Ah, the old questions, the old answers, there's nothing like them!
– Samuel Beckett, Endgame
Above all, the bourgeoisie produces its own gravediggers.
– Karl Marx, Communist Manifesto
FOR ME, THE history of the crisis begins with a sound. It's a chilly spring afternoon in Berlin in March 1990, the day before the first and last free elections in what was then still East Germany, the German Democratic Republic. I'm taking a walk along the Berlin Wall, on the western side, when my attention is caught by a chinking, clinking sound echoing in the frosty air. I turn on my tape recorder, put on the headphones and move closer. Up ahead, a small group of Turkish guest-workers are busy chipping pieces off the wall with hammers and chisels. The chips will be sealed up in plastic bags and sold to tourists as souvenirs.
I still have that recording. At the time, the clinking of the hammers seemed to me a perfect metaphor for the historical process that was unfolding in Germany: entrepreneurial capitalism chipping away at the Eastern Bloc's most potent symbol, sounding a tiny but insistent death knell for fifty years of communist domination in Eastern Europe.
The following day, the citizens of the German Democratic Republic voted decisively for the Christian Democratic Party, the deutschmark and reunification. ‘Jetzt waechst zusammen, was zusammengehoert,' declared the former Social Democrat Chancellor Willy Brandt: what belongs together now grows together.
Shortly after the fall of the wall, one of the GDR's most venerable writers, Stefan Heym, published a short newspaper article decrying his fellow citizens' appetite for all things western, as they stormed the supermarkets of West Berlin and returned to their homes in the east with shopping bags bulging with consumer items. For decades Heym himself had walked the tightrope of dissidence, a ‘critical-loyal' writer who was tolerated by the East German authorities. Now, wrote Heym, fifty years of socialist tradition was being tossed on the rubbish heap, and what for? Bananas.
Heym's tirade drew a swift retort from another former East German writer, Monika Maron. She had left the GDR in the mid-1980s, after publishing a novel which exposed the appalling environmental degradation caused by the East German chemical industry in the city of Bitterfeld. Never one to pull her punches, Maron accused Heym of speaking from a position of extraordinary privilege: under the old regime, he had been allowed to travel to the West and buy western consumer goods, a privilege normally reserved for senior party officials. Heym's sanctimonious rebuking of his fellow East Germans over their appetite for bananas, she declared, amounted to nothing more than ‘the arrogance of the well-fed who are disgusted by the table manners of the starving'.
That pithy exchange between two German intellectuals seems to me to resonate, along with the clinking of the hammers, just as insistently twenty years later. The central question posed by the global financial crisis is a simple one: should we apply the old remedies, jump-start the sputtering global economy with a fresh injection of high-octane growth, a new orgy of consumer spending? Or is growth itself the problem, rather than the solution?
It's all too easy for well-meaning, well-heeled and well-educated intellectuals in the West to declare that it's time to put an end to the tyranny of consumerism, to toss out our flat-screen tellies, downsize our kitchens and opt for a simpler, slower, less cluttered existence. And there's an undeniable environmental logic in this position. But are we really prepared to tell two billion people in the developing world, a generation who see the promise of a western lifestyle finally becoming a reality, that they should forego exactly the same consumer goods which we have taken for granted for the past fifty years – not even flat-screen TVs or SMEG kitchens, but items as ordinary as a family car? Isn't that tantamount to the well-fed tut-tutting at the table manners of the hungry?
It's perhaps no accident that a professor from the Chinese Academy of the Social Sciences, Jiahua Pan, was reported recently to have told an audience at the Australian National University that the planet ‘could not afford countries like Australia and the US having wasteful and luxurious lifestyles'.
A COUPLE OF weeks after the 1990 elections, I interviewed the East German writer and dramatist Heiner Mueller. At the time, Mueller's production of Hamlet was running in East Berlin. The performance lasted nine hours. Characters made their way across the stage at the glacial pace of actors in a Japanese Noh drama, taking a good ten minutes to make the journey from the wings to centre stage. Each time the ghost of Hamlet's father appeared he was accompanied by an eerie, crackling voice: a recording of Stalin from the 1930s.
Sipping Glenfiddich and smoking a Cuban cigar, Mueller explained some of the ideas behind his staging of the play. He'd deliberately slowed down the production to mimic the pace of life in the GDR. The working day in the former land of ‘real existing socialism' was nine hours long, but a good part of it was spent killing time. ‘You worked for two hours but were paid for nine,' Mueller wrote in On the State of the Nation, a collection of essays and interviews published around the the same time. ‘Naturally that was terribly inefficient.'
A few days after the elections, on the factory floor of a foundry in Leipzig which employed eighteen thousand people, I asked some of the workers why they'd voted for the Christian Democrats. ‘We want to do a proper day's work and be paid properly for it,' they told me. ‘We need investment and the Christian Democrats have the connections to West German capital, they'll bring it here.'
Looking around the factory hall, it wasn't hard to see why they felt that way. It looked like something out of Dickens: filthy and stuffy, badly ventilated and badly lit. The workers told me that some of the lathes they worked on dated back to the 1920s. Aren't you afraid that you'll lose your jobs if the foundry has to compete with West German firms? I asked. ‘We're not worried – the economy will take off and we'll find jobs elsewhere.'
When I went back to Leipzig in 1993, the foundry had closed down. No one I asked seemed to have much idea what had happened to the eighteen thousand workers who'd lost their jobs; no doubt some of them had found new work, but despite the hundreds of billions of deutschmarks poured into the east after reunification unemployment rose rapidly, and has consistently remained more than twice as high as in the west. At the same time, entrepreneurial capitalism in the east has generated some astonishing success stories: Bitterfeld, the ‘dirtiest city in Europe' in Monika Maron's novel, has now become the headquarters of Q-Cells, the world's largest manufacturer of solar cells.
According to Mueller, the basic contradiction between the two systems lay in the way the flow of time and the pace of everyday life was regulated. ‘In the west, the governing principle of society is all about speeding time up, total acceleration. In the east, it was all about deceleration, slowing life down.'
After sitting through nine hours of Hamlet, the Western members of the audience undoubtedly had some idea of what this principle of deceleration felt like in practice. The atmosphere of claustrophobia and paranoia in the state of Denmark mirrored the paralysis and ossification of the GDR. But what was the connection between Stalin and the ghost of Hamlet's father? I asked. Mueller chuckled mirthlessly. ‘Hamlet's dilemma is the dilemma of the GDR,' he replied, ‘caught between Stalin and the Deutsche Bank.'
Mueller was sceptical about the possibility of any middle way between the two, and the reunification of Germany proved him right. But, Mueller argued, there was a kind of utopian, oppositional potential in the slowing down of capitalism: ‘I'm interested in how one can create a positive quality out of deceleration.'
To paraphrase Mueller, we could say that ‘real existing socialism' in Eastern Europe acted as a brake on the process of modernisation. For the two decades since the fall of the wall, acceleration has been the order of the day. In the late '90s, it seemed that capitalism had overcome the laws of economic gravity and reached escape velocity; pundits sang the praises of the ‘weightless economy', a kind of neo-liberal utopia in which growth was freed from the traditional economic constraints and propelled by the dramatic expansion of ‘weightless' goods – principally computer software.
What put the weightless economy into orbit was, of course, the internet. In the first decade of the twenty-first century it is the mobile internet that has caused the acceleration of the knowledge economy – and the speeding-up of everyday life. There's good reason to think that the speed of global communications and the sheer volume of information ricocheting around the world were contributing factors in the financial crisis: turning points, such as the collapse of Lehman Brothers, sent the electronic herd into a stampede of selling that would have been hard to imagine before the advent of the BlackBerry and the wireless internet.
It's too early to say yet how much the crisis will slow the acceleration of globalisation itself. In the short term, it's clear that there is already a degree of ‘deglobalisation' occurring – a term coined by Walden Bello, one of the leading theorists of the counter-globalisation movement. Seventeen of the G20 countries have introduced protectionist measures in the wake of the crisis, world trade is falling rapidly and international capital flows have declined. This is what some sections of the counter-globalisation movement have been advocating for over a decade. Others in the movement have argued that what's necessary is greater democratic control over the key institutions of globalisation, the International Monetary Fund, the World Bank and the World Trade Organization. It's probably fair to say, however, that all share scepticism about the pace of global modernisation over the last two decades, and sympathy with Mueller's notion of ‘deceleration' as a kind of counter-dynamic.
What is really at stake, in the longer term however, is not just the speed and direction of globalisation, but its legitimacy as a process supported by the billions of human beings it affects. For this reason, it's worth drawing breath and attempting to look at the crisis and its causes and consequences with a longer perspective.
IT IS EASY to forget now how much the history of the last two decades owes to those clinking hammers chipping away at the Berlin Wall, and how much energy and confidence global capitalism derived from the humiliating defeat of its antagonist. As Heiner Mueller said presciently in 1990, Soviet communism had acted as a brake on capitalist modernisation; now the brake was off. Not only did the collapse of communism and the disintegration of the Soviet Union open up new markets, and end the competition between East and West for influence in the developing world; they also seemed to spell the end of any serious ideological challenge to the legitimacy of liberal capitalism.
Since World War II, that legitimacy had rested in no small measure on the democratisation of consumption. The forms of liberal capitalism varied considerably across the West, from Australia to Britain, Scandinavia, Germany and the US; but what united all of them was a consensus that the state would insure its citizens against the kinds of economic risks which had resulted in the Great Depression – and paved the way for the rise of fascism. Just as importantly, all across the West states underwrote a redistribution of wealth and an expansion of spending power, which enabled whole sections of their populations to buy things and do things previously reserved for a privileged minority. In Beveridge's famous formulation, they created a ladder and a net, and up that ladder several generations climbed into the middle class.
That achievement, perhaps more than any other, was the postwar West's most durable insurance against a challenge from the militant left or the appeal of Soviet or Chinese communism. In the 1970s, however, the consensus which had underpinned it began to break down, and in the Anglo-Saxon world Keynesian, social-democratic capitalism was driven from the mainstream and replaced by a neo-liberalism inspired by Hayek and Friedman. The triumph of neo-liberalism is a familiar story, but there are one or two subplots to that narrative which helped to pave the way for neo-liberalism's spectacular fall in 2008.
The first has to do with what the financial-services industry refers to as the ‘democratisation of risk'. This attractive-sounding euphemism is shorthand for the process whereby governments and employers shed the responsibility for providing retirement incomes and transferred that responsibility to us, the citizens and workers. The massive expansion of pension and superannuation funds since the 1980s occurred because we took on the risk previously managed by governments and financial institutions.
The effects were profound. A vast reservoir of capital flooded into the global economy, looking for investment opportunities and driving innovation. According to Mike Clowes, author of The Money Flood: How Pension Funds Revolutionized Investing (Wiley, 2000), the retirement savings of American workers provided the seed capital which enabled firms like Hewlett-Packard and Intel to launch themselves into the marketplace and grow. ‘If you look at when the American high-tech industry began to take off,' Clowes writes, ‘it coincides almost perfectly with the flow of pension dollars into the venture capital industry.' By the early years of the twenty-first century, around half the shares in American companies were held by pension funds.
The downside of this is only now becoming fully apparent. So far, the financial crisis has wiped US$5 trillion off the value of pension funds in the United States, Japan, the United Kingdom and the Netherlands. According to the World Bank's Robert Holzmann, the impact of the crisis will fall disproportionately on people aged over fifty, and governments will need to strengthen the role of state-funded pensions ‘to prevent individuals from falling easily into poverty in tumultuous times'.
Coinciding with the democratisation of risk was the ‘democratisation of credit' in the 1990s. As Zanny Minton Beddoes, economics editor of The Economist, wrote recently, the current crisis has its roots in the biggest housing and credit bubble in history – driven, at least initially, by the appetite of British and American householders for debt-financed spending, and the easy availability of consumer credit. For many consumers, easier access to credit was a good thing, allowing them to own homes which would previously have been beyond their reach. But in the 2000s, ‘asset and credit bubbles formed in many countries simultaneously'.
These bubbles in the developed economies were funded and inflated by capital from emerging economies. In other words, the good times that consumers in countries like Australia have enjoyed until recently have been financed by the savings of workers in the east and south of the globe – in particular, China.
IF, AS THE chinese academic Jiahua Pan says, the world can no longer afford Western consumers having ‘wasteful and luxurious lifestyles', what does this mean for the democratisation of consumption in the emerging economies?
In The Expanding Middle: The Exploding World Middle Class and Falling Global Inequality, a research paper published in July 2008, the Goldman Sachs economists Dominic Wilson and Raluca Dragusanu predicted that the global middle class will expand by up to two billion people by 2030. Driving this will be a shift in spending power away from the richest countries, towards middle-income economies – including some of the world's most populous countries: India and Brazil, and members of the ‘Next Eleven' (N11), such as Egypt, the Philippines, Indonesia, Iran, Mexico and Vietnam. To qualify for membership of this exploding middle class, new entrants must have annual incomes from US$6,000 to $30,000. Wilson and Dragusanu draw on earlier work showing that once people earn above $6,000 their demand for energy increases, and above $9,000 a year they can begin to afford consumer durables such as cars.
Just how the global financial crisis might affect these predictions is unclear. But there's evidence that some of the most successful companies in India, China and Brazil are banking on a burgeoning global bourgeoisie. Tata is an Indian conglomerate with operations in eighty-five countries that has recently bought up assets ranging from the Tetley tea company to the car firms Jaguar and Rover. In July this year Tata launched the Nano, a two-cylinder ‘people's car' with a price tag of US$2,000, in India. As Matthew Bishop said in The Economist, the Nano is aimed first and foremost at the lower income bracket of the Indian middle class. But its price puts it within reach of newly arrived members of the middle class in other developing countries.
What Tata is doing for drivers in the developing world, the Chinese computer company Lenovo is doing for a new generation itching to get online. Lenovo was founded in 1984 and built its growth on the domestic market in China. It bought IBM's personal-computer business in 2005, for about US$1.75 billion. Lenovo has been hard hit by the global crisis, losing more than $200 million in the first quarter of 2009, mainly as a result of falling sales in the US, its largest market outside China. But the company is betting on an unlikely new market to put it back in the black: Chinese peasants.
According to Lenovo Group's chairman, Liu Chuanzhi, also a deputy to the National People's Congress, Lenovo aims to sell five million computers in rural areas over the next three years. These cut-price, stripped-down ‘netbooks' will sell for 3,000 yuan (US$439) and, as part of the Chinese government's massive stimulus package, villagers will get a subsidy to buy them and other electronic equipment. A century ago Lenin famously declared, ‘Communism equals Soviets plus electrification'; in twenty-first century China, communism equals local assemblies plus laptops.
Can the world afford a vastly expanded global middle class equipped with low-cost cars, laptops and other consumer goods? Even if the manufacturer's claims are true and the Nano is a low-emissions, eco-friendly vehicle, it's mindboggling to try to imagine what an extra two billion Nano drivers would add to global greenhouse-gas emissions. But if consumers in the West are prepared to finance their lifestyles with easy credit from the East, why should governments in China, India, Indonesia and the Philippines attempt to rein in their citizens' expectations that they too should be able to enjoy a western lifestyle? If globalisation is to be environmentally and politically sustainable, politicians must begin to utter the unspeakable truth: that living standards in the West will have to fall as they rise elsewhere.
As Zanny Minton Beddoes writes in The Economist, it's clear that the whole direction of globalisation will change. In the short term, at least, the financial markets will be reregulated, governments will reassert their control over crucial areas of the economy such as food security and commodity prices, and the economic clout and intellectual authority of America will decline. But these changes alone do not amount to a more democratic global economy. Development economist Robert Wade has pointed out that neo-liberal globalisation ‘has a mixed record on its central ostensible aim of emancipation and prosperity. It has a much clearer record of success on its much more concealed aim as a class project: to redistribute income upwards to the very top percentiles of the population and consolidate political power in the hands of the wealthiest sliver of society.'
THE CONTINUING LEGITIMACY of liberal capitalism cannot rest on the ‘democratisation of consumption' alone. The crisis offers the potential for a much more far-reaching democratisation of global institutions, the global public sphere and global capital itself. There are a number of concrete and feasible directions this might take.
Just as the ‘democratisation of risk' exposed the retirement savings of a generation of workers in the Anglo-Saxon economies to the vagaries of the market, it also created what the late Paul Hirst described as the largest pool of socially owned capital in history, in the shape of pension funds. At present, the owners of this pool of capital exercise little control over the way it is invested and the consequences of its use. It might surprise many members of Australian superannuation funds, for example, to know that fourteen of the largest industry funds hold investments which directly generate nearly six million tonnes of carbon dioxide emissions a year.
My financial interests as a stakeholder in a super fund may not coincide with my interests as a citizen who is worried about global warming and the kind of world my children will live in. Neo-liberal capitalism created a dismembered citizen whose interests as shareholder, consumer, parent, partner, child and individual subject of the democratic process could somehow be compartmentalised, partitioned off from each other. A more democratic liberal capitalism would attempt to put the dismembered citizen back together, and recognise the common interests of the individual owners of capital in broader forms of social solidarity.
But this is not enough to restore legitimacy to globalisation as an economic and political project. If this is our goal, we will need to end the domination by the developed economies of institutions such as the World Bank, the International Monetary Fund and World Trade Organization, or replace these institutions with new ones which can better reflect the interests of people in the developing world – and, in particular, the poor.
Just as western governments after World War II set about redistributing wealth within their economies, a democratic global order can and should seek to redistribute wealth from richer to poorer citizens of the global economy. This may sound like a utopian project, but in fact one simple mechanism for doing so, the Tobin tax, was first suggested more than thirty years ago. The tax, now known as a currency-transaction tax, would impose a small levy on international currency transactions and use the proceeds to fund development projects. It is, as the former French President Jacques Chirac said, a tax on the benefits of globalisation, albeit a minuscule one, amounting to a ‘development levy' of 0.005 per cent. Such a levy would yield an estimated US$33 billion, which could be invested in the Millennium Development Goals adopted by the United Nations in September 2000. The practical means of collecting and distributing the revenue has been explored in research by the North-South Institute in Canada, and the UN Secretary-General, Ban Ki-moon, has supported its proposals.
As Marx wrote in the Communist Manifesto in 1848, the bourgeoisie has played a revolutionary role in history. The bourgeoisie of the developed world has reaped huge benefits from the first phase of neo-liberal globalisation, and it can continue to play an important role in a new phase of democratic globalisation; but only if it can find a new language in which to speak to the citizens of the developing world, stripped of the moralising tones of the well-fed.
The ascendancy of a new bourgeoisie in the South and East will not, of itself, guarantee the emergence of a more democratic and liberal global order. This will only happen if the global poor – the slum-dwellers, landless peasants and migrant workers of Africa, Asia and Latin America – receive a greater share of the benefits of globalisation.
The essential questions Marx asked – questions about human dignity and social justice in the conditions of modernity – are no less urgent now than they were more than a hundred and fifty years ago. Marx's answers to those questions were wrong, and the history of the twentieth century is littered with the corpses of tens of millions of people who, if they could be raised from the grave, would bear witness to how wrong they were. The global financial crisis marks a turning point no less significant than the collapse of communism in 1989: in Heiner Mueller's terms, we have moved beyond the point where the only choices open to us are between Stalin's ghost and the Deutsche Bank. But unless we can find some new answers to those same old questions, we will produce nothing but a new, global generation of gravediggers in the twenty-first century.