Thursday, 30 October 2008


If Obama Wins - Looking beyond the hope bubble

Americans have a decision to make on November 4, when the US presidential election is to be held. Evidently, Barack Obama's candidature and campaign for the presidential seat has become a global phenomenon, not just in America and Europe but also in the Middle East, Asia and Africa. It is not only because of his multi-racial background that Obama appeals to millions across the world, but also because his claim of giving hope resonates in the minds of Americans who are seeking a change from the 8 year-long economic deprivation wrought by the neo-liberal policies of the Republican Bush presidency.

In the Middle East, millions hope an Obama victory would signify a change in US foreign policy in Iraq, Afghanistan, Iran etc. Africans especially, see America as a second home, with its large population of African diaspora, meaning that the socio-economic wellbeing of the US is of prime importance to the millions of African families who have relations pursuing the 'American dream'. As Dr. Reuben Abati put it in his "Obama and the Tom Bradley effect" (The Guardian, Sunday October 26, 2008, pg 70), the Obama craze has infected Nigeria to such an extent that the "National Assembly almost passed a resolution endorsing Barack Obama for US president" while cars, motorcycles, barbers' salons and pepper soup joints are adorned with Obama-for-President stickers. This is a testimony to the phenomenal support which Barack Obama enjoys around the world, even from those who are not going to vote in the Nov. 4 elections.

But the twist is that though millions of working and middle class Americans have so much hope in Obama, the rich in America, Europe and Asia, bankers, stock brokers and big corporations are also looking to him for a way out of the current global financial meltdown which was triggered by the gambling of US fat cats, the consequences of which will be deep, drawn-out and devastating. Thus, Barack Obama can be said to be in the eye of the storm, comparable to the Biblical Jesus whom average Americans look to for salvation from mounting debts, foreclosures, job losses, unemployment and poverty, but who the greedy fat cats also look to, to save the capitalist system. Don't forget that as well as the donations of average Americans and youths to the Obama campaign, records show that big corporations and banks have donated the most, thus making the Obama campaign the most expensive in the history of US.

In the countdown to the November poll, some world media organisations such as the Washington Post, the New York Times and some of our own Nigerian media organizations and journalists, like Dr. Reuben Abati have all endorsed Barack Obama's candidature thus effectively making the Nov. 4 polls seem a mere ritual, as his victory seems already assured.

The aim of this article is to examine what many Obama advocates have refrained from examining: can the conflicting hopes of rich and poor working and middle class Americans vested in Obama be genuinely fulfilled? A careful look at the economic and political policies of Barack Obama and John McCain is therefore necessary.

'Joe the Plumber'

And where better to start than with the famous plight of 'Joe the Plumber', who had challenged Barack Obama's taxation policies as a threat to the 'American dream'. The American dream is the alleged, much touted ability of Americans, irrespective of social or economic background to climb the social ladder. This much touted 'American dream' was reinforced by the welfare policies of the US state in the 50s to 70s, influenced by the need to develop society after the ravages of the 1929 Great Depression and the Second World War. Thus we had the 'New Deal' of Franklin Roosevelt and the post-Second World War 'Marshal Plan'. This entailed massive state intervention and investment in housing, education, health etc which led to improvements in the standard of living.

However, with the restoration of naked neo-liberalism since the end of the 70s (from Ronald Reagan till now), the 'American dream' has become illusory. Since 1979, the share of income of the richest 1% has doubled, leaving the US with the greatest inequality among all developed nations. The richest 10% of the adult population possess 69.8% of the country's wealth. The result is a middle class hardly distinguishable from the working class. Millions (blacks, Latinos and whites etc) who had hitherto enjoyed some improved standard of living have now been thrown onto the garbage heap, as a result of the unbridled, profit-driven economic policies of the past three decades. It is these millions, angry and shocked at the horrific plummeting of their living standards that McCain and Obama are scrambling desperately to win in this election.

This explains the popularity of the 'Joe the Plumber' scenario in this election and McCain's effort (while offering nothing better) to discredit Obama's tax policies. Despite the efforts of Kennedy Emetulu in his article 'Joe the phantom plumber' (The Guardian, Sunday October 2008, P. 16) to play it down, this issue remains a sore point. In truth, McCain's tax policy pampers the rich but Barack's too equally toadies after the corporations who are funding his campaign, while offering peanuts to small businesses. Of course, millions of Americans facing foreclosures and job losses would welcome the tax relief promised by Obama, but this cannot fundamentally improve living standards in the immediate and further future.

Occupation of Iraq

Another issue of concern in the current election campaign is the US occupation of Iraq, which has cost tax payers billions of dollars and is bound to cost more blood and money if troops are not immediately withdrawn. Unfortunately, neither Obama or McCain have promised to immediately withdraw troops. All Obama has promised is phased withdrawal within 16 months. What this means is that Obama will only completely withdraw all US combat forces when the puppet Iraqi government proves it can police the country on its own. And as this will never happen in time, Obama's presidency may be bogged down by Iraq as much as Bush's. Recall that as an Illinois Senator, Obama once voted for funding for the prosecution of the Iraq war which is ultimately being waged for the profits of capitalists and their corporations. If Obama wins therefore, we should not expect immediate withdrawal from Iraq (although, at some time the US will eventually be compelled to withdraw, especially if the resistance within Iraq intensifies), especially as his government will also be faced with the need to restore the hurt confidence, integrity and pride of the US as the world policeman.

Therefore in all respects, both Obama and McCain are essentially the same, the difference being that where the former plays to the gallery by inflating a bubble of hope which will soon burst in a flurry of disillusionment, the latter bogged down by his identification with the hated Bush regime, has less room to manoeuvre and thus sticks to conservative Republican trash with a conceited air of indifference. Little wonder that fat cats and campaign financiers have jumped over to Obama. Thus, the Republican party is cash-strapped while the Democrats swim in an ocean of funds. But this is a 'subprime' bubble which is bound to burst soon. Unfortunately, it is on the heads of the American working and middle classes that this bubble will burst, especially when an Obama presidency defends the greed of the capitalists against working people.

Lack a real choice

In this election, average working class and middle class Americans lack a real choice precisely because there is as yet no genuine third political party in US which offers a credible alternative to the Republicans and Democrats. Thus, the task facing poor and working people in US and in fact all over the world is the need for the trade unions and pro-masses organizations to build a mass working class party with socialist policies of public ownership of the commanding heights of the economy under democratic management of the working people as against the capitalist policies of the official parties, which defend the interests of the rich few. If such a working class party were to be present in the current US elections, the current hope which millions of average Americans have misplaced on Obama would have been correctly placed on such a party - a party funded and democratically controlled by poor and working Americans and not the Democrat or Republican parties being funded and controlled by the rich.

Poor Americans need a President and party that will truly guarantee a permanent and improved standard of living. Poor Americans need a President that will boldly announce immediate withdrawal of troops from Iraq, in order to allow the Iraqi people to democratically determine their destiny and not this fuzzy hope that Obama preaches. Poor Americans need a government that can guarantee employment with decent pay, free and quality education and healthcare, quality and affordable housing, care for the environment, gay and lesbian rights, rights of abortion and genuine world peace by ending wars fought in the commercial interests of US capital.

But how can they possibly get this under an Obama presidency which merely wants to tax the rich a bit more? The current global financial meltdown, triggered by banks and subprime mortgages in the US has already proved that the current casino economy is not viable and the fact that even if eventually the world recovers from this crisis without a revolutionary movement of working people to take over the reins of society, the greed of the capitalists will, for as long as capitalism lasts, continue to drag humanity through a giddy cycle of boom and burst.

Reuben Abati in his article mentioned above said, "The crisis on Wall Street is a clear, measurable confirmation of Obama's message that America needs to be fixed". Then, why can't Obama promise to go further than the miserable George Bush by nationalizing not just failed banks, but all banks, mortgage providers, insurances and financial firms under the democratic control of workers, while paying compensation to small shareholders on the basis of proven need and guaranteeing the safety of depositors' savings? This would save the jobs of millions who will be rendered jobless under the current pro-rich package of Bush. If nationalized banks are then integrated with public ownership of all the commanding heights of the US economy with democratic management of committees of workers, experts, government and community representatives, it would then be possible to halt the dangerous slide into recession, re-energize the US economy and guarantee permanent, decent living standards for all. This would ensure the bail-out of the whole of society, rather than the nationalisation of failed banks carried out in Britain, US, France, Japan, Russia etc which only amount to compensating a few capitalist gamblers for their loss while millions face job losses. If Obama promised this, wouldn't it be a clearer and more measurable confirmation of his message that America needs to be fixed?

Free market advocators

But as expected, both Obama and McCain avoid bailing out the whole of society. When the Bush regime was forced to swallow its free market vomit in shame, by taking over the running of Fannie Mae and Freddie Mac (both failed Mortgage providers), the Democrats hurled the insult of 'socialism for the rich' with glee. But when McCain used 'Joe the Plumber' to paint Barack Obama as nearing socialism by his tax policies which aimed to 'distribute wealth', the Democrats shrieked in horror.

With anger, Kennedy Elumelu writes, "They are trying to say he's a socialist or Marxist who is itching to take away your riches and give them to those vermin on the streets. They are telling you he's going to punish industry and entrepreneurship and ruin your proud and beautiful edifices of individualism, hard work and honest earnings". Note the word 'vermin', which clearly denotes the average poor American made homeless and jobless by industry, entrepreneurship and the capitalist brand of hard work and honest earnings, which consists of drunken gambling on the stock exchange while those who produce the wealth slave 10 hrs a day in poor conditions, with peanuts as take-home pay and forever threatened by job losses whenever the chicken of capitalist gambling comes home to roost. The' vermin' are the American working class on whose back American civilization and industry was built.

And to assure the capitalist class that Obama is for them and will continue to be for them, Kennedy Elumelu says further, "Obama on his part must continue to let Americans know that he has in his team of advisers some of the richest, most credible and most accomplished Americans alive and that these people are joining and seriously supporting him because they know he isn't going socialist'. Surely, only the richest are allowed on Obama's team of advisers. Surely the 'vermin' have no place in the Democratic or Republican parties just as they will have no say when eventually either Obama or McCain wins.

Socialism for the majority

Who is afraid of socialism, we ask? Surely not the poor working American people seeking a way out of the economic crisis wrought by capitalism. Only the capitalists are afraid, because socialism means the wealth of the society will be redistributed to all members of that society according to the amount of work done while taking care of the young, the old, the sick, the infirm or disabled through a system of collective social security comprising of free education at all levels, free health services, extensive transportation system, housing etc. Contrary to the Soviet Union which degenerated into Stalinism (a bureaucratic totalitarianism totally alien to socialism), socialism also means the guaranteeing of democratic rights of all, including the right of people to self determination, rights to practice the religion of your choice, right to free speech and assembly, no discrimination against women etc.

Despite the abuse piled on him by capitalist commentators, many economists when analysing the current global financial meltdown have had cause to admit that Old Karl Marx was right after all. Despite it being the only way to save humanity from the current madness of global financial crisis, boom and bust, poverty amidst plenty etc, if Obama says or does anything close to socialism, Washington Post, New York Times and the fat cats pouring dollars into his campaign will run berserk and you can bet that the Democrats' campaign funds will dry up, while McCain becomes their preferred choice overnight. That is why every effort is being made to counter McCain's claims by saying that Obama does not wish to 'redistribute wealth' but 'spread wealth'. Who doesn't know the difference which is that the former will bail out the whole society while the latter will bail out a few failed banks and corporations?

Have you wondered why Barack Obama is running the most expensive campaign while McCain and the ruling Republican Party are cash starved few days to election? It is because majority sections of the capitalist class are supporting Obama because they see him as the only man who can direct the anger of millions of poor Americans at the economic situation into a huge bubble of illusion and hope thus ensuring that this anger does not lead to a social revolution. Capitalists have throughout history distinguished themselves as capable of jumping on any life boat in order to preserve their rule and they have no shame now in abandoning their old friend, George Bush and his Republicans for a boyish Illinois Senator little known couple of years ago. As Colin Powell's defection demonstrated, all is for the safety of the system and it is hoped that old McCain will understand. Dr. Reuben Abati was right when he ended his above mentioned article thus, "The first and the continuing task for an Obama Presidency, in the event of victory, will be the hubris of high expectations". If Obama does not win, a few years from now, myth will have it that he had the best policy to preside over America at a most trying time but was not given a chance because he was black. If Obama wins, eventually events and experience will show that "high expectations" are not being met.If Obama wins, eventually, events and experience will show that "high expectations" are not being met. At that time, far more will think seriously about the need to build a third alternative party that stands for the real interests of working people and in which arguments for socialism can gain an audience.

Taiwo Hassan Soweto, Democratic Socialist Movement (CWI in Nigeria)

31 october 2008


What will US foreign policy be after the election?

The two terms of George W Bush have been characterised by the ongoing wars in Afghanistan and Iraq, the brutality of Guantánamo Bay and ever increasing inequality in US society. Now, he is presiding over a deepening global recession. With the Democrat candidate, Barak Obama, clear favourite to win the race to the White House, what will this new situation mean for US foreign policy?

The US Presidential election campaign has opened a new chapter for US imperialism. The overwhelming opposition to the policies of the Bush regime and the onset of a deep and serious recession has seen a mass demand for 'change'. Massive enthusiasm and high expectations have been aroused, especially among young people and Afro-Americans in the Democratic candidate, Barak Obama. At the time of writing, he is clearly ahead in polls and is the most likely victor. The enthusiasm and hopes of what his presidency will mean goes beyond the USA. In poll after poll in Europe, Latin America, Asia and Africa, Obama is by far the favoured candidate.

While the outcome of the election to the Congress and scale of the Democrat majority, especially in the House of Representatives, will be important factors in determining what Obama actually does in some spheres of US intervention, one thing is clear: Obama is coming to power in an entirely different world situation than when Bush and the neo-cons took power in 2000. The question of US foreign policy in the post-Bush era is being posed sharply.

When Bush and the neo-cons seized power, they unleashed the economic and military might of the only real super-power which remained following the collapse of the former Stalinist Soviet Union in 1989-90. The 'empire', as Venezuelan president Hugo Chávez dubbed it, tried to impose its massive military and economic power internationally. The invasion of Iraq, stepping up the intervention in Afghanistan, Plan Colombia, and others were the reality of the 'unipolar' world of the neo-cons. The catastrophes which have been rained down on the peoples of the world through these and other interventions, while demonstrating the power of US imperialism, have also demonstrated the limitations of that power. While a powerful 'empire' has been constructed, it is not like the Roman empire in its ascendancy. It has more in common with the period of decline of Rome.

The disasters that have followed the neo-con reign have revealed the fact that US imperialism, although it remains the largest economic and military power, is a historically waning power. The entry of emerging capitalist China onto the world arena poses a new challenge to it economically and militarily. Russia has also played a more assertive role than in the immediate period following the collapse of the former Soviet Union. It has sought to establish its own sphere of influence which has brought it into conflict with the European Union states and US imperialism.

These conflicts between the main blocs of the US, EU, China, Japan and Russia represent a change in international inter-imperialist relations compared with the period following the collapse of the former Soviet Union and Eastern Europe. Such conflicts and clashes of interests are set to increase with the onset of a global recession. It is this trend, and the relative waning power of US imperialism, together with the legacy of the crisis left behind by the neo-con intervention in Iraq, Afghanistan, the Middle East and Asia, that will shape US foreign policy in the coming years.

Despite its reduced power, however, US imperialism remains by far the largest power. This is reflected in its military budget which stood at $547 billion in 2007, compared to $59 billion for China and $36.7 billion for Russia. China's defence bill is estimated on current trends to rise to $360 billion by 2020. Yet it is unlikely that it will be able to achieve this and surpass the US given the onset of a deep, prolonged world recession which will have devastating consequences economically and socially in China.

Russia has benefited from the oil bonanza in recent years which has been partly used to retool and re-equip its military. The fall in world oil prices which is taking place inevitably will have devastating consequences and cut across its recent economic and military expansion. It remains a shadow of the power of the former Soviet Union. The fact that the US remains the largest imperialist power will compel it to intervene where necessary, albeit from a weakened position.

A waning power

However, the changed international background and the crises which have engulfed the neo-cons, together with the waning power of US imperialism, will mean that the new presidency will not be a mere 'Bush mark II' – even in the event of a victory for John McCain which, at the time of writing, seems unlikely. These new features will force the new incumbent of the White House to adopt a more 'multipolar' policy which is more 'consensual'. The ideology of 'liberal imperialist intervention' is set to dominate the new administration. Even in the end game of the Bush presidency, the old unipolar doctrine of the neo-cons has been largely abandoned. The fact that the Bush regime was compelled to negotiate with North Korea, has failed, so far, to back an attack on Iran, and could not intervene in the Russia/Georgia crisis reflect this. The Georgian president, Mikhail Saakashvili, was advised by Condoleezza Rice, US secretary of state, not to attack South Ossetia. However, the Georgian government felt confident enough to go ahead, encouraged by some dissident voices in Washington who gave a 'nod and a wink'. However, this intervention and Russia's response illustrate the weakened position US imperialism finds itself in.

The current economic crisis also illustrates the change that has taken place since Bush arrived in the Oval office. That the main imperialist powers in the G7 were compelled to come together and agree a strategy to deal with the crisis reflected this. However, this does not mean that the US and other capitalist powers will not revert to breaking ranks and adopting protectionist or interventionist measures if they decide it is their own interests to do so. They will also adopt a similar approach towards foreign policy in their own spheres of interest if they are able to.

The waning power of US imperialism has been revealed by the abandonment of the neo-liberal, non-state intervention ideology which has dominated world politics for the last 25 years as the imperialist powers reacted to try and avert a catastrophe. Generally in the post-1945 era, US imperialism tried to impose its position and use its economic might on international economic policy. For example, it led the way in laying down the Bretton Woods agreement following the second world war. Significantly, it has been trailing the EU countries in agreeing to bank bail-out packages and the partial nationalisation of the banking system.

Throughout the neo-colonial world, as well as in Europe, hostility towards the USA as a consequence of Bush's policies has increased dramatically. Bush will leave the White House with the international authority and credibility of the US at record low levels. The devastating failure of the US intervention in Iraq and Afghanistan, and now the abandonment of neo-liberal policies when faced with the potential collapse of the world finance system, have encouraged the masses in Asia, Africa and Latin America. Having suffered the brutal consequences of the neo-con economic and foreign policy, the evident failure of them has boosted the morale of the masses in these continents as they see the imperialist powers plunge into crisis and Bush exposed as a 'dead duck' president.

High hopes in Obama

At the same time, there are undoubtedly high expectations and illusions about what an Obama presidency will usher in. In Europe, Obama is overwhelmingly the favoured candidate. The hope that a new Democratic presidency, especially a black president, will adopt far more radical, improved, 'humane' policies is overwhelmingly the view in Latin America, Africa and Asia.

Although Obama will be compelled to adopt a 'multipolar', 'consensual' foreign policy, the crucial issue is what it will mean in practice for the masses on these continents. Such a change in policy will be done to try and more effectively defend the interests of US imperialism and capitalism in decline. The shift is being forced onto US imperialism as the limits of its powers have been revealed in the military and social catastrophes which have unfolded in the Middle East and Asia. In Latin America, the failure, until now, to remove Chávez in Venezuela, or defeat Evo Morales in Bolivia, represents a further setback and may result in a possible change of policy by the new US administration. The clear failure of US policy in Cuba, which has strengthened Castro's regime, combined with the steps towards capitalist restoration by Raúl Castro, have also increased the pressure and demand for an alternative policy to be adopted there.

It is not the first time that such hopes have existed in what a new 'radical' Democratic presidency would mean. Indeed, it is possible that this is more pronounced in the neo-colonial world, at this stage, following the experience of two terms of George W Bush. However, there were also big expectations after the election of Bill Clinton, following the administrations of Ronald Reagan and George Bush senior. However, it should not be forgotten that the more 'consensual' approach from Clinton did not prevent US military intervention in Serbia or Somalia. Neither will Obama refrain from military intervention where it is judged to be in the interests of US imperialism and where it has the military capacity to do so.

As Obama put it: "We can neither retreat from the world nor try to bully it into submission. We must lead the world, by deed and by example..." Yet the masses of the world do not want to be led by US imperialism. If they cannot be convinced "by deed and by example", Obama continued, "We must also become better prepared to put boots on the ground in order to take on foes that fight asymmetrical and highly adaptive campaigns on a global scale". (Foreign Affairs, July/August 2007) In the same article, he went on to call for the expansion of US ground forces by adding 65,000 soldiers to the army and 27,000 to the marines. The National Guard, he urged, should have sufficient funding to "regain a state of readiness".

The ongoing crisis in the Middle East, especially Iraq and Iran, together with the worsening situation in Pakistan and Afghanistan, will be at the centre of US foreign policy in the coming months and years. Bogged down in the Iraq quagmire, Obama has supported the withdrawal of US combat troops. However, the prospect of a full withdrawal is not a likely perspective due to the conflicts and divisions which have been opened up following the invasion of Iraq and the overthrow of Saddam Hussein's dictatorship. Despite the recent claims of some commentators that the troop 'surge' has allowed US imperialism to stabalise the situation and reduce levels of violence, the situation remains extremely volatile with the prospect of an upsurge in ethnic clashes between Sunni and Shia peoples. At the same time, new conflicts have recently opened up. The outgoing commander of US troops, general David Petraeus, warned: The US still faces a long struggle in Iraq and recent security gains are not irreversible". This is despite an apparent drop in sectarian violence and the number of US casualties. The US army is currently losing more troops in Afghanistan than Iraq.

While the Shia-led government, headed by prime minister Nouri al-Maliki, has strengthened its position, underlying tensions and conflicts remain which could erupt at any time. The government has pledged to integrate up to 20,000 armed Sunni fighters and take over the Sunni Awakening Councils, in which the US paid Sunni fighters to turn against the insurgency. Despite Maliki's pledge, there are already signs that his regime is orchestrating a campaign to harass and intimidate many of them. Moreover, up to 100,000 Sunni fighters had been paid for by the US. The recent arrests of Sunni leaders have led to increased Shia-Sunni tensions and a spate of bombings. Fear of a reignited Sunni-Shia conflict was what lay behind Bush's recent withdrawal of 8,000 troops – a lower number and at a slower rate than many commentators were anticipating.

In addition to these tensions, Maliki's decision to send Iraqi troops into the mostly Kurdish town of Khanaquin – ostensibly as part of a broader military operation against al-Qaida forces – has inflamed the Kurds who saw it as a power play by Maliki and the Iraqi government. This intervention has made any prospect of a negotiated settlement over the status of oil-rich Kirkuk even more improbable.

The possibility of these conflicts erupting is further heightened by the world economic recession and the consequences it will have on Iraq and throughout the Middle East, especially with the fall in oil prices. Against this background, the prospect of the break-up of Iraq, or at least its fragmentation into a series of patchwork divisions of the Shia, Sunni, Kurdish and other peoples, is what the US and other imperialist powers are likely to confront in the near future. While a reduction of US troops from the current level of 140,000 is likely if the new occupant of the White House decides to escalate the offensive in Afghanistan, it will leave a series of heavily fortified garrisons in Iraq to protect US interests, especially the oilfields.

Downward spiral in Afghanistan

Obama's objective of scaling down military intervention in Iraq while stepping it up in Afghanistan, and Pakistan if necessary, rather than strengthening imperialism in the region, is certain to become as big a disaster as Iraq, and probably worse. Even before a major reduction of US forces in Iraq, the Pentagon has planned to boost the number of troops in Afghanistan from 33,000 to 47,000 because of the clear failure of the intervention. Far from stabilising the situation, a renewed offensive will boost Taliban resistance even further. During 2008, the US has lost more troops in Afghanistan than at any time since the occupation began in 2001. All 16 US spy agencies agreed in a recent report by the National Intelligence Estimation (NIE) Afghanistan, the publication of which has been postponed until after the presidential election, that the US and NATO forces faced a "downward spiral".

Overwhelming hostility to the US and NATO troops has given the insurgents greater support and sympathy. This has been re-enforced by the sea of corruption and nepotism which the government of Hamid Karzai is swimming in and by a collapse in security. With reports of local people having to go to the Taliban to receive 'justice' against crooks and thieves, because they cannot get it from the official state apparatus, the Karzai regime is rapidly loosening any confidence or legitimacy it may have had among big sections of the population. A desperate situation exists with a surge in violence and lack of security in Kabul and other cities. Rodric Braithwaite quoted Afghan journalists, former Mujahideen professionals: "They were contemptuous of president Hamid Karzai, whom they compared to Shah Shujah, the British puppet installed during the first Afghan war. Most preferred Mohammad Najibullah, the last communist president. Things were better under the Soviets. Kabul was secure, women were employed, the Soviets built factories, roads, schools and hospitals… Even the Taliban were not so bad: they were good Muslims, kept order…" (Financial Times, 16 October 2008)

With warlords switching sides to the highest bidder, and with over 50% of national income coming from the booming opium trade, the British writer, Max Hastings, commented that, "the highest aspiration" must be for a "controlled warlordism". (Guardian, 13 October 2008) Stepping up the military offensive will only result in a greater disaster which will drag US and NATO forces deeper and deeper into the swamp that is further destabalising the already explosive situation in neighbouring Pakistan.

Tensions between the US & Pakistan

The rotten Perves Musharraf was finally removed from power, much to the irritation of US imperialism which had rested on his regime as its main ally in the region in the 'war on terror'. For nine years, US imperialism backed his regime, lavishing it with an estimated $11 billion aid in return for its support. This policy of Musharraf, who was a quisling of US imperialism, served to undermine his support. Pakistan, awash with grinding poverty, corruption and national oppression, has evolved into a virtual failed state. Pakistan is on the edge of an implosion and even a possible break-up as a consequence of the economic and social disintegration which is taking place. Many staple food prices have rocketed by 100% in a few months. Power supplies are frequently interrupted, causing devastation for the masses and crippling businesses which cannot function. The NIE concludes that Pakistan is "on the edge". A US diplomat said that Pakistan has "no money, no energy and no government". (Guardian, 17 October 2008) The new coalition government, headed by Asif Ali Zadari – renowned for corruption and known as 'Mr 10%' because of the bribes he has been accused of accepting – threatens to be short lived.

The border regions with Afghanistan, North and South Warizistan, overwhelmingly made up of Pashtoons, and the North West Frontier Province (NWFP) have become the main base for Taliban and other insurgent forces which operate in Afghanistan. Warizistan has become what one diplomat described as a "terrorism supermarket", where Taliban forces arm, train and launch attacks into Afghanistan. In North and South Warizistan, the white pennants of the Tehrik-i-Taliban Pakistan, a local Islamist force, fly from government buildings. The capital of NWFP, Peshawar, was virtually encircled by its armed militias. In addition, an explosive situation exists in Baluchistan. When the murderous bombings that rock Karachi and the armed gangs and warlords which operate in the rural Sind are added to this, the scale of the disaster facing the peoples of Pakistan cannot be overstated.

The opposition to US imperialism among the masses in NWFP and North and South Warizistan has fuelled the growth of Taliban and other insurgent forces in these areas. The Pakistani security services, ISI, and sections of the army are riddled with sympathisers of the insurgents who oppose collaborating with the US and its 'war on terror'.

It is against this background that Bush has authorised the use of special operations units and incursions from Afghanistan into Pakistan. Admiral Mike Mullen, speaking to Congress on behalf of the chiefs of staff, along with defence secretary, Robert Gates, urged that these be stepped up. This strategy has been backed by Obama and the Democrats: "I will join with our allies in insisting – not simply requesting – that Pakistan crack down on the Taliban, pursue Osama bin Laden and his lieutenants, and end its relationship with all terrorist groups". (Foreign Affairs, July/August 2007)

This has raised tensions between the US and Pakistan's new prime minister, Zadari. These incursions recently resulted in the Pakistani army opening fire on US forces. The dangers of US military operations on Pakistani territory were clearly spelt out in an article by lieutenant general Shahid Aziz, a former chief of staff under Musharraf. He accused Musharraf of "Inviting the Americans to fight their war on Pakistani territory, without consulting the army… Militants will multiply by the thousands. The Pakistani army will not be able to support US operations. Financial crisis and street unrest will create chaos in the country and the war will spread". (Guardian, 16 September 2008) This policy is backed by Obama who raised the question of using US troops in Pakistan prior to Bush authorising recent incursions. The recent clashes have opened a deep rift in Zadari's government. One coalition partner, Jamiat-Ulama-i-Islam, has even proposed that the Taliban address the parliament following a report being presented by the military.

A combination of the Afghan crisis and events in Pakistan threaten a nightmare for US imperialism and will have horrific consequences for the people of the entire area. Obama's policy of putting more 'boots on the ground' will only fan the flames of the insurgency and make an explosive situation even more unstable.

An arc of crisis

To the crisis engulfing Pakistan, Afghanistan and Iraq must be added Iran which, together, embroil US and western imperialism in an 'arc of crisis" spanning the entire area. When the plight of the Palestinian peoples is added, along with the prospects of the overthrow of the pro-western regime of Hosni Mubarak in Egypt, as well as a series of upheavals throughout the Gulf and the Middle East, the scale of the problems facing US and western imperialism in this area alone are immense. Now, they are facing them from a weakened position.

There has been much speculation about the prospects of an attack on Iranian nuclear sites. The consequences of such a military strike would be to set the whole of the Middle East in flames. Moreover, the Iranian regime would certainly retaliate by blockading the Straits of Hormuz, thereby cutting off the lion's share of oil supplies to the west. The consequences of such an attack, and the effort and resources being poured into Iraq and Afghanistan, have so far deterred the Bush regime from supporting such a strike despite intense pressure from Israel. The Israeli regime is determined to avert Iran developing a nuclear weapons programme and undertook a series of military manoeuvres to demonstrate its capacity to launch such an attack, although it would probably need assistance from the US to carry it out. Moreover, even Bush has been prepared to modify his stance, taking steps to establish low level diplomatic openings. These, however, have now been put on hold until after the presidential elections.

While Bush and his regime have so far been checked from unleashing a bombing raid, although not probable, it cannot be excluded that Israel could act unilaterally, at a certain stage. Social crisis in Israel can drive the Israeli ruling class to use this as a means of 'rebuilding national unity' against a common enemy. On the other hand, the threat of such a strike has been used by the Iranian regime to try and bolster its own support. Faced with such pressure, it is possible that Obama would apply his 'consensual' foreign policy and open up negotiations, either openly or behind the scenes. Yet, as he has warned, this will be backed up by the application of even tougher sanctions against Iran, the price of which will be paid for by the Iranian people.

A new era

However, in Latin America, it is possible that Obama will adopt a different approach to the neo-cons, especially in relation to Cuba and, possibly, Venezuela and Bolivia. This reflects the failure of US policy towards Cuba since the revolution in 1959 and the attempts by Raúl Castro to move towards capitalist restoration together with a more open attitude by a second and third generation of Cubans and Latinos in Florida and other US states. As part of the process, it is possible that the trade sanctions will be eased. Some commentators have speculated that this could be done in return for 'free elections' at some point in the future with no specified date. However, the onset of world recession will complicate further the process of full capitalist restoration in Cuba.

It is not excluded that Obama may make some overtures to both Morales and Chávez, both of whose governments will face increased pressure and turmoil as a consequence of the fall in oil and other commodity prices. At the same time, the determination of the right-wing in these countries to remove both governments and the prospect of even greater social explosions by the masses demanding more radical anti-capitalist policies than have so far been introduced, could easily derail Obama's hope to 'reopen a dialogue' with these governments. Moreover, the prospect of even greater upheavals in other Latin American countries, such as Brazil, Mexico and Argentina, is certain to open up new conflicts with US imperialism as more radical, combative social movements emerge that can pressurise new governments to take even more radical measures that bring them into collision with US imperialism.

US imperialism is the only major imperialist power with a border directly with a neo-colonial country – Mexico. The Mexican government has been prepared to adopt pro-capitalist policies and collaborate with US imperialism. How long it can continue to do this is another question which will confront Obama. With 80% of Mexican exports destined for the US and $25 billion sent back every year by Mexicans working in the US, the developing recession is already having devastating consequences. The prospect of major social and class upheavals in Mexico will have important repercussions within the US itself.

The new inter-imperialist relations which are developing will open a new era, with growing tensions between the main blocs and within them, as has recently been shown in the EU during the economic crisis. The idea that is being propagated of a new Bretton Woods agreement does not correspond to the new realities which exist for global capitalism. The Bretton Woods agreement was undertaken when US imperialism was the clearly dominant world power. The existence of an alternative social system, the former Stalinist regimes in the Soviet Union and Eastern Europe, with planned economies ruled by bureaucratic dictatorships, provided a 'glue' which bound the other imperialist and capitalist countries together. With the collapse of these regimes no such glue exists today and the resources available to world capitalism in a period of deep recession are very different to those which existed following the second world war when an upturn of capitalism was taking place.

While temporary agreements are possible between the various imperialist powers, these will not offer a return to the relative stability which followed the Bretton Woods agreement. The bloody carnage in the Middle East, Asia, Africa and the Caucasus cannot be resolved under capitalism and imperialism. Despite its weakened position, the US, as the largest imperialist power, will be compelled to intervene in some of these crises. The prospect of increased conflict and war is what the new era of capitalism and imperialism will mean – until the working class and others exploited by capitalism replace it with socialism, the only way to resolve the conflicts and horrors that are the product of imperialist intervention and capitalism.

Tony Saunois, CWI London

31 October 2008

Thursday, 23 October 2008


"EVERY DAY this week there will be a picture of misery for the UK economy" said Citigroup economist Michael Saunders at the start of last week. The grim pictures are in the form of rising unemployment, falling retail sales, reduced business confidence, falling house prices, and many other symptoms of recession. Over 60,000 homeowners a month are now falling into negative equity.

Stock market share values recovered partially, after nosediving due to fear of a complete financial meltdown. But following the huge bank bail outs, which were designed to prevent a 'worst case' scenario, economic forecasts remain bleak and there is a general realisation that the recession could be long and severe.

U-turn has come after U-turn. First came bank nationalisations by the leading proponents of neo-liberalism. Now these same privatisers and worshippers of the market are singing the praises of Keynesian measures - the spending of public money on services, infrastructure etc to try to stimulate the economy.

Gordon Brown, chancellor Alistair Darling, and new business secretary Peter Mandelson, are chorusing that future expenditure on schools, hospitals and large infrastructure projects should be brought forward. Darling even went so far as to say: "Much of what Keynes wrote still makes sense. You will see us switching our spending priorities to areas that make a difference".

Their expediently-adopted guru, John Maynard Keynes, advocated increased state borrowing in times of recession, to pump-prime the economy. But while feeling compelled to accept the need for this, it is extremely problematic for the government to implement, as the national debt is escalating. It has gone up to around 50% of national income following the latest bank bail outs, and is estimated by the Centre for Policy Studies to be 103% of GDP if all the public sector pension liabilities, Private Finance Initiative contracts and Northern Rock liabilities are included.

This record debt level was built up during a long period of economic growth, because successive governments cut taxes for big business and the rich, and spent huge sums on weapons and wars. Going into a severe recession with such a debt level is a massive burden. Even without decisions in favour of additional spending, the state debt will increase as a result of lower tax receipts and higher unemployment benefits. So, at present, rather than promising new money, the government is trying to limit itself to 'bringing forward' future spending. This is being combined with some insufficient special measures, like funding more Housing Association housing and buying thousands of newly built houses for councils to rent out.

Also, the increased spending on some types of public services and needs is likely to be combined with cuts in others. The treasury has already clawed back over £5 billion of unspent NHS funding, to spend in other areas, and the NHS management board is presently waiting for further funding cuts and raids.

Nevertheless, such is the seriousness of the overall economic crisis and prognosis, that further Keynesian type measures are likely - some of which could be new departures compared to those taken in the past, and could be much further reaching than those announced so far. But the resulting increase in the public debt ultimately has to paid for, either through increased taxes on big business and the rich, or increased taxes on working class and middle class people, or through the government printing more money - which would fuel inflation.

The Socialist calls for a massive programme of public works, to satisfy people's needs for housing, schools etc, and to provide jobs. But this should not be paid for by ordinary people suffering increased taxes or price rises. The capitalist class however would howl with rage at being asked to pay through their taxes and would take measures to avoid this; which shows the need for the major companies to be taken out of their hands, and placed in public ownership.

Keynes also advocated lowering interest rates during a recession, and this is now the expected direction. Larry Elliot commented in the Guardian: "Although inflation currently stands at 5.2%, it is going to fall like a stone over the coming months... the impact of this on monetary policy is obvious. Rates will be cut, and cut aggressively, in an attempt to shock the economy back into life". But 'attempt' is the right word, as low interest rates are no panacea - they are only useful if the banks actually pass the lower rates on to borrowers and if people feel in a position to borrow money.

Greed and blame

THE EFFECTS of the uncontrolled speculation that has been carried out by finance industry chiefs, backed up by most of the leading western politicians, is being brought down on the heads of many millions of people. A thin layer of super wealthy 'investors' on the globe have enriched themselves hugely, not through any useful development of production or society, but through financial gimmicks involving fictitious capital.

Gordon Brown and David Cameron not so long ago were singing the praises of these parasites who have contributed greatly to the misery now being inflicted on ordinary people. Brown worshipped their "unique innovative skills", their "ingenuity and aspiration" and the "invaluable the prosperity of Britain". Cameron declared: "Our hugely sophisticated financial markets match funds with ideas better than ever before".

Last year, Barclays president, Bob Diamond, received total pay and bonuses totalling a staggering £36 million. Since the onset of the banking crisis, the top bankers and chief executives of most of the major companies are continuing to pay themselves indefensible salaries and bonuses; this year alone, the pay of FTSE 100 chief executives has gone up by 11.5% on average.

Ordinary working-class and middle-class people are furious about the greed and catastrophic management of the leading financiers. A FT/Harris poll found that most people are blaming the bankers for the economic crisis. But substantial minorities - as high as 30% in Germany - are blaming the failure of capitalism itself. They are right to do so. The bankers have indulged in huge excesses, making the credit crunch much worse than it would otherwise have been. But capitalism is a system that will always have cycles of boom and slump, as Karl Marx explained over 150 years ago. He also explained that it is a class based system that develops its own gravediggers - the working class - who have the common interest and potential power to build a socialist alternative.

Socialist Party of England and Wales (CWI BRITAIN)

Sunday, 19 October 2008


Statement by Nouriel Roubini

We carry below a very important statement on the world economy by Nouriel Roubini distributed by him on 10 October 2008. The CWI has quoted extensively from Roubini at different stages in the development of the crisis. This is because he has been one of the most accurate and realistic, economists in assessing the present stage through which the world economy is passing and what is the likely outcome.

This statement cannot be faulted in its diagnosis of the maladies of and prospects for world capitalism. Roubini is correct when he says that the US and the advanced industrial countries are now “headed towards a near-term systemic financial meltdown... All the advanced economies representing 55% of global GDP… entered a recession even before the massive financial shocks.” This “recession” is now combined with “a severe financial crisis and a severe banking crisis in advanced economies”. Moreover, there is a “re-coupling of the emerging market economies” rather than the “decoupling” that capitalist economists promised.

Moreover, Roubini is correct that this is likely to be a severe crisis – no matter what ‘temporary’ measures governments take – “U-shaped recession” or even an “L-shaped recession… like the one experienced by Japan in the 1990s after the bursting of its real estate and equity bubble”. Most crucially, he points out that “lack of confidence… is sharply rising and the investors have totally lost faith in the ability of policy authorities to control this meltdown”. In other words, this is not just an economic crisis but a severe political crisis, a crisis of leadership for capitalism.

Roubini scores a bull’s eye when he correctly writes: “At this point severe damage is done and one cannot rule out a systemic collapse and a global depression.”

However, will his remedies, which are essentially Keynesian in character, be adopted by the world’s capitalist governments? Because they are in panic mode, many of them very well could be. The partial nationalisations in the US, Britain and Iceland have not worked. This has prompted a writer in the Financial Times on 10 October to demand “temporary full state ownership” of the banks and financial institutions. It is not impossible that Roubini’s proposal for “a temporary freeze on all foreclosures” – repossessions of houses – could be introduced. Even “massive direct government fiscal stimulus packages” are possible, such is the depth of the abyss that has opened up for world capitalism.

Moreover, there could be a serious attempt on the part of the G7 large capitalist powers, joined by Russia, China and others, for collaboration and the “recycling of the surpluses of creditors” in an attempt to avoid the whole of the world plunging into economic chaos and the social and political convulsions that would follow.

These proposals are an echo of Roosevelt’s ‘New Deal’ policies of the 1930s. The ruling class is now so desperate to avoid the consequences of this systemic collapse that they are prepared to throw overboard everything that they have stood for in the last 30 years. They will jump into any ‘lifeboat’, even if it is leaky and risks sinking some time in the future. However, Roosevelt’s measures were introduced in 1933-34 when the American economy was coming out of recession. Moreover, as we have pointed out previously, these measures did not end the depression, only ameliorating some of the effects for some sections of the population. Therefore, the most likely scenario, as we sketch above, is of a serious economic recession, at the very least, in which all of the gains of the working class will be threatened.

These events have already discredited not one model of capitalism, neo-liberalism, but the whole system. The ‘free market’ threatens to drag millions into the abyss of unemployment and misery. For socialism to come roaring back as the alternative for the working class needs a mass political alternative to the discredited capitalist parties including the ex-workers’ parties of social democracy. We urge all sections of the CWI and the wider labour movement to energetically campaign now for the ideas of an alternative socialist plan of production to the chaos of capitalism, while at the same time fighting shoulder to shoulder with working class people, for real democratic and socialist nationalisation in defence of all jobs and services and past gains of the working class.

RGE Monitor
October 9, 2008

Nouriel Roubini: The world is at severe risk of a global systemic financial meltdown and a severe global depression

The U.S. and advanced economies’ financial systems are now headed towards a near-term systemic financial meltdown as day after day stock markets are in free fall, money markets have shut down while their spreads are skyrocketing, and credit spreads are surging through the roof. There is now the beginning of a generalized run on the banking system of these economies; a collapse of the shadow banking system, i.e. those non-banks (broker dealers, non-bank mortgage lenders, SIV and conduits, hedge funds, money market funds, private equity firms) that, like banks, borrow short and liquid, are highly leveraged and lend and invest long and illiquid, and are thus at risk of a run on their short-term liabilities; and now a roll-off of the short term liabilities of the corporate sectors that may lead to widespread bankruptcies of solvent but illiquid financial and non-financial firms.

On the real economic side, all the advanced economies representing 55% of global GDP (U.S.A, Eurozone, UK, other smaller European countries, Canada, Japan, Australia, New Zealand, Japan) entered a recession even before the massive financial shocks that started in the late summer made the liquidity and credit crunch even more virulent and will thus cause an even more severe recession than the one that started in the spring. So we have a severe recession, a severe financial crisis and a severe banking crisis in advanced economies.

There was no decoupling among advanced economies and there is no decoupling but rather re-coupling of the emerging market economies with the severe crisis of the advanced economies. By the third quarter of this year global economic growth will be in negative territory signaling a global recession. The re-coupling of emerging markets was initially limited to stock markets that fell even more than those of advanced economies as foreign investors pulled out of these markets; but then it spread to credit markets and money markets and currency markets bringing to the surface the vulnerabilities of many financial systems and corporate sectors that had experienced credit booms and that had borrowed short and in foreign currencies. Countries with large current account deficits and/or large fiscal deficits and with large short-term foreign currency liabilities and borrowings have been the most fragile. But even the better performing ones – like the BRICs club of Brazil, Russia, India and China – are now at risk of a hard landing. Trade and financial and currency and confidence channels are now leading to a massive slowdown of growth in emerging markets with many of them now at risk not only of a recession but also of a severe financial crisis.

The crisis was caused by the largest leveraged asset bubble and credit bubble in the history of humanity where excessive leveraging and bubbles were not limited to housing in the U.S. but also to housing in many other countries and excessive borrowing by financial institutions and some segments of the corporate sector and of the public sector in many and different economies: an housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, a hedge funds bubble are all now bursting at once in the biggest real sector and financial sector deleveraging since the Great Depression.

At this point the recession train has left the station; the financial and banking crisis train has left the station. The delusion that the U.S. and advanced economies contraction would be short and shallow – a V-shaped six month recession – has been replaced by the certainty that this will be a long and protracted U-shaped recession that may last at least two years in the U.S. and close to two years in most of the rest of the world. And given the rising risk of a global systemic financial meltdown, the probability that the outcome could become a decade long L-shaped recession – like the one experienced by Japan after the bursting of its real estate and equity bubble – cannot be ruled out.

And in a world where there is a glut and excess capacity of goods while aggregate demand is falling, soon enough we will start to worry about deflation, debt deflation, liquidity traps and what monetary policy makers should do to fight deflation when policy rates get dangerously close to zero.

At this point the risk of an imminent stock market crash – like the one-day collapse of 20% plus in U.S. stock prices in 1987 – cannot be ruled out as the financial system is breaking down, panic and lack of confidence in any counterparty is sharply rising and the investors have totally lost faith in the ability of policy authorities to control this meltdown.

This disconnect between more and more aggressive policy actions and easings, and greater and greater strains in the financial market is scary. When Bear Stearns’ creditors were bailed out to the tune of $30 bn in March, the rally in equity, money and credit markets lasted eight weeks; when in July the U.S. Treasury announced legislation to bail out the mortgage giants Fannie and Freddie, the rally lasted four weeks; when the actual $200 billion rescue of these firms was undertaken and their $6 trillion liabilities taken over by the U.S. government, the rally lasted one day, and by the next day the panic had moved to Lehman’s collapse; when AIG was bailed out to the tune of $85 billion, the market did not even rally for a day and instead fell 5%. Next when the $700 billion U.S. rescue package was passed by the U.S. Senate and House, markets fell another 7% in two days as there was no confidence in this flawed plan and the authorities. Next, as authorities in the U.S. and abroad took even more radical policy actions between October 6th and October 9th (payment of interest on reserves, doubling of the liquidity support of banks, extension of credit to the seized corporate sector, guarantees of bank deposits, plans to recapitalize banks, coordinated monetary policy easing, etc.), the stock markets and the credit markets and the money markets fell further and further and at accelerated rates day after day all week, including another 7% fall in U.S. equities today.

When in markets that are clearly way oversold, even the most radical policy actions don’t provide rallies or relief to market participants. You know that you are one step away from a market crash and a systemic financial sector and corporate sector collapse. A vicious circle of deleveraging, asset collapses, margin calls, and cascading falls in asset prices well below falling fundamentals, and panic is now underway.

At this point severe damage is done and one cannot rule out a systemic collapse and a global depression. It will take a significant change in leadership of economic policy and very radical, coordinated policy actions among all advanced and emerging market economies to avoid this economic and financial disaster. Urgent and immediate necessary actions that need to be done globally (with some variants across countries depending on the severity of the problem and the overall resources available to the sovereigns) include:

  • another rapid round of policy rate cuts of the order of at least 150 basis points on average globally;
  • a temporary blanket guarantee of all deposits while a triage between insolvent financial institutions that need to be shut down and distressed but solvent institutions that need to be partially nationalized with injections of public capital is made;
  • a rapid reduction of the debt burden of insolvent households preceded by a temporary freeze on all foreclosures;
  • massive and unlimited provision of liquidity to solvent financial institutions;
  • public provision of credit to the solvent parts of the corporate sector to avoid a short-term debt refinancing crisis for solvent but illiquid corporations and small businesses;
  • a massive direct government fiscal stimulus packages that includes public works, infrastructure spending, unemployment benefits, tax rebates to lower income households and provision of grants to strapped and crunched state and local government;
  • a rapid resolution of the banking problems via triage, public recapitalization of financial institutions and reduction of the debt burden of distressed households and borrowers;
  • an agreement between lender and creditor countries running current account surpluses and borrowing, and debtor countries running current account deficits to maintain an orderly financing of deficits and a recycling of the surpluses of creditors to avoid a disorderly adjustment of such imbalances.

At this point anything short of these radical and coordinated actions may lead to a market crash, a global systemic financial meltdown and to a global depression. The time to act is now as all the policy officials of the world are meeting this weekend in Washington at the IMF and World Bank annual meetings.

10 October 2008

Thursday, 9 October 2008


Lynn Walsh, editor of Socialism Today, discusses the announcement of the partial nationalisation of UK banks, the £500 billion bailout, the panic coordinated worldwide central banks' cut in interest rates, and answers the question - how will it affect us, and what can the working class do about the coming recession?

Wednesday, 8 October 2008


"Black Mondays used to be a once-a-decade event - now they're coming along more regularly than a London bus" declared one senior London trader as the UK stock market suffered the biggest one day points fall on record.

Stock markets also plunged worldwide on Monday 6 October. Unsurprisingly, it was the banking sector which suffered the biggest losses. The 'credit crunch' is turning into a freezing up of the world financial system. Every day another bank teeters on the brink of collapse.

As The Socialist has repeatedly warned, the finance-dominated, debt driven boom of recent years could not continue indefinitely, and when it reached its limits the world would face a severe economic crisis. Faced with overwhelming evidence, this conclusion has now been drawn by the vast majority of capitalist commentators.

Jeremy Warner summed up the situation in The Independent, saying: "So destructive has this storm in the banking system become that without the correct policy response it is certain to plunge the world into severe recession or even depression. Even a month ago, I would have regarded this as an extreme view which was highly likely to be proved wrong-headed. Yet events have since moved with terrifying speed and there is now a very real chance of them ending very badly indeed."

Far from being able to find a 'correct policy response', the world's governments have been reduced to little more than horrified onlookers, desperately and empirically trying to intervene in response to the latest disaster unfolding before them. Their ineffectiveness was summed up by the president of the World Bank, Robert Zoellick, when he declared simply: "The G7 is not working".

No matter how many emergency summits or 'war cabinets' are held, the efforts of capitalist politicians are having a limited, and sometimes even a negative, effect. Chancellor Alistair Darling's speech, designed to calm the markets, was a trigger for the latest plunge in the FTSE ( Financial Times Stock Exchange Index) - wiping £100 billion off the value of shares.

The markets had hoped that Darling would announce a 'part-nationalisation' of the entire banking system, using taxpayers' money on a huge scale to rescue the banking sector. Instead Darling limited himself to generalities with virtually no policy content. Nonetheless, the government will have no choice but to introduce some kind of scheme along those lines - a British version of the US $700,000 Paulson plan - in order to try to avert catastrophe. However, as the continued nightmare on Wall Street shows, the announcement of such a plan is far from guaranteed to 'put a floor' under the crisis.

At one stage the possibility of a pan-European version of the Paulson plan was mooted. However, both the British and German governments have said that they will not take part in any EU-wide banking rescue programme. The crisis is laying bare the limits of the European Union.

One of the fundamental contradictions of capitalism is the antagonism between the world market and the nation state. In the previous decade, with the launch of the euro, it could seem superficially that European capitalism had been able to overcome some of those limits. However, this was never fully the case. And now, under the impact of economic turmoil, each national government is acting to try to defend capitalism in its own country, even if doing so damages the eurozone as a whole.

The Irish government broke ranks by declaring it would guarantee all banking deposits in Irish banks. In reality, few, if any, national governments have the funds to 'guarantee' all banking deposits. However, the Irish move put enormous pressure on other countries to follow suit, in order to prevent depositors moving their money to Ireland. A series of countries have done so. Germany, the biggest economy in the EU, panicked by the collapse of Hypo Real Estate, the second biggest mortgage bank in the country, made a similar declaration, only to partially retreat from it later.

As the tensions that have already developed indicate, as economic crisis develops, there will be a possibility of some countries pulling out of the euro altogether. Even a complete breakdown of the currency cannot be excluded.

However, Britain, outside the eurozone, remains among the most vulnerable of the major capitalist powers to the coming recession. The British Chambers of Commerce have described the outlook for the British economy as "exceptionally bad".

Under the pressure of the crisis, a show of unity has temporarily broken out in New Labour. The 'ultra-Blairites' have come behind Brown for now - summed up by Peter Mandelson joining the cabinet for the third time. This will enrage working-class people who remember him as the man who summed up New Labour by declaring: "We are intensely relaxed about people getting filthy rich" and was twice removed from the cabinet for sleaze.

Mandelson's rehabilitation is an indication that, while the government is ineffective and panic stricken in the face of the economic crisis, it is clear on one thing - the working class will be expected to 'tighten our belts'. Over the last three New Labour 'boom years', pay has remained stagnant for 80% of people, while family incomes have fallen for a third. As unemployment starts to rise, a determined struggle by the trade unions and the working class to defend our pay, jobs and conditions is urgently required. This needs to be linked to a mass repopularising of socialist ideas, as the only real alternative to the nightmare of twenty-first century capitalism.

CWI Britain and Wales

Saturday, 4 October 2008


In the 1950s, Lee Kuan Yew formed a political association with the Communist Party of Malaya (CPM) which had been able to amass and maintain a huge following among the working class.

Whereas the CPM, which had been trapped in Maoist and Stalinist opportunist ideas, used the idea of a popular front (association with liberal or progressive bourgeois organisations or individuals) and the two stages theory (struggle for democratic rights first, and after accomplishing this, then struggle for the socialist transformation) to manoeuvre in Singaporean politics.

Chin Peng, the leader of the CPM in his autobiography (Alias Chin Peng) said about Lee’s astounding electoral victory in May, 1959: “I can certainly say that most of the island’s workers sympathised with the left-wing trade unions, and members of these unions well appreciated they were under the control of the CPM. Our supporters, sympathisers and fellow travellers went on to provide Lee’s grassroots electoral support. Without them he would never have achieved his stunning 43-seat victory in the 51 constituencies up for decision at the May 30 polls”.

But in 1963, confident in the consolidation of his power base, Lee prompted the attack on the CPM by launching ‘Operation Cold Store’ which saw a combined force of local and Malayan police conducting an island-wide round-up of alleged communist activists. Moreover, in 1963, when the left-wing Singapore Association of Trade Unions (SATU) led a general strike against the government, the pro-communist trade union organisation was banned and many of its leaders were arrested. Operation Cold Store crushed the CPM underground network throughout the island.

Those events demonstrate that the incorrect political direction and methods of the CPM, in not taking an independent working class road, had been capitalised on by the reactionary leaders in the PAP to wage a vicious attack on working class, left activists and trade unionists.

Trade unions and labour movements

After this Operation Cold Store, the labour movement in Singapore was massively incorporated under the state’s control to fulfil the needs of the ruling class. The non-communist National Trades Union Congress (NTUC), which was formed in 1961 to oppose SATU, was quickly elevated by the PAP as the leading trade union organisation. Ever since, strong personal ties between leaders of the PAP and the NTUC have formed the background of a ‘consensus’ relationship to create the conditions and laissez-faire atmosphere to attract business.

Beginning from 1980, the main NTUC leader has always been offered a minister-without-portfolio in a PAP cabinet. Meanwhile the NTUC reaffirmed its close relationship with the PAP by expelling stewards of NTUC-affiliated unions who had run for Parliament on opposition tickets. The trade unions’ role and structure were also modified. In the 1970s, the NTUC began establishing various cooperatives in the name of providing welfare benefits to its members. With the intention of facilitating better labour-management relations and promote company loyalty, the Trade Union Act was amended in 1982. In order to make factors such as working hours, conditions of service and fringe benefits predictable - and thus make businesses sufficiently attractive for investors - trade unions were barred from negotiating such matters as promotion, transfer, employment, dismissal, retrenchment, and reinstatement.

At present, the NTUC is no more than a ‘puppet’ of the state and the steadily declining union memberships since the late 1970s illustrates its complete ineffectiveness and its bias against workers. Now, only about 19 percent of Singapore’s 2.4 million work-force is represented by the NTUC. The last strike in Singapore was in 1986 when an employees’ union had taken issue with a company for victimising their officials. The NTUC even calls for workers’ wages to be organised in such a way that they can easily be cut whenever a company fails to make profits, such as in a downturn or recession, all under the guise of saving jobs.

The Singapore Government and the NTUC have tried a range of tricks to increase lagging productivity and boost the labour force participation rates of women and older workers. However, when labour shortages persist in the service sector and in many low-skilled jobs in the construction and electronics industries, they make up this shortfall by taking cheaper foreign workers. For instance in 2000, there were about 600,000 foreign workers in Singapore, from Malaysia, Thailand, Indonesia, Sri Lanka, Philippines and other countries constituting 27% of the total work force.

State Capitalism and economic development

Lee Kuan Yew described himself as a socialist in the 1950s and proclaimed that the victory of revolution in China was a great achievement for China and its people. He said at that time, “I have always thought that a Socialist is one who believes that state planning and control would bring about the greatest benefit to the community as a whole”. On the contrary, instead of benefiting the workers and boosting their democratic rights, the man who led Singapore for decades used state control and planning to heighten the capitalists’ profits by suppressing workers’ rights. As prime minister he opportunistically emulated the approach of the bureaucrats in China (under Mao and then Deng) in suppressing the workers’ democracy and trade unions to heighten state capitalism in Singapore. He established a strong paternalistic state to accumulate capital and achieve unnaturally rapid economic development.

In the 1950s, the state introduced a Central Provident Fund (CPF) as a scheme to force employees to save for their retirement through their own and their employers’ compulsory contributions. The CPF, directly managed by the state, has been used by the PAP government as a tool for capital accumulation and its fund has been utilised to finance social and economic developments, as well as for investment. In 1959, for the Housing Development Plan, which was budgeted to cost $871 million (of which $591.4 million was to come from domestic sources), the CPF contributed 80% of the plan’s local capital. Goh Keng Swee, who was Economic Minister at that time, viewed social services and economic development as rivals for the same funding. When it came to a direct choice, he would always choose economic development.

In the early 1960s, the Ministry of Finance took stakes in a variety of local companies in sectors like manufacturing and shipbuilding. Then in 1974 the state established Temasek Holdings to incorporate and manage these stakes and companies. At present, Temasek owns stakes in more than 60 local and foreign companies. In Singapore the companies range from the largest, such as SingTel, Singapore Airlines and Singapore Power, through public icons like the Raffles Hotel and the Singapore Zoological Gardens to the betting company, Singapore Pools. About half of its managed assets are external to Singapore and include stakes in telecommunication companies such as Telekom Malaysia, financial institutions such as PT Bank Danamon in Indonesia and NIB Bank in Pakistan and an extensive global portfolio, such as SingTel’s ownership of Australian Telco Optus. Recently, Temasek Holdings acquired 49% of shares in the controversial Shin Corporation, linked with Thailand’s Prime Minister, Thaksin Shinawatra – a deal which resulted in public outrage and protests in Thailand a few months ago.

Foreign investment

Temasek Holdings is said to have $55 billion dollars in assets and account for 60% of GDP. The government of Singapore has an investment arm called the Government of Singapore Investment Corporation (GIC), which primarily invests the government’s foreign reserves.

Foreign firms are found in almost all sectors of the economy with more than 3,000 Multinational Corporations (MNC) from the US, Japan, the EU and other countries investing in Singapore. MNCs account for more than two-thirds of manufacturing output and direct export sales, although certain service sectors remain dominated by government-linked corporations.

Although Singapore’s strategic location has given the country an economic importance in Southeast Asia, lack of physical resources and a small domestic market has forced the Singapore Government to adopt a pro-business, pro-foreign investment, export-oriented economic policy combined with state-directed investments. It makes the economy extremely vulnerable to regional and global financial changes. The economic slowdown in the US, Japan and the EU, as well as the worldwide electronics slump, reduced economic growth in 2001 to a negative - 2%.

High land and labour costs, caused by shortages of space and people, will, in time, force most manufacturers to flee to cheaper neighboring countries. The rapid growth of the economy, low wages and low production costs in China and India, attract the profit hungry MNCs to relocate their activities to those countries. This could endanger Singapore’s manufacturing and electronic industries which account for more than 40% of its total industrial output.

Because of the increasing volatility and vulnerability of its economy in recent years the Singapore Government has focused its investments in pharmaceuticals and biotechnology which needed advanced technology and a high-skill workforce. Recently it also changed the law prohibiting gambling businesses to allow world renowned casino operators to establish themselves on the island to further boost revenue through tourism.

Singapore is squashed into an area of 683 sq kms (266 sq miles) and desperately short of space not only for its 4.4 million inhabitants but also for investors to enlarge their industries and business activities. It has already expanded by around 10% by reclaiming land from the sea. In an attempt to counter this problem, the Singapore government has established ‘Singapore-cloned mini states’. Among them are Suzhou near Shanghai, China and the Indonesian Islands of Bintan and Batam. Here the Singapore government is exempted from some local regulations and trade tariffs. It has built factories, brought in domestic and multinational firms to occupy them and provided telecommunications links, roads, electricity generators and even pension schemes for their workers. Above all, it installed the “Singaporean operating system” - its trademark high-quality administration.

Singapore's government hoped to make exorbitant profits from selling and renting property and from charging management fees in its cloned mini-states. But during the 1997 Asian financial crisis, the biggest of them, Suzhou, was hit by fierce competition from a cut-price version that China set up alongside it. As a result of such setbacks, the returns on the ‘clones’ have been paltry considering the money Singapore put into them.

Need for a revolutionary party

In order to discredit socialism, Lee has often declared that he abandoned the idea of a welfare state established in the years following the PAP’s rise to power and in the 1970s, after witnessing the failure of socialism and the welfare state in Britain and seeing the record of achievement in welfare-free and capitalist Hong Kong.

The reforms and nationalisations under the Labour government in Britain in the 1950s - in health, transport, education and other sectors - were achieved through the struggles of the working class and were of great benefit to the population in general. Nevertheless such gains are not guaranteed under capitalism and its free market system. The Labour party at that time was a party of reform and its leaders were operating within the capitalist system. Since the 1990s it has been transformed completely into a right wing party by pro-capitalist leaders to the benefit of the ruling class. The socialist rhetoric that the Labour Party leaders propagated at that time was little different from what the PAP and Lee Kuan Yew used opportunistically for their own political gain in the 1950s.

Since the 1980s, the Conservative and New Labour parties in Britain have consecutively attacked the welfare state gains and benefits. At the present time, the New Labour government under Tony Blair is plundering the National Health Service, the education system, transport system and others for the benefit of the market.

Hong Kong, which Lee Kuan Yew claimed has inspired him as a model for Singapore, has created one of the most polarised societies in the world. There is virtually no social welfare and the cost of education, health care and other costs are rising sharply. The majority of local and migrant workers here earn very little and are extremely oppressed and exploited by the millionaires and tycoons who constitute less than 3% of the population.

The common nature of these governments - whether it is in Britain, Hong Kong or Singapore - is merely to act as a conduit for the ruling class to pursue profit and power, and they have no sympathy or concern for the working class and poor people who create the wealth but live in deplorable conditions under the system.

Stalinism used to scare-monger

Capitalist apologists and right wing governments have been harping on about the collapse of the regimes in the former Soviet Union and Eastern Europe as well as the development towards a capitalist market economy in China and Vietnam in order to discredit the ideas of socialism and the planned economy. The failures and incorrect approaches of many communist parties in the Southeast Asia region, such as the Communist Party of Malaya, which emulated the incorrect methods and approaches of Maoism and Stalinism, have been capitalised on by right wing politicians to create a phobia against socialism.

In fact the Stalinist and Maoist regimes in the former Soviet Union, China and other countries s were not genuinely socialist but a grotesque caricature. Economic planning in these countries took the form of central command from above by bureaucratic ministers and managers, acting on the orders of the privileged ruling class without any control by the working class in whose name the regimes were said to govern. This meant that their collapse was inevitable. It could only have been prevented if the bureaucracy had been overthrown and replaced by genuine workers’ democracy, elected committees at all levels – essential for running an efficient planned economy.

Active socialists world-wide must learn the lessons of their own and other countries’ working class histories. Only in this way can analysis and programmes be drawn up which match the needs of the new era of struggle and lead to victory.

Ravichandren, CWI Malaysia
26 June 2006