Commentary on Political Economy

Sunday 7 August 2011

The Downgrade and the US - Comment on Clive Crook FT Column

Sensible commentary from Crook overall. But what is missing is "a framework of analysis". This is something that we have been outlining at Essentially, the US emerged from the Great Depression and went into World War Two with a "New Deal Settlement" inspired by President Roosevelt: and the US defeated the Depression, won the War, and also dominated the ensuing peace.
The reasons behind this triumph are that the New Deal Settlement installed a regime of relative exploitation whereby workers' wages and living conditions were made to be "the motor" of industrial growth and development. This did not happen in Asia (Japan especially) where instead a regime of "absolute exploitation" was utilised whereby (to borrow a phrase from Paul Krugman) "resources were mobilised" (explosive population growth, rapid urbanisation, use of female labour, destruction of environmental resources, extreme technologies such as nuclear, and so on). Europe was a half-way house - but again the German bourgeoisie was allowed to exploit its workers by repressing wages and living standards and undervaluing the Deutschemark so as to benefit the large exporters - some of them already beneficiaries under the Nazi regime (Volkswagen, Mercedes, Porsche, Siemens, Krupps, Thyssen).
For both Japan and Germany, the US New Deal Settlement served to absorb their exports so as to strengthen their economies as bulwarks against the Communist threat (Soviet and Maoist). What we have had as a result of the Great Moderation since the 1980s is that the US have been asked to absorb both exports from China and also to recycle the capital arising from the profits of US corporations and of the Chinese dictatorship. The obvious inability to absorb this recycled capital by expanding US domestic consumption meant that US "finance capital" (Wall Street) became "creative" with its investment and led to an asset-price spiral culminating in the Financial Crisis.
Meanwhile, the profits from exploiting their own workers to a pulp through "absolute exploitation" have been used by the Chinese dictatorship to develop a military-industrial complex that poses dangers to world peace and that must be confronted and defeated. This can be done and US employment and manufacturing clout can be re-established only on condition that the 'export-dependent' bourgeoisies such as those of China, Germany and Japan are forced (they will never be persuaded) to change tack and adopt "relative exploitation" by a wall of greenbacks and rising inflation that will force them to revalue their currencies and adopt a growth regime more consonant with the New Deal Model.
This is why Ben Bernanke and the Fed will simply have to engage in new bouts of quantitative easing so as to maintain US leadership that is needed to ensure world peace and to democratise global societies - and capitalism itself. What the US cannot and must not do is to follow the advice of the Chinese dictatorship: follow austerity and atrophy and demolish its industrial and financial, and then military leadership. (Once more, interested friends can follow us at


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