Sometimes there are moments when the penny drops. Alex Callinicos’s Bonfire of Illusions is more than mere moments. It is a piggy bank of insight and enlightenment, full of many many pennies.
In his new book Callinicos argues that the belief that ‘liberal capitalism offered the only basis on which humankind could hope to enjoy peace prosperity and freedom’ was exposed as illusory in 2008 as a consequence of the global financial crisis (GCF) and the US setback represented by the war between Russia and Georgia.
However he recognises that the system, or rather the crisis, stabilised after massive state intervention, and the fire went out. The illusions rose phoenix like from the ashes. All that had melted into air re-solidified. As Callinicos puts it ‘the illusions have survived the bonfire. ‘
People want to believe again. But it is perhaps only a temporary stabilisation. The ongoing economic stagnation in the United States and the brutal attacks on workers’ living standards in Europe however has seen a new reality arise, at least on the Continent – class struggle.
The old mole is burrowing back to the surface. It is unlikely to go away.
This is because, as Callinicos explains, the GFC is an expression of and contributor to a more protracted crisis of overaccumulation and profitability. It is not a case of a few rotten apples or lack of adequate regulation. It is a case of a rotten and rotting system.
This is a book not just about the financial crisis. It is also about what Callinicos calls the Empire confined.
Thus Callinicos identifies some major trends in capitalism to emphasise its crisis-ridden nature. We cannot understand capitalism today without understanding imperialism, what Lenin called the highest stage of capitalism. Callinicos, drawing on Lenin and Bukharin, adopts the approach of David Harvey and others on imperialism. It is, he says ‘the intersection of economic and geopolitical competition’. He argues that:
modern imperialism is what happens where two previously distinct forms of competition merged, as they did in the late 19th century: (1) economic competition between capitals; (2) geopolitical competition between states.
It is this ‘contradictory fusion’ which continues to define imperialism today. The unipolar world is disappearing and the US faces a challenge from China. The US is the core of the world economy. But China is growing rapidly and recently surpassed Japan as the second largest economy. It is still a long long way behind the US.
The decline of US hegemony and the rise of China will bring more conflict across the globe.
One of the points that Callinicos makes is that the Russian invasion of Georgia in 2008 highlighted the weakening of US dominance.
Callinicos rightly argues that the lesson other countries have drawn from the US invasion of Iraq and Afghanistan is not of strength but of decline. At its most basic the US being bogged down in Afghanistan and Iraq emboldened Russian adventurism; more systemically it sends a clear message to China about the limits of US military power.
Intertwined with the crisis that is imperialism is the global economic crisis.
The fall in systemic profitability from the late 1960s and early 1970s onwards saw neoliberalism as an ideology and practice regain intellectual and political dominance.
Callinicos draws on the works of Brenner, Dumenil and Levy and Harman to argue, convincingly in my view, that profit rates after the crisis of the 70s (even taking into account periods of revitalisation and growth) did not approach the halcyon levels of the 50s and 60s.
Callinicos positions the GCF in the context of the general tendency of profit rates to decline.
There are two ways to restore profitability. One is to increase the rate of exploitation, a process that has been going on in various forms since the crisis of the 70s. The other is to devalue major elements of capital.
While this latter Schumpeterian creative destruction has worked in the past, (but as the Great Depression shows, at intolerable cost to humanity), the problems for global capitalism today are neatly summarised in the phrase ‘too big to fail’.
States across the globe stepped in during the GFC to bail out major financial and industrial capitalists, preventing the very cleaning out of the Augean stables which would have enabled the remaining capitalists to begin the recovery. Of course if states had not stepped in the possibility is the crisis would have deepened further and destroyed the system or important sections of it and set off a new Great Depression.
In stabilising the system the state has not only reasserted its role in capitalist production; it has laid the groundwork for a more precipitous collapse.
Another trend, the financialisation of capital , has added to instability.
Callinicos, drawing on Harvey in particular, integrates the instabilities of financialisation into the contradictions inherent in the production process.
Financialisation does not mean the dominance of finance capital. Reviewing the literature on this trend Callinicos concludes that financialisation is in fact multi-pronged. It is for him ‘the greater autonomy of the financial system, the proliferation of financial institutions and instruments and the integration of a broad range of economic actors in financial markets.’
Harvey says that a tension exists between the need to sustain accumulation through credit creation and the need to preserve the quality of money.
Or as Callinicos puts it ‘the demand, constantly generated by the accumulation process, for forms of money that will facilitate the rapid and profitable expansion of economic transactions, will tend to undermine money’s function, rooted in its nature as the universal equivalent, to render values mutually commensurable, which in turn is dependent on confidence in its stability and reliability.’
It is a confidence, as the GFC shows, that splinters when banks don’t trust each other, when risk is hidden through derivatives, when the poor and lower paid working class are exploited through risky loans in the housing and consumer markets.
Harvey explains it in these terms. The danger is that if credit is restricted or regulated you end up with recession through overproduction and devaluation. If not then you can end up with generalised devaluation, i.e. inflation. Or, I might add, massive disguised risk shifting which, as the GFC shows, threatens to and does devalue major elements of capital vital to the ongoing health and existence of the system. Fictitious capital proves itself to be a chimera.
It was Marx who thought that the process of financialisation allows capital accumulation to transcend its limits while at the same time bringing it up more forcibly against those limits. Later Marxists also see financialisation as an attempt by capital to ‘render different values mutually commensurable.’ In becoming the agent of exchange it however becomes a destabilizing force, and adds to over accumulation.
The GFC in 2008 challenged the ideology of the free market. The state roared back, as Callinicos put it. Major states like the US and many European countries rushed to bail out their financial institutions and prevent their collapse. They were too important to fail.
This has bought back to life debates within capitalism about the regulated and unregulated market. Both miss the point. The market is the problem, not the solution.
Is there an alternative? As one of the leading members of the international socialist tendency it is not surprising that Callinicos looks to the working class for a solution. He rejects not only the neoliberal ‘let the market rip’ approach. He is clear too that embedded liberalism and a kinder gentler capitalism – state intervention for example to regulate finance capital – do not address the fundamental process of crisis that is capitalism.
Callinicos argues for democratic planning. This can only occur through working class self-activity and action; the establishment through the struggle against capitalism of organs of democratic rule and planning that become the new state and overthrow the old.
Nationalisation on its own is not enough. Workers’ power and democratic planning are essential ingredients. There must be a break with the logic of competitive accumulation locally, nationally and eventually globally.
This is no easy task. Callinicos recognises the weakness of a radical anti-capitalist left around the globe. But the crisis ‘ has torn a huge hole in neoliberalism both as an ideology and as a mode of organising capitalism.’
Therein lies hope for the future. The working class, through revolutions to establish a planned and democratic society based on satisfying human need, can end the profit system, a system whose logic of competitive accumulation through global warming as Callinicos points out threatens the very existence of humanity.
For those wanting a deeper understanding and insightful analysis of capitalism today, read this book.
Alex Callinicos Bonfire of Illusions: The Twin Crises of the Liberal World Polity Press Cambridge 2010