Capital and Imperialism: Theory, History, and the Present

by Utsa Patnaik

  We mentioned earlier that colonialism was the ideal arrangement for capitalism. It provided a prop for aggregate demand, while at the same time ensuring that income deflation occurred to prevent any threat to the value of money anywhere in the system. Post–Second World War dirigisme provided a prop all right, but it did not have any mechanism to prevent inflation and hence a threat to the value of money. Neoliberal capitalism ensures that there is no threat to the value of money by imposing income deflation on the third world, but it lacks any prop for sustaining growth. Growth under this arrangement is essentially driven by the formation of bubbles, but they occur neither with any predictable regularity nor can they be made to occur. The neoliberal phase brings capitalism to an impasse, which we discuss in the next chapter.

  CHAPTER 19

  Capitalism at an Impasse

  We argued in the previous chapter that the post-2008 crisis of capitalism, which persists to this day, is not just a sequel to the collapse of a housing bubble in the United States. It is a manifestation of a deeper problem. And this deeper problem consists in the fact that, as in the interwar period of the Great Depression, capitalism today lacks even an exogenous stimulus that could provide a floor to downturns and ensure a positive growth trend, let alone a “market on tap” that could prevent a downturn.

  The colonial arrangement, which played a crucial role as an exogenous stimulus, more or less exhausted its capacity to play this role by the First World War, while state intervention in demand management, which acted as an exogenous stimulus after the Second World War, cannot serve this purpose any longer because of the opposition of globalized finance capital, an opposition whose effectiveness has increased many-fold because of this globalization itself. In the absence of an exogenous stimulus, growth phases occur only when there is the formation of a bubble; these bubbles are neither truly exogenous nor provide a market on tap. And this problem of the absence of an exogenous stimulus is compounded by the existence of a tendency toward overproduction that is also engendered by the globalization of capital.

  We are therefore in a period of protracted stagnation of world capitalism, which would be punctuated, within the prevailing regime, by bouts of revival caused by the formation of occasional asset-price bubbles, but these bouts of revival would collapse as the bubble collapses. Neoliberal capitalism, though it has a mechanism for dealing with inflation and hence the threat to the value of money, has absolutely no mechanism to stimulate growth other than asset-price bubbles And this infirmity exists within a context marked by an ex ante tendency toward overproduction, the like of which had never characterized world capitalism earlier.

  The absence of an external prop for stimulating growth is a characteristic that the current phase of capitalism shares with capitalism of the interwar period. But there is one important difference between the two periods. In the interwar period, the way forward for capitalism had been clear to many in the wake of the Keynesian Revolution, and that way forward was the introduction of state intervention in demand management. Pursuing this way forward required only the overcoming of the opposition of finance capital, which itself was nation-based, to such state intervention. Today, the way forward for capitalism is not clear. To revert back to a regime of state intervention would require instituting controls over crossborder capital flows. Since the state remains a nation-state, for it to play an active role it must detach the national economy from global capital flows to assert itself against the will of international finance capital. It requires, in other words, a retreat from globalization, since the main feature of the current globalization is the globalization of capital flows, including above all finance.

  There is another possibility, namely to have a surrogate global state, in the form of a coordination among the major nation-states, which fights and overcomes the opposition of globalized finance capital to a stimulation of the world economy through a coordinated fiscal effort. The idea would be to replicate on a global scale, through several powerful nation-states acting together in a concerted manner against the opposition of globalized finance capital, what individual nation-states had done after the Second World War in terms of overcoming the opposition of their respective national finance capitals. The outcome now would be a coordinated fiscal stimulus for the global economy.

  As yet, however, there is little discussion of this possibility. In the inter-war years, at least, there had been many voices, including that of Keynes, recommending a coordinated fiscal stimulus by major nation-states.1 Today, there is hardly any voice advocating such a course of action. So dominant is the influence of international finance capital that most economists still swear by “sound finance” as the virtuous path for a nation-state to follow.

  The structural crisis of capitalism consists not just in the inability of the system to generate sustained growth, other than through occasional bubbles, and hence its inability to overcome large-scale unemployment, which together with the wage-stagnation caused by the globalization of capital implies a squeeze on workers’ earnings even in advanced countries. The structural crisis consists also in the absence of any clear idea of a way forward. The reason is that any way forward requires overcoming the hegemony of international finance capital, whether through a national withdrawal from globalization or through a coordinated international onslaught upon this hegemony. There is, however, no awareness as yet in bourgeois circles of even the need to overcome this hegemony, let alone any attempt actually to overcome it.

  What is noteworthy is that the liberal bourgeois establishment, to which Keynes had belonged and which would be expected to visualize ways of overcoming the structural crisis of capitalism in order to save the system, does not recognize the structural crisis. While Keynes in his time had been worried that “the world will not much longer tolerate the unemployment, which, apart from brief intervals of excitement, is associated,” and in his opinion “inevitably associated with present-day capitalistic individualism,” liberal thinking in our time seems not even to recognize the existence of a serious problem of unemployment which will “not much longer” be tolerated.2 The overcoming of the structural crisis of capitalism seems particularly difficult in this context, and therein lies the impasse of capitalism.

  In case we have given the impression that this is only an intellectual failure, we must correct ourselves, since it has deep material roots. The transcendence of the current conjuncture requires overcoming the hegemony of international finance capital, but overcoming it is scarcely possible within the confines of the capitalist system, that is, through measures that would not recursively lead to a transcendence of the system.

  Retreat from the current globalization to activate the state of a particular nation to undertake measures for overcoming the crisis obviously requires a change in the class basis of the state, that is, the formation of an alternative class alliance in opposition to the domestic big bourgeoisie that is itself a part of globalized capital. Hence, it already represents a step toward the transcendence of the capitalist system. But even if we consider the possibility of coordinated action on the part of major nation-states to overcome the opposition of international finance capital to a global fiscal stimulus, this too would require an activation of other social classes to counter its hegemony.

  What is more, any such fiscal stimulation would, in the absence of income deflation of the sort exercised by neoliberalism today, revive inflation and undermine the value of money. And if income deflation is to be imposed on third world working people, then it would mean fiscal stimulation in one part of the world and fiscal contraction in another. This would be an impossibility unless the coordinating nation-states also launched a coordinated imperialist offensive, which, given advanced country diversity, is not going to be easy. Therefore, international finance capital in the face of such inflation will once again reassert its hegemony.

  Of course, the prospects of inflation even in the event of a coordinated fiscal stimulus can be kept at bay if the petty producers in the third world, inst
ead of being subject to income deflation, are on the contrary supported and protected by this new regime led by a set of coordinated nation-states. That would be a regime of global dirigisme. It would mean preventing the process of primitive accumulation of capital unleashed by neoliberalism, in which case it would not just be a matter of overcoming the opposition of international finance capital to fiscal stimulation, but putting serious restrictions on the modus operandi of capital itself. Such a global dirigiste regime, if at all it comes about, cannot be a lasting phenomenon. In view of the “spontaneity” of capitalism, it will either have to strengthen these restrictions more and more and move beyond capitalism, or loosen them over time, lapsing back to a situation of hegemony of international finance capital.

  Putting the matter differently, international finance capital represents the highest level of development of capitalism. There are no shoots of any higher development that can be discerned anywhere within the system. So overcoming its hegemony seems an impossible project within the confines of capitalism, which is why liberal intellectuals have preferred not even to take cognizance of the problem that confronts capitalism today. The current impasse of capitalism can thus be more accurately defined. The system cannot move forward without overcoming the hegemony of international finance capital, but at the same time this hegemony cannot be overcome without unleashing a process of transcendence of capitalism itself.

  The Rise of Fascist Tendencies

  The paralysis of the liberal bourgeois establishment is curiously combined at the present juncture with a certain stasis of the left as well. This stasis has two obvious causes. One is the collapse of the Soviet Union and Eastern European socialism, and the turn of several third world socialist countries toward greater integration into the capitalist world economy, including inviting foreign capitalists into these countries and promoting local capitalists, which has increased their domestic income and wealth inequalities to a point where it has become a matter of debate whether they should still be called socialist. This has created a widespread impression that socialism is unworkable, and even those left forces that had been critical of the earlier socialist regimes have also suffered as a consequence.

  The second cause is the decline in the strength of the working class. The rise in unemployment during the crisis is an obvious reason for it. But, in addition, the very fact of globalization and relocation of activities to lower-wage economies has undermined the strength of trade unions, with the threat of outsourcing hanging over their heads like the sword of Damocles. Besides, privatization, which is an important feature of neoliberal capitalism, also tends to weaken trade unions. Indeed, all over the world the extent of unionization is greater in the public sector than in the private sector, with the ratio of unionized workers to the total in the United States being 33 and 7 percent respectively (the public sector here includes education). This weakening of trade unions, and of working-class power in general, has had a debilitating effect on the left.

  In addition to these causes, however, there is a deeper cause for left stasis, and that has to do with its sheer ambivalence toward the current globalization. Although this globalization is occurring under the auspices of international finance capital and has been a universal source of dissatisfaction within the left, its being globalization of a sort nonetheless has received a cautious welcome, at least in the sense that any de-linking from it, which is the first of the two ways out of the current predicament, is frowned upon as a retreat to “nationalism.”

  This is a point we discuss at greater length in the final chapter of this book. The point to note here is that for significant sections of the left, at least in the advanced countries, any retreat from this finance-dominated globalization is seen as a reactionary step, a reversal to “nationalism.” While this sentiment is understandable because of the two world wars that have been fought on European soil, it contributes to the phenomenon of left stasis. The left often finds itself in the company of the liberal bourgeois establishment in opposing regimes that wish to de-link from the process of globalization.

  At the same time, the left has not pursued the alternative possibility mentioned earlier, of a coordinated fiscal stimulus by several advanced countries. What is remarkable is that despite the debt crisis engulfing several European countries, all of whom have been coerced into undertaking “austerity” measures, no serious demand was raised for a coordinated expansion of the economies of the European Union, which would have improved the conditions of the indebted countries. Attention was focused on what should be done to alleviate the problems of particular countries but not on any overall measures for recovery, which reflects perhaps an unwillingness on the part of the left to get caught in the domain of “transitional demands.”

  Given the liberal bourgeoisie’s paralysis and the left’s caution and ambivalence on globalization, it is right-wing forces that are emerging globally and claiming to be the harbingers of a new and better order. They have been labeled as “populist,” but this is a grossly inappropriate description. The term “populism,” also used for progressive regimes, serves to provide ideological respectability to the neoliberal opposition to genuine pro-people economic measures by categorizing such measures along with the racist, xenophobic, and divisive policies of the emerging right. It would be more appropriate to call the emerging right-wing forces “neo-fascist.” But it must be understood that they are quite a heterogeneous bunch. that we cannot expect a repetition of the 1930s-style fascism in today’s context; that a fascist state must be distinguished from a fascist movement even when it occupies state power; and that even the fascist movement changes its character, especially vis-à-vis big capital, in the course of its journey to power.

  Apart from a general muscular inhumaneness, there are at least four basic features that fascist movements typically display and that the currently emerging right-wing movements are displaying in varying degrees, with the Hindutva movement in India perhaps being the closest to fascism, though we do not yet have a fascist state anywhere in the world. The first is the targeting and vilification of some hapless minority group as being responsible for the crisis-induced plight of the majority. This is a trait that almost all the current crop of right-wing movements share. They claim that it is not the “system” that is responsible for the plight of the majority but the “Other”: Mexican immigrants, Muslim immigrants, and Chinese workers “stealing jobs” in the case of the United States; Muslims and the dalits in India; the immigrants in European countries, though the identity of the culpable “immigrant” varies from one country to another; and so on.

  The second feature is support for international finance capital, and, in turn, obtaining its support, which typically becomes more open and vocal as the movement comes closer to power. This is because the fascist movement can never aspire to power without the support of the big bourgeoisie whom therefore it begins to woo as it becomes stronger. To be sure there are differences between a Trump and a Modi on economic policy, with the former moving headlong toward protectionism while the latter apotheosizes neoliberalism in all its aspects. But there is never any confrontation with globalized finance or any proposal for controlling its free cross-border flows by any of these political movements, not even by Trump with his protectionist rhetoric and measures.

  The third feature is the supplementing of authoritarianism from the top with an unleashing of fascist gangs in the streets to terrorize opponents. Fascism is basically different from mere authoritarianism, insofar as it constitutes a mass movement that is based on the petty bourgeoisie, within which the urban salariat has to be included, that draws in the lumpen proletariat, and even sections of the working class in certain circumstances. Being a movement gives fascism a mass character, which Palmiro Togliatti underscored when he had talked of its having both a “class nature” and a “mass nature.”3 This motley mass uses strong-arm methods promoted by the leaders of the fascist movement against its opponents, which include the left, the liberal intelligentsia, and targeted m
inority groups. When fascist elements come to power but a fascist state has not yet been established, these street gangs are not necessarily dissolved since they play a major role in suppressing opponents and facilitating the journey toward a fascist state, though whether a fascist state will at all be reached in today’s situation as it did in the 1930s remains a moot point. (When it was reached in Germany, the SA had been destroyed, both for enlisting the support of finance capital, and also for absorbing the instruments of the earlier bourgeois state, such as the armed forces, into the new fascist state.)

  The fourth feature of fascism is the promotion of unreason. The obliteration of the dividing line between history and mythology, a contempt and total disregard for any evidence that goes against fascist ideological beliefs, and an extreme hostility toward the intelligentsia characterize the fascist movement, which itself after all is based upon unreason.

  Movements characterized by these features exist in all modern societies, but usually as fringe phenomena. They move center stage in periods of crisis when the liberal bourgeois establishment appears helpless or unconcerned about the crisis and when the left for reasons of its own is not in a position to project an alternative. Where the left does project an alternative, such as in the United States under Bernie Sanders or in Britain under Jeremy Corbyn, it cuts the ground from under the feet of the fascists by taking away chunks of their mass support. But when it does not offer an alternative, the fascist movement gets strengthened, cashing in on the people’s anger, but deflecting it away from the system, toward some hapless minority group. Precisely for this reason, fascist movements get adopted by finance capital, both to keep at bay any potential challenge from the left, and also to introduce a divisive discourse that makes any united mass action on quotidian material issues that much more difficult. By adopting the fascists, by forming an alliance, as Kalecki put it, between itself and the “fascist upstarts,” big capital, which might otherwise have been at the receiving end of mass anger, uses it against the trade unions and the working class to enfeeble them further.