Monday, 25 August 2014

In From The Cold: Post-Soviet Legacies in America

In 1945 two very different types of imperial project met on the continent of Europe. Despite all that might have seemed chaotic and spontaneous in the last years of the Second World War, nothing in this meeting was left to chance:

In Europe the demarcation lines had been drawn between 1943-45, both by agreement at various summits between Roosevelt, Churchill and Stalin, and by virtue of the fact that only the Red Army could defeat Germany.1

In the town of Plzen the triumphant Sixteenth Division of the Third Army rolled in, only to stop and wait for the Red Army to take Prague. By any standards of realpolitik, such casual ceding of ground to an imperial rival looks absurd. Yet as Eric Hobsbawm pointed out there were real affinities between the US and the Soviet Union at this point of the War, united as they were against the Fascist enemy.2 Not only this but the prominence of local communists in resistance movements across the continent produced, for the first time, several mass Communist Parties - notably in France and Italy. In Czechoslovakia the Communist Party had long been a mass political force, but elsewhere small, previously persecuted bands of party cadres were elevated to hero status. Yet as the postwar order began to take shape - in the midst of mass expulsions, expropriation of property, and sometimes ongoing armed insurgency - it was not the heroes of the resistance who took up roles in government, but increasingly a small band of what were known as 'Moscow Communists'. Meanwhile, in the western portion of the continent an epoch-defining plan was being put into effect by the highest brass of the American state. The delayed internationalisation of the Soviet model of rule (not by revolution but by stealth) would coincide with the internationalisation of the American state in the particular form it was given under FDR's New Deal. A global division of power was emerging that, until at least the early 1970s, looked absolute. This division would shape the foreign policies of the two empires in very different ways, and would ultimately produce very different results.

The Two Empires

To what extent is it academically useful, let alone theoretically cogent, to label either the USA or the USSR empires? Certainly neither was overtly colonialist in its ambitions, and formal colonial administration never played a defining role in either of their regional hegemonies. As is often noted, both were revolutionary states that defined themselves in opposition to traditional power hierarchies. While the USA tacitly supported an end to colonialism, the Soviet Union went all out for Third World liberation movements. Even formal colonies like the Philippines were regarded as anomalous, and certainly only temporary. Insofar as the Soviet Union inherited the geographical boundaries of the earlier Tsarist empire it could not help resembling its predecessor. Yet Lenin had from the earliest stages supported the right of national self-determination. The American riposte was President Wilson's Fourteen Points. The Soviet Union and the USA didn't merely voice opposition to Great Power imperialism, they acted differently to those old powers, through entirely different institutional structures of governance. The Soviet Union was a sort of radicalised autocracy which, though reminiscent of Tsarism, was much more brutal in its lack of tolerance for liberal institutions and bourgeois models of incorporation and inclusion of different classes. The Soviet state reflected very little of the kind of "class compromise" that characterised bourgeois liberal states, even those that existed before universal democratic suffrage. Meanwhile, the US had historically needed a much weaker national state, its attentions largely turned towards its own continental divisions. It was only with the recovery from the Long Depression (1873-79) and the creation of the Federal Reserve (1907) that US state capacities began the process of coming up to the levels of centralisation of the European powers, whose warring histories and often expansive empires necessitated more integrated governmental power.

Though they certainly did not resemble past empires, both the Soviet Union and the USA increasingly after 1945, and perhaps even since the Crash of 1929, were forced to take on the role of overseers and regulators of vast territories falling under their informal jurisdiction. Though Stalin's policy of 'Socialism in One Country' had always represented a certain confession of weakness - i.e. that the USSR could neither export its revolution abroad directly - the extraordinary victory of the Soviet Union in the Second World War supplied ample space into which previously suppressed political ambitions, along with paranoias, could expand. Eastern Europe was never strategically all that useful to the USSR, and at least initially was met with some lack of enthusiasm. Yet it was widely felt that the Soviet Union had to be compensated for its losses during the War with Germany, and that the territories it now occupied seemed most suitable. Thus Churchill's famous "Soviet sphere", the so called Iron Curtain, was at least partly a matter of his own devising. It was in this "informal" sense that the Soviet Union exerted imperial influence over Eastern Europe. Despite the return, in some form, of most of the east European states to "independent" status, the Soviet union exported its own practices to the region almost immediately. Its principal weapon of coercion and influence was not the state (widely undermined by Nazi occupation) but the formation of secret police forces on the model of the Soviet NKVD. Anne Applebaum writes:

Everywhere the Red Army went - even in Czechoslovakia, from which Soviet troops eventually withdrew - these newly minted secret policemen began to use selective violence, carefully targeting their political enemies according to previously composed lists and criteria.3

Combined with coalition in government (along with communist loyalists infiltrating the interior and defence ministries of the region's states) Moscow-backed communists could soon begin to develop a hegemony that was only narrowly autonomous from the Soviet Union. Descended from the kind of highly secretive, clandestine cells that had also spawned the Russian Bolsheviks, many of the 'Moscow communists' (Walter Ulbricht in East Germany, Matyas Rakosi in Hungary, and Boleslaw Bierut in Poland) were utterly ill-equipped to deal with mass politics. The pervasive presence of Soviet advisers in the region practically guaranteed that the USSR would effect some form of domination over it. The reasons it intended to do this are complex, though undoubtedly the need to buttress itself against the perceived threat of a renascent capitalist Europe was one of them. The name 'People's Democracy', given to the states in the diplomatically negotiated Soviet sphere, was important - it distinguished them from the true home of socialism, the USSR. In this sense, the Soviet Union was merely aiming to turn the its surrounding region away from capitalism.

As with the USSR, the USA's new empire was informal, though much like the carefully orchestrated division of the continent, its acquisition was systematically planned, this time by American minds alone. By 1942 the idea had already filtered through to important elements within US civil society (specifically the leading businessmen who took part in Fortune, Time and Life's joint roundtable discussion and subsequent 'American Proposal') that it would be crucial for the survival of postwar capitalism that America take a leading role in the system's reconstruction. Not only this, but liberalism's catastrophic failure - and the real attraction of socialist policies, along with Fascist and 'economic nationalist' ones - would require that the system be built on very different foundations to the those that had led to the Great Depression. It was also clear to some within the state, like Dean Acheson, that the US would have to direct capital to needy, strategically important states. US capital could no longer take shelter behind British naval pre-eminence. In this both American business and government were in accord. The future for capitalism lay in the building of a "stable international monetary system", one whose channels would be American finance and investment and whose guarantor would be the American state. This would require that the US sacrifice some if its extraordinary competitive advantage whilst funding the redevelopment of the rest of the capitalist world. The trade off, however, was the emergence of an "informal" capitalist hegemony with the US at its centre, in charge of an increasingly integrated world system which, though operating with ever more centrifugal force on small states, also had the potential for extraordinary costliness.

How the West Was Won

By the 1870s the US economy had already overtaken Britain's in terms of industrial output. However, the breakdown of British global hegemony would not be complete until during the Great Depression of the 1930s, and the US would not be in a position to take over Britain's mantle until after the Second World War. Thus what happened in the intervening years is essential to an understanding of the global order that emerged following the war.

My account draws heavily from Leo Panitch and Sam Gindin's book The Making of Global Capitalism. In it these two leading Marxist economists map in detail the various intersections between an increasingly Americanised capitalist class and the American state. The latter developed through a long series of improvisatory, policy-led responses to real and perceived challenges to its hegemony, not all of them consistent, though most of them directed at developing the tools to govern capitalism and even to direct it towards certain ends. To a certain extent there was a confluence, if not identity, of interests between capital and the American state, and Panitch and Gindin demonstrate that, the more it could be shown that novel state institutions could contribute positively to capitalist accumulation, the more the state was entrusted to do so. In this sense the American state operated under conditions of increasing "relative autonomy" from the capitalist and other pro-capitalist classes it largely represented. In short, during the first third of the 20th century, the American state finalised its ability to deliver harsh medicine to the capitalist system in the name of that system's own interests.

The transformation started at home with "organisational innovations that American companies introduced in both production and consumption" (industrial decentralisation within big corporations; productivity increases through technological innovations and intensifications). Factory productivity alone grew by 75% in the first decades of the century. By the end of the 1920s America's share of total global production stood at 40%. Thus the US was financially transformed from a debtor nation, heavily dependent on Britain, to an export-driven creditor. Yet as contemporary China shows, industrial pre-eminence does not amount of itself to any kind of global hegemony. Not only this but basic weaknesses in the state's ability to manage America's economic expansion were not overcome. Uneven development within the US - especially in the underdeveloped south - along with a lack of income-support programs, growing income inequality, and a wage-productivity gap, making mass consumption vulnerable in a system increasingly reliant on it, left the economy open to shocks. The 1929 stock market crash became a global depression precisely because of the US state's inability, along with the British Treasury, to coordinate an effective global financial response. Deflationary protectionist measures were taken up throughout the capitalist world.

However accurate Giovanni Arrighi's observation that, by contrast to the British "extensive" (naval; imperial; financial) hegemonic cycle of capital, the American was "intensive" (domestic; industrial), the US clearly could not assert its obvious strength until it could coordinate world financial markets to its benefit. Though tentative to begin with, the Democratic government elected in 1932 was returned triumphantly to office in 1936 largely owing to the "social turn" of the New Deal in 1935: the Wagner act legalized union campaigns, collective bargaining and the right to strike; the Social security Act created the US welfare state. Yet, despite Roosevelt's private claim that it was time for America to "turn radical for a generation", the President was a committed capitalist and in many ways a budgetary conservative. More than this (never having voiced public support for the Wagner act), Roosevelt and Henry Morgenthau (his Secretary of State) soon set about smoothing over relations with a flustered capitalist class. Not only this but the most militant sections of the working class were (in the era of the Popular Front) at least momentarily submerged within the Democratic Party. According to Panitch and Gindin:

This shift in the balance of class forces effectively ended the reforms of the New Deal's second phase. Nevertheless, a transformation in the capacities of the American state had been effected which the halting of the New Deal's momentum did not undo.4

However, there was no "dichotomy of purpose and function between state and capitalist actors" - true to Roosevelt's insistence, the state concerned itself with stimulating investment and stabilizing and rejuvenating capitalist markets. Financial regulation, in which a symbiotic relationship developed between public, semi-public and private bodies, was mostly insulated from democratic pressures. By creating such a complex the "commanding heights" of finance were elevated above the working class, the grounds for the integration of which were laid by the new model of mass consumption. Unions would increasingly trade off workplace control and economic democratisation for negotiated pay increases. For Panitch and Gindin the state had increased its relative autonomy from particular capitalist interests, integrated a broad section of the working class into capitalism (with the promise of steadily increasing wages, home-ownership, and mass consumption), while taking control of many aspects of financial regulation.

After US entry to the Second World War, plans for the internationalisation of the American state were officially laid. As the potential for US hegemony over global financial markets increased, so too did the state's capacity to coordinate markets. The US government continued to believe in free trade and market liberalisation as the key to prosperity. Yet the administration was quick to realise that America's future prosperity and stability lay in the ability of other key countries to catch-up with America's dominance. Thus "trade could only be liberalized on the basis of an international monetary arrangement that would also allow for economic growth and domestic consumption on other countries". This would not be a colonial form of dependency, nor would it rely on the subordination and impoverishment of rivals, but rather the supervision of financial flows to a capitalist 'core' aided and coordinated by the American state. In a sense the New Deal itself was to be internationalised. Less interventionist than regulatory, the planners would become liberal "custodians of an economy owned by the capitalists."

In early drafts of the famous White plan, the World Bank was envisaged as a public lender to redeveloping states. But owing to Roosevelt's desire to integrate Latin America into the word system and align its with the US, and also the need for the US public monies not to be directly responsible for European debt, the Bank became an incentiviser of private investment. J.M. Keynes' proposal, at Bretton Woods, for an international clearing fund and special international currency to facilitate lending to indebted countries on relatively easy terms was summarily ditched. Instead policy-makers within the US administration insisted on tight conditionality of borrowing, thus ensuring a continuous pace of capital liberalisation and expansion of free trade, regardless of the social cost to debtor nations.

In neither Giovanni Arrighi's account of what he calls the "hegemonic cycle of accumulation" of US capital, nor in the economist Robert Brenner's account of America's return to growth do peculiar class composition and alignments play such a central role. Brenner mentions the "containment" of militant US labour, but this appears to play little part in the developing story of American political consensus and disensus. The depression, Brenner confirms, was a major source of 'creative destruction', following which:

The way was prepared for the new epoch of growth by the huge reductions in the costs of production that were achieved during the crisis - by way of the enormous shake-out of obsolete capital stock, the strong downward pressure on real wages that resulted from record levels of unemployment, and the building of a backlog of unused innovations.5

For Brenner the huge potential of this process was only realized with the onset of the equally extraordinary mobilisation of the War economy. Nowhere does he mention the integration of the labour movement and the working class as a whole in political terms; nor does he account for what Panitch and Gindin see as the broad development of US state capacities (in the form of New Deal regulatory and institutional expansion) in the making of postwar US hegemony.

The neat division of the postwar era - into the industrially productive, Keynesian Golden Age (1945-1973) and the financialised, monetarist Age of Turbulence - prove to be deceptive. As Panitch and Gindin stress, state regulatory capacity and financial markets grew concurrently, if at different speeds at different times. The immediate postwar years - which spawned such extraordinary rates of growth throughout the capitalist and non-capitalist world - should be understood, they argue, as laying the foundations for the "explosion of global finance that occurred in the last decades of the 20th century." This took place, they stress, "within the framework of the New Deal and Bretton Woods regulations." The reason for this development - and the alliance that quickly developed between postwar European Social Democratic governments and the Democratic Party of the New Deal and Civil Rights era - was the need for urgent redevelopment of a liberal capitalist 'core'. Japan and the rest of South East Asia would later be ushered into this core. And with the expansion and deepening of financial markets as the crucial conduits of developmental capital, so too would the rest of the world become part of capitalism's periphery. Thus western European states found themselves at the centre of a newly globalised capitalist empire, not solely as client states but as competitors within an arrangement of reciprocal expansion.

Dismantling the Cold War

Though stalemate was the default political position of the Cold War balance of forces, from every consideration in the economic sphere the USA was quickly dominant. Although engendering its own contradictions (through which the American state and economy accepted debtor status in orderto maintain its increasingly chaotic financial hegemony), American power - both coercive and consensual - over the world system was never in doubt. While the 1980s generation of neoliberals in Washington, and their bastard offspring the neoconservatives, saw the war of position against the Soviets as vitally strategic, it was in the Third World that American elites found they could fight an ever-spiralling war of manoeuvre. Though the former grabbed more headlines in the neoliberal decade, it was the latter which from our perspective appears more relevant for contemporary struggles. It was, however, the existence of the Soviet empire which inadvertently allowed America to effectively police global order. In an international division of gendarmerie, the American state could allow a drawn out Soviet invasion of Afghanistan to cripple its rival while funding jihadist proxies and engaging in multiple fronts elsewhere. The Soviet collapse would end not only the Cold War stalemate but also the global balance of forces structurally weighted in America's favour.

Though successive Washington administrations were deeply committed to ending the Cold War and subjugating and stabilising the postcommunist states through NATO, these efforts could not stop the spread of ex-Soviet arms, the loss of Soviet demand in the world economy, nor the rapid loss of authoritarian Soviet power. All of these factors would force the US to thrust itself deeper into Middle Eastern and Asian geopolitics with a verve that would once have seemed impolitic. Even if the dollar was ultimately maintained by extraordinary efforts in the State Department and the Foreign Office, via the Plaza Accords and beyond, there was nonethless a creeping fragmentation of global political order. Thus the American state was left to carry the burden of Wall Street's bullishness, its own costly currency hegemony, and a raft of growing economic competitors it could no longer outflank. Not only this but military-industrial complex developed initially to combat communism was now constantly engaged in global fire-fighting efforts in the world communism had now vacated. With the defeat of a long wave of Third World liberation movements have emerged sectarian fundamentalisms promising no hope of a brighter future. A world conjured in the shadow of an American hegemony that is slowly taking on elements of a more straightforward kind of military domination, one certainly familiar to the KGB old guard. This is surely one irony not to escape them.

1Hobsbawm, Age of Extremes, 226-7
2ibid., 166-67
3Applebaum, Iron Curtain: The Crushing of Eastern Europe, xxxi
4Panitch and Gindin, The Making of Global Capitalism,
5Brenner, The Boom and the Bubble, 10