Davos-2013: Directionless And Purposeless

By Kumar David -February 2, 2013

Prof Kumar David

Socialism, State-Capitalism and System-D

The futility of the World Economic Forum in Davos from 23 to 27 January drove home that state and corporate leaders of global capitalism are at sixes and sevens; President Obama did not bother to attend and the Chinese all but boycotted it. In truth it was a European affair and even then pulling in different directions. David Cameron dropped a bombshell saying that if he won the next election he would hold a YES/NO referendum on whether Britain will stay in the EU. Angela Merkel and the European Central Bank expressed opposite opinions on financial reform. George Soros and Nouriel Roubini said the world was staggering down the tubes.

Billionaire Soros prophesied darkly: “I have a very strong conviction the current approach is doing more harm than good. It has actually destabilised political stability in a number of countries, like Mexico. What is the answer? I think we will only find out by trial and error”. Professor Roubini warned that Central Bankers need to think about “turning off the cheap money tap or risk creating another, possibly worse, bubble. As you do a slow exit from QE you may create another bubble and make another crisis”. The international news agency Reuters says “Leaders of the world’s largest banks have gone some way to persuading investors that their industry’s near-death experience (sic) is over, even though the public still don’t trust them”.

The lesson of Davos is that capitalism is not a self-sustaining autonomous socio-economic order; left to itself it periodically collapses in paroxysms of crises. Capitalism survives today in an intensive care unit run by national states, global state conglomerates (G-7, G-20, etc) and multilateral agencies (IMF, ECB, etc). Capitalism, as we knew it since the end of the war where great corporations and fiancé houses swam in a “free-market”, is over. It is a mutated and muted creature, tightly regulated and kept on a short leash by the global state. This is why I call it a kind of state-capitalism, though not in the sense of the state owning much of the economy as in the classic fascist cases. Davos, if you take a step back and observe, was about states and multilateral agencies regulating and managing corporations, banks and finance capital.

When socialism?

There is no denying that the world’s socialists are no nearer their millennial goals either; socialism is certainly not just round the corner or visible just over the horizon. Folks like me must have the intellectual honesty to grant that we are not on some short and royal road to socialism. I will return to what the next stage appears to be anon, but first a few words about Marx’s vision. There are some things in Marx which have been vindicated splendidly. Like Darwin’s evolutionary schema, Marx’s historical materialist method has been so well validated that it has seamlessly seeped into all historical and social science. Secondly, his transformation of Hegel’s bipolar dialectic to deal with the dynamics of complex systems, de facto founding systems-science, is a theoretical break through. Putting the two together, Das Kapital was his masterpiece.

Darwin and Marx began with empirical groundings, constructed new theories, and founded original sciences. However, an interesting difference is that though Darwin explained how species evolved and differentiated themselves, he did not prognosticate what would emerge next. Nowhere in Darwin will you find science fiction about what will come after man, nor speculation about what new forms of mammal, insect, fish or reptile will turn up in future epochs in assorted corners of the earth. Wisely, Darwin stayed clear of that.

In revolutionary politics one cannot stay silent when mankind demands to know “What next?” In response, Marx sketched out a vision in a few bold strokes and called it socialism. He wrote no notebooks or cookbooks on how to “do socialism”; all we have are half a dozen intriguing quips. “From each according to his ability to each according to his needs”; “expropriate the expropriators”; “freedom of all is the condition for the freedom of each”; “the productive powers ensconced in collective human labour”, and such audacious but cryptic epigrams are all we have. Soviet Stalinism and the one party state in China are more a travesty than a fulfilment of this crystal-ball gazing.

There is only one diagram in Origin of Species and that is a bush – not a tree rising high into the sky – which Darwin uses to illustrate evolution. Evolution is like a bush where things are going on everywhere all the time; new viruses and bacteria are emerging by the day; new creatures evolve right now in isolated pockets in the sea; in some sequestered places new mammals may be rising up. In the last 3 million years many hominid shoots sprouted and died, one branch, homo sapiens, survived. Evolution is a like a bush with change everywhere, all the time; it’s not purposeful and linear like a tree, reaching up to the sky, preordained to culminate in our species.

Social evolution, on the other hand, is sometimes bush-like, and sometimes like a tree where one propensity dominates. The all powerful linear example, of course, was the rise of capitalism which subdued the whole world and transformed it in its own likeness. In a few hundred years capitalism remade all the world in its own image. (There are pockets of pre-capitalist social forms in nooks and crannies, but they are overwhelmed and disappearing). The rise of capitalism was like a great tree rising to the skies, it was no bush. In other periods of human history, however, society was more like a bush with different social forms flourishing in different places. European feudalism, the later Chinese dynasties, the Mayas and other mezzo-American civilisations, and the Gupta and Mogul civilisations of India, these were separate branches of a contemporaneous flourishing bush.

Socialists have long subscribed to a tree-like hypothesis of socialism succeeding capitalism as an inevitable event. The road, however, has not been so linear. Today, as global capitalism falls flat on its face let us pause to review what is taking its place. I have already dealt state regulated capitalism taking over in the West; the Chinese state is like the older model of state-capitalism; and we have a residuum of liberal-democracy everywhere, not as an economic system but as a political form. Already it’s a bush. And then we have System-D!

System-D

The future is being shaped everywhere by something new; the rise of the Shadow Economy (SE) or the informal economy. The informal economy is not to be confused with the black-market or an underworld economy. Nor should it be construed as a service sector of street sellers; the informal economy is engaged in a range of productive and service activities. Nor should the SE be thought of as an incipient form of classical capitalism; baby capitalism treading the road to modern industrial capitalism, as early capitalism once did in the metropolitan heartlands. No, this is not that kind of creature; it is a new economic phenomenon that is here to stay. Interestingly it is strong not only in developing countries, but also in Europe and America. It is a force in Asia and dominates Africa and Latin America.

The shadow economy is a big player all over the world and employees 1.8 billion people world-wide; its global size is estimated at $10 trillion, second only to the US formal economy, which it will surpass within 10 years. Starting as simple street merchants, outside the control of regulators, tax-collectors and the state, it now deals in an enormous range of activities; construction, home services and repairs, transport, trash pick-up, brokerage, and every type of merchandise sale – food, electronics, mobile phones, clothes, you name it. In some countries it undertakes jobs needing heavy machinery. It is a legitimate competitor to corporate capitalism as the latter staggers on its last legs.

Theoretical study of the shadow economy commenced only recently and there has been some research in the last five years. But a web search only throws up descriptive and statistical material (some data is reproduced here), not fundamental socio-political and class analysis. It is referred to as System-D, from the French ‘Systeme-D’, which term emerged on the streets of Francophone Africa and the Caribbean as “l’economie de la debroullardise”. The word debrouillard denotes a resourceful or enterprising person. The term was jazzed up by the streets into Systeme-D.

In Lanka we are ever so familiar with street vendors, craftsmen, small contractors, brokers, transport agents and 3-wheeler karayas. The economic strength of this sector is rising; it creates the equivalent of 30% of our GDP which goes uncounted in official statistics. This class is a political force, but Marxists have not explored it, though it is as important as the bourgeoisie, the working class and peasantry. It is essential to examine the ideology of this class as it is differentiating itself from the traditional petty-bourgeois (sanga, vedda, guru, govi) as a distinctive social force. Its ideology in relation to the national question is crucial; is it a repository of deep racism? I hope not, and I don’t want to jump the gun, despite my unease about its relationship to Pakse ideology and the association of some of its elements with Mervyn-like good for nothings.

Whatever got into this merely free-thinking American chap to make him say two weeks ago:-

“We cannot mistake absolutism for principle, or substitute spectacle for politics, or treat name-calling as reasoned debate. We must act; we must act knowing that our work will be imperfect. We must act, knowing that today’s victories will be only partial”.

But he is right; Marxists too must think and act in the knowledge that “theories grow grey my friend but the tree of life is ever green” (Mephistopheles, in Goethe’s Faust}