Ideological Struggles in Contemporary Capitalism Prabhat Patnaik

Globalization has brought acute distress to the working people all over the world. This distress is not confined only to the period of the post-housing-bubble crisis; nor is it confined only to the workers of the advanced capitalist countries. Joseph Stiglitz’s finding that the average real wage of a male American worker in 2011 was somewhat lower than in 1968 clearly suggests that this distress has had a long duration. Likewise the presumption that the distress afflicts only the advanced country workers whose job opportunities have shrunk because metropolitan capital has been relocating economic activity to low-wage third world countries, and that the workers in these latter countries correspondingly have been the beneficiaries of globalization, is completely false: such relocation, far from denting the huge third world labour reserves, has on the contrary been accompanied by an increase in the relative size of such reserves, and hence a squeeze on the real wage rates. This has been inter alia because of the massive assault on the petty production sector in these countries, and the dispossession of petty producers, that globalization has entailed.

Such distress is arousing strong resentment among the working people all over the world, which of course is most clearly visible, as of now, in the advanced capitalist countries. And in the face of this opposition at least three distinct ideological positions are emerging in these countries. One of these is a Left position, which I shall come to later. The other two are positions within the bourgeois camp itself, whose principal characteristic is that they do not visualize any going beyond capitalism.

Of these two, the one that has emerged with striking force is that of the ultra-Right. While the positions of Donald Trump of the U.S., Marine Le Pen of France, and Nigel Farage of Britain, and their counterparts in other European countries, are by no means identical, nonetheless a certain common strand can be detected among them. They see globalization as entailing a worsening of the conditions of the workers, owing to the immigration of workers from elsewhere and the emigration of capital-in-production elsewhere, namely to low-wage destinations. This position therefore sees the basic problem as arising from the fact of competition from workers from other countries, and the panacea for it in restricting such competition, through preventing immigration, through protection against foreign goods, and through penalizing capital that tries to emigrate abroad for relocating activities in low-wage countries. In all this however there is little recognition of the role of finance capital, of the fact that the overall demand in the world economy, which can be accessed by all countries taken together, cannot be increased because of the hegemony of finance capital. Globalized finance capital, confronting nation-States, which willy-nilly have to accede to its demands, insists on keeping the size of the fiscal deficit within bounds everywhere. Likewise, the other possible way of financing larger government spending to enlarge aggregate demand, namely through taxes on capitalists, is also foreclosed by it. (Larger government spending financed by taxes on workers, who consume the bulk of their incomes anyway, does not help in increasing aggregate demand).

It is significant that Trump who has been aggressively propounding a protectionist “beggar-my-neighbour” policy, even to the point of penalizing direct foreign investment by American firms for meeting the U.S. domestic market, does not have a word to say on restraining globalized finance capital. (This has made some writers even claim that his policies are anti-manufacturing capital, but pro-finance; this however is an exaggeration since he is also keen to lower corporate taxes in general).

As against this position, there is the usual neo-liberal position, approved wholly by globalized finance, which attributes the distress of the workers not to globalization but to all kinds of other factors, and which even claims that protectionism of any kind simply cannot improve the condition of the workers. Nothing in short should be done to alter the present scenario of globalization. If anything needs to be done at all, then it has to be in other areas, and not with regard to the current regime of globalization. Christine Legard the current Managing Director of the IMF articulated this position explicitly in opposition to the Trump administration, and since then many financial commentators have echoed her views. In fact the IMF has just brought out a document arguing this position.

This position is so intellectually bankrupt that the adherence to it by the so-called “liberal bourgeoisie” is serving only to enhance the appeal of the ultra-Right which at least is credited for taking cognizance of the people’s distress. Its bankruptcy can be illustrated by examining an article written by Martin Wolf an influential journalist who writes regularly in The Financial Times of London. His argument is that if protectionism does raise output and employment in import-competing sectors, then it will only pull resources away from the export sectors. This would lower exports even as it reduces imports, leaving the trade deficit, and hence by implication the level of aggregate demand and employment, unchanged.

The fallacy of this argument lies in the fact that an increase in import-substitute production will be at the expense of export production only in an economy where there is full employment of resources (so that one sector’s production can rise only at the expense of another), not in an economy which has both unemployment and unutilized capacity. It follows therefore that the author is arguing that protectionism cannot increase employment, only by assuming that no unemployment exists anyway. It is the callousness of these “liberal” commentators, exhibited through such utterly absurd and logically fallacious ideas, that makes the working people turn to the ultra-Right parties at the expense of the “liberal bourgeois” parties, committed to the orthodoxy of finance capital, which such commentators favour.

Exactly the same fallacious reasoning underlies another proposition of Wolf. Starting from the truism that a country’s current account deficit must be equal to the excess of the goods and services it absorbs over what it produces, he argues that the U.S. current deficit can never be bridged unless its absorption of goods and services from the rest of the world is reduced. This is absurd because an excess of absorption over output can arise not just because absorption is too high but also because output is too low; and indeed the latter must be the case in an economy afflicted with crisis. Protectionism in such a case will reduce the current deficit and increase domestic output and unemployment. (This will not happen if there is already full employment in the economy, which is what Wolf must be implicitly assuming even in the midst of a crisis).

The argument that protectionism of the sort that Trump is promoting cannot logically raise employment and output is obviously wrong; but it can promote employment only if the other countries do not retaliate against U.S. protectionism. Since protectionism “exports unemployment” to other countries, it can certainly “work” if the other countries are willing to import unemployment. But if they are not, which of course is the likely scenario, then protectionism ceases to work, and competitive protectionism can even worsen the condition of all taken together.

The third position, which is the Left position, takes full cognizance of the role of finance capital in contemporary globalization. It would like a globalization devoid of the hegemony of finance, in which democratically elected governments are able to control finance rather than be controlled by it. There are serious differences within the Left over the degree to which a country should delink itself from globalization if the hegemony of finance is not overturned. In the European context this dilemma takes the form of whether a country should remain in the European Union if its attempt to throw off the shackles of finance do not bear fruit. Syriza in Greece decided to stay on in the EU despite failing to throw off the “austerity” imposed by finance on the Greek people. In the recent French elections Melenchon, the Communist-backed Left candidate had demanded a renegotiation of the EU agreement, and political control over the European Central Bank, while leaving open the question of quitting the EU (presumably to the outcome of the negotiations on all these issues).

As Trumpism, and the ultra-Right in general, comes a cropper, since it does not face the basic issue of the hegemony of finance, and as the Left acquires greater clarity on the need for delinking from globalization in the event of the hegemony of finance continuing to persist, the bankruptcy of the “liberal bourgeois” position will drive more and more working people into supporting the Left. This is already happening, with the rise of figures like Corbyn, Sanders and Melenchon; it will gather momentum if the Left sheds its residual ambivalence on globalization.

(This article was originally published in the People’s Democracy, Vol. XLI No. 18, April 30, 2017)