The final countdown

Capital and labour share the value produced, and their proportionate shares have varied over time. Capital gets profits, rents and interest. Labour gets salaries, benefits and pensions. The state levies a tax on all this and redistributes it to both capital and labour. Over the past three decades, increased productivity has largely favoured capital, while labour’s share has stagnated. Several factors seem to be behind this shift in wealth distribution.

The turning was initiated by Thatcher and Reagan, with fewer taxes and less distribution. The free services provided by governments were taken over by profit making companies and had to be paid for. Government disengagement from providing services such as health and education was not compensated by equivalent rises in salaries, so households were encouraged to restore their unbalanced finances with mortgages and overdrafts. Meanwhile, drastically reduced taxes were forcing governments into increasing debt. All these growing debts were the result of political decisions that were preceded by an ideological conversion.

The 1970s marked a trough in the business cycle, with economic stagnation, high inflation, a crude oil crisis over OPEC price hikes, the end of the gold standard and America’s withdrawal from Vietnam. The Eastern Block fared no better. It was the Brezhnev era, when opponents filled psychiatric institutions instead of Siberian work camps, where queuing for hours for shoddy goods was part of everyday life. And Solzhenitsyn’s Gulag Archipelago was published in 1973, a terrible indictment of the Soviet regime and its communist model. The proposed counter-model was small government, low taxes and free private enterprise. This meant selling publicly owned services, utilities, land and mines, and subduing the trade unions. Maggie and Ronald were pretty good at both, and they were followed by the two champions of Newspeak, Bill and Tony.

Britain and America initiated the mental turnabout from social to private, from commonwealth to corporations. In France, a newly elected “socialist” government was eager to join them. Elsewhere, adhesion was more hesitant, but after 1991 a new Russia and its ex-satellites auctioned off everything that could find a buyer. The nation’s wealth was handed over to some oligarchs who had been Soviet functionaries or KGB officers. China kept its centralised, one-party cooptative form of government, while opening up to foreign investments and joint ventures. And the rest of the world was forced to conform by the World Bank and the International Monetary Fund. Privatising the public domain brought governments some quickly spent cash and put an end to revenue. And the privatised need for profits meant cutting costs, especially the cost of labour. So governments and households compensated their falling incomes by borrowing. Revenue had changed hands and was invested in developing countries, where wages, regulations and taxes were all very advantageous. Outsourcing production reduced incomes even more and provoked an equivalent debt bubble.

Capital and labour are unremittingly linked together, as neither can function alone. Capital needs labour to produce and consume, while labour needs capital for the means of production and consumption. Capital finances and labour does, but only the owners of capital decide what is financed and what is done. And their ultimate goal is to make a profit, and thereby increase their capital. This driving force completely neglects the well-being of societies and of humanity as a whole. Capital can bring a return in various ways, mainly rent, entrepreneurial and commercial profits, and interest. It takes capital to house people and their productive/recreational activities. It takes capital to make land agriculturally productive. It takes capital to set up infrastructure for transport, communications, sewerage and the distribution of water, electricity and gas. It takes capital to build machines, to extract raw materials, to store and sell goods, and to supply services. It takes a little capital and a huge privilege to grant credit, most of which is created out of thin air as scriptural money.

Housing, agriculture and infrastructures are long term investments that can, with appropriate upkeep, last decades if not centuries. Industrial and commercial investments are more ephemeral, because technology and fashion are evolutive and unpredictable. Sinking funds are rarely provisioned for more than ten years, and commonly from two to five years, which are the life spans of new models. Investments in credit and debt must cover all these time scales, as well as some of their own. The period between a loan and its restitution may last hours, days, months, years, decades and up to a century, with interest clocking up all along the way. Individual debts can be packaged up as “derivatives” that can in turn be packaged, and so on. Their total has been variously estimated at between ten and twenty times Global World Product (from $700 trillion to $1.5 quadrillion as compared to $80 trillion) (1). There is no way this astronomical sum can be redeemed, so the debts roll over and go on increasing every second of every day.

One of the strongest arguments against a more egalitarian distribution of wealth is the promise of growth. Growth like a rising tide lifts all boats, big and small. Another version is that increased wealth at the top trickles down to the bottom. What is not said is that, though the poor benefit from growth, they do so far less than the rich. Increased wealth for the poor is a rise in wages, whereas increased wealth for the rich is a rise in capital. Wages may cease but capital remains and brings a return. Anaemic growth does not directly impact dividends, but it blocks and reduces salaries. And that in turn influences demand and eventually profits.

Production and consumption are two phases of the same process. Productive investments need willing and able consumers, whereas investments in debt need borrowers. When the two collude to makes consumers borrowers and borrowers consumers, labour is reduced to debt bondage and the concentration of wealth reaches its final stage of global dominion. However, trying to sustain long term growth in consumer demand with debt is a fairly obvious fallacy. Debt increases consumption and is consumed, which means that paying it back reduces consumption. So debts are rolled over and new ones are contracted to keep up growth in consumer demand and to pay for interest. Consumer debt cannot be reduced without a reduction in demand. And, because of interest, debts must increase just to maintain demand.

Capitalist accumulation of rent, interest and profits is possible because more value is taken from the market than is put in. This surplus value is paid with debts. Invested debts are returned, consumed debts are not. Consumer debt cannot be paid back without reducing demand. So debts pile up faster than demand and end up by becoming unmanageable. But there is no going back other than cancellation (bailing out), and there is no attenuation other than inflation. Global debt has reached such a disproportionate dimension that it can no longer grow fast enough to cover interest and increase consumer demand (2). When capitalist accumulation slows down globally it can still grow individually by buying other companies, or by putting them out of business and taking their market shares. Concentration is the final stage of accumulation, and it signals the end of the long cycle. It is a time of extreme tensions and violence, of cut-throat competition and chauvinistic reactions. And that is a pretty good description of today’s world. How it will end this time is anybody’s guess.

1. http://www.globalresearch.ca/global-derivatives-1-5-quadrillion-time-bomb/5464666

https://en.wikipedia.org/wiki/Gross_world_product

2. Until recently, Chinese debt had mostly been a good thing. China's economy was growing faster than its debt, making the debt manageable. The growth also meant that there were positive returns on money loaned out to growing Chinese enterprises.

The problem with debt, however, is that it lasts a long time. As the debt pile grows, the repayments become larger and larger, placing a burden on the economy. Each renminbi of new credit loaned out produces diminishing results. That prompted Barclay’s analyst Ajay Rajadhyaksha to call Chinese debt a "bubble" earlier this year.

https://uk.finance.yahoo.com/news/china-may-2-trillion-hidden-073200133.html

Nostalgia

Early Christianity was a syncretism of monotheism and polytheism, of Jewish and Greek cultures, two world views that had existed side by side since Alexander’s conquests. The gospels cannot avoid the Roman presence (judgment and crucifixion), but Greeks are hardly mentioned. Yet Flavius Josephus left an account of the times that depicted Greeks and Jews in violent conflict, and saw their opposition as the main cause of the war that led to the destruction of Jerusalem by Titus in 70. The Christian myth of god in the form of a bird seducing a young woman, who then gave birth to a humanised god, was an old Greek tradition. And the Galilean Jesus was presented as an Aristotelian peripatetic.

The first Christians worshipped the Father, the Son and the Holy “Ghost”. Soon the “Virgin” Mother joined the Pantheon, as did the Disciples, followed by an endless list of Saints and Martyrs. Christianity was polytheistic from the start, which explains its success in the heathen Roman Empire and beyond. Its beliefs became a vast theogony with multiple local variations. Jews would have nothing of this, nor would orthodox Sunni Moslems. And Protestant reformers preached a return to fundamentals, to the Jehovah Elohim of Abraham and Moses.

Polytheism is a popular faith because its multiplicity allows familiarity. Like the Roman Penates, everyone has his own personal deity. The mono-god rules the universe. He is too distant to be solicited. He began, however, as Abraham’s daemon, giving advice and guidance, and was passed on from father to son. Moses changed him into a tribal law giver, and the Babylonian exile, with the ensuing diaspora under Persian and Greek dominion, made him a universal entity from the Euphrates to the Nile. But he still belonged to a community that kept to itself.

Paul of Tarsus was a Roman citizen and may have attended his city’s celebrated stoic school. Having moved to Jerusalem, however, he became a heretic-hunting fundamentalist, which was probably unavoidable at the time considering the religious tensions in that part of the world. Then, after his “eureka” moment on the road to Damascus, he decided that the new sectarian belief in an incarnate god, a messiah executed and resuscitated, was tailored for Gentiles not Jews. Abraham’s divinity had fathered a family to populate his celestial domains, and had given a cross shaped sceptre to his son who would take Rome by storm on the Milvian Bridge.

Romans and Greeks ruled the world, but their empire weakened and fell, first to the forest tribes from the north, then to the desert tribes from the south. Northern forests were hideouts for mysterious beings, and the changing seasons signified multiple cosmic forces. So the polytheistic northern tribes easily adopted the Trinity and saints of their new subjects. Southern deserts offer empty vistas under an omnipresent sun. Moonlight, wind, thunder and rain are the only other elements in a thinly populated cosmos. So the monotheistic southern tribes converted their new subjects. The two tribal movements first clashed in Spain, Umayyad and Visigoths. Their two world views have confronted each other ever since.

Polytheism and monotheism proceed from and confirm two different mental states. Polytheism’s hierarchy of forces is reflected in social structures and the numerous intermediary levels of power between rulers and subjects. And it can admit newcomers. Monotheism is absolute. The biblical god occasionally uses messengers and converses with Lucifer (book of Job), but he is very much in charge of everything and admits no alternative recourse. The introduction to the laws he transmitted to Moses was explicit, no others, no images, no naming in vain. And the law was written once and for all because no other biblical prophet had the intimacy that Moses shared with god. Until Mohammed received a similar legislative message in Arabic, albeit in a far less spectacular manner, alone in a cave instead of on a thundery mountain top with a crowd of spectators below.

The Greek theogony mutated into the Christian mythology of father and spirit, mother and son, stepfather, twelve disciples etc. The fantasy and cruelty of the Olympian gods became a mundane tale of artisan life, of parables, of death and resurrection. It was a huge popular success, due partly to Paul’s proselytism, and more importantly to the promise of an afterlife of light, not darkness. Over centuries, the Catholic and Orthodox churches incorporated countless local saints, and became in practice saint cults. The Reformation with its iconoclast Anabaptists and its intransigent Puritans, brought back some fundamentals, but canonisation based on “miracles” is still a ritual practised by the Vatican’s gerontocracy. The bible god was alone before he created the world, and his creation did not change this condition, it only suggested he was bored and self-congratulatory. Lord of the universe, he sets down the rules and their transgression is fatal. This was the god whose messenger spoke to Mohammed and, as with Moses, the law was engraved for ever.

Greek gods intervene in human affairs for fun or to spite one another. They obey no rules other than might, and impose none on mortals. Greek laws are man-made, the result of social and political struggles. Being a human contrivance they can evolve and change, for better or for worse. This was a disadvantage for most people when violent tyranny reigned. But it was an advantage whenever people managed to govern themselves. It has allowed the law to follow a changing perception of right and wrong. A change provoked by the growing understanding of physical and biological phenomena. Lightening and cholera were not godly or satanic manifestations. They were charged particles and microbes going about their business. Materialism could replace divine right and superstition in deciding the laws of the land. The once-and-forever, god-given laws cannot take that path, they are engraved for eternity. The Greco-Roman/Christian, polytheistic conception of the world is manifold and evolutive (in a different context this applies to most of Asia). The children of Shem have only one god, who has been and will be the same. This perennial entity is an obstruction to change. It happened to Jews until they secularised their beliefs. And, in a similar way, it is still stopping Moslems from stepping out of the Middle Ages into modernity. They are chained to the past by an ancestral faith and a code that no human hand can modify.

Religions are not neutral. They model minds and mould societies. Many gods with laws that result from political power, or one god with rules dictated from on high. The first is open to tyranny and change, the second is an obstacle to both. The first was able to construct a world of reason where the gods do not intervene, that could evolve from the Dark Ages to Enlightenment. The second got stuck in between. The contradictions between faith and reason were manifest in Islam almost from the start, when Ibn Hanbal tried to oppose Mutazilites in the 9^th century. Later Ibn Taymiyyah preached successfully against the Asharites for their minor concessions to reason. By the 18^th century, the Ottoman Empire was in decline and under pressure from Russian expansion around the Caspian and Black Seas. This favoured rebellion elsewhere. In 1744 an alliance was sealed between Ibn Saud and a fundamentalist preacher Ibn Abd al-Wahhab. The religious fervour of Salafism became the Saud family’s instrument for conquest and rule. It gave them control of most of the Arabian peninsula, in particular the holy sites of Mecca and Medina, briefly under Ottoman dominion (1803-1819), and a century later after the empire’s dismemberment by the Sèvres Treaty in 1920 (Mecca taken in 1925).

The 19^th century saw some attempts at reforming, renewing and modernising Islam. The Tanzimat movement in Turkey and Al-Nahda in Egypt occurred as sultan Mahmud was getting rid of his Janissaries and Muhammad Ali Pasha was eliminating the Mamelukes. Egypt and Turkey were opening up to European investments and ideas, provoking an intellectual renaissance. (Europe was in turn under the influence of Orientalism). The two metropolitan centres of Islam, Cairo and Istanbul, were evolving towards materialism and reason, which can function alongside religious beliefs. Whereas the ruling Saud family was driving Arabia back to Islamic fundamentals, to the 7^th century caliphate. And they controlled vast quantities of easily accessible petroleum. Wealth makes any form of government easier, as support can be bought. Regimes in Turkey and Egypt, under strong military influences, with fast growing populations and no particular mineral bounties at their disposal, were unable to satisfy the popular expectations of social progress. With petro-dollars, the House of Saud paid for collusion at home and abroad, building a network around the world. By stopping modernity with religious orthodoxy, the Saud family has kept control of the country and its immense oil income. But no nation can be cut off from the world indefinitely. Goods and ideas will always permeate its borders. And the Saudi were wholly dependent on foreign technology, on exporting crude oil and on importing everything other than camels and goats. The religious police might roam the streets of Riyadh, in the privacy of homes, clubs and palaces, a hedonistic lifestyle prevailed.

The secular, largely military, regimes put in place by Mustafa Kemal in Turkey and by Jamal Nasser in Egypt did not fulfil their social promises, and the Saud’s religious rigour was an ideological façade. These multiple failures resulted in a Salafist revival. And, when the Soviet Union withdrew its troops from Afghanistan (1989) and fell apart (1991), military Jihad received a global promotion, and gave encouragement to insurgents throughout the Moslem world. Meanwhile, the original monotheism was being exemplary. Israel had declared itself Jewish and had fought a successful expansionist war based on nationalism and religion, ever since its conception in 1948 with god on its side. Israel’s defeated enemies, Egypt, Syria, Jordan, Lebanon and Palestine were all secular. They would become more religious and more radical, as would Israel.

In the 1950s, 60s and 70s, fighting was about nationalism. Fostered by the US and then the USSR, colonial entities struggled for independence from their European masters. Some changed their allegiance from West to East, but they all remained vassals because of financial, technological and ideological constraints. After 1991, the leeway given by the Cold War confrontation came to an end. Subjection to the capitalist imperative had to be complete. To resist submission, many nations only had tribal traditions on which to build an alternative story. The Middle East, however, still kept the memory of a Caliphate in Baghdad, and how it held sway over half the known world. Arabs also remember the dominion of Ottoman Turks, French and British mandates, Cold War Soviet and American interventions, and chaos and destruction of growing intensity since the 1991 Gulf War. Their nostalgia is comprehensible, but their attempts at turning clocks back a thousand years just show incomprehension of time and the flow of history. The Abbasside Caliphate rested on the Koran and Sharia law, but it also had the best artisans in the world and state of the art technology. Baghdad was the destination of the Silk Road from China, but the possibilities of gunpowder and printing were passed by to become a European advantage. Then the looting and destruction by Mongol armies in 1258 and 1401 paved the way for Ottoman and Mameluke rule. In unfavourable circumstances the Arab nation has been unable to move forward, and it is harking back to a distant past. But this is just the extreme expression of a general malaise. The whole world is in a rut and lacks future prospects, so nostalgic thoughts about mythical bygone times predominate. When the present and the foreseeable future are dark and foreboding, only the past can bring hope and solace.