Archive for the ‘International Trade’ Category

Political and Economic Crises (Pt 9)

July 21, 2019

Scandals that rocked the Trump administration this month included sex scandals involving both the current president and former President Bill Clinton. Another scandal involved “detention centers” for immigrants, which are finally being called by their right name — concentration camps. The prisoners held in these camps are desperate people — men, women, children and infants — forced to flee desperate conditions in Central America created by U.S. imperialism under both Republicans and Democrats.

Particularly outrageous is the detention of children and even infants, who are held in cages and go without basic medical care (resulting in some children dying in the camps), toothbrushes, and bathing. The conditions in which these concentration camp victims are held would be scandalous even if they involved adult prisoners convicted after fair trials of terrible crimes. When the victims are children and infants, even the term popularized after the post-WWII Nuremberg Trials of German Nazi leaders for “crimes against humanity” seems somehow trite.

Trump supporters claim it is outrageous to call the detention centers concentration camps, pointing out there are no gas chambers or crematoria in these camps. This much is true. However, there were no gas chambers or crematoria in the Nazi concentration camps of the 1930s. There were also no children in the 1930s-era Nazi concentration camps. That did not prevent the Nazi government, which originally held “only” adult Communists, trade unionists, and some Social Democrats in “protective custody,” from calling them concentration camps. It was only during World War II that non-political women, children and infants — most Jews and Roma people — were taken to concentration camps equipped with gas chambers and crematoria.

As these revelations became known, a growing movement has emerged demanding that the concentration camps be shut down. On July 12, reports circulated that ICE, the U.S. federal secret police agency in charge of enforcing immigration laws, were planning massive raids on Sunday, July 14. In response, a series of demonstrations swept the U.S. demanding that the concentration camps be shut down and immigrants be allowed to stay.

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Political and Economic Crises (Pt 8)

June 23, 2019

Trade war intensifies as U.S. and world economy slows

The last month has been characterized by a major escalation of the trade war with the People’s Republic of China. In another important but largely overlooked development, Trump also increased tariffs on imports from India, opening yet another front in the expanding trade war.

Trump threatened but did not impose tariffs on imports from Mexico if the Mexican government did not curb the flow of Central American immigrants through its territory to the U.S. This allowed Trump to “energize” members of his racist base concerned that the U.S. is ceasing to be a “white country.” The moves against Mexico illustrate the current phase of imperialism, and I will examine the Mexican situation more closely next month.

All this has occurred against the backdrop of a global economic slowdown. “Sales of new U.S. single-family homes,” Reuters reported, “fell from near an 11-1/2-year high in April as prices rebounded and manufacturing activity hit its lowest level in almost a decade in May, suggesting a sharp slowdown in economic growth was underway.”

This confirms what I wrote last month about the inventory buildup that helped boost the annualized GDP rate of growth to 3.2 percent, signaling a slowing, not accelerating, U.S. economy. The White House and much of the media — especially in the headlines — gave the misleading impression that the GDP report indicated that the U.S. economy was accelerating and the recession danger was fading away.

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Political and Economic Crises (Pt 7)

May 26, 2019

April 30 Venezuela coup fails as trade war with China intensifies

On April 30, the Trump administration backed by the “Party of Order” launched a major new attempt to overthrow the democratically elected government of Venezuelan President Nicolas Maduro. Juan Guaidó, claiming he had major military support, announced that “Operation Freedom” – the coup – had entered its final stage. The hope of Trump, Mike Pence, John Bolton, and Eliot Abrams, supported by Democrat Speaker of the House Nancy Pelosi and Senate Minority Leader Charles Schumer, was that the Maduro government would be overthrown by May Day – the international workers’ holiday.

The hope of Trump and the Democrats was that Trump-appointed Juan Guaidó – perhaps on May Day itself – would be installed as the puppet “interim president.” The counterrevolutionary victory would then be ratified in a hastily organized election in which the overthrown Chavistas would be banned from participating, thus guaranteeing a victory for the pro-imperialist reactionaries.

Instead, the coup never got off the ground, and the Chavistas staged one of the largest May Day demonstrations in years, completely dwarfing the small, dispirited actions held by the Guaidó forces. Of course, the events of April 30-May 1 were only a battle – but an important one. A battle has been won but the war continues. The Trump administration still indicates that if all else fails it reserves the right to pass from economic and political war to a full-scale military invasion.

If the coup had succeeded, Trump, who has promised to banish socialism forever, would have celebrated what to him – and his class – would have been a major victory. When Trump uses the term socialism – a term of many meanings – he is not using it in the sense Lenin used it in his classic work “State and Revolution.”

In that work, Lenin defined socialism as the first stage of the future communist society. In this stage, private ownership of the means of production and with it the division of society into classes, along with commodity-money relations of production, have already died out.

But Lenin explained that socialism, while a form of communism, is an imperfect communism because people will still be paid, at least in part, according to their work rather than according to their needs, as would be the case in the higher form of communist society.

Trump, in contrast to Lenin, means by “socialism” the policies advocated by modern European social-democratic parties. These parties advocate a capitalist society with laws that limit the workday to 40 hours or less so workers have time to participate in politics; the right of workers to organize into unions and political parties and establish a mass workers’ press; and recognition of housing and education as rights along with social guarantees such as unemployment insurance, social security, and the right to medical care regardless of income and the ability to pay.

These things, even when taken together and fully realized, are still very far from Lenin’s definition of socialism. Under social-democratic “socialism,” society remains divided into a class of capitalist buyers of labor power and workers who sell their labor power and through their unpaid or surplus labor produce surplus value. The U.S. has achieved less of the elements of “socialism” in the modern social-democratic sense than virtually any other advanced capitalist country.

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Political and Economic Crises (Pt 2)

December 23, 2018

As boom slows, political instability rises in the imperialist countries

As 2018 winds down, political instability is sweeping the Western imperialist countries – both the United States and Western Europe. In the United States, as part of a plea bargain with federal prosecutors, Michael Cohen, Trump’s former lawyer and “fixer,” pleaded guilty to violating with “Individual 1” U.S. campaign finance laws. Cohen faces three years in prison.

It is no secret that “Individual 1” is one Donald J. Trump, the current president of the United States. According to Cohen’s plea, Trump directed Cohen to break U.S. campaign finance laws in order to pay “hush money” to porn star Stormy Daniels and “Playboy playmate” Karen McDougall. Trump paid the hush money because he didn’t want the headlines of his extramarital affairs to dominate the news in the weeks leading up to the U.S. presidential election.

Since these payments violated federal election law, it is clear that Trump committed felonies. These felonies, it should be pointed out, are not connected with the so-called Mueller probe into whether Trump, other members of the Trump family, or other associates violated U.S. laws as part of their alleged collusion with Russia in the 2016 elections. That is a separate matter. So far, Mueller and his prosecutors have not presented concrete evidence of law-breaking on the part of Trump in this matter, though there continues to be much speculation about this possibility in the media.

Theoretically, Trump can now be impeached because he committed felonies, which meets the U.S. constitutional standard for impeachment for “high crimes and misdemeanors.” Some Democrats have suggested that in light of these facts impeachment proceedings against Trump in the House of Representatives should now commence. However, there is also a general feeling that crimes centered on sexual affairs are not sufficient grounds to remove a president from office. After all, who in Washington has not had an affair or two or more? While the Democrats will have a majority in the U.S. House of Representatives beginning in January, they would need a large number of Republican votes in the Senate to reach the two-thirds’ majority necessary to remove Trump from office.

The Republicans are reluctant to remove Trump on impeachment charges. If they do vote to remove him, they will likely lose Trump’s white racist “base,” which continues to adore him. The “Trump base” will be furious if their adored leader is removed over what is essentially a sex scandal. Can Trump – and this is a concern for those ruling-class circles of the “Party of Order” who do not like Trump – be removed from office without splitting the Republican Party in such a way that its continued existence as one of the two “major parties” in the two-party system would be in question?

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Modern Money (Pt 3)

August 26, 2018

In this post, I contrast the analysis of foreign trade found in Professor L. Randall Wray’s book “Modern Money Theory” to the analysis of foreign trade that logically emerges from Marx’s theory of commodities, money and capital.

From trade war to war?

The August 10 on-line edition of the British rag The Express has a headline blaring, “China Fires SIX WARNINGS to US Navy in South China Sea.” When Chinese air force planes demanded the U.S. aircraft leave the area, the U.S. pilots arrogantly answered, according to The Express, “I am a sovereign immune United States naval aircraft conducting lawful military activities beyond the national airspace of any coastal state.” Notice, this occurred in the South China Sea near China and not anywhere near the U.S.

Now, if this was an isolated incident, it might not mean much. But the incident occurred against the background of the growing trade war between the U.S. and China. The Trump administration has made it clear that it is determined to reduce China’s share of the world market, especially but not only the U.S. part. If Trump’s policies are successful, it will bring China’s era of rapid development of capitalism to an end. Though China has made amazing progress and now has the highest level of industrial production in the world, it has about four times the population of the U.S. To reach a level of development equivalent to the U.S., China would need to have about four times the industrial and agricultural production of the U.S.

Another weakness of Chinese industry is that Chinese factories are dependent on high-tech components manufactured in South Korea, Taiwan and the United States. In addition, patents for these components are owned by Silicon Valley and British companies. Recent sanctions imposed by the Trump White House against the Chinese mobile phone manufacturer ZTE for allegedly violating U.S. sanctions against Iran and North Korea threatened to destroy the company because its phones depend on high-tech components that are not manufactured in China. Later, the Trump administration backed down amidst rumors that ZTE had to pay a bribe to Trump personally. The fact that a major Chinese company can be shut down at will by a U.S. president shows just how vulnerable Chinese industry is.

The productivity of labor in China, whether in industry or agriculture, is still far lower than that of the U.S. While wages have been rising in China, they are still far lower than the wages of U.S. workers or workers in the other imperialist countries. This means that industrial capitalists in China are far more likely to choose “labor-intensive” as opposed to “capital-intensive” methods of production. Or to use the more precise terminology of Marx, the organic composition of capital of Chinese industrial enterprises is much lower than those in the United States and other imperialist countries.

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Three Books on Marxist Political Economy (Pt 15)

February 4, 2018

Reader Manuel Angeles commented: “In Cambridge (UK) in the 1970s, a whole slew of them rejected marginalist theory. Joan Robinson, in fact, frequently ridiculed it, in spite of Keynes´s chapter in the General Theory.”

Angeles refers to the so-called Cambridge Capital Controversy, which pitted economists from Cambridge, Mass., led by Paul Samuelson against Cambridge UK-based economists led by the Italian-British economist Piero Sraffa (1898-1983). Paul Samuelson (1915-2009), who was considered perhaps the leading (bourgeois) U.S. economist of his generation, defended marginalist theory. Samuelson combined marginalism with a watered-down Keynesianism that he called the “Grand Neoclassical Synthesis.”

Sraffa and his supporters clearly came out on top against the Samuelson-led marginalists. Sraffa’s attack on marginalism is contained in his short book “Production of Commodities by Means of Commodities,” where he exposed logical and mathematical paradoxes in marginalist theory.

But what value theory did Sraffa and his generally left Keynesian supporters propose in place of marginalism? Nothing, really, beyond that, given free competition, prices will tend toward levels where capitals of equal size earn equal profits in equal periods of time. The Sraffians also claimed that, with a given level of productivity of labor, wages and “interest rates”—by which is meant the rate of profit—will vary inversely.

Whatever he may have thought in private about the labor value schools of Ricardo and Marx—Sraffa was a great admirer and scholar of Ricardo and was well acquainted with Marxism having been a sympathizer of the Italian Communist Party in his youth—”neo-Ricardian” followers of Sraffa’s work have often used it against Marx’s labor value and surplus value theory. Once we accept the “neo-Ricardian” “price of production school” in place of Marxist value theory, we are forced to draw the conclusion that constant capital—machines and raw materials—as well as land produce value and surplus value.

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Three Books on Marxist Political Economy (Pt 10)

September 10, 2017

History of interest rates

A chart showing the history of interest rates over the last few centuries shows an interesting pattern — low hills and valleys with a generally downward tendency. During and immediately after World War I, interest rates form what looks like a low mountain range. Then with the arrival of the Great Depression of the 1930s, rates sink into a deep valley. Unlike during World War I, interest rates remain near Depression lows during World War II but start to rise slowly with some wiggles through the end of the 1960s.

But during the 1970s, interest rates suddenly spike upward, without precedent in the history of capitalist production. It is as though after riding through gently rolling country for several hundred years of capitalist history, you suddenly run into the Himalaya mountain range. Then, beginning in the early 1980s, interest rates start to fall into a deep valley, reaching all-time lows in the wake of the 2007-09 Great Recession. Clearly something dramatic occurred in the last half of the 20th century.

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Three Books on Marxist Political Economy (Pt 5)

April 23, 2017

Shaikh’s wrong theory of interest rates

“The interest rate is the price of finance,” Shaikh writes at the beginning of Chapter 10, “Competition, Finance, and Interest Rates.” Shaikh treats the rate of interest as fluctuating around the price of production of the “provision of finance.” Late in Chapter 10, Shaikh indicates he was confused on this subject in the 1970s and the early 1980s but brought to his current views by the Sraffrian-neo-Ricardian Italian economist Carlo Panico. Is this the correct approach to ascertaining what actually determines the rate(s) of interest? I believe it is not.

Do interest rates really fluctuate around a “price” of the provision of finance the way market prices fluctuate around prices of production? Strictly speaking, price is the value of one commodity measured in terms of the use value of the commodity that serves as the universal equivalent—money. According to this definition, interest rates are not prices at all.

It is true that we often use price in a looser sense. For example, we talk about the prices of securities that are in reality legal documents that entitle their owners to flows of income. Another example is the price of unimproved land whose owners hold titles to flows of ground rent. It would be absurd to talk about the price of production of unimproved land if only because unimproved land is a form of wealth produced by nature and not by human labor.

Some other ‘non-price’ prices

Another example of a price that is not a real price is the dollar “price” of gold. This very important economic variable is not really a price at all but instead measures the amount of gold that a dollar represents at any moment. Other examples of “non-price” prices are the “price” of one currency in terms of another—exchange rates—and the price of politicians.

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Three Books on Marxist Political Economy (Pt 4)

March 27, 2017

The wave of reactionary racist economic nationalism represented by the British “Brexit” and election of Donald Trump to the U.S. presidency has drawn attention to the question of world trade. Most capitalist economists are supporters of “free trade.” So-called free-trade policies have been protected and encouraged by what this blog calls the “U.S. world empire”—and what the economists call “the international liberal order”—since 1945. These policies followed an era of intense economic nationalism among the imperialist countries that led to, among other outcomes, Hitler’s fascism and two world wars within a generation.

Bourgeois economists who support free trade—the majority in the imperialist countries—claim that international trade is governed by an economic law called “comparative advantage,” first proposed by the great English economist David Ricardo.

The “law” of comparative advantage makes two basic claims about world trade.

The first is that the less role capitalist nation-states and their governments play in international trade the more the international division of labor will maximize labor productivity.

The second is that regardless of the relative degree of capitalist development among capitalist nation states, all such states benefit equally if they engage in free trade. In terms of government policy, this means that regardless of their degree of capitalist development, the best policy is no protective tariffs, no industrial policies, and no interference in the movement of money from one capitalist country to another.

In contrast, economic nationalists in the imperialist countries both right and left, though they sometimes claim to have nothing against free trade, insist that it must be “fair trade.” For example, President Trump insists that since 1945 global trade has been increasingly unfair to the United States, leading to the collapse of much of U.S. basic industry. Trump promises to change this and wants more government intervention in international trade, such as border taxes and other tariffs to make sure that trade is “fair.” This will, the Trumpists claim, lead to re-industrialization of the United States and the return of good-paying industrial jobs.

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Three Books on Marxist Political Economy (Pt 3)

February 26, 2017

The election of Donald Trump as the 45th president of the United States, combined with the rise of similar right-wing demagogues in Europe, has prompted a discussion about the cause of the decline in the number of relatively high-wage, “middle-class,” unionized industrial jobs in the imperialist core countries. One view blames globalization and bad trade deals. The European Union, successor to the (West) European Common Market of the 1960s; the North American Free Trade Area; and the now aborted Trans Pacific Partnership have gotten much of the blame for the long-term jobs crisis.

This position gets support not only from President Trump and his right-hand man Steve Bannon and their European counterparts on the far right but also much of the trade-union leadership and the “progressive” and even socialist left. The solution to the problems caused by disappearing high-paid jobs in industry, according to economic nationalists of both right and left, is to retreat from the global market back into the safe cocoon of the nation-state. Economic nationalists insist that to the extent that world trade cannot be entirely abandoned, trade deals must be renegotiated to safeguard the jobs of “our workers.”

Most professional economists have a completely different explanation for the jobs crisis. They argue that changes in technology, especially the rapid growth of artificial intelligence in general and machine-learning in particular, is making human labor increasingly unnecessary in both industrial production and the service sector. Last year—though it now seems like centuries ago—when I was talking with one of this blog’s editors about possible new topics for future blogs, a suggestion was made that I take up a warning by the famous British physicist Stephan Hawking that recent gains in artificial intelligence will create a massive jobs crisis. This is a good place to examine some of the subject matter that might have been in that blog post if Brexit and Donald Trump had been defeated as expected and the first months of the Hillary Clinton administration had turned out to be a slow news period.

It is a fact that over the last 40 years computers and computer-controlled machines—robots—have increasingly ousted workers from factories and mines. The growth of artificial intelligence and machine learning is giving the “workers of the brain” a run for their money as well. This has already happened big time on Wall Street, where specially programmed computers have largely replaced humans on the trading floors of the big Wall Street banks. No human trader can possibly keep up with computers that can run a complex algorithm and execute trades based on the results of the computation in a fraction of a second.

Wall Street traders are not the only workers of the brain whose jobs are endangered by the further development of AI. Among these workers are the computer programmers themselves. According to an article by Matt Reynolds that appeared in the February 22, 2017, edition of the New Scientist, Microsoft and Cambridge University in the UK have developed a program that can write simple computer programs.

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