Posts Tagged ‘crisis theory’

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 6)

April 21, 2019

Storm over the Federal Reserve System

U.S. President Donald Trump has indicated that he will nominate right-wing economic commentator Stephen Moore and businessman Herman Cain to fill two vacancies on the
Federal Reserve System’s Board of Governors – called the Federal Reserve Board for short. If confirmed, both Moore and Cain would serve for 14 years. While Trump’s other nominees to the “Fed” have been conventional conservative Republicans, Moore and especially Cain have been strongly attacked in the media and by economists and some Republicans for being completely unqualified.

Of the two, Cain has drawn the most opposition from within the Republican Party. As of this writing, his confirmation by the U.S. Senate looks unlikely. Republican Senators Mitt Romney (who ran against Obama for president in 2012), Lisa Murkowski, Cory Gardner, and Kevin Cramer have all indicated that they are leaning against voting to confirm Cain. If all them vote no, Cain’s nomination will fail unless he can win over some Democratic senators.

Cain – one of the few African-Americans Trump has nominated for high office – throughout his business career has expressed opposition to even elementary labor rights. In 2016, he briefly ran for president as a Republican on a platform of reforming the federal tax system in an extremely regressive way going beyond Trump’s own tax cut for the rich. Cain was then forced to withdraw from the presidential campaign when several women came forward alleging that he had sexually assaulted them. For Donald Trump, this was not a disqualification but it might be for some U.S. senators who have to face re-election.

Cain has not indicated that he supports inflationary monetary policies. On the contrary, he has said that he would like to see a return to the gold standard. For taking this stand, he has been ridiculed by liberals and progressives as well as mainstream economists. However, Cain does have actual central bank experience having served as head of the Federal Reserve Bank of Kansas City, one of 12 regional banks that make up the Federal Reserve System.

Capitalist opponents of Cain’s nomination – Cain has been a strong supporter of Trump – fear that Cain would do Donald Trump’s bidding on the Fed’s Open Market Committee (1). With the 2020 presidential election approaching, it is widely suspected that Cain would push for an “easy” monetary policy and cuts to the Fed’s target for the federal funds rate in a bid to stave off the looming recession until after the November 2020 election. Not only would such a policy put the dollar-centered international monetary system in danger in the short run, it would also erode the Federal Reserve System’s independence over the long run.

Trump’s other prospective nominee, Stephen Moore, has drawn much criticism from mainstream media and professional economists but so far less from Senate Republicans. Like most of Trump’s nominees for high positions, Moore is white. He is not even a professional economist. Although majoring in economics in college, he does not hold a PhD. Unlike Cain, Moore has never directed either a business enterprise – Cain in addition to serving as head the Federal Reserve Bank of Kansas City was also head of the Godfather Pizza Chain. However, like Cain, Moore has been accused of mistreating women. This raises the question whether Cain’s race could be a factor in the apparent lack of opposition to Moore on the part of Senate Republicans.

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Political and Economic Crises (Pt 5)

March 24, 2019

Trump’s Islamophobic demagoguery and the New Zealand massacre

On March 15, the world was shocked when a far-right gunman killed 50 Muslim worshipers and injured many others at two Mosques in Christchurch, New Zealand. The gunman hailed U.S. President Donald Trump as “a symbol of renewed white identity and common purpose,” but complained that he is not a good “policymaker and leader.”

This fascist terrorist mass murderer put his finger on the relationship between “Trumpism” and the growing fascist “white nationalist” movement, which if it should win state power in a major imperialist country would put in the shade the crimes of its 20th-century predecessor.

Trump lacks a mass movement organized not only as a political party but as a mass armed militia based on middle-class youth driven to desperation by a crisis of monopoly capitalism. Such a movement, once it reaches a certain degree of development, is capable of launching a civil war against the organized workers’ movement and its allies as well as “racial” and religious minorities of all classes. Once a fascist movement becomes powerful enough to wage a civil war, it always does so in the interest of its finance-capital masters. From the viewpoint of today’s fascists, since Trumpism is only preparing the way for the real thing, Trump falls short as a “policymaker and leader.”

But Trump is preparing the way for 21st-century fascism through his role as a “symbol of renewed white identity and common purpose,” not only in the U.S. but in all the imperialist countries. Our hearts must go out to the victims of this unspeakable crime, casualties of Trump’s racism and the capitalist system that breeds it.

We must fight Trumpism and all it stands for with all our strength. But to do this effectively, we must also fight the Party of (the current imperialist world) Order, which is doing all it can to cripple the fight against Trumpism by usurping the leadership of the “resistance” to Trump from within.

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Political and Economic Crises (Pt 4)

February 24, 2019

Trump and ‘Party of Order’ unite to declare war on Bolivarian Venezuela

On Jan. 23, after conferring with U.S. Vice President Mike Pence, Venezuelan right-wing politician Juan Guaidó declared himself “interim president” of Venezuela. The United States promptly recognized Guaidó as the “interim president.” Trump refused to rule out a military attack against Venezuela if the government of President Nicolas Maduro and the Venezuelan people resist the U.S. government’s appointment.

In a series of moves that included breaking diplomatic relations with the legitimate government, appointing a puppet government in its place, seizing state assets and handing them over to the puppet government, demanding that Venezuela’s military support the puppet, and threatening direct military action if the Venezuelan military refuses, “commander-in-chief” Donald Trump’s order amounts to a declaration of war against the government and people of oil-rich Venezuela.

As part of the war drive, Trump imposed a full-scale economic blockade against Venezuela. The assets of the state oil company held abroad, including its U.S branch Citgo, has been seized and handed over to the puppet Guaidó “government.” Venezuelan bank accounts have been frozen, including $1.2 billion in gold bullion held in the Bank of England.

Venezuela is one of a bloc of three large oil-producing countries, the other two being Iran and Russia, that is not under the control of the Empire. If Trump succeeds in his war against Venezuela, the pressure on Iran and Russia will increase. For the moment, the war against Venezuela is being fought with economic methods, but this could change at any moment.

Even if the war remains economic, this doesn’t change the fact that it is a war of aggression and, as such, a crime against humanity. By Feb. 6, the European countries of Austria, Belgium, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Iceland, Latvia, Lithuania, Luxembourg, Macedonia, Netherlands, Poland, Portugal, Spain, Sweden, and the UK had recognized the U.S.-appointed “interim president.”

Latin American countries that resist the Empire continue to recognize the legal government of Venezuela. These include socialist Cuba – no surprise there – Bolivia Uruguay, Nicaragua, and the new nationalist government of Mexico, which came to power in January after many years of right-wing rule. On the other hand, Latin American countries ruled by right-wing governments belonging to the so-called Lima group announced that they recognize the Trump-appointed Guaidó as Venezuela’s “interim president.” Among the Latin American governments recognizing Guaidó is the new far-right government of President Jair Bolsonaro in Brazil.

Beyond Latin America, Israel also announced its support for the coup government. In contrast, Syria continues to recognize the Maduro government. Russia, China and Iran also continue to recognize Maduro as the sole legitimate president of Venezuela.

There is a general pattern here. Governments that are integrated into the U.S. empire quickly recognized the coup government and joined the U.S. declaration of war against Venezuela. All other governments recognize Maduro as head of the only legitimate government of Venezuela.

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The Current U.S. Economic Boom in Historical Perspective (Pt 2)

May 6, 2018

Trump’s attempts to reverse the decline of U.S. capitalism

In April 2018, the U.S. political world was shaken by the news that Paul Ryan, the Ayn Rand/Austrian school-inspired Republican speaker of the U.S. House of Representatives, would not be running for re-election in this year’s mid-term race. Ryan claimed he was retiring at the age of 48 from politics “to spend more time with my family.”

It is widely believed, however, that Ryan is retiring from Congress because he fears a humiliating defeat at the hands of his Democratic Party opponent, the construction worker, trade unionist, and “Berniecrat” Randy Bryce. Over the last year, many of Ryan’s constituents were no doubt shocked to learn that their handsome, genial congressperson wanted to take away their health insurance.

It seems likely that Ryan, who is believed to harbor presidential ambitions, plans to lie low, make lots of money in the private sector, and count on the public forgetting (with the assistance of the mass media) about his attempt to throw tens of millions of people off their health insurance. At a later day, Ryan will be poised to reenter electoral politics and ride a new Republican wave, perhaps all the way to the White House.

But how could there be another Republican wave in the aftermath of the ever-growing debacle of the Trump presidency and the self-exposure of the Republican Party on the health insurance issue? To assume that a Republican comeback is impossible, would be to ignore the lessons of the last great “progressive” victory in U.S. politics—the election in November 2008 that brought into the White House the first African-American president, combined with solid Democratic majorities in both houses of Congress. However, at the end of Obama’s triumph lurked the racist Donald Trump, backed by Republican majorities in both the Senate and the House.

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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 8)

July 16, 2017

Engels wrote in “Socialism Utopian and Scientific”: “We have seen that the ever-increasing perfectibility of modern machinery is, by the anarchy of social production, turned into a compulsory law that forces the individual industrial capitalist always to improve his machinery, always to increase its productive force. The bare possibility of extending the field of production is transformed for him into a similarly compulsory law. The enormous expansive force of modern industry, compared with which that of gases is mere child’s play, appears to us now as a necessity for expansion, both qualitative and quantitative, that laughs at all resistance. Such resistance is offered by consumption, by sales, by the markets for the products of modern industry. But the capacity for extension, extensive and intensive, of the markets is primarily governed by quite different laws that work much less energetically. The extension of the markets cannot keep pace with the extension of production. The collision becomes inevitable, and as this cannot produce any real solution so long as it does not break in pieces the capitalist mode of production, the collisions become periodic. Capitalist production has begotten another ‘vicious circle.’”

This famous quote was written when Marx was still alive. It passed his muster. Indeed, throughout their long partnership, the founders of scientific socialism described cyclical capitalist crises as crises of the general relative overproduction of commodities. However, most modern Marxist economists reject this idea. Among them is Anwar Shaikh.

Shaikh, in contrast to Marx and Engels, believes that the limit “modern industry” runs into is not the market but the supply of labor power. Marx and Engels believed that securing an adequate quantity of “free labor power” was crucial to the establishment of the capitalist mode of production. This was the big problem early capitalists faced, which was solved by separating the producers, often through force and violence, from their means of production. But once capitalism was firmly established, it has been the limit imposed by the limited ability of the market to grow relative to production that capitalism regularly runs up against.

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Germany and the U.S. Empire (Pt. 3)

December 6, 2015

*Special Statement*

I don’t normally comment on current events unless they are connected to economic events or theories of capitalist economic crises. However, the terrorist acts in Paris that led to the deaths of at least 130 civilians and the injuring of scores of others forces an exception.

I deplore the deaths of civilians in Paris whose only crime was enjoying a night of partying, drinking and music, a “crime” I have been guilty of myself. This follows the terrorist attack in Beirut and the apparent bombing of a Russian airliner that crashed in Egypt causing the deaths of 224 passengers. All these acts seem to be the work of supporters of the Islamic State, also called ISIS, ISIL and Daesh.

The media has shown much more concern about the mostly white Western European victims in Paris than they have for the victims on the Russian plane, not to speak of the victims of Islamic State terror attacks in the Muslim countries such as the recent attack in Beirut. But bad as the carnage caused by the terrorist acts organized or encouraged by the Islamic state have been, it pales before the much greater number of civilians that are being killed not only in Syria but in many other countries being attacked by U.S. imperialism and its satellites such has France.

Even if we count the nearly 3,000 people killed in the Twin Towers attack on September 11, 2001—also innocent bystanders whose only “crime” was showing up at work at the World Trade Center in New York that day—the total number of civilians killed by individual or small-group terrorist actions such as those carried out by the Islamic State or al-Qaeda is still dwarfed by the number of dead resulting from the terrorist war against terror waged by the U.S. government, Israel and the Empire’s imperialist satellite states against the peoples of the Muslim world and beyond. Are the lives of white Parisians more valuable than of “brown” Syrians, Iraqis or Palestinians? I say no! Black and Brown lives matter just as much!

It is also worth noting that the “war on terror” launched by George W. Bush and continued under President Obama has been joined with great enthusiasm by the French government. Paris is hoping the U.S. will allow France to once again become the colonial master in all but name of Syria.

The war on terror is itself being waged with terrorist methods. That is, the government of the U.S. and its satellites are using methods of warfare that in the past were associated with individual and small-group terrorist acts. One famous example is the assassination of Crown Prince Archduke Franz Ferdinand and his wife Sophie by Serbian nationalist terrorists in June 1914.

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Capitalist Economists Debate ‘Secular Stagnation’ (Pt 5)

September 13, 2015

Rudi Dornbusch predicts unending capitalist expansion

“The U.S. economy likely will not see a recession for years to come,” economist Rudi Dornbusch (1942-2001) wrote in 1998. “We don’t want one, we don’t need one, and, as we have the tools to keep the current expansion going, we won’t have one. This expansion will run forever.”

In the late 1990s, the Internet was making rapid progress. Fueled by various technologies including the digital computer, the transistor and electronic circuit board—the “computer on a chip”—and the GNU/Linux computer operating system, world communications were, and are, being revolutionized. And this technological revolution was no illusion.

For the first time, home computer users could connect to the Internet, which now featured its own graphical user interface called the World Wide Web. No longer was the Internet confined to text but would soon include audio and video files. With such a great technological revolution under way, many capitalist economists—and this was echoed by some Marxists as well—foresaw an era of never-ending capitalist expansion. The Clinton boom of the late 1990s was to be just the beginning.

During the Clinton administration, stocks soared on Wall Street while the rise in the NASDAQ stock index—which lists “high-tech” stocks—seemed to know no limit. Goldman-Sachs economist and financial analyst Abby Joseph Cohen’s (1952- ) predictions of continuing soaring stock market prices drew skepticism from many seasoned stock market veterans, yet she continued to be proved right. Until March 2000, that is. Then things began to go horribly wrong as the NASDAQ index sagged and then crashed.

“Her reputation was further damaged when she failed to foresee the great crash of 2008,” Wikipedia writes. “In December 2007, she predicted the S&P 500 index would rally to 1,675 in 2008. The S&P 500 traded as low as 741 by November 2008, 56% below her prediction. On March 8, 2008, Goldman Sachs announced that Abby Joseph Cohen was being replaced by David Kostin as the bank’s chief forecaster for the U.S. stock market.” Although Internet technology continued to make great strides and stock markets both crashed and soared, the world capitalist economy entered into a period of slow growth—interrupted by the the turn-of-the-century recession that included the NASDAQ crash that Cohen missed and then the much deeper “Great Recession.”

Indeed, the world economy has, since Dornbusch made his prediction of unending capitalist prosperity, seen the worst growth figures since the 1930s Depression. The situation has gotten so bad that some capitalist economists have revived the term “secular stagnation,” last widely used among economists in the late 1930s. What did Cohen and Dornbusch and so many others miss?

They were right about the technological revolution. They left out only one little thing: the contradictions of the capitalist mode of production. But perhaps we shouldn’t be too hard on them. Though both Dornbusch and Cohen were/are highly trained economists, they didn’t learn about the contradictions of capitalism in their university studies. It wasn’t part of their course work. For that, they would have had to turn to the work of Karl Marx, and that they apparently neglected to do.

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Capitalist Economists Debate ‘Secular Stagnation’ (Pt 3)

July 19, 2015

Secular stagnation and the Greek crisis

Many on the left have expressed acute disappointment that the Syriza government has agreed to accept more “austerity” in the wake of the No! vote of the Greek people. We must remember that the Syriza government is not a revolutionary socialist government—a dictatorship of the proletariat—and a socialist revolution is not, or rather is not yet, unfolding in Greece or anywhere else in Europe at the moment. The logic of the class struggle does point in the direction of a European socialist revolution, but we are not yet there. This blog will not attempt to lay out strategy and tactics for Greek revolutionaries during the present acute crisis.

Instead, I am interested in another question: Why is the “troika” so unreasonable in its dealings with the Syriza government? The government leaders have made it clear that they are determined to remain within the European Union and the Eurozone. Their program has always been quite modest—an end to the relentless austerity that has led to a depression worse in terms of both the unemployment rate and duration than the early 1930s super-crisis was in the United States or in Germany.

The super-crisis proper of the early 1930s lasted “only” three and a half years in the U.S. and Germany. The Greek crisis has lasted six years. A brief rise in the Greek GDP late last year had already given way to renewed recession before the crisis that shut down the Greek banking system for two weeks. The agreement between Syriza and the troika for still more austerity in exchange for loans that will enable the gradual reopening of the Greek banks threatens to further prolong the Greek slump.

It has been almost 50 years since the May-June 1968 General Strike in France. The French government of the day, headed by General Charles de Gaulle, largely conceded the economic demands of the strikers in order for the ruling class to hold on to power. The French government was prepared to do this through civil war if necessary. De Gaulle’s willingness to wage civil war to uphold capitalist rule combined with a willingness to make concessions in the economic sphere prevented a prolonged social and political crisis in France in 1968 of the type that is now unfolding in Greece. Why isn’t the troika, the de Gaulle of today, following the same policy for Greece that worked so well for de Gaulle and the French capitalists in 1968?

Last week, in a special post on Greece, I explained that behind the hard-line policies pursued by the troika lies the current “tightening” phase of the U.S. Federal Reserve Board monetary policy. This tightening phase is, in turn, rooted in the extraordinary policy of “quantitative easing” that the Fed followed in response to the near collapse of the U.S. banking system in the fall of 2008. But they could not continue this policy indefinitely without incurring a fatal crisis of the dollar system sooner or later.

As the quantity of U.S, dollars has begun to grow relatively more scarce than in the years of quantitative easing, there have been a few shocks—for example, the recent Chinese stock market panic. But for now, the crisis in Greece is the most dramatic. So in order to understand the deep roots of the Greek crisis and the troika response to it, we have to understand the causes of the crisis of 2008 and the quantitative easing it led to. The “Great Recession” itself was embedded in a more chronic problem of prolonged slowing economic growth that economist Larry Summers calls “secular stagnation.”

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