III
The most significant change
that has taken place in world capitalism in recent years is the emergence
of a new form of international finance capital, which differs from what
writers like Hobson, Lenin and Hilferding had written about in the pre-first
war period. The Leninist notion of finance capital for instance was
essentially nation-State based, and nation-State aided. It represented
a "coalescence" of banking and industrial capital, being presided
over by a financial oligarchy that was thrown up by a "personal
union" between magnates belonging to the banking and industrial
spheres. And it operated in, indeed gave rise to, a universe characterised
by intense inter-imperialist rivalry, a belief in the pervasiveness
of which underlay the notion of the "general crisis of capitalism"
adopted by the Communist International under Lenin's leadership as its
theoretical lynch-pin. In contrast, what we have today is finance capital
that is "international" in the sense of not necessarily having
German, or French or American interests stamped upon it, and not, for
that reason, enjoying the backing of only some particular nation-State
in the advanced capitalist world. It is a fluid mass that sucks in finance
from all over, that breaks barriers to its unfttered movement all over
the globe, and that is funadmentally in search of quick profits, and
hence speculative in character, rather than having any enduring links
with industry. What is more, far from giving rise to inter-imperialist
rivalries, it is perhaps an important factor contributing to a recession
of such rivalries: since a world broken up by rivalries is not very
conducive to the global fluidity of speculative finance in search of
quick gains, it exerts pressure for muting rivalries.
Three implications of this
phenomenon of globalised finance capital are of relevance to us here.
First, it undermines the possibility of Keynesian demand management,
and indeed of any State intervention for boosting the level of activity.
This is not to say that the State "retreats" from the sphere
of the economy, but, rather the nature of its intervention undergoes
a change. When such intervention in the earlier period invoked the "national"
interest, this was not without a rationale. For example, when State
intervention in the advanced capitalist countries was directed palpably
towards boosting the level of activity and employment, it conferred
benefits in varying degrees on virtually all domestic social groups;
likewise, when the State intervened in the underdeveloped countries
for building up the productive base of the economy through "development
planning", it could not be acused objetively of serving only the
sectional interest of some particular domestic social group. But State
intervention in contemporary capitalism, whether in the advanced or
the backward economies, gets increasingly oriented towards serving the
narrow sectional interests of globalised finance capital in order to
keep up its "confidence" in the economy.
There are at least two distinct
reasons why Keynesian demand management is undermined by speculative
financial flows. First, any boosting of activity to levels close to
"full employment", as was the aim in the heyday of Keynesianism,
gives rise to expectations of inflation and currency depreciation, so
that long before the economy comes anywhere near full employment a flight
of finance capital occurs which realises these very expectations (providing
a retrospective justification for them), and thereby forces a contraction
of the level of activity. Secondly, when this boosting is done under
the aegis of the State, especially through higher State spending for
purposes other than militarism, this becomes all the more a cause for
panic in financial circles, since an activist State of this genre
appears too radical for comfort. The only ways then that an advanced
capitalist country can achieve high levels of activity and employment
in these conditions are: either if it is so decisively the financial
centre of the world that the sheer expansion of its financial sector
that must necessarily occur in the era of globalised finance is enough
to generate high employment; or if its currency is so decisively
the lynchpin of the entire system that everyone has confidence in its
value even when the economy of the country has high levels of activity.
The Anglo-Saxon world would generally be the beneficiary of the first
set of considerations, and the US in particular (whose currency is considered
"as good as gold" even when not officially decreed to be so
as under the Bretton Woods system) of the second. By the same token
however the fact that Continental Europe, despite having a string of
Socialist or Social Democratic governments, elected to office on the
promise of getting rid of unemployment, continues to remain saddled
with massive unemployment underscores the impossibility of Keynesian
demand management in an economy caught in the vortex of globalised finance.
Taking the advanced capitalist world as a whole, this means a lower
level of activity on average than during the halcyon days of Keynesianism.I
shall come later to what this entails, but let me move now to the second
implication of globalised finance, which concerns third world countries.
