The crisis and the left
Source Louis Proyect
Date 12/04/06/15:12

'The Crisis and the Left' by Leo Panitch, Greg Albo and Vivek
Chibber (eds) Leo Panitch, Greg Albo and Vivek Chibber (eds)
The Crisis and the Left: Socialist Register 2012
Merlin Press, London, 2011. 360pp., £15.95 pb
ISBN 9780850366822

Reviewed by Bill Jefferies

About the reviewer
Bill Jefferies is studying for a doctorate in "measures of the
transition from central planning to capitalism in the 1990s" at
MMUBS. He is a member of the editorial board of Permanent
Revolution magazine


THIS COLLECTION COVERS the economic crisis. It focuses mainly on
the USA but includes pieces on Latin America, Eastern Europe,
China and the Eurozone. Inevitably given the spread of authors,
and with contributions ranging from carbon trading to auto
bail-outs, the overriding theme is not always clear. Occasionally
the authors conflict with or even contradict each other. That is
no bad thing in itself of course., If there is a common thread, it
is that the credit crunch has ushered in a new crisis-ridden phase
of capitalist development.

The two opening pieces establish this theme. David Harvey
discusses how Marxists need to integrate finance into Marx’s
critique of political economy if they are to develop a successful
and rounded understanding of the contemporary world system. David
McNally asserts capitalism has entered a period of “global slump”,
the current crisis signals “the exhaustion of the accumulation
regime that had emerged almost thirty years earlier. Rather than
an ordinary recession, a short-lived downturn in the business
cycle, it constituted a systemic crisis, a major contraction whose
effects will be with us for many years to come” (36). Quantitative
easing (QE) “can no more generate sustained growth today than it
has in Japan over the past 15 years” (36).

McNally says that by every significant measure, the Great
Recession was the deepest and longest decline experienced by
global capitalism since the catastrophic collapse of 1929-33.
World industrial output fell 13% in 2009 (37). McNally is mistaken
here: in 2009 world trade fell by 13%, world industrial production
fell by 7%. In 2010 trade grew by 15% and industrial production by
10%, (J. Ebregt, 2012). The OECD economies, which do not include
China, experienced an average 6% fall in GDP. For several months
the world economy traced the collapse after the 1929 Wall Street
crash. But a $21 trillion bail-out package ensured that the
world’s financial institutions survived the crisis. McNally points
out that with “the important exception” of corporate profits, “the
rebound in output, income, employment and investment” in these
Western nations has been “incredibly tepid” (39). McNally shows
that business investment had at the time of writing (mid-2011)
failed to recover from its very low slump levels, but since then
net business investment has begun to rise more strongly.
Unfortunately, McNally fails to account for the rapid recovery of
world trade and industrial production, while world GDP growth
expanded at more than 4% in 2010 and 2011. At least until now, the
“global slump” has been limited to parts of the West.

Ursula Huws discusses how neo-liberal governments see the crisis
as a capitalist opportunity, with generalised austerity on the
back of the financial crisis, seeing the pace of privatisation in
the public services accelerating over the last two years. Larry
Lohman considers how the creation for a market in carbon credits
mirrors the growth of derivatives and is useless for limiting the
growth of industrial carbon use, while Frances Fox Piven describes
the disproportionate impact of unemployment and wage cuts on black
people and women in the USA. Nicole M. Aschoff shows how the US
government “rescue” of the three main US auto manufacturers was
undertaken at the expense of its workers, with the complicity of
the United Auto Workers (UAW) undermining pay, job security and
pensions. Adolph Reed, Jr and Merlin Chowkwanyun consider how
contemporary academics have discussed race and class in the USA.

The relative decoupling of the so-called emerging markets from the
older Western powers is discussed in essays on the Arab uprisings,
China and Eastern Europe.

Adam Hanieh considers how high oil prices are affecting the Gulf
Cooperation Council (GCC), consisting of the most reactionary oil
potentates, traditionally closely aligned with the USA. A nearly
tenfold rise in oil prices in the noughties created a surplus of
between $500 billion and $1 trillion and GCC holdings of US
securities increased by 50% (185). The close relationship between
the GCC and the USA is, however, being undermined by the growth of
China, now the largest importer of Saudi Arabian oil, and the
threat of the spread of the Arab uprisings to these very
conservative states.

Claudio Katz explains the relatively limited and short-lived
impact of the crisis on Latin America, as the authorities took
advantage of the extensive restructuring of their economies
already undertaken, and how high raw materials prices cushioned
the recession. Katz examines the different types of government
across the region – conservative, social democratic and leftist
popular –and describes the political ferment that poses the
possibility of the revival of the left.

Ho-Fung Hung assesses the durability of China’s growth, and
whether the Sinomania of parts of the left is justified. Hung says
that in 2007 the Chinese Academy of Social Sciences pointed to
“unsustainable expansion of an asset bubble” (217), and that since
then the reflation of the economy through post-crisis lending has
created “a mega bubble” (217). The bursting of this bubble “can be
the trigger of a second wave of global financial crisis” (218). He
points to the possibility of bad debts through reckless local
state spending, and Hung pointHhn says that by 2006 75% of Chinese
industry was “plagued by overcapacity” (219). Hung says that new
export industries have not replaced the jobs lost through the
privatisation of state manufacturing in the 1990s (220). Hung
demonstrates the growing income inequality and the decline in
consumption as a proportion of GDP (221). Hung concludes that
“From a Marxist perspective, a capitalist economy is said to
encounter an over-accumulation crisis when the rate of capital
accumulation surpasses the level that could not prevent rate of
profit from failing, either because of the build up of excess
production capacity or lack of consumption” (222).

But if productivity is rising faster than the physical increase in
the amount of investment, then the organic composition of capital
can fall, offsetting the fall in profit rates. While the
cheapening of the cost of the reproduction of labour power means
that living standards can rise, wages fall as a proportion of
national income and relative surplus value increases. There might
be over-accumulation of capital in China, but given the relatively
undeveloped nature of China’s economy, with 50% of the population
still employed in agriculture, and the very low or even absent
organic composition of capital inherited from the abolition of
state planning in the 1990s, there are reasons to doubt whether
that situation has been reached yet.

The profit rate of all industries may have fallen from 7.69% in
2007 to 7.09% in 2009 (223), but this was at the bottom of the
crisis, and over the last two years profits of Chinese firms have
risen very fast. What is the rate of profit in 2010 or 2011? Since
2006 Chinese annual fixed investment has more than doubled, and
China’s steel production has increased by a further 50% per annum
in 2011. Is this a sign of chronic over-capacity? The probably 200
million strong army of unregistered migrant workers excluded from
official unemployment figures makes estimates of the size of the
industrial working class uncertain. While there is certainly
evidence of a property bubble, house prices have fallen or
stagnated in 2011, and a state housing programme to construct 10
million subsidised houses has limited the slow-down in the
residential construction sector.

Hung points to China’s high proportion of exports relative to GDP,
which reached about 40% in 2008 before falling to around 30% by
2009 (228). This is in and of itself evidence of rebalancing, but
more importantly, this compares sales with GDP, which is a measure
of value added. A very high proportion of China’s exports consists
in the processing of imported parts, for assembly and so on. The
contribution of exports to Chinese GDP is much lower than the
nominal figure of export sales to GDP. Hung may be right that
China faces immanent economic crisis, but as the inaccuracy of the
2007 Chinese Academy of Social Sciences forecast about the housing
bubble shows, these predictions are fraught with difficulty.

Jan Toporowski considers the impact of the crisis on the
post-Communist, newly restored capitalist economies of Central and
Eastern Europe (CEE). Toporowski shows the wholesale destruction
wrought by the introduction of the market into these states and
their weakness faced with the crash of 2008. The smaller states
like Latvia and Hungry remain prostrate before the agency of
Western finance, the IMF, World Bank and ECB, while the absence of
a socialist alternative stymies their resistance to the free reign
of capital. Peadar Kirby considers the collapse of the Irish
Tiger, and the failed response of the Irish authorities to stem
the collapse of speculative building and the banks that had funded
them. Kirby shows how the ECB imposed austerity in return for
saving the Euro, and demonstrates the failure of the labour
movement’s collaborationist strategy. The rich remain rich, and
the structural features of the Irish economy and society remain
largely unchanged, even though there is mass popular and working
class disillusion with and alienation from them.

Socialist Register concludes with a symposium on the Eurozone
crisis in the shape of the collapse of the Greek economy, and two
alternative socialist strategies to deal with it. Elmar Altvater
analyses the Greek economy within the Euro and contrasts it with
the USA, showing how the deep structural inequalities of the
Eurozone have shaped the response of the different players within
it, and the determination of the Northern powers to make the South
pay for the crisis. Costas Lapavitsas situates the Greek crisis
within the attempt of European capitalists to create a world
currency to rival the US dollar. Lapavitsas unequivocally asserts
that this attempt has “effectively failed” (288). Lapavitsas shows
how the Growth and Stability pact created a “race to the bottom
for workers’ wages and conditions across the Eurozone” (289);
attempts to rescue the Euro have been made at the expense of the
peripheral countries, with lenders making healthy profits in 2011
(290). The authorities have bailed out the banks rather than the
nations, maintaining pressure on workers’ conditions while
attempting to avoid widespread banking failure. Germany as the
hegemonic European power stands to gain most: “The risks are high
but, if the strategy succeeds, Germany could become the undisputed
master of European capitalism, in command of the second most
important form of world money” (291). Recognising this “requires
abandoning the notion that the European Monetary Union could be
reformed in the interests of working people, or that a ‘good euro’
could be created” (291). Lapavitsas points to the contradiction at
the heart of the position of those who want to stay in the Euro,
while restructuring the debt: “they propose to write debt off
unilaterally while remaining within the framework of the eurozone,
the main powers of which will have to take the losses. Quite how
this will be achieved has yet to be explained” (292). Instead,
Lapavitsas proposes a solution that “alters the balance of social
forces in favour of labour and pushes Europe in a socialist
direction” (294). This requires a departure from the Euro. A
default on debt would raise the question of Eurozone membership.
It would require the public ownership and control of the banks,
capital controls, redistributive tax and wage policies and a
democratic restructuring of the state. According to Lapavitsas,
these measures “would not necessarily be socialist in the first
instance”, as precise strategy would emerge through struggle. This
is a moot point, since the logic of the struggle appears to impose
socialist answers from the outset.

Michel Husson presents an alternative political perspective that
attempts to reconcile membership of the Euro with a wholesale
restructuring of national debt. Husson points out that devaluation
benefits one country at the expense of others, that it is an
individual rather than collective solution to the crisis. Husson
says that “A government of social transformation would, indeed,
commit a terrible strategic mistake by leaving the euro, exposing
itself to all kinds of speculative retaliation” (302). But how
much choice would a government of social transformation
(presumably long hand for a socialist government) have in the
matter? Indeed, Husson does not exclude leaving the Euro (304).
The real difference seems to be whether departure from the Euro is
a prerequisite for restructuring national debts in the interests
of the workers – Husson thinks not, Lapavatisas thinks so – or
whether it is simply the inevitable result of doing so. If so, how
much of a difference is there really between the two sides?
Rumours abound that even the current conservative,
austerity-driven Greek government may be forced from the Euro, in
spite of its commitment to meet the demands of the ECB and IMF.
How much chance would any leftist government have under these

The Socialist Register 2012 provides a fascinating and very
informative series of pieces on diverse aspects of the current
crisis. Although occasionally eclectic and contradictory, it is
thought-provoking and insightful throughout.

Ebregt, G. van W. J. (2012). "CPB world trade monitor Feb
2012", Netherlands Bureau for Economic Policy Analysis. Retrieved

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