Archive for August, 2013

Japan’s liquidity trap and its cousins

August 30, 2013

Recently the Bank of Japan released this handy chart showing sectoral financial balances (savings minus investment) in the three major regions of the advanced capitalist core.

It shows – just for the record – that borrowing by the business sector in the US, Japan and the Eurozone is abysmal. The retained earnings of corporations vastly exceed their net spending on fixed investment.

Flow of funds - Japan USA and Europe

Such figures have become familiar throughout Japan’s ‘Lost Decade’ (now in its twentieth year).

Japan’s persistent liquidity trap is not a matter of conjunctural factors applying in the Keynesian short-run; the causes of flagging investment are structural.

I’ve written before of how, since Japan’s elastic labour supply exhausted itself in the 1970s, and with productivity catch-up completed, the prospective rate of return hasn’t been sufficient to motivate new projects that would tie up fungible money capital in risky and illiquid form.

Japanese labour productivity

Japanese output-capital ratioJapan - profit rate

The investment propensity of Japanese capitalists is therefore sluggish and insensitive to low interest rates. Increases in credit availability (e.g. quantitative easing) are simply absorbed as cash holdings, used in the carry trade or pumped into financial markets to fuel asset bubbles.

Stagnant growth, and with it subdued accumulation, have ensued.

Japanese deflation - Skott and Nakatani

Japan’s enduring slowdown has been a way of arresting the accumulation process in the distributional interests of property owners. A policy of restrained accumulation (diverting the surplus product away from new investment by e.g. reducing retained earnings through higher dividend payouts, interest payments, and unproductive luxury spending) prevents demand for labour and other inputs from increasing to levels that will threaten profit margins.

(By contrast, China is said to save and invest over 50 percent of national income. As noted previously on this blog, this high accumulation rate will see China become labour-constrained within the next decade, repeating the Japanese trajectory.)

The result is that Japan’s base of productive capacity has been eroded.

The spread since 2001 of similar conditions to North America and the Eurozone (as shown in the BoJ’s chart) also points to a deeper malaise. It suggests the presence of deep technological problems for world capitalism: above all the slowdown in innovation in the capital goods sector since the 1970s.

Output-capital ratio US

Since then, as in Japan, profitability has acted as a constraint on investment: in 2009, the US stock of fixed capital was 32 percent lower than it would have been had postwar rates of accumulation been maintained.

These underlying issues with domestic accumulation and weak investment show up as global imbalances (see ‘rest of the world’ in the BoJ’s chart, or the IMF’s 2005 World Economic Outlook). The ‘savings glut’ and other disproportionalities fuel volatility in currency, real estate and other asset prices, increasing financial fragility.

Moreover, as Adam Smith warned long ago, the diversion of the Japanese, US and European surplus product away from productive investment also threatens the position of these ‘mature’ economies relative to that of their external rivals. If the fixed-capital stock of a country is hollowed out, its position on the current account will worsen and its net stock of foreign assets will dwindle.

Ultimately, therefore, the ‘mature’ economies have seen their flagging investment levels disturb their respective positions in the hierarchy of international relations. The governments of these countries have responded by seeking to modify or revoke the basic rules of international law, diplomacy and inter-state relations.

This, I’ll explain in a future post, is what lies behind the turn of US and European elites to militarism and extra-territorial wars of aggression.


The Kosovo precedent

August 25, 2013

Saturday’s New York Times quoted an unnamed ‘senior administration official’ as saying that ‘the Kosovo precedent was one of many subjects discussed in continuing White House meetings on the crisis in Syria’:

“It’s a step too far to say we’re drawing up legal justifications for an action, given that the president hasn’t made a decision,” said the official, who spoke on the condition of anonymity to discuss the deliberations. “But Kosovo, of course, is a precedent of something that is perhaps similar.”

The White House’s invocation of NATO’s illegal 1999 attack as some kind of model for Syria is instructive.

Washington’s serial wars, whether by proxy or direct intervention, now allow successful plot-lines to be repeated and familiar personages to reappear. The latter, sensing their moment, mount the stage again, script in hand, having donned their old costumes — still well-fitting after all these years — and begin to recite old lines.

Back in 1999, Australian writer Michael Karadjis took to the pages of the Democratic Socialist Party’s Green Left Weekly to dismiss claims, emanating from ‘some on the left’, that the Kosovo Liberation Army was ‘a creation of the CIA and organised crime syndicates in the region.’

Sure, Karadjis conceded, the KLA had engaged in some drug trafficking and other unpleasant activities. But the Yugoslav emergency allowed no time for decorum and rectitude: ‘The KLA can’t raise funds by writing a funding submission!’

The KLA, he insisted, was ‘a genuine liberation movement representing the aspirations of the oppressed Albanian majority.’

That was why ‘Western media and virtually all Western leaders have remained essentially hostile to the KLA.’ Washington had ‘sought to undermine the KLA.’ ‘Western “aid” to the KLA’ had been negligible.

NATO’s bombing campaign had, in fact, delegated to Milošević the covert aim of destroying the KLA-led ‘liberation movement.’ Washington, said Karadjis, was ‘implacably opposed’ to Kosovar separatism.

Karadjis book

Having been unpardonably wrong on every point, Karadjis was never compelled to acknowledge the consequence of his mistakes, let alone surrender a single one of  his illusions. Nor was he forced to relinquish his pretensions as an intellectual authority and drawer of conclusions for ‘the left’.

Such a record does not invite disgrace nor vitiate one’s standing within today’s left. It is not evidence of incompetence, but simply part of the job.

For, just as the late 1990s saw Green Left Weekly serve as a cheerleader for ‘self-determination’ in Yugoslavia and East Timor, today the loftiest of ‘humanitarian’ reasons elevate the support of would-be socialist groups for Washington-led regime change in Syria and Libya.

Having staged a sham-ridden ‘socialist’ argument that recruited left-wing support for NATO war aims in Yugoslavia, a connoisseur of cant like Karadjis is today marked out for success, and condemned to sore typing fingers.

Australia’s Socialist Alternative recently invited another profound appraisal from this dazzling thinker.

Karadjis purported to apprise his readers of certain facts:

The argument that the US “must” be behind the anti-Assad rebellion because some of its Arab allies are behind parts of it, is even more strange given the key US ally in the region, Israel, remains steadfastly opposed to the Saudi-led project…

Recent Israeli airstrikes in Syria, he explained, had merely ‘been to prevent the delivery of arms (apparently long-range missiles) to Hezbollah in Lebanon.’ Tel Aviv simply ‘wants to weaken the Assad regime in order to disrupt the passage of arms between Iran and Hezbollah via Syria.’

Otherwise, he insisted dementedly, ‘Israel, the key imperialist asset in the region, very clearly sees the Syrian rebellion as a far worse alternative to the Assad regime.’

In the blink of an historical eye, most of the nominally socialist organizations and avowedly Marxist intellectuals in the advanced capitalist countries have emerged as handy servants for rampant imperialism. Those who abstained from Bill Clinton’s military benefaction along Russia’s western flanks have now been won over by Obama’s strategic thrusts in Libya and Syria.

While mass constituencies for wars in the Balkans, West Asia and North Africa are recruited via the media slogans of humanitarian intervention and the ‘responsibility to protect’, more specialized messages, deliberately tailored to target certain weak-points (nationalism, feminism, etc.), are directed at niche audiences among ‘radical’ activists.

The latter are then mobilized for regime change, proxy war or ‘troops in’ campaigns by figures like Karadjis,  Gilbert AchcarAlex Callinicos and Richard Seymour.

Their undoubted capacity for stupidity does not explain this recent passage of the International Socialist tendency and its various national affiliates and sympathizers into the role of NATO cheerleaders.

In tracing this route, they have only followed, at one decade’s remove, the former parties of the United Secretariat (smoothing, no doubt, the recent fusion talks between Australia’s Socialist Alternative and Karadjis’s Socialist Alliance).

This tarnishing and debasement of Marxist language, emblems and theoretical tokens, through their use for the purpose of organizing NATO’s military campaigns, is a grim development for anyone interested in the fate of Marxism and revolutionary socialism.

The latter will, of course, survive so long as human societies with surplus products and class divisions exist. But the goodwill account must record the impairment caused by so-called Marxists like Karadjis and Achcar, just as it did following usurpation by Stalinists and social democrats, the dalliance of academic Western Marxists with Stalinism, and the bêtises and incoherence of ‘post-Marxism’.

Twenty years since the collapse of the Soviet Union and the turn of the US governing elite to unchecked militarism, the unprecedented bleakness of our ideological surroundings has scarcely been taken in.

A good line

August 23, 2013

The writing in Fredric Jameson’s cinema books is notoriously bad.

The chief problem isn’t that it’s unclarifiably obscure or difficult to construe, in the way of much academic bullshit. (G.A. Cohen: ‘For the record, I do not believe that Hegel was a bullshitter, and I am too ignorant of the work of Heidegger to say whether or not he was a bullshitter. But I agree with my late supervisor Gilbert Ryle that Heidegger was a shit.’) It’s that too; but above all it’s just syntactically wacky.

But this line Jameson’s The Geopolitical Aesthetic is rather good, I think:

[It] would be comical to wish the social burden of bourgeois respectability and elaborate moral taboo back into existence merely to re-endow the sex drive with the value of a political act.

Doesn’t such comedy describe the (spuriously ‘subversive’) activities of countless ‘radical’ activists and identity politicians?