A big change in the world

2010 marked the big change in world economics, argues Sophie Katz. And equivalent changes in world politics will follow. We know this because what happened in 2010 was the tipping over of a trend that started in 1995 into a new global economic reality. In 2010 the ‘developed’ countries’ share of world trade dropped below 40% and the BRIC economies share rose above 40%. By 2012 the BRIC economies had a 45% share of world trade and the ‘developed’ economies had a 38% share.

This might have been because the west had simply been importing more from BRIC. But it wasn’t. What is mainly boosting BRIC figures is that the value of the trade between BRICs themselves is rising fast. Last year BRICs exported $282bn to each other. China alone had nearly $1200bn worth of trade with ‘emergent’ economies. (Its trade with the US and EU combined in 2011 was only $1014bn in comparison.) The trend here is clear too. For example Chinese officials expect that their trade with Africa will be greater than their trade with the EU in ‘three to five years’ (former vice-minister of commerce Wei Jianguo, China Daily June 7, 2013.) Like the classic imperialist powers of the past, China is soaking Africa (and Brazil, Peru, Chile etc) for basic materials. Whether the Chinese international ‘partnerships’ have the same content as Africa’s historic imperialist relationships is entirely another matter, but China in particular is increasingly importing from emergent economies and then consuming its own products while exporting more and more of the rest to BRICs.

The historic weaknesses of western capitalism after two world wars, battles with its own massively active and organised working class and the costs of the endless arms economy which western states pursued in order to ‘win’ the cold war have created the conditions in which some of the larger poor countries of the world, who were held in poverty by imperialism for centuries, were able to break free on the path to their own development. The most successful, China, owes the speed of its creation to its own revolutionary heritage, a heritage that broke the initial set of international bonds that had held it in penury. Today the Chinese CP still argues that it leads a ‘workers and peasants state’ on top of a capitalist economy. Naturally – ‘a capitalist economy of a special type’! Perhaps at last the rest of us can see a case of genuine state capitalism?

The essence of this matter for big capital in the west however is very clear. To survive globally it cannot any more be rooted, or even identified as essentially western. And yet because of its already existing bases and, more importantly, its connection with the centres of world finance, it must still extract extra capital (extra surplus value) from the west in order to maximise its investments in the fast developing east (and south.) The new capital is best be accumulated by a cut in western workers’ incomes and a cut in commitments to the social wage by refusal to pay anything for traditional western social welfare via taxation. The 2008 banking crisis offered greater opportunities in the same direction. Big capital is recapitalising its banks and its own investment funds via a massive redistribution of wealth away from the western working class and towards itself. It is a crucial, perhaps a pre-conditional part of the general process of a global rebalancing of the world economy in favour of capital and against labour – where the extreme poverty of labour in the east and south gives capital at least a few decades (it believes) to expand profits exponentially and where meanwhile the growing impoverishment of the western worker creates initial capital accumulations now available to launch the new southern and eastern based adventures. There is no doubt about future targets; they are the Chinese (and other BRIC) middle classes. (The largest companies in Britain are currently ‘holding’ £700bn in potential investment capital assets. Between $13 and $20 trillion is currently ‘held’ in tax havens by rich individuals. But nobody wants to invest anywhere in Britain, in the EU or even in the US – except in property and otherwise except in German industrial exports – but that’s tied up.)  The long and the short of it is that the west (the US and the EU plus) is no longer the front line of world capitalist development. It may still hold most of the world’s finance but capital’s global intention is to use that accumulated finance to invest in China and the south.

The essence of this matter for working class people in the west is capitalism has no future for them. It is currently in the process of transferring their previously accumulated wealth and social benefits for use in the new front line. The western working class are to be squeezed dry, as with any declining resource, as the asset strippers do with dying companies, and left on their own to manage the husks of their lives and their future.

In politics across the west, the social democratic model ‘please give us some privileges for our own workforces out of the great surpluses provided by the western imperialist system’ has crumbled to dust. Social democrats all over the west now bleat on about multi-national corporation’s (lack of) taxpaying; about the terrible short-termism and greed of the bankers. But the world has turned. There is no real material, economic basis within the current mechanisms of big capitalism to source significant benefits for western working class people.

Thus the enormous emphasis on SME. Small and medium sized enterprises are the new Holy Grail across western countries: the new western ‘get out of jail card.’ They do all sorts of worthy things. They now employ more people in most western countries than larger firms. They emerge from local and national conditions so they ain’t going anywhere else in the globe.  The ‘add value’ to basic products which needs a ‘clever’ workforce. They are IT savy. Sadly for this version of our rosy future however most of them fail and the others sell themselves as soon as they produce some management millionaires and billionaires, to the big corporations (who run things from Silicon Valley or Shanghai – and who certainly don’t pay local, national taxes.) The pathetic SME strategies being developed by western politicians are the output of literally desperate people fiddling at the margins. SME’s main function is primarily to provide lifeboats to a class of marginal entrepreneurs who cannot move quickly enough into the super rich winner’s paddock.

The bleak fact is that the west’s crisis can only be fixed in one way; by rescuing politics; by a mass, political struggle first to defend what is and then to create what is not. The early to mid 20^th century seemed to offer the working class of the west an intermediary solution between the harsh dynamics of the Russian and then the Chinese revolutions on the one hand and of naked capitalist domination on the other. Social democracy was born into and then flourished in that space. Now social democrats can only choose which version of the relentless process of the immiseration of the western working class they prefer. No wonder western politics is more and more corrupt. No wonder these people seem to present themselves in a pathetic and marginal way. There is nothing left for the politicians to do. Politics, including the politics of capitalist societies, only flourishes when it can dominate economics. The new billionaire czars of world capitalism are beyond capitalist politics. A new way, a new creation of political democracy along side the birth of a new way of doing economics – eschewing the ‘great model’ of the company and corporation, tied to markets and not to needs – is needed urgently. Never has Vladimir Ilyich Ulyanov’s dictum been more prescient, the only way to achieve reform in current conditions is in the fight for revolution.