By Christophe Aguiton
ATTACDecember 14, 2000
Half way through 1997, the financial crisis affecting a number of Asian countries set off a wave of panic within economic and political circles, with the fear of a global collapse hovering in the background. The extent of this crisis disclosed not only the difficulties, but also the incapacity of international institutions to effectively regulate markets in the face of massive financial speculation.
If we had to pinpoint a date which would serve to symbolize the birth of the movement against "liberal globalization", it would have to be 1997. The movement began to cause a stir in the following year, with the occurrence of the first major demonstration in Birmingham, for the cancellation of third world debt, as well as protest movements against the MAI and the emergence of ATTAC in France. But the financial crisis pointed to clear signs of an abrupt loss of confidence in the system, which even extended into the world of liberal economics (cf. headlines from the English language economic journals covering that period).
Although the question of financial markets is central to the issue, it must not be considered in isolation, to the point where every crisis could be resolved by simply resorting to regulatory measures. If we take the Asian crisis as an example, we can see that this is not just a matter of principle. At one time, it was believed in ATTAC, as in many other movements, that the Asian crisis was the simple product of a "speculative bubble" and that measures such as the Tobin tax would be enough to reduce it. Such a tax has the potential to provide substantial support, as we will see later, but only on condition that the whole system is taken into consideration.
Before we go any further, it would be useful to start by reviewing the international financial system as it is today. Its institutions were established in 1944, as part of the Bretton Woods agreements. But even if the major institutions created at the time, the IMF and the World Bank, continue to play an essential role, the world financial system is nothing like that which existed in the post-war years.
Several important events have shaped the current system, including the end of the gold exchange standard, a decision taken by the United States which definitely marked the beginning of financial speculation. Also worth noting are the roles of the Eurodollar and the petrodollar in the growth of the potential of financial capital. Two dates in particular provide an insight into the scale of the "revolution" in process; a revolution intrinsic to the capitalist system that allowed for the setting up of a new accumulation regime. This was very different from the one which was initiated by the Bretton Woods agreements, and which remained in place until the 1970s.
It all began with the liberalization of public bond markets and "securitization", when national debts were put on the market between 1979 and 1981, starting with that of United States. While these operations allowed the member states of the OECD to borrow on a large scale, resulting in mounting public debt, they ensured a steady income for the creditors, who were riding comfortably on the escalating interest rates. From the end of the 80's, the weight of public debt and the level of interest rates guaranteed a massive transfer of wealth towards capital income. This represented nearly 20% of the budget of OECD states, accounting for between 2 and 5% of their GDP. This rapid growth in financial capital hailed the beginning of the "dictatorship of fixed income holders". As Alain Minc, a French liberal ideologist, acknowledged, " the emergence, since 1982, of positive interest rates, that is to say, in excess of inflation…contained the seeds of a social revolution. Before, the owners got poorer and the debtors grew richer. From then on, it was the owners who grew richer and the debtors who got poorer". For third-world countries, it was the beginning of the debt crisis and the start of a cycle that was very rapidly to reverse the direction of the flow of money, henceforth going from South to North.
But at the end of the 70's, there was a transition period during which other players attempted to "find an answer" to the economic crisis affecting the whole world. Whereas employers, reacting to a massive drop in levels of profit, mobilized at a very early stage, governments continued applying Keynesian-type policies for a good number of years. Thus after 1975, the European employers federation, UNICE, launched an "ideological crusade" against government and EU policies, and entered into conflict with the unions by imposing wage restraints, part-time and flexible working practices, and adjustments to working hours. It was the outset of an offensive which was to last throughout the 80's and 90's and which was to have an impact on every front with moderation and individualization of wages, the development of job insecurity and the questioning of fundamental rights to work and to social protection, etc.
It was in 1976/77 that the political powers brought up the rear and launched their own offensive in two stages. The first wave of attack came from France's Raymond Barre and Germany's Helmut Schmidt, who introduced their first austerity plan with an affirmed policy to restore profit levels. This was the era of the famous phrase; "Today's profits are tomorrow's jobs", pronounced by the German Chancellor on the eve of the outbreak of unemployment in Europe! The elections of Margaret Thatcher in 1979 and Ronald Reagan in 1980 exacerbated the downturn. >From then on, it was a matter of challenging the gains that workers had made in the 60's and 70's and of breaking with "fordism", a name often applied to the accumulation regime introduced during the 1930's in USA, under the presidency of Franklin Roosevelt, and after the war, in Japan and Western Europe. This Conservative revolution began with direct hits on the work place, laying off striking air traffic controllers in the United States and adopting hard-line tactics with Britain's striking miners.
The second turning point came a decade later, at a time when the world was undergoing a complete shake-up, with the fall of the Berlin wall and the Gulf war. This too was a global process, in which social and political power juggling was to be an essential factor in determining economic policy. Attempts were made at international level to establish a new institutional order with the Washington consensus as its modus operandi, the rules of which were summed up by John Williamson in 1989, a not wholly insignificant date. World-wide application of these rules, and in particular, the opening-up of financial markets and the convertibility of currencies, was to lead to growth in the volume of financial speculation and was to increase the risks of financial crises. During this period, economic policy was characterized by the initiation of the clearing of national debts, facilitated, especially in the United States, by a drop in defense budgets after the fall of the USSR. This was accompanied by a relative drop in interest rates and the switch over of investments to the stock market, with the appearance of speculative bubbles in "new economy" stocks.
But it was during this second watershed, after the Gulf war, that American hegemony triumphed, and as its natural consequence, Anglo-Saxon capitalism, with its specific rules, came to the forefront. The whole of the productive system is subject to the rules of capital finance with important consequences whether in the organization of businesses or in the management of the work force: the avalanche of subcontracting chains and massive growth of precarious employment, etc. Other forms of capitalism, particularly German and Japanese, are subject to the pressure of the "dominant model" and begin to comply to its constraints. The fiscal measures which have just been announced in Germany, after the victory of Vodaphone in its takeover bid for Mannesmann, are going to allow for the dissolution of the partnerships between banking capital and industrial capital, which form the basis of the German model.
A coherent accumulation regime
This brief presentation does not pretend to give a vision of all the mutations that capitalism has undergone. It is simply a matter of showing that it is a global process with multiple interactions. What is establishing itself is what Franí§ois Chesnais and Robert Boyer both refer to as a " financified accumulation regime", (but they disagree, at the same time, on the depth of its implantation).
This regime is characterized by two phenomena; the appearance, side by side with salaries and profits, of revenues resulting from the ownership of shares and bonds, and the role played by the financial markets in the overall running of the economy including government policies (privatization and deregulation). It is a fairly unstable regime, in any case much less stable than the previous one, often referred to as "fordist", for social reasons as well as for its lack of adequate regulation. The social reasons are obvious; this new accumulation regime is a "generator of inequality", whether between the countries of north and the south, or within each individual country, it encourages job insecurity right across the board, carrying widespread "social insecurity" in its wake. Another factor contributing to instability is the absence of an adequate level of regulation. In the post-war years, nations were responsible for regulating both economic policies, and social agreements. The new accumulation regime operates at a global level, without any administrative provision at all for regulating the system in the long term.
But whilst being an unstable regime, it remains in spite of everything a coherent one. Admittedly, it encourages the growth of speculative bubbles, as we saw on the financial markets during the Asian crisis and more recently, in the first half of 2000, on the stock market when the value of shares in the technological sector raced out of control. But the very same mechanisms that serve the creation of these bubbles can in fact be useful to the system. To illustrate this, let us take the example of the often referred to financial speculator, Georges Soros. The owner of the Quantum hedge fund, whose performance against the pound, in 1990, made him close to a billion dollars, spurring him on, during the summer of 1997, to tackle the Thai baht and the Hong Kong dollar. It is often forgotten that hedge funds are a requisite for the system, as they allow big businesses to cover themselves against the ravages of wildly fluctuating exchange rates by using the technique of derivatives. It is very difficult, even impossible, to differentiate between those who are investing in these funds for the purposes of speculation and those who are using them to secure their investments and exchanges.
A word about our claims
By stressing the coherent nature of the system rooted in liberal globalization, we could be criticized for taking an excessively globalizing approach. We could be accused of taking the twin risks of disillusioned abandonment – in considering that there was no other way out than that offered by this system, or that it would only be possible to humanize on the fringes - or of what looks like a radical assessment, that is, suggesting that the only appropriate action would a challenge to capitalism on a global level. Conversely, there are numerous examples, where seemingly limited claims have had considerable and far reaching effects. At the end of the 1960's, for example, trade unions questioned the "taylorian" assembly line system used in the automobile industry, and this contributed to the "fordist" crisis.
It is in this spirit that we must formulate our claims in respect of the regulation of the international financial system. Each time we put forward a proposal, we must be sure that its implementation (and even more the campaign of action this requires), is going to help workers, young people, and all those that we now refer to as "citizens", to seize the initiative, to understand and get to grips with the system, in a word, to get moving.
The reasoning behind this process is twofold. In the first instance, nothing could be worse than a technocratic application of proposals that have originated from militant circles. Imagine, if you can, a Tobin tax set up by the IMF, the very organization responsible for granting funds to the Southern Hemisphere on condition that they set up fiscal adjustments, in the same way as for the national debt. This might hold back the risk of a speculative financial crisis, but it will basically do very little, if anything, to change the international balance of power or the material situation of the poorest nations. Imagine, too, in the same vein, the dismantling of the IMF in favor of regionally located funds. In the regions concerned, this would simply mean the substitution of Japanese for American domination, in the case of the Asian countries, and domination by the larger EU states in the case of the Mediterranean countries.
There is a second, more important reason. As we saw in Prague and Okinawa, everything points to the fact that the system is not ready yet, even for a limited change of direction - for a number of reasons. If we want to progress from the point of clocking up defensive victories, such as paralyzing the WTO, to more offensive ones, like the establishment of a Tobin tax or an overhaul of the mechanics of the international financial system, then there will have to be a substantial change in the balance of power, and movements of far greater proportions than those of Seattle, Washington or Prague.
This is why we think that, in order to build an international counter-power, it is very important that we amalgamate finely-honed campaigns, in which expertise and lobbying play a vital role, with massive gatherings of force, giving pride of place to social movements, peasant and workers groups, youth organizations, both from the North and the South. This is what we are attempting to do in ATTAC, this is the significance of our participation in Prague and this is what we will be targeting at future gatherings in Nice, Porto Alegre, Davos and Genoa, and next summer for the G7 meeting.
In just a few years, if not a few months, we have made considerable progress on this front. The victory in Seattle has been attributed to the demonstrators and to the social movements and not to the differences between nations, in particular the United States and the European Union, who did, however, play a part in the failure of the WTO. A victory for the Tobin tax, in addition to the support that ATTAC has gained in France and elsewhere, would be seen as a victory for the movements and the same would be said about the campaign for the cancellation of third-world debt, which has had reverberations throughout the world. This is the direction in which it would seem best for us to concentrate our efforts.
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