Terms of Trade | The revenge of history
One can continue to see the upheaval in capitalism as country-specific developments or accept that the marriage of liberal democracy and capitalism is ending
In politics, there are decades when nothing happens; and there are weeks when decades happen, Lenin said. Although a cliché, this is perhaps a fitting phrase to begin this week’s column.
In the UK, the Labour Party has pulled off a landslide victory with what is among the smallest ever vote shares for a winning party in the country. A lot of the losses suffered by the incumbent Conservatives were due to the attack from the right flank by Nigel Farage’s Reform UK. Labour, in fact, went to the elections with the plank of having course corrected from a sharp left turn under Jeremy Corbyn.
In France, a right-wing takeover of the parliament has, at least for now, been averted by a tactical arrangement between the centrist Ensemble and a broad coalition of left parties called Nouveau Front Populaire.
Both these progressive outcomes will have to handle several contradictions, political and economic, to live up to their stated goal of restoring faith in democracy and preventing a right-wing takeover of politics. Indeed, almost all of Europe is being haunted by the spectre of neo-right or neo-fascist politics gaining more and more ground if not power.
In the United States, politics seems to be going from tragedy to farce. First, it was the good old conservative Republican Party which succumbed to a reactionary, unpredictable and as the events of 2021 on Capitol Hill show, dangerous demagogue in the form of Donald Trump. Now, it seems the US’s best bet against this kind of politics, the Democratic Party, has been taken over by a leader who has lost his physical and mental faculties to campaign and more importantly govern. Both possibilities at the moment, Biden losing to Trump or coming back to power, do very little to assure the world about the US leading the global economic and political order and making it more stable.
One can continue to see these events in isolation and try and come up with country-specific stand-alone theories of what ought to and ought not to be done. Or, one can begin to accept the fact that the marriage of capitalism, in its present form, and liberal democracy, as we have known it over the past few decades is on the verge of ending. If one were to take the latter view, the joke is not on Francis Fukuyama who postponed his “end of history” proclamation but on the capital and its political foot soldiers who are still refusing to see the writing on the wall.
Capitalism’s lifespan, after all, shows us clearly that its cohabitation with liberal values is valid for a very small part of its history. If one were to describe the history of modern capitalism in an extremely sweeping generalization, it could be as follows:
Capitalism in western Europe came into being with the legs, or rather oars, of colonialism which furnished the dual task of providing capital (from colonial loot) and markets for investment and demand for the industrial revolution in western Europe. The process was far from peaceful and amicable and culminated in a World War which was fought among competing imperial powers in Europe. The outcome of the First World War and the terms imposed on the losers by the victors sowed the seeds of what came to be known as fascism in the world. Although catastrophic in terms of human suffering – it led to another world war and genocide of millions of Jews in Europe – the militarization, military conflict and the post-war reconstruction which followed the rise of fascism pulled capitalism out of its worst-ever depression which began in the late 1920s.
Left to its own, capitalism might never have won the battle against fascism and it took an alliance with Stalin’s (now much condemned) war communism to decisively crush fascism. It was this military and economic appeal of the communists at the culmination of the war that forced capital to offer an olive branch to working classes in what came to be known as the golden age of capitalism. This temporary progressive turn in capitalism ended with the neoliberal counter-revolution with finance reclaiming its dominance and forcing a major rollback of the welfare state that had emerged in the advanced capitalist world in the post-war years. While the neoliberal project has been remarkably successful in giving capital, especially finance, a field day in terms of making profits and accumulating wealth like never before, in hindsight, it could never find a stable growth anchor. The problems first started in the proverbial periphery of the capitalist core, with financial crisis-ridden lost decades in Latin America, Eastern Europe and Southeast Asia. The crisis however culminated in a giant financial sector meltdown in the heart of capitalism in 2008 and has dealt a body blow to economic growth which is struggling to find its bearings even today. What has made matters worse for advanced capitalism and its quest for democratic legitimacy are the distributional consequences of outsourcing and migration for the white working class. It is this mismatch between the so-called gains from trade and its real-life adverse effects on the majority which has dealt the biggest blow to the democratic credibility of the so-called liberal order and created tailwinds for the Brexits and Donald Trumps of the world. What has made matters worse for the state in these countries is their failure to arrive at a consensus to prevent big capital from evading even the payment of basic taxes by exploiting the tax haven route. The inability to tax these profits has put serious constraints on the fiscal ability of the state to provide material comfort to millions of voters who ended up as losers in the globalisation bargain.
The democratic disenchantment one is witnessing in the growing appeal for the extreme right and left spectrum of politics has its material roots in this unequal sharing of gains from economic liberalization. Unless the basic economic order changes significantly, one must reconcile to embracing more and more political instability going forward even if it has brief phases of what appears like domination of a saner variety of politics.
Where does one leave us to guess which way the world might pivot in the days to come? It is useful to remember what British historian Eric Hobsbawm wrote in the concluding paragraph of Age of Extremes, the last of his four-part cult classic history of capitalism. “We do not know where we are going. We only know that history has brought us to this point and –if readers share the argument of this book—why. If humanity is to have a recognizable future, it cannot be by prolonging the past or the present”, he writes.
Hobsbawm’s caution against historical stasis was not some esoteric rant. He was always clear where the central contradiction was. “As the millennium approached, it became increasingly evident that the central task of time was not to gloat over the corpse of Soviet communism, but to consider, once again, the built-in defects of capitalism. What changes in the system would their removal require? Would it still be the same system after their removal? For, as Joseph Schumpeter had observed, aprops of the cyclical fluctuations of the capitalist economy, they “are not, like tonsils, separate things that can be treated by themselves, but are, like the beat of the heart, of the essence of the organism that displays them”.
The collective horror which is visiting the cheerleaders who believed the marriage of liberal democracy and capitalism as being the end of history is nothing but the revenge of history on their hubris.
Roshan Kishore, HT's Data and Political Economy Editor, writes a weekly column on the state of the country's economy and its political fall out, and vice-versa
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