Political and social impact of the crisis of neo-liberalism

Prakash Karat

When one looks at the international situation, there seems to be a confusing picture of volatility, new contradictions and conflicts, emergence of new political forces and “strong men” in governments and visible signs of the adverse impact of climate change, resulting in a spate of natural calamities.

The recent years saw the emergence of a “maverick” billionaire, Donald Trump as President of the United States; the decision of Britain to exit the European Union; the rise of inter-imperialist contradictions and the growing contradiction between Russia and the West; the rise of extreme right wing forces in Europe and the rightwing counter-offensive in Latin America. The period has also seen the rise of China as a economic and political power whose growing influence is felt in world affairs.

How do we analyse these developments? Is there any pattern or these are unconnected developments? It is not possible to understand these current international developments unless they are set in the background of the crisis of neo-liberalism.  The crisis of neo-liberalism which dramatically manifested itself in the global financial crisis of 2007-08 and the continuing failure even after a decade to come out of this crisis is resulting in the economic, political and social outcomes of the present day.

The Political Resolution of the CPI(M)’s  22nd Congress has pinpointed  this aspect: “This crisis of neo-liberalism has created new contradictions leading to ruptures, conflicts amongst imperialist countries such as Brexit. Emergence of new political forces and the rising tensions are the order of the day.” Nearly four decades of imperialist globalization which is actually the imperialism of finance capital and the neo-liberal order are the root cause for the economic difficulties, financial crises and the unprecedented inequalities in the advanced capitalist countries and the developing countries.

Trump’s policies

The United States of America which is the strongest capitalist power in the world has also suffered due to this crisis of neo-liberalism. Finance capital has relocated many of the industries from America to the developing countries; this resulted in loss of jobs and social status for the working class. The imperialist finance system relies on the dollar as the reserve currency and the hegemony of the dollar has ensured that capital from all around the world flows into the United States. Thus, while the Wall Street financiers and the multinational companies are able to make huge profits, the real wages and jobs of the working people have steadily declined.

The election of Donald Trump as the President of the United States in November 2016 was the protest vote by large sections of the working people against the effects of neo-liberalism and finance driven globalization. Trump also promised to make America great again and bring the industries back to the United States got support from these sections.

The paradox however, is that an ultra right-wing figure was elected as the President by those who were badly affected by the ravages of finance capitalism.

Donald Trump in his efforts to put “America First” has gone against many of the cherished policies of finance capitalism. He is against many of the multi- lateral trade agreements; he wants a protectionist policy for American industry and goods; he demands that NATO allies of the United States increase their defense spending and rely less on the United States military budget.

Trump in order to protect the American economy has announced increased tariffs for a whole range of goods from China, the European Union, Canada, and Mexico. This in turn has led these countries to impose retaliatory tariffs. Trump has recently imposed tariffs worth $200 billion dollars on goods imported from China. China’s retaliated with similar tariff increases. This will lead to a trade war developing. The net result will be that American exports of goods will be affected and thus jobs too.

Trump is trying to solve the crisis within the neo-liberal frame work without affecting its main feature which is the global mobility of finance. It is the nature of finance capital which has led to the neo-liberal crisis , so Trump is bound to fail as  he will not tackle the root cause.

Overall, with the rising international oil prices and huge debts accumulated by governments and banks, there is another financial meltdown looming.

Growing inter-imperialist contradictions 

Moreover, Trump’s policies are going to stimulate inter-imperialist contradictions. Germany, France and Britain, the three key European allies of the United States have opposed some of Trump’s policies. This is not confined to economic policies alone but in the political sphere too. For instance, the US decision to withdraw from the Nuclear Agreement with Iran was opposed by these three allies who continue to maintain that the agreement with Iran is still valid. Similarly, the European Union has opposed Trump’s decision to withdraw from the Paris Climate Change Treaty.

The US contradiction with Russia has also sharpened, though Trump wishes to have better relations with President Putin and Russia. The entire ruling establishment in the United States is for confronting Russia. More sanctions have been imposed on Russia under the Trump Presidency.

The new conflicts engendered in the imperialist bloc under the neo-liberal crisis were also manifested by Brexit. The second largest economy in the European Union, Britain, voted to leave the Union. This decision of the referendum came against the wishes of finance capital. But, the same revolt against neo-liberalism and imperialist globalization by the British working people, led to this dramatic result. Britain has suffered de-industrialization and massive loss of jobs in industry in the past three decades. It has also hollowed out towns and communities in the traditional industrial areas.

The current period is marked by a spate of natural disasters. Floods, forest fires, unseasonal rains, high summer temperatures, earthquakes and other natural calamities are occurring in various parts of the planet. All these are dire warnings of the havoc that climate change will come. Here too, the discard between the US and its Western allies and the rest of the world is going to sharpen inter-imperial contradictions and the contradiction between the advanced countries and the developing world. Predatory neo-liberal capitalism is the perpetuation of this problem and cannot provide any solution to this serious threat to the future of the planet.

Rightward shift

The European Union has policies designed to favour trans-national companies and the neo-liberal frame work. The bulk of the British working class felt that exit from European Union was the only way to escape from the dire situation.When Britain leaves the European Union in March 2019 it will set in motion a new chain of events in Europe which cannot be fully foreseen now.

The havoc caused by neo-liberalism in Europe with de-industrialisation, unemployment and rising inequalities has led to growing discontent and bitterness among people.  In this period migrant labour flowed into Europe with the ruling classes eager to exploit cheap labour. This discontent and anger of the working people have been utilized by extreme right wing and neo-fascist forces. The rise of the National Front in France, the Alternative in Germany, the Freedom Party in Austria, the Golden Dawn in Greece and the Northern League in Italy are part of this process. These forces have raised fears about the immigrant influx and thrive as anti-foreigner sentiments and Islamophobia.

When a deep crisis affects the capitalist system, it does not automatically lead to the rise of the Left and the working class movement. History has shown how fascist and extreme rightwing forces arose out of the chronic capitalist crisis such as the Great Depression of 1929-33. The crisis of neo-liberalism in the last one decade has seen the rise of the extreme right and neo-fascist forces. This is not confined to Europe alone.

There has been a rightward shift globally in this period. In Latin America where the Left had made advances for one and half decades between the mid-1990s and the early 2000s, a counter offensive of the right has unfolded. The centre-left or social democratic governments of Brazil and Argentina have been replaced by rightwing ones, in the case of Brazil through a soft coup. Venezuela is being targeted for destabilization. The rightwing forces in South America are being supported by the United States.

However, the struggle against this right-wing offensive is also being organized. While there have been setbacks in some countries, Mexico has recently elected a Left oriented president. In Venezuela the Chavistas and the Left wing forces have fought back various attempts to topple the Maduro government.

New opportunities for Left

However, the present crisis and the rise of the rightwing forces also presents opportunities for the Left.

One of the reasons for the rightwing advance in Europe has been their taking over the space vacated by the traditional social democratic parties which had influence over the working class. Since the 90s, the social democratic parties which ruled in various European countries like the Labour Party in Britain, the Socialist Party in France, the German Social Democratic Party and the Spanish and Greek socialist parties had surrendered before the power of finance capital and embraced neo-liberalism. The social democratic parties have lost ground rapidly in recent years. The Communist parties in most of these countries are weak. When the backlash against neo-liberalism and globalization developed, it was the extreme rightwing forces which led the opposition and attracted support.

There is a lesson to be drawn from these developments. Where the Left was able to take a firm stand against neo-liberalism and did not compromise the interests of the working class, they were able to gather the discontent and advance. A striking illustration is the Labour Party in Britain. Here under a new leader, Jeremy Corbyn, the Labour Party adopted a broadly Left manifesto for the parliament elections in June 2017. They were supported by the mass movements against privatization and imperialist wars. The Labour Party got 40 per cent of the vote and prevented the Conservatives from getting a majority. It is significant that young people below 25 years voted in large numbers for Labour.

In France, during the presidential elections, the Left bloc with its candidate, Jean-Luc Melenchon got nearly 20 per cent of the vote in the first round. New radical platforms emerged in the name of Podemos in Spain and Syriza in Greece, though in the latter after forming the government Syriza compromised with the EU on accepting austerity measures. In Portugal and Greece, the Communist parties there have been able to hold on to their mass base because of their consistent opposition to neo-liberal policies and the European Union’s straightjacket.

These signs of resistance and assertion by the Left in Europe show the way forward towards fighting the offensive of finance capital and neo-liberalism.

It will be a mistake to however see the United States as a weakened force due to the neo-liberal crisis. The United States is still the leader of the imperialist bloc because of its key role in the finance capitalist system and the hegemony of the dollar. Militarily, the US is by far the strongest power in the world. The entire imperialist system is dependent on the strength and the leading role of the United States.

Challenge posed by China 

The only visible challenge rising against this imperialist power is that of China. The growing assertion and role of China on a global scale is seen by the United States as a strategic threat. China has actively intervened and participated in various multilateral forums which can counter the dominance of the US imperialist system. The strategic alliance between China and Russia has deepened. The Shanghai Cooperation Organisation which now includes India and Pakistan as full members is becoming a significant regional formation. Ventures like the Brics Bank, Asian Infrastructure Development Bank; the Belt and Road Initiative (BRI) now encompasses 72 countries in three continents. 

All these developments have strengthened the trend of multipolarity. The more the United States takes a protectionist route, new alliances and forums will emerge to counter American unilateralism.

The United States has been developing its geo-political strategy to counter China during the last two decades. From the pivot to Asia under the Obama presidency, the creation of the Indo-Pacific command and the growing strategic military ties between US and India – all are part of this effort to counter the “threat” posed by China to US supremacy. 

Struggle against right wing offensive in India 

In India too the rightward shift resulted in the Modi government coming into office in 2014. A variant of the same rightwing politics around the globe has been witnessed-aggressive pursuit of neo-liberalism, belligerent Hindutva nationalism and subservience to US imperialist interests. Such a rightward shift has targeted the Left and is one of the major reasons for the setbacks suffered by the Left in the recent years.

Hence our strategy and tactics to counter the Hindutva rightwing forces must draw lessons from the worldwide experience. The 22nd Congress of the Party has worked out a political-tactical line keeping all these factors in mind.

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