[Mayworks-org] 'Is The Big Ship America Sinking?'

[The Bullet]

~~~~~~~~~~~~~~~~~(((( T h e B u l l e t ))))~~~~~~~~~~~~~~~~~~
A Socialist Project e-bulletin .... No. 42... February 8, 2007
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**Is the Big Ship America Sinking?

Contradictions and Openings**

**by Sam Gindin**

There's something happening

What it is ain't exactly clear

Buffalo Springfield, 1966

Are we in the midst of a momentous turn in world politics? Donald
Rumsfeld has been shuffled out of the Pentagon. Daniel Ortega,
Washington's nemesis from the Sandinista Revolution of the late
1970s, is back as President of Nicaragua. Hugo Chavez has been
triumphantly re-elected, and Bolivia and Ecuador also have new
left-populist presidents. U.S.-led neoliberalism is scrambling in
Latin America; the U.S. state seems to be in the throes of a full
retreat in Iraq; and, in its look ahead to the year 2007, The
Economist is warning of the dangers of an 'authority deficit' at the
level of nation states, international institutions, and the role of
'the superpower'. The U.S. economy is slowing down; Europe's economy
is speeding up; and China, having quadrupled its output over the past
15 years, is becoming more confident and assertive internationally.
The fall of the U.S. dollar has been imminent for some time, but now
the talk is of its decline turning into a chaotic rout. And suddenly
everyone is an environmentalist, with the Bush Administration being
the main force against the Kyoto climate change protocols.

What next? With the Bush neo-conservatives on the defensive, will a
new common sense emerge? Will the broad left regain its confidence
and move to overturning three decades of increased inequality,
erosion of social rights and corrosion of substantive democracy? Will
this also extend to challenging corporate power? Will Bush's
humiliation in Iraq spill into Canadian debates over the war in
Afghanistan and drag Harper down along with his imperial friend? Will
the new reality in Iraq force the U.S. and Israel towards some
substantive compromise with Palestinians? Will the turmoil within the
American empire provide space for the populist experiments taking
place in Latin America -- experiments that might inspire a more
radical activism in our own countries?

**An Unraveling Empire?**

It is tempting to identify, in all of the above observations and
questions, signs of the unraveling of the American empire. But to
argue that the American economy may be on its last legs substitutes
wishful thinking for sober analysis. The American economy retains a
remarkable capacity to adjust to change (with great costs, of course
to American workers). American military power has limits but it
remains the greatest military power the world has ever seen, and its
coercive potential and reach should not be underestimated. Shifts are
occurring among the hierarchy of capitalist states and regions -- the
dramatic rise of Asia and the development of the European Union being
the most obvious and important -- but American leadership in the
making of global capitalism continues.

There are other reasons for caution. Empires aren't toppled by
falling exchange rates. The U.S. dollar fell by 44% relative to the
G-10 countries between February 1985 and October 1987. Although there
was a recession in the early 1990s, this was followed by the great
American 1990s economic boom. Empires do not collapse from particular
defeats either. Vietnam defeated the U.S. in the 1970s, but a main
priority of Vietnam today is to deepen its participation in
American-led globalization. The American economy is clearly not
focused on addressing popular needs, but that is not what matters to
capital's successful survival. For American capital, the more
important development is that U.S. after-tax profits as a share of
GDP are at their highest since 1929.

The U.S. is losing manufacturing jobs at an alarming rate: the number
of manufacturing jobs in the U.S. is today below where it was fifty
years ago and as a share of total jobs, manufacturing employment is
today less than half of what it was then. Yet because of the high
productivity of the remaining workers, manufacturing production is
not disappearing: the volume of manufactured goods produced in the
U.S. has increased six-fold since 1950. Remarkably, given the decline
in manufacturing jobs, manufacturing production has maintained its
share of the American economy's real (after adjustments for price
inflation) output. The U.S. continues to generate half the research
and development done amongst the G-7 leading capitalist economies.
According to the U.S. National Science Foundation, the American share
of the global production of high-tech goods, in spite of all the
outsourcing and the imports, actually increased from 25% a quarter of
a century ago to 42% in 2003. It is certainly true that high tech
production in China and South Korea has increased much faster, but
they started from a low base (about 1% in each country) and their
global share has risen to what is still a fraction of the U.S.
levels, at only 9% and 4% respectively.

Even if some U.S. multinational corporations have lost their former
overwhelming dominance in certain sectors, others have maintained
their strength, as with the aerospace industry, and new ones have
flourished, particularly in such high tech sectors as computers,
telecommunications, pharmaceuticals, medical equipment,
biotechnology, and others. The leadership role of the U.S. is
confirmed even as European and Asian companies increase their drive
to catch up, or at times even surpass, American manufacturing. In
other sectors, the advice and skills they seek is that coming from
those with the most experience and expertise in the making of global
capitalism: which overwhelmingly means U.S. banks, investment houses,
consulting agencies, and law and accounting firms still dominate the
financial and services sectors.

**A Collapsing Trade Position?**

What about the American trade deficit (including a trade deficit even
in high tech goods) and the loss of competitiveness this expresses?
American exports have in fact been very competitive and increased
very significantly. It is the remarkable level of imports that
account for the trade deficit. In high tech, for example, American
consumers are buying, and American businesses using, more such goods
than anyone else does. The result is that the U.S. ends up both
producing more and importing more. It should also be noted that
American multinationals now sell far more abroad through their
affiliates than through exports from the USA, so trade data does not
give a meaningful measure of American corporate strength.

The U.S. has been able, for over a quarter century now, to import
more goods than it exports and pay for this through other countries
accumulating American dollars (dollars which are now falling in
value). If any other country tried to do the same, it would be
disciplined by international financial markets as capitalists would
pull out their capital until that country corrected its
'overspending'. The U.S. can get away with this not just because the
dollar is the dominant currency in the world: more important is that
global finance is still relatively confident in the American dollar
(the dollar remains the 'safe haven' in an uncertain world) and the
resilience of the American economy. The net result has, essentially,
been that a larger share of global labour has been working to supply
the U.S. with its needs, and that the U.S. has also captured a
disproportionate share of world savings. In this sense, the U.S. has
been able to run consistent trade deficits for over a quarter of a
century as a sign of relative strength rather than weakness in
relationship to other advanced capitalist centers.

The U.S. economy may face a significant degree of instability and
uncertainty in the coming period. But a global run on the U.S. dollar
is most unlikely because of the way the rest of the world is now
structurally interdependent with -- and even directly integrated into
-- the American empire. The countries currently holding large dollar
reserves, especially China and Japan, hold dollars to keep their own
currencies from rising relative to the dollar and so maintain their
advantage in exporting to the crucial U.S. market. If they did
convert their dollars to another international currency such as the
yen or euro, the Japanese and Europeans -- panicking over a
competitiveness-destroying rise in their currency -- would
immediately turn to buying up dollars, thereby neutralizing the net
impact on overall holdings of dollars. More generally, the countries
with large holdings of U.S. dollars have come to understand that,
given their integration into global capitalism, a crisis for the
dollar is a crisis for everyone. This general concern to support the
dollar even as it falls, and avoid a collapse of the U.S. economy,
reflects the contradictions of success within the American empire,
and that structural interdependency has become a significant
foundation of the American empire.

**A Military Power in Retreat?**

The U.S. military impasse -- and potential full retreat -- in Iraq
raises the limits to the American empire. The Los Angeles Times
(December 3, 2006) reports that the recent trip of top American
officials to shore up their Middle East allies found "friends both
old and new near a state of panic" fearing that "that the Bush
administration may make things worse." But Iraq and the entire Middle
East will still have to sell their oil on the world market, and the
U.S. will keep receiving it (as it now does from Venezuela in spite
of the Bush-Chavez conflict). American oil companies will continue to
play a prominent and profitable role in the process (as they still do
in Venezuela and Bolivia). Many of the new American military bases
established in the Middle East and Central Asia in the course of the
'war on terrorism' are likely to remain in place. And an unintended
consequence of a less unilateral American state forced into
negotiations with Iran, may well lead Iran to become more
'responsible' and integrated within global capitalism, an outcome not
necessarily negative for American interests. 

There also other reasons for a more sober assessment of existing
geopolitical alliances and balance of forces. The electoral rejection
of neoliberalism in Latin America states, for example, is obviously a
great electoral victory for the people in these particular countries
and a rejection of neoliberal policies. But these neither yet
represent a defeat of neoliberalism as a system of power and
capitalist market relations or a fundamental challenge to existing
global social relations. In Nicaragua, it is not clear that Ortega
any longer represents a challenge to neoliberalism. Argentina has
come back into the fold of global capitalism, and is actively
negotiating the repayment of its defaulted debt. Bolivia and Ecuador
face serious limits on how far radical policy agendas in such small
countries can be implemented given their international integration
and poverty. And even Chavez, for all he has accomplished in
Venezuela has, to date, found it necessary to go slow in challenging
private industry and finance. Brazil, with half of Latin America's
population, is clearly critical to continental possibilities but Lula
has not emerged as a threat to either the Brazilian or global
capitalists, and, if anything, his government has served to contain
the opposition from below. There is need for a careful calibration of
the Latin American struggle against U.S. imperialism and political
hegemony, and the forces that remain to be defeated.

China raises a different set of issues and cautions with respect to
shifting geopolitical forces. Chinese growth, much at the great
expense of Chinese peasants and ecology, has indeed been stunning.
But China has a long way to go to match the U.S. Its total Gross
Domestic Product remains about one-quarter that of the U.S. The top
500 companies in China are still only one-fifth the size of the top
500 U.S. companies. China has relied on foreign direct investment as
no other capitalist development transition has ever done. Even as
China becomes more technologically sophisticated, its dependence on
global technologies, components and markets is not decreasing, but
increasing. Between 1993 and 2003, the share of China's exports
produced by foreign-funded enterprises (FFEs) increased from 35% to
79%. The FFE's share of exports of computer equipment rose from 74%
to 92%, and of electronics and telecom from 45% to 74%. Between 1998
and 2002, FFE's even increased their share of China's domestic
consumption of high-tech goods from 32% to 45% (see the essay by
Howard French at www.howardwfrench.com
<http://www.howardwfrench.com/archives/2005/08>
).

A crucial question is whether Chinese dependence on foreign
corporations is just a pragmatic economic strategy that can be
modified as China develops, or whether it carries with it a social
significance. For example, the foreign dependence affects the making
of a Chinese capitalist class, intertwining it with ties to foreign
markets and suppliers. That is, the Chinese capitalist class has a
developing vested interest, like capitalists elsewhere, in the
conditions of global capitalism, as well as the Chinese economic
space. This can be partly seen in the major political and economic
summit held in December between Chinese and American political and
business leaders over the nature of Chinese-American economic ties
and their relationship to the global economy. To the extent that such
a Chinese capitalist class is in fact emerging, the main global
'contradiction' represented by China's growth may consequently not be
found in its threat to the U.S., but rather in China's internal class
and ecological relations.

There are also specific limits on China's emergence as global
political rival in the immediate period. There are some serious
potential problems with China's banking system and the unserviced
debt that has been mounting; the inflow of speculative 'hot-money'
and China's real estate bubble are becoming more difficult to contain
with the Bank of China's main sterilization policy of building up U.S.
dollar reserves; an aging population and weak social security
structure that is putting pressure to shift resources from private
accumulation to public services; an already-existing environmental
crisis that will only get worse at present growth rates; and extremes
of regional and class inequalities. There is, finally, the critical
question of whether the Chinese state can contain the formation of
popular forces, above all within the working class, and their growing
expectations of work-place rights, material well-being and democracy.

**New Openings?**

Where then does this leave us? There may be a downturn, strains and
uncertainties, even a degree of quite serious turmoil. Given that
neoliberalism has, to some extent, been discredited as a pure policy
framework, this may lead to some turn away from neoliberalism's
harshest and most messianic policies. As The Economist (November 25,
2006) suggested after the fall 2006 American Congressional elections,
rebuilding "America's social contract" may be "a prerequisite for
shoring up support for globalization." As well, the Democratic Party
most certainly will, in light of the delegitimation of Bush's
international policies of unilateralism, be more cautious in its
interventions abroad and more sensitive to multilateral incorporation
of allies, as has already been evolving with respect to Middle East
policies and North Korea. In the absence of sustained social
pressures from within the U.S., however, the changes will be limited
to a 'kinder' (and perhaps more acceptable) capitalist globalization
and the more 'multilateral' (and perhaps more efficient) imperialism
which the Europeans have sought from the USA. 

American capitalism and the American empire continue to have staying
power. This is because of the absence of pressure from below. Without
effective social resistance, American capital can restructure at the
expense of the middle and working classes. Without organized
resistance, the 'competitiveness' of U.S. firms and the economy
becomes the discursive and organizational framework for middle and
working class discontent. The cracks in the neoliberal architecture
of the empire in the military quagmire in Iraq, electoral revolts in
Latin America, and the structural American trade deficit and dollar
overhang, are not the bursting of historic 'contradictions' that lead
to the crisis that will unravel American geopolitical hegemony.
Rather, these are historic 'openings' that challenge us to create a
new politics that can lead to radical new political alignments. The
real issue is not whether 'the system' will fall apart, but whether a
new kind of left can come together. 

In Canada, it is significant that federal anti-scab legislation and a
living wage are actually on the parliamentary agenda and that the new
leader of the Liberal Party is an avowed 'environmentalist'. But
these positive signs are more a reflection of the Liberals sensing a
general and vague unease in the country, than any fear of a
radicalized and mass left. The question is whether we can build on
such openings. Might the present moment be that long-awaited chance
to place real economic and social transformation - with all the
difficult (and sometimes uncomfortable) questions of political
capacities and organization this implies -- on the agenda once again?

Sam Gindin teaches political economy at York University.

****************************************************************

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JUST PUBLISHED RELAY #15: Jan/Feb 2007

Available at: http://www.socialistproject.ca/relay

Table of Contents:

 Canada, Quebec and the Left, Nathan Rao 
 Quebec Solidaire Adopts a Program for Government, Richard Fidler 
 A Proposal for a Discussion on Party Building, Ken Kalturnyk and
Karen Naylor 
 From the Food Bank to the Luggage Carousel, Kevin Skerrett 

 Echoes of the 1930s: The UNITE-HERE Campaign, Sedef Arat-Koc, Aparna
Sundar and Bryan Evans 
 Challenging Wal-Mart, Herman Rosenfeld 
 Neoliberalism and Canada's Ruling Class, Greg Albo 
 It's Time to Wise Up, Fellow Workers: The IWW in Canada, Len Wallace


 The 'I Am Fed Up' Vote: A Quick Look at the Nov. 7 Elections, Bill
Fletcher Jr. 
 The 2006 U.S. Congressional Election: Hold the Champagne, Simon
Enoch 
 Greek Democracy in the Post-Euro Era -- Michalis Spourdalakis 

 Continuing Gains in the Struggle Against Israeli Apartheid, Zac
Smith 
 Far From Being the Last Arab-Israeli War, Hassan Husseini 

 Cuba: The Trials and Tribulations of Socialism, Carlos Torres &
Carolyn Watson 
 Cuba's Revolution Marks its 50th Anniversary, John Riddell 
 The British Left and the Anti-imperialist Struggle, Ernie Tate 
 Venezuelan Solidarity Wins New Ground in Toronto, Suzanne Weiss 
 The Orientalist Technique and the Western Media, Nishant Upadhyay 
 Pinochet is Gone but Neoliberalism Remains, Carlos Torres 
 Epitaph to the death of Death, Carlos Torres 

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