Since the U.S. Federal Reserve first hinted that it was planning to end its ‘quantitative easing’ policies a year and a half ago, it has become more clear that the world’s foremost financial-imperialist power still dominates the global economy--despite the rise of newly industrialized centers of super-exploited labor in the ‘developing world’. Now, with the announcement by the Bank of Japan of its own quantitative easing policies, and the EU divided over proposals to follow suit, the traditional great powers are stepping up to potentially play a larger global role than they have in generations. Without a serious effort to analyze and debate the changes in capitalism, Marxists will be unable to provide leadership in an increasingly complex world system. In reflecting on economic developments over the past decade, the Left in general has tailed behind the ruling class, whose money is at stake if it miscalculates. Even before the 2007-08 global financial crisis, bourgeois economists were predicting that the newly industrialized countries – epitomized by China but including a great number of other formerly colonized and oppressed states – were going to become the drivers of the global economy, catching up to and potentially surpassing the U.S. in importance. When Beijing responded to the initial shocks of the crisis with an unprecedented construction stimulus, and governments across the ‘third world’ subsequently launched their own credit-fueled binges, it inspired a bonanza of speculative foreign investment in ‘emerging markets’; soon an increasing number of organizations on the Left began characterizing China as imperialist. What’s recently become clear is that it was really the U.S.’s financial stimulus measures that undergird this economic growth in the third world since the crisis. To prevent looming capital failures at home and abroad in 2008, the U.S. central bank had to inject unprecedented credit into the global economy by printing trillions of dollars and using them to buy up stocks and government-issued bonds [see chart in comment 1]. By inflating the prices of financial assets through a new state-sponsored bubble of fictitious value, these policies, termed quantitative easing, not only created a new lifeline for U.S. capital, but also acted as a global stimulus by keeping interest rates low and stock prices high. Countries throughout the third world were able to avoid a prolonged downturn during the crisis because low interest rates made it possible for them to take-on unheard of levels of debt despite a steady decline in the rate of profit on investments. Even countries like China, with state control over the major banks and corporations, were sucked into a cycle where the low real returns on the first round of stimulus have required ever-larger injections of credit to keep the economy going, forcing them to open up their financial system to global markets and sacrificing their capacity to raise wages and living standards. When the U.S. attempted to phase out this financial stimulus last year, it discovered that it could not do so without triggering capital flight and a wave of debt defaults across the ‘emerging’ world, even China. With the U.S. increasingly straining to fulfill its role as the global military and financial hegemon, its rulers have sought to shift some of their burden onto their major allies. Japan in particular has been encouraged to play a bigger role, given that the U.S. military’s planned ‘pivot to Asia’ has been limited by its ongoing quagmire in the Middle East. Earlier this year, the Japanese government amended its national constitution to remove pacifist clauses in place since the end of WW2 – a move hailed as “historic” by the Obama administration. As tensions between China and its neighbors rise, Japan has already begun selling cutting-edge military equipment to a chain of states from Vietnam, to Philippines, to Australia. Washington hopes to re-consecrate its alliance with a rearming Japan through a comprehensive new free trade agreement spanning the Western Pacific, Northern America and parts of Latin America: The Trans-Pacific Partnership. The announcement by Japan last week that it was launching its own quantitative easing program is an even more significant re-assertion of its status as a world power. Proportional to the size of its central bank, the increased purchase of financial assets by the Japanese state will be even greater than the Federal Reserve’s program; an attempt by Japan to punch far above its weight and spring ahead to act as a guarantor of the global finance. This announcement that Japan will begin plowing credit into global markets has finally allowed the U.S. to end its own ‘emergency’ policies six years after they began, and immediately highlights the shift in the global balance of power. At the same time as Japanese banks are taking on this new role, China’s recent launch of its own Asian Infrastructure Investment Bank is already looking like a lame attempt. But Tokyo’s decision to begin quantitative easing, like the U.S.’s, is in direct response to internal weaknesses of its own. Japan never really recovered from the economic crisis of the early 1990s, and over two decades has launched one stimulus program after another in an attempt to revive its domestic industry. These new policies, although serving the broader agenda of keeping the global economy afloat, are essentially an intensification of earlier fiscal stimulus, intended to finally boost Japanese exports by making the Yen cheaper, raising stock prices, and keeping interest rates ultra-low to allow Japanese corporations to continue to roll-over their sky-high debt. The re-emergence of Japan as a major financial-imperialist power, therefore, although temporarily alleviating stress in the global economy, greatly intensifies the risks of a new financial crisis in the not-so-long term. Whereas the U.S. domestic economy underlying its ability to support quantitative easing was relatively robust, the Japanese policy is a huge stretch for that country, and is based entirely on the gamble that it will bring substantial growth to profits of its industry. Already burdened by the highest debt levels in the imperialist world, if Japanese industry doesn’t perform as planned, or if global demand continues to contract more rapidly than bourgeois economists are expecting, then the new credit binge could be unsustainable, and touch off an enormous debt crisis that has been growing in the developing world since 2009. However, the ruling class will never allow its system to completely fall apart without using every available means to salvage its position, and Japan’s heightened financial weight will greatly increase the resources at its disposal to prop itself up. Already over the past several years, the upshot of intensified stimulus measures by Prime Minister Abe’s government has been a huge surge of Japanese foreign capital investments in new markets in search of higher returns. Just between 2012 and 2013, while new Japanese investments in China fell by nearly a third, they more than doubled in Southeast Asia, where wages are even lower. Japanese investment in Mexico increased 342% between 2009 and 2013; Abe’s government has now announced its intention of doubling investment in India over the next five years, and has an even more ambitious plan to develop Sub-Saharan Africa. As quantitative easing policies bring new pressure on the economy to produce real returns, Japan will turn to these new frontiers of super-exploitation as the only way out of the crisis. Deploying its increased military strength will be absolutely essential to protect its investments in such regions of the world, where local ruling classes are weak but the possibilities for profit tremendous. And, just as ominously, its potential to adopt fiscal and military policies at odds with U.S. interests will increase (already talks on the Trans-Pacific Partnership have broken down, and Tokyo has tried to develop friendly relations with Putin despite the Ukraine crisis and sanctions). The one development in the imperialist system that could have even greater significance than Japan’s rising stature in the years ahead is if the European Union begins its own quantitative easing and military-diplomatic push. Having similarly failed to recover from the financial crisis, and now on the verge of its third recession in six years, the leaders of the European Central Bank in Brussels, with Washington’s encouragement, have already declared the need to do just that, and begin purchasing government-bonds of the Eurozone states. However, the EU is not a centralized state like Japan, and these proposals by the Central Bank have immediately plunged the union’s central institutions into a political crisis due to the opposition of its foremost member state, Germany. Europe’s financial powerhouse, German banks would have to supply the capital needed to make European quantitative easing a reality, but so far domestic public opinion has been resolutely opposed to taking on increased risk to prop up the finances of weaker member states. Nevertheless, a key shift in the attitudes of the German ruling class have been apparent in the past month or two, with political and business leaders supporting the idea of stimulus for the first time since 2008, but insisting on concessions, from France and Italy in particular. Right now, Berlin is using the new European slowdown to play a high-stakes game of chicken to get Paris and Rome to agree to impose major new austerity cuts and lower their national deficits. The outcome of this contest is not certain, but increasing pressure on all European national capitals in the face of the global slowdown makes a future agreement on these terms more and more likely. Already, its major imperialist states are taking on unprecedented military and diplomatic roles in the new war in Iraq and Syria and the crisis in Ukraine. And, having also already expanded into new frontier markets in the third world, Germany and France are investigating the possibility of joint military interventions under the banner of the EU to protect its investments in the future. These developments are unlikely to undermine the U.S.’s position as the dominant imperialist power, established during the Second World War and entrenched ever since. But they do point to the coming decline of its hegemony – not due to new contenders in the third world, where living standards will stagnate and fall in the coming period under unsustainable debt burdens, increasing dependence on international finance, and explosions of class struggle – but because of an increasingly aggressive Japan and Germany/EU. Right now these countries are allies of the U.S., and the White House is working to deepen their mutual interests; but increased financial and military capabilities open up the possibility of increased competition and rivalry emerging during future crises. With much of the Left already disoriented by the growing aggressiveness of Russia, still a much weaker imperialist power, it will be even more pressing to learn how to think in a world with growing inter-imperialist rivalry, all attempting to intervene in every struggle to push its own agenda at the expense of others, to show the way for the working class to play an independent role.
Posted on: Sat, 08 Nov 2014 10:20:11 +0000
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