Leo PANITCH
The chain broke at its weakest link (Jan 09)
The crisis depends on the fightback (April 08)
Panitch makes two main points in these articles.
- “I don’t think that US hegemony has waned”
- “social-democratisation” of globalisation is underway.
US hegemony
The US is still the strongest economy.
The US is the only global military power.
Panitch makes the point that world capitalism need the US as a financial centre – New York, and US banks operating out of London.
Capitalism needs the US dollar as a pseudo world currency which no other currency can replace as the “most stable store of value in a highly volatile capitalist world”.
Because of this the US deficit can be sustained for a long time and the US will continue to play a major role in global capitalism.
‘Social democratisation’ of globalisation
Increased governmental intervention and even nationalisation of financial institutions and possibly nationalisation of manufacturing firms like GM. But this is not like the social democratic push of post 1945.
The current push for increased government intervention in the economy is more like a social-neo liberalism than social democratic intervention. Continuationof neo-liberal policies of:
Privatisation of public services; relatively liberal trade, financial and investment regimes; regressive taxation such as VAT/GST; central bank independence geared to restraining inflation.
Intervention for the purpose solely of safeguarding the health of the profit system.
Working class indebtedness
“People tend to overlook the extent to which, even though real wages have not increased, or not by much, since the 1970’s, living standards for workers in the advanced capitalist world have gone up. They’ve gone up primarily through those workers becoming more integrated into finance.”
He asks whether advanced capitalism has reached its limit here. This is the breaking of the ‘weakest link’. The sub-prime crash.
Questions
Panitch: “If derivatives play the central role they do, as Dick Bryan explains, in hedging risk, there is a question whether the financial crisis will affect trade in the long run.”
Why does Panitch poses this as a question?
According to the Australian newspaper on 18 October 2008:
“The world financial system is leveraged beyond comprehension. It is estimated that between $US500 trillion ($732 trillion) and $US700 trillion worth of derivatives are outstanding.”
“Compare this with the total economic activity (GDP) of the world, which is about $US50 trillion..”
The trillions of ‘fictitious value’ will need to be paid for, written off or otherwise dealt with sooner rather than later. If companies can’t borrow because banks won’t/can’t lend there must surely be an impact on production and trade.
Panitch poses questions about whether the balance of class forces will alter as a result of the current crisis. Whether the working class will push from below. At present there is not much evidence of that.
On another Blog Andrew Kliman points out that world capitalism has not really recovered from the 1970’s crisis:
“Thus there have been persistent debt crises, and these will continue until:
(a) sufficient capital is destroyed (in value terms and physically) to once again make investment truly profitable – the present crisis may well end up being this moment, or
(b) there’s such a panic (“liquidity lock,” as a Fed official recently called it) that lending stops and the economy crashes, ushering in chaos or fascism or warlordism or whatever, or
(c) capitalism is replaced by a new human, socialist society.”
Can advanced capitalism find a way to re-integrate into indebtedness those workers who are the victims of the financial crash? Will the internal dynamic of the economies of China and India be enough to pull capitalism out of the world recession any time soon? Ditto for the various bailouts to corporations, banks and the cash splashes to the population in general. Will it be enough considering the trillions of value which needs still to be accounted for?
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Laibman call this the “perfect storm of crisis” : the coming together of crises since the 1070s. He asserts that the present crisis could have been averted or at least had a softer landing by ‘blowing out the bubble’ even more (my phrase). More leveraging, more securitisation.
He seems to imply that if the stalinist states in Europe had still been around the balance of global class forces may have forced this option.
But the capitalist powers, both private and governmental, decided to let this one go. They “concluded that the housing crisis *should not* be further postponed; that it was *now* both necessary and politically possible.”
……. “the will to offset the downturn evaporates as the political need to do so vanishes. A perfect storm.”
In a way he may be right but not because of the demise of the stalinist states. Look at the role of China in all this – hardly acting as a counterwieght to Washington, the EU & Tokyo. But the current balance of class forces certainly is not what is was in the first half of the 20th century. And thats an important point to make.