Trickle down recession

The landlord wants rent, the banker wants interest and the entrepreneur wants profit. These are the tributes paid to property, to those who possess and control the Earth’s surface, the means of payment and the means of production. Profit is the unpaid value added by labour, and some of it goes to rent and interest, but a part of the added value that labour does get paid for also goes to rent and interest. This means that the tribute to rent and interest contains paid and unpaid value, whereas the tribute to profit is all unpaid value. Unpaid added value is monetised by debt, so that when the rate of borrowing slows down or regresses it has a direct effect on profit and a lesser one on rent and interest. However, the production of goods and services through the adding of value by labour is the source of wealth, while bankers and landlords are just profiteers and rentiers. But then bankers control borrowing and the supply of money, which gives them a strong hand and puts the burden of recession on landlords.

Real estate is the first to suffer the effects of a reduction in the rate of borrowing. Production is next, and profits drop as competitors cut prices to keep their share of a shrinking market. Finally, when borrowing decreases significantly, banks are in trouble with debt defaults piling up steadily and margins falling. “Keynesian” economists claim that cyclical drops in household borrowing can be compensated by Treasury borrowing, that public investments and tax cuts can reverse a slowdown in private investments. Such alternate borrowing sprees might work in an ideal system of controls, but in today’s reality of colossal debts accumulated by all actors – even corporations have got in deep to buy back their shares – the capacity to kick-start a growth cycle does not exist. And, though they may impose themselves in the not so distant future, monetary, wage and price inflation are out of the question. So austerity measures and hopeless attempts at debt reduction are the only alternatives on offer. Unfortunately, the examples of Argentina, Greece, Spain, etc. show that the treatment brings a lot of pain and no salvation, hardly a cheerful perspective for the years to come.

The revolving wheel of history

Human migrations for climatic, demographic, religious, political or economic reasons have existed ever since homo sapiens spread out from Africa. And some have been massive enough to partly or totally annihilate the native populations. Over the past century Western Europe has experienced two periods of intense migrations. The first was the consequence of ethnic cleansing in Turkey, of the dismemberment of the Austro-Hungarian Empire, of civil war in Russia and later in Spain, of the rise of fascism in Italy and national-socialism in Germany, and of general poverty. The second, which is still going on, is the consequence of the dismemberment of the Soviet Empire, of civil war in countless countries, of numerous fascist regimes, of the Taliban, Al-Shabaab, AQMI, Boko Haram, IS and of general poverty. In the first case, the interwar period, the migrants spoke different languages, had different customs and practised different religions, but they and the countries they went to shared a common history of alliances and conflicts, and a common heritage of Greek, Latin and the origins of Christianity. From the Black Sea to the Atlantic Ocean and from the Mediterranean Sea to the Arctic Ocean, millennia of fighting had created a community. And the circulation of literature meant that a Lithuanian or a Moldavian would not feel a complete stranger in Paris or London. Also, in the 1920s and 30s Western Europe was the gateway to both American continents, then still open to new arrivals. So that some of the flow crossed the Atlantic. At present the migratory movement into Western Europe comes from Eastern Europe and, more significantly, from Africa, Asia and the Middle East, and the only shared experience those immigrants have with their host countries, is that of past colonial subordinations. Some speak a European language, but few have any experience of European cultural and social practices and of Christian traditions whether secularised or not. They are alien and alienated.

Hannah Arendt has described the effects of clandestine “stateless” migrants in the interwar period and their consequences (1). Similar causes are having similar effects today. And, though Europeans may have become more tolerant over the past century, the greater distinctiveness of the present clandestine surge nullifies it. Illegal immigrants are by definition outside the law. They have neither rights nor duties and, as the numbers grow, the lack of legal status results in outlaw spaces under arbitrary rule (the US has free-fire zones for its security services). The trouble is that this contaminates the rest of society. First it implicates legal or naturalised migrants who have the same origins. Then even those that are born in the host country and have full citizenship are drawn back from assimilation by identifying with the clandestine minority in their midst. Moreover, the extra-legal situation imposed on unauthorised arrivals is projected on the whole group. Arendt saw in all this the premises of a police state and potentially a totalitarian one. History is supposed not to repeat itself, but in this age of financial breakdown, of un- and under- employment and contracting demand for unskilled labour, of religious and nationalist armed confrontations and of global surveillance, the totalitarian phantom is getting more consistent every day. And the way a nation treats those seeking refuge is a sure test of that consistence.

1. The Origins of Totalitarianism, part two: Imperialism, chapter nine: The decline of the nation state and the end of the rights of man. (Thirty odd pages worth reading.)

The resistible rise of universal debt

In 1867 Marx published the first volume of a long series that was not to be. In it, and in the notes that would make up the posthumous volumes published by Engels and Kautsky, he developed the concept of surplus value, that part of the value added by labour for which it receives no wages. However, he was unable to explain how surplus value was monetised and accumulated as capital. And Rosa Luxemburg would highlight this deficiency in “The accumulation of capital” (1913). Having analysed the numerous theories of her time, she concluded that unpaid added value could be accumulated as capital by colonial expansion, exploitation and expropriation. Surplus value for consumption, say guns and ammunition, could be sent overseas and its value brought back as land rights, raw materials and bullion. This trade of consumer goods for raw materials, of consumption for investments, survived the end of the colonial system and persists to this day, but it was not and is not sufficient to absorb all unpaid added value.

War is a great consumer and governments are able to borrow vast amounts. During the first half of the 20^th century total global war resolved the problem of surplus value for consumption by demolition, death, monetary devaluation and debt defaults on a grand scale. But the technology of destruction finally reached a stage where it could no longer be expended. The awesome horror of Nagasaki and Hiroshima put an end to total war and reduced bellicose consumption to the Cold War dimensions of counterinsurgency. This meant that surplus value needed new outlets. The solution was household consumption and consumer credit. This turn around was tempered by a costly competition for unusable weapons and by quite heavy fighting in Korea, Vietnam, Burma, Kenya, Algeria and with a lesser intensity elsewhere. Nevertheless, by the late 1970s civilian consumption and household debts were booming. The euphoria would last three decades.

Presently, the debts accumulated by treasuries, by urban or regional administrations and by households are all approaching or passing national revenue. Most incomes are spent before they are earned, and debts have reached a stage where their growth only covers interest charges and cannot increase consumer spending. If this is a high tide, it will ebb. And the last few months strongly suggest that moment of slack when the current moves neither one way nor the other. Will the pause last till autumn, or is a downturn already under way? The summer of 2015 could be the hottest on record.