Is
The Big Ship America Sinking?
Contradictions and Openings
By Sam Gindin
10 February, 2007
Socialist
Project
There's something happening
What it is ain't exactly clear
Buffalo Springfield, 1966
Are
we in the midst of a momentous turn in world politics? Donald Rumsfeld
has been shuffled out of the Pentagon. Daniel Ortega, Washington's nemesis
from the Sandinista Revolution of the late 1970s, is back as President
of Nicaragua. Hugo Chavez has been triumphantly re-elected, and Bolivia
and Ecuador also have new left-populist presidents. U.S.-led neoliberalism
is scrambling in Latin America; the U.S. state seems to be in the throes
of a full retreat in Iraq; and, in its look ahead to the year 2007,
The Economist is warning of the dangers of an 'authority deficit' at
the level of nation states, international institutions, and the role
of 'the superpower'. The U.S. economy is slowing down; Europe's economy
is speeding up; and China, having quadrupled its output over the past
15 years, is becoming more confident and assertive internationally.
The fall of the U.S. dollar has been imminent for some time, but now
the talk is of its decline turning into a chaotic rout. And suddenly
everyone is an environmentalist, with the Bush Administration being
the main force against the Kyoto climate change protocols.
What next? With the Bush
neo-conservatives on the defensive, will a new common sense emerge?
Will the broad left regain its confidence and move to overturning three
decades of increased inequality, erosion of social rights and corrosion
of substantive democracy? Will this also extend to challenging corporate
power? Will Bush's humiliation in Iraq spill into Canadian debates over
the war in Afghanistan and drag Harper down along with his imperial
friend? Will the new reality in Iraq force the U.S. and Israel towards
some substantive compromise with Palestinians? Will the turmoil within
the American empire provide space for the populist experiments taking
place in Latin America – experiments that might inspire a more
radical activism in our own countries?
An Unraveling Empire?
It is tempting to identify,
in all of the above observations and questions, signs of the unraveling
of the American empire. But to argue that the American economy may be
on its last legs substitutes wishful thinking for sober analysis. The
American economy retains a remarkable capacity to adjust to change (with
great costs, of course to American workers). American military power
has limits but it remains the greatest military power the world has
ever seen, and its coercive potential and reach should not be underestimated.
Shifts are occurring among the hierarchy of capitalist states and regions
– the dramatic rise of Asia and the development of the European
Union being the most obvious and important – but American leadership
in the making of global capitalism continues.
There are other reasons for
caution. Empires aren't toppled by falling exchange rates. The U.S.
dollar fell by 44% relative to the G-10 countries between February 1985
and October 1987. Although there was a recession in the early 1990s,
this was followed by the great American 1990s economic boom. Empires
do not collapse from particular defeats either. Vietnam defeated the
U.S. in the 1970s, but a main priority of Vietnam today is to deepen
its participation in American-led globalization. The American economy
is clearly not focused on addressing popular needs, but that is not
what matters to capital's successful survival. For American capital,
the more important development is that U.S. after-tax profits as a share
of GDP are at their highest since 1929.
The U.S. is losing manufacturing
jobs at an alarming rate: the number of manufacturing jobs in the U.S.
is today below where it was fifty years ago and as a share of total
jobs, manufacturing employment is today less than half of what it was
then. Yet because of the high productivity of the remaining workers,
manufacturing production is not disappearing: the volume of manufactured
goods produced in the U.S. has increased six-fold since 1950. Remarkably,
given the decline in manufacturing jobs, manufacturing production has
maintained its share of the American economy's real (after adjustments
for price inflation) output. The U.S. continues to generate half the
research and development done amongst the G-7 leading capitalist economies.
According to the U.S. National Science Foundation, the American share
of the global production of high-tech goods, in spite of all the outsourcing
and the imports, actually increased from 25% a quarter of a century
ago to 42% in 2003. It is certainly true that high tech production in
China and South Korea has increased much faster, but they started from
a low base (about 1% in each country) and their global share has risen
to what is still a fraction of the U.S. levels, at only 9% and 4% respectively.
Even if some U.S. multinational
corporations have lost their former overwhelming dominance in certain
sectors, others have maintained their strength, as with the aerospace
industry, and new ones have flourished, particularly in such high tech
sectors as computers, telecommunications, pharmaceuticals, medical equipment,
biotechnology, and others. The leadership role of the U.S. is confirmed
even as European and Asian companies increase their drive to catch up,
or at times even surpass, American manufacturing. In other sectors,
the advice and skills they seek is that coming from those with the most
experience and expertise in the making of global capitalism: which overwhelmingly
means U.S. banks, investment houses, consulting agencies, and law and
accounting firms still dominate the financial and services sectors.
A Collapsing Trade
Position?
What about the American trade
deficit (including a trade deficit even in high tech goods) and the
loss of competitiveness this expresses? American exports have in fact
been very competitive and increased very significantly. It is the remarkable
level of imports that account for the trade deficit. In high tech, for
example, American consumers are buying, and American businesses using,
more such goods than anyone else does. The result is that the U.S. ends
up both producing more and importing more. It should also be noted that
American multinationals now sell far more abroad through their affiliates
than through exports from the USA, so trade data does not give a meaningful
measure of American corporate strength.
The U.S. has been able, for
over a quarter century now, to import more goods than it exports and
pay for this through other countries accumulating American dollars (dollars
which are now falling in value). If any other country tried to do the
same, it would be disciplined by international financial markets as
capitalists would pull out their capital until that country corrected
its 'overspending'. The U.S. can get away with this not just because
the dollar is the dominant currency in the world: more important is
that global finance is still relatively confident in the American dollar
(the dollar remains the 'safe haven' in an uncertain world) and the
resilience of the American economy. The net result has, essentially,
been that a larger share of global labour has been working to supply
the U.S. with its needs, and that the U.S. has also captured a disproportionate
share of world savings. In this sense, the U.S. has been able to run
consistent trade deficits for over a quarter of a century as a sign
of relative strength rather than weakness in relationship to other advanced
capitalist centers.
The U.S. economy may face
a significant degree of instability and uncertainty in the coming period.
But a global run on the U.S. dollar is most unlikely because of the
way the rest of the world is now structurally interdependent with –
and even directly integrated into – the American empire. The countries
currently holding large dollar reserves, especially China and Japan,
hold dollars to keep their own currencies from rising relative to the
dollar and so maintain their advantage in exporting to the crucial U.S.
market. If they did convert their dollars to another international currency
such as the yen or euro, the Japanese and Europeans – panicking
over a competitiveness-destroying rise in their currency – would
immediately turn to buying up dollars, thereby neutralizing the net
impact on overall holdings of dollars. More generally, the countries
with large holdings of U.S. dollars have come to understand that, given
their integration into global capitalism, a crisis for the dollar is
a crisis for everyone. This general concern to support the dollar even
as it falls, and avoid a collapse of the U.S. economy, reflects the
contradictions of success within the American empire, and that structural
interdependency has become a significant foundation of the American
empire.
A Military Power
in Retreat?
The U.S. military impasse
– and potential full retreat – in Iraq raises the limits
to the American empire. The Los Angeles Times (December 3, 2006) reports
that the recent trip of top American officials to shore up their Middle
East allies found “friends both old and new near a state of panic”
fearing that “that the Bush administration may make things worse.”
But Iraq and the entire Middle East will still have to sell their oil
on the world market, and the U.S. will keep receiving it (as it now
does from Venezuela in spite of the Bush-Chavez conflict). American
oil companies will continue to play a prominent and profitable role
in the process (as they still do in Venezuela and Bolivia). Many of
the new American military bases established in the Middle East and Central
Asia in the course of the 'war on terrorism' are likely to remain in
place. And an unintended consequence of a less unilateral American state
forced into negotiations with Iran, may well lead Iran to become more
'responsible' and integrated within global capitalism, an outcome not
necessarily negative for American interests.
There also other reasons
for a more sober assessment of existing geopolitical alliances and balance
of forces. The electoral rejection of neoliberalism in Latin America
states, for example, is obviously a great electoral victory for the
people in these particular countries and a rejection of neoliberal policies.
But these neither yet represent a defeat of neoliberalism as a system
of power and capitalist market relations or a fundamental challenge
to existing global social relations. In Nicaragua, it is not clear that
Ortega any longer represents a challenge to neoliberalism. Argentina
has come back into the fold of global capitalism, and is actively negotiating
the repayment of its defaulted debt. Bolivia and Ecuador face serious
limits on how far radical policy agendas in such small countries can
be implemented given their international integration and poverty. And
even Chavez, for all he has accomplished in Venezuela has, to date,
found it necessary to go slow in challenging private industry and finance.
Brazil, with half of Latin America's population, is clearly critical
to continental possibilities but Lula has not emerged as a threat to
either the Brazilian or global capitalists, and, if anything, his government
has served to contain the opposition from below. There is need for a
careful calibration of the Latin American struggle against U.S. imperialism
and political hegemony, and the forces that remain to be defeated.
China raises a different
set of issues and cautions with respect to shifting geopolitical forces.
Chinese growth, much at the great expense of Chinese peasants and ecology,
has indeed been stunning. But China has a long way to go to match the
USA. Its total Gross Domestic Product remains about one-quarter that
of the U.S. The top 500 companies in China are still only one-fifth
the size of the top 500 U.S. companies. China has relied on foreign
direct investment as no other capitalist development transition has
ever done. Even as China becomes more technologically sophisticated,
its dependence on global technologies, components and markets is not
decreasing, but increasing. Between 1993 and 2003, the share of China's
exports produced by foreign-funded enterprises (FFEs) increased from
35% to 79%. The FFE's share of exports of computer equipment rose from
74% to 92%, and of electronics and telecom from 45% to 74%. Between
1998 and 2002, FFE's even increased their share of China's domestic
consumption of high-tech goods from 32% to 45% (see the essay by Howard
French at www.howardwfrench.com).
A crucial question is whether
Chinese dependence on foreign corporations is just a pragmatic economic
strategy that can be modified as China develops, or whether it carries
with it a social significance. For example, the foreign dependence affects
the making of a Chinese capitalist class, intertwining it with ties
to foreign markets and suppliers. That is, the Chinese capitalist class
has a developing vested interest, like capitalists elsewhere, in the
conditions of global capitalism, as well as the Chinese economic space.
This can be partly seen in the major political and economic summit held
in December between Chinese and American political and business leaders
over the nature of Chinese-American economic ties and their relationship
to the global economy. To the extent that such a Chinese capitalist
class is in fact emerging, the main global 'contradiction' represented
by China's growth may consequently not be found in its threat to the
U.S., but rather in China's internal class and ecological relations.
There are also specific limits
on China's emergence as global political rival in the immediate period.
There are some serious potential problems with China's banking system
and the unserviced debt that has been mounting; the inflow of speculative
'hot-money' and China's real estate bubble are becoming more difficult
to contain with the Bank of China's main sterilization policy of building
up U.S. dollar reserves; an aging population and weak social security
structure that is putting pressure to shift resources from private accumulation
to public services; an already-existing environmental crisis that will
only get worse at present growth rates; and extremes of regional and
class inequalities. There is, finally, the critical question of whether
the Chinese state can contain the formation of popular forces, above
all within the working class, and their growing expectations of work-place
rights, material well-being and democracy.
New Openings?
Where then does this leave
us? There may be a downturn, strains and uncertainties, even a degree
of quite serious turmoil. Given that neoliberalism has, to some extent,
been discredited as a pure policy framework, this may lead to some turn
away from neoliberalism's harshest and most messianic policies. As The
Economist (November 25, 2006) suggested after the fall 2006 American
Congressional elections, rebuilding “America's social contract”
may be “a prerequisite for shoring up support for globalization.”
As well, the Democratic Party most certainly will, in light of the delegitimation
of Bush's international policies of unilateralism, be more cautious
in its interventions abroad and more sensitive to multilateral incorporation
of allies, as has already been evolving with respect to Middle East
policies and North Korea. In the absence of sustained social pressures
from within the U.S., however, the changes will be limited to a 'kinder'
(and perhaps more acceptable) capitalist globalization and the more
'multilateral' (and perhaps more efficient) imperialism which the Europeans
have sought from the USA.
American capitalism and the
American empire continue to have staying power. This is because of the
absence of pressure from below. Without effective social resistance,
American capital can restructure at the expense of the middle and working
classes. Without organized resistance, the 'competitiveness' of U.S.
firms and the economy becomes the discursive and organizational framework
for middle and working class discontent. The cracks in the neoliberal
architecture of the empire in the military quagmire in Iraq, electoral
revolts in Latin America, and the structural American trade deficit
and dollar overhang, are not the bursting of historic 'contradictions'
that lead to the crisis that will unravel American geopolitical hegemony.
Rather, these are historic 'openings' that challenge us to create a
new politics that can lead to radical new political alignments. The
real issue is not whether 'the system' will fall apart, but whether
a new kind of left can come together.
In Canada, it is significant
that federal anti-scab legislation and a living wage are actually on
the parliamentary agenda and that the new leader of the Liberal Party
is an avowed 'environmentalist'. But these positive signs are more a
reflection of the Liberals sensing a general and vague unease in the
country, than any fear of a radicalized and mass left. The question
is whether we can build on such openings. Might the present moment be
that long-awaited chance to place real economic and social transformation
- with all the difficult (and sometimes uncomfortable) questions of
political capacities and organization this implies – on the agenda
once again? •
Sam Gindin
teaches political economy at York University.
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