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Archive of Communist Workers Group of Aoteaora/New Zealand up to 2006

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Chomsky’s blurred Vision [February 1999]

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Noam Chomsky recently visited New Zealand as a guest of the Peace Foundation. He spoke to overflowing audiences eager to hear his critique of the US role in imposing the neo-liberal New World Order on the rest of the world. While Chomsky has a long track record in exposing the lies and hypocrisy of the US in its exercise of power, he cannot explain why the US behaves like this. Nor can he explain where we go from here, or what to do. We argue that Chomsky’s vision is blurred.

The core of Chomsky’s argument is the US drive to dominate the world in the post-WW2 period by subordinating the rest of the world to its global plan. fact the beginnings of globalisation. The world was partitioned so that the developing countries would serve as suppliers of raw materials and labour for the developed countries. This exploitation of the third world required political policies that did not allow the populations in these countries to opt out of this global plan. The IMF and World Bank and its more recent offspring NAFTA, WTO the MAI etc, were the instruments of this plan. Against this third world nationalism backed by the Soviet Union was identified as the main enemy. US backed coups and the cold war to isolate and ultimately destroy the Soviet Union were the tactics designed to keep this global plan on track. Chomsky’s writings over the last 30 years are really no more than documentation of the application of these policies in Latin America, Asia and the Middle East.

In a recent article in the New Left Review (No 230 July/August 1998) Chomsky develops this analysis further. He argues that the mechanisms for imposing this global plan are increasingly secret and outside democratic control. NAFTA and the MAI are examples of new agreements designed to force small states to accept trade and investment on the US terms that were conceived in secret. Resistance to these agreements only arose after their existence was ‘leaked’. On the MAI Chomsky states: the MAI “would constitute a major attack on democracy; it would shift the decision-making power over social and economic affairs even further into the hands of private tyrannies that operate in secret, unaccountable to the public. Corporations had been granted the rights of immortal persons by radical judicial activism early this century; but the MAI grants them the rights of states” (p.25).

Chomsky concludes: “The long-term goal of such initiatives is clear enough to anyone with open eyes: an international political economy which is organised by powerful states and secret bureaucracies whose primary function is to serve the concentrations of private power, which administer markets through their internal operations, through networks of corporate alliances, including the intra-firm transactions that are mislabeled ‘trade’. They rely on the public for subsidy, for research and development, for innovation and for bail-outs when things go wrong. They rely on the powerful states for protection from dangerous ‘democracy openings’. In such ways, they seek to ensure that the ‘prime beneficiaries’ of the world’s wealth are the right people; the smug and prosperous ‘Americans’; the ‘domestic constituencies’ and their counterparts elsewhere.” (p.27)

But what causes this power surge, and what do we do about it? Where do we go from here? Chomsky is a radical democrat; some would say an anarchist or libertarian socialist. He is certainly hostile to Marxism and Communism, which he associates with the Soviet Union. His solutions are to rally the citizenry to the cause of democracy and to bring these power plays under the control of the people. “There is no reason to doubt that it (this excessive power) can be controlled, even within existing formal institutions of parliamentary democracy (my emphasis). These are not the operations of any mysterious economic laws; they are human decisions that are subject to challenge, revision and reversal. They are also decisions made within institutions, state and private. They have to face the test of legitimacy, as always; and if they do not meet that test they can be replaced by others that are more free and just, exactly as has happened throughout history.” (p.27)

Chomsky’s logic is classic social democrat. Once the masses are informed, and reject the exercise of arbitrary power, then they can use the institutions of bourgeois democracy to “challenge, revise and reverse” such power. Here Chomsky detaches the state (and private) institutions from the ‘political economy’. Lenin said that politics is concentrated economics. Chomsky reverses the power flow from ‘political’ to the ‘economic’. There are no ‘mysterious economic laws’ he says. There is just the zero-sum game of a struggle for scarce resources. Who wins this struggle has the power. Therefore economics becomes reduced to politics – to decisions taken in secret, that can however be exposed and made public. So economic problems can be resolved by means of realising the ideal of parliamentary democracy.

What’s missing from this analysis is any understanding of the economic social relations that motivate the power struggle. Already under capitalism, social relations exist depending upon whether one owns the means of production or not. Therefore power flows from the ownership of private property that enables the capitalist class to force wage-labour to work and produced surplus value, to politics. This power relationship cannot be reversed or revised by parliament. In fact parliament functions to defend this power relationship by defending private property. Parliament can respond to democratic demands only when private property is not challenged. But once workers become ‘informed’ i.e. class conscious, and begin to ‘challenge, revise and reverse’ existing power relations, the threat to the property relations, upon which such power rests, will ensure that the state renounces its democratic trappings and imposes direct rule upon its subjects.

That’s why in the postwar period that Chomsky documents, no successful challenge to US power by means of parliamentary institutions has occurred inside or outside the US. The only successful challenges, all of which failed ultimately, arose from the exercise of non-democratic challenges; that is challenges that did not result from the existence of parliamentary democracy. They arose either from undemocratic elite opposition, such as that of Saddam Hussein in Iraq, or from mass struggles that by-passed the trappings of formal parliamentary democracy – street protests or civil disobedience in the US, or popular uprisings and mass movements such as in Cuba, Vietnam, Palestine, etc. Nor can it be argued that these social movements have succeeded in ‘renewing’ parliamentary democracy. The fate of the ex-SU and other so-called ‘socialist’ states proves this fact. Whatever the failings of so-called ‘socialist’ regimes – their non-democratic and bureaucratic nature etc – the return to ‘democracy and free markets’ is an unmitigated disaster; unmitigated by any exercise of democratic rights in moderating the devastating impact of the market.

The failure of these radical movements which threatened to overturn bourgeois states is not due to their non-democratic form, but due to their suppression by the military might of imperialism in the name of ‘democracy’. Therefore, it is naive and ultimately self-defeating for popular movements to have illusions in parliamentary democracy. The foundation of ‘actually existing capitalism’, as Chomsky calls it, is not an aberrant concentration of power that can be corrected by democratic process. No it is the underlying property relations, defended by the capitalist state, which can only be “challenged, revised and reversed” by extending the struggle for democracy to socialist revolution. Smashing the capitalist state, and creating a planned economy in which production is for need and not profits.

From Class Struggle, No 25, Dec 1998-Feb 1999

Written by raved

August 26, 2007 at 10:51 pm

The Wall St Virus and the Crisis of Overproduction [September 1998]

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It is obvious to most people that the world economy is in trouble. And it is not just an ‘Asian’ problem. Instead of the Asian ‘virus’ spreading across the world, it is clear that the real source of the Asian crisis is not an Asian but a Wall St. Virus. What is it? As we explain below, it is speculation based on a surplus of capital that can find no outlet in profitable production – i.e. the classic Marxist explanation of capitalist crisis, overproduction of capital!

Recently some of the most true blue bourgeois mouthpieces such as the New York Times started paying homage to Marx as “maybe” right after all! They suspect that the system has a profound flaw – an inability to regulate the monetary system and prevent a ‘meltdown’ similar to 1929, though they don’t really know why. Increasingly, the current period is seen as following the lines of the great depression, and a new depression is all the talk. We say – we told you so! Marxism is not dead! It is capitalism that is in its death throes!

The bourgeois gurus are very confused about the causes of the current economic situation. The monetarists claim that only the US economy is healthy and that is because the market has replaced state spending as the driving force. This overlooks that the 1980’s recovery under the right-wing Reagan was fuelled by massive government spending on armaments! Even Chile, the first neo-liberal ‘experiment’, requires foreign investors to give monetary guarantees that they will not speculate in the Chilian economy. Never mind these facts, now that the Asian miracle is over, the monetarists like Friedman call for getting the state out of business, balancing the budget, and allowing banks and firms to go broke.

Neo-liberal hypocrisy.

This neo-liberal prescription is what underlies the role played by the IMF which is imposing severe cuts on state spending, and forcing insolvent banks and bankrupt firms to go to the wall. But this policy of “slash and burn” is compromised as the Asian states are expected to pay back foreign investors instead of allowing them to go broke. The Economist – conscience of the neo-liberals – opposes this as “immoral” because it does not punish investors from making bad investments. Clearly, such rescue operations, modelled on that of Mexico a few years ago, show that the neo-liberals hypocritically preach free market for others, but demand state rescue packages for themselves!

This is not surprising. The neo-liberals are starting to panic about a world economic collapse. Prominent speculators like George Soros and and right wing gurus like John Gray, former advocates of free market forces, now call for moderation and international controls on the movement of capital. Soros now recognises that the free rule of the market generates social chaos, and ultimately a threat to his immense wealth. Gray, now claims that the free market is itself the result of a strong state, and calls for the return of a new international keynesian type economic policy capable of keeping and rogue capitalist states in line.

Into the ‘third way’ camp.

These former more market advocates now find themselves in the same camp as long-time social democrats like Galbraith and Robert Reich, or NGO operatives like Walden Bello, who today argue for a “third way” between capitalism and communism based on the “smart state”. The smart state is not the protectionist, social democratic state of the past, but a state which is geared to international economic institutions such as a revamped IMF and World Bank capable of coordinating the world economy. Even supposedly ‘socialist’ commentators like Robert Slade and Frank Venuto in the New Left Review No 228, call for a ‘new Bretton Woods’ to regulate the international monetary system. Socialist Appeal newspaper of the former Militant tendency, also pipes up with its underconsumptionist, Keynesian analysis. [See their website].

This confusion is based on a totally wrong understanding of what makes capitalism go into periodic crises. Different bourgeois schools of thought all focus upon one or other symptom of crisis without understanding its real cause. It has nothing to do with too much or too little state interference, or lack of controls on the movement of capital, or underconsumption brought on by neo-liberal policies, or the dangers of ‘hot money’ or speculative finance capital. These are all symptoms of crisis and not their causes. Therefore attacking one of many symptoms of crisis will not solve crisis and overcome capitalism’s tendency towards chaos and destruction.

The Cause of the Current Crisis.

The cause of crisis is the overproduction of capital which cannot be invested to create sufficient surplus to return an average profit. This creates a surplus of capital which looks for some other means of getting a return. Speculation in commodities or exchange rates becomes the usual outlet. Attempts by the state to attempt to offset this diversion of capital from productive investment, by means of state investment and state spending, must fail. They do not overcome the root problem of overproduction of capital. Value becomes devalued by inflation and profits fall further. Similarly, attempts to regulate capital movements, or outlaw speculation, may slow down the worst effects of excess capital, but do not prevent its ultimate destruction. Calls for a new “Bretton Woods” are misplaced because such an international agreement will not hold in the free-for-all of dog-eat-dog rivalry among the imperialist powers to re-partition the world market.

Crises therefore are the normal means by which an excess of capital is devalued (destroyed) so that the remaining capital can be re-invested at a profit. Devaluation takes two forms; (1) devaluation of constant capital – i.e. firms go bankrupt, old technology is written off, and the stronger, more competitive firms stay in business with lower fixed costs and new technolgy; (2) devaluation of variable capital – i.e. lowering of the wage bill by destruction of jobs and real wage cuts. What makes this process a normal and natural part of capitalism?

The answer is the law of value. Capitalism runs on the ex-traction of value from the labour-time of productive workers. This is because labour-power is the active ingredient which creates value out of the raw materials of nature. Capitalists own the means of production and so can force workers who do not, to work for a longer period than is necessary to pay for their wage. Workers produce enough value for the capitalist to pay them enough to buy the commodities necessary to reproduce their labour-power. Over and above that necessary labour-time, workers work for a surplus period of time in which they produce surplus-value which is the basis of capitalist profits. The ratio of necessary value to surplus value is the rate of exploitation.

However, in order to increase their surplus-value and profits in competition with other capitalists, each employer must drive up the rate of exploitation by introducing new machines or techniques to increase the productivity of labour. This means more an more capital is invested in machines which do not increase value, compared with labour-power which does produce value. When employers can no longer increase the rate of exploitation fast enough to get a return on their increased investment, the rate of profit begins to fall. Capitalists look for new outlets to increase their profits.

Typically, the search for new investment opportunities has been to export capital to countries with lower wages and lower technology costs, or to take advantage of access to markets. This ‘foreign investment’ of capital from the imperialist countries to the ‘developing countries’ which began late last century is now expressed by the term ‘globalisation’ to mean the movement of capital throughout the globe looking for cheaper costs of production and access to markets.

Capital Speculation.

Today, however, such is the excess capital searching for profits, demanding the right to move in and out of countries at will, this means that the international economy is inherently unstable. This instability is expressed at the centre of the global economy, Wall St. where capital values cannot escape the axe of the law of value. Despite the 1980’s devaluation of US industry and cuts in jobs and wages, US business cannot return sufficient profits to the excess capital accumuated in banks and other institutions.

In the 1980’s excess capital has flooded out of the US and Japan into East and South-East Asia where profit rates were much higher. However, even these dynamic, youthful capitalist economies were not immune to falling profits. Therefore, the so-called ‘Asian crisis’ was not caused by heavy handed state intervention, bad banks, cronyism, or corruption, but by falling profits. The collapse of these economies resulted from the flight of speculative capital out of Asia. And because there are not yet sufficient outlets for excess capital in the former Soviet Union or China, excess capital is driving up US stock and share values beyond the real value of US business where profits and returns to shareholders are falling. In Japan, the long-delayed restructuring of capital is about to see a massive destruction of constant and variable capital, exposing that economy to the entry of rival US capital.

So the Wall St. virus which is in danger of spreading round the world can be seen as a delilberate policy by the US state to transfer its own imperialist crisis onto weaker countries in the world economy. This is why the US wants to impose free trade and capital mobility on other states, but not itself. That’s why it uses the IMF and the World Bank to impose tough conditions on foreign states to force them to pay their debts to US banks by cutting social spending programmes and forcing the cost of their crisis onto the backs of the workers and poor peasants of the ‘third world”, and the newly capitalist former USSR and the almost-capitalist China.

The payoff for the most powerful US capitalists is that they can buyup bankrupt semi-colonial firms, takeover banks and concentrate and centralise the forces of production into their hands at the expense of semi-colonial capitalism and the mass of the world’s workers and poor peasants. But even as they do that, they can’t get over the fact that this does not get them out of crisis. To return to profitable accumulation, the strongest capitals must destroy the weakest to survive.

In the process, whole countries like the former USSR and China must be turned into sources of cheap labour and super-profits. The US will not be without rivals in this struggle. Both Japan and the EU are competing for access to new investment outlets for their excess capital. But they are nowhere in the same league as the US and will both suffer from US capital inroads. The social chaos that results will threaten to explode the flimsly hold that US imperialism has on the world economy.

From Class Struggle No 23, August-September 1998

Written by raved

August 26, 2007 at 10:30 pm