Speech at the First Plenary Session of the Left Forum, Pace University, New York, April 17, 2009
Good evening. I would like to thank the organizers of the Left Forum for inviting me to join the distinguished members of this panel. I have just arrived from Asia, where the global economic contraction is said to be at its sharpest. 20 million workers have lost their jobs in China. Singapore’s economy shrunk at an annualized rate of 17 per cent in the last three months of 2008 and Japan’s by 13 per cent. Taiwan’s GDP may fall by as much as 11 per cent in 2009 and the news from Southeast Asia is equally grim.
Globalization has ensured that economies that went up together in the boom would also go down together, with unparalleled speed, in the bust, the end of which is nowhere to be discerned. Our leaders in East Asia took globalization seriously, they took export-oriented industrialization seriously, and now that the heroic American middle class consumer is bankrupt, we are going down with the ship.
I think that there is real panic out there among Asian and global elites and real disarray, and a sinking feeling that things will get worse before they get better and that the old neoliberal institutions, like the IMF, WTO, and G 20 have become irrelevant, even as Keynesian methods of deficit spending and monetary easing might have very limited effects. Increasingly the more intelligent representatives of the establishment are realizing that we are just at the beginning of the global freefall and really don’t know when we are going to hit rock bottom and once we reach it, how long the global economy will lie there. Indeed, the best image I can conjure up for the global economy is that of a German World War II U-Boat that has been depth-charged in the mid-Atlantic by British destroyers. It’s descending rapidly to the ocean bottom, and once it reaches the bottom, you don't know how the crew is going to get the submarine back up. Will the crew's tortuous maneuvers to get some compressed air into the damaged ballast tanks get it back to the surface, as in Wolfgang Petersen’s classic film Das Boot, or will the U-boat just stay at the bottom? The current capitalist crew manning the global economy doesn't know whether Keynesian methods can re-inflate the global submarine. The more critical thinkers of capital like Martin Wolf and Paul Krugman are not taking bets on the submarine resurfacing anytime soon.
With the collapse of globalization and the deregulated market going haywire, the neoliberal metaphysics that propped up contemporary capitalism has been thoroughly discredited, though it will undoubtedly engage in some rearguard action, like the German Army after Stalingrad. The one thing we can be sure of is that the facts on the ground will dictate what those who wish to save the system will do, not any predetermined ideological limits. So let us disabuse ourselves of the notion that classical neoliberal principles will constitute red lines beyond which they will not go.
Let me be more specific. I think that the actions of the new Obama administration in Washington clearly constitute a break with neoliberalism. One important question, of course, is how decisive and definitive the break with neoliberalism will be. Will government ownership, intervention, and control be exercised simply to stabilize capitalism, after which control will be given back to the corporate elites? Are we going to see a second round of Keynesian capitalism, where the state and corporate elites along with labor work out a partnership based on industrial policy, growth, and high wages--though with a green dimension this time around? There are limits to reform in the system of global capitalism, but at no other time in the last half century have those limits seemed more fluid.
At this point, massive stimulus spending at record-breaking levels—something anathema to neoliberals—has become practice, the only difference among Northern elites being how much stimulus spending it will take to refloat the submarine. On this, Obama has become the super-Keynesian, and while Germany’s Angela Merkel has been more restrained about deficit spending than Obama, that is only in relative terms; Social Democrats there are now calling Merkel a convert to Social Democracy. Nationalization of the banks—another practice condemned by neoliberalism---is also well in progress, and the questions that divide the elites is how aggressively the government will exercise its control of the majority shares of the stocks and whether it will return the banks to private management once the crisis is over. 14 US banks were nationalized in the first six weeks of this year, and the government has put it billions of dollars into big boys like Citigroup and Bank of America in return for a government role in decisionmaking. Reprivatization is not a predetermined fact. The facts on the ground will determine the answer to these questions, for the task at hand for the state managers of capitalism is not whether or not the solutions are in line with a discredited doctrine but what it will take to save capitalism. We would be foolish to assume otherwise. We would be ill-advised to dismiss the Economist when it editorializes that the government’s most urgent task at the moment is “to get on with spending….” It would be really myopic if we were to dismiss as mere rhetoric Prime Minister Gordon Brown’s summing up of the G-20’s stimulus package cum financial regulation: “The old Washington Consensus is over.” Let me qualify, however: I am not saying that the G 20 statement consolidates a new approach that replaces neoliberalism. I am saying that it is a bridge toward a new approach to stabilize capitalism.
Let me explain: Beyond deficit spending and nationalization, I think that there will increasingly be a debate within the establishment on whether to go on the path of what I call “Global Social Democracy”, or GSD, in order to respond to capitalism’s desperate dual needs for stabilization and legitimacy.
Even before the full unfolding of the financial crisis, partisans of GSD had already been positioning it as alternative to neoliberal globalization in response to the stresses and strains being provoked by the latter. One personality associated with it is Gordon Brown, who led the initial European response to the financial meltdown via the nationalization of the banks. Widely regarded as the godfather of the "Make Poverty History" campaign in the United Kingdom, Brown, while he was still the British chancellor, proposed what he called an "alliance capitalism" between market and state institutions that would reproduce at the global stage what he said Franklin Roosevelt did for the national economy: "securing the benefits of the market while taming its excesses." This must be a system, continued Brown, that "captures the full benefits of global markets and capital flows, minimizes the risk of disruption, maximizes opportunity for all, and lifts up the most vulnerable - in short, the restoration in the international economy of public purpose and high ideals."
Joining Brown in articulating the Global Social Democratic discourse has been a diverse group consisting of, among others, the economist Jeffrey Sachs, George Soros, former UN Secretary General Kofi Annan, the sociologist David Held, Nobel laureates Joseph Stiglitz and Paul Krugman, and even Bill Gates. There are, of course, differences of nuance in the positions of these people, but the thrust of their perspectives is the same: to bring about a reformed social order and a reinvigorated ideological consensus for global capitalism.
Among the key propositions advanced by partisans of GSD are the following:
Globalization is essentially beneficial for the world; the neoliberals have simply botched the job of managing it and selling it to the public;
It is urgent to save globalization from the neoliberals because globalization is reversible and may, in fact, already be in the process of being reversed;
Growth must not be accompanied by increasing inequality;
Trade must be promoted but subjected to social and environmental conditions;
Unilateralism must be avoided while at the same time preserving while fundamentally reforming the multilateral institutions and agreements;
Global social integration, or reducing inequalities both within and across countries, must accompany global market integration;
The global debt of developing countries must be cancelled or radically reduced, so the resulting savings can be used to stimulate the local economy, thus contributing to global reflation;
Poverty and environmental degradation are so severe that a massive aid program or "Marshall Plan" from the North to the South must be mounted within the framework of the "Millennium Development Goals";
A "Second Green Revolution" must be put into motion, especially in Africa, through the widespread adoption of genetically engineered seeds.
Huge investments must be devoted to push the global economy along more environmentally sustainable paths, with government taking a leading role ("Green Keynesianism" or "Green Capitalism");
Global Social Democracy has not received much critical attention, perhaps because, like the French generals at the start of the Second World War, many progressives are still fighting the last war, that is, against neoliberalism. A critique is urgent, and not only because GSD is neoliberalism's most likely successor. More important, although GSD has some positive elements, it has, like the old Social Democratic Keynesian paradigm, a number of problematic features.
A critique might begin by highlighting problems with four central elements in the GSD perspective.
First, GSD shares neoliberalism's bias for globalization, differentiating itself mainly by promising to promote globalization better than the neoliberals. Globalization, that is the rapid integration of production and markets but with effective regulation as EU Director General for Finance Jan Koopman, who describes himself as a Keynesian, puts it. This amounts to saying, however, that simply by adding the dimension of regulation, along with that of "global social integration," an inherently socially and ecologically destructive and disruptive process can be made palatable and acceptable. GSD assumes that people really want to be part of a functionally integrated global economy where the barriers between the national and the international have disappeared. But would they not in fact prefer to be part of economies that are subject to local control and are buffered from the vagaries of the international economy? Indeed, today's swift downward trajectory of interconnected economies underscores the validity of one of anti-globalization movement's key criticisms of the globalization process..
Second, GSD shares neoliberalism's preference for the market as the principal mechanism for production, distribution, and consumption, differentiating itself mainly by advocating state action to address market failures. The kind of globalization the world needs, according to Jeffrey Sachs in The End of Poverty, would entail "harnessing...the remarkable power of trade and investment while acknowledging and addressing limitations through compensatory collective action." This is very different from saying that the citizenry and civil society must make the key economic decisions and the market, like the state bureaucracy, is only one mechanism of implementation as democratic decision-making expands its ambit to all areas and all levels of the economy.
Third, GSD is a technocratic project, with experts hatching and pushing reforms on society from above, instead of being a participatory project where initiatives percolate from the ground up.
Fourth, GSD, while critical of neoliberalism, accepts the framework of monopoly capitalism, which rests fundamentally the concentrated private control of the means of production, deriving profit from the exploitative extraction of surplus value from labor, is driven from crisis to crisis by inherent tendencies toward overproduction, and tends to push the environment to its limits in its search for profitability. Like traditional Keynesianism in the national arena, GSD seeks in the global arena a new class compromise that is accompanied by new methods to contain or minimize capitalism's tendency toward crisis. Just as the old Social Democracy and the New Deal stabilized national capitalism, the historical function of Global Social Democracy is to iron out the contradictions of contemporary global capitalism and to relegitimize it after the crisis and chaos left by neoliberalism.
GSD is, at root, about social management. What the progressive perspective is about is about social liberation. GSD is about technocratic management, the progressive perspective is about participatory democracy down to the level of economic enterprises. GSD is about making reconfiguring monopoly capitalism like the old Keynesianism did, though at a global level this time around; he progressive perspective is about creating a post-capitalist system when it comes to property relations.. GSD is about perfecting globalization; the progressive perspective is about deglobalizing. GSD sees the future in Green Capitalism; we see decapitalization as a precondition for a truly ecologically benign social organization of the planet.
Like President Lula of Brazil, President Obama has a talent for rhetorically bridging different political discourses. He is also a "blank slate" when it comes to economics. Like FDR, he is not bound to the formulas of the ancien regime. Like Lula and FDR, he is a pragmatist whose key criterion is success at social management. As such, he is uniquely positioned to lead this ambitious reformist enterprise. Our task will not merely be how to support the positive aspects of the GSD program that promote the people’s welfare while opposing those that lead to a restabilization of capitalism, but more important how, in the process, we differentiate our enterprise from the GSD enterprise and win people over to our strategic vision and program.
However, the choice in the coming period is not going to simply boil down to a contest sbetween a progressive movement espousing a post-capitaist program and global social democracy seeking to stabilize monopoly capitalism. Would that it were that simple! In fact, there could be a response that would be anti-neoliberal in its economics, at least rhetorically, populist in its social policy, but exclusionist in its politics, evoking tribal as opposed to people’s solidarity. We can already see some of this in the approach of President Nicolas Sarkozy in France. . Declaring that "laissez-faire capitalism is dead," he has created a strategic investment fund of 20 billion euros to promote technological innovation, keep advanced industries in French hands, and save jobs. "The day we don't build trains, airplanes, automobiles, and ships, what will be left of the French economy?" he recently asked rhetorically. "Memories. I will not make France a simple tourist reserve." This kind of aggressive industrial policy aimed at shoring up key sectors of the French capitalist class and winning over the country's traditional white working class can go hand-in-hand with the exclusionary anti-immigrant policies with which the French president has been associated.
Sarkozy’s conservative populism is relatively mild. There are more radical ones waiting in the wings, like the anti-Muslim movement of Gerd Wilders in the Netherlands, which is said to be poised to win 28 per cent of the seats in the coming parliamentary elections, again with the same mix of communal solidarity, populist economics, and authoritarian leadership. We know of such movements everywhere in the developed and developing world, and my worry is that it maybe be in the developing crisis that they might make their breakthrough to becoming a critical mass, esepcially in Europe.
The point is that things will become worse, much worse, before they become better, and the global crisis is not something that can be managed technocratically to a soft landing like the US Airways flight that was eased into a soft landing on the Hudson River in New York a few weeks ago. If Global Social Democracy fails in its effort to reinvigorate capitalism and progressives are unable to come out with a vision and program built on equality, justice, participatory democracy that appeals to people in a period of severe and prolonged crisis, then other forces will step into the breach, as they did in the 1930’s. For nature does abhor a vacuum.
Let me sum up. What we are facing is not a simply a crisis of the neoliberal variant of capitalism but of capitalism itself. The root cause of this crisis is the central crisis of capitalism, which is the crisis of overproduction. Indeed, the last 35 years may be seen as an effort on the part of capital to find ways to escape from the crisis of overaccumulation that overtook it in the late seventies and early eighties.
These efforts at stabilization, which came under the rubric of neoliberal policies, failed. Even as progressives were engaged in full-scale war against neoliberalism, reformist thinking was percolating in critical establishment circles. This thinking is now becoming policy, and progressives must work double time to engage it. It is not just a matter of moving from criticism to prescription. The challenge is to overcome the limits to the progressive political imagination imposed by the aggressiveness of the neoliberal challenge in the 1980s combined with the collapse of the bureaucratic socialist regimes in the early 1990s. Progressives should boldly aspire once again to paradigms of social organization that unabashedly aim for equality and participatory democratic control of both the national economy and the global economy as prerequisites for collective and individual liberation and, one must add, ecological stabilization.
That is a perspective that we must might fight for not simply in a battle for people’s minds but for their hearts and souls, and here the struggle is, on the one hand, against the technocratic capitalist restabilization schemes of Global Social Democracy and, on the other, the mass-based heated capitalist restabilization schemes of nationalist and fundamentalist populism.