by John Smith
The attack on organised labour and working people in Europe, Japan and the USA, through intensification of labour, wage repression and cuts in social spending, was on its own nothing like enough to allow capitalism to escape from the systemic crisis of the 1970s. The most important contribution to the resumption of capitalist accumulation in its heartlands was the surplus-value extracted from hundreds of millions of workers in the export-oriented industries of the Third World (or Global South) and captured by imperialist transnational corporations (TNCs) and their suppliers as profits and by imperialist states through taxation. Once again, systemic crisis propelled capitalism along an imperialist trajectory.
By exposing workers in imperialist countries to increased competition with workers in low-wage countries, outsourcing, even the threat of it, has proved to be a powerful weapon against organised labour, which could not resist because its leaders failed to heed Marx’s prescient warning: “In order to oppose their workers, the employers either bring in workers from abroad or else transfer manufacture to countries where there is a cheap labour force. Given this state of affairs, if the working class wishes to continue its struggle with some chance of success, the national organisations must become international” (Marx, 1867).
The employers’ offensive in the imperialist countries in the decades before 2007 was most intense in the United States, where the median real wage has barely changed since the late 1970s and where the social safety net has been shredded.(1) Since wage inequality sharply increased during this period, it is evident that broad layers of the US working class have experienced declining wages. In contrast, most workers in most European countries experienced a slow but steady advance in real wages since 1980—including in the UK, despite Thatcher’s onslaught on unions. The major exception is Germany, where, according to the OECD, between the mid-1990s and 2008 real incomes of the poorest 30% of German households declined and those of the next 30% barely moved (Fredrikson, 2012).
The German reunification in 1990, which exposed West German workers to competition from lower-paid workers from East Germany, and the eastern expansion of the European Union, which exposed them to competition with workers across central Europe, ended the era when (West) German workers wages were the highest in Europe and helped German industry to maintain its share of global trade in manufactured goods. Italy, too, has experienced stagnant or falling average wages since 2000, in contrast to other Mediterranean countries like Greece and Spain, where average real wages grew relatively briskly until the advent of the crisis in 2008. Real wages in Japan, the other major imperialist power, have not grown since the mid-1990s, reflecting the moribund state of the Japanese economy since the bursting of its credit bubble in 1990-91. Outsourcing, to central Europe or to China and other low-wage countries in Asia, was and continues to be a major force pressing down on German and Japanese wages.
Spending on social wage rises
In contrast to Africa, Asia and Latin America, in imperialist countries public provision of health, education and social welfare — the “social wage” — forms a big part of workers’ total consumption. Despite deep cuts in many areas of social spending, throughout the neoliberal era (2) government social expenditure in all imperialist countries continued to rise as a proportion of GDP (and even more so in absolute terms). Leaving publicly-funded health and education services to one side, social expenditure, defined by the OECD as the “provision by public institutions of benefits to…. households and individuals in order to provide support during circumstances which adversely affect their welfare” (otherwise known as transfer payments: pensions, child support, unemployment pay etc), rose from 15.6% of GDP in 1980 to 21.5% in 2010 in the UK and from 12.8% to 19.0% in the US. In most other imperialist countries transfer payments rose even more strongly and now exceeds 25% of GDP in many of them, reaching 31.7% in France, up from 20.2% in 1980. The corresponding figures for Mexico, South Korea and Turkey, the only developing nations included in the OECD dataset, highlight the gulf between imperialist countries and the rest of the world: public social expenditure in Mexico rose from 3.2% of GDP in 1990 to 7.5% in 2010; South Korea’s rose from 2.7% to 10.1% of GDP between 1990 and 2015, while Turkish social expenditure from rose 4% in 1980 and 12.8% in 2010 (World Development Indicators, OECDStat).
The increasing cost of social provision is definitely not what the rulers intended! Capital has made little real progress towards reversing the expensive post-World War II health, education and welfare reforms conceded to the working class in the imperialist countries, as Fidel Castro said, “out of fear of revolution, out of fear of socialism.”(3) They were reluctant to mount a generalised assault on our wages and living standards because they feared its consequences: economic depression and generalised resistance. And the capitalists have met resistance, which they fear will boil over if they press too hard. Just as outsourcing provided capitalists with an alternative to investment in new means of production, so it also provided an alternative way to restore profits than through an all-out attack on wages and the social wage at home. But this has only been postponed; the onset of the global crisis now speeds its approach. The reversals endured and ground lost by workers in imperialist countries were not the result of crushing defeats of hard-fought battles involving millions, as in Europe in the 1920s and the “developing world” since World War II — which means the biggest battles facing working people in imperialist countries are still to come, which they face strengthened by the influx of women and migrant workers into their ranks.
Crises centred in Third World
The absence of economic crises in imperialist countries during the quarter-century that followed 1980 and the grinding war of position between capital and labour that unfolded there sharply contrasts with the wrenching economic crises and intense social conflicts that convulsed developing nations during this period. Ishac Diwan, a World Bank economist, recorded 216 crises in developing nations between 1975 and the mid-1990s, of which 67 provided sufficient data for analysis (Diwan, 2001). Diwan defined a crisis to be when a national currency declines by more than 25 percent against the dollar. In every case these crises resulted in a sharp and sometimes precipitous fall in labor’s share of dwindling national income, beginning a slide that typically continued for five years.
On average, “GDP per capita drop[ped] by 4.7 percent during the year of the crisis, 7.3 percent in years 2 and 3, before stabilizing in year 4” (ibid., 27), and he finds that “more recent crises have tended to hurt labor more than older ones, as if the mobility of capital has increased over time… causing a larger share of the losses to be shifted to labor” (ibid., 24). Diwan described the “transfer of assets away from labor during the crisis period” as “staggering, which goes a long way in explaining why workers fear financial crises so much. The world average is 33.7 percent of GDP per financial crisis” (ibid, 10).
Mexico’s ‘Tequila Crisis’ — when Mexico’s peso lost 42 percent of its value against the dollar in December 1994, touching off a deep recession and widespread bankruptcies — is one of those analysed by Diwan. A few months after the peso crashed the Financial Times observed approvingly that “devaluations improve a country’s competitive position by bringing about a reduction in real wages … four-fifths of pay settlements have not exceeded 7.5 percent, compared with officially forecast inflation of 42 percent this year” (Financial Times, 1995). Conditions attached by Congress to the U.S. contribution of $20bn to the $50bn rescue obliged the Mexican government to ensure that wages increased no faster than productivity, locking in the huge fall in wages. Özlem Onaran reported that “in Mexico. . . the wage share has declined 29.5 percent as of 1996 compared to 1993, and indeed has still not returned to its pre-crisis level ten years after the crisis” (Onaran, 2007, 14-15). When, as typically happened, a crisis-affected country approached the IMF for emergency assistance, this was made conditional on the adoption of a concentrated dose of ‘neoliberal’ remedies: extreme austerity, privatization, and removal of restrictions on the free flow of capital and commodities.
Across Africa, Asia and Latin America, IMF-ordained “structural adjustment’ and austerity policies aroused widespread resistance, typically met by savage repression, including widespread use of assassination, imprisonment and torture, police and army attacks on protests, strikes and occupations. Just as the installation of the Pinochet dictatorship created the condition for Chile’s pioneering neoliberal reforms, so the imperialists and their protégés across the world made liberal use of state and paramilitary terror to vanquish resistance to the neoliberal juggernaut. The contrast as well as the commonality between the antilabour offensive in imperialist nations and in oppressed nations is highlighted by the fact that, at the same time that President Ronald Reagan was breaking the “illegal” PATCO strike (Professional Air Traffic Controllers Organization) in 1981, a key moment in the anti-labor offensive in the USA, he was breaking the bodies of trade unionists in El Salvador—the US embassy was running death squads for that very purpose.
Trade unions and labor movements in imperialist countries would be better placed to resist domestic austerity today had they, during the 1980s and 1990s, thrown their weight behind trade union and popular resistance to the extreme austerity, enforced by death squads and military dictatorships, which their governments imposed on crisis-racked developing countries. The words spoken by James P. Cannon (1953, 43) about US union leaders’ support for Roosevelt and Truman’s foreign policy apply equally to the era of Reagan and Clinton and to unions in other imperialist countries:
“the labor leaders’ support of the imperialist government has been absolute and unconditional — and given in advance for any kind of crime on the international field. What was that monstrous policy of all the labor fakers based on? It was based on the purely selfish calculation that they, and a section of the American workers, would share in the spoils of world conquest.”
1. In recent decades, in all imperialist economies and especially so in the United States, average wages have advanced faster than median wages (the median is the midpoint of a series, so if this series is wages, arranged from the lowest to the highest, the median wage is the wage of the person in the middle), reflecting a “flying top” increase in wage inequality. This is one way in which widely-touted data on average wages do not coincide with what most workers actually experience.
2. There’s not a single term that’s not contaminated in some way, and ‘neoliberalism’ is absolutely crawling. In a situation where we have not collectively conquered ground, my approach has been to take possession of such terms and give them my own meaning. Anyway, neoliberalism, for me, is simply shorthand for the era of capitalism that began with the Volcker shock, the unleashing of death squads and contras against the peoples of Central America etc – and therefore exactly coincides with ‘imperialist offensive’. All governments in all imperialist countries have gone along with this, whatever mask they were wearing, and one of my favourite sayings these days is “who the cap fits, let them wear it” (partly because it comes with a great tune and reggae rhythm).
3. “Exploitation has much more terrible connotations in a Third World country than in a developed capitalist country, because it is exactly out of fear of revolution, out of fear of socialism that developed capitalism came up with some distribution schemes that, to a certain degree, do away with the great hunger that European countries were familiar with in Engels day, in Marx’s day.” Fidel Castro, 28 January,1994 speech to an international solidarity conference in Havana (1994).
Castro, F. 8 January,1994 speech to an international solidarity conference in Havana, reprinted in The Militant, 7 March 1994.
James P. Cannon (1953, 1975), America’s Road to Socialism. New York: Pathfinder Press, 1975.
Diwan, I. 2001, Debt as Sweat: Labor, Financial Crises, and the Globalization of Capital. World Bank Working Paper, http://info.worldbank.org/etools/docs/voddocs/150/332/diwan.pdf (accessed November 20, 2016).
Financial Times, 1995. Unsigned editorial, 28 April 1995.
Fredrikson, K. B. 2012. Income Inequality in the European Union. OECD Economic Department Working Papers, No. 952. http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=ECO/WKP(2012)29&docLanguage=En
Marx, K. 1867, On The Lausanne Congress, http://www.marxists.org/archive/marx/iwma/documents/1867/lausanne-call.htm (accessed November 20, 2016).
Onaran, Ö. 2007, Wage Share, Globalization, and Crisis: The Case of the Manufacturing Industry in Korea, Mexico, and Turkey. Political Economy Research Institute PERI Working Paper Series #132. (http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_101-150/WP132.pdf
John led the last discussion of the Imperialism Study Group and will be leading the next one, as we are currently studying his book on 21st century imperialism. For our interview with him, see here.