a highly unlikely meaningful trade agreement, Chinese State Capitalism, economic autarchy is back, fashioning a deglobalized US industrial policy, state intervention in the economy via fiscal reform, the algorithms which run trading, The clash of ideologies, the fragmentation of the world economy, the stupidity of Wall Street, The US State Department and its spooks
By Brian Green, 4thDecember 2019
This article deals with two issues. Firstly the ongoing trade war that has turned nasty. Secondly, the clash between two visions of capitalism: that of state capitalism versus small state and unregulated capitalism.
One has to admire the stupidity of Wall Street. Like a dog trained to respond to the words:“trade deal imminent”, they wag their tail and the market rises. Even on a day like today,when the ADP release of only 67,000 new jobs(the second lowest in a decade) and the ISM service sector index,both of which disappointed, the allure of a trade deal still supported the market.
The reason for the stupidity of Wall Street, what a waste of salaries, is that the trade war is no longer merely economic, it has become political, therefore more dangerous and intractable. It has moved to a qualitatively higher stage. Wall Street has failed to recognise this or at least the algorithms which run trading have not been adapted to take into account “the political”, and to give it the correct weighting. It is clear that the US has made a strategic decision to interfere in China’s sphere of influence: Hong Kong and the Uyghur’s region of China.
In both instances, the US Congress has supported the struggles against Chinese rule posing to the [protesters] and the prisoners as their liberators, when in fact the US is the Chief Global Prison Warder. The US State Department and its spooks are therefore engaged in a low key destabilisation effort in both these regions in order to distract from without and weaken from within. This is a key tactic which often trips over into war.
This can only antagonise the Chinese government, once again confirming the US’s aggressive intentions towards the rise of China. It will make them increasingly reluctant to accede to US trade demands. It could even outweigh the urgent need on either side for a trade deal as both economies bleed. If that is the case then we are one step further away from a negotiated settlement and one step closer to war. These political events have made a meaningful trade agreement highly unlikely.
The clash of ideologies
For a decade there has been a clash of economic cultures. Would Chinese State Capitalism prevail, or would the Chinese Economy adapt to a more open and less state intensive Western model. Until recently, the weight of opinion held that it would be the Chinese Economy that would adapt. More recently that weight of opinion has been reversed. Now it is the case that debate in the West has moved towards state intervention in the economy via fiscal reform, to overcome economic stagnation there.
This is not only true for Britain and the Labour Party Manifesto which calls for amongst other things a state investment bank and more state sponsored Research & Development. It is not only true for the left in the US Democratic Party which calls for more state involvement and state led services, for example in health care. It has gone further. It is now enveloping the commanding heights of corporate business itself.
On the 2nd December the Financial Times, published a perceptive article titled: Consciously Decoupling the US Economy by Rana Foroohar. The author was commenting on developments taking place in the US Commerce Department and the Council on Foreign Relations, which together are fashioning a deglobalized US industrial policy. In short,the proposal is for the US to re-industrialise to lessen its dependency on the international supply chain.
It seems, economic autarchy is back with a vengeance, and, consequentially it can only accelerate the fragmentation of the world economy. Those who decried globalisation are likely to eat their words when they appreciate the dangers its opposite, national autarchy, potentiates. The forces driving this new posture is summed up in the article: “…the US needs a more coherent national economic strategy in a world in which state capitalism is in the ascendant.”
But how to get there the author asks, and then answers, clearly not on the basis of laissez-faire policies which are limited by their internal contradictions. Only the state, not the market, can drive this transition. The author reveals the torturous discussions going on in business aimed at redefining the role of the state and the limits to its involvement. While these discussions remain at a tentative stage, it is clear that the large corporations recognise that to fight state capitalism the US needs a form of tightly regulated state capitalism itself, in order to centralise and co-ordinate this transition.
It therefore seems that it is the Chinese, not the US who have won the argument. It was always going to be thus. A diminished state that unleashes a corporate free-for-all is a recipe for disorganisation and inequality, which ultimately leads to a hollowed out economy. This the case of the USA which spends more money on building military runways around the world than it does on its own roads and whose working class is slowly dying out, and if not dying out, then clearly becoming too unhealthy to be exploited productively.
In part 2,I will examine the attitude of the left to the state and its role in the economy. Clearly support for state led solutions is blossoming in the left. While it is unlikely to get to the levels found in World War 1, which influenced the revolutionary left at the time[,] including Lenin, it’s growing popularity means we have to once again define the nature of the workers’ state and it’s withering away in a post-revolutionary period. Otherwise we are going to end up with a workers’ state that goes beyond the need to implement, to police workers’ rights and to defend the revolution, and,which therefore ends up interfering with the free association of newly liberated producers.
Brian Green, 4th December 2019