As part of our investigation into contemporary political economy, The Current Moment will be publishing interviews with different individuals on the subject of today’s economic and financial crisis. Based on the same set of questions, these interviews are aimed at opening up a debate about the causes and consequences of the current crisis and at advancing our understanding of political economy.
Today’s interview is with Kees Van Der Pijl, professor of international relations at the University of Sussex, UK. One of the leading Marxist scholars of international relations and international political economy, Professor Van Der Pijl has published widely. His books include a three volume project on modes of foreign relations (vol. 1 and vol. 2), Global Rivalries: From the Cold War to Iraq (2006) and The Making of an Atlantic Ruling Class (1984). He has also published widely in the New Left Review and other journals and magazines.
What are the stories right now that you think people either aren’t paying enough attention to, or about which we have the wrong view?
Generally speaking I have become more and more concerned with the War on Terror as a route to constraining civil liberties and freeing the forces of authoritarianism in the West. In combination with a stubborn adherence to neoliberal responses to the crisis, the by now almost routine resort to war as a means of regime change, the steady build-up by the West of military assets against Russia and China, and Israel’s preparation for war with Iran (in which NATO is complicit in many ways, for instance by allowing Israeli air force jets to practice on Sardinia for such an attack), this raises the frightening prospect of a larger conflict which in turn will further reduce the space for dissent.
Turning to the Eurozone debt problem, a dominant view is that Greeks and Italians are corrupt, inefficient and lazy, and that is why they find themselves in this mess. What is your view of what is going on?
Tax evasion and the size of a black economy are real problems. But if compared to what it costs in campaign contributions to be elected to the presidency of the US, or the non-payment of taxes by big corporations in the US and the larger EU economies (just think of how the hedge fund LCTM, based in the Cayman Island, was bailed out in 1998 by the Fed with public money, or what German banks were able to avoid paying by a simple change in capital gains tax so that they could divest themselves of their stakes in other corporations), what happens in southern Europe is small fry.
What is at stake everywhere is that bank capital is able to avoid the negative consequences of low interest rates by raising the call for debt reduction, which means debt rescheduling and mark-ups in bond rates for the most affected countries. All of which works to keep the banks in a position where they can dictate to governments which economic policy to follow.
Deeper down of course is the issue that ‘growth’, that is, capital accumulation, is stalling because society is reaching the limits (which are ‘culturally’ specific in each country) of what it can absorb in goods and services, what it can perform work-wise, and the like.
The standard recipe for the recovery from the Eurozone crisis is austerity and structural reforms in the peripheries, plus some recapitalization of banks. Do you think this is the right way to go?
This is a recipe for disaster and will aggravate what I said above. Shrinking the economy will make any debt relatively larger and the ability to service it more difficult.
What do you think would address the trade and debt imbalances between Northern and Southern Europe? Do you think it can be done within the European monetary union or does it require a fundamental change or dismantling of that union?
EMU was set up prematurely to allow the strongest capitals to expand from a larger economic zone without having unnecessary transaction costs. More importantly, it served to generalize their desire to have a strong currency to diversify internationally through direct foreign investment. For German capital in particular this solution does not harm its remaining export prospects because the sectors in which production remains in Germany are not price-sensitive. A power plant or a giant turbine for hydroelectric dam is not bought at competitive prices, even a Mercedes or BMW is not subject to the same price pressures as an Alfa Romeo or a Renault.
Hence EMU was bound to reinforce the strongest German capitals, Dutch, some French, at the expense of the peripheral economies which no longer can adjust lower productivity and greater exposure to competitive pressures by devaluation. Liberal capitalism always produces inequalities; uneven development is at the heart of it.
Within a capitalist economy, Eurobonds would have a stabilizing effect. However, that is precisely where the financial fraction of US capital and politicians associated with it (Volcker, Summers, Geithner…) don’t want the Euro: it would create a real alternative to US Treasury bonds which are currently the mainstay of the global credit economy and keep the US afloat. The current Eurozone troubles work in various ways to keep the Euro embattled and prevent the Eurobond solution. Inequality is translated by the Murdoch and Springer media and the like into chauvinist sentiment (‘Greeks are lazy’, the ‘PIGS’ etc.), with the result that German or Dutch ‘public opinion’ resists shouldering a heavier interest rate burden on public debt which Eurobonds would entail. The way Strauss-Kahn, a philanderer but also an advocate of building a more complete financial infrastructure around the Euro, was removed, or the ‘mistake’ of downgrading France’s credit-rating, is a reminder of the conspiratorial dimension that is inevitably involved in keeping the Euro off-balance. Of course, the process is systemic but it evolves through concrete actions.
The hegemony of the demand for austerity is striking. It is offered as the solution to the Eurozone crisis, as well as to the American situation – the US Congress even created a supercommittee to find savings. It seems odd to have such agreement around austerity in the midst of a potential double dip recession. Why is there such agreement on this point and what do you think of the demand for austerity?
This is about the continued hegemony of neoclassical economics, the failure of Keynesians to adjust to a globalised economy and the even more disturbing failure of Marxist-inspired or Institutionalist political economists to challenge neoclassical principles, in the way of the 1970s capital debate and so on. Only this can explain why completely corrupt mainstream economics (just look at the part on the economists’ role in the film ‘Inside Job’) can remain as the dominant intellectual force. Mario Monti is called ‘a respected economist’ and nobody asks in what sort of economics did he gain his credentials.
In the US, an influential view is to argue for continued expansionary monetary policy but with contractionary fiscal policy. That seems to be the recipe of the moment, with the Fed even contemplating another round of quantitative easing. What do you think of this approach to inadequate demand and balance sheet problems?
Dollar inflation by printing more money keeps the mass consumption economy going although it is losing steam as accumulation stalls. And as long as China, Japan, Kuwait and the like continue to buy up US Treasuries, the value of the dollar is hardly affected either. As purchases of precious metals by China and other countries outside the Atlantic heartland increase, we may be in for a surprise at some point in terms of global monetary relations. However, how the holders of US Treasuries would square a loss of value of their 2 or 3 trillion worth of holdings, with a new role for e.g. the Yuan backed by gold or silver, I cannot predict.
Debt, especially mortgages and student loans, have become a major issue over the past few years. What, if anything, should be done about this? How should we understand the growing debt of American households in the past decades?
In the English-speaking West, the debt problem is much more acute because the lowering of wages was accompanied by a credit-card culture that kept consumption going in spite of it. Also their mortgage debt is higher than elsewhere and the attempts by banks to move into new zones to create mortgage markets are more recent or even just beginning. Only some sort of socialization of debt, separating economically and ecologically justifiable repayments (that is, to institutions useful in these respects) from speculative titles, can be a way out here. The continued payment of interest to big players who are not, say, pension funds or otherwise institutions of public interest, should be suspended.
One thing that seems to tie the American and European situation together is the considerable growth of financial activity. Is there anything to the view that the last decades can be understood as a period of “financialization”? If so, what might it mean to say the economy has become “financialized”?
This has been explained by noting on the one hand the accumulation crisis which diverts investment funds to speculative circulation, quasi-liquidity, all to make commercial profit by raiding and asset-stripping. On the other hand, financialization serves as a socialization of risk, hence ‘hedge’ funds etc. of course also operating for profit but simultaneously performing a role that we later may come to see as a route to some sort of socialization of the economy as a whole.
Related to that question, what accounts for the “bubbliness” of the US and European economies and especially the scale of these bubbles? We have seen a number of different bubbles and credit crises – housing bubbles in the US, UK, Ireland, and Spain; sovereign debt events in Greece, Portugal, and Italy, perhaps even France. While there was the dot.com bubble in the late 90s, and the East Asian financial crisis in the same decade, those don’t seem to have had the magnitude and systemic character as the latest period. What is, or isn’t, different about what we’re experiencing now?
What we’re experiencing now is that speculation, hedging etc. is coming home from having raided various peripheral locations. It is now the turn of the ‘central’ bubble which contains all others. This raises profound questions about the role of the shadow economy and how it is related to shadow politics.
How optimistic/pessimistic are you about the ability of national democratic procedures to provide solutions to the current economic crises in Europe and in the US? What do you think of the recent proliferation of technocratic governments in Greece and Italy? Does the current crisis expose some basic tensions between capitalism and democracy? If so, how exactly?
I am not optimistic about the ability of the established parliamentary governing classes to come up with any solution of their own because they are morally corrupt and hostage to a defunct understanding of the economy and society. The governments imposed on Greece and Italy are instances of ‘soft regime change’ by the EU and the IMF and will fail as their elected predecessors have.
What are your views of the nascent protests (Occupy Wall Street, Indignados) developing in response to the introduction of austerity packages in Europe and the US? Are these movements a continuation of or a break with the anti-globalization movements of the past? Are they likely to fundamentally change public perceptions and government policy or will they have only a small lasting impact?
The Occupy movements are the most important event in thirty years and are having an impact already on mainstream political discourse. They go beyond anti-globalization because they demand from governments (irrespective of their stripe) to restore a basic decency to social life and to disempower global finance. This conforms, unintentionally of course, to Marx’s insight in Capital Volume III that a transition to what he called the ‘Associated Mode of Production’ would come about through precisely such a movement demanding from governments that they rein in financial flows destabilizing economies, after which an economy based on cooperation of polytechnic workers would replace the capitalist one based on direction by owners. Today we would add the ecological dimension, the most urgent issue of our epoch.
What, finally, do you think the appropriate political response is to both these crises and their aftermath?
Some form of ecological socialism, within the specific context of each particular national or regional culture and attuned to the expectations of its citizens. In such a society, education should be at the heart of social reproduction and guide people to living culturally rich lives that are less dependant on continually buying new consumer goods.