'The crisis' and the crisis of global capitalism

Challenges for the Left in South Africa
23 September 2010

"The financial crisis" is one facet of the systemic and converging crises of capitalism - a predictable symptom of oligopolistic late capitalism; but what main challenges lie ahead for the Left in South Africa?


(Note: This is a shortened version of a paper presented by Dot Keet to a conference in Brussels, October 28-November 1st 2009, sponsored by the Rosa Luxembourg Foundation in cooperation with the World Forum on Alternatives and the Transnational Institute, on “The World Crisis and Beyond – Alternatives and Transformation Paths to overcome the Regime of Crisis-Capitalism”.)

Anti-capitalist analysts of the current global crisis argue that this is a crisis of “neoliberal financial-market capitalism” and that it “is not a crisis of the neoliberal variant of capitalism but the crisis of capitalism” [Walden Bello, ibid].  Left analyses also point out that “the financial crisis is only the visible tip of the structural crisis of globalised capitalism” [Mamdou Habashi, ibid ], and ‘the’ crisis is in fact a “combination of various crises which are all the fruit of capitalist logic” [Francois Houtart, ibid]; but with a further observation that “the current crisis is neither a financial crisis, nor the sum of multiple systemic crises but the crisis of imperialist late capitalism of generalised and financialised oligopolies” [Samir Amin, ibid]. These differing perspectives or emphases require deeper discussion and fuller clarification on the sources and interaction of these forces and dynamics, as well as on the nature and main location of their multiple effects. There are, however, further perspectives that need to be included with these observations and in these discussions.

1. Financial and productive capital

In the first instance, further observations and elaborations are required on the respective role(s) and relationship between financial and productive capital:

1.1   It is certainly correct to point out that financial forces and agencies have become vastly more powerful over recent decades and have down-graded and to some extent side-lined productive capital from its formerly dominant position. But the latter (in manufacturing, mining, agriculture, forestry, fisheries and services etc) have not thereby ceased to exist and operate. They have, in fact, continued to actively argue for and impose their own particular demands and specific needs in governmental policy-making (eg on foreign trade and investment liberalisation) and actions (eg oil companies and the gulf war). And it is such international investors and production companies - largely transnational corporations, TNCs - that are the main ‘face’ of internationalised capitalism from the North in the South, and that impose the main direct impacts in the countries of Africa, Asia , Latin America and the Caribbean (see 2.3 below).

1.2   At the same time, it is not correct to posit a sharp line distinguishing financial from productive capital because the latter depend to a considerable degree on the former in order to function. Conversely, productive (eg auto-manufacturers) and services (eg supermarket/retail) enterprises have created their own financial/credit devices similar to those supplied by specifically financial institutions. Such production and service enterprises have, therefore, also contributed to the escalating financial crisis – through individual/family debt - and hence to the ‘decline in consumption’ in ‘the real economy’. They have, in this way, contributed directly to the broader and deeper economic and social dimensions of the current crisis, especially in the richer ‘more advanced’ countries and high consumer societies, but with implications also for the lesser and least developed countries in the South [see 2.1 below].

1.3   This inter-penetration and interdependence of financial and productive capital is manifest at an even more fundamental level. Although financial and productive capital have differing operational modalities and requirements, and although there are therefore differences in their priorities and their respective immediate demands on governments and other public authorities, and inter-governmental institutions [see 2.3 below], they also have common interests and commitments to the essential values/philosophy/ideology of capitalism. The exertion of such influence and power is intrinsic to their own continuing role(s) and status, and the functioning and survival of the capitalist system as such.

2. Multiple dimensions of the crisis.

The multifaceted nature and multiple dimensions of the global crisis/crises of capitalism relate to the financial and ‘real economy’ crises, growing unemployment and poverty crises; food supply/price crises and related hunger and health crises; energy and other resources extractions and environmental damages, ecological destructions, climate change and ‘natural’ disasters. In this context it is necessary to note that:

2.1   The more explicitly and specifically financial dimension of the crisis is primarily and fundamentally located in the advanced economies, in the heartlands and at the core of globalised capitalism. But this financial crisis impacts in the peripheral economies in the South directly - such as tighter and more costly trade credits from northern banks precautiously holding onto their cash reserves. The crisis also impacts indirectly - such as through governments in the North committing major proportions of their financial resources towards dealing with ‘national’ financial, economic and social needs and away from ‘aid’ to countries in the South. Yet many of the latter have been made structurally dependent on such aid.

2.2   The other dimensions of the global crisis/crises emerging from the very functioning of globalised capitalism will gradually become more strongly evident and will be manifest in all countries and economies. But the scale and impacts of these multiple crises will be uneven from country to country. This will be largely commensurate with the degree to which, or the ways in which countries have opened up (‘liberalised’) their economies and are exposed to the full functioning and effects of globalised capitalism. For many, this is effected through the structural orientation (or ‘extroversion’) of their economies to import/export trade with the richest economies, now in recession; although affected also by other internal/domestic structural and conjunctural (political, social and cultural) factors.

2.3   For many countries in the periphery of globalised capitalism, the economic and social effects of the functioning of ‘the global economy’, and the international ‘policy’ requirements in support of transnational corporations and capital - largely imposed through the IMF, World Bank and the WTO - have already been emerging and experienced over many decades. These effects include, amongst others:

• de-industrialisation and the massive growth of unemployment and soaring rates of urban concentrations and poverty in weaker economies;
• the undermining of small-scale agriculture, adding to rural-urban population flows; the decline in domestic food production and growing dependence on ever more expensive food imports;
• the latter aggravated by commodity speculators in the North, especially in the context of the increasing value of crops for the production of agro-fuels.

The accompanying internal land, water and environmental pressures and stresses, and the national and international effects of global warming and climate instabilities - resulting massively from the functioning of industrialised capitalism over a century and more - are also already being felt most directly and heavily in countries of the South. These effects will continue and deepen for such countries - large and small, strong(er) and weak(er) - although also threatening the entire planetary ecological-system(s) and all of humanity.

3. Systemic dynamics intrinsic to capitalism

Transnational production and service corporations, international exporters and investors located in the more highly industrialised economies of the North have, in recent decades, pressurised their governments to impose bilateral and bi-regional economic agreements on the countries and regional groupings of the South, and/or to utilise major multilateral institutions to force the opening up of all sectors in all economies across the world. This intensified drive arises directly from the systemic dynamics and the dilemmas intrinsic to capitalism, namely:

3.1   The ever-increasing productive capacity of industrial capitalism, expanded and intensified with each new technological advance, results in escalating over-production relative to domestic levels of consumption or ‘under-consumption’. Despite intensive social conditioning and persuasions/pressures towards greater mass consumption in the richest countries - and utilising easy credit/debt for this purpose - ever-expanding over-production (referred to, in business terms, as ‘excess-inventories’) continues to outstrip even the exaggerated levels of consumption and outright waste within these societies. Furthermore, the continuing disjuncture between production and consumption in the richest economies is constantly exacerbated by downward pressures on the wages of the employed and semi-employed, as well as through unpaid (mainly womens) labour, and deliberately entrenched ‘reserves’ of unemployed.

3.2   Within the class compact in the advanced economies after the Second World War, the still dominant industrial capital in the richer countries was, for decades, faced with unacceptable levels of taxation and other social responsibilities (such as welfare contributions, pension funds etc). This ‘social contract’, reflecting the class balance of forces at the time, even included the legal(ised) rights and power, and some accommodations to organised labour in those years. But, the vast investments entailed in the new unfolding technological revolution from the later 1970s and into the 1980s were not – yet- yielding commensurate returns for capital. These factors combined to create unsatisfactory rates of profit for capitalist enterprises in these economies in these years. And, what is more, this was at the same time that new manufacturing competitors were emerging in the national corporatised economies of East and South-East Asia ‘unburdened’ by such social obligations and organised popular counter-forces.

3.3   Thus, an intensified thrust was pursued from the 1980s and into the next decades by industrial, agricultural and service companies in the most developed countries. It was necessary to off-load or export their ‘excess’ production/capacities and to find better rates of profitable investment abroad. It was also very useful to outflank and ‘discipline’ labour at home through access to ‘more amenable’ conditions abroad. This entailed the ‘liberation’ of capital from regulatory controls and other political and policy constraints within their own ‘home’ countries. But it also required the removal of other governments’ constraints upon their exports into and investment operations in other economies. This, in turn, entailed exerting bilateral and multilateral pressures on other countries to ‘liberalise’ their national trade and investment regimes. The ‘debt obligations’ of many such countries provided further useful enforcement mechanisms in this regard. The inevitable effect – and the deliberate aim - of these instruments and impositions was further vast capital outflows from such economies in the South. This added yet further to the over-accumulation of capital in the home economies of globalised corporations in the North.

3.4   While many banking and other corporations and companies from the more advanced economies were reaping rich returns from their operations in the ex-colonies/neo-colonies in the South, and through major new opportunities opening up throughout the world (most notably China, of course), these ventures carried their own complexities and even faced some continued regulatory and operational constraints in such countries. Thus, many major holders of accumulating capital – both institutional and individual – opted not to venture onto the choppy waters of foreign direct investment (even though it was highly lucrative) or even take on the practical, political and economic challenges of real investment at home. They chose rather to by-pass productive investment altogether and to use their capital to directly create more (money and paper) capital in a self-reinforcing upward spiral of escalating accumulation. The ever-greater financial concentration and centralisation has exacerbated the ‘financialisation’ of late capitalism.

4. Crises from the neoliberal version of capitalism, or crises from capitalism per se?

In light of the above, the inter-relationship between the role/functioning and effects of neo-liberal globalised capitalism in creating the current crisis/crises, on the one hand, and on the other hand the role of the intrinsic dynamics within capitalism, per se, in creating the current - and recurrent - crises is thus clear. These processes are intricately inter-related and mutually reinforcing. In sum:

4.1   Neoliberalism - in practice and as a theoretical rationalisation - is clearly itself a direct outcome and requirement for Capital to be able to break out of the dilemmas of overproduction and limitations on their profit-maximisation in their home economies. This outward drive was also important as an offensive strategy to try to outflank and pre-empt effective productive competition advancing further from within other economies in the world (particularly, but not only, in Asia).

4.2   The dilemmas of Northern-based capitalist enterprises and investors are, however, accentuated because some of the more adept governments of the South, separately and collectively manage to retain certain national ‘policy space’. Thus, some economies in the South are able to make some (small but significant) financial and technological gains from the operations of international capital in their countries. Some such governments also contrive to provide (direct/indirect) supports to domestic enterprises to enable them to continue growing and even take advantage of the consumer markets, the financial needs and other economic opportunities/acquisitions in the richest countries (most notably the US of course).

4.3   At the same time, the processes of capital over-accumulation and concentration in the financial centres in the North are also accentuated by the ‘foreign reserve’ strategies of governments in the South, largely focused on Northern-based banks, and on the purchase of rich country government bonds. These capital flows are augmented by the legal/illegal capital transfers to the North by the (small but very affluent) economic and political/rentier classes in the more economically successful (or richly resource-endowed) countries of the South. These add yet further to the accumulating resources and power of financial institutions in the North and the ever-higher levels of financialisation of these economies. [as in 3.4 above].

5. Oligopolistic and imperialistic late capitalism

What also emerges clearly from the above is that the inherent dynamics of capitalism demand the unceasing expansion of capitalist production and unlimited consumption throughout the world.

5.1   The ‘opening up’ of all countries and all sectors to the operations of capitalist forces, and competition between them for control over markets and resources throughout the world, is promoted by ‘their’national governments through all the economic/financial, and political/legal means required. This includes recourse to military means when necessary. This expansion/penetration and control has, in recent years, also been promoted through formally ‘multilateral’ institutions, above all the IMF/WB and the WTO, but this has not ended the plurilateral, bilateral and unilateral exercise of force by the more powerful governments around and even within these very institutions. Thus, the expansionary and imperialistic nature of capitalism continues in both the political/military and economic/social (and cultural) dimensions.

5.2   At the same time, there is an ever-increasing concentration of ownership and control within ever-fewer banks and other financial institutions and within ever-bigger globalised corporations and conglomerates. The financial corporations are now considered ‘too big to fail’, and feel they are too big to be controlled or even regulated by governments. The conglomerates are being combined, willingly or forcibly, through cannibalistic mergers and acquisitions (M&As) in each and every sector. The overwhelming financial, economic, political, ideological, social and cultural power exercised by such gargantuan financial and other economic entities/agencies is creating an unprecedented oligopolistic concentration of power over, and overriding, the formal processes and institutions of political ‘democracy’, even where they exist.

5.3   At the same time, however, the erstwhile hegemony of one global superpower now faces a future of multiple challenges in an emerging multi-polar world. The question for anti-capitalist analysts, governmental and non-governmental, and all labour and social movement activists is how capitalist concentration and control can be countered by global socio-economic diversification and socio-ecological transformation and genuine institutionalised popular democratic power. This is now both a crucial need for social equity and justice and a survival necessity for humanity and the planet.

6. Strategic perspectives on the immediate and further future

Organised mass responses to their extreme exploitation, dispossession and oppression is growing - although unevenly - in the countries of Latin America and the Caribbean, Asia and Africa. Such mass reactions will undoubtedly continue, especially as they are hit most forcefully by the climate instabilities and ecological crises threatening the whole world. What is more, the ‘market’ modalities proposed to deal with these crises, and the levels and forms of economic activity and policies still being pursued by powerful corporate forces and governments will contribute further to the looming climate and ecological crises now and into the future.

In the period immediately ahead, the crises in the ‘real economy’ will not disappear.

• Even if the functioning of the financial sector seems to be ‘stabilised’ since the upheavals of recent years, the banks continue to retain enormous financial, economic and consequent political power. This will not be reduced even if some precautionary national and international regulatory ground-rules may eventually be devised to make their operations more ‘sound’ and less prone to risk-taking, destabilising miscalculations, and extreme self-serving excesses in many directions.
• The ‘stock markets’ continue their established modus operandi unabated. They continue to exploit whatever opportunities they find or foresee in the real economies. Financial operators/speculators are unashamedly manipulating to their immediate profitable advantage the struggles within and between corporations, the fluctuations in different commodities and sectors and in national economies the world over; and even ‘betting on’ potential sovereign debt defaults of the most troubled countries.
• The reported ‘improvements in the business climate’ and the apparent return to investment and revived production and consumption and growth have yet to be confirmed on the ground, but more global ‘growth’ is actually a problem in itself. Furthermore, even such ‘revived’ production will not produce a return to employment for the hundreds of millions of unemployed the world over, as business will, characteristically, take advantage of the current crises to reduce their employee numbers and labour costs, and even the labour rights and conditions that have been established in some countries over the years.

In short, over and above the long-term environmental and climate threats, the established features of oligopolistic late capitalism and the immediate crises that have been created in the key economic and social sectors are set to continue. The scenario ahead is continued instability and unpredictability, fluctuations in investment, production and ‘consumption’, and of course in the world’s climate patterns. The period ahead will also see further shifts within and between economies, and in the global distribution of economic and political power.

In South Africa with its already acute social and economic imbalances, resource misuses and environmental abuses, the challenges of the ongoing crises created and aggravated by globalised industrial capitalism and climate change are going to be particularly marked. The common sources of these crises in the very functioning of capitalism provide the basis for the forces of the left and growing social movements to build their respective campaigns, and their mutual support and solidarity in creating alternatives for their communities and the whole country. But this must be with the rest of the Southern African region and the African continent... and in ways that are also to the benefit of humanity and our common planetary home.