Misfits

When resentment builds up to the point where desperation takes over, the more benign forms of social control are no longer effective. When 10% of a nation’s members are set aside because of their geographic ancestry, when their customs are stigmatised and their living space is ghettoised, and when crime is their most credible success story, there is a concentration of psychological and physical violence that the rest of society prefers to ignore, until it suddenly exposes itself in all its horror. The ghetto’s youth is supposed to be content with rap, tags and drug deals. A few cross the barrier, sever their roots and toe the line, which makes them dubious role models, but what of those who reject the deviousness of both ‘hustling’ and ‘integrating’? For them there is no place anywhere, so their refusal has to be radical.

A social outcast may find solace in religion, especially if it has a universal message that transcends race and class and offers a spiritual community. In the US, the Afro-American and Latin-American minorities are Christians, culturally if not in practice. In Europe, The minorities from French ex-colonial Africa, from the British ex-Raj in India and from the ex-Ottoman Empire are mainly of Moslem cultures. In the US, someone with Mexican ancestry may share his faith/culture with someone whose ancestors came from Poland or Italy, and someone with Congolese ancestry may share her faith/culture with someone whose ancestors came from Scotland or Germany. In Europe there is no such concurrence between the Moslem minority and the Christian majority, so the racial and social divide is aggravated by a religious one. And, as racism is universally condemned in its public expression, the religious/cultural difference has been given pre-eminence. Having found no place in secular society and having their faith pilloried and mocked, the recourse to violence by those whose only world is their religion seems a predictable reaction. In Islam there is no Gethsemane, no crucifixion, no tradition of being herded into circuses to be mauled by lions. From the start, Moslem martyrs went down fighting on the battle-field.

Europe is awakening with a start to a situation that has been smouldering for at least a generation. Thirty years ago in France, an anti-racist movement whose slogan was ‘Touche pas à mon pote’ (Don’t touch my pal) attracted massive support. And again in 1998, when France hosted the FIFA World Cup and won it with a multi-ethnic team, there was a great emotional sentiment of being all together. But nothing happened, no decisions were taken, no affirmative actions, no educational priorities, nothing on housing, no communal activities in the arts and sport, just some symbolic gestures, an institute, a museum, and all was back as usual. Except that the mounting pressure of new immigrants, many of them clandestine, could only make matters worse. Hannah Arendt’s comment on Europe in the 1930s is close to the present situation, only the names have changed.

Where a wave of refugees found members of their own nationality already settled in the country to which they immigrated – as was the case with the Armenians and Italians in France, for example, and with Jews everywhere – a certain retrogression set in in the assimilation of those who had been there longer. For their help and solidarity could be mobilised only by appealing to the original nationality they had in common with the newcomers. This point was of immediate interest to countries flooded by refugees but unable or unwilling to give them direct help or the right to work. In all these cases, national feelings of the older group proved to be ‘one of the main factors in the successful establishment of the refugees’ (Simpson), but by appealing to such national conscience and solidarity, the receiving countries naturally increased the number of unassimilated aliens. To take one particularly interesting instance, 10,000 Italian refugees were enough to postpone indefinitely the assimilation of almost one million Italian immigrants in France. (1)

Assimilating a different religious culture does not work, and ignoring its presence is a dangerous denial. Granting it the same rights and privileges, the same influence in public affairs and the same capacity to spread its ideas as the established religious cultures is possible in the US, which has never experienced a monolithic church. In all European nations church and state were intimately intertwined. (In the 17^th century, French monarchs styled themselves ‘The Most Christian King’, and Spanish ones were ‘The Catholic King’. For the Holy Roman Empire the formula was: Cuis regio, eius religio i.e. Rulers determine religion. And in England Protestant parliaments got rid of two Catholic kings, 1649 and 1688, before abolishing them for ever.) And their recent separations are still incomplete, so neither can admit a new partner in this waning relationship. Especially in those nations like France that had been ‘cleansed’ of Protestantism by war, murder and oppression, and where religious tolerance is a very recent experience that is tainted by a rejection of the Roman Church as a reactionary influence close to the absolutism of kings and tyrants. Even today the Catholic position on abortion, contraception, homosexuality and assisted suicide is contrary to opinions held by the liberal left. And the Moslem religion is perceived to be just as retrograde if not more so.

Because of the ambiguous relation between the lay Republic and the Catholic Church, and because of its colonial past in North Africa, France is least able to admit a Moslem minority. As an extreme simplification it can be said that the right rejects them for their origins, and the left rejects them for their faith. Those with racist or anticlerical opinions have a shared aversion, and each side can denounce the other’s attitude to justify its own, which has so far avoided unanimity. Yet, despite its incapacity to admit them, France has more inhabitants of Moslem cultural origins than other Western European nations. And the number is growing with countless arrivals from war-weary countries to the South and East of the Mediterranean. The outcome is not preordained, but Arendt’s analysis of the 1930s noted the premises of things to come.

The nation-state, incapable of providing a law for those who had lost the protection of a national government, transferred the whole matter to the police. This was the first time the police in Western Europe had received authority to act on its own, to rule directly over people; in one sphere of public life it was no longer an instrument to carry out and enforce the law, but had become a ruling authority independent of government and ministries. Its strength and its emancipation from law and government grew in direct proportion to the influx of refugees. The greater the ratio of stateless and potentially stateless to the population at large – in pre-war France it had reached 10 per cent of the total – the greater the danger of a gradual transformation into a police state. (2)

That is where the danger lies. The risk of falling under the total control of security agencies cannot be balanced by that of being murdered by distraught youths brought up on violence. And though individuals may without consequence value life above freedom, when a nation does the same it is doomed.

1. The Origins of Totalitarianism, Harcourt, part 2, chapter 9, page 285, note 39

2. p. 287/8

Who pays for profit?

Economic cycles began to attract attention in the 19^th century. Marx wrote on crises and their recurrence, notably in articles published by the New-York Daily Tribune in the late 1850s, and Juglar published a book in 1862 that has associated his name to a 10-year cycle. In 1920s and 30s Kitchin named a 3-year cycle, Kuznets a 20-year cycle, Kondratieff a 30-year cycle and Schumpeter tried to summarise the subject in “Business Cycles” (1939). Regularly, the question of cycles comes to the fore and is put aside for lack of a convincing explanation for the phenomena. 1929, 1973 and 2008 are the starting dates for three prolonged economic slumps. The first two are 44 years apart and the last two are 35 years apart. However, the slump decades of the 1930s, 1970s and 2010s are quite evenly spaced. So why do thirty years of growth lead to ten years of stagnation? What mechanism can have such a regular effect, if not the perfectly timed periodicities of credit and debt with their longer terms lasting 10, 20 and 30 years? Business cycles are in fact the predictable ups and downs of demand fuelled by borrowing.

Growth in production needs an equivalent growth in demand, a demand that is able to pay. This can be resolved by creating more money, but its distribution presents multiple difficulties – quantitative easing for example – and can get out of hand. Another method is granting credit with virtual or ephemeral money. (Lending instead of hoarding money keeps it circulating, which maintains the money supply but does not increase it). Except for payments in notes and coins, banks keep accounts of all transactions. They manage the debiting and the crediting, but it is just subtracting and adding with no actual movement of money. The purely scriptural nature of most payments allows banks to credit accounts with virtual money and put off the debits for an agreed time lapse. Originally, when bankers were merchants, credit was granted pending the future sale of goods, a profitable transaction that insured repayment and interest. It was a sort of investment based on confidence. The practise has been generalised, but today’s retailers are so powerful that they pay no interest and obtain rebates. Then, in the post-WW2 period when war production was reorganised for civilian consumption, credit was granted to consumers. The form of payment expanded, but consuming goods is not the same as selling them on for profit.

To maintain solvent demand unspent money is lent at interest. To increase solvent demand credit is granted as investments and for consumption, but the two forms of growth progress differently. Because the invested credit is returned with a profit, it can be repaid with interest and renewed. This means that investments and credit increase at the same rate. The consumed credit is … consumed, it increases consumption when it is granted and reduces consumption when it is paid back. Except when wages are increasing rapidly, which happens nominally when inflation is high, or when the credit is rolled over. Today’s credit means more spending than yesterday. Tomorrow’s repayment means less spending than yesterday. Without the repayment, tomorrow’s spending is the same as yesterday. For tomorrow to spend like today a second credit must be granted, and for today’s growth to continue tomorrow a third credit is needed. This necessity means that consumer credit grows much faster than consumer demand. And at some point the credit bubble bursts. For their long term treasury bonds governments collect money, for the short term loans negotiated with banks there may be a mix of cash and credit. This borrowing, whether for war or peace, is for consumption, which means that it also piles up much faster than government spending – except for high inflation – and cannot sustain growth in consumer demand indefinitely.

Increasing consumer demand by borrowing, increases debts much faster than it does consumption, with the cyclical consequences of financial chaos and economic depression. What remains unclear is why growth depends on borrowing and why consumption is fuelled by debt. As Rosa Luxemburg pointed out a century ago, the problem is surplus value (rent, interest and dividends), the part of the value added by labour that employers do not pay for. This unpaid added value is part of the turnover and must find a solvent demand on the market. But the surplus value has not been paid for, so the demand is not solvent and the exchanges have recourse to credit. And, as it is labour that is not being paid all its added value, it is demand for consumption that lacks solvency. Some demand for consumption can be generated abroad, and surplus consumer goods and services can be traded for investments such as minerals or machine-tools, but mass production for consumption on a global market can only replace unpaid surplus value by consumer credit.

Governments borrow and circulate unspent incomes, and labour is granted credit so that there is a solvent demand for surplus value. And, at each term, private credit and public debt must multiply to keep growth in demand in line with supply. Capital accumulates and borrowing accumulates faster. After three decennial terms there is an overload of debt, so that consumer demand falters and slumps. Capital also accumulates in the form of debt, which does not produce anything and does not need a corresponding consumer demand. And when growth in productive capital is obliged to slow down because of insufficient demand, unproductive investments are the alternative. Bonds and shares are where capital can accumulate without increasing supply. And as the unpaid added value stays the same and finds it increasingly difficult to find a demand, the growing capital gets diminishing interest and dividends. Also, when consumer credit does not increase, consumer spending is reduced (see above). Stable debts cause recession. However, general indebtedness has reached such levels that multiplying it at term is no longer feasible. As for killing debts with high inflation and fast rising wages, which has solved the problem in the past, cut-throat global competition for markets excludes it. And the large scale foreign ownership of treasury bonds is a second strong deterrent. Forty years ago the US largely dominated world industrial production and owned its treasury debts, Europe and Japan had only just finished their post-war reconstruction and the rest of the world did not count for much, so the US government could allow inflation without much risk to its dominion. In today’s deflationary situation even a modest wage increase is a surprise, as the general tendency has been downward since the beginning of the century. While the employment rebound in the UK and the US has mostly concerned part time, short time, no time jobs, and cumulating two or even three of them does not pay for decent lodgings and barely for heating, clothing and food.

Capitalism is competitive. It is about making more for less and undercutting competition on the market. One way to do this is through technological improvements and a qualified work force. The other is to reduce costs with the same technology, cheaper raw materials and energy, and lower wages. The first requires investments in education, research and development, and is socially progressive. The second cuts off these investments and is socially regressive. One is the product of a credit boom, the other of a credit squeeze. The absolute necessity of surplus value to pay rent, interest and dividends, means profits must be obtained at all costs. If there is no surplus value the land owner, the banker and the shareholder stop the financial flow, so the company closes or is downsized to a profitable format. Breaking even could be good enough, but capital must have its unpaid added value and must provoke periodic pandemonium to obtain that value on the market and accumulate it. There must be a way to avoid cyclical crises, but it would mean forfeiting surplus value and the private property of the means of production. In the past, going back far enough, common property of land as the primordial tool was the rule, but in industrial nations it disappeared so long ago that its memory has been erased and the notion seems inconceivable. And yet, only the common property of the means of production is content to forfeit surplus value, as the community furnishes the work force and exchanges the produce. In this case, surplus value is the part of the value produced that is not consumed by the producers and is distributed for education, research and development, and for administration, health, defence, law and order. Society can function without private alienable property of land and industry, without unpaid added value and without periodic financial disorders. Unfortunately, the 1% feels invaluable and believes its dominion is given by nature or by god. It is the certainty of absolute power that cannot be undone by words. But, as the present depression runs its course, that power will surely be battered by the storm winds of history.

P.S. Ten years ago I started posting stuff on this blog, and I would like to thank those who have taken time to read it for their encouragement. This time last year I predicted that the global economic downturn would accentuate in the autumn. Well nothing spectacular happened, except the drop in price of crude oil. Forty years ago an OPEC embargo on exports more than doubled the price of oil and triggered inflation of between 5% and 15% for ten consecutive years. The “no future” decade wrote off debts on a massive scale and an equivalent amount of savings. Impervious to the suffering and despair, capital destroyed wealth and cleared the deck for a new cycle of expansion and accumulation based on government and household debts. This time around, oil prices have almost halved and OPEC is considering increasing production to lower prices even more. Some see this as a fatal blow for oil-dependent resistance to the US Empire by Russia, Iran and Venezuela. But the effect of much cheaper oil is deflationary for everyone, by a knock-on effect on other prices. It is also and perhaps primarily an attack on small producers and on expensive non-conventional extraction such as shale and deep-sea drilling. Both consequences are recessional with less money circulating and less jobs. Meanwhile stock markets around the world are jittery, to say the least. Generous end of year bonuses and dividends have provoked a yuletide surge in share prices but, as there is no foreseeable follow-up in the New Year (more QE?), the “bears” will be back well before spring.