March 13, 2019
from TheTelegraphIndia Website
may show the current US unemployment rate
at a mere 4%, but there has been a notable decline
in the ratio of labour-force to population in the US
since the crisis of 2008,
owing to the ‘discouraged worker effect’
arising from meager employment opportunities.
to reduce unemployment in the US
is not a matter
of mere idiosyncrasy...
It indicates, coming on
the heels of US protectionist measures against China, that the
neo-liberal regime has reached a dead end.
Liberal opinion would no
doubt put the blame for such protectionism on the idiosyncrasy of
a Donald Trump, but Trump is responding, no doubt in his own
maverick manner, to a situation which liberal opinion scarcely
even recognizes, namely the acute distress and unemployment among
And Trump's act is a
desperate measure to bring it down as no other way seems possible
under the neo-liberal dispensation.
Fiscal stimulus for a new boom, through larger government expenditure, can be effective only if such expenditure is financed through either a fiscal deficit or taxes on capitalists (taxing workers to increase government spending does not create much additional demand since the workers spend much of their income anyway)...
But finance capital is opposed to both fiscal deficits and taxes on capitalists.
Besides, any increase in demand in the US will 'leak away' in the form of higher imports, creating greater employment elsewhere while increasing the external indebtedness of the US. And no other country can expand demand by fiscal means (which could also help the US), because doing so would drive finance away from it causing a financial crisis.
There is, in short, a
logjam at present...
But protectionism as a means of generating employment amounts to snatching markets, and hence employment, from other countries. It amounts to a 'beggar-my-neighbor' policy whereby the protecting country in effect exports unemployment to others.
It can work for the protecting country only if others do not retaliate, which is what Trump's negotiations would now be aiming at.
But whether others do or
do not retaliate, the basic point is that there are no means
available today for increasing world aggregate demand. (Indeed, if
others do retaliate, then the ensuing tariff war, by discouraging
investment everywhere, would lower world aggregate demand.)
In fact during the 1930s Depression, a group of German trade unionists had made such a suggestion, as had John Maynard Keynes; but it was not considered seriously.
In the present context
there is not even such a suggestion; there is consequently little
prospect of breaking the logjam in which neo-liberalism is caught.
As the world economy stagnates, and as the US resorts increasingly to protectionism, the prospects of 'export-led growth', which had opened up for a select group of East Asian countries in the 1960s and 1970s because of their proximity to the US (exemplified by their support for that country in the Vietnam war), and which had become much wider when the neo-liberal dispensation established its sway over the world economy, are now becoming increasingly dim.
The basis of growth in the new situation that is unfolding will have to be the home market.
For large countries like India and China this would mean their own national markets, but for smaller countries this would require a coming together by several of them to create a market of a certain minimum size.
For India, therefore,
what Trump's protectionism signals is the end of a conjuncture that
began in 1991 with 'economic liberalization'.
And no such change in
course can be effected if the economy remains open to free capital
flows, especially financial flows.
In short, there has to be a change of course from the one the country has been following since 1991.
This is not just a matter of choice:
But as the Latin American experience of the 1930s shows, any such change of economic course requires a change in the class nature of the State.
In Latin America in the 1930s, the old alliance of foreign capital, domestic landlords, and comprador bourgeoisie, which had exercised State power until then, was challenged, though not successfully everywhere, by a new political alliance led by the manufacturing ('national') bourgeoisie.
In today's context, a
change of course away from neo-liberalism would require again a
shift from a neo-liberal State towards an alternative State that
enjoys the support of the workers, peasants and petty producers and
of sections of the bourgeoisie and middle class wishing to break
Even countries like China
which have been remarkably successful in promoting 'export-led
growth' will have to adjust to the new situation by moving towards
an alternative strategy based on greater home consumption; and for
this they will have to move 'Leftward' in the sense of essaying a
more egalitarian society.
In fact, the current upsurge of fascism all over the world can be seen as a way of forestalling such a change of course, a means of preserving the existing neo-liberal order marked by the hegemony of globalized finance capital (albeit modified by metropolitan protectionism).
We are at the threshold
of historic changes, not at the end of history...