The Making of Global Capitalism: Current Thoughts for the Philippine Left

In 2012, Leo Panitch and Sam Gindin published The Making of Global Capitalism: The Political Economy of American Empire. The subject matter of MGC is Capitalism itself -- how it works, the institutions that run it, the crisis it spawns -- and the state that holds it all together, the United States.

It is a mammoth of a book, the life's work of two scholar-activists who have devoted their entire lives to the socialist cause. It is a must read if one has to be up to date on the subject. (And In a Left community that hardly updates its dogmatic understanding of things, it's even more relevant.)

In the Philippines, probably much of the Left's understanding of the workings of Capitalism is tied to the single most dominant paradigm still plying its trade in the country, the paradigm of Imperialism.

According to this understanding, the current capitalist stage is one characterized by an American state in a crisis of overproduction which drives it to look for "semi-colonies" where it could export goods and capital to, to make up for the saturation of its markets at home. The paradigm also points to a logical conclusion of imperialist wars, as many different capitalist/imperialist powers supposedly battle it out for global dominance.

Much of this is outdated. A key point Panitch and Gindin make is that the American economy is far from saturated. American consumer spending is unparalleled in the world (and is in fact a key growth driver for the global economy for having a population with a very high purchasing power, and which is a recipient of much of the world's exports).

On the other hand, it is equally counterproductive (if not dangerous), to still be fixated to a pre-World War II view of the world in the face of one glaring reality -- global capitalism at present is in fact upheld by all the major industrialized nations, and to make capitalism work they all look to a singular leader -- America. The most developed nations' leadership has in fact been institutionalized through the formation of the G7/G8 -- one of whose primary tasks is to ensure harmony in the global financial system.

Global finance

This latter cooperation for the sake of the financial system is inseparable from global capitalism, especially because the system is under constant threat -- not from overproduction but from financial crises.

According to the authors:

"The unresolved dilemma for all capitalist states today is how to both stimulate the economy and regulate financial markets so as to limit increasingly dangerous volatility without undermining the ability of finance to play its esential role in global capitalism."

Put another way, capitalism's central contradiction is that to keep on stimulating the economy, it allows for the activities of finance which eventually threatens the system itself by eroding regimes of value. Financial crises cannot be predicted. We do not know when the next Dotcom Bubble or the next Subprime Mortgage Lending Crisis will occur, and there is only so much that regulators can do to keep profit-seekers from unwittingly conjuring the next crash. (In many cases, the policies that once checked finance have themselves been removed to accommodate more profit-making.)

So finance is integral to -- and inseparable from -- the working of Capitalism. It oils up the wheels and sprockets of global economic activity. But its bullish activity breeds financial crisis. In a financial crisis, assets – bonds, stocks, currencies -- dramatically lose their value. This eventually results in a widespread slowdown in economic activity.

The coordination of policies especially among the most advanced capitalist states is thus important in managing global finance, and in containing crisis when it does eventually arise. Policies relating to capital risks, reserves, lending ratios (the Basel accords), financial liberalization, and liquidity during periods of crisis all have to be coordinated.

Perhaps part of what this means for us in the Left is to endeavor to have a very deep understanding of the financial/capital markets, to be able to show just how irrational the entire system is. Just as the Left periodically tracks statistics relating to poverty and wages, so should it record movements in local interest rates (from the Bangko Sentral) and hot money flowing in from abroad (a.k.a. "portfolio investments").

At present, global capitalism is a creation of a global capitalist class led first and foremost by one state, the United States of America. Its current agenda is to promote capitalist production in the entire globe; exploit or/and develop new markets; and maintain international regimes of value especially in times when the financial system makes a mess of itself. The global Capitalist system is run by the Federal Reserve, the de facto central bank of the world. Together with the US Treasury, it conducts US monetary policy which is the global basis for short-term economic policy everywhere else.

Philippine setting

Another danger of looking at capitalism from an overproduction/market saturation perspective is that the Left would cling to the hope that some final rupture will eventually occur that will finally end the rule of global capital. It is very unlikely that that will happen. As Panitch and Gindin showed, one remarkable phenomenon that occurred during the last crisis, in '07-'08, was how quickly the governments of the G20 lined up in support of the United States in helping avert further potential economic loss.

But what insights can MGC offer the Philippine Left in relation to its own local situation, and in the context of Philippine political realities, for example the current Menace in Malacanang?

Perhaps we will need to understand how Philippine economy is currently integrated to the international capitalist system, especially to international finance. From the perspective of global Capital, the Philippines is basically a low-income nation that offers cheap, English-speaking labor whose economy is ultimately propped up by a long-standing labor export policy. It should hardly be an inviting site for hot money/portfolio investments, although this is something that the Left should probably guard against.

But perhaps one of the things that need to be pointed out is that Philippine economic development is not materializing not because there are international Capitalist forces preventing it from doing so. In fact, it could instead probably be sufficiently argued that it is in the interest of global capital to see the local economy grow, so that it becomes a broader market for higher-end exports. Rather, economic underdevelopment will have to be blamed on the local class interests that no longer care about such worthless cases as national economic development. Economic development necessitates land reform, something never palatable to the local (landed) ruling elites.

But at the same time, it will be in the top interest of global capitalist elites to not rock the local class alignments in the Philippines that in the end are their own caretakers for their own economic interests in the country. It is in this context that for as long as Rodrigo Duterte is a faithful steward of global Capital in the Philippines, he can count on continuing his activities, including killing citizens, with impunity. All the Western powers will eventually turn a blind eye -- except for the occasional token condemnation.

In the final analysis, Third World governments are really nothing more than the local stewards of global Capital. As such, they have only one role: to ensure that the system of private property, financial liberalization and regimes of Value are protected. All other tasks, such as the niceties of human rights and "good governance" are a mere bonus -- and are in any case done not for their own sake, but in aid of the smooth running of the international system as a whole. Marcos was, after all, a son of a bitch. but he was "[their] son of a bitch."

Panitch and Gindin mention that it is the contradictions that emerge within, rather than between, states during times of severe economic crisis that show the openings for political action. Whether one of the future political battles will get to tackle the unmaking of the irrationalities of capitalism in this part of the world is one local democratic socialists should decide. xxx