The imperialist counter-offensive against a decade of reforms

Photo: Semilla Luz
Demonstration outside the National Congress in Brasilia June 2013

By Jane West

The world economic situation is today chiefly characterised by a prolonged stagnation of the productive forces, which is beginning to lead to mass unrest and political problems throughout the imperialist and semi-colonial world.

While the working through of the results of economic stagnation over the last 3 years has led to progressive developments, like the uprisings in Egypt in 2011 against Mubarak, and mass demonstrations in Chile against a rightist government, it is also now also creating serious problems for a series of left reforming governments particularly in Latin America that are facing the exhaustion of an economic project that relied upon rising world commodity prices to fund more or less radical redistributive policies.

The 2008-13 five year stagnation of the main imperialist economies is already longer than anything experienced in the entire post-war period, and shows no sign of an early end.

Continued robust, if slowing, growth in China, the world’s second largest economy, is not enough alone to lift the entire world economy out of slump. Europe is still overall in recession, the US in very low growth. Demand in the world economy is falling, as economic activity remains sluggish.

This has now worked through into commodity prices, which have fallen by 20 per cent overall since mid-2011. This has put paid to hopes for an unending ‘supercycle’ in rising commodity prices anticipated on the assumption that previous high growth in China and the other BRICS means overall demand in the world economy is sufficiently high to maintain commodity prices despite recession and stagnation.

This is now changing the political dynamics of the struggle against imperialism particularly in Latin America.

The last decade – since the defeat of the US-inspired anti-Chavez coup attempt in Venezuela in 2002 – had seen a series of progressive developments particularly across Latin America, but also in other parts of the semi-colonial world.

The advances in Latin America range from a full-blown revolutionary process in Venezuela, very advanced left governments in Bolivia and Ecuador, and the election of left reformist governments across much of the continent, notably in Brazil and Argentina.

The progress of the left in Latin America is most striking, but a similar process was reflected in a more fragmented and less advanced fashion in other parts of the semi-colonial world, driven by the same economic and political processes.

This contradictory advance to the left included the replacement of Thabo M’Beki by Zuma in South Africa, Erdogan’s AKP 2004 victory in Turkey over the army backed coalitions in power since the 1997 coup, the election of Thaksin parties in Thailand since 2001 but especially 2011, and the overthrow of Mubarak in Egypt followed by the election of Morsi.

At the same time the relentless economic rise of China created room for manoeuvre for a whole range of semi-colonial countries, especially in sub-Saharan Africa, which no longer had to accept the first bad economic deals offered by the US and its imperialist allies. This not only laid the conditions for more rapid economic growth in the poorest part of the world, but also fed the growth of bourgeois nationalist political currents that asserted greater independence from the West in a number of African countries.

However, the process was most advanced and most dramatic in Latin America. Through the first decade of the 21st century, the Latin and Central America of the 1970s, 80s and 90s dominated by US-sponsored puppets, juntas and military dictators – Pinochet, Somoza, D’Aubuisson, Arana, Stroessner, Noriega – was swept away by a tide of red and pink.

One by one pro-US right-wing governments fell in the midst of popular protests that reinstated democracy and brought to power Chavez in Venezuela, Morales in Bolivia, Lula and the PT in Brazil, Ortega in Nicaragua, Christina Fernandez in Argentina, Correa in Ecuador and others.

Only Chile and Colombia have held out with governments of the right – and after US-backed coups add Honduras and Paraguay. Though even Colombia has seen a shift from a right-wing government supine before the behests of the US to a right-wing government that ploughs a slightly more independent, pro-Latin American line.

This advance of the left in the continent was propelled by revulsion in the populations at lost decades where rightist repression was accompanied by whole-scale adoption of neo-liberal economic policies that led to decline, debt crisis, squeezed incomes, privatisations, failing infrastructure, cuts in welfare and increased inequality while US and other multinationals creamed off profits and failed to invest. The failure of the neo-liberal project was highlighted by the utter collapse of the Argentinian economy and default, which had previously slavishly followed the prescriptions of the IMF and ultimately US imperialism.

The leftist governments that came to power asserted their independence from the demands of US imperialism, breaking with US foreign policy on a range of issues including the blockade of Cuba, the Iraq war, Afghanistan, Israel and Palestine, Iran, Libya and others and developing greater regional integration through forums like UNASUR, that exclude the US.

Alongside this they carried out more or less redistributive political and economic policies financed through growth based on rising world commodity prices, which continued even after the 2008 crisis buoyed by China’s huge counter-cyclical stimulus measures in 2009.

This type of policy was carried out most extensively by the revolutionary government of Chavez in Venezuela, where repatriated oil profits were deployed to develop extensive health and education programmes, support to the barrios and a huge tranche of welfare and social measures.

Other governments undertook less extensive redistributive programmes, but the model was essentially the same; default on excessive debt, renationalise where necessary the profits from the productive sectors of the economy – primarily raw materials – and carry out reforms through redistributive measures based on growing positive trade balances fuelled by buoyant demand and high prices for raw materials.

The scope for such redistribution was considerable in the context of these rising world commodity prices which powered growth in the Latin American developing economies. The 5 year moving average of GDP growth in the region reached 5.4 per cent in 2008. This was followed by recession in 2009, but annual growth quickly rebounded to 6.2 per cent in 2010.

This advance to the left in Latin America, other shifts in a progressive direction elsewhere in the world and above all the continuing rise of China pose a significant challenge to US and imperialist hegemony.

The US counter-offensive

The US and its allies have been urgently seeking the route to an effective counter-offensive against this anti-imperialist trend in the rest of the world.

One response has been the US’s announced ‘pivot’ to Asia, aimed at developing a military stranglehold round China that forces it to redirect resources to military spending, slows the growth of its economy and inhibits its economic and political impact in the semi-colonial world.

In the Middle East its military interventions in Iraq and Afghanistan have been costly failures. But lacking an alternative tactic, it pursued the same military course in Libya and now Syria. More successful political tactics in Egypt – including creating economic chaos through the IMF and Saudi Arabia withholding promised loans – set up the conditions for the overthrow of Morsi and the return of the army and pro-US Mubarakists.

In sub-Saharan Africa, French imperialism has been the instrument for the counter-offensive, ensuring the more rightist Ouattara replaced Gbagbo in Cote d’Ivoire and are now in Mali to prevent the advance of forces hostile to the West.

But until recently these attempts were bearing minimal fruit, especially and crucially in Latin and Central America. It had clocked up a success in Libya, successfully divided Arab nationalism along sectarian lines and undermined the regime in Syria. But overall, until now, for each advance in one area it experienced a setback in another.

However, the impact of the stagnation in the world economy is now beginning to do the imperialists’ job for them. Failing growth and declining world trade is working through into falling world commodity prices, with a severe impact on those economies that remain most dependent on the export of raw materials.

The working through of the results of this in a squeeze on incomes is leading to mass discontent in all quarters of the globe. The title of journalist Paul Mason’s recent book accurately summarised the result: Why it’s kicking off everywhere.

In the semi-colonial countries, recent months have seen mass strikes and protests by miners in South Africa, huge demonstrations against fuel price rises in Indonesia, violent protests against power cuts resulting from lack of infrastructure investment in India, continuing though declining protests against Putin in Russia, the mass conflict over Taksim Square in Turkey, the mass demonstrations in Brazil against fare rises, student protests in Chile, and others.

However, while these explosions of protest reflect genuine economic grievances and rising hardship, where the left or forces more independent of imperialism are in government’ this is being turned to the advantage of the pro-imperialist right which is seeking to place itself at the head of the rising mass discontent resulting from stalled economic growth.

Its most striking success so far has been the counter-revolutionary coup in Egypt.

The end of an era of ‘reforms’ based on a commodities boom

The next target is Latin America, where the beginnings of more serious economic problems are starting to make themselves felt. Although comprehensive data has not yet been published for last year, data for individual countries shows that by 2012 growth was slowing in the region, as falling world trade and declining commodity prices worked through.

While growth slowed across the continent, some countries suffered far worse. Brazil, the famed B in BRIC, growth fell to less than 1 per cent last year compared to previous growth rates of up to 7.5 per cent in post-economic crisis 2010.

Without a renewed period of growth in the entire world economy to create a renewed upward pressure on commodity prices, the period where progressive policy could be delivered simply on the basis of a more or less comprehensive redistribution of the surplus available from existing, primarily commodity, production has come to an end for Latin America.

Without export-funded growth in resources to pay for expanding health care, education, and welfare support, these programmes are increasingly unaffordable. At the same time, rising regional inflation – 6.9 per cent in May – especially driven by problems in Venezuela where inflation jumped from 27.9 per cent in April to 33.7 per cent in May, is undermining real income levels.

The left governments that have been riding a decade long wave of popularity on the basis of these types of progressive policies find themselves facing popular unrest, falling mass support and no means to turn this around without taking more radical economic steps than have been required before.

The recent wave of demonstrations that swept through Brazil saw Dilma Rousseff and the PT’s popularity fall sharply. June figures from Datafolha showed her approval ratings fell from 57 per cent to 30 per cent in the space of a month. Reversing the planned fare increase was a necessary step. But with growth below 1 per cent there is no generalised ‘feel good’ factor to turn the political situation around.

The same economic problems explain the surprisingly narrow victory for Maduro in the Venezuelan presidential elections following the death of Hugo Chavez. They also lie behind the major demonstrations in Argentina in April.

In all these cases the right has moved rapidly to try to seize the political leadership of these mass movements. While they are driven by genuine grievances – rising prices, stagnant or falling wages, rising unemployment, shortages – they are exploited by the right to undermine the left governments and lay the ground for advances by the right in the next round of elections. Or even prepare for coups or overturns of the existing governments, as was clearly the initial intention of the Venezuelan opposition after the Presidential elections. This attempt failed, but the idea has not been abandoned if new economic problems create the circumstances for another round of opposition led mass protests.

Of course, less reported in the West, the right-wing government in Chile is also facing a mass opposition movement mainly led by leftist students, which has organised huge demonstrations and erupted into violent unrest.

The mass anger is not due to some right-wing turn in these left-led countries, which has not occurred. Nor is it in response to acts of repression, which again have not taken place except increasingly in Chile. In Brazil an early police crackdown on demonstrators was quickly reversed. In Venezuela, where post-Presidential election demonstrations by the right turn quickly very ugly and violent, there was nonetheless no crackdown. Nor are they due to allegations of corruption, which have been circulating for years.

The protests are a response to a squeeze on living standards due to a slowing economy, and are directed against whoever is in power, left or right. The issue is what should the response of these left governments be.

While a radically redistributive economic policy is clearly progressive, it is does not change the relationship of these underdeveloped and dependent economies to the world economy. Nationalisations, primarily of oil in Venezuela, Argentina and Ecuador, have ensured the profits from the export of raw materials are available to the governments for such redistributive policies but do not change the fundamental dynamics of their economies.

With the raw materials’ export surpluses disappearing, much more radical economic measures are needed to re-organise production to create growth. This requires significant state investment programmes, particularly targeted at infrastructure to develop the economy through increasing its productivity. There have been radical, in some cases revolutionary changes in the distribution of incomes. What is required is a comparable shift in the sphere of production.

This requires driving up investment as a proportion of GDP, which can only be achieved through the action of the state. Where this has been done – most notably China, but also, for example, in Ecuador – growth has been maintained despite the fall in world trade and its impact on commodity prices.

Over the last few years the Correa government in Ecuador has increased state investment in the economy to 10 per cent – this compares to the UK for example where the state’s share of investment in the UK economy is a paltry 1-1.5 per cent. This policy is already paying dividends in ensuring Ecuador can better ride out the storms in the world economy as it has developed the instruments to apply state investment for infrastructure development, increasing productivity and supporting the transition from simple to higher value commodity production.

Other left governments in Latin America have yet to take this course. This is for a variety of reasons: they are not ideologically convinced of the need to develop the state-led part of the economy rather than rely on private capital; they don’t have the instruments (state companies with appropriate expertise) to carry out such a programme; or they have not considered it urgent as the commodities’ boom seemed unending.

Unfortunately this leaves them exposed to the impact of the stagnation in the world economy. Moreover, such state-led investment is not a ‘quick fix’. Delivering major infrastructure projects – building an oil refinery, a power station or a railway line for example – take time to plan and construct, and time to deliver their benefit to the economy as a whole. So even embarking on such a programme now cannot turn the economy of Brazil around, for example, before elections next year.

Therefore we can predict some bumpy times for the governments of the left in Latin America – protests, demonstrations and falling electoral support, which the pro-imperialist right is preparing to exploit. As in Egypt, to understand what is happening in these countries will require careful analysis of the situation from the point of view of developments in all classes including internationally.

Observing that there is a big movement of the poor and oppressed voicing genuine grievances will not be enough to understand the situation. The big neighbour to the North is looking for every opportunity to exploit such movements, not to meet their fundamental demands, but to use them as an instrument to defeat the left and bring back to power its puppets, strongmen and cheerleaders in the region.

The prolonged stagnation of the world’s productive forces is bringing to an end a period when the left could make gains simply through redistributive reforms. In order to maintain momentum against imperialism in the circumstances of heightened class struggle that this unleashes requires more radical and profound steps to restructure production – by taking control of the levers of the economy through major programmes of state-led investment – than have been carried out by most of the Latin American left so far.