From the Fall of Saigon to the Fall of Lehman

[Chapter from AK Press "The End of the World as We Know It?"]

In a blurry black and white photograph from Italy in the 1960s, a worker rides a Vespa past a factory wall on which is scrawled operaist graffiti "Il Vietnam è in fabbrica" - Vietnam is in the factory. Today it would be more likely to find "The factory is in Vietnam" on the walls of the long-closed factory. Yet these two moments are not unconnected. So how did we get from the fall of Saigon to the fall of Lehman brothers, from Nixon to Obama? The answer from much of the Left seems to be "financialization", understood not as a materialist process, but as fulfillment of the Communist Manifesto's apocalyptic vision that "all that is solid melts into air."

Financialization, credit, debt become immaterial, intangible factors, things of air and fiction, in the process becoming explanations that explain nothing. Trying to step back from such ultimately unsatisfying interpretations, this chapter begins the attempt to outline a materialist history of how the global capitalist system has evolved since the demise of the post-WW2 Bretton Woods system in the ruins of Saigon, to the present day rise of China as the world's foremost industrial power and the onset of stagnation and decline of the West.

In the process, I attempt to avoid falling into the pitfalls of geopolitics or economic determinism and keep sight of the human agency of real processes of struggle and production, and productive struggle.


Regimes of Accumulation, Care and Settlement

In order to frame our narrative it is useful to introduce some loosely structuring concepts. We will use the ideas of regimes of accumulation, regimes of care, and regimes of settlement to tell the story of the rise of Keynesianism from the ashes of the Gold Standard era, its breakdown and replacement by neoliberal globalism, and the crisis of the latter, which is where we find ourselves today.

A regime of accumulation is a term originally introduced by the French Regulation School of Marxist historians, although we use it here much more loosely to refer to an ensemble of strategies and institutions that together define the dominant mode of making profit in a given state territory. As such it must, by implication, also deal with the biopolitical needs of the population of that territory, both in a disciplinary and policing sense, but also as the living basis of the labor power that is the source of profit. To that extent, it has been argued recently, in a paper by Gareth Brown, Emma Dowling, David Harvie and Keir Milburn, “Careless Talk”, that each regime of accumulation necessarily implies a shadow “regime of care.”i

A regime of care, in this formulation, is the totality of the strategies and institutions that manage the reproduction of living labor and of labor power. That includes health and education systems, but also prisons, madhouses, police, and questions of cultural reproduction, such as whether the leisure activities of workers are self-organized, state-controlled, or commodified by the market. The relationship between regimes of accumulation and regimes of care parallels and reflects the one between capital’s cycle of accumulation and labor’s cycle of social reproduction.

If we were to pick one vignette to illustrate the development of regimes of care, then the school breakfasts program of the Black Panther Party would be it. Set up through the agency of autonomous and politically-conscious self-organization, it would be taken over by the state under the Keynesian policies of the Nixon/Ford era and then, ultimately fall victim to the cuts of the Reagan years. This trajectory, in a nutshell, is emblematic of the passage from classical to Keynesian to neoliberal regimes of care undergone in the 20th century.

Above and beyond the regimes of accumulation and care that shape the dynamics of struggle and development within a particular state territory, we need some concept of the international system that states use to manage their economic interactions, trade, and the balances and imbalances of payment they lead to. The conventional frame for looking at the Gold standard and Bretton Woods, is to consider these as international monetary systems. Instead we choose to call it a settlement system. In part this is in homage to the Bank of International Settlements, the oldest established dedicated institution of the system, and still at the heart of setting the agreed rules for international banking today. But mostly it’s to step back from the fetishism that substitutes one of the tools of settlement, money, for the real processes and problems of international balances of payment. Whatever may be the merits in communications theory of Marshall McLuhan’s famous epigram that “the medium is the message”, nothing could be more misleading or mystifying than applying the same principle to the role of money in economics. In any case, there is no such thing today as a truly international money, and has not been since the days of the Spanish peso de ocho of the Mercantile era. On that note, let us remark in passing that the Gold standard does not refer to the time when people used gold directly as money, in which case settlement problems mostly do not arise, but the system of setting the exchange rate of national token currencies by reference, and convertibility to, gold.

Without wanting to write an economic textbook, there are certain problems with settling balance of payments of debts between countries. Loosely speaking, an imbalance of payments between two countries occurs if one persistently buys more imports from the other than they sell to it in return. In parenthesis we must note that the relationship between balance of trade and balance of payments does also involve other factors (export of capital, repatriation of profits, intangibles, distinction between a country’s current account and capital account, etc). But, to cut a long story short, one of the resulting problems is that the deficit country ends up with a shortage of the other’s currency and the surplus party has more than they want of the deficit trader’s money. When the surplus country decides they won’t accept payment in the deficit currency any more, the problem arises of needing a third means of payment, as the deficit country has a shortage of the net exporter’s currency, by definition. By preference this would be a third means of payment that is widely accepted by other countries for imbalances the surplus party may, in turn, need to settle with them. Who chooses this third means of payment, exactly what it is, and how its relation with national currencies is managed, is one of the key problems of a regime of international settlements.

Of course these three interrelated regimes do not exhaust all the aspects of the political, social and economic development in the modern era. We could talk of the problems of an international analogue to national regimes of care. Of course no such regime properly exists, as the problems of migrant and refugee struggles for even the most basic rights, including life itself, show very well. Yet the system of international organizations and institutions does include some that address biopolitical concerns at a global level, such as the World Health Organization, the UNHCR, various development bodies, or the whole swarming host of those “mendicant orders of Empire” (to use Toni Negri’s delightfully puckish phrase), the international relief and development NGOs.

But above and beyond that, the net effects of the interactions between these three regimes produces definite and distinctive eras in the frame of global governance. From the colonial imperialism of the Gold standard era, through the neo-colonialism of the Keynesian, to a putative post-colonial era inaugurated by neoliberal globalism, the appearance of a correlation between regimes of material relations and the politics of global governance raises the question of the direction of causality between the two. It is one of the contentions of this text that the actual direction of causation is the opposite of the common assumption that the politics of global governance shapes the path of capitalist development according to its own conscious design. “The best laid plans of mice and men, gang aft agley” as Robbie Burns put it.


The rise and fall of Keynesianism

The ensemble of national regimes of accumulation, of care, and international regimes of settlement that came to be known, somewhat misleadingly, under the single title of Keynesianism, grew out of the crisis of the Gold standard era. It was a crisis that encompassed two inter-European imperialist wars, the Great Depression of the inter-war period, and the loss of great swathes of the globe’s territory and population to the imperialist powers through the establishment of state socialist regimes first in Russia, and then following WW2, in China and most of Eastern and Central Europe.

These losses, even more than the destruction of the wars, were existentially alarming to the newly dominant US and its surviving European capitalist allies. If the practices, traditions,and dogmas of the Gold standard era had mostly evolved “organically” through precedent, improvisation, and imitation, those of its replacement would, of necessity, be carefully designed to ward off the looming catastrophe of the overrunning of the entire Eurasian landmass by the barbarian “Communist” hordes. To that end, in 1944 delegates from allied countries, including John Maynard Keynes for the UK and Harry Dexter White for the US, met at the Mount Washington Hotel in Bretton Woods, New Hampshire for most of that July. The system of international settlements and currency management agreed there has ever since born the resort town’s name.

The Bretton Woods system aimed to restore the stability of fixed interest rates that the Gold standard had provided until its breakdown. However, rather than pegging each state’s currency to gold convertibility directly, they would be pegged to the US dollar. Only the dollar then would be convertible. Keynes had argued that currencies should be pegged to a synthetic, non-national currency, the bancor, which would in turn be convertible not simply to gold, but a basket of basic industrial raw material commodities. However, in their hour of triumph and, either already possessing or now being owed virtually all the gold reserves of the remaining western capitalist powers, the US was having none of it. The US dollar would be the reference point and international reserve currency and convertible to gold directly. 

As well as defining the mechanics of a fixed currency system, the principle of capital controls to allow member countries to defend their exchange rate without sacrificing all control over their national economies was accepted for the first time in mainstream economics. In addition, international institutions were established to defend the system against national currency crises and the dangers of the “beggar thy neighbor” protectionist wars that had caused chaos during the 30s. Those institutions, the International Monetary Fund, the International Bank of Reconstruction and Development (now World Bank), and the General Agreement on Trade and Tariffs (now the World Trade Organisation) are with us still. 

There was a controversy at the Bretton Woods conference over the Bank on International Settlements (BIS). The BIS was originally set up to manage the punitive war reparations payments imposed on Germany by the Versailles treaty after WW1. As such, it had a number of German treasury figures on the board who became Nazi place-men after 1933. The Norwegian delegation to the Bretton Woods conference charged the BIS of having aided the financing of the Nazis during the war, facilitated the looting of occupied Europe,and been complicit in the Holocaust. The Norwegians, with the backing of Harry Dexter White and Henry Morgenthau of the US, called for the liquidation of the BIS. This move was opposed by Keynes, not because the BIS wasn’t guilty as charged (they certainly were), but because he recognized the need for an independent international “capi di tutti capi” (boss of all bosses) bank regulator to make the system work. Had the Swiss-based BIS been liquidated, the chances of a replacement being either blocked entirely, or relocated to New York and subsumed under US banking, were overwhelming. Like all Keynes’ other battles against White at the conference, the decision went with the Americans. However, despite being passed, the order to liquidate the BIS was never implemented before Roosevelt’s death and the UK was able to convince Truman to rescind the order. The motives for choosing the BIS as the emblematic institutional figure of contemporary regimes of settlement are not limited to its purely economic history or functions alone.

There are three things that need to be said about the Keynesian regime of accumulation at the start. The first is that this was a party to which not everyone was invited. Keynes was a loyal British Empire man and the battles he fought with Harry Dexter White were mainly aimed at trying to defend some British independence within the trans-Atlantic alliance, despite the reality that an economically ruined UK was totally in hock to the US by the end of the war. However both Keynes and White were on the same side when it came to maintaining the old world order of a white supremacist Euro-American dominance of the globe and the division of the world into a developed “inside” versus a colonial, or soon to be nominally independent, neo-colonial “outside.” The new “Keynesian” world order was a fundamentally divided world - a division bolstered by capital controls - in which the Cold War forced the Western capitalist powers to cease fighting militarily over exclusive access to colonial territories and agree to share them, under US hegemony, naturally. 

This fundamentally colonial character of the Keynesian world order is particularly worth recalling today when so many veteran left-wing commentators, with a honorable record in criticizing US and Western imperialism, show a contradictory nostalgia for the very Keynesian world order that was built on those same imperialist foundations.

The second point of note is that the critique of the causes of the Great Depression, out of which Keynesianism was born, explicitly made the connection between the breakdown of the Gold standard’s international regime of settlement and the failure of the national regimes of accumulation to provide employment or break out of the debt-deflation downwards spiral. This is also worth remembering now as many of today’s wannabe “retro-Keynesians” present their alternative to the neoliberal order as a purely national project of accumulation, under the slogan of “jobs and growth,” divorced from any associated need for change to the international settlement system itself. 

The third consideration, related to the second, is that as a project for national regeneration and return to full employment, so-called Keynesianism is in fact much more a product of the policies of the New Deal and fascist corporatism, re-articulated in Abba Lerner’s “functional finance” - the perceived need for government intervention and use of active monetary and, above all, fiscal policy to achieve goals such as full employment, economic growth, etc. Now derided by the Right as “tax and spend” policies, the kind of dirigiste government economic policies that many people now associate with “Keynesianism” are really functional finance or “Lernerism.” Just as the systematization of Keynes work into conventional economics, via John Hicks’s IS/LM curve (as preached today by the likes of Paul Krugman or Brad deLong) should more properly be known as Hicksianism.

If the Keynesian regime of care can be summed up in one phrase, it would be the colonization of the space of social reproduction by the state. This is a process that began in the 1930s under the New Deal and the various Fascist governments in Europe. Impelled by the pressure of the Great Depression, worker unrest, and the threatening example of the Russian Revolution, areas of worker’s life outside of the shop floor that had previously been outside the horizon of bourgeois concern became targets for intervention and co-option. Most famously this included the organizations of workers economic defense themselves - the unions. 

Here we find the famous Keynesian “productivity deal” which both provided its conjunctural power, while simultaneously containing the seeds of its eventual destruction. The inclusion of the organs of labor’s social reproduction into a Faustian compact with a national regime of accumulation violated the core ontological foundation of capitalist society - capital’s need for autonomy from any limits posed by labor’s reproductive needs. Worse, the effects of a regime founded on the, even partial, subsumption of capital’s expansion to human needs undermined the very ideological foundation of the productivity deal to start with, and ultimately contributed to the great revolt of workers against work that began in the late 1960s and lasted throughout the 1970s.

Ultimately the Keynesian divided world order fell to a double pincer movement of anti-colonial struggles on the “outside” and the smashing of the productivity deal by workers on the “inside.” The struggle of the workers against the work-discipline implied in the Keynesian productivity deal, we have just talked about was the “inside” struggle. In terms of the “outside” struggle, the situation of the Cold War meant that the US found itself somewhat trapped on the horns of a political dilemma. Despite its initial willingness to see decolonization struggles succeed in freeing former colonies from their exclusive possession by one or other European power - all the better to open them to American commercial interests - a contrary motivation raised its head—namely the fear that support for decolonization struggles from the “Communist” world of Russia or China would gain enough support amongst national liberation movements to bring the ex-colonies into their orbit, and thus be lost entirely to the capitalist sphere of influence. 

Thus the “domino theory” came to mean that the US, rather than playing the role, however hypocritical, of liberator to European colonies, ended up taking over the European powers’counter-insurgency struggles as “colonizer of last resort”. Lest we forget, Ho Chi Minh, not a Communist at the time, wrote to the US president for support for the freeing of Vietnam from Japanese and French colonial domination at the end of WW2. Vietnam was not originally a “domino,” it was US support for French imperialism that forced the Viet Minh into the Communist camp. 

The US decision to opt for the military suppression of decolonization struggles for fear of losing territory to their Cold War opponents committed them to a struggle against the needs of the peoples of the colonial “outside”—a struggle which became unsustainable, both financially and politico-militarily. 

The spiraling costs of the Vietnam War increased the flow of US dollars outside of US jurisdiction from a river to a flood. By 1971 this brought the maintenance of dollar convertibility at $35 an ounce of gold, the Bretton Woods founding price, to impossible levels. But if the costs of the war accelerated the process to breaking point, this was in many ways a death foretold. In 1960 the economist Robert Triffin warned that the US dollar-based Bretton Woods settlement regime was doomed. If the American purgatory in Vietnam was the result of the political dilemma over decolonization, it was what came to be known as the Triffin dilemma that ultimately sank dollar convertibility.

Again, a full exposition of the Triffin dilemma is best left to economics textbooks, but for our purposes the rough outline is as follows. Triffin pointed out that as the global reserve currency, the dollar was trying to do two jobs at the same time. The first was to serve the domestic needs of US economic growth and global trade competitivity. The second was to serve the needs of the global community of capitalist nations that needed dollars for their own reserves and international settlement needs. The dilemma was that the two roles were in contradiction with each other. For the same reasons we looked at in the sketch model of balance of payments problems above, for the US to supply external countries with enough dollars to support their own growth - thus keeping them from the clutches of the Cold War enemy - required running a massive current account deficit. As well as driving up inflation at home, the popularity of the dollar as reserve currency meant high demand and high value for the dollar, thus making US exports more uncompetitive relative to those of other countries. The compensatory factor of external demand for US treasuries making the rest of the world subsidize cheap deficit credit for the US, a kind of “seigniorage” tribute remarked upon by some left commentators, including David Graeber for e.g., actually only aggravates the net secular effect of exporting productive capacity to the rest of the world. 

This basic dynamic of the Triffin dilemma of the US dollar as global reserve currency has been, to a greater or lesser degree, the secular trend since the establishment of the Bretton Woods system, to the current day. Keynes’ arguments for the Bancor turned out to be far-sighted. A point recently made by the governor of the Central Bank of China and a good number of other commentators on the current woes of the global monetary system. To give some idea of the scale of what we are talking about, current estimates are that 3 out of 4 US dollars in global circulation are outside of the US jurisdiction. 


Globalisation and Neoliberalism

In 1971, Nixon’s administration was forced to end the direct convertibility of the dollar to gold. A revaluation of currencies followed later that year and the dollar and other currencies abandoned any form of exchange rate control by 1973. The resulting volatility in international exchange rates, combined with the chaos occasioned by the loss of the Vietnam War, rampant class struggle in the West, oil price shocks, inflation, spiraling public spending and the general lack of any coherent alternative capitalist strategy to the broken Keynesian model, dragged on throughout the 1970s. It wasn’t until Margaret Thatcher gained power in 1979 and became the first to unilaterally drop capital controls that the Keynesian system was finally put out of its misery.

But if the form of appearance of the Reagan/Thatcher neoliberal “revolution” was that of a political initiative, we need to understand that its material and financial precursors had gestated during the previous period. The growth of the repurchase or repo market, currency swaps, and other elements of the derivatives revolution, as means of evading capital and interest rate controls during the breakdown period of Keynesianism, I have covered elsewhere in “Financial Weapons of Mass Destruction” and will not rehearse here, for reasons of space.ii Suffice it to say that the cozy social-democratic myth that had it notbeen for the deregulation of the neoliberal era, financialization could not have escaped state control in the way that it did, is a fallacy based on ignorance of the real history. Deregulation was in many ways simply the legalization of financial practices of evading controls that the state proved powerless to prevent (not for want of trying).

Leaving aside the question of financialization until later, we must recognize the logistical revolution in global freight transport effected by containerization. If the Vietnam War had bankrupted the dollar’s gold convertibility, holing Bretton Woods below the waterline, it’s flipside was cementing the logistical revolution that opened the era of globalization. The combination of dropping any capital controls on foreign direct investment, the growth of a derivatives-based system of hedging cross-border risks, and the opening of a virtual trans-Pacific container conveyer belt provided the basis for David Harvey’s famous “spatial fix.”iii Globalizing production chains allowed capitalists to outflank worker’s revolt against productivity in the West by relocating production to the East. The income gap opened by the drop in real wages caused by de-industrialization and replacement service sector “McJobs” was bridged by the importation of disinflation, in the shape of ever-cheaper wage goods from the East. So was born a new “post-Fordist” neoliberal regime of accumulation.

Initially the container ships returning empty from Vietnam were filled by Japanese transistor radios, motorcycles, and other exports. But by the time of 1979, Deng Xiao Ping’s struggle to succeed Mao was complete and he saw the opportunity to hitch Chinese industrial development onto the trans-Pacific container conveyer belt and so began the process of turning China into the world’s leading exporter—a process that eventually saw China overtake Japan, plunging the latter into what is now nearly two decades of stagnation. 

From the perspective of the birth of a new regime of international settlement, the contrast with Bretton Woods could not be greater. Whereas the earlier system had been consciously designed, on the basis of nearly two decades of reflection on the failures of the Gold standard, the “floating world” of the post-Bretton Woods order came about almost entirely as an improvisation in the face of a sudden rupture. When Thatcher took the decision to drop capital controls, much to the horror of all of Whitehall and the City’s financial elite, she was impelled by dogmatic radicalism, rather than any understanding of what the likely outcome would be.

But the other aspect of the post-Bretton Woods settlement system is that it was not a wholly new replacement for the previous system, but it’s continuation in a partially collapsed form. Fixed exchange rates and capital controls may be gone, but the US dollar remains the global reserve currency. This also means that the basic dynamics expressed in the Triffin dilemma continue to operate.

In addition to the relocation overseas of production in “troublesome” industries already discussed, the other strategy of neoliberal regime of accumulation was privatization. Specifically privatization of those sectors of the Keynesian “mixed economy” model taken into state hands both provided windfalls to cut taxes on the middle and upper classes, while increasing the terrain for finance capital to valorize itself.

If the Keynesian regime of care was characterized by the colonization of previously autonomous workers’ culture and institutions around reproduction, then the neoliberal regime was based on, what else, privatization. In other words, the retreat of the state from supporting the biopolitical needs of the working class was to cede the space not to a return to self-organized self-provision, but into the clutches of the market for the commodification of leisure, health, education: culture and life itself.

But it was not simply the commodification of the sphere of social reproduction that neoliberalism was interested in, but its actual financialization. The demutualization of the mortgage industry and the promotion of home ownership for the masses was once again founded on the enormous expansion of the finance and credit sector—particularly anchored in the property sector, being the one consumer durable that could not be shipped across the ocean in containers from China. Just as the importation of disinflation kept prices in other wage goods down, despite the inflationary monetary policies of the era of the Greenspan “put,” so the non-transportability of property meant inflation appeared in this sector as “asset” inflation. Of course housing is actually a cost to labor, not an asset. In reality, rising housing costs make workers poorer, but it was the triumph of bourgeois ideology to convince workers, that as members of the “property-owning democracy,” the legal possession (albeit mortgaged) of their own homes made them into small capitalists. Such that house price inflation created a “wealth effect” of people believing that they were being enriched by the process that was objectively impoverishing them, beyond the short-term perspective of the “home equity loan.” But then neoliberalism was always about the short-term being the only visible horizon.

This hiving off of the role of “deficit spender of the last resort” from the state to private households, especially of ordinary workers, was termed by some “privatized Keynesianism”. The difference is that when the crunch comes, the state can print money to pay the bills, while working class households cannot.

In addition to the financialization of everyday life and social reproduction, the other form of deficit spending engaged in massively by neoliberalism was “military Keynesianism.”Throughout the Reagan years the US state ran enormous deficits, not to fund health, education. or social programs, which were all being savagely slashed (in the name of “balancing the books” - as if!), but on military spending. In part, this was simple pork-barrelling of the military-industrial complex, but partly this was also a Cold War strategy to engage the USSR in a financial arms race on military spending in the hopes of bankrupting it—a strategy that ultimately proved successful in bringing about the downfall of the USSR and the end of the Cold War.

In terms of global governance, the turn of the US towards the repression of the former European colonies through the sponsoring of countless repressive “anti-communist” regimes continued unabated into the Reagan/Thatcher years. Outside of the G7 nations of North America, Western Europe, and Japan, the so-called “Free world” looked overwhelmingly like a dystopian nightmare prison camp world of fascistic military dictatorships. The Bretton Woods institutions of the international settlement system were repurposed to leverage the volatility of floating exchange rates and free-flowing capital, to make good use of “crisis opportunities,” such as the default crises of Mexico and many other countries of the global South to impose a “Washington Consensus” medicine of austerity and cuts to social and development programs.

Had the determining factor in global development been the political program of governance of the Washington Consensus, then we could have expected this pattern of military and/or IMF dictatorship over the global South to continue indefinitely. Indeed for much of the 1980s and early 90s this appeared to be what was happening. But beneath the surface, the contradiction between the neoliberal globalized regime of accumulation and its strategy of global governance was undermining the very foundation of the post-Cold War Washington Consensus itself. Beneath the “shock doctrine” tactics of neoliberal governance, the secular tendency for the export of industrial productive capacity occasioned by the underlying international relations of production and exchange continued unabated.

The apogee of the post-Berlin Wall unipolar world of unchallenged Washington hegemony, which proved also to be its turning point, came with the so-called Asian crisis of 1998. In Asia it was and is pointedly called the IMF crisis and regional countries resented bitterly the way that the collapsed property bubbles and resulting sovereign and currency crises were used by US and Western finance as an opportunity for a smash and grab raid. A process documented, in their different ways, by Naomi Klein and Paul Krugman, amongst others. But this represented the high point of the “Washington Consensus.” By the Summer of 2008, the IMF was virtually out of business, having only 2 remaining clients, and serious plans were being made to wind the institution up before it was saved by the fallout from Lehman Brothers and the 10/10/2008 global financial heart attack. 

One of the unintended consequences of the crisis was the Russian default which led to the collapse of the infamous Long Term Capital Management hedge fund (LTCM). The fall of LTCM, set up by the maths geeks who won the bogus Nobel economics prize for the Black-Scholes equation used to price options (and many other derivatives, by analogy), ten years before the fall of Bear Stearns and Lehman Brothers, in many way foreshadowed the 2007-2008 financial crash. Of course retrospect is a fine thing, and that aspect was covered up at the time by subsequent events - the internet tech bubble, its collapse, 9/11, and the neocon military offensive, etc. 

Another unintended consequence of the 1998 IMF crisis (let’s go with the Asian perspective on this one) was the institution of a strong dollar peg by the pillaged Asian economies, imitating what had long been China’s policy since its 1979 opening to the trans-Pacific export market. This so-called “Bretton Woods II” policy of the dollar peg being reintroduced, not by the US in the service of its own interests, but by its opponents in the service of theirs, massively accelerated the trans-Pacific exportation of industrial capacity from the US to China particularly and Asia more generally. In order to maintain low peg rates, the participants in this policy had to soak up (or “sterilize” to use the conventional term) the surplus dollars being imported and reinvest them in a safe store of value - either US treasury bonds or similarly triple-AAA rated US denominated financial assets. 

It was this element of massive demand for triple-AAA rated finance assets that drove the mania for invention of ever more obscure financial instruments, including the infamous securitization industry that turned semi-fictional (in risk terms) mortgages into MBS, CDOs,and their ilk. The credit boom was the result, not of the fictional conjuring of money out of thin air, but rather the enormous pent-up demand of very real money looking for financial assets to invest in, to get some return for idle cash. In other words, the credit boom was supply-side driven, contrary to some interpretations.


The crisis of Neoliberal globalization

Since the 2007-2008 global financial crash, whose story I tell in greater detail in the “10-10 Event”iv named after the aforementioned date of the Lehman Brother’s CDS auction on 10/10/2008, we have found ourselves marooned in a no-man’s land of stagnation and multiple crises. 

On the one hand, we have the continuing Eurozone crisis. Accepting Marx’s dictum that history repeats itself, first as tragedy, then as farce, then the Eurozone is the Gold standard as farce. The structural similarities of a fixed exchange rate area with free flow of capital, with a lack of fiscal or political union or democracy is leading to similar governance outcomes in a pseudo-colonial dynamic of the core exporting its financial and economic contradictions to the periphery. Naturally the Eurotops are in total denial about this reality. 

Similarly the US power elite is in denial about the ongoing results of dollar reserve currency status and the Japanese, likewise, are trying to restore competitivity through devaluation of the Yen, leading to an undeclared global “beggar thy neighbor” currency war. Meanwhile,the Chinese ruling class have just completed their ten yearly reshuffle by ending the balance of power between technocrats and party aristocracy, in favor of the latter, thus demonstrating that they too are in denial, lip-service notwithstanding, of the systemic threat that corruption poses to an absolutist state where political and economic power, rather than being separated, are combined and concentrated in the hands of an unaccountable elite. The road to avoiding the revolutionary overthrow of Communist Party power in China is the road less travelled at this stage.

What’s more, in this period of interregnum between the decline and fall of US global hegemony and the rise of its Chinese replacement, the structural problems of global finance that triggered the last financial crash have not been fixed in any way, leaving the system open to a recurrence of the same, if only perhaps on a bigger scale. The problem is a lack of agency. Although the global capitalist class has forums like the G20 to talk out their differences and make plans, so far the only element capable of uniting them over and above their differing interests is lacking. Only the threat of working class power can unite the differing national capitalist classes and so far this is missing. The destruction wrought upon western workers by globalization has yet to be overcome by a recomposition of a post-industrial class power. Similarly, the rising industrial muscle of the East and emerging economies, while resulting in a proliferation of vigorous local battles and struggles, has yet to reach the level of providing an existential threat to the established order. The words of Gramsci from the time of the last great epochal crisis resonate once more: “The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear.”

From the point of view of global governance, if neoliberalism was a project to not only restore capitalist profit rates, but to conserve the West’s global dominance, then we would have to say that neoliberalism will go down as one of the biggest own goalsin history. Its end result has been the decline of Western dominance and the seemingly unstoppable rise of China and other emergent powers to not simply equal status, but in China’s case, to overtake the US as the world’s largest economic power in the next decade or so. The white supremacist world order of the 19th and 20th centuries is finally drawing to an end. And good riddance to it! But of course, it is the contention of this text that the dynamics of capitalist development have never been dominated by the conscious political projects of global governance. 

If one thing about the recent history of the modern era is clear, it is that Marx was not wrong when he called capitalism a revolutionary force, capable of sweeping away the remnants of the ancien regime. However the extension of capitalism across the world’s surface and the global human population does not reduce the problems of its contradictions, but magnifies them a thousand fold. The ever-accelerating destruction of the global climate and human-friendly environment is only one sign of the existential crisis that global capitalism faces us with. So let us remember, before we get too tied up in the minutiae of sub-prime mortgages and Gaussian copulas, the big picture: we have a world to win, and we need to win it to ensure the survival of the next generations.


i The full paper can be found here: .

ii You can find the full text catalogued here: .

iii See David Harvey, “Globalization and the ‘Spatial Fix’,” Geographische Revue 2/2001, .



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