crisis, and not the EU President) and also involving China’s dictatorship with its maligned ‘peg’ of the yuan to the US dollar which simply aggravates the adjustment burden for US employment given the steady ‘devaluation’ of the euro! For its part, the EU welcomes the falling euro but fears the onset of ‘inflationary wage expectations’ among its workers that would undermine social stability.

These ‘hegemonic’ conflicts have been widely reviewed and we will not enter them here. SUFFICE IT TO SAY, in conclusion, that the German bourgeoisie HAS NO CHOICE but to defend the EMU and to accelerate the strengthening of a “European economic government” (which includes a more active role of the ECB in inflation management with the possible election of the Italian Mario Draghi rather than Axel Weber to its presidency) PRECISELY BECAUSE the ‘eurozone’ is the real source of its ‘dominant’ or hegemonic status in Europe. Were the eurozone to break up, this would undermine the scale and weight of German (and European) capitalist industry on the global stage and in the world market!! (This is the conclusion of a recent report commissioned by the EU fretting the reduction of Europe to “a mere appendage of Asia” and the recurrent theme of the highest EU authorities –  also reported in the FT.)

Apologies for the lengthy post, but I feel certain that participants will appreciate the overriding importance of ‘shedding light’ (Sichtbar Machen) on what can be complex and confusing events.

Whilst it is tempting to confine debates of this type to ‘technical issues’, I believe it is a moral and civic as well as an intellectual duty for us to ensure that these matters do not become the province of “scientific experts” who, as Jurgen Habermas always reminded us, then become “the inmates of closed institutions” (in ‘Theorie und Praxis’). Regards.

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