The Current Historical Conjuncture: Socialism or Barbarism?

Betsy Bowman
Monday, January 1, 2018

The great Rosa Luxemburg loudly proclaimed in 1916 in her “Junius pamphlet” before she was assassinated by the right-wing Germans in 1919 that the choice facing human kind was “Socialism or Barbarism.” 

Regrettably this is still true today.  Historically speaking, instead of progressing towards a society of equality, freedom and abundance as promised or hoped by the 18th Century Enlightenment philosophers and the Classical Economists (Adam Smith, David Ricardo, John Stuart Mills, Henry George), we have rather regressed towards a neo-feudal society based on debt peonage. 

Capitalism grew out of a society of local lords (the 1%) and serfs (the 99%).  The local lords in the Medieval period had made sure that the landed aristocracy would not be rivalled in wealth by the incipient bankers inwhat became the banking industry.  We often forget that “usury,” lending at interest, was prohibited by the Chuch (at the time the only Chuch was the Roman Catholic Chutch before the Protestant Reformation beginning in the 16th Century at the beginning of what is called the “modern” age and the end of the Medieval period.)  As we know, lending at interest was only permitted by Jews who were forbidden from owning land.  In this manner, the local landed aristocracy kept the wealth of the land for themselves while allowing the necessary banking services to be performed by those unable to own land. 

Bit by bit, of course, Roman Catholics and later Protestants, joined the money-lending or banking services.  By the 19th century, landed aristocrats were also in the money lending services and the money lenders were allowed to own land.  Today we see that the real estate interests and the finance industry are closely entertwined – it's called the FIRE sector of the economy – FIRE for Finance, Insurance and Real Estate. 

Michal Hudson – much of my analysis comes from his books –  repeatedly insists that the money gained by the FIRE sector of the economy should not be counted in the GDP, in the National Income and Products Accounts NIPA (produced by the Bureau of Economic Analysis of the Dept. of Commerce) because this is money that is not earned by productive activities but rather by extractive activities such as capturing the gains of rent.  Rent for economists like Michael Hudson is not what you pay for your monthly rental of your home but is rather unearned income that you can appropriate such as capital gains – when the value of something – land or stock – increases through no effort of the owner who sells it at a gain – that is what “rent” is in an economic sense – unearned income rather than earned income.  When we buy a house and sell it a few years later for more than we paid, that is a capital gain or rent.  That is money that the owner appropriates for him or herself through no added labor of his or her own.  For Marxist economists, value or gain is created only by two things:  human labor and nature.  Any monetary gain that comes from other sources such as interest or capital gains is unearned income and should be subtracted from the National Income and Products Accounts NIPA, not added to it.

We can all agree that the Wall St. bankers who brought us the 2008 crash engaged in no productive activity – they did not make one pair of socks or one ceramic pot but rather gambled on debt instruments such as Mortgage Backed Securities, Collateralize Loan Obligations, Credit Default Swaps and other financial “innovations.”   

On this point I want to be very clear.  I'm not saying that it is immoral or criminal to gain from capital gains;  capital gains are legal in our economic system.  I myself have gained from capital gains.  What I am saying is that this is unearned income that should be taxed higher than earned income.  Of course in the US and in most of the developed world, capital gains are taxed at a lower rate than income earned by working.  This is not mere happenstance – the FIRE sector of the economy has lobbied Congress for decades to change the tax code to achieve this result.  You might remember that under Richard Nixon the top tax rate was about 90% and capital gains were taxed much higher than income earned by working. 

That sleight of hand writ large is how today workers pay a larger percentage of income tax than do businesses and those appropriating capital gains.  Warren Buffet himself has admitted that he pays a lower percentage of his income in taxes than does his secretary.

So one of the important changes that we have seen over the history of capitalism is that the FIRE sector and those who own land have changed the laws so that the wealthy can own land and banking services, rather than the two being separated as during the Medieval period.  This is one aspect of our current historical conjuncture that is significant and that has led to such extreme concentration of wealth on the one hand and the mass impoverishment of the planet's population on the other hand. 

The other important change in monetary practice is that it used to be the King or ruler or government that created money and introduced it into the general economy.  Abraham Lincoln financed the Civil War with “green backs,” money printed debt-free by the government.  Since 1913 and the creation of the Federal Reserve – a giant bank owned by private banks – since then private banks have been allowed to create money by LENDING it into the general economy through loans.  Thus today all money represents a debt that is owned to someone.  Society is divided by those who own the debts and those who owe the debts – the creditors and the debtors.  And all debts have to be repaid with interest compelling every debtor to repay more than was borrowed and firmly rooting the growth imperative of capitalism into the heart of the economy.  Ultimately societies end up with a small group of creditors and a very large group of debtors.  In the Ancient World, the resulting social strife produced a new ruler who cancelled the previous debts of individuals so that the game could begin again.  Even Jesus Christ preached debt cancellation or a jubilee year periodically so that individuals could be freed of their debts periodically and they would not spend their lives in debt servitude and their children would not inherit their debts – something that used to happen!  Children inheriting their parents' debts!!  Of course we know what happened to Jesus . . . 

So where are we now?  We have a society of the creditors – the 1% and the debtors – the 99%.  What will be the solution? 

William Davies in an article in New Left Review entitled “The New Neoliberalism” describes three stages of neoliberalism.  The first from 1979 to 1989 as “Combative Neoliberalism” ; the second from 1989 to 2008 “Normative Neoliberalism” or what Alan Greenspan called “The Great Moderation” by which he meant that workers were so indebted that they were one pay check from foreclosure and homelessness and so were very docile and “moderate” and didn't strike or make demands of their employers (for employers this immiseration and traumatization of the work force is a good thing); and the third from 2008 to the present and into the future called “Punitive Neoliberalism.” 

We at the Center for Global Justice have discussed Neoliberalism as a response to the 1970s crisis of capitalism, or rather the crisis in the rate of profit and the slowing of accumulation and concentration of wealth upwards to the 1%.  The goal of capitalism is fundamentally to accumulate and concentrate the wealth of society into fewer and fewer hands, like in the game Monopoly when one person ends up owning the entire board. 

Today we are in the third stage of Neoliberalism -- the punishment stage of capitalism where all new wealth and new productivity gains are being channeled up to the 1%; where workers are so insecure in their employment, in their precarious position, in the new “gig” economy, where everyone is so indebted that we are all one paycheck away from foreclosure and homelessness – this state of traumatization and concomitantly the withdrawal of public services and adequate health care leads to a real, generalized public psychosis where everyone leaves in fear and does not dare to challenge capitalism. 

We are caught in the pincers of the creditors and their militarized police and their legal claims of ownership and claims that debts must be paid.  We are being squeezed by the militarized surveillance state which acts on the behalf of the 1% of creditors while we the 99% of debtors live in debt peonage and work as hard as we can (and sometimes steal) to pay our debts.  The US military and NATO (now synonymous) enforce the terms of the creditors and squeeze every last drop of blood from the debtors.  And people are dying.  There are those committing suicide:  farmers in India; pensioners in Greece; veterans in the US; and there are those being killed for striking such as the miners in South Africa and the poor black motorist in the US with a tail light that is out of order.  Not to mention of course that the US is murdering innocent women and children called “terrorists” in 140 countries in the world where there are US military installations.  The current US administration is provoking Russia and China, just daring them to attack the US. 

It is truly an astonishing feat that successive US administrations from George W Bush on have succeeded in uniting the Chinese and Russians – enemies from time immemorial – and uniting the indigenous peoples of north and south America in fighting the oil and gas pipelines and fracing – tribes of indigenous peoples who have been at odds since time immemorial. 

We are truly at a turning point in history where the elites of this world have turned against the citizens of their own countries in a last grab at enriching themselves.  They have taken over the reigns of power and the militaries are under their control and they are threatening us all with death if we don't obey and turn over to the 1% the produt of our labor, leaving us not even enough to make the interest payments due on our debts. 

At the same time as the 1% with their armies, guards, drones, police  etc. are threatening us with death, the poors of the world are rising up against this threat.  Everywhere one looks – South African miners, the indigenous in north America fighting pielines, the indigenous in South America fighting the destruction of the Amazon and their natural habitat, the Chinese on strike by the millions – everywhere we look we see what can only be described as a global uprising against capital and the threat of death imposed to squeeze the last drop of profit from the workers. 

There are solutions to the climate crisis and the economic crisis and even the moral, social crisis with its climate of fear that we live in.  Step 1):  green the economy; step 2) cancel all personal debts;  step 3):  nationalize all banks and channel all interest payments on loans to the government;  step 4) make all banks public;  5) make all businesses worker-owned and worker-run.  Those five steps would be a good start at saving our planet and our lives.

There is a global uprising taking shape.  We at the Center for Global Justice are involved in internitonal networks of recuperated factories; worked-owned and worker-run enterprises; peace movements and anti-war, anti-military, and anti-nuclear and anti-surveillance movements world wide. We are involved in the global “Me Too” movement, the global feminist and anti-racist movements.  We can do it.  We have to do it.  Thank you

Elizabeth A. Bowman, Ph.D., President and Research Assoc. Center for Global Justice