Class, Trump, Brexit, and the decline of the West

Bernie Sanders speaks to supporters at a rally in support of the nation's first universal health-care system, in Boulder, Colo., October 17, 2016. Brennan Linsley/Press Association. All rights reserved.All mainstream European newspapers professed
themselves “shocked” by Trump's victory. Representing large swathes of liberal
and institutional elites, they expressed fears that his presidency will be
destabilising and adventurist for both sides of the Atlantic.

Le Monde characterised the victory as
"a fundamental transformation" comparable to the fall of the Berlin
Wall and 9/11. For The Guardian, Trump
"will halt all the progressive narrative about America in the 21st
Century"; further, xenophobic and right-wing Europeans, with Le Pen first
among them, will be "jumping on Trump's bandwagon", whereas Moscow
and Damascus "will cheer" and the "Latvian" and the
Ukrainian" will suffer. Handelsblatt,
Germany's financial daily, connects Trump to a serious threat to "the
liberal international order". Paul Krugman complains that this is a president
who knows nothing of law, politics and economics, with an army of "bad
advisors" in all of these respected disciplines. Some Italians draw
parallels between Trump and Berlusconi, whereas some middle-to-upper-middle
class white feminists wonder what Hillary got wrong about "gender
equality". Yanis Varoufakis, belatedly, has realised that Trump's success
means that "America, too, needs democracy", and not just the Eurozone,
as his DiEM25 movement advocates.

Then there are ‘explanations’. Michael Kazin in Foreign Affairs, brands Trump an
"unlikely populist", and initiates a discussion drawn from the
American populist traditions of the nineteenth century. Francis Fukuyama, too,
turns his rage on Trump's "populist nationalism" and laments the fact
that the working class is lost to the Democratic party, which is now a party of
"identity politics: a coalition of women, African-Americans, Hispanics,
environmentalists and the LGBT community". Others, quite rightly, blame
the democratic establishment, which sidelined Bernie Sanders, an advocate of
democratic socialism who could have taken on Trump, winning the vote of the
declining, white, male working class, eventually cast to Trump. Indeed, Trump snatched Sanders' claim and argued
openly that, unlike Clinton – the personification of Wall Street and the
bureaucratised oligarchy of Washington DC – he could improve the conditions of
those "who have been left behind by globalisation, failing domestic
industries and crushed small businesses".

Trump won the American election against all odds, even
against his own Republican party, against the Wall Street and the Washington
establishment, including large swathes of the media and the liberal-intellectual
establishment.

Something very similar happened in England with the
Brexit referendum of 23 June: almost the entire City was behind the
"Remain" campaign, as well as key departments of the British state
and an army of intellectuals. Yet the "Leave" vote won. Marxists,
such as Alex Callinicos, believe that after the Brexit vote of 23 June, the
Trump victory represents the second major blow to globalisation, since the
majority of the ruling classes of the two key imperial states that spear-headed
it in the late 1970s stood behind politicians that finally lost, and lost even
against the prediction of pollsters. Callinicos concludes that there is
something deeper going on. That is correct. But what is it?

Stagflation to neo-liberal globalisation
(NLG)

In a remarkable passage in his Prison Notebooks, Antonio Gramsci, the incarcerated leader of the
Italian Left in Mussolini's fascist Italy between the wars, wrote that in
international politics and economics we need to distinguish between what he
called "organic movements", relatively permanent, from movements
which may be termed "conjunctural", and which appear as occasional,
immediate, almost accidental.

The Trump victory – and, for that matter, the Brexit
vote of 23 June – is an epiphenomenon of the deeply embedded structural and
historic changes and trends taking place in international political economy and
the global system of power since the 1970s. Journalists, pundits,
party-political personnel, politicians, tycoons, media discourses and
pollsters, either for their own reasons or out of ignorance, avoid looking at
matters structurally and historically: hence their false predictions and
speculations.

The most important, structural transformation that
took place in the west after WWII was a massive crisis in manufacturing
manifesting itself as stagflation (economic
stagnation accompanied by double-digit inflation).

This was the result of the exhaustion of demand-led,
Keynesian economics and of the over-competitive, liberal international order
that saw new centres of economic power (Germany, Japan) emerging and competing
on an equal footing with the winner of WWII and big creditor, the USA.

This competition drove down the rates of profit and
investments, resulting in an unprecedented economic crisis, the collapse of the
Bretton Woods system of fixed exchange rates and the devaluation of the US dollar.

The USA became a debtor power, registering persistent
losses in its balance of payments since the early 1960s. The global
(capitalist) economic order in the 1970s collapsed because of the structural
power-shift to the two strong economic ends of Eurasia, chiefly Germany and
Japan. These fault-lines of the international system criss-crossed with the
state-led economic structures of the Soviet bloc, putting massive pressure on
both China and the USSR to open up, as indeed happened (China began opening up
in the late 1970s and the Soviet Union, under Gorbachev, in the second half of
the 1980s).

From this perspective, we should point out that discourses
by scholars of international relations that over-emphasise "the end of the
Cold War", the "fall of the Berlin Wall" and the "end of
Communism" and consider these events "monumental" are, in our
view, rather ideological, western-centric and deeply misleading.   

As recovery within the old, demand-led global politico-economic
system was not forthcoming, the liberal elites, first and foremost in the USA
and Britain, broke away from the old consensus by way of unleashing money and
financial services and taking advantage of the end of the monetary stability
provided by the Bretton Woods system.

The switch from demand-led to supply-led economics
took place within an unbelievably punitive policy framework for waged labour
and its welfare institutions (health, pensions, education), inasmuch as it was
deemed responsible for the stagflation of
the 1970s.

The interest rate spike engineered by the American Fed
under Paul Volcker in the 1980s did not just break "the back of
inflation", as he argued, but also the back of the living wage, pushing
American industry into irreversible decline and outsourcing (the work of Leo
Panitch here is very important in understanding this process). Neo-liberal
globalisation, under the aegis of Wall Street and the City of London, hereby laid
down the policy constraints of new international and domestic orders, pushing
parties of both the left and the right to converge within its programmatic
remit.       

Neo-liberal globalisation
and the power-shift to the Global East

However, for a number of reasons, the project was
doomed from the outset. The leading power behind it aiming at transplanting neo-liberal
globalisation regimes around the world, the USA, was already an empire of debt
entering a period of long, protracted, yet steady and statistically traceable
decline. Buttressed by the power of the dollar as the globe's reserve currency
in a floating exchange rate environment, the US attempted to provide leadership
in a global political economy via a Treasury Bill Standard.

This meant that countries with trade surpluses (e.g.
Japan, Germany, Saudi Arabia, China etc.) would buy US paper propping up
America's external and internal debts. In fact, this became and continues to be
the case, introducing to the world an unprecedented and markedly unstable
international monetary system, yet one that is not sustainable in the long run.
This is why.

Bernie Sanders supporter at first day of Democratic National Convention in Philadelphia, July 25, 2016. John Locher/Press Association. All rights reserved.

All real, long-term, "organic" indicators,
as Gramsci would have put it, worsened in this period, if compared with the
so-called "golden age of capitalism" (1950-1970). Thus, unemployment,
albeit manageable, became endemic; consumption was buttressed by borrowing
rather than real wages; and technological innovation was used by export-led
states to cannibalise markets rather than induce real and sustainable
development (typical, in this respect, is the example of Germany within the
Eurozone).

Profits in the financial sector soared, but they were
consumed among the rich and the speculative arbitragers, magnifying inequality
and undermining growth and job creation.

Pointedly, China's domestic reforms and its coming
onto the global stage through the WTO, coupled with its export drive, cheap
manufacturing products and purchasing of assets across the world, signalled a
dramatic shift in global political economy, a shift in the centre of gravity
from the Atlantic shores to Asia.

2008

The global chain of extreme financialisation and
speculative profiteering broke in 2007-09, only to be transplanted into the
Eurozone via the over-leveraged banking sector. Wall Street and the City of
London were perplexed, and so were the German banks, which were the first to
collapse in 2008, having purchased massive stocks of American CDOs
(Collateralised Debt Obligations).

The American Fed and the Bank of England "did the
right thing", as Martin Wolf put it, in order to save capitalism, by
pouring the right amounts of money into the system ("quantitative
easing"), yet politics and ideology always lag behind.

Both ruling parties across the Atlantic, with the
partial exception of the Labour Party under Jeremy Corbyn and Sanders' faction
within the Democratic Party, failed to see these large structural,
"organic" historical movements. They have  continued to generate policies, liberal discourses
and media-led nonsense, including false electoral predictions, that did not
correspond to these long-term tendencies and realities on the ground.

Inequality has worsened markedly; real wages are on
the wane as the share of labour in GDP fell drastically and the rate of
creation of new jobs has slowed significantly, meaning that no substantive
investment occurs on the part either of the private or the public sector; real
GDP growth per person has been 1.4% a year, well below levels before the credit
crunch of 2007-08; and reports from the IMF and OECD have forewarned us that
global trade is contracting and that, as this is happening, a wave of
protectionism is on the rise.

This is all related to China's ascent. Last April, the
Australians blocked a vast land sale to a Chinese-led consortium and last
October Germany withdrew approval for the $1bn takeover of chip equipment maker
"Aixtron" by a group of Chinese investors. The value of Chinese
overseas acquisitions announced in the first nine months of 2016 totalled
$191bn, almost double the inflows of foreign investment into China over the
same period. This is a real challenge for traditional transatlantic interests.
The paramount aim of the notorious Transatlantic Trade and Investment
Partnership with the EU (TTIP), which is not forthcoming, and the Trans-Pacific
Partnership (TPP) between the US and 11 other Asia-Pacific countries, is not
just about how to pulverise nation-state power but also how to consolidate a western
trade bloc to fight Chinese competition. Pointedly, China is excluded from the
US-led initiative of TPP.  

Trump’s boasted protection of US industry and jobs
from Chinese competition was very appealing to voters and the unemployed. But
Clinton continued riding on the old and declining financial wagon of Wall Street
and Washington's liberal establishment (pretty much like the "Remain"
campaign in England in the run-up to the referendum of June 23, the sole
exception being the new leading group in the Labour Party under Corbyn). The
upper middle class Clinton's talk of women’s rights failed to convince the Latino
woman worker, who works the night-shift in Wall Mart on a meagre salary and with
no rights at all. Trump and, for that matter, Bernie Sanders – wrongly sidelined
by the democratic establishment in the primaries – understood better the global
shift and the class issues involved in it, than the Democrats. (And in that
respect, it has to be said that Trump and his advisers understand economics
better than Krugman.) In London, The
Guardian lamented that 53% of women pushed Trump to victory. Indeed, black
and Hispanic female voters opted overwhelmingly for Trump at the very moment
when Trump argued for building a wall on the border with Mexico!

Class matters more than hollow appeals to identity
politics issues at the moment when class
inequality is rising sharply. "Between 1980 and the most recent
period", Martin Wolf wrote in Financial
Times, "the top 1 per cent in pre-tax income jumped from 10 per cent
to 18 per cent". And he continues: "Even after tax, it rose by a
third, from 8 to 12 per cent. The rise in compensation of chief executives,
relative to that of workers, has been huge. The US has the highest inequality
of any high-income country and has seen the fastest rise in inequality among
the seven leading high-income countries".

If you work for Wall Mart you are not an
"employee". An "employee" has rights. In Wall Mart you are
an "Associate". As such, you have no fundamental rights and you are
not protected by labour legislation and agreements crafted by trade unions and
businesses. Similar industrial practices have been adopted in Britain and
Europe by major enterprises and multi-national corporations.

The decline of
the West

In the long history of (pre-modern and modern) global
political economy, crises come and go, as do the focal points around which they
form. To understand the dynamics of the current process of change we must also
understand the history that gives it volume and reach. The long crisis that
began in the 1970s remains unresolved as neo-liberal globalisation failed to
provide a response within the remit of the western-led global capitalist
system.

If anything, it brought new global players with it,
challenging the supremacy of the US and its European allies. As such, it
brought about fundamental changes in the world and has already generated
irreversible geo-political consequences, such as the rise of China. We believe
that Western capitalist economies have been in a long, structural,
"organic" decline since the 1970s and, with them, the primacy of the
US in the global economic system. To extend this claim to the level of
"civilisation" is a different discourse altogether that we cannot
address in this short article, although re-reading Oswald Spengler's opaque
work, The Decline of the West, is good
preparation.

The victories of Trump in the US and the
"Leave" campaign in Britain are but epiphenomena of momentous shifts
in global political economy and international geo-political alignments that have
been taking place since the 1970s. Right-wing forces win elections because they
have read these "organic", long-term trends faster than the traditional
"third way" Left and, from their own class perspective, have drawn
their conclusions and elaborated their electoral tactics. They are not just "populists"
(a term that should stop being used in a derogatory manner which, alas, has
become a constant practice among liberal journalists) and, unlike Krugman's
assertion to the opposite, they do know how to appeal to the suffering working
classes quite well.

What about the Left? Having completely relinquished
Keynesian policy-making in order to maintain its stakes in the governance of neo-liberal
globalisation, the "third way" Lefts of the Clintons and Blairs have
now lost any remaining credibility. To our minds, there is no doubt that had
Bernie Sanders been nominated to take on Trump, he would have had a better
chance to win the presidency and the contest would have been shaped along
correct class demarcation lines, albeit social democratic ones.

But the declining liberal-financial establishments of
Wall Street and Washington DC that keep defending the bankrupt international
order of neo-liberal globalisation prevented this from happening. It is for
this reason that the prospects are quite bleak for the US and the rest of the
world. Will Le Pen and the xenophobic Right in Europe benefit from Trump's
victory? Of course they will. But whose fault will that be? That is anybody's
guess.