Padua, Italy.
Making economics and politics appear separate is one of the chief characteristics of capitalism as a system of class rule, as Ellen Mieksins Wood has pointed out in many of her writings. But it is how politics is manifested AS economics and economics AS politics that should concern us especially right now.
Today a general strike is paralyzing Portugal, as workers there protest the loss of job security through legal changes, and the wage cuts (through elimination of 13th and 14th months of pay, which are standard in many European countries where monthly wages are not that high) that are essential parts of the austerity program approved last week to please the Troika (IMF, European Central Bank and EU Commission). Fitch announced this afternoon that is downgrading Portugal’s bonds to junk status.
In the streets of Cairo clashes have taken place over six days, and hundreds of thousands have gathered for several days in a row demanding that the military junta cede power to civilian rule so that the process of democratization supposedly won in the February Revolution can go forward again. Standard and Poor just cut Egypt’s sovereign bond ratings “deeper into junk status”.
The message is: bond ratings are a reflection of how well a local government successfully suppresses working class and popular revolt. That is lesson 1.
Lesson 2: The downgraded bond rating is also intended to back that government up in suppressing such opposition, by limiting options, requiring even stricter and more painful austerity. This has been very much the point of externally-imposed austerity programs for more than 30 years, in the form of structural adjustment programs of the IMF and World Bank, and more recently across Europe and the US. Further, the organized, collective purchase or non-purchase of a country’s sovereign debt is a primary means by which the capitalist class, especially its best organized sector finance, controls and limits the policy options available to any government. Hence the famous exchange recorded in Bob Woodward’s “The Choice” in which newly elected Bill Clinton rants about how the bond market is controlling his presidency.
Lesson 3: “market” is an abstraction. What is abstracts is a set of identifiable players, fewer than it might seem at first, since the concerted, coordinated or simply coincidental actions of a few very large banks and investors can make a huge difference on a given day when concentrated on a single country. This leads to Lesson 4: There is an increasingly united, increasingly global ruling class, who act collectively through a set of institutions that I call, using that classes’ own phrase for it “global governance”. Global governance includes four different kinds of organizations:
- Most obviously, the specifically global governance organizations themselves, that is institutions such as the IMF, World Bank, WTO, EU Commission, UN Security Council and a plethora of less central agencies involved with energy, environment, management of the seas and so forth.
- Informal gatherings, some official, some not, ranging from the annual World Economic Forum at Davos, Switzerland to the right wing’s favorite conspiratorial suspect the Bilderberg Group, to the Trilateral Commission to the G20 summits, to the European Council summits. The importance of these in shaping and enforcing, through peer pressure, or what one scholar called “elite socialization” should not be underestimated. Nelson Mandela describes how it was at Davos in the 1990s, when he was the world’s most famous and esteemed leader, that he was convinced by the consensus of other world leaders to abandon the promises of his own ANC’s Freedom Charter with its call to make the wealth and resources of South Africa property of the whole people and instead to work for free markets, foreign investment and trade. Any process more convincing than a lifetime as leader of a revolutionary movement and 27 years of suffering in prison for it should be taken seriously.
- Central Banks. These are now Fifth Columns in every democratic republic. Their “independence” – of elected officials, constitutional niceties and control by the people – is a requirement by capital worldwide as a precondition for even dealing with countries, as it was for creating the European Union and the Euro. These act as political leadership for the banking and investment industries as a whole, guiding financial movements, setting initial conditions, such as money supply and interest rates, so that the options available to other actors are restricted. While these are national in general the ECB is of course above and outside of any national government’s control, which was the whole point of it, indeed is the whole point of central banks in general today. That the ECB’s new head, Mario Draghi was able to oust elected (if execrable) prime minister Silvio Berlusconi by not buying Italian state bonds for a few days a couple of weeks ago makes clear my point. Investors followed Draghi’s lead and the result was that the whole Euro zone was nearly capsized as it took time for Draghi’s adjustment in buying Italian bonds to turn the ship around again once it was clear that finance has won and their direct rule, in the form of the unelected government of new PM Mario Monti, former head of the Italian central bank and ex-Goldman Sachs executive, was guaranteed.
- A number of private but collective actors such as banks, investors and especially ratings agencies – the big three Standard and Poor, Fitch and Moody’s to whom anti-trust rules apparently do not apply, since if they did any country that applied them would be subject to a downgrade similar to the one that S and P carried out on the US rating this past year to put pressure on for more austerity during the Debt Ceiling crisis there. That no such downgrade of say, Lehman Brothers, Bear Sterns or any of the other disasters on Wall St. took place has not been the subject of an investigation, let alone of any arrests and charges, or to be really absurd the cancelling of the ratings agencies’ charters and their being closed down for good in favor of a governmental or inter-governmental, non-profit and neutral body to rate companies and public credit worthiness should not surprise us. Do anything of the sort and your credit will be downgraded, costing you a fortune in higher interest rates to sell your bonds, or even a shriveling of credit resulting from your meddling in ruling class matters.
These actors, though distinct, not always in perfect agreement and coming from different points of view at times, are nevertheless part of the same overall division of labor (no pun intended, but irony yes) for capital: they constitute, in their ensemble as global governance a political force, a political party of sorts if you like, able to act in concert, and whose general perspective will be similar as a result of the elite socialization process that serves to unite the private and public sector, the national and global organization actors into a single class. How else to explain why Obama, Mandela and his successors, Lula and others so easily end up carrying out the same essential policies? How better to understand why everyone at the G20 agreed that Greek Prime Minister Papandreos’ call for a national referendum so the Greek people could decide their own fate, and judge whether the wrecking of their national economy and social fabric was too high a price to pay for membership in the Euro was an act of insanity and in bad taste besides?
So Lesson 5, summing up what we have learned: whenever you see economics, especially when it seems to be neutral, professional, technocratic, as in the new governments in Greece and Italy, you are watching politics happen, class politics. And it is not happening either as a result of impersonal, diffuse market forces, but because there are organized class forces making it happen.
My wife recently came to this conclusion independently as she learned watching the news here in Italy where we live, that Italy will now be required (passive tense, already a literary preference for style in the Italian language is very well suited to the process of global governance, since in governance, unlike in government, no one appears to be governing – all the better for those that are) to change its constitution to require municipalities and the national state to balance their budget. Such a legal change is appalling for several reasons, among which are that the Italian constitution is the result of the Resistance movement that liberated the country from the Nazis and Fascists, and changing it because of outside pressure is shocking to many. Second, because any such requirement of a balanced budget essentially outlaws Keynesian economics and most social democratic and leftist politics by definition. Whether one likes or does not like such policies, banning one side in a political debate from enacting its own policies and requiring only one set of opposed policies is to thoroughly supplant exactly what a democratic debate and elections are meant to decide.
But my wife Silvia cut straight to the chase, to the heart of the matter one split-second after hearing the news: “That is the same thing the right wanted in the US when they were debating the Debt Ceiling” she told me. “This is a precisely-formulated program!” That is, she had exactly identified the main point in world politics today: who the main actors are. C.Wright Mills would not have put it better – a few whose ability to shape history far outweighs that of most of the rest of us put together. He called the ones he studied the Power Elite, I call the ones we face today a global ruling class and the institutional framework through which they act Global Governance. They’ve evolved since Mills’ time in other words.
But there is one more lesson: Politics, OUR politics, is also represented as economics. This is hard for activists to see since it sometimes requires both reading hieroglyphics such as market quotations, or interest rates, that at first sight appear to be unrelated to strikes, struggles, occupations and protests, even elections, and even boring to those of us who have avoided working in banking or Wall St. because this stuff did not seem the stuff of dreams to us. Also because it requires understanding that the results of our struggles sometimes leap up several levels of mediation.
Thus, on October 22, during the waning days of Jean-Claude Trichet’s tenure at head of the ECB, it was announced by Trichet, Sarkozy and Merkel that the banks would have to take a 50% haircut on their loans to Greece to save the Eurozone. This came just a couple of days after the largest, most disruptive strikes and protests to that time in Athens during the entire year and half of agony that has attended Greece’s debt crisis/class war, which is saying something, and after 100,000 had marched in Rome with much of the city involving clashes with police, on the eve of the already in the works Italian crisis. The ruling class had taken a step back from the abyss, writing down the Greek debts, as a revolution in Greece, the country’s withdrawal from the Euro and the Euro’s collapse were not the results desired, since the whole point was to use the Euro to force Greece to transfer wealth from its working population to global finance, not to have the whole debt cancelled and the measure of wealth in European banks reduced to paper.
Similarly, yesterday’s (Nov. 23) fiasco of German bonds, and the news that a Eurobond of some kind now appears inevitable are highly mediated but unmistakable results of the struggle as well. It has proven impossible to defend German finance while waging the class war on so many fronts in Southern Europe and while the students in Italy whose occupations as the “draghi ribelli” (rebel dragons but a play on the surname of the ECB head) and Greek and Portugese strikers and protesters will undoubtedly be made to pay later with more downgrades, more austerity proposals and the rest, they should be aware that their struggles in the streets, plazas and piazzas are not without effect.
For in the end, the real lesson is the one Marx gave us: that economic minutia measure class struggle, and our struggle therefore has an impact on the system as a whole, its profitability, its flows of investment, its institutional stability. This is the trump card of political struggle, from Tahrir Square to the occupations across the US, to the strikes coming up in the UK, Greece and elsewhere in the next week or so, we can rest assured that the cracks in their seemingly technocratic edifice, in their stock quotations, bond ratings and profit rates are determined by our movements in the final analysis.
STEVEN COLATRELLA lives in Padua, Italy.