Pro-Tip: To Fight Austerity the Radical Left Must Embrace Austerity

by Jehu

I have already said that if you want to make sense of the European elections, don’t look at the results in the UK.

Okay, the statement was a little bit cryptic and could even be said to be reductionist. So, let me expand on this argument briefly. Instead of trying to make sense of the European Parliament results, look instead at Fiat Chrysler. That’s right, Fiat Chrysler, not the Brexit Party, Labour Party or even the UK European elections results generally.

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Fiat Chrysler has a long history, much of which can be gleaned from its Wikipedia entry. The Fiat side of this corporate duet was founded in 1899 in Italy. During its more than a century long history, it has manufactured everything from automobiles to railway engines and carriages, military vehicles, farm tractors, and aircraft. The Chrysler side was founded in 1925 from the remains of the Maxwell Motor Company in the United States. It has produce everything from automobiles to tanks to radar to missiles. Chrysler has been bailed out by Washington about as often as a leaky row boat in a hurricane. While the management of the Fiat side once pledged its undying fidelity to its Mussolini fascist party bosses.

The two balls in this corporate nut-sack have accompanied their respective nation-states into war and both have been generously coddled by their respective nation-states during times of economic stress. In addition to the care and feeding both have received throughout their history from their respective nation-states, they also have been prominent sites of the class struggle, having seen their factories occupied by communists and anarchists on both sides of the Atlantic at one time or another.

Today, Fiat Chrysler wants to merge with Renault. But Renault, the object of their affection, is already in a strategic partnership with Nissan and Mitsubishi, two auto companies based in Japan. Together, the Nissan-Renault-Mitsubishi Alliance sell one out of every nine automobiles world-wide. The stakes of this courtship are high: a successful marriage between Fiat Chrysler and Renault would result in the third largest automaker in the world, with a market capitalization of $35 billion and production facilities and licensing agreements in scores of countries around the globe, from the U.S. to China to Brazil to South Africa.

But, as we shall see, there are problems with this corporate booty call.

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The government of France owns a big piece of Renault, which throws a wrench in a potential tie-up between these two conglomerates. Moreover, a new French law gave the government of France effective control of Renault despite its minority share in the company.

The newly constituted Italian government don’t like the fact that the French government just voted itself control of Renault, which could give the government of France an inordinate say in how the potential new conglomerate would be run. Meanwhile, the French government don’t like the new euroskeptic Italian government at all. It accuses the Italian government of fanning the flames of euroskepticism in France and even recalled its ambassador. The government of France has accused the new Italian government of threatening the very existence of the European Union and of breaking the previous Italian government’s commitment to austerity.

But this is not the only problem.

At the same time, the CEO of the Nissan-Renault-Mitsubishi Alliance was recently arrested by Japan’s prosecutor and fired by both Nissan and Mitsubishi. He is presently being prosecuted in Japan for alleged financial irregularities. But, rumor has it, the real reason the government of Japan is prosecuting him is that it doesn’t want the government of France effectively running a Japanese firm. According to Wikipedia, the same law that gives the government of France effective control of Renault guarantees “Renault has effective control over the [Nissan-Renault-Mitsubishi] Alliance due to its significant voting stake in Nissan and its Nissan board seats.”

If the deal goes through between Fiat Chrysler and Renault, the government of France could conceivably be in control of Renault, Fiat Chrysler, Nissan and Mitsubishi. It turns out the government of Japan no more likes the government of France running Nissan and Mitsubishi than the government of Italy likes government of France running Fiat Chrysler and is trying to force both the CEO and France out. And this is making for a very messy conflict.

To say the least, these state-corporate dust ups are a tad problematic for massive global automobile monopolies with tentacles spread over dozens of countries, but this is what we have come to. This is the bizarre intersection between the conflict among global capitalist firms and the nation-states with which they have been historically associated. To add some perspective on this nasty bit of state-corporate rivalry, it probably would help to remember that while Japan was busy locking up the former CEO of the Nissan-Renault-Mitsubishi Alliance, Canada, at the instigation of the United States, was locking up the CFO of Huawei on equally suspect charges.

It is becoming almost as dangerous for a corporate executive to walk the streets of an advanced capitalist country as it is for a black man to drive in Los Angeles.

(Just joking. Black men don’t typically control large amounts of capital for their defense ministry daddies, so cops just shoot them.)

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What does all of this have to do with the results of the European Parliament elections in Britain?

Nothing.

Everything.

Take your pick; you’ll look like a fool either way.

The collapse of the nation-state is determined by forces far larger than an election in the UK or Greece. This much we all can agree on and if the discussion ended here, it would be banal.

The point is that the Brexit Party is not driving this process; rather, it is a symptom of the process that operates on a whole different level, one we seldom see examined in radical Left literature. That level is the unfolding of the law of value, a process that progressively draws national capitals into competition with one another, undermines the sovereignty of each nation state, and makes developments within one national economy dependent on the development of the others.

Again, this is a point a few radical Leftists are willing to concede, if reluctantly and only in the long run. But in the short run, they insist, there are these measures a committed radical Left government can take to save capitalism from itself. Inevitably it turns out that the measures never actually materialize.

In the meantime we can eat austerity.

So if the Brexiteers have no real platform beyond Brexit and are unable to formulate a realistic manifesto for governance, this is only natural since they find themselves suspended in mid-air, with the very ground they hoped to stand on swept away by global economic forces bound up with capital. They want a world where the UK government determines what happens in the UK economy with respect to laws, immigration, taxes, education, pension and the like.

At the risk of insulting the delicate sensibilities of some on the radical Left, let me say that, in this sense, the aims of the Brexit Party are no different than the aims of the SYRIZA Party; each seeks only to employ the existing state power to determine what happens in their respective economies — and nothing more. Yes, the Brexit Party is racist and anti-immigrant and its leader is a clown. But, be honest now, you know Tsipras dresses badly, and for all his compassion for immigrants, he was just as silly to think his party ever had the slightest hope of using the state power to determine what happens in the Greece economy as Farage is insane to think the Brexit Party can use the state power to determine what happens in the far more globally important UK economy.

What Tsipras and Farage have in common, despite their totally superficial political differences on which radical Left analysis usually focuses, is the fact that there is no such thing as a UK or Greece economy anymore — just as there are no French, Japanese, Chinese or Italian economies.

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There remains today only a single world market, composed of massive competing capitals, who use every advantage at their disposal, including the political power of their respective nation-states, to advance their interests against the others. This has deep implications for what has been called the fight against austerity in Europe. The first implication is that there is no fight against austerity. To understand why, we have to address a technical argument that is so terribly boring you probably will want to skip this section entirely.

According to Wikipedia, austerity refers to a set of policies that together aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. These measures are said to be forced on governments that find it difficult to pay their past debts. They are meant to bring government revenues closer to expenditures in order to make the payment of debt easier. The radical Left takes exception to austerity because, obviously, it prioritizes the repayment of public debt to creditors over the other priorities of government, such as maintaining so-called full employment, eradicating poverty or addressing global climate change.

Moreover, as Wikipedia admits, most macroeconomic models assume austerity leads to an increase in unemployment as government spending reductions lead to reduced public and private employment. Further, raising taxes to pay off debt reduces income and thus consumption. Thus, austerity may have the perverse effect of actually increasing deficits, as was the case in most countries following the IMF internal restructuring program in the European Union after 2010.

For the radical Left, austerity is not just inhumane, it is self-defeating. It can’t work.

Add to this the fact that, in some circumstance, even when it does not lead to outright political opposition, its most obvious practical political effect is to produce the sort of incoherent political backlash that led to Brexit in the UK, and the election of Trump in the US. Masses of disaffected workers may not revolt against the system as the radical Left predicts, but they begin to blame immigrants and other vulnerable populations for their predicament.

Politics under austerity becomes highly unstable, extremely contingent and unpredictable. Mostly it just becomes ugly. It can, on the one hand, produce vaguely radical movements like SYRIZA in Greece, Podemos in Spain or Die Linke in Germany, but it can also produce vaguely fascistic movements like UKIP in the UK, AfD in Germany and the National Rally in France.

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Dangerous though austerity may be, it is inevitable. The United States aside, absent a trade surplus, the typical nation-state has no means to run long-term fiscal deficits now required for sustained economic growth. Nation-states thus cannot artificially stimulate domestic economic growth as Keynes discussed in his General Theory.

And why might this be true?

Remember what we discussed above with regards to Fiat Chrysler. Capital today is global, with tentacles reaching into scores of countries. No nation-state today can rely on its domestic capital to finance expenditures as Keynes assumed. States must attract global capital to finance the deficits. Although most radicals (especially American radicals) don’t realize it, because they live in their first world bubbles, Britain, France, Germany, Italy, Greece and every other country on the planet are always competing to attract foreign capital.

(I will not discuss here why this does not apply to the United States, but it does not and this is a peculiar problem for communists in the US.)

This means, sooner or later, the nation-state must reduce its expenditures to what it can raise in taxes. The capitals who will lend them their excess capital want to be assured they will be repaid. But if the nation-state to whom they lend their excess capital prioritizes the repayment of their debts over their other functions, their expenditures must be further reduced.

This tendency to prioritize debt repayment over other functions of the state gets worse over time.

If austerity is inevitable as I argue, a realistic program for change must take this into account; it must adopt austerity as its own program and rebrand (i.e., re-conceptualize) it. This means more than just giving austerity a catchy new name and a logo. It means embracing the idea that the entire Keynesian concept of public deficit-stimulated economic growth is so last century in the face of new circumstances we face in the 21st century.

The expansion of the nation-state’s share of national GDP for the last century or more has always been predicated on the idea that this expansion was both necessary and possible in order to overcome the inherent limits of capitalist accumulation. Austerity is simply the general recognition by society that, for most states at least, further expansion of the state’s share of GDP is a practical impossibility.

Austerity has to happen; we cannot prevent it — which is to say, we can no longer rely on state deficit-financed economic growth to overcome the inherent limits of capitalist accumulation. But ending reliance on state deficit-financed economic growth does not mean we have to tolerate rising unemployment, growing poverty and climate change.

We need a solution to the inherent limits of capitalist accumulation that prioritizes maintaining employment, eradicating poverty and reversing climate change over repayment of debt. That approach will have to increase the consumption of the working class, not reduce it. And, obviously, since it demotes debt repayment below improving workers’ conditions, it will have to end reliance on deficits entirely.

The only measure that can accomplish this form of austerity is a reduction of hours of labor. The long Keynesian detour has finally reached a dead-end; from here on out, hours of labor must be dramatically reduced. It is the only program remaining for the radical Left.