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.
Reuters, which always puts the best possible spin — sometimes grotesquely so — on economic data, pointed to a tiny decline in the initial estimate of new claims for unemployment insurance as a sign that “Labor market strength should support the economy. … ” This ignores, just like countless articles that appear in the Associated Press, The New York Times, and other media outlets, what is known to anyone with even an elementary knowledge of the “business cycle.” The labor market is always strong on the eve of a new recession. If a boom-generated “strong labor market” meant that a recession could not occur, recessions would never occur. (1)
Reuters added: “The mixed reports [the reports weren’t so mixed — SM] followed data last week showing a decline in retail sales and industrial production in April, which prompted economists to cut second-quarter growth estimates.” With growth falling across the globe, the only real question is whether the U.S. and world economies are still in the critical stage that precedes the recession proper or, alternatively, we are already in the early stages of a new economic downturn. When a recession begins in a particular country or on a global level can only be answered in retrospect.
What can be said with some confidence is that the hopes of the Trump White House that full-scale recession conditions — or post-recession conditions (2) — with resulting high cyclical unemployment can be postponed to sometime after November 2020 appears to be in serious jeopardy. This fact should be kept in mind when examining Trump’s latest trade war moves against China and India.
The real cause of the current US and global economic slowdown
The anti-Trump “Party of Order” media claim that the current worldwide economic slowdown in production and trade is caused by Trump’s tariffs and other trade war measures — the implication being that if the U.S. government had only followed the “free trade” recommendations of the Party of Order, there would be no recession danger. If that were the case, why didn’t “free trade” prevent the Great Recession of 2008 when there were no tariff wars?
Claims that the current slowdown is caused by growing protectionism actually reverses cause and effect. The ultimate cause of the current global slowdown is the general overproduction of commodities on a global level relative to the ability of markets to fully absorb them at current levels of production at profitable prices. However, the prospect of a recession-induced contraction of global trade is increasing the intensity of capitalist competition among both individual capitalists and nation-states engaged in capitalist production.
The more immediate cause of the economic slowdown can be traced back to the decision of the U.S. Federal Reserve System, which under the current dollar-centered international monetary system acts as the global central bank, to begin destroying a small but growing portion of the enormous quantity of dollars it created during and after the Great Recession. In September 2015, the number of Federal Reserve System dollars — not to be confused with the dollars created by U.S. commercial banks through their dollar-denominated loans — reached an all-time peak of $4,166 billion on a seasonally adjusted basis, according to the Federal Reserve Bank of St. Louis. By May of this year (2019), the monetary base had dropped to $3,235 billion, a more than 22 percent drop over a three-and-a-half-year period.
The monetary base is a crucial variable, because Federal Reserve-created dollars not only form the “base” on which commercial banks in the U.S. create their own credit money dollars, but it also forms the base on which the central banks of other countries create their own domestic currency monetary bases. Commercial banks in countries other than the U.S. then create credit money through making loans denominated in their own local currencies. Therefore, when the quantity of U.S. dollars declines — or even grows at a reduced rate like it did in the several years immediately preceding the Great Recession — credit throughout the world is squeezed inducing a global recession.
The Federal Reserve is carrying out this “monetary normalization,” as it calls it, in order to prevent the “quantitative easing” — in lay terms, the money-printing binge — from triggering a 1970s style — or worse — inflation. If such an inflation were to develop, it would under present economic and political conditions — very different from those of the 1970s — likely lead to the collapse of the international dollar system.
A sudden end of the dollar system would not only trigger an extremely severe global economic crisis but more importantly would end the Federal Reserve System’s role as the world’s de facto central bank. If the Federal Reserve loses its control of the international monetary system, the U.S. world empire, which has dominated the capitalist world since 1945, will in turn fall. The stakes could not be higher.
This shows that the looming U.S. and world recession is not in the final analysis caused by the policies of the Federal Reserve System — though the Fed can make things far worse if it makes major policy mistakes. Rather, the current U.S. and global economic slowdown and looming recession are caused by basic contradictions of capitalist production that make periodic recessions — and occasionally far worse economic crises — inevitable.
So from the viewpoint of defending the dollar as well as limiting the extent of the next global recession, the Federal Reserve really had no choice but to follow the dollar-destroying course it has been pursuing during the last three and a half years.
When a highly unusual December mini-panic hit the U.S. stock exchange — and Trump reportedly threatened to fire Fed chief Jerome Powell, who he himself had nominated for the top job at the Fed — Powell promised to end the Fed’s dollar-destroying operation by September (2019).
This was much earlier than most “Fed watchers” and business cycle experts had expected. The economic laws that govern the dollar system forced the Federal Reserve to walk a fine line between a “too tight” policy that would accelerate and unnecessarily deepen the next recession and a “too loose” policy that would lead to a dollar devaluation-fueled inflation causing an even more severe economic crisis at a later date.
The turning point of the industrial cycle
The problem that the Federal Reserve System faced is that the dollar price of gold, which measures the value of the U.S. dollar, and through the rates of exchange between the dollar and all other currencies, has not decreased since the Federal Reserve System began its dollar-destroying program in the final quarter of 2015. At that time, the dollar price of gold was around $1,150 an ounce while today it has risen to just short of $1,400. The Fed’s problem is how to once again start to increase the number of dollars in the world without causing a further sharp rise in the dollar price of gold.
A short-term solution, which would have to be done by the government since under current laws the Federal Reserve does not have the power to do this, would be to dump gold on the market. This could either be gold owned directly by the U.S. Treasury — the last time Treasury gold was actually sold on the open market to lower the dollar price of gold was in 1976 — or sell some of the gold belonging to other countries that is stored in the vault of the Federal Reserve Bank of New York. However, if the underlying demand for gold remains strong, this would deplete the gold reserve that ultimately backs the dollar, leading to a far worse crisis in the not very distant future.
Therefore, the only real solution to the Fed’s problem is to wait until a recession is triggered causing a rising demand for the U.S. dollar as a means of payment. This will then enable the Federal Reserve to once again start expanding the number of dollars in the world without a new sharp rise in the dollar price of gold. Indeed, the dollar price of gold might very well fall, perhaps below $1,000, for a period of time, even as the total quantity of Federal Reserve-created dollars in the world once again starts to grow. This would be because private gold hoarders — and perhaps some central banks — would be forced to sell gold in order to raise U.S. dollars in order to meet demands for payments of debts in U.S. dollars.
We are now approaching — or have already reached — the turning point of the economic cycle where the rising demand for dollars as a means of payment will allow — and indeed force — the Federal Reserve to resume creating dollars without causing a new massive inflation-breeding and interest rate-boosting depreciation of the U.S. dollar. If the economic slowdown develops into recession fast enough, the Powell Fed may be able to start cutting its target for the federal funds rate and start creating new dollars even before September. Increasingly, this is exactly what Wall Street expects.
Indeed, there are indications that the Fed might do this as early as the next scheduled meeting due to be held July 30-31. Powell hinted at just such a development in early June and most recently this week causing stock market prices to jump in anticipation of lower interest rates and easier credit conditions.
What happens if the Fed ‘eases too soon’?
But — and this can only be determined in retrospect — there is always the chance that the Powell Fed will, either under the pressure of Trump and the Republican Party or simply due to its own misjudgment, move “prematurely” to create new dollars. This could then lead to a dollar crisis — a sudden sharp rise in the dollar price of gold — which would oblige the Fed to suddenly reverse course and make an “emergency” and “unexpected” upward change in the federal funds target or take other “deflationary moves,” the opposite of what Wall Street now expects.
A spike in the dollar price of gold to over $1,300 an ounce in early June, though not that serious in and of itself, pointed to the dangers of a “premature” easing by the Federal Reserve Board. (3) If, for example, the dollar price of gold were to climb to $2,000 or above by this September, the Fed, the dollar system it manages, and the U.S. empire will be in serious trouble indeed.
In reality, whether Jerome Powell and other Fed leaders know it or not, a normal recession — not a “Great Recession” such as 2008 — without an inflation-breeding, interest rate-raising dollar crisis unfolding over the next several years is probably the best outcome they can hope for given the current stage of the industrial cycle and general economic conditions. (4)
A “mild recession” therefore meets the needs of the global capitalist system at this time. However, even a “mild” global recession means that a considerably higher level of unemployment will be in place just in time for the 2020 presidential election. Therefore, the “mild recession” that the global capitalist system — and the U.S. world empire — need in order to stabilize itself economically and financially is exactly what Donald Trump seeks to avoid.
The Mueller report
While the recent release of a censored version of the report written by the veteran federal prosecutor and former FBI chief Robert Mueller cleared Trump of the demagogic and lying claims by the Democrats that the president is a Russian agent taking orders from the Kremlin, it didn’t clear him from charges of “obstruction of justice.”
Not surprisingly, Mueller found no evidence that could stand up in court that Trump had broken U.S. laws in his dealings with the Russians. This finding embarrassed the Democrats and upset progressives tailing Democratic leaders who in Hillary Clinton’s words claimed that Trump was a “Putin puppet.”
Trump certainly wasn’t happy about the FBI digging into his business records. In this respect, it seems highly likely that Trump did indeed “obstruct justice.” Under U.S. laws it is illegal to lie to police and government investigators. (5) However, Mueller claims, along with the U.S. Justice Department, that as long as a president is in office, he or she can violate any federal law and face no legal penalty. The president is, therefore, according to Robert Mueller, “above the law.” (6)
Mueller passed the ball to Congress, which has the power to impeach a president in the House and try and remove him in the Senate. Only if Trump is impeached by the Democratic House and convicted and removed from office by the Republican Senate, and then is not pardoned by a President Mike Pence could he be indicted by a federal grand jury and tried in a federal criminal court.
The “obstruction of justice” charges the Mueller report hints that he is guilty of could still lead to Trump’s impeachment or removal from office under the 25th Amendment. However, for this to become a real possibility, the Republican Senate would have to be convinced that it has no alternative but to dump Trump. But Republican senators are reluctant to do this in view of Trump’s continued popularity among the GOP’s racist base.
The real risk for Trump is that a lot, if not the full extent, of his likely tax dodging — what businessman doesn’t do a little tax dodging — bank fraud, money laundering, and mob ties will come to light. Even if Trump avoids prison time, which is likely since no former U.S. president has gone to prison, he would likely have to pay back taxes and massive fines that would do serious financial damage to his real estate and business empire.
Trump’s best hope of preventing this is to win re-election decisively in 2020. He would hope that the Republicans would regain control of the House and retain their control of the Senate. Trump would then have four more years in the White House, which would allow him to appoint more friendly — to him — federal judges, including several Supreme Court justices.
Therefore, a decisive win in the 2020 elections for Trump and the Republicans could prove crucial to the financial future of Trump and his family. That is why Trump needs a booming economy with very low cyclical unemployment in 2020. In this respect, the personal interests of Trump and his family do not coincide with the needs of the global capitalist economy for an economically stabilizing “mild” recession” in 2020.
Trump’s answer to the threat of a looming recession — besides having his administration predict years of recession-free growth — has been two-fold. One has been his public campaign to put pressure on the Federal Reserve to cut interest rates immediately and resume “quantitative easing” to push back the recession threat until sometime after November 2020. At the very least, this campaign creates a scapegoat for Trump to blame if he has to run for re-election under recession conditions.
In that case, Trump will blame the Federal Reserve System and the Republican Senate for their failure to confirm his “pro-growth” nominees Herman Cain and Stephen Moore. And he might hint that sinister “elites” such as “international bankers” and “globalists” wrecked the U.S. economy in order to bring down the man that made America great again. (7) The second method Trump is using is to shift the burden of the developing world recession onto China, Europe, Japan, and India by securing a larger percentage of the world market for U.S.-based businesses. This is where the trade war comes in.
The deeper roots of the trade war
However, it would be a mistake to see the growing trade war as simply a function of the Trump administration’s desperate attempts to win reelection. This factor may be the immediate cause for the current escalation of the trade war, but its roots are in the conflict of early 21st-century productive forces and the two outmoded institutions that dominate the global economy — capitalist private property in the means of production and the nation state.
The first hint of a new aggravated phase of the trade war came in December (2018) when Canada announced it had arrested and jailed at the request of the U.S. government a Chinese businesswoman, Meng Wan Zhou. Ms. Meng is the chief financial officer of Huawei, one of China’s leading tech and communication companies. She also happens to be the daughter of Huawei founder Ren Zhengfei, one of the richest and most powerful men in China. The U.S. government claims that Ms. Meng violated U.S. international sanctions against Iran, among other “crimes.” Ms. Meng is now under house arrest in Canada and facing extradition to the U.S., where she faces years of potential prison time. The media treated the Meng arrest as an isolated incident.
Despite this incident, which should have been a signal to Beijing of the kind of people they were dealing with, Washington media reports circulated that U.S. and China were about to announce a deal the would end the trade war between the two nations. Indeed, it was treated as practically a done deal.
However, instead of the trade war ending, it sharply escalated beginning in mid-May. It has become clear that the arrest of Ms. Meng was no isolated incident. The escalation in the trade war occurred as the Trump administration initiated a new series of moves. First, it postponed for six months the imposition of tariffs on European automobiles. It also announced that it was ending tariffs against Canadian and Mexican imports.
However, apparently out of the blue, Trump then announced that he would, beginning June 10, impose a 5 percent tariff on imports from Mexico unless Mexico agreed to crack down on the flow of “illegal immigrants” from Central America. The threatened tariffs would then increase another 5 percent every month until they reached 25 percent in October.
This latter move created a wave of opposition in the U.S. business community and among Senate Republicans. The Senate Republicans threatened to vote with the Democrats for legislation that would nullify the declaration of the phony “state of emergency” that Trump would need to impose the tariffs. With the “business community” and their media and the Democrats and Senate Republicans united against the Mexican tariffs, Trump on June 7 announced that he would suspend the tariffs on Mexican imports. Trump claimed that Mexico had agreed to all of his demands to crack down on immigrants headed for the U.S. who were passing through Mexico, though the Mexican government denied this. More on this next month.
This move to remove the earlier tariffs that Trump had imposed against Canadian and Mexican steel and aluminum, combined with the suspension of his threatened tariffs against Mexico, Europe, and Japan, is designed to prop up the U.S. auto industry, whose profits were being adversely affected by tariffs against steel and parts that are important for auto factories operating in the U.S.
Trump has now opened a trade war against India by removing India’s preferential trade status. Unlike the case with the Mexico tariffs, there have been no widespread complaints against the anti-India tariffs from the business community and its media. This has forced the right-wing, anti-Muslim government of Shri Narendra Modi, generally considered pro-U.S., to impose tariffs on 28 U.S. commodities. More on this next month.
Related to this trade war move is the imposition of bans against the import of oil from Venezuela and Iran. These moves by the Trump administration have the potential to turn into hot wars, as the recent attacks on ships in the region illustrate. Trump is not simply saying that U.S. companies cannot import oil from Venezuela and Iran. Instead, he is saying that companies that do business with Venezuela and Iran are banned from doing business with U.S. companies.
If neither Iran or Venezuela can export oil — or their ability to do so is severely curtailed — their balance of trade and payments is thrown into a deep deficit, which drains money out of their economies. This causes a deep recession and hyperinflation. In Venezuela, openly and in the Iranian case as well — despite Trump’s denial — the aim is to replace the current governments with governments that will allow U.S. oil companies to take control of their oil. If Trump and the Democrats get their way, the new puppet governments will then pursue — in the name of correcting “failed socialist” policies — vicious neo-liberal economic policies against their own people.
Trump is also creating an oil noose around the satellite imperialist states in Europe and Japan as well as China, India, Vietnam, and any other nation. These countries are being told that they cannot buy oil and other hydrocarbons from Iran or Venezuela. And Germany, much to the dismay of the German business community, is under pressure not to purchase natural gas from Russia through the Nord Stream pipeline. Instead, Germany is being told that it must buy more expensive natural gas pumped out of the ground through fracking in the U.S. and shipped across the Atlantic in liquefied form. (8)
If Trump gets away with this, these countries will either have to buy oil and natural gas directly from the U.S. or from U.S.-dominated Arab oil monarchies such as Saudi Arabia. They will only be allowed to buy oil from Iran and Venezuela if and when the two countries succumb to U.S. pressure and puppet governments are installed.
This fits well into the strategy already seen under Obama but intensifying under Trump of making the U.S. the dominant producer of carbon-containing fuels such as oil, natural gas, and coal — as was the case during the 20th century. As a result, down to the present, the capitalists who own and control the carbon fuel-producing industries have exercised an out-sized influence on U.S. politics. This has been true under traditional Party of Order Republicans and the Democrats and continues under Trump.
Trump has been doing all he can to show that he is the most pro-fossil fuel president ever — admittedly a tall order — bypulling out of the rather toothless Paris Climate Agreement. The U.S. is now the only country in the world not part of this agreement. Trump has become notorious for his denial of the fact of human-caused global warming and the grave dangers that are associated with it. And it is unlikely that U.S. policies will change fundamentally under a Democratic administration despite the talk of a “Green New Deal” by some Democrats. Trump is clear that the U.S. is demanding that the world economy must stay on a carbon basis and that the U.S. fully intends to dominate the production of carbon-rich fuel, the climate be dammed.
Foxconn and Huawei, a tale of two companies
In addition to the tariffs — and formally separated from them — Trump has launched a massive attack against the Chinese telecommunications company Huawei, aimed at driving it out of business entirely by denying the company sales and the inputs it needs to produce its products, which include telecommunications equipment, smartphones, and laptop computers. The excuse Trump gave is that Huawei is a threat to U.S. “national security” and allegedly engages in espionage because of links to the Chinese state and the Chinese Communist Party. This is old-time red-baiting, which never seems to go out of style.
Apple Computer, the largest U.S company — at least on some days — in terms of its stock market value, puts out products that say they are designed in California but produced — assembled — from components produced in many countries. The labor-intensive assembly — where the bulk of the value and surplus value is produced — is performed in China.
Foxcomm — also known as the Hon Hai Precision Group — has built gigantic assembly plants in South China — the largest factories in the entire history of capitalism. Foxconn corporate headquarters is based, however, not in mainland China but on Taiwan.
Taiwan is a Chinese island. Though the U.S. and its closest allies on the island have tried ever since Nixon met with Mao in Beijing in 1972 (9) to convince the Taiwanese people that they are a separate nation. The majority of the population on Taiwan is of Han nationality — also the largest national group in China — though there is an aboriginal population as well.
Taiwan was stolen from China by Japan as a result of the Sino-Japanese war of 1895. It was returned to China after Japan’s defeat in 1945. But then it was effectively stolen from China again by the U.S. in 1949 when the counterrevolutionary armies of Chiang Kai-Shek were driven off the mainland by the great people’s revolution of 1949 and found refugee in Taiwan under the direct protection of the U.S. military. Chiang Kai-Shek then ruled Taiwan as a dictator, dependent on U.S. military protection until his death in 1975. Chiang’s successors remain dependent on U.S. protection to this day.
Foxconn was founded in U.S.-dominated Taiwan in 1974 — when Chiang Kai-Shek was still alive — by Terry Gou. The company’s business model is simple. It uses the “cheap labor” of China — and other oppressed countries — to manufacture commodities not only for Apple but other imperialist monopolies. Foxcomm’s low cost is a function of the low price it pays for labor power in China and other countries.
Foxcomm plays the role of industrial capitalist while the imperialist companies collect super-profits by selling the commodities assembled in Foxconn’s huge factories in South China and other countries at large merchant mark-ups under such brand names as Blackberry, Kindle, Nintendo, Nokia, PlayStation, Xbox, iPad, and iPhone. [see Wikipiedia]
In addition to the merchant mark-up, these monopolies appropriate tremendous quantities of surplus value through their control of “intellectual property,” which in addition to brand names, include software copyrights and software and hardware patents. That is human knowledge produced by engineers and scientists of many nations that is treated as their private property by its monopoly capitalist owners.
Therefore, Foxconn’s business model comes down to squeezing huge amounts of surplus value out of its largely female workforce in exchange for keeping a cut for themselves. However, the lion’s share of the surplus value produced by the Foxconn workers is appropriated by monopolies [and real-estate investors] based in the U.S. and other imperialist countries — in various forms, including the sky-high rents that residents of Silicon Valley are forced to pay.
The kind of capitalism represented by Foxconn illustrates the subordination of industrial capitalists to “finance capital” — a basic characteristic of imperialism according to Lenin — but adds to this the economic subordination of China to the U.S. and other imperialist countries. Foxconn is perhaps the classic example of John Smith’s model of early 21st-century imperialism{link to post which discusses Smith], which differs from the imperialism of Lenin’s day in that the bulk of industrial production now is carried out in low-wage oppressed countries. The result has been a dramatically lowering of the value of labor power worldwide.
In the early 20th-century imperialism analyzed by Lenin, it was still mostly the extractive industries and agriculture that was located in the then-colonial countries while the bulk of industrial production proper was still carried out in the imperialist countries themselves. However, the beginning of the tendency of capitalist industry to move from its traditional homelands to the colonized countries was already obvious to John Hobson, who Lenin quotes in his classic pamphlet “Imperialism, the Highest Stage of Capitalism” [link to post which reproduces the quotes form Hobson]. What was a mere tendency in Hobson’s and Lenin’s time has become a fact in our own time.
While U.S. capitalists love Foxconn, they hate Huawei. Huawei corporate headquarters is located in Shenzhen, China, located on the mainland, controlled by the government in Beijing. Huawei was founded in 1987, during Deng Xiaoping’s “pro-market” economic reforms, by Ren Zhengfei, a former military technologist for the People’s Liberation Army. Ren Zhengfei still serves on the Board of Directors and is one of three rotating CEOs. He also owns 1 percent of Huawei stock, with the rest owned by the trade union that represents Huawei workers. Huawei workers share in the profits and losses of Huawei through this union structure.
During World War II, Ren’s family fled Japanese-occupied territory and found refuge in the southern city Guangzhou — widely known in the West as Canton. There they worked with Chiang Kai-shek’s Kuomintang government, which was resisting if rather half-heartedly the Japanese attempt to colonize China. After the victory of the Chinese people’s revolution of 1949, the Ren family, though considered bourgeois, stayed on the mainland in order to help build the new China. Ren founded Huawei in 1987 after retiring from the army.
As we saw above, Huawei is not state-owned but a private company, meaning that its shares are not traded on the stock exchanges but rather are held by a trade union — that is, except for Ren Zhengfei, who owns a little more than 1 percent of the shares, and perhaps a few other “employees.”
Under this scheme, when an employee leaves Huawei the company buys the employees’ shares back, except for employees who achieved a certain amount of seniority. Imperialist propagandists claim that Huawei is closely linked to the Chinese government and the ruling Communist Party, making Huawei a state-owned company in disguise. This supposedly gives it unfair advantages in its competition with the corporations based in the West and in Japan that represent the pure spirit of “free enterprise.”
Present-day socialists who are attracted to cooperative ownership, where workers own the company as opposed to state ownership, might see Huawei as a gigantic producers’ cooperative, though this is spoiled somewhat by ownership of a little more than 1 percent of the company by Ren. Still, others could see Huawei as a company controlled by Ren and other senior executives that motivates the workers by paying them extra wages when the company does well — known as profit sharing — and cuts wages if the company does badly. This is similar to the ESOP (Employee Stock Ownership Plan) schemes sometimes used by capitalist corporations in the West to convince workers they have the same interests as their bosses. (10)
Unlike the state enterprises of the former USSR, Huawei operates in a market economy, which forces it to maximize profits. However, unlike Foxconn, Huawei is neither owned by or subordinate to U.S., Japanese or Western capitalists. Instead of producing products that are sold under Western and Japanese brand names like Foxconn does, Huawei is developing its own brand names.
Huawei began as a manufacturer of phone switches. But in 2012, it became the largest telecommunications equipment maker in the world. It then overtook Apple as the second-largest manufacturer of smartphones. As the largest producer of telecommunications equipment and the second-largest producer of smartphones, Huawei is not a collaborator of Silicon Valley companies such as Apple and Cisco but rather a competitor. And — at least before Trump launched his anti-China trade war — it seemed well positioned to become the leading company in the coming global switch from 4G to 5G — G being short for generation — technology expected to revolutionize computerized communications in the next few years. [Wikipedia]
In Huawei, we have a Chinese-owned company located in Chinese-controlled China, not U.S.-controlled Taiwan, which unlike Foxconn produces under its own brand name products designed in China — not California — playing a leading role in one the most important industries of the early 21st century.
Trump declared an all-out economic war against Huawei on May 15 (2019) when the U.S. Commerce Department announced that it was adding Huawei to the list of persons and companies or other “entities” alleged to be acting against U.S. security or foreign policy interests. (Daily Press)
Washington claims that if Huawei isn’t stopped it will allow Chinese intelligence agencies to spy on U.S. citizens. However, for most citizens and residents of the U.S., Europe, and Japan, the danger that they will be spied on by the Chinese political police is rather far down on their lists of concerns. They have a lot more to fear from the U.S. political police, which unlike the Chinese political police, which confines their activities to Chinese territory, spy on and reserve the right to arrest — and even kill — any person living anywhere in the world regardless of their nationality or citizenship.
If you don’t believe that, just ask Julian Assange or Ms Meng. Or the Iraqi citizens who were tortured directly by CIA political police in Iraq after the U.S. invasion of that country in 2003. And as Edward Snowden has revealed, the U.S intelligence and political police apparatus, through its various agencies such as NSA, work closely with U.S. private companies.
In December 2018, in opening its war against Huawei the Trump administration descended to gangster tactics. It had the Canadian authorities arrest — that is, kidnap Meng Wan Zhou, Huawei’s chief financial officer in December, at the “request” of the U.S. Ms Meng in her own right is one of China’s most prominent woman business leaders.
What is Ms Meng’s alleged crime? She is accused of violating the U.S. criminal sanctions — actually, blockade — aimed at destroying Iran’s economy. Therefore, to the extent Ms. Meng is “guilty” of this charge, she is actually a crime fighter. Though Ms Meng is now out of jail, she is under house arrest and under electronic surveillance that is stopping her from returning to her family in China and her duties at Huawei.
Now, when capitalists compete against each other — at least according to the textbooks — they are supposed to compete over matters of price and quality, not by kidnapping the daughters of their business rivals. Those kinds of tactics, once the capitalist state has reached a certain degree of development, are only used by members of “the mob,” which are obliged to operate illegally outside the protection and control of the state. But — and this is a very important point in understanding the role the capitalist state in the international global economy — when the competition gets rough, the monopoly capitalists have their own version of a “mob” enforcement arm. It is called the state.
Through the Meng case, the Trump administration itself has directly linked the struggle of both China and Iran to develop their economies — along capitalist lines but independently of U.S. imperialism. Corporate America is using its state against Iran, Mexico, China, India and Venezuela — and in reality against any other country that dares to compete with it. Not only does the U.S. use trade barriers such as tariffs against other nations, it directly threatens their companies by attempting to block their continued access to markets and their sources of parts, raw materials, and labor power. Corporate America also takes full advantage of state-enforced intellectual property laws in both hardware and software. The highly lucrative intellectual property racket is enforced by the Pentagon.
What is the Democrat wing of the “resistance to Trump” doing to oppose his global gangsterism? Exactly what they are doing against Trump’s economic war against Venezuela and Iran. They are supporting it! After all, Trump’s main advisor on foreign trade, the sinister, racist, warmongering anti-China Peter Navarro, is himself a Democrat.
The reactionary role of US imperialism versus the relatively progressive role of Chinese capitalism
Trump’s attack against Huawei is coming at a critical point in the development of the telecommunications industry, the transition from 4th-generation networks to much faster 5G. And it is exactly in this area that Huawei has emerged as the global leader. So far at least, Huawei has shown it can produce advanced communication equipment of the highest quality and at a lower cost price than its U.S. and Western European competitors. Established capitalists are in no hurry to replace fixed capital that represents older but not fully depreciated fixed capital such as 4G telecommunications equipment. Industrial capitalists never junk their fixed capital before it is worn out physically unless forced to by competition.
When industrial capitalists are forced to junk existing fixed capital before it is worn out, they lose a portion of their capital, and these losses must be subtracted from profits. However, industrial capitalists can postpone the introduction of new technology such as 5G only if they have sufficient monopoly power to suppress competition. The capitalists acting on their own can sometimes with the assistance of the state enforce their monopoly through cartels — agreements between independent capitalists, or more radically by merging into a trust. While a cartel is an alliance of independent industrial capitalists that can break down, a trust acts as single capital that totally suppresses competition among the capitalists that join it. (11)
But what happens if the actions of individual industrial capitalists and their bankers are insufficient to suppress competition? This is most likely to be the case on an international level. In that case, capitalists turn to their enforcement arm, the state.
One example of such an action was the kidnapping — oh, the arrest — by the Canadian government of Ms. Meng at the command — oh, I mean request — of the U.S. government. Only through the state but not individually can they impose tariffs, and beyond tariffs outright trade bans such as Trump has imposed on Iran, Venezuela, and Huawei. Ultimately, such violent actions — the arrest of Ms. Meng on a small scale and the attacks on shipping in the Persian Gulf on a larger scale — become, beyond a certain point, full-scale shooting wars. The state, after all, is an organization of violence.
US and British corporations snap into line
Following the demands of the Trump administration, Google has announced that it will no longer allow Huawei to use intellectual property such as Gmail, YouTube, Google Maps, or Google Play, as well as Google hardware. Google could not really do this on its own, since like every capitalist it cannot turn down sales. But if the state forces it to, that is another matter. Google cannot, however, prevent Huawei from using the Linux kernel and other free parts of the Android Operating System, which are still legally protected by free software licenses such as the General Public License.
Today’s smartphones use one of two operating systems. One is Apple’s proprietary iOS, and the other is the Android operating system developed by Google, which combines both proprietary and free — in the sense of free speech not free beer — components such as the Linux operating system kernel.
However, other parts of the Android operating system firmware needed to run many individual chips use proprietary code, as do programs written by Google such as Gmail, Google Play, and Google Maps. Huawei claims that it anticipated the moves of the Trump administration by developing its own operating system and alternative components such as chips. Microsoft, for its part, has just announced that it will no longer supply its propriety Windows operating system for Huawei’s own laptop computer.
This shows that any country that wants to avoid buckling to U.S. demands should not depend on software that is either patented or copyrighted in the U.S., or any other country for that matter. Nor should individuals who do not wish to be spied on through the back doors that exist in both Microsoft Windows and Mac OS systems, especially when there is a superior alternative in the Gnu+Linux operating system.[link to FSF and GNU web sites].
ARM, a British company, has also under the direct command of gangster-in-chief Trump just announced that it will not allow Huawei to use its chips. ARM does not produce chips but designs and collects royalties on them. The problem for Huawei is that, outside of Apple, virtually all smartphones use ARM chips and there is much speculation on the Web that ARM chips may also soon be replacing the Intel chips in laptops. Britain has long functioned as a U.S. imperialist satellite. So it is not surprising that ARM has rallied behind Donald Trump in his war against Huawei.
If the Trump administration succeeds in either destroying Huawei altogether or greatly weakening the company, the result will be higher prices for Windows and Mac laptops — though, I personally wouldn’t recommend using Windows or MacOS computers, tablets, and smartphones — and a slower transition to modern 5G communication technology.
This will mean pricier and lower quality smartphones that respond like molasses whenever you attempt to use their general computer functions. Indeed, certain rural areas in the U.S. that depend on Huawei equipment for their smartphone access today are threatened with complete loss of that access. For consumers, Trump’s economic war with China in the service of U.S.-based monopolies means higher prices and lower quality service — or no service. But for the monopolistic corporations of the U.S, Japan, and Western Europe, it means that their flow of monopoly super-profits will be protected.
Foxconn offers to undermine China in the interests of Trump and Apple
China has various cards of its own to play in its growing economic struggle with U.S. imperialism. Perhaps its strongest card would be to transform its portfolio of over a trillion dollars worth of U.S government securities into cash and use those dollars to buy gold, which would put the yuan on a solid gold basis. But it is very unlikely to do this unless an all-out shooting war breaks out and maybe not even then.
While such a move might break the dollar system, it would also lead to a deep global depression far worse than 2008-09 and rival 1929-33. (12) Such a depression would then engulf the Chinese economy, leading to a massive unemployment crisis in that increasingly industrial country and halting China’s own economic progress for a number of years. No government is likely to take actions it knows will induce a global “Great Depression.”
However, the Chinese government can and is indicating that it will take other actions to defend Huawei and its economy in general. China is the largest producer of metals called “rare earths.” Other countries, including the U.S., also have rare earths but they can be mined and refined only at a much higher cost than the Chinese rare earths. Rare earths have many uses including in tech and in the military. China is hinting that it will begin withholding the export of rare earths if Trump doesn’t call off his economic war against China.
In another move against Trump’s economic war, China is preparing its own “unreliable entities list.” This is a list of companies that are going along with Trump’s demands that they not sell to or do business with Huawei. These would include Google, Microsoft, AMD, and others. Huawei is not only a competitor to U.S. — and other Western and Japanese companies — but is also a market for them. By calling them “unreliable entities” — which they are showing themselves to be — the Chinese government is also pointing out that both governments and private companies in other countries should consider alternatives to depending on U.S. companies — or the private companies of other countries that follow the commands of the White House. In this way, the Chinese government is providing incentives for U.S. companies to put pressure on Trump and other economic nationalists in both the Republican and the Democratic parties to halt the economic war on China. It remains to be seen how effective these measures will be.
Finally, China could move against Apple. China forms an important part of Apple’s global market, but even more importantly it is in China where most Apple products are produced. The “nuclear option” would be for the Chinese government to seize Foxconn’s giant manufacturing plant in China or simply order Foxconn to stop assembly of Apple products.
Far more likely, China could simply increase its inspections of Foxconn facilities and more strictly enforce the laws that are on the books but not really enforced. If the Chinese government did this, it would slow down the production of Apple products in China, which could be very costly to Apple in its own competitive struggle against Android phone competitors.
But China has a problem here, especially if the Chinese government doesn’t move quickly. Foxconn, remember, is headquartered in Taiwan, which though part of China is not controlled by China but by the U.S., and it is offering to move the production of Apple’s products to India. Indeed, it is already doing so: “Apple Inc will begin assembling its top-end iPhones in India through the local unit of Foxconn as early as 2019, the first time the Taiwanese contract manufacturer will have made the product in the country, according to a source familiar with the matter. Importantly, Foxconn will be assembling the most expensive models, such as devices in the flagship iPhone X family, the source said, potentially taking Apple’s business in India to a new level.” (February online Indian Financial Chronicle)
Foxconn’s business model of using low-paid workers in China to make huge super-profits and then share them with Apple will work even better for Apple and other Western and Japanese monopolies in India where workers are even more exploited than they are in China. In light of the economic war against China, Terry Gou’s actions might be seen by Chinese patriots as treasonous — though they are in Gou’s profit interests, which is all that matters for capitalists. However, the Chinese government cannot take action against Gou because, though he is Chinese, he lives in a part of China that is not under the control of the Chinese government but instead dependent on the U.S. government for protection.
Chinese capitalism
We should not idealize Chinese capitalism or confuse it with any form of socialism. Chinese capitalism is subject to all the economic laws described in Marx’s “Capital” that govern the capitalist mode of production as a whole. The Chinese capitalists are just as hungry for surplus value — the unpaid labor of the working class — as any other capitalists. In the struggle between China’s growing working class and the Chinese capitalists, we must support our sisters and brothers of the Chinese working class. But our sympathies are with China and other oppressed nations whose capitalists are challenging the thoroughly reactionary monopoly capitalism represented by the “Western democracies.”
But what happens if in the future the Chinese capitalists achieve domination of the world including the United States, Japan, Western Europe, Latin America, India, and so on? Won’t they behave in the same way the capitalists of the U.S. Europe, and so on are behaving today? Of course, they will. That is the way capitalism works. But that is the future and now is now. In addition, this is a future that will likely never arrive. One reason is that the U.S. world empire may crush the challenge of Chinese capitalism.
More importantly, Chinese capitalism will hopefully be swept away in all its forms by the combined actions of the working classes of the U.S, Europe, China, Latin America and all other nations before Chinese capitalism can develop into Chinese imperialism. This is the future we must strive for.
But to return to the present day, U.S. imperialism, due to the very nature of the capitalist system and the economic laws that govern it, cannot tolerate China with its huge population — more than a billion people — and continental scope as a rival. Foxconn yes but Huawei no! After all, the U.S. couldn’t even tolerate Germany, which compared to China is a European mini-state of around 80 million. It certainly cannot tolerate the competition of a fully developed capitalist China dominated by dynamic companies like Huawei.
This is true whoever is president at the moment, whether its Trump, Biden, Bernie Sanders or Tulsi Gabbard. Presidents, prime ministers, Bonapartist “strong men” or “strong women,” or even fascist dictators such as Adolf Hitler — he lasted all of 12 years — come and go, but the economic laws that govern capitalism remain the same. These economic laws will remain the same until the capitalist system is transformed into socialism through the socialist revolution of the working class or modern society collapses altogether sending capitalism into the grave.
A cold war or a commercial war?
The growing economic war that has been launched by the Trump administration against China — sometimes called a “new cold war” — is really something quite different. The original cold war was launched by the Democratic administration of Harry Truman — supported by the then-”opposition” Republican Party — against the Soviet Union while German and Japanese resistance was being mopped up. Its aim was to destroy the Soviet Union and its state-owned planned economy protected by the state monopoly of foreign trade. Under the monopoly of foreign trade, neither collective farms, other cooperative enterprises, or the individual state-owned enterprises dealt directly with capitalist enterprises. Indeed, during the Soviet era, trade between the Soviet Union — and later Eastern Europe — was minimal. Nor did the state enterprises of the Soviet Union invest abroad.
The U.S. capitalist class was not concerned that the Soviet Union would flood its markets with cheap commodities. Rather, they feared the example of a modern industrial country without capitalists would prove so attractive that it eventually would encourage the working classes of Europe, Japan, and ultimately the United States to overthrow the capitalist system. It is no accident that the launching of the Cold War was accompanied by a massive attack against the left — above all the Communist Party-led left. But the witch hunt against the Communist Party quickly spilled over to an attack on Trotskyists and finally anybody who was at all progressive.
The witch hunt actually began in the CIO unions but then spread to all areas of life, such as elementary schools to universities, the press, Hollywood, and the churches. The witch hunt gained the nickname “McCarthyism” after the Republican senator from Wisconsin Joseph McCarthy, who spearheaded the witch hunt between 1950 and 1954. The Cold War was therefore not a commercial war but rather a global class war between the working class and its organizations, the most powerful of which was the Soviet State and its ruling party, the Communist Party of the Soviet Union.
The ruling party of the People’s Republic of China is for historical reasons also called Communist. (13) And in its attacks against modern China, the U.S. ruling class and its propaganda apparatus sometimes — though not always — dust off the old anti-Communist themes of the Cold War. It does this even in its attacks against the anti-Communist Russian government of Vladamir Putin, because of the historical association of Russia with “Communism” in the minds of the American people.
However, the Chinese economy of today is nothing like the Soviet economy. While there were many examples of bureaucratic privilege in the USSR, capitalists were blocked from playing any significant role in the Soviet industrial economy. Soviet state enterprises were not run by or in the interest of a class of billionaires and multimillionaires but rather by a general plan drawn up by the ruling working-class party, the Communist Party of the Soviet Union.
The Soviet bourgeoisie — or rather the anti-Soviet bourgeoisie — often called the mafia because its economic activities, though tolerated, were illegal — increased their wealth through speculating in chronically short use values. This criminal activity had a purely parasitic relationship with the Soviet planned economy and became known as a “second economy” and was much praised in the Western media.
In the 1970s, as the authority of the Soviet Communist Party weakened, the “second economy” began punching ever larger holes in the Soviet monopoly of foreign trade and began to spread to and link directly with Western economies. The “second economy” when it began to spread to the United States became known as “the Russian mob.” It seems that a young New York real estate developer named Donald Trump was very much involved in this process.
Before Mikhail Gorbachev became general secretary of the Communist Party of the Soviet Union in 1985, the ability of the gangsters and corrupt party and government officials they bought off to act as industrial capitalists were limited by the repressive activities of the Soviet state against such activity. More fundamentally, as long as the right to a job was guaranteed by the planned economy, the ability of capitalists to employ and exploit wage labor was severely limited. It was no accident that one of the chief demands of the “pro-perestroika” — that is, bourgeois — economists of the Gorbachev era was to end the right to a job. Only then could capitalism be restored on a large scale.
In China today, industry is clearly owned and dominated by a class of capitalists, a few of which have become dollar billionaires. There is no monopoly of foreign trade and Chinese enterprises operate not only in China but around the world. Unlike Soviet state enterprises, today’s Chinese enterprises — like Huawei, for example — whether state-owned, owned by stockholders, or privately owned, compete directly with both Chinese and non-Chinese capitalist enterprises for market share, access to raw materials, and labor power in order to maximize their profits.
None of this, however, changes the fact that the transformation of China from an impoverished peasant economy into what in many ways is emerging as the world’s leading industrial country adopting the latest technologies is an event of incalculable progressive significance.
The most important consequence of this process has been the rise in China of a mighty industrial working class, which has waged many militant economic struggles with China’s increasingly wealthy capitalist class. This is true no matter how disappointed we might be at the failure of China — which was a peasant country that was far less developed than Czarist Russia had been on the eve of the 1917 revolution — to develop along socialist lines.
On the other side of the class barricades, the U.S. at first was overjoyed by the Deng Xiaoping leadership’s open embrace of markets, private property, and increasingly undisguised capitalist economic ownership of economic enterprises. They were especially relieved that there was no resumption of the Sino-Soviet alliance that existed between 1949 and 1959 after the death in 1976 of the strongly anti-Soviet Mao Zedong in 1976.
No doubt the failure of China to renew its alliance with the Soviet Union after Mao’s death played an important role in the rise of Mikhail Gorbachev to power in 1985. But the U.S.’s enthusiasm for Chinese capitalism began to wane when Chinese capitalist enterprises — like Huawei — began to compete with and beat U.S. capitalist enterprises at their own game. That was not supposed to happen!
One problem with referring to the economic war against China that has been launched by the Trump administration as a “new cold war” is that there is no guarantee that this growing commercial war will remain “cold.” It may well at some point — not necessarily under Trump — become a hot war.
The transformation from a “peaceful” commercial war to a violent hot war will not happen as easily as it did in the past because of the extreme destructive violence of modern weapons, especially but not only nuclear weapons. But this provides no guarantee that the commercial war between China and the U.S. will remain “cold.” A shooting war between the U.S. and China would likely begin as a “limited war” involving conventional weapons, perhaps in the form of limited naval clashes in the Pacific Ocean or the South China Sea. Where it would go from there is anyone’s guess. Or it might begin as a cyberwar whose battlefield is the Internet. This is happening to some extent already.
One of the factors that prevented the U.S.-launched Cold War from becoming a full-scale World War III hot war was that the U.S.-dominated capitalist world economy and the socialist economies of the Soviet Union and its Eastern European allies developed as parallel economies with relatively little contact. Today, however, the economies of the U.S. and China have become thoroughly intertwined, which makes economic warfare inevitable.
During the Cold War — and still today — the complete political and military subordination of Germany, Japan, and to a lesser extent Britain and France to the U.S. world empire blocked a new inter-imperialist war. However, as the Party of Order points out, Trump’s economic and political nationalism — with strong racist overtones — is encouraging the growth of nationalism and undermining the very conditions that have prevented inter-imperialist wars since 1945.
The threat of war, including the nightmare of nuclear war, is therefore growing. Competition for mastery of the world market, now increasingly being fought with tariffs, threats of tariffs, and other methods such as the kidnapping of Ms. Meng, “sanctions,” the attacks on shipping in the Persian Gulf, as well as traditional economic methods, grows ever more intense.
The last month saw Trump threaten — though he didn’t actually do it — to impose tariffs against Mexico. The racist-in-chief demanded that Mexico take drastic steps to halt “illegal immigration” or face 5 percent tariffs beginning June 10 to be raised by 5 percent monthly until it reached 25 percent in October.
However, Trump’s moves brought a wave of complaints not only from Democrats but also Senate Republicans, who threatened to vote against the “state of emergency” Trump would have to declare in order to impose the tariffs without bothering with a congressional vote. This will be the second time the Senate Republicans have opposed Trump in the last several months. The first was their refusal to support Trump’s nominations of Herman Cain and Stephen Moore to the U.S. Federal Reserve Board. I will examine this episode further since it tells us much about contemporary imperialism.
To be continued.
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1 This doesn’t prevent many economists and the media from claiming that it is low unemployment — from the viewpoint of the capitalists, a general shortage of the commodity labor power — that is responsible for recessions. The argument goes that “labor shortages” lead to higher wages — so-called wage inflation — which forces the central bank to raise interest rates that eventually ends in a recession.
A more honest version of this argument is that low unemployment leads to higher wages — so-called wage inflation — and wage inflation leads not to general inflation but lower profits. Lower profits end in recession. In either case, if unemployment is really at 50-year lows — or at record lows, as the media going even further than the U.S. Labor Department claims — a recession in the near future should be a virtual certainty. (back)
2 If a U.S. recession has already begun — or is about to begin in the next month or so — it is possible that the actual low point of the recession will have passed by November 2020. However, since November 2020 is a little less than a year and a half away — this is written in June 2019 — U.S. unemployment would be at or very close to the cyclical peak instead of being at or near the cyclical low that it is now. This would enable Trump’s Democrat opponent to claim that while under the Democratic Obama administration unemployment declined from its Great Recession highs toward 50-year lows, under Trump the trend reversed and unemployment began to rise once again. With his approval still below 50 percent in virtually every poll, Trump desperately needs a low level of cyclical unemployment in November 2020 if he is to carry the Electoral College. (back)
3 On June 13, the U.S. government reported that prices hardly rose in May, causing stock market prices to jump sharply in anticipation of an imminent cut in the Federal Reserve’s fed funds target and possibly other “easing moves.” The low inflation was not really surprising considering that overall U.S. industrial capacity utilization is below 80 percent, indicating that demand for commodities is not exceeding the supply of commodities at current prices. The U.S. Federal Reserve System has been destroying dollars for three and a half years, and the U.S. and world economies appear to be on the brink of full-scale recession.
However, the dollar price of gold has been rising in the last few weeks. If the gold market decides that the Fed is easing “too fast” or that it moved “prematurely,” the dollar price of gold will soar, driving up dollar prices of primary commodities and suddenly the current “tame” inflation numbers will mean nothing. (back)
4 Imagine what would happen if Powell explained in a public forum that the Fed’s policy was aimed at bringing about a “mild recession” in late 2019 and 2020 because “our free-enterprise” economy needs a recession about every 10 years in order to postpone a more serious crisis. There would be demands for Powell’s immediate resignation across the capitalist political spectrum from progressive supporters of Modern Monetary Theory and all the Democratic presidential candidates to, not least, President Trump and his supporters. (back)
5 This is why U.S. lawyers advise everybody from the president down to the humblest non-citizen resident never to agree to talk to the police — including the FBI — without a lawyer present. Though you can’t legally lie to the police in the U.S., the Fifth Amendment to the U.S. Constitutions means that you do not have to talk to the police. (back)
6 The doctrine that a sitting president is immune from prosecution in federal court reeks of Bonapartism. Taken to an extreme, the president could stage a coup, dissolve Congress, and arrest all members of Congress, including senators who dare oppose him or her. This would be, of course, in gross violation of the Constitution that forms the foundation of federal law, which, however, the president is not bound to as long as he or she is in office.
True, Congress could then respond by impeaching, trying, convicting and removing any president who would dare disperse Congress. However, with Congress members in jail, how would Congress accomplish this? True, the president could be called to account once his or her term expired. However, under Mueller’s interpretation, the president could then declare him or herself president for life and though this would violate federal law the president cannot according to Mueller be tried in court for violating the law as long as he or she is in office, which in this case would be life. (back)
7 Among Trump’s numerous anti-Semitic supporters, words like elites, globalists, internationalists, and bankers are code for “the Jews.” Trump is actually more pro-Israel not only in rhetoric but in actions than any previous U.S. president. No other U.S. president has recognized Jerusalem as Israel’s “eternal capital,” as the Zionists call it, nor has recognized the Golan Heights as part of Israel. However, unlike his recent predecessors, he has avoided so far nominating people of Jewish origin to the Federal Reserve Board.
Trump is hinting that he is for Jews as long as they are loyal to their country — which for him happens to be Israel, not the U.S. — and play their assigned roles in fighting the Palestinian people, Arabs in general, Muslims, and other Brown and Black people around the world. Since 1948, the Israelis have emerged as world experts in “counter-insurgency,” operating far beyond the Middle East. To the extent “the Jews” through “their state of Israel” do this, the alt-right types around Trump are saying they show that they are becoming a “normal nation” at long last and can have a future.
However, Trump is also hinting that the Jews’ alleged death grip on “international finance” that has been exercised partially through the Federal Reserve must end. As Trump’s racist anti-Semitic supporters see things, his enemies are not the Israeli and Zionist Jews — who are a model for white Aryan Europeans to learn from — but rather the “international financial Jews” who are determined to ruin the Trump program of making “America Great Again” and to destroy the white race. (back)
8 Natural gas is mostly methane, which is a far more potent greenhouse gas than carbon dioxide if it gets into the atmosphere. (back)
9 Before the U.S. government was essentially forced by the Vietnam War to normalize relations with the People’s Republic of China, the U.S. claimed that the Chiang Kai-shek government represented “free China” resisting “Communist tyranny.” Successive administrations, both Democrat and Republican, insisted that China’s seat in the General Assembly in the UN and permanent seat on the UN Security Council be represented by Chiang’s government, though it ruled only Taiwan.
Chiang, backed by the U.S., would eventually return to the mainland and “liberate” the Chinese people from “communism.” Indeed, periodically the U.S. threatened to “unleash” Chiang Kai-Shek to invade the mainland — which at least was an admission that he was “leashed” to begin with. In those days, there was no talk of Taiwan being a nation separate and apart from China. (back)
10 Union density is lower today in the U.S. than in virtually any other developed — and many underdeveloped — countries. To find a lower union density in the U.S. itself, you have to go back to before the turn of the 20th century. This does not prevent the U.S., working through the AFL-CIO, from sponsoring reactionary unions that serve not the interests of the workers they claim to represent but the interests of U.S. imperialism.
We see this in Venezuela today, just as we saw it in Chile under President Allende. We can be sure that the U.S. is working to organize a “free trade union” movement in Cuba, though they so far haven’t had any success. One of the aims of Trump recently tightening the economic blockade against Cuba is to create conditions more favorable for the emergence of pro-imperialist “free” — as in free of the Communist Party but not free of the bosses — unions. Supporting the Chinese workers against the Chinese capitalists is not the same thing as supporting pro-imperialist U.S. government-sponsored unions that are working to reduce China once again to a semi-colony of U.S. imperialism. (back)
11 The original industrial trust was John D. Rockefeller’s Standard Oil Company. Rockefeller used the legal device of a trust fund where the stocks of formerly independent oil companies were held in a common fund that voted as a bloc putting all the “independent” companies under the control of the Rockefeller-dominated trust. Hence the term trust.
This device was declared illegal in the U.S. It was replaced by the holding company, which is the form that trusts take today, both in the U.S. and around the world. A corporation is created that does not run a business but instead owns stock in other corporations, which brings them under the control of the holding company. The trust appears as a group of corporations whose shares are owned by the same holding company and as a result do not compete with one another. (back)
12 In 1929-33, China was an overwhelmingly pre-capitalist peasant country — capitalism only had a few toeholds in Shanghai, Guangzhou (Canton), and Hong Kong. This limited the impact of the 1930s Depression on peasant China. In the 1930s, it was the crushing of the traditional Chinese society and the moves by Britain, Japan — with the U.S. in the background — not the world Depression that was the biggest problem facing the Chinese people.
Today China has the highest industrial production in the world — though not on a per-capita basis. While its huge reserve of foreign currency — overwhelmingly U.S. dollars — protected it somewhat from the effects of the 2008 crisis since it enabled the government to undertake huge “Keynesian” anti-crisis public expenditures, China is very vulnerable to effects of the kind of global depression that would accompany and follow a sudden collapse of the dollar system. Therefore, it is virtually excluded that the Chinese government will do anything that would trigger such a collapse. (back)
13 A crucial difference between the Soviet Union and the People’s Republic of China is that the Communist Party of the Soviet Union had to be overthrown before Russia and the other Soviet Republics could liquidate socialist construction and embark on what has turned out to be very crippled capitalist development. In China, on the contrary, the Communist Party has retained its political power. But this has not prevented China, too, from developing along capitalist lines. But with this difference: Chinese capitalism has proved far more robust than the stunted capitalism of Russia and the other former Soviet nations. How did a Communist Party that was once a section of the Third International and led a great revolution in its own country become the guardian of capitalist development?
The difference I think lies in the different nature of the Russian and Chinese revolutions. On the eve of the Russian Revolution, Russia had an intermediate level of development between that of Western Europe and China. Russian capitalism and its industrial working class were developed enough to enable Lenin and his associates to build a party both in terms of program but perhaps even more importantly in terms of composition based on the industrial working class.
Lenin did not build a party that reflected the composition of the people of Russia — defined as the entire population of Russia minus the large capitalists and landlords. This was a conscious policy on Lenin’s part. If Lenin and the other Bolsheviks had built a party that reflected the composition of the people — excluding only the large landlords and capitalists — of the Russian Empire, the party would have had an overwhelming peasant, not working class, composition.
Lenin and the Bolshevik Party — later the Communist Party — supported and led the peasants in their struggle for the land. But they did this through the industrial working class. While the Communist Party’s working-class composition became increasingly diluted in later years, the change was for many years quantitative, not qualitative. As a result, as an instrument of the working class, the Communist Party of the Soviet Union was weakened but not destroyed. Even when a grouping strongly influenced by pro-capitalist ideas headed by Mikhail Gorbachev captured the leadership of the Soviet Communist Party, the party proved to be the chief obstacle to actually carrying out the pro-capitalist “perestroika” reforms.
After the so-called August coup of 1991, Gorbachev announced that the Communist Party was banned. By the end of the year, the Soviet Union was formally dissolved and the privatization or destruction — it was mostly destruction — of Soviet industry was carried out at lightning speed.
Russia and the other former Soviet nations then made a transition from a higher stage of production — a socialist economy and society under construction — to a lower stage of production, capitalism, with an unprecedented destruction of the productive forces not previously seen in another country either in depression or war. Russia and the other former Soviet nations have not fully recovered to this day. But in order to achieve these “results,” the Communist Party founded by Lenin had first to be weakened over many years in terms of social composition, its program, and through corruption and ever-increasing bureaucratic privilege and then overthrown.
The Chinese revolution and its leading party, the Communist Party of China, followed a fundamentally different path. Mao built a party that reflected the actual composition of the Chinese nation — again minus the large landowners and big capitalists. Like the Chinese people themselves, the Communist Party of China Mao built was overwhelmingly peasant in composition. This enabled the Communist Party under Mao’s leadership to come to power and “shake the world” in 1949.
But this meant that unlike in the case in the Soviet Union, the bourgeoisie — in the form of the peasant bourgeoisie — was right inside the Communist Party well before the triumph of the revolution in 1949. Peasant production — simple commodity production, as Lenin explained — breeds under modern conditions capitalism on a continuous basis. This was not the result of the ill will of certain individual “capitalist-roaders” but arises from basic economic laws. It is not an accident that Marx began his analysis of capitalism in “Capital” not with capital itself but with the commodity.
When the “capitalist-roaders” captured the leadership of the Chinese Communist Party after Mao’s death, they found a solid base of support in the bourgeoisie who were already inside the Communist Party and had been for decades before the triumph of the revolution. Therefore, far from being an obstacle to the development of capitalism in China, the Communist Party of China, despite its name, has proven to be the essential instrument in China’s emergence as a major capitalist country in its own right. Today China is again shaking the world not through a mass upsurge of the oppressed classes but rather through cheap commodities. (back)
A Critique of Crisis Theory 