Page 4 of 5 CHINA'S DOLLAR MILLSTONE, Part 4 Gold, manipulation and domination
By Henry C K Liu
East issues signaled only that Stalin was holding out for a better deal on
Germany, primarily on reparations, and not to start a Cold War.
In May 1948, Moscow tried to counter the creation of the Organization for
European Economic Cooperation (OEEC), which was the institutional embodiment of
the Marshall Plan, by proposing the establishment of "a committee for the
development of economic relations between European states" under the auspices
of the UN Economic Commission for Europe. The OEEC later became an
international organization of some 30 countries, some outside of Europe, that
accept the principles of representative democracy and free market economies
with the
name Organization of Economic Cooperation and Development (OECD).
Imminent crisis of capitalism
In the fall of 1948, the debate among Soviet academic experts about the
imminent general crisis of capitalism was about Soviet policy on where the
US-dominated Western bloc was heading and what Soviet response to its likely
development ought to be. The USSR in January 1949 inaugurated the Council for
Mutual Economic Assistance, later known as Comecon. To Eastern European
officials invited for the occasion, Soviet leaders suggested Western European
allies of the US, particularly Italy and France, could be pulled loose from the
US if they were pit in a position of being critically dependent on the Soviet
supply of raw materials. In 2008. the European Union, dependent on Russia for
34% of its imported oil and 40% of imported gas, did not venture beyond verbal
condemnations over Russian invasion of Gerogia.
Soviet planners thought that Comecon, by creating a raw material base for the
whole of Europe, would become more important than the Cominform, the official
forum of the international communist movement since the dissolution of the
Comintern. Cominform was founded in September 1947 in response to divergences
among eastern European governments on whether or not to attend the Paris
Conference on Marshall Aid in July 1947. Stalin was quoted as saying that he
"does not attach much importance to military matters", as he saw little
probability of war in the next eight to 10 years. Stalin's prediction was
wrong. Five years later, in 1951, the Korea War was started by US client state
South Korea.
Russia viewed the end of the Cold War not as the beginning of a new equitable
world order of peace and prosperity for all, but a world dominated by a US
driven by a philosophy of confrontation with the assumption that it was
empowered by destiny to do anything it wants.
Now Russia, boosted by its energy leverage drawn from a commodity price
structure largely engineered by US policy, is pushing back by copying US
post-Cold War unilateralism. In marching into Georgia, Russia did not bother to
seek United Nations diplomatic cover. Topping the list of Russian grievances
with post-Cold War US aggressiveness is the expansion of NATO to Russia's
sphere of influence and the planned basing of a US anti-missile system in
former Soviet satellites Poland and the Czech Republic. "In their eyes, this is
payback time," admits Jack Matlock, former US ambassador to the Soviet Union
during the Reagan administration. "We have set some very bad precedents for
Russia."
The US system of relying on private defense contractors was in a better
position to reap economic benefits from nuclear and conventional armament than
the Soviet system of state enterprises. The strategy to bankrupt the USSR with
arms spending was essentially the one that Ronald Reagan employed to win the
Cold War. But the key factor for Soviet economic failure was its decision to
engage Western capitalist markets denominated in dollars, which the US could
print at will after 1971, while the USSR had to earn through trade.
By joining Western markets, the USSR found it increasingly difficult to fund
with socialist sovereign credit denominated in rubles its share of the arms
race with the US. After the Soviet leadership allowed the Soviet economy to
fall into the trap of needing dollars to achieve Soviet planning goals, it was
a matter of time before the socialist system in the USSR would collapse.
Ironically, the fall of the USSR launched the US on a path of national hubris
divergent from its core national interest. In 1951, the academic and pioneer in
the field of international relations theory Hans Morgenthau published In Defense
of the National Interest, in which he warned US policymakers about
confusing two important issues: Russian imperialism and genuine revolution.
American
foreign policy ought not to have the objective of bringing the blessings of
some social and political system to all the world or of protecting all the
world from the evils of some other system. [...] If we allow ourselves to be
diverted from this objective of safeguarding our national security, and if
instead we conceive of the American mission in some abstract, universal, and
emotional terms, we may well be induced, against our better knowledge and
intent, yet by the very logic of the task in hand, to raise the banner of
universal counter-revolution abroad and of conformity in thought and action at
home. In that manner we shall jeopardize our external security, promote the
world revolution we are trying to suppress, and at home make ourselves
distinguishable perhaps in degree, but not in kind, from those with which we
are locked in ideological combat....
It is not an exaggeration
to note that much of the national security problems faced by the US after the
end of the Cold War were created by US policy.
Ownership of the means of production
The defining characteristic of a socialist system is the public ownership of
the means of production. Karl Marx observed that the historical-cultural
pattern of the ownership of the means of production (OMP) gave rise to the
social phenomenon of class and the politics of class struggle.
Membership in either class, bourgeoisie of proletariat, is defined by the
individual's relationship to the means of production. When workers, through
their pension funds, participate indirectly in OMP as shareholders, they become
members of the petite bourgeoisie. Self-employed professionals are also members
of the petite bourgeoisie, even as they are increasingly corporatized. For a
market system to remain balanced, the public sector needs to be dominant.
Minsky pointed out in his 1996 paper "Uncertainty and the Institutional
Structure of Capitalist Economies" that capitalism is an ever-evolving
construct that recently entered a new stage: money manager capitalism. In this
form of capitalism, nearly all businesses are organized as corporations;
pension and mutual funds are the predominant owners of financial assets; and
managers of these funds are judged solely on the total return on fund assets
(dividends and interest plus appreciation in share value). One consequence of
the money manager structure is predominance of short-run considerations in
decision making. A robust public sector is needed to rebalance excessive
uncertainty in the private sector.
Two important points need to be borne in mind in understanding the concept of
ownership of the means of production. The first point is that private ownership
of the means of production is more than owning physical and intellectual
property, or owning the financial capital behind it. The second point is that
private ownership of the means of production in a capitalist system refers to a
socio-cultural practice in which a small number of individuals within a larger
corporation, namely shareholders represented by the board of directors,
operating under the capitalist law of private property rights and the sanctity
of contracts as if the corporation were one single individual, can control and
decide what is done with all the profit created by the entire corporation
composed largely of workers who are legally disfranchised of their economic
rights merely because they do not own the means of production.
As represented by management under the supervision of the board of directors,
these absentee owners of the means of production do not have anything to do
with the operation of the corporation besides ownership of its capital. When
corporations make good profits, only their management and shareholders benefit.
Workers are paid a fixed wage and generally do not receive bonuses based on
profit earned by the corporation that employ them. This may be legal and appear
fair under the doctrine of private ownership rights, but it is the fundamental
injustice of capitalism.
While shareowners of a corporation, members of the bourgeoisie class by
definition, contribute only financial capital that enhances the productivity of
workers, and workers, members of the proletariat class, produce the profit,
shareholders command complete legal control over that profit and how it is used
and distributed.
The owning bourgeoisie have complete legal control over both how much the
working proletariat are paid in wages and complete legal control over how the
profit from worker productivity is used, thus giving rise to a class division.
In Chinese political nomenclature, the term bourgeoisie stands for the
"propertied class" and the term proletariat stands for the "property-less
class". The politics of class struggle is a battle between uneven power
commanded by capital and labor. Under a central banking regime in a market
economy, non-inflationary monetary policy requires the maintenance of
"structural unemployment", thus systemically weakening the bargaining power of
labor against capital, unionism or no unionism.
Workers become their own oppressors
Charles Dickens wrote on the inhumanity of capitalism as a natural outcome of
the Industrial Revolution to promote reform. But Marx and Engels wrote on the
structural contradiction of capitalism to show that even if workers were
treated more humanely by capital as an enlightened utilitarian necessity,
capitalism will still not escape collapse from its internal contradiction.
The introduction of meta-wage benefits via pension funds turns classical
capitalism into mass capitalism, making workers simultaneously into their own
oppressors through a system that allows capital in the form of labor's own
retirement savings to continue to oppress labor. The search for high return on
workers pension funds is pushing wages down everywhere in the globalized
economy and relocating jobs from high-wage economies to low wage economies. The
neoliberal name for capitalism is market economy. The concept of a labor market
is merely a modern version of slavery.
Capitalist bias notwithstanding, labor is not a factor of production. It is the
core component in the economy around which factors of production, such as
capital, land, technology, organization, and so forth are applied to increase
labor productivity. Marx considered it a reification to treat labor as just
another factor of production. Workers are people who should not be used as
things, with profit they create extracted to benefit solely others who own
things that workers use to be more productive. Return on capital should not be
achieved through robbing labor of its fair share of the fruits of workers'
labor.
Profit should only be realizable pari passu with wage increases. As
corporate revenue rises, wages must rise with it to prevent obscene profits.
Rather, corporate profit should be shared with labor in the from of wage
bonuses along with dividends to shareholders.
Privatization of the public sector is an abdication of government
responsibility to the governed. It is economically unsound, financially
inefficient and socially unjust when national public infrastructure, either
physical or social, are privatized.
The public sector is not merely another component of the national economy. It
is the critical component that defines the limits of the globalized market in a
functioning sovereign state. Minsky pointed out that a sizable and strong
government sector is indispensable for a capitalist market economy to maintain
macroeconomic stability and avoid recurring deep recessions. In a globalized
economy, national public sectors are necessary to maintain global macroeconomic
stability.
Privatization of the public sector exposes the capitalist market economy to
cyclical disasters that require nationalization measures to bail out, as the
recent collapse of the finance sector of the US economy aptly illustrates. Even
in the boom phase of the business cycle, privatization of the pubic sector
drives socio-
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
