The role of the State: Panitch and Gindin on the 'Making of Global Capitalism' - Part II

| October 26, 2012
The role of the State: Panitch and Gindin on the 'Making of Global Capitalism' - Part II

Leo Panitch and Sam Gindin have just released their latest book, The Making of Global Capitalism. Gindin is the former Research Director of the Canadian Autoworkers Union and Packer Visiting Chair in Social Justice at York University, and Panitch is Canada Research Chair in Comparative Political Economy and Distinguished Research Professor of Political Science at York University. The two have worked together on many books and publications. 

Aaron Leonard recently sat down with them in New York City to discuss their work. This is Part II of a three-part series. 

Aaron Leonard: You make a startling and revealing statement, "American workers were not only attacked, but also materially integrated into the making of global capitalism." What does this mean and what effect has it had?

Sam Gindin: I think this is crucial in understanding the nature of the defeat of the working class over that period. A few things happened that were very important. Workers will always find a way of surviving. The left wasn't all that strong in this period of the seventies -- though there was a left. The consequent absence of alternatives meant that people survived in very individual ways. They worked longer hours, went into debt, young people stayed at home longer, older workers hoped that the stock market going up would help their pensions. That was important culturally, but it was also important because it lead to an atrophy of collective strengths, sensibilities and solidarity.

The other thing that happened was competition was intensified in this period. Finance was being liberalized and globalization was accelerating. The impact of this on the working class was uneven. Union members could perhaps defend themselves a little, hang on to the status quo, but not make gains, while the poor got really hammered. You have the working class itself being more fragmented, which makes it even harder to build solidarity. The resentments go both ways. Union members paying taxes complain about people on welfare, and people on welfare complain about unions wanting more. So the very formation of the class is negatively affected. That's one very important thing that begins to happen. Moreover, consumption actually increases over this period, further materially integrating workers. But consumption is increasing because workers are exploiting themselves more and debt becomes so important because it also affects the growth of finance. Crucial to the growth of finance was the earlier growth of pensions earlier and later consumer credit and especially mortgage credit. The dependence of workers on credit means that the system is especially fragile as workers wages aren’t rising but their debt is growing. And as finance is liberalized and competes by increasing its leverage and moving into new riskier areas, its volatility intensifies. 

That combination of the growth of finance and the credit dependence of workers are central factors in this crisis. Housing overlaps the two because it was at the center of the increase in credit. When you have a stock market bubble it is one thing, you can more or less wait it out. When you have a housing crash, however, it is directly linked to the economy and is not just financial. It affects construction, furniture and appliances, and especially how workers view their savings and future security and so whether they are going to spend. So the form through which workers accessed consumption was very important in terms of the formation of the working class and to the nature of the crisis that followed.

Leo Panitch: When the unions were defeated, when the welfare state was pushed back, when you couldn’t get any public housing to solve the crisis of American cities, the compensating great reform was to get workers more integrated into the private financial system. Just as with the reforms that helped women get credit cards under pressure from the feminist movement, the mots significant reform under Carter was the Community Reinvestment Act which required all banks in the U.S. to set aside 5 per cent of their capital in every area where they were doing business and lend into previously redlined areas where black people were not able to get mortgages and black businesses were not able to get credit. This was seen as a great victory, but it was a reform that totally depended on financial capital to solve social problems.

The Clinton administration was very proud of expanding mortgage credit and business credit to American blacks, that financial innovations had allowed secondary mortgages to be sold off around the world. The Treasury proudly pointed to all the institutions around the world competing to lend money to American blacks to buy houses. Then Bush gets in and he lets every shyster into the business. The Congressional report on the crisis showed that over 10,000 people who were selling mortgages in Florida already had criminal records and 4,000 had been convicted for fraud. Of course that is the nature of the Republican party -- the Party at the local level consists of real estate dealers, brokers, loan sharks -- often 'respectable' loan sharks, rather than kinds of loan sharks in black communities we see on a television series like The Wire.

More generally, even though the Democrats were complicit in creating the housing bubble, and the Bush administration blew it up, this was also something that workers actually embraced. They depended on secondary mortgages to keep up their standards of living, wanted to get into the game -- and why shouldn't even black Americans want to get into the game of the American Dream? The only asset most workers will ever have to speak of, apart from their pension, is their home. Why shouldn't they try and get into this game of that singular asset bubble. And it was dangerous and disastrous.

SG: There is a general point here. There are reforms that might strengthen working people and there are reforms where you might get something in the short term, but you get them at great cost. In focusing on the short term, the working class is itself complicit in reproducing neoliberalism. The other dimension in which this occurs is around ‘competitiveness’. Once unions accept the logic of competition and are selling it to their members - you have to accept this to be competitive - neoliberalism is reproduced within the institutions of the working class.

LP: In the run up to NAFTA, Sam and another economist in the Canadian autoworkers issued a wonderful pamphlet which argued that competition is a constraint, it's not the union's goal. But for most unions it eventually becomes the goal and this undermines every aspect of solidarity.

AL: Early on you discuss, "The roles of states in maintaining property rights, overseeing, stabilizing currencies, reproducing class relations, and containing crisis has always been central to capitalism." This really goes against "common sense" view of states -- which most people think are ideally supposed to be instruments for the common good. Could you talk a more about what you mean by your definition and how this works? 

LP: This is the central theme of the book. When the right ideologically articulated a market versus states perspective, the left tended to speak in terms of: 'they say free markets are good and states are bad, but in fact states are good and the unregulated market is bad' -- shifting the dichotomy from one end to the other. That confused people enormously in terms of the extent to which the states in question are capitalist states. Not merely in the sense that politicians are bought off, that political parties depend on donations from corporations, and banks etc. But more profoundly in the sense that as they have evolved over the course of the 20th century these states are thoroughly capitalist in the way they are structured. They are dependent on capital accumulation to provide the taxes that fuel the operations of any given department or agency. They are dependent on capital accumulation for employment that will yield them legitimacy as well as mass taxation.

Marxists have themselves failed traditionally to develop a sophisticated understanding of this, often speaking as though it's the wishes of the capitalists that determines what the state does. No! The state figures out things that capitalists individually can't figure out because they are competing with one another. But because the state is dependent on capitalist accumulation it takes responsibility for seeing the forest for the trees. Of course, certain states do this more and better than others. The attempts to develop a more sophisticated Marxist theory of the state in the 1970s, whether by Ralph Miliband -- who was my teacher in the UK, or by the Greek theoretician Nicos Poulantzas in France, largely got interrupted throughout the 1980s. The political defeat of the left together with the pressures of professionalism and careerism among so many leftist intellectuals who previously would have gone into revolutionary organizations but now found themselves in universities, contributed to the rise of a postmodernist, post-structuralist, post-colonialist discourse that deflected from further attempts to properly understand the capitalist state. 

This contributed by the turn of the century not only to the view that you can change the world just by changing discourse, but also to the resonance of quasi-anarchist chant that you can change the world without taking power. Part of what this book is about is trying to revive and develop further a Marxist understanding of the state that will be of use in the class struggle. Not least so people won’t be as confused by the right-wing ideologues’ ‘states are bad’ rhetoric. All they mean by that is that they want states to be doing the things that help to accumulate capital rather than doing those things that fulfill the basic needs of the mass of working people. 

SG: What we are doing in terms of developing the centrality of this notion is to ask certain questions about states. How did the American state come to have a special capacity that it can play this role on behalf of global capitalism? Or if you have a world of multinational corporations does this mean that states are irrelevant or does it mean that multinational corporations depend on many states? One of our arguments is that this kind of empire is unique because it is based on sovereign states.

LP: Not on colonies. In a sense Canada is the model state for a world made up of autonomous individual sovereign states that are part of an integrated global capitalism. Its happenstance that Canada became the model state but it had a form of capitalist development based on a form of well-paid independent commodity producer farming class in the middle of the 19th century. Which, as in the U.S. was the basis of a very dynamic manufacturing economy because local manufacturers linked up with those local farmers in the American Midwest and the wheat heartland of Ontario in Canada. The first multi-corporation was the Singer sewing machine company. Canada introduced a tariff barrier in 1879, to ensure that capital wouldn't just flow out to the United States. Well the American corporations jumped over the tariff barrier to sell to those well-paid Ontario farmers who were making good money in the wheat economy, then to the high wage proletariat inside the cities. They were able to use Canada as a staging post to sell in the Commonwealth of the British Empire. 

Canada always gets a great deal of foreign direct investment from the United States. Engels comes to Canada in the 1880s and says it will only be a matter of years before this country is absorbed into the United States, the Canadian are going to demand it themselves. That isn’t what happens. There’s a free trade agreement proposed in 1911 by Laurier - a previously very popular prime minister - and its defeated! Partly because they identify with the British empire, but partly because there is a sense already of Canadian identity, nationalism, nationhood etc. That doesn't prevent American capital from becoming a major force inside Canada and Canadian capital allying with it. Canadian financial capital is increasingly lending money to American industrial capital to accumulate inside Canada, with the Canadian capitalist turning themselves into a very concentrated and powerful fraction of the financial capitalist class, which retains a Canadian identity, and a special relationship to the Canadian state. At the same time, American capital operates as a class force inside Canada, not so much in the sense of GM telling the Canadian state what to do, but because workers in Windsor are saying what’s in interest for GM is in our interest. 

When free trade happens it is not that Reagan shoves this down Canada’s throat. Afraid of those forces inside the United States concerned about Japanese imports, Canadian business is desperate not to get caught by the US introduction of tariff barriers. Because of the depth of their century-long integration into the American empire, it is the Canadian bourgeoisie that takes the lead in advocating free trade, even more than the Americans. The same then applies in Mexico. The most difficult place to get NAFTA passed was in the United States! More generally, you need to see the extent to which world’s bourgeoisies looked to the U.S. as the state that would do most for them. This isn’t a matter of American domination in the sense of defining the American interest as imposing it and marginalizing other national interests. Other states and ruling classes define their best interests in terms of getting into this empire.

SG: To give an example, you could say Japan wants to be into the U.S. auto market because it is the richest and you can do it by exporting. Part of coming to the U.S. is that they want to be inside the U.S. Empire because not to be inside of it might mean protectionism at some point. But how does that work? It sounds pretty complicated. Leo’s done a lot of work, before this book, on the internationalization of states. As you can often see in the practices of the Canadian state, we want to ask how do other states than the US also come to take responsibility for global capitalism? And out of this the crucial political point arises: The left should not be saying we’ll administer capitalism better than them.’ Politics for us is about transforming the state.

LP: Some people on the left say this is a depressing argument. Because what it says is, when you get elected and it is so difficult to transform this capitalist state, what can you really do? It does mean that people need to understand that when you get elected you need to transform the structures of the state, not just the policies of the state. So much of the left can't think beyond 'we'll carry this or that set of progressive policies into the state, and we will really hold onto them. We're committed to these policies...' No, this can’t happen unless there is a fundamental restructuring of the state apparatus. Lenin called it smashing the state, which is not such a good metaphor because it suggests taking a hammer and knocking down the building. No, but what it does mean is changing the mode of administration, and this requires developing the capacities in left political organizations to change the way states are structured. This is the only way forward for those who are not naively anarchist, and want to claim 'we can do this without states.' 

Part I of this interview is available here. The final installment will be published early next week. 

Aaron Leonard is a writer and freelance journalist. He is a contributor to truthout.org, History News Network, rabble.ca and other publications. He is based in New York City. His writings can be found by clicking here.

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