On the eve of his arrest, Chen struck the posture of a political martyr, telling a press conference that he was about be put in the “Bastille” to appease Beijing. “The KMT and the Chinese Communist Party see me as their No.1 prisoner as I am the biggest stone blocking their way to reunification,” he said. Chen accused Ma of persecution akin to the late KMT dictator Chiang Kai-shek’s treatment of political opponents.
At the centre of the bitter political differences is the issue of Taiwan’s relations with China. The KMT fled to Taiwan in 1949 after losing power to the Chinese Communist Party (CCP) and established a government-in-exile headed by Chiang. While the KMT and CCP were bitter Cold War enemies, both regimes claimed to be the legitimate rulers of all China, including Taiwan. The KMT suffered a major political blow when Washington reached a rapprochement with Beijing in 1971 that recognised its rights over all China.
The last time Chen was jailed by the KMT was in 1986 as a political dissident advocating Taiwanese independence and “democracy”. The island was rapidly emerging as a major cheap labour platform—one of the “Asian tigers”. Chen’s Democratic Progressive Party (DPP) represented new layers of the business elite who came into conflict with the KMT’s cronyism and required an independent state to advance their political and economic interests internationally. Beijing, which regards Taiwan as a renegade province, has repeatedly threatened military action if formal independence were ever declared.
The explosive emergence of China as the world’s largest cheap labour platform has dramatically altered relations with Taiwan. With $150 billion invested in China, significant sections of Taiwanese business regard the DPP’s calls for independence as a threat to their interests. The KMT, which once denounced the CCP as “communist bandits”, has established cordial relations with Beijing. Ma defeated Chen at the presidential election in March, in part by promising that a “common market” with China would boost the Taiwanese economy and provide jobs.
However, the global economic crisis has hit the Chinese and Taiwanese economies hard, exacerbating the conflict in ruling circles in Taipei. Ma has denied that he ordered Chen’s arrest. The KMT cynically claims that the case demonstrates that the “rule of law” now applies in Taiwan. In reality, the KMT, which ruled Taiwan as a dictatorship until 1988 and only lost power to Chen in 2000, has intimate ties to the entire state apparatus, including the police and the judiciary. The case would not have proceeded without the government’s approval and encouragement.
The nature of the corruption charges is also significant. Prosecutors have alleged that Chen embezzled $450,000 from a secretive diplomatic fund used to bribe small countries in Latin America, the South Pacific and Africa to establish ties with Taipei, rather than Beijing. In a separate case, Chen’s wife, son, daughter-in-law and brother-in-law have all been accused of laundering tens of millions of dollars from Chen’s campaign fund. Chen admitted in August that his wife wired money abroad without his knowledge.
As the KMT has sought closer ties with China, it has played down the previous rivalry for diplomatic recognition and highlighted cases of corruption involving the “diplomatic fund”. Last month, Chiou I-jen, a former vice-premier in Chen’s government, was also arrested for embezzling $500,000 the same fund.
Chen’s arrest came just after Chen Yunlin, head of China’s Association for Relations Across the Taiwan Strait (ARATS), visited Taiwan last week. He is the most senior Beijing representative to have visited the island since 1949, and signed four agreements to expand direct transportation links.
For decades, there was no direct transport between China and Taiwan. People and cargo had to travel via a third destination such as Hong Kong. During Chen’s presidency, limited progress was made in expanding direct transport, which is now a matter of urgency for Taiwanese investors and businesses operating in China.
The deals signed last week will expand chartered passenger flights from the current 36 round-trips each weekend to 108 trips a week with services operating each day. The number of destinations in China will increase from five to 21. The number of monthly chartered cargo flights will be increased to 60. New sea links will be opened up from 11 ports in Taiwan and 63 in China.
The DPP staged large protests against the visit by Chinese officials. The KMT responded by mobilising 7,000 police officers, provoking violent clashes with the protestors. In calling the protests, the DPP sought to exploit growing discontent over unemployment and declining living standards by mounting a scare campaign about Chinese workers stealing local jobs.
Living standards are falling as the Taiwanese economy slows. Last month, Taiwan’s total overall exports fell by 8.3 percent from a year ago—sales to China fell by 19.9 percent and to the US by 11.4 percent. A recent survey found that more than 20 percent of Taiwanese firms have shed workers or are planning to do so during the fourth quarter. At the same time, nearly 13 percent of the surveyed businesses indicated that they were considering closing down—more than double the figure of 5.03 percent in June.
Ma’s popularity has plummeted from 60 percent when he took office in May to just 24 percent last month. Around 600,000 people turned out to the DPP’s rallies on October 26. Although many were traditional DPP supporters, others undoubtedly took the opportunity to express their anger over deteriorating social conditions.
The deep divisions in the Taiwanese ruling elite will only intensify after Chen’s jailing. Not all sections of business are oriented solely to China. The Taipei Times, for instance, commented: “[T]he possibility that China may use Taiwan’s dependence on its market as political leverage is real. Taiwan should strive to link itself with the entire world when linking with China, so that global business interests are connected to Taiwan’s interests and serve to protect it.”
Neither faction of the ruling elite has the slightest concern for the growing social crisis facing working people. There is no doubt that if discontent erupted on a large scale over rising unemployment and poverty, both sides would rapidly bury their differences to suppress the threat.
The 50-year-old actress suggested last week that the devastating May 12 earthquake in China could have been the result of bad karma over the government's treatment of Tibet. That prompted the founder of one of China's biggest cinema chains to say his company would not show her films in his theaters, according to a story in The Hollywood Reporter.
"I'm not happy about the way the Chinese are treating the Tibetans because I don't think anyone should be unkind to anyone else," Stone said Thursday during a Cannes Film Festival red-carpet interview with Hong Kong's Cable Entertainment News. "And then this earthquake and all this stuff happened, and then I thought, is that karma? When you're not nice that the bad things happen to you?"
Ng See-Yuen, founder of the UME Cineplex chain and the chairman of the Federation of Hong Kong Filmmakers, called Stone's comments "inappropriate," adding that actors should not bring personal politics to comments about a natural disaster that has left five million Chinese homeless, according to the Reporter.
UME has branches in Beijing, Shanghai, Chongqing, Hangzhou and Guangzhou, China's biggest urban movie markets.
During the brief interview, which has also surfaced on YouTube, Stone also said she cried when she received a letter from the Tibetan Foundation asking her to help quake victims.
"They wanted to go and be helpful, and that made me cry," she said. "It was a big lesson to me that sometimes you have to learn to put your head down and be of service even to people who aren't nice to you."
Stone's words created a swell of anger on the Internet, including at least one Chinese Web site devoted solely to disparaging her comments.
"To Sharon Stone's comment, it's unlikely that we will respond," said a woman who answered the phone at the Foreign Ministry in Beijing. She refused to give her name or position.
After-hours phone calls and email to a representative for Stone were not immediately returned Tuesday night.
Throughout the 1990s, the idea of humanitarian intervention rapidly gained in popularity in a world where the balance of power was suddenly no more. The idea of spreading democracy and human rights has always been in line with America's self-created "manifest destiny". It was thus not hard for individuals and organisations to pull at the heartstrings of Washington politicians, as well as those in Whitehall and Berlin, to get democracies to stand up for human rights as defined by a liberal, educated western elite.
Foley contends, rather correctly, that this has set dangerous precedents. First of all, what right and responsibility do these various NGOs have in naming a conflict "genocide" or a "humanitarian disaster"? The case of Darfur, where the Save Darfur Coalition drastically exaggerated the nature of the conflict, so much so that the British Advertising Standards Authority ruled its adverts were "misleading" – one such example of an NGO bearing no responsibility for reckless policies. Even though they purport not to, humanitarians take sides in conflicts when in most every case from Rwanda to Uganda and the Balkans both sides have committed atrocities.
There is also the issue of the role humanitarians play in actual conflicts. Once on the ground, humanitarian organisations are often there promoting western values, although they proclaim to be neutral. In realty, very few modern day humanitarian organisations are neutral. Instead, they are multimandate. This means in addition to providing humanitarian assistance (food, shelter, etc) they also work on programmes promoting the rights of women, literacy for children and sex education. Most humanitarian organisations are run and supported by upper-middle class, educated, liberal, white, westerners unable to divorce themselves from their own cultural bias. Of course women in Afghanistan should be treated equally to men – and while we provide Afghans with food we are also going to get women into parliament. I (and Foley, I assume) believe in the rights of women, but one needs to keep in mind the cultural modernity of many of these countries where the west is involved. Western governments are always accused of imperialism, but far too few interrogate what is essentially humanitarian imperialism and Foley calls them out for it.
Finally and perhaps most importantly, there is the issue of humanitarianism and legitimacy. Has humanitarianism become a way to legitimise and justify our interventions in the affairs of other states for ulterior motives? Sadly, yes, in many cases. The difficulty of course is how do you divorce the two. With regard to Iraq, there was a blanket abuse of the humanitarian ideal to legitimise a patently illegitimate war. In Afghanistan the case is more difficult. The US went in to punish the perpetrators of 9/11, but there has been a humanitarian emergency in Afghanistan for the last decade (if not the last 30 years). Of course, the Bush administration never planned to develop Afghanistan, which is one of the reasons the mission has gone so poorly. And the US did not go to Afghanistan to relieve humanitarian suffering. From Kosovo to Africa and Asia, the last two decades are littered with humanitarian interventions, many of which might have done more harm that good.
Humanitarian organisations over the last two decades have helped to paradoxically rain down western missiles in the name of help and humanitarian ideals, and for this Foley holds them in contempt. Making matters worse, these organisations line up for government cash that further legitimises the conflicts especially in places like Iraq, even if they disagree with the focus or rationale for the intervention. Instead of challenging government about the legitimacy of their actions, they are complicit in the crime.
Meanwhile, the headline of a 16 October online editorial by the ISO’s Socialist Worker bemoans, “Why Won’t Obama Back a Real Jobs Plan?” The article itself asks, “If the U.S. government can find $700 billion to buy up bad debts on Wall Street and another $250 billion for a stake in the biggest banks, why not spend some money on the government creating jobs?” Why not just build heaven on earth? “The challenge,” according to the ISO, “is to build a working-class opposition, independent of the mainstream parties, which can make our demands heard and felt by all the politicians in Washington.” This is just another version of the classic reformist slogan, “money for jobs, not war.” Its premise is the lie that the capitalist system can, through protest and pressure, be made to serve the interests of working people and the oppressed. Exploitation, oppression and war are the priorities of the capitalist system. No amount of protest or pressure can fundamentally change that. We live under the dictatorship of capital, with a bourgeois-democratic facade.
All this underlines that without the leadership of a Marxist party that unites the struggles of the multiracial working class with the fight for the rights of black people, women, immigrants and all the oppressed, the social discontents of this society can go in many, including reactionary, directions. The U.S. is the only advanced capitalist country in which the working class does not have its own political party, not even a reformist one like the social-democratic parties in Europe, Australia and Japan. In large part, this is because the bourgeoisie—abetted by the pro-capitalist labor bureaucrats—has been able to successfully utilize the poison of racism to divide the working class and obscure the fundamental class divisions in this society. Whipping up racial and ethnic hatred has long served the ruling class in furthering the exploitation of all workers. As 19th-century American robber baron Jay Gould boasted: “I can hire one half of the working class to kill the other half.”
It is only through united and integrated class struggle and the forging of a working-class leadership that actively combats the bourgeois rulers’ poison of chauvinism that racial divisions in this country can be overcome. Key to such a perspective is recognizing the centrality of the struggle against black oppression. The oppression of black people as a race-color caste, historically forcibly segregated at the bottom of society, is materially rooted in and central to American capitalism. Chattel slavery was smashed only by blood and iron in the Civil War, the Second American Revolution.
Capitalist rule must be replaced with the dictatorship of the proletariat—i.e., a workers government that serves the interests of working people and the oppressed. Only through the socialist overthrow of this deeply inhumane capitalist system can the vista of human liberation be opened. Only when those who labor rule can the vast resources of society be reorganized to put an end to material scarcity and the ideological backwardness that capitalism inevitably generates. What the exploited and oppressed need is a revolutionary workers party, forged in class struggle—a multiracial vanguard party in which black workers will play a key leadership role. What is necessary is the fight for socialist revolutions in the U.S. and throughout the world.
At the same time, we are for proletarian political revolution to oust this bureaucracy. We recognize that the bureaucracy’s political rule is counterposed to the advance toward socialism—an egalitarian society based on modern technology and material plenty for all. The nationalism of the Chinese Communist Party (CCP) regime, its claim that “socialism” can be built in a single country, disarms and misleads the workers. Its corruption and mismanagement undermine the collectivized economy. We fight to replace the rule of the CCP with the rule of democratically elected workers and peasants councils (soviets) committed to the fight for communism worldwide. That requires forging a new, internationalist, revolutionary party to lead these struggles.
The economy is the issue dominating the U.S. presidential elections: how to bail out the capitalists at the working people’s expense to prop up an outmoded system. Communists have a very clear principle: we don’t support or vote for a capitalist party or politician, whether Democrat, Republican or Green—period. And we would not ourselves run for an executive office that administers the capitalist state, like president, governor or mayor. The government is the executive committee of the ruling class. The capitalist state cannot be reformed to meet the interests of the oppressed, but must be swept away through workers revolution.
There are many groups out there that call themselves “Marxist” that have disdain for the principles and program of genuine Marxism. They are trying to reform an economic system that long ago outlived its usefulness. This forum is a polemic against these opponents of Marxism and in defense of a Marxist worldview.
China-Bashing and the Elections
Columnist John Feffer of the Huntington Post wrote on June 9:
“Although Iraq is the defining foreign policy issue so far in the presidential race, China will no doubt be smuggled into the election through this rather stark contrast between the Republicans and Democrats over trade…. Not to be outdone in China-bashing, McCain will likely argue that China is a national security threat that requires more military spending.”
It’s not as if the regimes of Bush I and II, as well as the Clinton regime haven’t already spent lots of money on the military. Currently, the U.S. accounts for 48 percent of the entire world’s military spending. And China has been in the imperialists’ cross hairs ever since its 1949 Revolution. With the counterrevolutionary destruction of the Soviet Union in 1991-92, China became the central strategic target of the U.S., which is encircling it with military bases from South Korea and Japan to Guam and Central Asia.
The imperialists have a two-pronged strategy for capitalist counterrevolution in China: military and economic. The Democrats and Republicans agree on the military strategy of encirclement and unremitting military provocations. They disagree only on the economic strategy. The anti-China protectionism pushed by Democratic politicians is based on the lie that the growth of the Chinese economy is a major cause of the loss of jobs and lowering living standards in the U.S. This myth promotes illusions that capitalism can work in the interests of the working class, thereby exonerating this exploitative system while making a scapegoat out of another country, in this case China. The biggest salesmen for protectionism are inevitably the bureaucrats who head the trade unions (Marxists call them “labor lieutenants of capitalism”), who are also selling the Democratic Party as “friends” of the workers.
In June 2007, Obama sent a letter to Treasury Secretary Henry Paulson complaining that the government “has refused yet again to declare that China is manipulating its currency”—as if that were the cause of the U.S.’s economic problems! The reality is that China has $504 billion of its $1.8 trillion in foreign exchange reserves invested in U.S. Treasury bonds, which helps to keep the U.S. economy afloat. Especially nowadays this is not a very wise investment, not to mention that this investment policy is helping to finance the U.S. military.
China-bashing has picked up intensity since the collapse of the market for subprime mortgages triggered the current financial crisis. China is being blamed for everything from the so-called international “food shortage” to higher gas prices, the problems in Darfur, and let’s not forget global warming. We’re told the reason prices have gone up is because China is industrializing, leading more Chinese to eat more, drive cars, watch television, use air conditioning. In other words, the problem isn’t the capitalist system, it’s the Chinese deformed workers state and its economic growth!
Economic penetration by the imperialists has enormously strengthened the forces of counterrevolution within China while increasing inequality. But capitalists in China are still prevented from organizing themselves politically and vying for power. The core sectors of the economy remain collectivized and the banking system remains effectively state-owned. Economic development has vastly increased the size of the proletariat, drawing many former peasants to the cities. From 1976 to 2006 the urban population has increased from 20 to 44 percent of the total. This is historically progressive. Nonetheless there are still 740 million people living in the countryside.
The contradictions of the Chinese bureaucratically deformed workers state are sharpening. China is only the third country to have a man walk in space, but it can’t effectively ensure the quality of its milk production for babies. The massive relief efforts following the devastating earthquake in Sichuan Province last spring, coupled with the collapse of many schools due to their shoddy construction, are a striking measure of these contradictions. We elaborated on this in our article on the Sichuan quake in WV No. 917, 4 July. The relief efforts were widely recognized as impressive, thus at the time cooling down the imperialist frenzy and media uproar over the counterrevolutionary riots in Tibet in March.
After the first week of the provocations in Tibet, Democratic Speaker of the House Nancy Pelosi visited the Dalai Lama’s headquarters in India. Pelosi blathered: “If freedom-loving people throughout the world do not speak out against China’s oppression in China and Tibet, we have lost all moral authority to speak on behalf of human rights anywhere in the world.” Both Barack Obama and Hillary Clinton called on Bush to boycott the opening ceremonies of the Beijing Olympics in solidarity with Tibet’s “freedom fighters.” Meanwhile, ethnic Chinese and Muslims were being burned alive in Lhasa—they didn’t have traditional Tibetan scarves, known as kataks, outside their stores to identity themselves to the “freedom fighters.”
Pelosi’s “human rights” rhetoric is the vilest hypocrisy coming from a representative of U.S. imperialism, which has killed hundreds of thousands in Iraq and is currently occupying Iraq and Afghanistan. Of course, that’s for the cause of “freedom” too!
Under the pro-slavery Dalai Lama, Tibetans were “free” to live an expected 35 years in squalor. Since the “Lamaocracy” was driven out of Tibet in 1959, people live nearly twice as long. Yet groups like the International Socialist Organization (ISO), Socialist Action and the Committee for a Workers’ International—represented in the U.S. by Socialist Alternative—all enthuse over the cause of the anti-Communist “Free Tibet” movement. Like the Dalai Lama and his coterie, this “movement”—the Tibetan Youth Congress, Students for a Free Tibet, etc.—is funded by the CIA front called the National Endowment for Democracy. If Tibet were not part of China, it would be a protectorate of U.S. imperialism, a base for counterrevolution throughout China.
A Vietnam veteran, retired US Army colonel, and Boston University professor, Bacevich came into the public eye in the 1990s as a commentator on military affairs for conservative flagships like the National Review and the Weekly Standard. If Bacevich already seemed less sanguine about the US's supposed "unipolar moment" than many of his colleagues, there was nonetheless little to mark him as a future pillar of opposition to the status quo.
But as a result of his vocal criticism of the Iraq War – a war which claimed the life of his son – and of the post-World War II political and military establishment in general, Bacevich has come to occupy a unique role in contemporary foreign policy debates. In books like The New American Militarism and articles for publications ranging from the left-wing Nation to the paleoconservative American Conservative, he has warned against the militarization of US foreign policy and the messianic ambitions of neoconservative hardliners.
Bacevich's new book The Limits of Power (Metropolitan, 2008) attempts a deeper historical and theoretical examination of the US's current woes, suggesting that the excesses of recent foreign policy are far more deeply rooted in the US character than its critics have been willing to acknowledge.
His largely convincing – and deeply pessimistic – portrayal should help curtail any tendency to pin all blame on the blundering and bad intentions of the Bush administration, and dampen undue enthusiasm that a simple change of administrations will alleviate the structural problems facing the US.
Bacevich begins with a brief historical recap of the US's rise and expansion across the continent. He resists the urge to see current policy as the betrayal of a mythical golden age in US history, in which Washington's motives were benign and its aspirations humble, instead detailing the interest-driven process by which the US expropriated its natives and rose to the status of world power. At the same time, however, this often-ruthless expansionism correlated with increasing abundance and the extension of democratic freedoms among US citizens.
A critical part of Bacevich's argument is that this correlation between expansion, abundance and freedom is no longer operative. Against those who would take the US's expansionist past as a vindication of its present ambitions – Robert Kagan's "Dangerous Nation" seems to be an implicit target – he claims that the correlation broke down in the Vietnam era; now expansionism "squanders American wealth and power, while putting freedom at risk."
This situation, Bacevich argues, is rooted in three interlocking crises – one socioeconomic, one political, and one military. His account of the first, which he calls "the crisis of profligacy", constitutes his most radical challenge to the mainstream US political consensus, and forms the analytical heart of the book.
The problems of US foreign policy, he claims, are at root a manifestation of the problems of US identity – of a notion of freedom defined as ever-increasing consumption and the unlimited satisfaction of desires. This "empire of consumption" both necessitates and undermines an imperial foreign policy.
It necessitates this foreign policy, because the insatiable need for resources requires effective control of the areas that produce them. Hence the Carter Doctrine, which takes US dependence on oil as the basis for a policy of intervention in the Middle East.
At the same time, it undermines this foreign policy, because a population preoccupied with consumption becomes less willing and less able to defend these new national security interests. As Bacevich puts it, a "grand bazaar provides an inadequate basis on which to erect a vast empire."
Bacevich's critique therefore extends all the way to the very meaning of the US ideal of freedom in a consumer society – quite a bit farther than most critics of US foreign policy, left or right, have been willing to go.
And his story features an unlikely hero and villain – the former being Jimmy Carter, who warned futilely that the US must learn to live within its means, the latter being Ronald Reagan, who reassured the US citizenry that they could have their cake and eat it too. Far from being the epitome of conservatism, Reagan stands in Bacevich's account as "the modern prophet of profligacy."
Related to this crisis of profligacy are two other crises, one political and one military. Here, Bacevich retreads some old ground – much of the material will seem familiar to readers of "The New American Militarism" – but his arguments are valuable and incisive nonetheless.
The chapter on "the political crisis" reviews the militarization of US foreign policy and the growth of the natural security apparatus in the wake of World War II, centering on a fundamental shift in the way that the US conceived of its security.
Leaving behind the traditional view that the US military existed to respond to specific threats, and should expand and contract according to the scope of these threats, Cold War policymakers began to see imperfect security as by definition inadequate security, and concluded that the US could only be safe when it exercised permanent global military supremacy.
Bacevich identifies Eisenhower-era strategist Paul Nitze as the key architect of this shift, but correctly sees the militarization of US foreign policy as a constant drive that transcended individuals, administrations, and parties. While the Bush Doctrine of preventive war may have been the most extreme manifestation of these tendencies, they were equally visible in the administrations of supposedly more dovish presidents such as Carter and Clinton.
This growing "ideology of national security" led to a fundamental overestimation of what military power was capable of achieving. Entranced by illusions of permanent supremacy, policymakers forgot about the inherent unpredictability of war and the limited utility of force as a tool for social and political transformation. When faced with recent disappointments in Afghanistan and Iraq, Bacevich argues, they have fallen back on glib and superficial lessons (empower the generals over the civilians, reinstate the draft) that have failed to reckon with the real nature of the problem.
Bacevich is particularly good on the current fad towards viewing counterinsurgency doctrine as universal panacea for the US military's woes. Without disparaging the successes of counterinsurgency as developed by strategists such as David Petraeus, he argues persuasively that "small war" techniques cannot take the place of a serious assessment of what the US's strategic interests are, and what its military should do.
Historically, he notes, "'small wars' are imperial wars." To take counterinsurgency as the solution to the military crisis is to take for granted that the primary role of the US military should be the long-term occupation of foreign countries and the subduing of their native populations. The newly popular embrace of counterinsurgency sweeps the most important strategic questions under the table.
The Limits of Power is short and briskly argued – sometimes too briskly. The book is ambitious enough that it would have been nice to see its more contentious points argued in greater depth.
Still, Bacevich's central arguments are too important to pass over, and his book provides a much-needed challenge to what has become an ideologically rigid and historically ignorant foreign policy consensus.
The simultaneous unfolding of the US presidential campaign and unraveling of the financial markets presents one of those occasions where the political and economic systems starkly reveal their nature.
Passion about the campaign may not be universally shared but almost everybody can feel the anxiety from the foreclosure of a million homes, and concerns about jobs, savings and healthcare at risk.
The initial Bush proposals to deal with the crisis so reeked of totalitarianism that they were quickly modified. Under intense lobbyist pressure, they were reshaped as "a clear win for the largest institutions in the system . . . a way of dumping assets without having to fail or close", as described by James Rickards, who negotiated the federal bailout for the hedge fund Long Term Capital Management in 1998, reminding us that we are treading familiar turf. The immediate origins of the current meltdown lie in the collapse of the housing bubble supervised by Federal Reserve chairman Alan Greenspan, which sustained the struggling economy through the Bush years by debt-based consumer spending along with borrowing from abroad. But the roots are deeper. In part they lie in the triumph of financial liberalisation in the past 30 years - that is, freeing the markets as much as possible from government regulation.
These steps predictably increased the frequency and depth of severe reversals, which now threaten to bring about the worst crisis since the Great Depression.
Also predictably, the narrow sectors that reaped enormous profits from liberalisation are calling for massive state intervention to rescue collapsing financial institutions.
Such interventionism is a regular feature of state capitalism, though the scale today is unusual. A study by international economists Winfried Ruigrok and Rob van Tulder 15 years ago found that at least 20 companies in the Fortune 100 would not have survived if they had not been saved by their respective governments, and that many of the rest gained substantially by demanding that governments "socialise their losses," as in today's taxpayer-financed bailout. Such government intervention "has been the rule rather than the exception over the past two centuries", they conclude.
In a functioning democratic society, a political campaign would address such fundamental issues, looking into root causes and cures, and proposing the means by which people suffering the consequences can take effective control.
The financial market "underprices risk" and is "systematically inefficient", as economists John Eatwell and Lance Taylor wrote a decade ago, warning of the extreme dangers of financial liberalisation and reviewing the substantial costs already incurred - and proposing solutions, which have been ignored. One factor is failure to calculate the costs to those who do not participate in transactions. These "externalities" can be huge. Ignoring systemic risk leads to more risk-taking than would take place in an efficient economy, even by the narrowest measures.
The task of financial institutions is to take risks and, if well-managed, to ensure that potential losses to themselves will be covered. The emphasis is on "to themselves". Under state capitalist rules, it is not their business to consider the cost to others - the "externalities" of decent survival - if their practices lead to financial crisis, as they regularly do.
Financial liberalisation has effects well beyond the economy. It has long been understood that it is a powerful weapon against democracy. Free capital movement creates what some have called a "virtual parliament" of investors and lenders, who closely monitor government programmes and "vote" against them if they are considered irrational: for the benefit of people, rather than concentrated private power.
Investors and lenders can "vote" by capital flight, attacks on currencies and other devices offered by financial liberalisation. That is one reason why the Bretton Woods system established by the United States and Britain after the second World War instituted capital controls and regulated currencies.*
The Great Depression and the war had aroused powerful radical democratic currents, ranging from the anti-fascist resistance to working class organisation. These pressures made it necessary to permit social democratic policies. The Bretton Woods system was designed in part to create a space for government action responding to public will - for some measure of democracy.
John Maynard Keynes, the British negotiator, considered the most important achievement of Bretton Woods to be the establishment of the right of governments to restrict capital movement.
In dramatic contrast, in the neoliberal phase after the breakdown of the Bretton Woods system in the 1970s, the US treasury now regards free capital mobility as a "fundamental right", unlike such alleged "rights" as those guaranteed by the Universal Declaration of Human Rights: health, education, decent employment, security and other rights that the Reagan and Bush administrations have dismissed as "letters to Santa Claus", "preposterous", mere "myths".
In earlier years, the public had not been much of a problem. The reasons are reviewed by Barry Eichengreen in his standard scholarly history of the international monetary system. He explains that in the 19th century, governments had not yet been "politicised by universal male suffrage and the rise of trade unionism and parliamentary labour parties". Therefore, the severe costs imposed by the virtual parliament could be transferred to the general population.
But with the radicalisation of the general public during the Great Depression and the anti-fascist war, that luxury was no longer available to private power and wealth. Hence in the Bretton Woods system, "limits on capital mobility substituted for limits on democracy as a source of insulation from market pressures".
The obvious corollary is that after the dismantling of the postwar system, democracy is restricted. It has therefore become necessary to control and marginalise the public in some fashion, processes particularly evident in the more business-run societies like the United States. The management of electoral extravaganzas by the public relations industry is one illustration.
"Politics is the shadow cast on society by big business," concluded America's leading 20th century social philosopher John Dewey, and will remain so as long as power resides in "business for private profit through private control of banking, land, industry, reinforced by command of the press, press agents and other means of publicity and propaganda".
The United States effectively has a one-party system, the business party, with two factions, Republicans and Democrats. There are differences between them. In his study Unequal Democracy: The Political Economy of the New Gilded Age, Larry Bartels shows that during the past six decades "real incomes of middle-class families have grown twice as fast under Democrats as they have under Republicans, while the real incomes of working-poor families have grown six times as fast under Democrats as they have under Republicans".
Differences can be detected in the current election as well. Voters should consider them, but without illusions about the political parties, and with the recognition that consistently over the centuries, progressive legislation and social welfare have been won by popular struggles, not gifts from above.
Those struggles follow a cycle of success and setback. They must be waged every day, not just once every four years, always with the goal of creating a genuinely responsive democratic society, from the voting booth to the workplace.
Note
* The Bretton Woods system of global financial management was created by 730 delegates from all 44 Allied second World War nations who attended a UN-hosted Monetary and Financial Conference at the Mount Washington Hotel in Bretton Woods in New Hampshire in 1944.
Bretton Woods, which collapsed in 1971, was the system of rules, institutions, and procedures that regulated the international monetary system, under which were set up the International Bank for Reconstruction and Development (IBRD) (now one of five institutions in the World Bank Group) and the International Monetary Fund (IMF), which came into effect in 1945.
The chief feature of Bretton Woods was an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value.
The system collapsed when the US suspended convertibility from dollars to gold. This created the unique situation whereby the US dollar became the "reserve currency" for the other countries within Bretton Woods.