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Washington’s delusion of endless world dominion

23 Mar

China and the U.S. struggle over Eurasia, the epicenter of world power.By Alfred W. McCoy -March 22, 2021

Empires live and die by their illusions. Visions of empowerment can inspire nations to scale the heights of global hegemony. Similarly, however, illusions of omnipotence can send fading empires crashing into oblivion. So it was with Great Britain in the 1950s and so it may be with the United States today.

By 1956, Britain had exploited its global empire shamelessly for a decade in an effort to lift its domestic economy out of the rubble of World War II. It was looking forward to doing so for many decades to come. Then an obscure Egyptian army colonel named Gamal Abdel Nasser seized the Suez Canal and Britain’s establishment erupted in a paroxysm of racist outrage. The prime minister of the day, Sir Antony Eden, forged an alliance with France and Israel to send six aircraft carriers to the Suez area, smash Egypt’s tank force in the Sinai desert, and sweep its air force from the skies.

But Nasser grasped the deeper geopolitics of empire in a way that British leaders had long forgotten. The Suez Canal was the strategic hinge that tied Britain to its Asian empire — to British Petroleum’s oil fields in the Persian Gulf and the sea lanes to Singapore and beyond. So, in a geopolitical masterstroke, he simply filled a few rusting freighters with rocks and sank them at the entrance to the canal, snapping that hinge in a single gesture. After Eden was forced to withdraw British forces in a humiliating defeat, the once-mighty British pound trembled at the precipice of collapse and, overnight, the sense of imperial power in England seemed to vanish like a desert mirage.

Two decades of delusions

In a similar manner, Washington’s hubris is finding its nemesis in China’s President Xi Jinping and his grand strategy for uniting Eurasia into the world’s largest economic bloc. For two decades, as China climbed, step by step, toward global eminence, Washington’s inside-the-Beltway power elite was blinded by its overarching dreams of eternal military omnipotence. In the process, from Bill Clinton’s administration to Joe Biden’s, Washington’s China policy has morphed from illusion directly into a state of bipartisan delusion.

Back in 2000, the Clinton administration believed that, if admitted to the World Trade Organization, Beijing would play the global game strictly by Washington’s rules. When China started playing imperial hardball instead — stealing patents, forcing companies to turn over trade secrets, and manipulating its currency to increase its exports — the elite journal Foreign Affairs tut-tutted that such charges had “little merit,” urging Washington to avoid “an all-out trade war” by learning to “respect difference and look for common ground.”

Within just three years, a flood of exports produced by China’s low-wage workforce, drawn from 20% of the world’s population, began shutting down factories across America. The AFL-CIO labor confederation then started accusing Beijing of illegally “dumping” its goods in the U.S. at below-market prices. The administration of George W. Bush, however, dismissed the charges for lack of “conclusive evidence,” allowing Beijing’s export juggernaut to grind on unimpeded.

For the most part, the Bush-Cheney White House simply ignored China, instead invading Iraq in 2003, launching a strategy that was supposed to give the U.S. lasting dominion over the Middle East’s vast oil reserves. By the time Washington withdrew from Baghdad in 2011, having wasted up to $5.4 trillion on the misbegotten invasion and occupation of that country, fracking had left America on the edge of energy independence, while oil was joining cordwood and coal as a fuel whose days were numbered, potentially rendering the future Middle East geopolitically irrelevant.

While Washington had been pouring blood and treasure into desert sands, Beijing was making itself into the world’s workshop. It had amassed $4 trillion in foreign exchange, which it began investing in an ambitious scheme it called the Belt and Road Initiative to unify Eurasia via history’s largest set of infrastructure projects. Hoping to counter that move with a bold geopolitical gambit, President Barack Obama tried to check China with a new strategy that he called a “pivot to Asia.” It was to entail a global military shift of U.S. forces to the Pacific and a drawing of Eurasia’s commerce toward America through a new set of trade pacts. The scheme, brilliant in the abstract, soon crashed head-first into some harsh realities. As a start, extricating the U.S. military from the mess it had made in the Greater Middle East proved far harder than imagined. Meanwhile, getting big global trade treaties approved as anti-globalization populism surged across America — fueled by factory closures and stagnant wages — turned out, in the end, to be impossible.

Even President Obama underestimated the seriousness of China’s sustained challenge to this country’s global power. “Across the ideological spectrum, we in the U.S. foreign policy community,” two senior Obama officials would later write, “shared the underlying belief that U.S. power and hegemony could readily mold China to the United States’ liking… All sides of the policy debate erred.”

Breaking with the Beltway consensus about China, Donald Trump would spend two years of his presidency fighting a trade war, thinking he could use America’s economic power — in the end, just a few tariffs — to bring Beijing to its knees. Despite his administration’s incredibly erratic foreign policy, its recognition of China’s challenge would prove surprisingly consistent. Trump’s former national security adviser H.R. McMaster would, for instance, observe that Washington had empowered “a nation whose leaders were determined not only to displace the United States in Asia, but also to promote a rival economic and governance model globally.” Similarly, Trump’s State Department warned that Beijing harbored “hegemonic ambitions” aimed at “displacing the United States as the world’s foremost power.”

In the end, however, Trump would capitulate. By January 2020, his trade war would have devastated this country’s agricultural exports, while inflicting heavy losses on its commercial supply chain, forcing the White House to rescind some of those punitive tariffs in exchange for Beijing’s unenforceable promises to purchase more American goods. Despite a celebratory White House signing ceremony, that deal represented little more than a surrender.

Even now, after these 20 years of bipartisan failure, Washington’s imperial illusions persist. The Biden administration and its inside-the-Beltway foreign-policy experts seem to think that China is a problem like Covid-19 that can be managed simply by being the un-Trump. Last December, a pair of professors writing in the establishment journal Foreign Affairs typically opined that “America may one day look back on China the way they now view the Soviet Union,” that is, “as a dangerous rival whose evident strengths concealed stagnation and vulnerability.”

Sure, China might be surpassing this country in multiple economic metrics and building up its military power, said Ryan Hass, the former China director in Obama’s National Security Council, but it is not 10 feet tall. China’s population, he pointed out, is aging, its debt ballooning, and its politics “increasingly sclerotic.” In the event of conflict, China is geopolitically “vulnerable when it comes to food and energy security,” since its navy is unable to prevent it “from being cut off from vital supplies.”

In the months before the 2020 presidential election, a former official in Obama’s State Department, Jake Sullivan, began auditioning for appointment as Biden’s national security adviser by staking out a similar position. In Foreign Affairs, he argued that China might be “more formidable economically… than the Soviet Union ever was,” but Washington could still achieve “a steady state of… coexistence on terms favorable to U.S. interests and values.” Although China was clearly trying “to establish itself as the world’s leading power,” he added, America “still has the ability to more than hold its own in that competition,” just as long as it avoids Trump’s “trajectory of self-sabotage.”

As expected from such a skilled courtier, Sullivan’s views coincided carefully with those of his future boss, Joe Biden. In his main foreign policy manifesto for the 2020 presidential campaign, candidate Biden argued that “to win the competition for the future against China,” the U.S. had to “sharpen its innovative edge and unite the economic might of democracies around the world.”

All these men are veteran foreign policy professionals with a wealth of international experience. Yet they seem oblivious to the geopolitical foundations for global power that Xi Jinping, like Nasser before him, seemed to grasp so intuitively. Like the British establishment of the 1950s, these American leaders have been on top of the world for so long that they’ve forgotten how they got there.

In the aftermath of World War II, America’s Cold War leaders had a clear understanding that their global power, like Britain’s before it, would depend on control over Eurasia. For the previous 400 years, every would-be global hegemony had struggled to dominate that vast land mass. In the sixteenth century, Portugal had dotted continental coastlines with 50 fortified ports (feitorias) stretching from Lisbon to the Straits of Malacca (which connect the Indian Ocean to the Pacific), just as, in the late nineteenth century, Great Britain would rule the waves through naval bastions that stretched from Scapa Flow, Scotland, to Singapore.

While Portugal’s strategy, as recorded in royal decrees, was focused on controlling maritime choke points, Britain benefited from the systematic study of geopolitics by the geographer Sir Halford Mackinder, who argued that the key to global power was control over Eurasia and, more broadly, a tri-continental “world island” comprised of Asia, Europe, and Africa. As strong as those empires were in their day, no imperial power fully perfected its global reach by capturing both axial ends of Eurasia — until America came on the scene.

The Cold War struggle for control over Eurasia

During its first decade as the globe’s great hegemon at the close of World War II, Washington quite self-consciously set out to build an apparatus of awesome military power that would allow it to dominate the sprawling Eurasian land mass. With each passing decade, layer upon layer of weaponry and an ever-growing network of military bastions were combined to “contain” communism behind a 5,000-mile Iron Curtain that arched across Eurasia, from the Berlin Wall to the Demilitarized Zone near Seoul, South Korea.

Through its post-World War II occupation of the defeated Axis powers, Germany and Japan, Washington seized military bases, large and small, at both ends of Eurasia. In Japan, for example, its military would occupy approximately 100 installations from Misawa air base in the far north to Sasebo naval base in the south.

Soon after, as Washington reeled from the twin shocks of a communist victory in China and the start of the Korean war in June 1950, the National Security Council adopted NSC-68, a memorandum making it clear that control of Eurasia would be the key to its global power struggle against communism. “Soviet efforts are now directed toward the domination of the Eurasian land mass,” read that foundational document. The U.S., it insisted, must expand its military yet again “to deter, if possible, Soviet expansion, and to defeat, if necessary, aggressive Soviet or Soviet-directed actions.”

As the Pentagon’s budget quadrupled from $13.5 billion to $48.2 billion in the early 1950s in pursuit of that strategic mission, Washington quickly built a chain of 500 military installations ringing that landmass, from the massive Ramstein air base in West Germany to vast, sprawling naval bases at Subic Bay in the Philippines and Yokosuka, Japan.

Such bases were the visible manifestation of a chain of mutual defense pacts organized across the breadth of Eurasia, from the North Atlantic Treaty Organization (NATO) in Europe to a security treaty, ANZUS, involving Australia, New Zealand, and the U.S. in the South Pacific. Along the strategic island chain facing Asia known as the Pacific littoral, Washington quickly cemented its position through bilateral defense pacts with Japan, South Korea, the Philippines, and Australia.

Along the Iron Curtain running through the heart of Europe, 25 active-duty NATO divisions faced 150 Soviet-led Warsaw Pact divisions, both backed by armadas of artillery, tanks, strategic bombers, and nuclear-armed missiles. To patrol the Eurasian continent’s sprawling coastline, Washington mobilized massive naval armadas stiffened by nuclear-armed submarines and aircraft carriers — the 6th Fleet in the Mediterranean and the massive 7th Fleet in the Indian Ocean and the Pacific.

For the next 40 years, Washington’s secret Cold War weapon, the Central Intelligence Agency, or CIA, fought its largest and longest covert wars around the rim of Eurasia. Probing relentlessly for vulnerabilities of any sort in the Sino-Soviet bloc, the CIA mounted a series of small invasions of Tibet and southwest China in the early 1950s; fought a secret war in Laos, mobilizing a 30,000-strong militia of local Hmong villagers during the 1960s; and launched a massive, multibillion dollar covert war against the Red Army in Afghanistan in the 1980s.

During those same four decades, America’s only hot wars were similarly fought at the edge of Eurasia, seeking to contain the expansion of Communist China. On the Korean Peninsula from 1950 to 1953, almost 40,000 Americans (and untold numbers of Koreans) died in Washington’s effort to block the advance of North Korean and Chinese forces across the 38th parallel. In Southeast Asia from 1962 to 1975, some 58,000 American troops (and millions of Vietnamese, Laotians, and Cambodians) died in an unsuccessful attempt to stop the expansion of communists south of the 17th parallel that divided North and South Vietnam.

By the time the Soviet Union imploded in 1990 (just as China was turning into a Communist Party-run capitalist power), the U.S. military had become a global behemoth standing astride the Eurasian continent with more than 700 overseas bases, an air force of 1,763 jet fighters, more than 1,000 ballistic missiles, and a navy of nearly 600 ships, including 15 nuclear carrier battle groups — all linked together by a global system of satellites for communication, navigation, and espionage.

Despite its name, the Global War on Terror after 2001 was actually fought, like the Cold War before it, at the edge of Eurasia. Apart from the invasions of Afghanistan and Iraq, the Air Force and CIA had, within a decade, ringed the southern rim of that landmass with a network of 60 bases for its growing arsenal of Reaper and Predator drones, stretching all the way from the Sigonella Naval Air Station in Sicily to Andersen Air Force Base on the island of Guam. And yet, in that series of failed, never-ending conflicts, the old military formula for “containing,” constraining, and dominating Eurasia was visibly failing. The Global War on Terror proved, in some sense, a long-drawn-out version of Britain’s imperial Suez disaster.

China’s Eurasian strategy

After all that, it seems remarkable that Washington’s current generation of foreign policy leaders, like Britain’s in the 1950s, is so blindingly oblivious to the geopolitics of empire — in this case, to Beijing’s largely economic bid for global power on that same “world island” (Eurasia plus an adjoining Africa).

It’s not as if China has been hiding some secret strategy. In a 2013 speech at Kazakhstan’s Nazarbayev University, President Xi typically urged the peoples of Central Asia to join with his country to “forge closer economic ties, deepen cooperation, and expand development space in the Eurasian region.” Through trade and infrastructure “connecting the Pacific and the Baltic Sea,” this vast landmass inhabited by close to three billion people could, he said, become “the biggest market in the world with unparalleled potential.”

This development scheme, soon to be dubbed the Belt and Road Initiative, would become a massive effort to economically integrate that “world island” of Africa, Asia, and Europe by investing well more than a trillion dollars — a sum 10 times larger than the famed U.S. Marshall plan that rebuilt a ravaged Europe after World War II. Beijing also established the Asian Infrastructure Investment Bank with an impressive $100 billion in capital and 103 member nations. More recently, China has formed the world’s largest trade bloc with 14 Asia-Pacific partners and, over Washington’s strenuous objections, signed an ambitious financial services agreement with the European Union.

Such investments, almost none of a military nature, quickly fostered the formation of a transcontinental grid of railroads and gas pipelines extending from East Asia to Europe, the Pacific to the Atlantic, all linked to Beijing. In a striking parallel with that sixteenth century chain of 50 fortified Portuguese ports, Beijing has also acquired special access through loans and leases to more than 40 seaports encompassing its own latter-day “world island” — from the Straits of Malacca, across the Indian Ocean, around Africa, and along Europe’s extended coastline from Piraeus, Greece, to Zeebrugge, Belgium.

With its growing wealth, China also built a blue-water navy that, by 2020, already had 360 warships, backed by land-based missiles, jet fighters, and the planet’s second global system of military satellites. That growing force was meant to be the tip of China’s spear aimed at puncturing Washington’s encirclement of Asia. To cut the chain of American installations along the Pacific littoral, Beijing has built eight military bases on tiny (often dredged) islands in the South China Sea and imposed an air defense zone over a portion of the East China Sea. It has also challenged the U.S. Navy’s long-standing dominion over the Indian Ocean by opening its first foreign base at Djibouti in East Africa and building modern ports at Gwadar, Pakistan, and Hambantota, Sri Lanka, with potential military applications.

By now, the inherent strength of Beijing’s geopolitical strategy should be obvious to Washington foreign policy experts, were their insights not clouded by imperial hubris. Ignoring the unbending geopolitics of global power, centered as always on Eurasia, those Washington insiders now coming to power in the Biden administration somehow imagine that there is still a fight to be fought, a competition to be waged, a race to be run. Yet, as with the British in the 1950s, that ship may well have sailed.

By grasping the geopolitical logic of unifying Eurasia’s vast landmass — home to 70% of the world’s population — through transcontinental infrastructures for commerce, energy, finance, and transport, Beijing has rendered Washington’s encircling armadas of aircraft and warships redundant, even irrelevant.

As Sir Halford Mackinder might have put it, had he lived to celebrate his 160th birthday last month, the U.S. dominated Eurasia and thereby the world for 70 years. Now, China is taking control of that strategic continent and global power will surely follow.

However, it will do so on anything but the recognizable planet of the last 400 years. Sooner or later, Washington will undoubtedly have to accept the unbending geopolitical reality that under girds the latest shift in global power and adapt its foreign policy and fiscal priorities accordingly.

This current version of the Suez syndrome is, nonetheless, anything but the usual. Thanks to longterm imperial development based on fossil fuels, planet Earth itself is now changing in ways dangerous to any power, no matter how imperial or ascendant. So, sooner or later, both Washington and Beijing will have to recognize that we are now in a distinctly dangerous new world where, in the decades to come, without some kind of coordination and global cooperation to curtail climate change, old imperial truths of any sort are likely to be left in the attic of history in a house coming down around all our ears.

Capital and ideology: interview with Thomas Piketty.

27 Dec

by Thomas Piketty on 23rd December 2020 @PikettyLeMonde

Thomas Piketty tells Robin Wilson how wealth and power can be transferred from capital to workers and citizens.

Robin Wilson: If Capital in the Twenty-First Century made you famous for one thing, it was the equation ‘r>g’: the rise of inequality in recent decades has been linked to the excess of profit accumulation over economic growth and so to huge rents for shareholders and chief executives. Redressing such inequality then implies taxing heavily capital assets as well as high incomes. But in Capital and Ideology you raise a problem: a feature of globalisation has been the transnationalisation of wealth and the failure of nation-states to keep up—even in terms of the data they collect. So what is to be done?

Thomas Piketty: We have to rethink the way we organise globalisation. Free capital flow is not something that came from the sky—it was created by us. It was organised via particular international treaties and we have to rewrite these treaties. The circulation of investment is, of course, not bad in itself but it has to come with an automatic transmission of information about who owns what and where. It has to come with some common tax system, so that the most mobile and most powerful economic actors have to contribute to the common good—at least as much a proportion of their wealth and of their income as the middle class and the lower socio-economic groups.

Otherwise, we have created a very dangerous system, where a very large part of the population feel that they are not gaining from globalization—they are not gaining in particular from European integration—and that people at the top, large corporations or people with high wealth and high income, get a better deal because the system in a way was organize so that they can just click on a button and transfer their wealth to another jurisdiction and nobody can follow them. It doesn’t have to be this This is a very sophisticated international legal system, in particular in Europe, which has made it possible that you accumulate wealth by, in effect, using the public infrastructure of a country—the public education system and everything—and then you can go somewhere else and nothing has been planned so that we can follow you. This has to be changed.

I voted yes in the Maastricht treaty referendum in 1992. I was very young but still I am part of the many people who maybe did not realise at the time that this would lead us to a very unfair system. Some other people realised very well what they were pushing for: we should have more competition between countries so that countries will make an effort to be more ‘efficient’ and not tax too much.

To some extent, I can understand this argument. Except that, at the end of the day, this is a mistrust of democracy—this attempt to go around democratic choices by forcing the rules of the game to deliver certain types of distributional outcomes, mainly by making it possible for the most mobile and most powerful economic actors to avoid taxation in effect. This is a very dangerous choice for globalisation and for democracy and it is putting our basic social contract under a very dangerous threat.

Let’s focus on the European Union. We are up against a race to the bottom in corporate taxation in Europe as individual states have pursued beggar-my-neighbour approaches, rather than collaborating to match collectively the power of capital. One of the features of the current EU architecture, to which you have alluded, is the constraint of unanimity operating hitherto against action at EU level to reverse this race to the bottom. So how can it be reversed?

We cannot wait for unanimity to change the rule of unanimity. So at some point we need to have a subset of countries, ideally including the largest countries—Germany, France, Italy, Spain, as many countries as possible—which decide to sign a new treaty between them whereby they will take a majority-rule decision on a certain number of tax decisions: to create a common tax on the profits of large corporations, on large carbon emissions and on high-income, high-wealth taxpayers.

This will be done through majority rule among these countries. Ideally, I would like this to be done through a new European assembly made up of national parliament members—a little bit like the German-French parliamentary assembly created last year as part of the new bilateral treaty between France and Germany. Which, by the way, illustrates that it’s perfectly possible for two countries or more to stay in the European Union—France and Germany are still in the EU, of course—and to have a bilateral or trilateral or whatever treaty, in order to create some special co-operation for countries that want to move ahead into more political and fiscal integration.

I very much hope that a subset of countries will put this proposal on the table—and not only make this proposal but say ‘Okay, six months from now, 12 months from now, this will come into force and we will have majority-rule decision-making to have this recovery plan with this new common tax system’ and so on. I very much hope that most of the 27 countries that are currently members of the EU will join, but probably what will happen is that at least for a certain number of years some countries will choose to remain aside from this mechanism.

This is what happened with the creation of the euro, of course. I’m not saying this is perfect—I would prefer all 27 countries to be part of the full process of integration. I would also like Britain to come back and I think at some point this will happen. But if we wait for all countries to agree before moving in this direction we are going to wait forever. So it’s very important that a subset of countries moves in this direction—if we are always waiting for unanimity to make progress, at some point the cost of unanimity is enormous.

We’ve seen that recently with the new recovery plan, which has finally been adopted. But as we all know it has been adopted under the threat that if some countries put in their veto then there would be a separate agreement between 25 countries instead of 27. You cannot rule a large federation forever in this manner. It is not working because, in effect, it takes too much time.

If we decide in three months, in six months, that the recovery plan was too small—which is very likely to be the case—what are we going to do? Are we going to play this game another time, forcing unanimity to happen behind-closed-doors without public parliamentary deliberation, without majority-rule decision-making? We have to move to something else.

In Capital and Ideology, you paint a fairly unforgiving picture of the evolution of the EU, as effectively the only quasi-federal entity in the world to define itself so narrowly in terms of market-clearing measures rather than social policy or a political community. This has, you claim, fuelled alienation from the European project among les classes populaires, as their socio-political aspirations have not been addressed—as evidenced by the Brexit referendum, the earlier referendum defeats on the proposed EU constitution, or indeed the controversy over Maastricht which you mentioned. How can citizen trust in Europe be rebuilt?

Let me first say that I am a European federalist—I believe in Europe. Before describing everything that should be improved, it’s important to remember that European nation-states have been able to build, especially in the decades after World War II, the best social-security system in the world, the least unequal, social-market economic system in the world. This is a great achievement. I am not here to say that everything is bad in Europe—that would be ridiculous. We have built a social system which, by and large, is the least unequal in history, and this is a huge achievement, but this achievement is fragile.

For a long time we thought that it was possible to have the welfare state within each nation-state and then the EU would just be in charge of enforcing the common market and the free flow of goods, services and capital. We realise today that this is not sufficient and if we don’t harmonise tax legislation—and, more generally, if we don’t have some common public policy to regulate capitalism and to reduce inequality—then indeed there is a risk that the divorce between the European project and les classes populaires at some point will just destroy the project itself.

I am very shocked by the fact that, as I show in Capital and Ideology, if you look, referendum after referendum—whether it is in Britain, France or Denmark—wherever you have a referendum over Europe, it’s always the bottom 50 or 60 per cent of income, wealth or education groups which vote against Europe and only the top 10, 20 or 30 per cent which vote for Europe. This cannot be a coincidence.

The explanation according to which the bottom 50 or 60 per cent group are so nationalist, or they don’t like internationalist ideas, is just wrong. There are many examples in history where, in fact, the more disadvantaged socio-economic groups are more internationalist than the elite.

It entirely depends on the political project—the political mobilisation around internationalist ideas—that you present. The problem is that over time the European project has been viewed more and more as being built in the interest of the most mobile and most powerful economic actors. This is indeed very dangerous.

With the Covid crisis, we have an opportunity to try to show to the public opinion of Europe that Europe can be here to reduce inequality. But this will require some deep change in the way we conduct economic and tax policy.

Who is going to repay the large public debt? For now we put everything on the balance sheet of the European Central Bank but at some point we will have to discuss who is going to pay for that. There are solutions which, in fact, come also from the history of Europe itself. Let me remind you that after World War II, in the 1950s, many countries—including in particular Germany—invented some very innovative ways to reduce large public debt, including very progressive tax on very high-wealth individuals.

Germany in 1952 put in place a very ambitious, exceptional, progressive wealth tax, which applied between 1952 and the 1960s: very high-wealth taxpayers had to pay a very large amount of money to the German treasury. This was very successful in the sense that this policy not only helped reduce public debt—it paid for public investment, public infrastructure, and it was part of the very successful postwar growth model.

We are going to have to find something similar in the future, except that now we cannot do it alone. It cannot be just Germany or France or Italy. We will have to have some common tax policy.

Europe has to show its citizens that Europe can mean solidarity—Europe can mean asking more of those who have more and, in particular, of very high-wealth individuals who have more than €1 million or €2 million in assets. They should make an exceptional contribution in the coming years, to repay some of the Covid debt. Some proposals have been put on the table in various countries, including in Germany—very similar in fact to what was actually done in Germany in 1952, when it was a big success.

At some point, we will have to add this up at a transnational level. Through the kind of European assembly I was describing earlier—it could be Germany and France but it would be better if it was Germany, France, Italy, Spain, Belgium, as many countries as possible—we will have to change the course of Europe, so as to convince the middle class and lower socio-economic groups of Europe that Europe can work for them and Europe can be here to reduce inequality, and not only be in the interest of the wealthiest citizens.

Continuing that point about les classes populaires, you have some very striking sociological graphs in Capital and Ideology where you show how the support base for the parties of the left in Europe, which was historically among les classes populaires, has shifted dramatically in recent decades, so that they have come to represent the better-educated and even to some extent the better-off in Europe. And, in the process, you say what you call the ‘classist’ politics of the past risks being substituted by the identitarian politics of nativist movements in the Europe of today. How has such a dramatic transformation come about and can it be corrected?

The biggest part of the explanation has to do with the fact that we have stopped discussing the transformation of the economic system. We have stopped discussing reducing inequality between social classes. For many decades now, we have been telling the public that there is only one possible economic system and one possible economic policy, that governments cannot really do anything to change the distribution of income and wealth between social classes—and that the only thing that governments can do is control their borders, control identity.      

We should not be surprised that 20 or 30 years later the entire political conversation is about border control and identity. This is largely the consequence of the fact that we have stopped discussing the transformation of the economic system.

That’s partly due, of course, to the gigantic historical failure of communism, which has contributed to a general disillusion towards the idea of changing the economic system. I was 18 at the time of the fall of the Berlin wall in 1989 and I can remember, in the 1990s, I was much more a pro-market believer than I am today, and so I can very well understand the feeling that came after the fall of communism.

But not only has this gone too far. We have forgotten that on the other hand you have all the many achievements of social democracy, including progressive taxation of income and wealth, including co-determination in companies, including social-security systems. This big success of the 20th century can be taken further in the future. New thinking about a new form of economic system—more equitable, more sustainable—is the discussion we now need to have.

In the book, you conclude with your version of an alternative, which you describe as ‘participatory socialism’. It involves a progressive tax on all wealth—the proceeds of which, you say, should go to a capital endowment for every 25-year-old, as well as the extension of existing co-determination arrangements in Germany and elsewhere to change the balance of corporate power. You’re saying this would be a way to transcend capitalism without repeating the Soviet nightmare, so can you finally elaborate on that?

The system of participatory socialism I describe at the end of Capital and Ideology some people would prefer to call social democracy for the21st century. I have no problem with this but I prefer to talk about participatory socialism. In effect, this is the continuation of what has been done in the20th century and what was successful. This includes equal access to education, to health, to a system of basic income, which to some extent is already in place but needs to be made more automatic; educational justice needs to be more real and less theoretical, as it is too often the case.

Regarding the system of property, which has always been the core discussion about socialism and capitalism, the proposal I am making relies on two main pillars: one is co-determination, through change in the legal system and the system of governance of companies, and the other part is progressive taxation and the permanent circulation of property.

Regarding co-determination, let me remind you that in a number of European countries—including Germany and Sweden, starting around the 1950s—we’ve had a system where 50 per cent of seats on the governing boards of large companies will go to elected representatives of employees, of workers, even if they don’t have a share in the capital of the company, and the other 50 per cent of voting rights will go to shareholders.

Which means that if, in addition, the workers and employees of the company have a capital share of, say, 10 or 20 per cent, or if some local or regional government, as sometimes happens in Germany, has a share of 10 or 20 per cent in the capital stock of the company, then in effect this will shift the majority, even if you have a private shareholder who has 70, 80 or 90 per cent of the capital. So this is quite a big change, as compared to the usual rule of one share, one vote, which is supposed to be the basic definition of shareholder capitalism. In France, Britain or the United States, or in other countries where this system was not extended, shareholders don’t like this idea at all.

But, in the end, it was pretty successful in Germany and Sweden. I don’t want to idealise the system but it has to some extent made it possible to involve workers in the long-run strategy of companies, in a way that is not perfect in Germany or Sweden but is a bit better at least than in France, Britain and the US.

We can go further in this direction, so the first pillar of participatory socialism I propose is to say ‘Okay, let’s extend this co-determination system to all countries’—all countries in Europe to begin with but all countries in the world, ideally. Let’s also extend it to small companies and not only the large companies where it applies in Germany. In Sweden it applies to a bit smaller companies but the very small companies are excluded. Let’s apply it to all companies, no matter the size, and let’s go further by assuming, for instance, that with the 50 per cent of the vote going to shareholders, a single shareholder cannot have more than 10 per cent of the vote in large companies—say of over 100 workers.

The general idea is that we need to share power. We need more participation by everybody. We live in very educated societies, where lots of people—lots of wage-earners, engineers, managers, technicians—have something to contribute to decision-making in the company.

When you are in a very small company where there’s only one individual who put in the small capital to create the company and hires one or two people, you can see where you want the majority of the vote with the one individual, the founder of the company. But, as the company gets bigger and bigger, you need more deliberation, and you cannot be in a system where one individual, because he or she had a good idea or was very lucky at the age of 30, is going to concentrate all the decision-making power at the age of 50, 70, 90—including in a huge company with thousands or tens of thousands of workers.

So that’s the first pillar of participatory socialism. We start from the co-determination system, as it has been applied, and we try to extend it.

The second pillar is progressive taxation. Again, we start from what has been experimented with during the20th century. Some countries, like the US, for instance, went pretty far in the direction of progressive taxation: the top income tax rate at the time of Roosevelt was 91 per cent and on average between 1930 and 1980 it was over 80 per cent.

And in fact it was very successful, in the sense that productivity growth at this time was much higher than it has been since the 1980s. So the view that was put at the time of Reagan—that in order to get more innovation, more growth, you need more and more inequality at the top—is simply wrong if you look at the historical evidence.

The big lesson from history that I push in my book is that economic prosperity historically comes from equality and, in particular, equality in education. The US was the most educated country in the world in the middle of the20th century, with 80-90 per cent of the generation going to high school, at a time when it was maybe 20-30 per cent in Germany, France or Japan. You had this huge educational advance and the US was also the most productive economy.

The top income-tax and top inheritance-tax rates were divided by two by Reagan, but in fact the per capita national-income growth rate was also divided by two in the three decades after the Reagan reform. So I propose large-scale progressive taxation—not only of income and inherited wealth but also of wealth itself and on an annual basis, so as to avoid excessive concentration of wealth at the top.

And indeed so as to pay for a minimum inheritance for all: I propose €120,000 at the age of 25. This is still quite far from complete equality. In the system I propose, the people who today receive zero euro, which are basically the bottom 50 or even 60 per cent of societies, would receive €120,000, and the people who today receive €1 million, after the tax and everything, would still receive €600,000—which is less than €1 million but a lot more than €120,000.

So we are still very far from equal opportunity, which is a theoretical principle that people pretend they like but in practice—when it comes to concrete proposals—many people have a problem with. We need however to go in this direction. This proposal is actually very moderate—we could go further.

I am not saying this platform should be applied next week in every country. This is a general view of how the economic system should be transformed in the long run. The system I am describing, which I call participatory socialism, of course is different from the welfare or social-democratic capitalism we have today. But it’s very much a continuation of the transformation that already took place over the past century.

The welfare or social-democratic capitalism we have today is very, very different from the colonial capitalism that we had in 1900 or 1910, where the rights of property owners—at the world level, the colonial level, but also the domestic level—were much, much stronger. You could fire a worker when you wanted, oust a tenant when you wanted. This has nothing to do with the system we have today. So there is a long-run process towards more equality, towards justice. And this comes with a more balanced distribution of economic and social rights between owners and non-owners, with the regulation of property and the transformation of property relations.

This evolution will continue. It has already been very strong in the past century and it will continue in the future. This is a discussion we need to reopen—to shift the political conversation away from identity politics and border control towards economic and social progress and transformation.

This is part of a series on Corporate Taxation in a Globalised Era supported by the Hans Böckler Stiftung

Thomas Piketty is professor of economics at the Paris School of Economics and author of Capital and Ideology and Capital in the Twenty-First Century (both Belknap Press).

Popular Resistance Newsletter – People are rising up against the elites!

23 Nov

This weekend, ten thousand people took to the streets in Guatemala to protest the President and Congress over a proposed budget, the largest in its history, that cuts funds for health care and education as poverty rises, and provides slush funds to politicians and governments. In Colombia, the people held a national strike to protest their violent, right-wing government. In Peru, protests against a right-wing power grab have ousted one appointed president and people are demanding a new government and constitution. And people in Chile won the right to a new constitution. Now they are defending the process to make sure it represents them.

Across the Atlantic Ocean in Nigeria, in what began as a response to ongoing and severe state violence, the #EndSARS movement, has evolved to a struggle for full liberation from a corrupt and repressive government. Their new hashtag is #EndBadGovernanceInNigeria. I spoke with Abiodun Aremu, a long time movement leader in Lagos, on Clearing the FOG, about the current conditions and history of looting and exploitation by those in power.

In these countries and more, the people are rising up against the elite power structure to fight for their rights. Across borders, we share a common enemy, neoliberal economies that funnel wealth to the top, deregulate industries so they violate worker rights and destroy the environment, and impose austerity programs to deny our basic necessities. We also share a common vision for a world where the self-determination of peoples is respected and all people have equitable access to a life of dignity and prosperity

The Center for Budget and Policy Priorities has a new report that finds the economy, which improved slightly over the summer, is stagnating again. As the provisions from the CARES Act expire, poverty is rising, especially for black and brown people. Women are also being adversely impacted because of the lack of childcare. Most of the jobs that have been lost, 52 percent, are low-wage jobs.Boxes of food were handed out by the Greater Pittsburgh Community Food Bank. Gene J. Puskar/AP.

They point to a recent study from the Department of Health and Human Services that predicts ten million more people will become impoverished by the end of this year. Currently, 24 million adults say they don’t have enough food in their homes and 80 million adults say they are struggling to afford basic necessities. Without adequate support from the government, the economy won’t recover and people will continue to suffer.

The COVID19 pandemic is surging with more than 200,000 cases in one day last week and deaths are rising again. Across the country, hospitals are struggling without enough beds and the staff to care for patients. The United States is expected to remain at this crisis level through the winter unless drastic steps are taken such as a national shut down, including all non-essential businesses. At present, that is not an option being considered by either President Trump or President-Elect Biden.

Both Trump and Biden are putting corporate profits over the needs of people by focusing on reopening businesses rather than providing the relief people desperately need. The Institute for Policy Studies reports that billionaires have increased their wealth by nearly $1 trillion since the start of the pandemic while their workers are left unprotected and without increases in their wages. They specifically call out a “delinquent dozen” of “pandemic profiteers.”

As Congress refuses to provide support for the millions who have lost their jobs, their health insurance and their homes, people are calling on  the incoming Biden administration to take immediate action. For example, David Dayen points out that a provision in the Affordable Care Act allows the President to use executive power to expand Medicare to whomever needs it.David McNew/Getty Images.

Biden, unfortunately, has made it clear that he opposes Medicare for All.  I spoke about the COVID-19 crisis and our for-profit healthcare system with Chris Hedges on his program, On Contact, this weekend.

This past week, more than 235 organizations called on Joe Biden to cancel student debt, which can also be done using executive power. Student debt has reached a staggering $1.6 trillion, a burden that is crippling people in the current recession. The groups state, “Cancellation will help jumpstart spending, create jobs, and add to the GDP. Short-term payment suspension alone is not enough to help struggling borrowers who are unemployed, already in default, or in serious delinquency.”

In addition to failing to address the pandemic and economic hardship at home, the United States government also inflicts pain and suffering across the planet through the many regime change efforts and military aggressions. Medea Benjamin and Nicolas J. S. Davies outlined ten steps Joe Biden could take immediately to change our foreign policy to one that is in line with international law, provides humanitarian aid instead of bombs and reduces the threat of nuclear war.

Federal spending on the security state dwarfs what is spent on domestic needs. Only 32 percent of the federal discretionary budget is used for health care, education, energy and housing and the biggest chunk of that goes to the Veterans Health Administration. The rest goes to the Pentagon, Homeland Security, the State Department, and NASA. Imagine what could be done to provide universal health care, child care, fully-funded education through the university level, low-cost clean energy and affordable housing if we stopped our wars and brought the military home.

Now that it is clear the next president will be Joe Biden, some people may think it is time to relax and let him go to work running the country. This is the message the power holders want the people to hear. The Biden administration will go to great lengths to give the appearance that it is different and that it will make positive changes, but just as we have experienced over and over again, when it comes to domestic economic policy or foreign policy, there is little difference between Democratic and Republican administrations. Both serve the wealthy class and the military industrial complex.Sean Rayford/New York Times.

The power elites are never going to give us what we need. We must demand it. As we see people in other countries doing, we must organize and mobilize with a clear set of demands now. Joe Biden can take immediate steps to relieve suffering, and in a time of crisis as we are in now, he can do it using executive power. We must not give Biden a honeymoon. We must not be fooled by the excuses used to convince us it can’t be done.

Popular Resistance Newsletter – People are rising up against the elites

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