The Barrel of a Gun - capitalism in crisis

The Barrel of a Gun

In his 1998 analysis of the US financial system, "Wall Street" (VERSO), Doug Henwood gives us a brief tale of his experiences as a worker in a Manhattan brokerage; "One morning, riding the elevator up to work, I noticed a cop standing next to me, a gun on his hip. I realised in an instant that all the sophisticated machinations that went on upstairs and around the whole Wall Street neighbourhood rested ultimately on force. Financial power, too, grows out of the barrel of a gun."

August 1998 gave us three illustrations of how gun law capitalism works.

The collapse of the Russian economy caused a ripple of panic amongst Western financiers when the Russian Central Bank suspended conversion of the rouble into dollars and declared a 90 day moratorium on paying $10 billion of short term debt. A surprisingly nervous editorial in The Economist (surprising because Russia has such little economic weight anyway) noted "the sickness that started in Asia is spreading still, claiming victims far beyond its source. Investors cannot find time to count their mounting losses, so busy are they trying to guess where the plague will strike next. The recent (and mainly downward) gyrations in stockmarkets bear witness to the new surge of fright and confusion - and to mounting concern that the turmoil in emerging markets will end in world-wide depression."

The dismantling of state capitalism in Eastern Europe heralded a new order of low wages, mass unemployment and corporate asset stripping. Integration of the former Soviet economies into the global economy meant the expropriation of land, labour and resources and the reduction of living standards to Third World levels. Eastern Europe became a playground for speculative capital. Multinational corporations have rushed in to take over Russia's reserves of oil and natural gas. A 1994 Guardian article noted "The hundreds of millions of dollars spawned by Western aid programmes have mainly benefited the Western companies which headed East to board the aid gravy train." A 1996 International Monetary Fund loan of $10 billion was linked directly to the privatisation of agriculture and the ending of human service and fuel subsidies. The Guardian's economic editor, Larry Elliott, interviewed by Tribune, summed the mess up: "they've been told to stick with free-market "reforms" when workers and pensioners have not been paid for months. Output is about half of what it was when communism collapsed. Things are much worse in rural areas and large chunks of the economy are operating on the basis of barter. They were told "just get on top of inflation, shut down all your inefficient factories, throw loads of people on the dole and when you've done all that we might give you some money."

Russia does almost no trade with the United States, and precious little with the European Union. So why the panic? Simple. As the Canada-based economist Michel Chossudovsky observed (The Globalisation of Poverty-Third World Network 1997) "The movement of the global economy is "regulated" by "a worldwide process of debt collection" which constricts the institutions of the national state and contributes to destroying employment and economic activity. In the developing world, the burden of the external debt has reached two trillion dollars; entire countries have been destabilised as a consequence of the collapse of national currencies, often resulting in the outbreak of social strife, ethnic conflict and civil war." IMF sponsored reforms are used to regulate labour costs to establish a "cheap labour economy." Debt has become the prime medium for the transfer of wealth from poor to rich, whether through servicing external debt from Third World to First, or the use of tax revenues to service public debt, while handing out, at the same time, tax breaks and subsidies to big business. The end result, as Larry Elliott comments, is "all market constraints have been taken off. The ability of a shock in one country to affect another and ricochet round the world has become immense over the past 20 years.".

As capital becomes more voracious in its pursuit of global profits, so it becomes more exposed. It is this that has made the financial pundits start to panic. "As for the sentiment that it is not merely the international capital market but the basic principles of capitalist economics that need to be questioned, one can only despair that the thought has even surfaced." (The Economist 5/9/98) The threat of Russia's proposed moratorium on short term debt and Malaysia's leader Mahathir Mohammed announcing controls on cross border flows of capital, "a kind of financial autarky", as the Economist put it, made the penny drop. The bubble won't burst if no-one bursts it!!!

In August 1998 the US launched air strikes against targets in Sudan and Afghanistan. The ostensible justification was retaliation for bombings of US embassies allegedly carried out by Muslim activists under the direction of Osama Bin Laden. This is bullshit. There is no clear evidence of any link between Bin Laden and the embassy bombs. Support for Bin Laden grows with every US action. Even accepted on its own terms, the military strike reeks of hypocrisy given that the US is the main defender of Israeli aggression in the Middle East at the United Nations. (In 1996, when Israel attacked a civilian refugee camp the US blocked any attempt at condemnation by the UN Security Council.)

The real basis for US military sabre rattling against the "threat of Islam" is neither defence of secular virtues nor of its territorial integrity. It is the fear of "financial autarky"- that the nature of Islamic regimes such as the Talibhans is such that they are likely to attempt to resist incorporation into the global economy on the terms set out for the Latin and Eastern economies. The cruise missile strikes were a shot across the bows for any government in the region considering the option of doing anything other than rolling over and playing dead for the IMF.

Similarly, in the aftermath of the Omagh bombing by the Real IRA, Tony Blair moved to pass "emergency legislation" which amounts to the backdoor introduction of internment. Part of the reason for this was to show a clenched fist to the nationalist community should they consider rejecting the dubious carrots of the Belfast Agreement. The legislation, however, went much further, by including provisions for convictions of groups conspiring to commit "terrorist acts" abroad. Obvious targets for this arm of the legislation include dissident groups in the UK who dare to oppose "friendly states" in the Middle East - such as the Egyptian oppositionist Arab Observation Centre and the Advice and Reformation Committee which aims to expel the US from Saudi Arabia. The demonisation of Islam dates from the 1970s oil crisis, when the Arab oil producers asserted their economic clout against the US. The new legislation is part of the same process.

Whenever and wherever someone rocks the boat, the "sophisticated machinations" of capital disappear and the gun barrel is produced. The panic of the last few weeks should serve to show us how easily the boat can be rocked. Moreover, the increasing globalisation of capital has left it vulnerable and over exposed. Chossudovsky has, correctly argued that there are "no technical solutions to this crisis" - that the globalisation of poverty requires co-ordinated international resistance by our class. "What is at stake is the massive concentration of financial wealth and the command over real resources by a social minority...The "globalisation" of this struggle is fundamental, requiring a degree of solidarity and internationalism unprecedented in world history. The global economic system feeds on social divisiveness between and within countries. Unity of purpose and world-wide co-ordination among diverse groups and social movements is crucial." We have, still, a world to win.