Money and Anwar Shaikh

The U.S. Supreme Court’s decision on June 24, 2022, to strip women of their right to abortion dominates the news. The Court overturned its 1973 Roe v. Wade decision establishing abortion as a constitutional right. The other event dominating U.S. politics was the congressional hearings into the events of January 6, 2021. These issues unfold against a background of high inflation, a looming recession, and disastrously low approval ratings for President Joseph Biden. On July 11, T he New York Times/Siena College poll gave Biden a 33% approval rating. The same poll showed only 26% of Democrat voters support his renomination for a second term.

Democrats, appearing likely to lose control of the House and maybe the Senate, hope to recoup power by making abortion a prime issue. A bill to make abortion rights a federal law has gone nowhere. Democratic Senators Joseph Manchin and Kyrsten Sinema refuse to suspend a Senate rule that effectively gives the Republican Party veto power over all legislation, the filibuster rule. Democrats hope the outrage felt by women and many men over the Supreme Court decision will cause them to vote Democratic in the November congressional elections. These elections will determine the make-up of Congress for the final two years of Biden’s term.

However, attempts by Democrats to profit from the outrage over the Court decision were undermined when it was revealed Biden made a deal with Senate Republican leader Mitch McConnell to nominate anti-abortion Republican Chad Meredith to a lifetime federal judgeship. This deal — though it appears to have fallen through — is typical of Biden’s 50-year-long political career. As a young Senator, Biden played a crucial role in securing Senate approval of Republican President George H.W. Bush nominee Clarence Thomas to a lifetime position on the Supreme Court. Thomas joined the Court majority in throwing out the right of abortion as a constitutional right.

Commodity Money Versus Non-Commodity Money

On March 11, President Joseph Biden signed into law a $1.9 trillion package called the Coronavirus Relief bill. It provides for $300-a-week extra in unemployment insurance payments — only half the original $600 provided by the CARES Act passed last year — and only until Sept. 6. It also provides $25 billion for rental relief and utility assistance and $350 billion relief for hard-pressed state and local and Native American tribal governments.

The bill includes a one-time $1,400 payment for low- and middle-income Americans. Also, $20 billion will be spent on COVID-19 vaccinations. Democrats are especially proud of a provision that extends for a year a child tax credit that was part of the CARES Act. They claim this will reduce child poverty in the richest nation in the world by one-half. This tells you a lot about the nature of the U.S. tax system, which pushes many children of working-class families below the official federal poverty line while allowing billionaires like former President Trump as well as giant corporations like Apple to get away with paying virtually no taxes.

Progressives were hoping that the stimulus bill would have a provision raising the federal minimum wage to $15 an hour from the current $7.25. This was important because the bizarre and undemocratic rules that govern the U.S. Senate mean only a few bills can be passed through a process known as “budgetary reconciliation” with a simple majority vote. All other bills need the support of 60 senators. This means that given the composition of the current Senate, 50 Democrats and 50 Republicans with Democratic Vice President Kamala Harris casting the tie-breaking vote, the GOP has veto power over most other proposed legislation coming up this session.

For the minimum wage hike to have had any chance of passing in the current session, it would have been necessary to include it in the stimulus bill. President Biden gave lip service to the proposed minimum wage hike but failed to push it. This gave the green light to conservative Democrats to ally with the GOP to exclude the $15-an-hour minimum wage from the bill — effectively killing it. This is the exact outcome the capitalists wanted. Once again, the Democrats and Republicans working together delivered the goods for capital.

Three Books on Marxist Political Economy (Pt 11)

John Smith’s ‘Imperialism in the Twenty-First Century’

The year 2016 marks the centenary of V.I. Lenin’s famous pamphlet “Imperialism, the Highest Stage of Capitalism,” subtitled “A Popular Outline.” The pamphlet has immensely influenced politics of the last century. This is largely but not only because the author the following year became the leader of the first socialist revolution as well as chief inspirer and de facto leader of the Third (Communist) International—also known as the Comintern. If Lenin had not led the first socialist revolution and/or had not lived to found the Third International, the pamphlet would still have had considerable influence but of course not the influence it has had.

A century after Lenin’s “Imperialism” appeared, Monthly Review Press published “Imperialism in the Twenty-First Century,” by the British Marxist John Smith. As the title indicates, this book aims to do for the Marxist analysis of imperialism in our new century what Lenin’s “Imperialism” did for the last. Smith holds against innumerable critics that Lenin’s basic thesis was not only correct for its own time but also for our own, at least in broad outline.

But Smith’s book is more ambitious than that, and this is what attracted the interest of this blog. Smith is not entirely satisfied with Lenin’s work, which in the Third International, and the more loosely organized international Communist movement that continued after the Third International was dissolved in 1943, was often treated as virtually on a par with Marx’s “Capital.” Smith is dissatisfied with Lenin’s classic pamphlet because, unlike Marx in “Capital,” Lenin does not directly apply value theory. Value analysis is implicit rather than explicit as it is in “Capital.”

Smith in his “Imperialism” attempts to accomplish two tasks. One, he attempts to update Lenin’s “Imperialism.” More ambitiously, he attempts to “complete” Lenin’s work, bringing it into line with Marx’s “Capital,” first published 150 years ago this year. Smith explicitly puts value analysis at the center of his analysis of modern imperialism.

The Early Cold War and the Two-Party System

The Brexit vote and new wave of racist police murder in the U.S.

During the week leading up to the June 23 Brexit referendum, media representing the largest capitalists that benefit from the U.S.-dominated world empire pulled all the tricks out their bag to ensure that the proposal for Britain to leave the European Union was defeated. They claimed that Brexit would bring financial panic and a deep new world recession that would otherwise be avoided.

The leaders of all the major parties in Britain, including the Conservative leader and prime minister David Cameron, Labor leader Jeremy Corbyn, who was lukewarm in his opposition to Brexit, and the leadership of the liberal Social-Democratic Party, were united on their opposition to Brexit. Only the far-right racist United Kingdom Independence Party and a few small leftist groups supported it.

What was the Brexit vote about?

The Brexit movement was dominated by the racist anti-immigrant right with neo-fascist components, much like the Trump campaign is in the United States. There was a much smaller left-wing movement that also favored Brexit. The problem was there was no way to distinguish between votes for anti-immigrant, racist Brexit and the leftish “lexit” movement.

Unfortunately, there are many on the left who echo Brexit by explaining that there has to be some limit on immigration, since otherwise wages in Britain and other “white” European countries will plummet. Such people are not thinking like working-class revolutionaries but like bourgeois trade unionists who want to assure high wages for “our British Workers” at the expense of “foreign workers” who are not “white” or are from Poland. (Polish workers in Britain these days do not qualify as “white.”)

Voters were given two choices. One was to vote for the British nationalist “Trumpist” movement’s position based on nostalgia for the days when “Britannia ruled” and everybody in Britain was English, Welsh, Scottish, or “at worst” Irish, and there were many relatively good paying jobs in industry and mining. In bygone days in industrial Britain, the high demand for the commodity labor power made it possible to organize powerful trade unions that limited the competition among the sellers of that commodity, resulting in relatively high wages for British workers.

The other choice was to vote for the order that has “given the world 70 years of peace”—among the imperialist robber countries, that is—but has also led to the progressive decay of the industrial economies of the imperialist core countries—especially Britain. In U.S. terms, it was comparable to voting for Hillary Clinton—the status-quo presidential candidate—or the anti-immigrant, racist, fascist-infested Donald Trump candidacy.

As the day of the vote approached, the “establishment” prepared to celebrate. Polls under the weight of the media campaign were shifting toward the “anti-Brexit” position. The assassination of Jo Cox, a strong Brexit opponent and Labor MP, by a neo-Nazi a short time before the referendum seemed to put wind in the sails of the anti-Brexit camp. In anticipation of another great victory for the “pro-European Union position”—which really means pro-U.S. world empire—world stock markets climbed relentlessly while U.S. government bonds and the dollar price of gold slumped.

Or, as the financial press likes to say, with Brexit headed for defeat the appetite for risk was increasing. The defeat of Brexit in Britain would then signal the coming victory of the pro-status quo, conservative Hillary Clinton in the November U.S. presidential election over her anti-immigrant, nationalist-racist challenger Donald Trump.

Just before the polls closed, the media reported that a last-minute poll showed a further swing toward the anti-Brexit position. It was, it seemed, a done deal, and the anti-Brexit supporters prepared to celebrate their great victory! But that was before the votes began to be counted. As the returns came in, the mood of victory among the conservative supporters of the status quo turned to horror. Against all expectations, Brexit was victorious at the polls.

What happened? It seems that many young people—comparable to Bernie Sanders supporters in the U.S., though they most certainly didn’t support the racist Brexit campaign—couldn’t get themselves to vote for the status quo by voting against Brexit. Many of these young people disgusted with what was being offered to them by both the pro- and anti-Brexit positions simply stayed home. Could something like that happen in November in the U.S. causing the election of Donald Trump to the U.S. presidency?

Capitalist Economists Debate ‘Secular Stagnation’ (Pt 2)

Recently, I have been looking at Thomas Piketty’s book “Capital in the Twenty-First Century.” Piketty, a French bourgeois economist, created a sensation by pointing out that over the last 45 years a growing proportion of national income—wages plus surplus value in Marxist terms—has been going to profit at the expense of wages. Piketty is alarmed that if this trend isn’t reversed capitalism will be seriously destabilized.

The title of his book is, of course, inspired by Marx’s great work “Capital,” though it predictably rejects Marx’s anti-capitalist revolutionary conclusions. Naturally, I was interested in what Piketty had to say about Marx.

What I found striking was that Piketty did not understand Marx at all. The reason is that he views Marx through marginalist lenses. Essentially, Piketty treats Marx as a fellow marginalist. Marx’s theory of value and surplus value, so completely at odds with the marginalist theory of value and surplus value, is literally beyond Piketty’s comprehension.

In examining the current debate about “secular stagnation” among economists like Larry Summers and Ben Bernanke, we must never forget how deep the gulf between their economic theories and Marxism really is. This is true even when their terminology is similar. This month, I will contrast the theories of two economists of the 20th century, Joseph Schumpeter and John Maynard Keynes, regarding capitalist growth and stagnation. Both men were marginalists, even if not the most “orthodox” ones, and therefore had much more in common with each other than with Marx.

Next month, I will begin to contrast their views with Marx and the views I have been developing in this blog. (1 ) But before we reach the “Marxist mountains” we will have to slog through the plains of modern bourgeois economics. Only when we begin to ascend into the Marxist mountains will we be able to explore whether any of the ideas of Schumpeter can be integrated into Marxism. I have already dealt with Keynes quite extensively in this blog. (See, for example, six-part series beginning here.)

Joseph Schumpeter (1883-1950) was the most famous marginalist economist to deal with the question of technological changes, or “innovation,” under capitalism. Schumpeter was an Austrian economist in the sense he came from Austria, though he spent his last years in the United States as a professor at Harvard University. He was certainly influenced by the “Austrian economists” as well as other schools of post-classical bourgeois economics current in his day. Like the Austrian economists proper, Schumpeter preferred to communicate his ideas in natural language as opposed to mathematics.

Also like the Austrians, he was a hardcore supporter of capitalism, disliked “socialism”—proposals to reform capitalism in the interest of the workers—and was an opponent of the “Keynesian revolution” in bourgeois economic theory of the 1930s. He was what would be called today a “neo-liberal.” Like the Austrian economists proper, Schumpeter took a dim view of democracy, which he was convinced would inevitably lead to socialism. Yet he was a friend of Paul Sweezy and therefore had a certain influence on the Monthly Review school.

Capitalist Economists Debate ‘Secular Stagnation’

A debate has broken out between economist Larry Summers (1954- ), who fears that the U.S. and world capitalist economies are stuck in an era of “secular stagnation” with no end in sight, and blogger Ben Bernanke (1953- ). Blogger Bernanke is, no less, the Ben Bernanke who headed the U.S. Federal Reserve Board between 2006 and 2014. Bernanke claims that the U.S. and world economies are simply dealing with lingering aftereffects of the 2007-2009 “Great Recession,” which broke out while he was head of the Federal Reserve System.

In effect, Bernanke is saying that there is nothing fundamentally wrong with capitalism and that healthy growth and “low unemployment and inflation” will return once the lingering aftereffects of the crisis are fully shaken off. Bernanke is, however, alarmed by the rapid growth of German exports and the growing share of the world market going to German industry.

Last year, we “celebrated” the 100th anniversary of the outbreak of World War I. Bernanke’s concerns show that the economic fault lines that led to both World War I and II have not disappeared. Instead, they have been joined by new ones as more countries have become industrialized. And the prolonged period of slow growth—and in some countries virtually no growth—that has followed the Great Recession is once again sharpening them. Competition both among individual capitalists and between capitalist countries is much sharper when world markets are growing slowly. World War I itself broke out when the early 20th-century “boom” was running out of steam, while World War II broke out after a decade of the Depression.

The debate between Summers and Bernanke on secular stagnation has been joined by other eminent U.S. economists such as Joseph Stiglitz (1943- ) and Brad DeLong (1960- ). Summers, Stiglitz and DeLong are Keynesian-leaning economists, while Bernanke, a Republican, leans more in the direction of “neoliberalism,” though like most U.S. policymakers, he is thoroughly pragmatic.

The debate began with Summers’ speech to the IMF’s Fourteenth Annual Research Conference in Honor of Stanley Fisher. Summers noted that the panic of 2008 was “an event that in the fall of 2008 and winter of 2009 … appeared, by most of the statistics—GDP, industrial production, employment, world trade, the stock market—worse than the fall of 1929 and the winter of 1930. …”

At the very least, this was a major defeat for “stabilization policies” that were supposed to iron out the capitalist industrial cycle and abolish panics. But the problem extends far beyond the 2008 panic itself.

“… in the four years since financial normalization,” Summers observed, “the share of adults who are working has not increased at all and GDP has fallen further and further behind potential, as we would have defined it in the fall of 2009.”

The highly misleading unemployment rate calculated by the U.S. Department of Labor notwithstanding, there has been a massive growth in long-term unemployment in the U.S. in the wake of the crisis, as shown by the declining percentage of the U.S. population actually working.

In the days before the “Keynesian revolution” in the 1930s, the “classical” neoclassical marginalist economists, whose theories still form the bedrock of the economics taught in U.S. universities, were willing to concede that some “outside shock” to the economic system (for example, a major policy blunder by the central bank or a major harvest failure) might occasionally create a severe recession and considerable amount of “involuntary unemployment.” But these learned economists insisted that since a “free market economy” naturally tends toward an equilibrium with full employment of both workers and machines, the capitalist system should quickly return to “full employment” if a severe recession occurs.

World War I—Its Causes and Consequences (pt 2)

Wars rarely turn out the way their initiators expect. In our own time, we can point to many examples. George W. Bush and Tony Blair, when they ordered the invasion of Iraq on March 19, 2003, believed that the U.S.-British forces would defeat Iraq’s armed forces—weakened by years of sanctions, continued military attacks, and forced unilateral disarmament—within weeks with hardly any casualties on the side of the invaders. It would then be “mission accomplished.”

But now in August 2014—100 years to the month since the outbreak of the “Great War”—the U.S. has resumed bombing Iraq as the government it created crumbles. The reason this government is failing is that virtually no Iraqi wants to fight and die for it. Why should an Iraqi fight for a foreign-imposed government?

Nor should we forget the war against Afghanistan launched by the Washington war-makers in October 2001 against the Taliban government, which had no modern armed forces, only a militia. Within weeks, U.S. media were writing about that most unequal war in the past tense. But now, 13 years later, the U.S. is still struggling to find a way to exit that war without the return of the Taliban to power. That war didn’t turn out as the Washington war-makers expected either.

Nor has the air war fought by U.S-NATO against Libya in 2011 turned out the way the Obama administration, which launched that war, expected. And the same will probably be true of the most recent war—if it can even be called a war—launched by Israel, with at least the tacit support of the U.S., against the people of tiny Gaza, which has no army, air force or navy.

This August marks not only the 100th anniversary of the beginning of World War I but also the 50th anniversary of the infamous Gulf of Tonkin Incident. If we were to believe the U.S. propaganda of the time, (North) Vietnam’s tiny navy attacked without any provocation the mightiest navy the world had ever seen! This “incident” occurred—or rather didn’t occur—on August 2, 1964, just two days short of the 50th anniversary of the start of the “Great War.”

The U.S. Congress used this faked incident to grant the Johnson administration cart blanche to wage war against Vietnam, which the administration took full advantage of by launching a series of bombing raids on the Democratic Republic of Vietnam that August. This gave way to a steady air bombardment of (North) Vietnam—the South had been subject to steady U.S. bombardment for the preceding five years—the following year after Johnson won re-election as the “peace candidate.”

While the Washington war-makers succeeded in killing millions of Vietnamese people and doing incalculable damage to the environment with Agent Orange and other forms of environmental warfare, in the end the war against Vietnam did not turn out the way the war-makers in the White House, the Pentagon and Congress expected. For example, the renaming of Saigon Ho Chi Minh City was probably not part of Washington’s war plans.

Nor did the war against Korea, which is usually seen as beginning in June 1950 but really began when Washington occupied the southern part of Korea in 1945, turn out exactly as the Washington war-makers intended, though they succeeded in killing millions of Korean people and left no multistory building standing in the northern part of the country.

The rule that wars seldom turn out the way those who start them expect was certainly true of the general European war that began exactly a century ago. To the generation that actually fought, it was known as the “Great War” or “the World War,” ”the war to make the world safe for democracy,” or, most ironic of all, “the war to end all wars.” But as a result of unintended consequences of the war, it had to undergo a name change. It was renamed World War I, a mere prelude to the even greater bloodbath of World War II.

‘Before the leaves fall’

When the general European war commenced on August 4, 1914, each warring imperialist power was convinced that it would be a short war and that it would emerge victorious. Or as was said, the war would be over “before the leaves fall.”

The ‘Implications’ of Paul Baran, Pt 3

Forty-six years after ‘Monopoly Capital’

The special July-August 2012 edition of Monthly Review, devoted to the critique of economics, not only includes Paul Baran’s “Implications” and correspondence between Baran and Sweezy that is invaluable in understanding the past of Marxist political economy and monopoly capitalism. It also contains an article by John Smith of Kingston University in London that points to the kind of Marxist economics that is necessary to understand the monopoly capitalism of the early 21st century.

“Monopoly Capital” was published 56 years after Rudolf Hilferding’s “Finance Capital” and 50 years after Lenin’s pamphlet “Imperialism.” The period of time that now separates us from “Monopoly Capital” is approximately the same as that separating Rudolf Hilferding’s “Finance Capital” and Lenin’s Imperialism from Marx’s “Capital.”

The world of ‘Monopoly Capital’

As we have seen, “Monopoly Capital” was very much a book of its time. It reflected the changes that had occurred between the era of Hilferding and Lenin and the time that “Monopoly Capital” was written in the late 1950s and early 1960s. Let’s review what those changes were.

The most important was the impact of the Russian Revolution of October 1917, which proved to be the defining event of the entire 20th century. For the first time in history, the working class seized and held state power for a substantial period of time. The working class held power long enough to embark on the construction of socialism. As a result, for the first time world capitalism faced a rival economic system that proved in practice, not just in theory, that capitalists are not necessary for modern industrial production.

The other defining event of the last century was the great Chinese Revolution of 1949. Only today can we fully appreciate the significance of this revolution. It began a process of shifting the center of human civilization from Europe and its “white colonies”—including the United States—toward Asia. The days of using the term “Asiatic” as a synonym for backwardness are gone for good.

These revolutions—and there were many others—forced the capitalist classes to make unheard-of concessions to the working classes of the imperialist countries in order to maintain capitalist rule. These revolutions also completely undermined the old European colonial empires—most importantly the British Empire. In contrast, the European empires were near the peak of their power when Hilferding published “Finance Capital” in 1910.

Gold as Money and the Role of the National Question in the Current Crisis

Nikos, a good friend of this blog, has asked two questions—one involving monetary theory and the other regarding the role of the national question in the current crisis.

Nikos’ first question relates to a proposal made last year by the German Council of Economic Experts that the Greek government and other highly indebted European governments put up a portion of their foreign exchange reserves—gold and foreign currency holdings—as collateral for what would amount to loans in the form of euros. The proposal was rejected at the time by the Merkel government but supported by the Social Democratic and Green opposition parties.

Nikos actually has two questions about this proposal. First, does it indicate that gold is still money? And second, does this movement toward using gold as collateral point to a return to the gold standard?

Gold as world money

I would answer yes to the first question and no to the second. Among gold’s basic monetary roles is its role as world money. Traditionally, paper or banknote currencies circulated only within nation states. Insomuch as currencies were made not out of paper and ink but of gold coins—and silver coins in earlier times—these currencies were literally made out of money material. The coins could be converted into bullion—pure money material—by simply melting them down. In this way, gold and or silver bullion would wear the “uniform” of a national currency.

Because gold and silver coins were made of money material and could easily be melted down into bullion, they could circulate internationally. Their role as money did not depend on their being “legal tender” in any particular country.

Origins of the U.S. dollar

Indeed, what became the U.S. dollar had its origins in a Spanish silver coin—called the dollar—that circulated widely in Britain’s North American colonies. Now, because of the U.S. world empire, today’s paper dollar currency enjoys a sphere of circulation far beyond the borders of the U.S. itself. This is true even though the U.S. dollar is legal tender only within the U.S., Panama, Ecuador and the so-called “Commonwealth” of Puerto Rico.

But, in fact, the U.S. dollar has invaded the circulation of many other countries even where it is not officially legal tender. The role of the U.S. dollar as the world currency is shown by the fact that basic commodities and gold itself are priced in terms of dollars. As a result, more Federal Reserve Notes—U.S. currency units—are circulating outside the boundaries of the U.S. than within them.

U.S. world empire

What I call the dollar system—the widespread acceptability of the U.S. dollar as a means of payment well beyond the formal borders of the United States—is inseparable from the U.S. world empire. If the empire were to fall, the U.S. dollar would certainly cease to be the world’s currency. Similarly, any crisis of the U.S. dollar, defined as a sudden sharp loss of gold value, would bring into question the continued existence of the U.S. world empire.

Gold retains its role as world money under the dollar system

Under the dollar standard, gold fully retains its role as world money. The U.S. global empire has existed only since World War II, while gold’s role as world money goes back thousands of years. In addition, as we have explained many times in this blog, the U.S. dollar cannot act as a universal measure of value independently of gold, since the law of value requires that the value of a commodity be measured in the use value of another commodity.

Europe’s Decline and Its Sovereign Debt and Currency Crisis

Reader Jon B writes that I should build on my “analysis of the U.S. empire and the dollar-centered international monetary system by writing on the European debt/euro crisis, the possible outcomes for the world economy, and whether U.S. global domination is likely to be boosted or undercut.”

On November 30, it was announced that the world’s major central banks were extending their “swap agreements” in an attempt to control the growing European credit crisis centered on the “sovereign debts” of European governments. The announcement indicated that the crisis may be coming to a head, and that the U.S. Federal Reserve System stands ready to pump U.S. dollars into Europe in a bid to stave off a full-scale financial panic such as occurred when the Lehman Brothers investment bank collapsed in September 2008.

A few weeks earlier, the Greek government had agreed to a vicious austerity package. The government of Prime Minister George Papandreou, which had briefly threatened to hold a referendum on the austerity package, instead meekly resigned in favor of a so-called “technocratic government” headed by Lucas Papademos a former vice president of the European Central Bank. The new Greek bankers’ government, in order to broaden its base beyond the bankers, includes the racist LAOS party.

The European leaders, finally admitting that the Greek government couldn’t possibly pay its debts, agreed to a 50 percent write-down of Greece’s bonded debt.

This is similar to what happens when a U.S. corporation goes bankrupt under Chapter 11 of the bankruptcy law. In addition to the corporation getting out of any contracts it has signed with its workers, a portion of its bonded debt is written down. The “reorganized corporation” is then given another shot at making profits for its stockholders and bondholders.

The U.S. media proclaimed that this “agreement” indicated that the European crisis was finally on its way to being resolved—as the media have repeatedly done whenever top European leaders get together and announce “agreements.” They do add, just to cover themselves, that “much still has to be done” to fully resolve the crisis. Nor did the U.S. media—who pretend to support democracy all over the world—hide their delight that a government of unelected bankers had replaced the elected government of Greece.