Tag Archive for Socialist Voice

TTIP—a cloak for imperialist expansion

sv

Taken from this months Socialist Voice -http://www.communistpartyofireland.ie/sv/02-ttip.html

The Transatlantic Trade and Investment Partnership, now being secretly negotiated between the European Union and the United States, is an agreement designed to attack the gains of workers, to open up public utilities and services to private competition, to reduce environmental and safety standards, and to do away with banking regulations, and it will result in massive levels of unemployment and reductions in wages.

Furthermore, TTIP would give transnational corporations a veto over any government regulations that stood in the way of greater profit. And—according to the US “ambassador” to the EU, Anthony Gardner—TTIP is an imperial geopolitical strategy, aimed at isolating Russia and creating an economic version of NATO.

The origin of TTIP goes back to 1995, when it was floated by the Transatlantic Business Dialogue, an invitation-only group of chief executives of the most powerful American and European companies. Unlike other trade agreements, TTIP has little to do with the lowering of tariffs and everything to do with removing or degrading regulations that they see as a barrier to profits. The banking regulations that were intended to prevent another 2008-style capitalist crash are to go; environmental regulations that are superior to those in the United States are to be degraded, giving American transnationals a decided advantage over European businesses; and hard-won social standards and labour rights are to go, along with health and safety regulations, food standards, and regulations on toxic chemicals and on data protection.

Furthermore, the proposed establishment of a “Regulatory Co-operation Council” would police the implementation of agreed deregulation commitments, and would give corporations the power to amend, or even veto, the planned regulations of a sovereign state, even after TTIP has been ratified. This would give the corporations power over national governments, diminishing their right to regulate in the interests of their own people. Any proposed regulations that corporations felt would get in the way of profit could be amended by the corporations in their interests, or removed altogether.

With regard to employment, exaggerated claims have been made by EU officials and local politicians about the positive effect TTIP would have on the creation of jobs. Reducing Transatlantic Barriers to Trade and Investment: An Economic Assessment, commissioned by the Centre for Economic Policy Research, claims that the EU’s economic output would rise by 0.5 per cent by 2027, and this has become the most commonly quoted figure. However, this claim is nothing more than smoke and mirrors, and is only the most optimistic scenario from that report. More realistic scenarios from the same report estimate an increase in GDP of little more than 0.1 per cent—i.e. an annual increase in the growth of GDP of 0.01 per cent for the ten-year period.

The reality is very different from the optimistic claims of the pro-TTIP officials and politicians. The degrading and reversal of regulations, and the fact that employment standards are lower in the United States and that trade union rights are practicality non-existent, would result in European companies purchasing goods and services from the United States, causing a huge negative effect on jobs in Europe.

A recent report by Jeronim Capaldo, The Trans-Atlantic Trade and Investment Partnership: European Disintegration, Unemployment and Instability, predicts that European countries would lose 600,000 jobs. Furthermore, there would be a significant reduction in wages as a result of TTIP.

The EU has in fact recognised the reality of such job losses, and that those who lost their jobs would be unlikely to find alternative employment. In response to this probable loss the EU Commission has advised member-states to draw on structural support funds, such as the European Globalisation Fund and the European Social Fund, which has been assigned €70 billion to distribute over the seven years 2014–2020.

The hard-won working conditions of Irish and other European workers will be under threat as TTIP seeks to harmonise the working conditions of European workers with those in the United States. This puts in context the Croke Park and Haddington Road Agreements, which are preparing the way for a wholesale onslaught on the wages and working conditions of Irish workers.

For further evidence of the likely effect on jobs we need only look at the North American Free Trade Agreement (between the United States, Canada, and Mexico), which also promised hundreds of thousands of jobs but in fact resulted in the loss of more than a million.

Public services and government procurement contracts would be opened up, creating new privatised markets for transnational corporations, particularly in the fields of health, education, water, and housing—which explains the disinvestment by the Irish government in those areas: they are preparing the way for privatisation.

Furthermore, local authority procurement contracts would be opened up to the private sector. This means that important social and environmental goals and protections would no longer be allowed.

Massive job losses, wage reductions, banking deregulation, environmental and safety deregulation, the privatisation of public utilities and services, and the vetting by corporations of proposed national government regulations—you would think it couldn’t get worse. But it can.

In all its recent trade agreements the United States has built in an “investor-state dispute settlement” (ISDS) mechanism. It also wishes to see this as part of TTIP, which would mean that transnational corporations would be able to sue national governments over any existing legislation that would inhibit profit-making. ISDS makes transnational capital the equal of sovereign states, which threatens to undermine the most basic principles of democracy.

Under ISDS, transnational corporations would be able to bring states to a tribunal outside the normal legal system, administered by corporate lawyers. Several countries are already being sued under ISDS, including Sweden, Canada, Australia, Argentina, Uruguay, and Ecuador. In Australia the tobacco giant Philip Morris is suing the Australian government for introducing plain packaging on cigarettes. Ecuador was fined €1.77 billion for ending the oil contract with Occidental Petroleum after the company broke Ecuadorian law. In another tribunal Ecuador was refused a claim for €19 billion against Chevron for damage the company did to the Ecuadorian rain forest.

TTIP is something more than a trade agreement: it is an imperialist geopolitical strategy, with three clear purposes:

(1) an imposed economic and regulatory hegemony between the EU and the United States, resulting in the loss of 600,000 jobs, worsening conditions of employment, and wage reductions, massive privatisations of public utilities and services, and deregulation in banking and environmental protection and in health and safety;

(2) a reduction of the powers of sovereign states over their own regulatory legislation, which would be vetted by transnational corporations, which could sue states over any legislation that negatively affected their profit;

(3) the isolation of Russia and the creation of a bulwark against China and against Asian energy supplies. As Anthony Gardner recently stated, “there are critical geo-strategic reasons to get this deal done, and every day I am reminded of the global context of why we are negotiating TTIP.” And, “just look at what is happening in the Middle East, or Russia’s behaviour in Ukraine. We need this deal to help solidify further the transatlantic alliance, to provide an economic equivalent to NATO, and to set the rules of world trade before others do it for us. There are many reasons why this agreement is not only important, it is vital.”

The capitalist crisis of 2008 provided the cover for capitalism to attack the hard-won living standards of workers. TTIP would be a frontal assault on all the gains workers have achieved not only in wages and working conditions but in social support, environmental protection, health and safety, personal privacy, and financial regulation. Social-democratic government would be eviscerated, becoming a mere fig leaf for corporatism.

Irish government ministers have been falling over themselves to praise TTIP; but such is the level of secrecy surrounding it that ministers are not involved in the negotiation of the treaty. They can only see documents related to TTIP under very restricted circumstances, and are not allowed to take copies. They would have no say in the final agreement. Ministers have exposed themselves for the collaborators they are. They represent the interests of international capital and the imperialist powers and have no regard for the interests of their own citizens.

While hundreds of thousands have demonstrated in Europe against TTIP, there has been no similar response here in Ireland. The trade unions have complained about it but have done little by way of organising the people against it. The mainstream media have virtually ignored it. An international trade agreement that would devastate the working class is staring us in the face, yet little or nothing is being done to offer even a token defence.

Trade unions are meant to be the protectors of workers. It is imperative that they rally Irish workers to reject this agreement, rather than walking them into this nightmare.

The rise of shadow banking

Both the EU Central Bank and the International Monetary Fund published reports recently on the growth and risk of the shadow-banking sector.
While estimating the size of the sector and identifying some immediate risks, both reports fail to identify the rise of finance, and in particular non-bank credit-creating entities, over recent decades as a systemic aspect of monopolisation, stagnation, and over-accumulation.
Both reports also promote the “positive” aspects of shadow banking and see it having a role in releasing credit where other financial institutions might not venture. As the IMF put it, “the challenge for policy-makers is to maximise the benefits of shadow banking.”
The IMF defines shadow banking as credit intermediation outside the conventional banking system—or non-bank entities that create credit. This is a broad definition, making shadow banking about a quarter of total financial intermediation. It therefore includes pension funds, insurance entities, hedge funds, structured investment vehicles, mortgage services rights (collectors of interest and debt), and derivative product companies, which are often special-purpose vehicles.
The Financial Stability Board has been monitoring shadow banking since 2011 and has reported that the United States, Britain and the euro area have the largest shadow-banking systems. Britain’s accounts for more than 360 per cent of GDP, while those of the United States and the euro area are closer to 200 per cent.
But Ireland (also included in the euro area) stands out. The shadow-banking system here has been estimated to be in the region of €1.7 trillion—almost 11 times our GNP. This is without doubt related to global tax evasion and the fact that many corporations pay less than 1 per cent tax, never mind the official rate of 12½ per cent.
The growth of the shadow-banking system has created new risks and instabilities within the system, but it has also provided a much-need avenue for investment. Its importance as an avenue for investment far exceeds the risks it creates with regard to the reproduction of capital, and so there have been few serious attempts to control, isolate or regulate the sector. In fact the IMF makes it clear that, as regulation has increased in the normal banking industry, shadow banking has grown, as if to imply that regulation is futile and that shadow banking should be embraced and normalised.
Seven years after the crisis erupted, the crucial role played by finance, financial products and investment avenues is obvious. There will be no serious attempt to control capital merely to mitigate its worst instabilities by establishing publicly funded bail-out mechanisms or to increase the confidence of investors in finance. This is monopoly capitalism in the twenty-first century.

Taken from Socialist Voice, http://www.communistpartyofireland.ie/sv/07-shadow.html

Explaining the crisis: A response

In the April and May issues of Socialist Voice an opinion article raised a number of questions about an article on economics in the January issue. It proposed that the review of Andrew Kliman’s book The Failure of Capitalist Production counterposed the “declining rate of profit” thesis with the Monthly Review thesis of “financialisation.” It proposed in turn that distinctions between the competing explanations are exaggerated and are reconcilable. Yet this misses important points of demarcation. Furthermore, the subsequent counter-explanation advanced has a number of shortcomings for understanding crisis in capitalism.

Too much or too little surplus value?

The first matter is whether there is indeed a significant difference between the Monthly Review approach and those scholars who emphasise profit cycles. Fundamentally, the Monthly Review thesis represents a theory of “under-consumption.” As a consequence, this thesis views the cause of economic crisis in capitalism as emanating from the excessive exploitation of workers: that is, crisis and stagnation are a result of the rate of surplus value being too high. According to the “under-consumptionist” thesis, capital has appropriated lots of surplus value but it cannot ultimately find enough buyers for the vast quantity of commodities it is able to produce; the spread between surplus and variable capital is highly skewed towards the former.

So it is a problem of investment realisation. The result is either acute economic crisis at periodic intervals or long-term economic stagnation, with many workers and machines lying idle. This is pretty close to the Monthly Reviewthesis, although it should be noted that in their explanatory framework they do not use core Marxist economic categories such as surplus value or indeed the labour theory of value. In contrast, other radical economists, from Henryk Grossman to Andrew Kliman and Alan Freeman, have tended to emphasise a different set of variables in explaining capitalist crisis.      Crucially, this school sees the cause of crises as being the exact opposite of what the Monthly Review school and other under-consumptionists claim it is. The “falling rate of profit” school holds that it is an insufficient rate of surplus value that leads to acute capitalist economic crises. Too little, as opposed to too much, surplus value is being produced for the needs of the capitalist system. The problem is not that there is too much surplus value, with few profitable investment outlets, but the realisation of surplus value itself.

Conceptual demarcations matter

Conceptually, these two theses of crisis theory are completely opposed to one another. Furthermore, the two theses might lead to quite different political conclusions.

The “under-consumption” thesis implies that if a more equal distribution of the national income can be achieved under capitalism—a lower rate of surplus value—the problem of crises and mass unemployment can be overcome within the capitalist system.

This indeed was the position of Paul Sweezy, the intellectual founder of the Monthly Reviewschool. Writing in 1995, he argued:

If my analysis of the performance of the U.S. economy during the last sixty years is accepted, to what policy conclusions does it point? . . . Public ownership of the means of production and planning to meet the needs of all the people [won’t be] a serious option . . . any time soon. The question should therefore be reformulated: what could be done within the framework of the private-enterprise system to make it work better?      The second indispensable change needed to make the private-enterprise economy work better is a redistribution of wealth and income towards greater equality. We live in a period in which an unprecedented and growing share of society’s income accrues to corporations and wealthy rentiers, while the share of the underlying population stagnates or declines.      This implies a permanent imbalance between society’s potential for adding to its stock of capital and its flagging consumer power . . . Would the capitalist class as a whole, in extremis, be willing to give up half of what it has to save the other half? I have a feeling that the fate of the private-enterprise system may depend on the answer to this question. [“Reminiscences,” Monthly Review, May 1995.]
 There is indeed continuity with this political stance in the current efforts of Monthly Reviewto project a “21st-century socialism” that, unpacked, is more radical social democracy rather than Marxian socialism. The “falling rate of profit” thesis, in contrast, implies that the only way out of a capitalist crisis is through an increase in the rate of exploitation of workers.      Here too the crisis problem might in theory be overcome within the framework of capitalism, but only by greatly increasing the rate of surplus value. This, however, implies an explosive intensification of the class struggle (which is precisely what we are seeing now in Ireland and beyond).

Misspecifying demand

Aside from this, other issues are evident in the opinion article that are worth revisiting. One is the argument advanced about the notion of falling consumption capacity on the part of the working class, which in time—admittedly in confluence with other variables—leads to a generalised crisis of capitalism. Intuitively, there is some logic to this argument: if workers’ pay or share of income (or both) are falling, personal consumption demand will tend to fall (unless it is offset by something else, such as credit).

This reduces profits, and sets the stage for an economic crisis or recession. However, this thesis is problematic when we consider that a decline in personal consumption demand can be offset by a rise in another component of demand, for example investment demand. Investment demand consists of spending by businesses to build such things as factories, machinery, and so on.

So if investment demand rises, and the increase is large enough to offset the fall in personal consumption demand, a decline in wages, or workers’ share of income, does not lead to a decline in total demand and therefore does not lead to an economic crisis.

Of course “under-consumptionists” would counter that investment demand cannot grow faster than personal consumption demand in the long run: ultimately, consumers have to buy the stuff. This, however, ignores the fact that a significant section of demand within capitalism is internal to capital, i.e. capitalists selling to each other within “closed circuits.” Mining companies, for example, sell iron to companies that use the iron to make steel; steel companies sell the steel to companies that use it to build mining equipment; companies that build mining equipment sell to the mining companies.

The production of consumer goods and the demand for them typically rises less rapidly than the production of and demand for investment goods. Indeed, if we take the empirical evidence from the world’s largest capitalist economy—the United States—this is what has happened. Since the 1980s (and up to 2009) real investment demand or productive demand grew 73-fold; personal consumption only 15-fold (Source: Bureau of Economic Analysis, www.bea.gov). So investment demand grew five times as rapidly as consumption demand. Thus consumption demand is not wholly pivotal to the workings of capitalist crisis.

Furthermore, productive investment has not stagnated irreversibly since the late 1960s but has fluctuated in line with wider profit cycles.

Financialisation, fictitious value, and the dangers of one case

Questions might be raised about the idea that capitalism has reached a new stage, defined not by commodity production but by money simply creating more money (M—M′). If this is so, then we are no longer living in a capitalist mode of production.

Capitalism is commodity production (which is why the first chapter of volume 1 of Capital begins with commodities). If capitalism is not predominantly characterised by M—C—M′ exchange, then it ceases to exist as we know it. If we live in an economy predominated by M—M′ then we live in a fairyland of fictitious value, where everything is ethereal and no value is created.

Of course the only reason M—M′ can exist is if it is grounded on M—C—M′. No economy can exist on M + M′ alone: fictitious value at some point must have recourse to real value in the economy, real value being based on commodity production. In any case, much of the financialisation activity over the last twenty years or so has been rooted in actual productive investment, in utilities such as telecoms, for example, which belies the notion that financialisation must exclusively be indicative of some profit strategy at odds with real production.

Ultimately, financialisation and financial crisis have always accompanied capitalism (tulip mania in 1637, for example). Financialisation at some level indeed is necessary for lubricating the system of productive capitalism. To claim that it represents a new stage is to simply conflate what has been a process of intensification brought about not by stagnant productive investment (which is subject to cyclical waves) but by the deregulation of capital flows in the search for greater profitability.

Of course it is well known that financialisation profits have risen sharply compared with non-financials in the United States; but there has been an even more significant increase in profits from overseas production. Profits from productive sectors overseas have quadrupled since the 1950s, while financial profits have only doubled. (Source: Bureau of Economic Analysis, www.bea.gov).

In any case, we should be cautious about extrapolating evidence from the single case of the United States to make wider generalisations about the trajectory of international capitalism. Capitalism at the global level operates unevenly; and while American capitalism might be faced with a secular decline in profitability, this is hardly true of some of the other large economies in the world: India, Brazil, Russia, or China.

Conclusion

The thesis advanced in the opinion article, while containing much validity, is not without problems. Firstly, the conceptual demarcations between the Monthly Review school and the “falling rate of profit” thesis are not as superficial as implied. This is true at both the conceptual and the political level.

Secondly, the wider argument about the trajectory of contemporary capitalism and the genesis of the present crisis is based on three problematic features. The first is arguably based on a misspecification of effective demand by inflating the importance of personal consumption to capitalist growth.

The second problem is arguably based on misconceptualising fictitious value within capitalism; the third is based on an exaggeration of the significance of financialisation as a new stage within the development of capitalism.

[NC]