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The state of global

capitalism today
Sam Gindin and Leo Panitch
Will the US sustain its imperial role in the wake of the
fourth great crisis of capitalism?
40 | IPPR Progressive Review | Volume 25(1)

I
t is not only the depth of the economic crisis that began in 2007-08,
but the way it has played out over the course of the past decade at
different times and in different places, that justifies its characterization
as the fourth long crisis in capitalism since the last quarter of the 19th
century. For a good many states, not least the US state, this has now
produced what appears to be a political crisis as much or more than an
economic one.
Even though the governing structures of global capitalism have been
maintained through the crisis, their legitimacy has increasingly been
challenged by significant political forces inside many states. The
reverberations of the economic crisis were felt through the decade, with
first the Euro crisis and then the collapse of commodity prices quickly
following on the heels of the return to moderate global economic growth
by 2010. This had profound implications not only for the most advanced
transnational projects like the European Union but also the traditional
mainstream political parties which sponsored neoliberal globalisation
within each state. This political dimension of the first great capitalist crisis
of the 21st century was especially heightened with Donald Trump’s
election to the presidency of the American empire.
The widespread political expression of hyper-nationalist sentiment against
globalisation has its roots in one of the most paradoxical aspects over the
whole period of the making of global capitalism. Since this did not bypass
states but rather depended on states facilitating and codifying a globalising
capitalism, as well as cooperating in its management internationally, state
legitimation still depended on justifying all this as an expression of the
‘national interest’. This not only sustained national identity but also
provided ground for those expressing nationalist ideology in anti-
globalisation terms.

© 2018 The Author/s. IPPR Progressive Review © 2018 IPPR


Summer 2018 | 41

“Even as many of the empire’s functionaries


billed the US as the ‘indispensable nation’ in
this respect, this coincided with a strong strain
of nationalism which extolled their global
power while at the same time fuelling
resentment against bearing the burdens and
responsibilities of superintending global
capitalism”
This could be clearly seen in the American case despite its central role in
the making of global capitalism. Even as many of the empire’s
functionaries billed the US as the ‘indispensable nation’ in this respect, this
coincided with a strong strain of nationalism which extolled their global
power while at the same time fuelling resentment against bearing the
burdens and responsibilities of superintending global capitalism. This
repeatedly emerged as a contradiction inside the state itself, whether as
expressed in the form of congressional hostility to international financial
institutions, or to ‘raising the debt ceiling’ as required for the Treasury bill
to sustain the dollar as the global reserve currency.
This often led to the concealment of US lending to foreign banks to
contain international financial crises. The roots of this contradiction were
always material as well as ideological insofar as neoliberal globalisation
entailed significant effects in terms of domestic economic restructuring,
downward pressure on wages and benefits, and job insecurity alongside
international labour flows and refugee migration.

ECONOMIC DRIVERS OF DISCONTENT


To properly appreciate how the economic reverberations through the
decade of crisis produced these effects, it is crucial to view them in the
context of the balance of class forces and state capacities. As the 2007 crisis
in US mortgage securities led to the overall economic collapse of 2008, a
new US president was elected who was especially committed to the state
maintaining an active role in sustaining globalisation as it strove to contain
the crisis.
This involved not only bailing out the Wall Street banks but doing so with
an eye to preventing the collapse of banks abroad; not only undertaking the
largest fiscal stimulus in US peacetime, but coordinating the timing of this
with the G20 states; not only massively ramping up global monetary
© 2018 The Author/s. IPPR Progressive Review © 2018 IPPR
42 | IPPR Progressive Review | Volume 25(1)

expansion as fiscal austerity quickly followed in many states, but also


steadfastly securing the continuing commitment of those states to free trade
and untrammeled capital movements. This proved important given that
the overall return to global economic growth by 2010 was extremely
moderate, as well as marked by great unevenness, including depression-like
conditions in some states.
Inside the US, the remarkably long period of uninterrupted economic
growth after 2009 was equally remarkable for the persistence of a
historically low rate of growth. Unemployment which had more than
doubled to 10 percent from 2007 to 2009, trended consistently downward
to near 4 per cent by the fall of 2017; but the proportion of people in the
workforce has remained below its pre-recession level. With trade unionism
under continued assault, wage growth has remained at extremely low levels.
Even though the housing market has fully recovered, as has the overall level
of consumption, this is once again sustained by massive indebtedness. If all
this confirms the continuing weakness of American labour, it also appears
to confirm the strength of US capital.
This has emphatically not been a profitability crisis. The 2008 economic
collapse was not preceded by low profits; and by 2012 corporate profits
already exceeded their pre-recession peak, and as a share of the GDP,
profits have since then been at their highest since the mid-1960s.
Moreover, encouraged by persistently low interest rates as well the high
profits, stock market valuations have exploded to record levels. That said,
what is really notable about this sustained period of high profits is that it
has not been matched by parallel increases in investment, while both
labour and capital productivity have remained historically low.

“With the admission of China to the WTO and


its rapid integration into global capitalism as
the leading manufacturing centre, there was a
massive decline of US manufacturing jobs,
which redounded to Democrats’ electoral
benefit in 2008”
Longer term structural developments seem to be at work in determining
how the fourth great capitalist crisis has evolved. In looking for indicators
that would suggest such structural developments, what is especially notable
is the emergence of a marked gap between profits and investment well

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Summer 2018 | 43

before the onset of the crisis. The restructuring of US capitalism and the
defeat of trade unionism after the previous long crisis of 1968 to 1982 led
to the recovery of profits, investment and productivity right through to the
end of the 1990s. Coinciding with the bursting of the high tech bubble at
the turn of the millennium, the pattern of high profits accompanied by
relatively low investment, and lower capital and labour productivity
dramatically emerges.
With the admission of China to the WTO and its rapid integration into
global capitalism as the leading manufacturing centre, there was a massive
decline of US manufacturing jobs, which redounded to Democrats’
electoral benefit in 2008. Yet this decline was even further accelerated
through the past decade, especially after the federal bailout of GM and
Chrysler at the height of the new crisis saw a profound shift in automobile
production to Mexico (the US’s $65 billion trade deficit with Mexico is
totally the product of its $70 billion deficit in the auto sector). This shift
was in train since the mid-1990s under NAFTA but this was especially
intensified in the last decade, notably even involving the closure of plants
that had been opened in rural areas of the midwest states since the
restructuring of the 1980s. This proved a key determinant in the role
played by those states in electing Trump.
This is not to say that there will be a significant revival of manufacturing
jobs in the US, or even an improvement in the economic conditions for
most people following Trump’s victory. Given already high profits as well as
low interest rates, the overriding Republican concern with cutting taxes, once
implemented, will hardly be much of a spur for new investment. But the
resulting fiscal effects of this will also militate against massive infrastructure
development to create jobs, not least since this would under this
administration inevitably have to involve heavy subsidies to private capital.

THE POLITICAL CRISIS OF GLOBAL CAPITALISM


The question of whether the US will remain at the centre of global
capitalism through this political crisis may turn less on the material base of
the US empire at home than on the state’s capacity to sustain its imperial
role. Trump’s orientation to protectionism will be constrained by the
networked international production chains of US multinationals as well as
Wall Street’s place in global finance. The continued strength of the dollar as
the global currency, as well as the power and reach of US corporations, not
least in the new technology sectors as well as in business services, is unlikely
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to be undermined by tariff adjustments, let alone tax incentives to bring


multinational corporations’ overseas profits home. Trump’s hyper-nationalist
rhetoric isn’t new.
As with previous administrations who have complained of the US bearing
too great a burden in a globalising capitalism, there is no coherent strategy
for changing this. The collapse of Bretton Woods under Nixon actually
had the effect of extending and deepening the international role of the
dollar amidst the removal of capital controls and the further financialisation
that this fostered. And, as with Reagan, Trump’s protectionist discourse
could well provide a lever for further opening markets, if not through
multilateral trade agreements then through the renegotiation and extension
of bilateral ones.
But whereas the crucial condition for these developments was the enhanced
capacity of US state institutions like the Treasury and Federal Reserve to
superintend an increasingly globalising capitalism, and to coordinate with
other states the codification of rules for market-making and guaranteeing
property rights, what is by no means clear is whether these institutions will
continue to have sufficient motivation or capacity to play these roles.
Indeed, the persistent inability of the Obama administration to influence
German policy during the Euro crisis already spoke to diminishing imperial
capacities in the US Treasury, as did the frustration of its efforts to prevent
other states from joining the Chinese-led initiative to create the Asian
Infrastructure Investment Bank. This of course amounts to little in terms
of the diminution of US hegemony as compared with the mess made by
US foreign and military policies in the Middle East and north Africa,
let alone the lingering legacy of the much earlier mess on the Korean
peninsula and the more recent one in the Ukraine.

“The conjuncture of 2016-17, when Trump and


Brexit were conjoined with the growth of
hyper-nationalist reactionary forces in Europe
as enamoured of Putin as of Trump, has
attested to the political crisis”
As for Russia and China, they could never have been expected to be
integrated within the informal American empire along the lines of
Germany and Japan, not only because of the US state’s direct role in the
postwar reconstruction of the latter, but also because the US has never

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Summer 2018 | 45

played the same role in guaranteeing the former’s access to resources. In


any case the nationalism in Russia and China is distinct from most
others by still being fuelled by a traditional world power self-image. The
conjuncture of 2016-17, when Trump and Brexit were conjoined with
the growth of hyper-nationalist reactionary forces in Europe as
enamoured of Putin as of Trump, has attested to the political crisis. This
will further test the capacities of its governing structures, not least those
rooted in the US state, even while it remains utterly clear that no other
state (let alone the European Union) is capable of taking over its
leading role.
The persistence of neoliberalism alongside hyper-nationalism through the
crisis increasingly poses the question of ‘socialism vs barbarism redux’. But
this may exaggerate the strength and staying power of today’s capitalist
forces as well as underestimate the possibility for socialist governments to
emerge. This can only be conceived as taking place at the level of nation
states even in a global capitalist world. Indeed, national identity has always
been an aspect of class formation, not just through the processes of
securing property rights for capital but also for winning citizens’ and
workers’ rights through nation states. The hyper-nationalism which
exploits working class identity in the current conjuncture needs to be
confronted by a socialist internationalism which builds on, rather than
denigrates or wishes away, overlapping national and class identities.
This can’t be just written off by the left, especially in light of the need for
progressive immigration policies as well as the need for effective capital
controls and restrictions on corporate power - let alone the public
ownership that can only be secured through nationalisations. In the UK,
the focus of the Corbyn-led Labour Party on the role of municipal public
ownership and procurement policies to seed and nurture worker and
community cooperatives is important here. It was designed to avoid the
replication of top-down corporate management in publicly owned
enterprises by encouraging new forms of industrial democracy.
Nevertheless, disentangling administrative, as well economic, international
integration through municipalisation or other local economic strategies can
only go so far without securing the adequate space and support for
democratic planning within nation states, even while attention is turned to
what would replace the EU, NAFTA, and other capitalist umbrellas of
regional economic integration.

© 2018 The Author/s. IPPR Progressive Review © 2018 IPPR


46 | IPPR Progressive Review | Volume 25(1)

“The changes in the international arena that


should be pursued by socialists are those that
would allow them more room for manoeuvre
within each state”
That said, socialist governments oriented to these ends would inevitably
run into the difficulties of disentangling from these regional institutions.
The ability to sustain themselves without either retreating to embracing
capitalist globalisation themselves, or fomenting a return to hyper-
nationalist reaction, will depend not only on the capacities of those socialist
governments but also on developments in other states that would allow for
international socialist cooperation in democratic economic planning.
The measure of the party’s leadership under Corbyn in this regard should
not be how explicitly socialist its policies are, or whether it offers an
immediate break with the international capitalist structures. Rather, the
strategic test will be the extent to which it problematises how to implement
reform measures to advance, rather than close off, future socialist
possibilities. That is, to enhance – through the development of class, party
and state capacities – the possibility of realising socialist goals.
The changes in the international arena that should be pursued by socialists
are those that would allow them more room for manoeuvre within each
state. What socialist internationalism must mean today is an orientation to
shifting the balances of forces in other countries and in international bodies
so as to create more space for transformative forces in every country.
A longer version of this essay will appear in A World Turned Upside Down?
Socialist Register 2019, London: Merlin Press, forthcoming autumn 2018.

Sam Gindin is the former research director of the Canadian


Autoworkers Union and Packer visiting chair in social justice at York
University and Leo Panitch is emeritus distinguished research
professor of political science at York University and Canada research
chair in comparative political economy. They are co-authors of The
Making of Global Capitalism: The Political Economy of American
Empire (Verso, 2013) and, most recently, of The Socialist Challenge
Today: Syriza, Sanders, Corbyn (Merlin 2018).

© 2018 The Author/s. IPPR Progressive Review © 2018 IPPR