SOCIALISM, LAND and BANKING: 2017
COMPARED TO 1917
By Michael Hudson
Here only the brief
introd & last part of this Art. Whole Art
at:
This is an article written for the
hundredth anniversary of the Russian Revolution, to be read in Beijing today.
[[ Before and during the PC-CH
Congress ]]
Socialism a century ago seemed to be the wave of the future.
There were various schools of socialism, but the common ideal was to guarantee
support for basic needs, and for state ownership to free society from
landlords, predatory banking and monopolies. In the West these hopes are now
much further away than they seemed in 1917. Land and natural resources, basic
infrastructure monopolies, health care and pensions have been increasingly
privatized and financialized.
…
Today’s revival of
Marxist scholarship has begun to show how the U.S. -centered global economy- is
entering a period of chronic austerity, debt deflation, and polarization
between creditors and debtors.
Financialization and
privatization are submerging capitalism in debt deflation
By 1991, when the Soviet Union’s leaders decided to take the
“Western” path, the Western economies themselves were reaching a
terminus. Appearances were saved by a wave of unproductive credit and debt
creation to sustain the bubble economy that finally crashed in 2008.
The pitfalls of this financial dynamic were not apparent in
the early years after World War II, largely because economies emerged with
their private sectors free of debt. The ensuing boom endowed the middle
class in the United States and other countries, but was debt financed, first
for home ownership and commercial real estate, then by consumer credit to
purchase of automobiles and appliances, and finally by credit-card debt just to
meet living expenses.
The same debt overgrowth occurred in the industrial sector, where
bank and bondholder credit since the 1980s has been increasingly for corporate
takeovers and raiding, stock buybacks and even to pay dividends. Industry has
become a vehicle for financial engineering to increase stock prices and strip
assets, not to increase the means of production. The result is that capitalism
has fallen prey to resurgent rentier interests instead of liberating economies
from absentee landlords, predatory banking and monopolies. Banks and bondholders have found their most lucrative market
not in the manufacturing sector but in real estate and natural resource
extraction.
These vested interests have translated their takings into the
political power to shed taxes and dismantle regulations on wealth. The
resulting political Counter-Reformation has inverted the idea of “free market”
to mean an economy free for rent extractors, not free from landlords,
monopolists and financial exploitation as Adam Smith, John Stuart Mill and
other classical economists had envisioned. The word “reform” as used by today’s
neoliberal media means undoing Progressive Era reforms, dismantling public
regulation and government power – except for control by finance and its allied
vested interests.
All this is the opposite of socialism, which has now sunk to
its nadir through the Western World. The past four decades have seen
most of the European and North American parties calling themselves “socialist”
make an about-face to follow Tony Blair’s New Labour, the French
socialists-in-name and the Clinton’s New Democrats. They support
privatization, financialization and a shift away from progressive taxation to a
value-added tax (VAT) falling on consumers, not on finance or real estate.
China’s socialist diplomacy in
today’s hostile world
Now that Western finance capitalism is stagnating, it
is fighting even harder to prevent the post-2008 crisis from leading to
socialist reforms that would re-socialize infrastructure that has been
privatized and put a public banking system in place. Depicting the contrast
between socialist and finance-capitalist economies as a clash of civilizations,
U.S.-centered “Western” diplomacy is using military and political subversion to
prevent a transition from capitalism into socialism.
China is the leading example of socialist success in a mixed
economy. Unlike the Soviet Union, it has not proselytized its economic
system or sought to promote revolution abroad to emulate its economic doctrine.
Just the opposite: To avert attack, China has given foreign investors a stake
in its economic growth. The aim has been to mobilize U.S. and other foreign
interests as allies, willing customers for China’s exports, and suppliers of
modern production facilities in China.
This is the opposite of the antagonism that confronted
Russia. The risk is that it involves financial investment. But China has
protected its autonomy by requiring majority Chinese ownership in most sectors.
The main danger is domestic, in the form of financial dynamics and private rent
extraction. The great economic choice facing China today concerns the degree to
which land and natural resources should be taxed.
The state owns the land, but does not fully tax its rising
valuation or rent-of-location that has made many families rich. Letting
the resulting real-estate and financialized wealth dominate its economic growth
poses two dangers: First, it increases the price that new buyers must pay for
their home. Second, rising housing prices force these families to borrow – at
interest. This turns the rental value of land – value created by society and
public infrastructure investment – into a flow of interest to the banks. They
end up receiving more over time than the sellers, while increasing the cost of
living and doing business. That is a fate which a socialist economy must avoid
at all costs.
At issue is how China can best manage credit and natural
resource rent in a way that best meets the needs of its population. Now
that China has built up a prosperous industry and real estate, its main
challenge is to avoid the financial dynamics that are subjecting the West to
debt deflation and burying Western economies. To avoid these dynamics, China
must curtail the proliferation of unproductive debt created merely to transfer
property on credit, inflating asset prices in the process.
Socialism is incompatible with a rentier class of landlords,
natural resource owners and monopolists – the preferred clients of banks hoping
to turn economic rent into interest charges. As a vehicle to allocate
resources “the market” reflects the status quo of property ownership and
credit-creation privileges at any given moment of time, without consideration
for what is fair and efficient or predatory. Vested interests claim that such a
market is an immutable force of nature, whose course cannot be altered by
government “interference.” This rhetoric of political passivity aims to deter
politicians and voters from regulating economies, leaving the wealthy free to
extract as much economic rent and interest as markets can bear by privatizing
real estate, natural resources, banking and other monopolies.
Such rent seeking is antithetical to socialism’s aim to take these assets into the public domain. That is why the financial sector, oil and mineral extractors and monopolists fight so passionately to dismantle state regulatory power and public banking. That is the diplomacy of finance capital, aiming to consolidate American hegemony over a unipolar world. It backs this strategy with a neoliberal academic curriculum that depicts predatory financial and rentier gains as if they add to national income, not simply transferring it into the hands of the rentier classes. This misleading picture of economic reality poses a danger for China sending its students to study economics at American and European universities.
The century that has elapsed since Russia’s October 1917
Revolution has produced a substantial Marxist literature describing how finance
capitalism has overpowered industrial capitalism. Its dynamics occupied
Marx in Volumes II and III of Capital (and also his Theories of Surplus Value).
Like most observers of his era, Marx expected capitalism to make a substantial
step toward socialism by overcoming the dynamics of parasitic capital, above
all the tendency for debt to keep on expanding at compound interest until it
produces a financial crash.
The only way to control banks and their allied rentier
sectors is outright socialization. The past century has shown that if
society does not control the banks and financial sector, they will control
society. Their strategy is to block government money creation so that economies
will be forced to rely on banks and bondholders. Regulatory authority to limit
such financial aggression and the monopoly pricing and rent extraction it
supports has been crippled in the West by “regulatory capture” by the rentier
oligarchy.
Attempts to tax away rental income (the liberal alternative
to taking real estate and natural resources directly into the public domain) is
prone to lobbying for loopholes and evasion, most notoriously via offshore
banking centers in tax-avoidance enclaves and the “flags of convenience”
sponsored by the global oil and mining companies. This leaves the only
way to save society from the financial power to convert rent into interest to
be a policy of nationalizing natural resources, fully taxing land rent (where
land and minerals are not taken directly into the public domain), and
de-privatizing infrastructure and other key sectors.
CONCLUSION
Markets have not recovered for the products of American industry and labor since 2008. Industrial capitalism has been sacrificed to a form of finance capitalism that is looking more pre-capitalist (or simply oligarchic and neofeudal) with each passing year. The resulting polarization forces every economy – including China – to choose between saving its bankers and other creditors or freeing debtors and lowering the economy’s cost structure. Will the government enforce bank and bondholder claims, or will it give priority to the economy and its people? That is an eternal political question spanning pre-capitalist, capitalist and post-capitalist economies.
Marx described the mathematics of compound interest expanding
to absorb the entire economy as age-old, long predating industrial capitalism. He
characterized the ancient mode of production as dominated by slavery and usury,
and medieval banking as predatory. These financial dynamics exist in socialist
economies just as they did in medieval and ancient economies. The way in which governments manage the dynamics of credit
and debt thus are the dominant force in every era, and should receive the most
pressing attention today as China shapes its socialist future.
…
----
----
No hay comentarios:
Publicar un comentario