Tomasz Konicz

While many elements of Keynesian economic policy are used in the day-to-day crisis, post-Keynesianism is running wild as an ideology on the German left.

Whether they are stock-conservative market disciples[1] or staid social-democratic trade unionists,[2] in times of crisis, they are all Keynesians. In every crisis episode of recent years, when it was once again necessary to save the fading late capitalism from collapse by means of billion-dollar economic stimulus programs and massive money printing, the British economist, whose demand-oriented economic policy was dominant until it was replaced by neoliberalism in the 1980s, experienced a fleeting public boom. After the bursting of the transatlantic housing bubble in 2008 or the pandemic-induced slump in 2020, everyone was suddenly talking about John Maynard Keynes, who, as the court economist of the old statist social democracy, had advocated an active role for the state in investment programs and monetary policy. Until, after the usual wear and tear in the media circus, nobody talked about him anymore and capitalism seemed to return to “business as usual” after the “Keynesian” stabilization phase.

All that was left were the Keynesians, who had been pushed out of the political and academic mainstream in the neoliberal age and were constantly whining, and with whom the left beyond social democracy now had to contend. But the constant lament from the spectrum of neo-Keynesians and Modern Monetary “Theory” (MMT) that more Keynesianism is needed to make everything better again and for late capitalism to return to the era of the economic miracle is, to put it mildly, misplaced in the face of political realities. Many of the tools of Keynesianism continue to be used in crisis management, but they are not discussed or perceived as such. Keynes has long been a pragmatic part of everyday crisis management, and many of the crisis measures and programs that have stabilized the system since 2008 bear his signature.

And this is only logical against the background of the historical genesis of this school of economics: Keynesianism found its way into the capitalist mainstream after the end of the Second World War precisely as the great “lesson” from the crisis phase that began in 1929 – and in times of crisis the capitalist functional elites almost reflexively resort to its instruments. Consistent regulation of the currency and financial markets, the state as an economic regulatory and steering agent pursuing an active investment policy, a demand-oriented wage and social policy, in which the wage earners of the economic miracle were also understood as consumers, and a counter-cyclical economic policy – these were the now idealized features of the Keynesian economic order until the rise of neoliberalism under Thatcher and Reagan, to which the neo-Keynesians want to return.

It Doesn’t Get Cheaper Than This

The pragmatic recourse to the instruments of Keynesianism finds its clearest expression in all the economic stimulus programs that were launched in the wake of the intensifying episodes of crisis. As a result of this increasing intensity, these government subsidy and investment packages have grown in size with each new wave of crisis,[3] as the notorious management consultancy McKinsey demonstrated with reference to the global financial crisis of 2008/09 and the pandemic of 2020.[4] By mid-2020, global government spending to mitigate the effects of the pandemic-generated crisis surge had already reached around $10 trillion – three times the amount of the 2008/09 crisis programs.

And it was precisely the German government, which was cautious in its economic policy in 2008 and only made negative headlines at the time with the infamous (and disastrous in terms of climate policy) car scrappage program, that launched particularly far-reaching crisis programs in 2020. In relation to Germany’s GDP, Berlin even launched the largest economic stimulus package of all Western industrialized countries: it amounted to 33 percent of GDP. In addition, the Merkel government also initiated a gradual shift away from the pernicious austerity regime in the “German” eurozone by agreeing to a European economic stimulus program in mid-2020 as part of the European budget, which, with a volume of 750 billion, nevertheless includes 380 billion euros of aid payments to the periphery.[5]

And in terms of monetary policy, both the European Central Bank (ECB) and the Federal Reserve (Fed) have, until recently, followed the “it doesn’t get cheaper than this” approach. Key interest rates in all Western currency areas have tended to fall further and further in the 21st century. Between 2009 and 2021, a zero interest rate policy prevailed – with brief interruptions – to support the economy and the financial sector. In addition, after the bursting of the transatlantic real estate bubble, the central banks resorted to pure money printing, first by buying mortgage securities and later increasingly by buying government bonds– injecting additional liquidity into the financial sphere and leading to securities price inflation in the context of the great liquidity bubble that burst in 2020. Over the course of the 21st century, the Fed and the ECB have increased their balance sheets almost tenfold, becoming the dumping grounds of the late-capitalist financial system, doomed to perpetual boom, and the largest holders of their sovereigns’ debt instruments.

Hyperactive Central Bank Capitalism

The central banks have thus become key economic actors in the course of the crisis process, since without their intervention both the financial sphere and government financing would have collapsed. One could speak of central bank capitalism, as the political economist Joscha Wullweber does in a book of the same title, which highlights the dependence of one part of the financial sphere, the largely unregulated market for repurchase agreements (repos), on central banks’ money printing.[6] The current attempt by the ECB and the Fed, in the face of double-digit inflation rates (only the Bank of Japan is desperately bucking the trend),[7] to curb inflation, which has multiple causes (the pandemic, war, the bursting of the liquidity bubble, the climate crisis), by resorting to restrictive monetary policy is not working,[8] but does not necessarily go hand in hand with an end to government bond purchases.

In the eurozone, the PEPP (Pandemic Emergency Purchase Program), a 1.85 trillion euro program that buys government bonds while raising interest rates (net purchases are to be suspended next March),[9] has been created specifically to stabilize the eurozone, effectively undermining the fight against inflation – and in turn strengthening the economic role of the state, which can continue to finance its budget deficit under the PEPP. In addition, there have been steps toward an active economic policy by the state, especially with regard to the Green New Deal. Neoliberal hardliners[10] are now complaining loudly in the Handelsblatt about the state’s efforts to “steer credit” towards the environment, which would be expressed above all in the introduction of the EU taxonomy regulation defining sustainable investments (ironically, investments in natural gas and nuclear power are also considered “sustainable” in this context). Moreover, German Vice-Chancellor Robert Habeck’s State Secretary Sven Giegold – an Attac activist from the very beginning – already spoke out a year ago in the Financial Times (FT) in favor of an “active industrial policy” by Berlin, which should “support innovations” in order to transform the FRG into an “ecological and social market economy.”[11]

However, this structure of crisis capitalism, characterized by increasing state activity, is not the result of a coherent strategy, but an expression of the respective efforts to prevent a collapse of the world economy during the acute episodes of crisis. It is a Keynesianism of blind action, in which functional elites acted quasi-reflexively. The emergency programs and policy changes, often introduced as temporary measures, then become permanent in the course of the crisis; they coagulate into new structures and dynamics in latent crisis phases. In the words of then Finance Minister Schäuble, the German government’s actions during the global financial crisis in 2009 were “driving on sight.”[12][13] The packages of measures simply build on each other. Habeck’s active industrial policy, for example, for which Giegold drummed up support in the FT, has its precursor in the state promotion of “national champions” under his predecessor Peter Altmaier, who also wanted to specifically promote Germany’s export industry in the face of increasing crisis competition and informal state subsidies in China and the United States.[14]

This “driving on sight” of the functional elites in manifest times of crisis, in which ever new elements of state-capitalist crisis management are applied in response to waves of crisis, gives this formation all the characteristics of a transitional stage within the late-capitalist unfolding of crisis. The economic and ecological crises that force politicians to adopt crisis Keynesianism are not the expression of a “wrong” economic policy, but of the escalating internal and external contradictions of the capital relation, which manifest themselves quite concretely in constantly rising debts (faster than world economic output) and an incessantly rising CO₂ concentration.

Due to the ever increasing global level of productivity, the world system is, in fact, increasingly running on credit, unable to develop a new leading industrial sector, a new regime of accumulation in which masses of wage labor would be valorized. Through money printing and deficit spending, the state is increasingly acting as a last resort to postpone the crisis, now that deficit accumulation in the context of the neoliberal financial bubble economy (dot-com bubble, real estate bubble, liquidity bubble) has largely exhausted itself in the hot financial markets. For example, the broad-based U.S. stock index S&P 500 has now fallen about a thousand points after reaching its historic high of more than 4700 points at the end of 2021.

Modern Monetary Ideology

The late phase of globalized financial bubble capitalism, in which central banks’ expansionary monetary policies contributed to the inflation of securities prices in the financial sphere – to the point of swarm investing and the fleeting booms of meme stocks like GameStop[15] – also gave rise to an extreme form of late- and post-Keynesian economic ideology, which, ignoring any systemic crisis analysis, especially the connection between bubble formation and central banks’ monetary open floodgates, could claim that all of the economic and social problems of late capitalism could be solved by printing money. After all, interest rates and inflation remained low between 2008 and 2020.

Modern Monetary Theory (MMT) seemed to have succeeded in squaring the capitalist circle. Full employment, the welfare state, economic growth and ecological turnaround are only a matter of expansionary monetary policy, according to the central thesis of MMT. According to this neo-Keynesian monetary theory, which is very popular on the socialist left in the United States, governments that control their currency can freely increase government spending without worrying about deficits. This is because they can always print enough money to pay off their national debt in their currency. According to this theory, inflation is not a problem as long as the economy does not reach its natural growth limits or there is unused economic capacity, such as unemployment.

Printing money until full employment – that is the goal of this late Keynesian demand-driven economic ideology, born in the wake of the financialization of capitalism that it failed to understand. Most proponents of MMT point to the expansionary monetary policy of the U.S. Federal Reserve, which pumped trillions of dollars into the faltering financial markets from 2007 to 2009 and from 2020 onward. Since the money printing known as “quantitative easing” apparently did not result in any surge in inflation, MMT wants to elevate these crisis measures to the guiding principle of neo-social democratic economic policy. An expansive monetary policy is supposed to increase the supply of money as a commodity until demand is satisfied, unemployment has disappeared and the economy is humming along. The historically unprecedented purchasing programs of the central banks, with which a late capitalism running on credit is painstakingly stabilized, are ultimately to be declared the new normality by MMT – and thus become an ideology, a justification of the existing.

It is also no coincidence that MMT has its political home in the U.S., which controls the world’s reserve currency, the U.S. dollar. This allows Washington to borrow in the global value measure of all commodities. What it looks like when peripheral countries, which find their global measure of value in the U.S. dollar, start printing their own currencies at will can currently be studied, for example, in the Turkey of the “interest rate critic” Erdogen, where the inflation rate threatens to accelerate into triple digits.[16] MMT is thus not only a very exclusive ideology that may still find supporters in the eurozone, but it is simply disgraced by the experiences in the periphery and semi-periphery.

Thus, neo-Keynesianism sees the cause of the current capitalist malaise primarily in a lack of money supply. The real cause of the crisis, however, is the lack of a leading economic sector, the lack of a new regime of accumulation that would valorize wage labor on a massive scale. Of course, such a regime will never be re-established due to the high level of global productivity. The irrational end in itself of capital is, after all, its highest possible valorization through the exploitation of wage labor – the only commodity that can produce surplus value as the substance of capital – in commodity production. Keynesian demand policy, on the other hand, pretends that capitalism has already been overcome, as if the satisfaction of needs – and not the unlimited valorization of capital – were the purpose of the capitalist economy. It is the usual Keynesian sleight of hand that simply hides the irrationality of capitalist socialization.

We can clearly observe that since the 1980s, as a rule, when capital accumulation in the real economy sputters, speculative growth in the financial sphere sets in. What MMT ignores here is the connection between quantitative easing and the growth of the bloated late capitalist financial sector. The Fed’s money printing (like that of the European Central Bank) did indeed lead to inflation – to the inflation of securities prices in the financial markets. Thus, the inflated financial sector so frequently demonized by the Keynesians – the basis of the global debt dynamics that act as an economic engine – was the decisive factor in preventing a period of stagflation, such as the one that broke the back of Keynesianism in the 1970s and opened the way for neoliberalism. Neoliberalism unleashed the financial sphere precisely in response to the crisis phase of stagflation, which, as a form of crisis postponement, led to the formation of a zombie capitalism that ran on credit and lurched from bubble to bubble.[17]

The Return of the Deflationary Past

Capital thus loses its own substance, value-creating labor, in commodity production, which drives policymakers, confronted with ever greater mountains of debt, into a dead end: Inflation or deflation? In concrete terms, the aporia of capitalist crisis policy resulting from the inner barrier of capital is illustrated by the dreary dispute between supply-oriented neoliberals and demand-oriented Keynesians over the priorities of economic policy, which has been going on for years.[18] Twitter Keynesian Maurice Höfgen likes to practice this mindless shadowboxing.[19] It’s always the same refrain, reeled off in a thousand variations: The neoliberal warning of over-indebtedness and inflation in the case of economic stimulus programs is countered by the Keynesians with the warning of the deflationary downward spiral triggered by austerity programs. Both sides are correct in their diagnoses, which were only obscured by the financial bubble economics of the neoliberal era. Now, in the era of stagflation, it is becoming clear that it is precisely the monetary policy of central banks that is in a crisis trap.[20] Central banks would have to raise interest rates for the sake of inflation, and at the same time lower interest rates to prevent a recession.

Incidentally, the historical period of stagflation in the 1970s outlined above – to which the late capitalist world system is currently returning at a much higher level of crisis– was the point at which Keynesianism actually failed brilliantly.[21] After the end of the great post-war boom, which was fueled by the Fordist accumulation regime, all Keynesian policy prescriptions failed. Thus, neoliberalism was able to prevail in the 1980s only because Keynesianism failed spectacularly –with double-digit inflation rates, frequent recessions, and mass unemployment. When a has-been Keynesian like Heiner Flassbeck claims – true to style in the Querfront magazine Telepolis[22] – that it was only the energy and oil price crisis that triggered the rise in inflation then as now, he is lying to himself. Despite all the economic stimulus programs, Keynesianism was not able to create a new regime of accumulation – and it will not be able to conjure up new markets that could valorize masses of wage labor at the current global level of productivity.

Neoliberalism “solved” the problem through the speculative expansion of the financial sphere, the financialization of capitalism, i.e. through the postponement of crisis within the framework of a veritable financial bubble economy, which allowed capital to live a kind of zombie life on credit for three decades. This is also the fundamental difference between the stagflation of the 1970s and the current phase of stagflation. The level of crisis is much higher – and this can easily be seen from the ratio of total debt to economic output, which has risen from around 110 percent at the beginning of the neoliberal era in 1980 to 256 percent today (excluding the financial sector).[23]

And a sustainable reduction of this mountain of debt is possible only at the price of a recession – in other words, not at all in the long run. Quite apart from the fact that responding to recessions with Keynesian stimulus programs is ecological madness. The recessions of 2009 and 2020, which erupted in the wake of the crisis surges of the time, resulted in the only years in the 21st century in which CO₂ emissions declined. But the stimulus packages described above led to the highest emissions increases of the century in the years that followed. In 2009, greenhouse gas emissions fell by 1.4 percent,[24] only to rise by 5.9 percent in 2010 thanks to Keynesian stimulus programs![25]In 2020, emissions fell again by 4.4 percent due to the pandemic, while in 2021 they increased by 5.3 percent due to multiple stimulus packages.[26] Destitution in recession or climate death? This is the expression of the ecological aporia of capitalist crisis policy.

Ideological Material for Leftist Crisis Opportunism

Obdurate old Keynesians like Flassbeck, as well as the completely crazy new generation around MMT, stubbornly ignore these simple connections, which point quite clearly to the necessity of system transformation. They still promote the fairy tale that the wrong policies led to financialization, to the expansion of the financial markets in the neoliberal era – and that the only thing to do is to “contain” them. And, of course, they routinely repeat their tired routine of warning against restrictive monetary policy despite double-digit inflation. But the acrobatics with which the evidence of the crisis trap of bourgeois policies is denied in order to repeatedly dismiss inflation as an “anomaly” to be fought with “real” Keynesian policies are becoming downright embarrassing. In Keynesianism, which is rapidly turning into regression, there is simply no sense of shame, even when one’s own predictions are so clearly embarrassed by the reality of the crisis, as in the current phase of stagflation.

In Flassbeck, the notorious Höfgen, and in many other Keyensians who are absolutely blind to the world crisis of capital, there is a reflex to deny all evidence of the ideological impasse in which they find themselves. Just as inflation is not “real” inflation, they call for the “real” Keynes in crisis policy, since everything that has been used so far in terms of methods does not correspond to the ideal. In all depressing frankness, this is evident in the author of the above-mentioned book on central bank capitalism, who describes at length how central banks have to prop up the bloated financial system, only to claim that this is not Keynesianism because financial markets are not restrained:[27] “So the current heavy intervention by central banks in the financial system and even the support measures taken by governments during the Covid pandemic are not a return to the strong state or a new Keynesianism. Despite the severity of the crises, there have been no far-reaching changes in the course of economic and fiscal policy. It is a way of governing that takes place within the market-liberal economic order that continues to prevail. Neither the functioning of the financial system in general nor that of the shadow banking system in particular is being questioned. But that is exactly what would have to happen to overcome the system’s inherent tendencies toward crisis.”

In fact, today’s crisis Keynesianism cannot live up to the old ideal because, as a form of precarious crisis management, it is confronted with the consequences of the decade-long financialization of capitalism. It is depressing: Joscha Wullweber describes the consequences of this financialization on the basis of what he calls the “shadow banking system” of repo transactions[28] and laments the consequences of the rapid expansion of the financial sphere, only to remain in the capitalist thought-prison and declare the structural dynamics a mere question of a wrong policy. And it is precisely this way of thinking that makes Keynesianism an easy ideological vehicle for left opportunism.[29]The Keynesians are courted by the “Left Party” because they reduce the systemic crisis to a mere question of policy, which legitimizes the deliberate complicity in crisis management of entire Left Party rackets, from left-liberal to right-nationalist. The Keynesian critique of capitalism has long since coagulated into an ideology.

Post Keynesian War Economy

Keynesianism, with its drab deficit spending and its love for the state, cannot, of course, solve the deepening internal and external crisis of capital, but it can function as a transition to a new quality of crisis. Keynes can provide a useful bootloader, a transitional vehicle, to a qualitatively new form of authoritarian crisis management, especially for functional elites who often act “on sight.” Ideologically advanced post-Keynesians, such as the Taz editor Ulrike Herrmann, have long understood this:[30] In her recent book on the “end of capitalism,” she combines an account of the external limit of capital largely cribbed from the critique of value with a commitment to the war economy – including ukase (decree, Russian) and rationing. The Taz editor wants to endow the German state, which is blind in its right eye and riddled with right-wing cronies, with immense power and make it the central agent of social reproduction in the crisis. Here too, of course, Ms. Herrmann is building on a Keynesian critique of capitalism in which the state appears as the great antagonist of capital – and not as part of the capitalist system that is going down with it, as is already the case in a number of “failed states” on the periphery.

This, authoritarian, post-democratic crisis management, carried out by eroding, sometimes openly savage state apparatuses, is what the course of the crisis boils down to. The Keynesians play only the – stupid or perfidious – cheerleaders of this objective crisis tendency towards anomic authoritarianism. Keynesianism, which is only considered to be to the left of social democracy because of the absurd rightward shift of the entire political spectrum, thus degenerates here, too, into ideology in the purest sense: to justify the threatening authoritarian state-capitalist crisis administration, which would be the exact opposite of the emancipation from the collapsing late-capitalist objective coercion regime, an emancipation that is necessary for the survival of humanity. Consequently, the left should finally come to see the Keynesians for what they objectively are: ideologues.

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[1] https://www.faz.net/aktuell/wirtschaft/der-volks-und-betriebswirt/volkswirtschaftslehre-sind-wir-jetzt-alle-keynesianer-1775435.html

[2] https://www.freitag.de/autoren/der-freitag/in-der-krise-sind-alle-keynesianer

[3] https://www.konicz.info/2020/10/27/vergleich-der-krisen-2020-vs-2008/

[4] https://www.mckinsey.com/featured-insights/coronavirus-leading-through-the-crisis/charting-the-path-to-the-next-normal/total-stimulus-for-the-covid-19-crisis-already-triple-that-for-the-entire-2008-09-recession

[5] https://www.sueddeutsche.de/politik/eu-sondergipfel-haushalt-1.4973847

[6] https://www.bpb.de/shop/zeitschriften/apuz/geldpolitik-2022/507732/zentralbankkapitalismus/

[7] https://www.konicz.info/2022/12/30/japan-in-der-krise-mehr-alkoholismus-wagen/

[8] https://www.konicz.info/2021/08/08/dreierlei-inflation/

[9] https://www.ecb.europa.eu/mopo/implement/pepp/html/index.en.html

[10] https://www.handelsblatt.com/meinung/homo-oeconomicus/gastkommentar-homo-oeconomicus-kreditlenkung-ist-kein-gutes-rezept-fuer-klimaschutz/27974940.html

[11] https://www.ft.com/content/fa740376-da98-4067-92b4-85d315bbb6e2

[12] https://wolfgang-schaeuble.de/wir-fahren-auf-sicht-dazu-muss-man-sich-offen-bekennen/

[13] TN: The phrase “driving on sight” [Fahren auf Sicht] refers to driving a car with the headlights off, in essence only being able to see and react to what is right in front of you, without much ability to anticipate or plan for the future.

[14] https://www.ifo.de/publikationen/2005/aufsatz-zeitschrift/nationale-industriepolitik-brauchen-wir-nationale-champions

[15] https://www.konicz.info/2021/01/30/hedge-fonds-gamestop-und-reddit-kleinanleger-die-grosse-blackrock-bonanza/

[16] https://www.konicz.info/2022/01/31/werteverfall/

[17] https://www.streifzuege.org/2017/wir-sind-zombie/

[18] https://www.konicz.info/2011/08/15/politik-in-der-krisenfalle/

[19] https://twitter.com/MauriceHoefgen/status/1610588756754534400

[20] https://www.konicz.info/2011/08/15/politik-in-der-krisenfalle/

[21] https://www.xn--untergrund-blttle-2qb.ch/wirtschaft/theorie/stagflation-inflationsrate-6794.html

[22] https://www.telepolis.de/features/Die-Welt-vor-der-Rezession-Diese-alten-Fehler-werden-die-Lage-verschaerfen-7286773.html?seite=all

[23] https://www.imf.org/en/Blogs/Articles/2021/12/15/blog-global-debt-reaches-a-record-226-trillion

[24] https://www.reuters.com/article/us-climate-emissions-idUSTRE6AK1OU20101121

[25] https://www.reuters.com/article/us-iea-co2-idUSTRE74T4K220110530

[26] https://joint-research-centre.ec.europa.eu/jrc-news/global-co2-emissions-rebound-2021-after-temporary-reduction-during-covid19-lockdown-2022-10-14_en#:~:text=In%202021%2C%20global%20anthropogenic%20fossil,the%20world’s%20largest%20CO2%20emitters.

[27] https://www.bpb.de/shop/zeitschriften/apuz/geldpolitik-2022/507732/zentralbankkapitalismus/

[28] Wullweber (source in footnote no. 26) summarizes repurchase agreements (repos) as follows: “Repos are contracts under which securities are sold at a certain price in order to repurchase them after a defined period of time at a predetermined price plus interest. […] In principle, a repo is nothing more than a pawnshop: One side needs money and deposits a pledge in the form of a security as collateral. The other side has money and lends it against this collateral. […] Generally speaking, in the shadow banking system there are, on the one hand, financial players such as hedge funds and commercial banks that need funds to make a short-term profit through transactions with different risk profiles or to make up for a shortfall in capital reserves. […] On the other hand, you find money market funds, asset managers, pension funds and other institutional investors or even companies that want to invest their excess capital with relatively low risks and comparatively high returns.”

[29] https://exitinenglish.com/2023/01/23/opportunism-in-the-crisis/

[30] https://exitinenglish.com/2023/04/02/rebranding-capitalism/

Originally published on oekumenisches-netz.de in 02/2023

The liberal end as an authoritarian beginning: When left-liberal business editors write about the end of capitalism, they mean its descent into authoritarianism. A review of Ulrike Herrmann’s “The End of Capitalism.”

Tomasz Konicz

For just where fails the comprehension,

A word steps promptly in as deputy.

With words ’tis excellent disputing;

Systems to words ’tis easy suiting;

On words ’tis excellent believing;

No word can ever lose a jot from thieving.

Mephisto in Goethe’s Faust, Part 1

At last! After all these long years,[1] in which critics of value, like lonely voices in the wilderness, have addressed the self-destructive tendencies of capital, and warned of the collapse of the process of civilization due to the incompatibility of capitalism and climate protection,[2][3] it now seems that the mainstream of published opinion is also taking up this issue. This is hardly surprising in view of the manifest systemic crisis, in which all attempts to nurse capital back to health are bound to fail.[4] While the opportunistically closed-off “Left Party,” in which national-social and left-liberal rackets fight for hegemony,[5] clings to its dull social demagoguery, Ulrike Herrmann, economics editor of the daily newspaper taz, the left-liberal organ of the ruling Green Party, has written a book on the “end of capitalism,” the subtitle of which at least notes the incompatibility of “growth” and climate protection.[6]

Isn’t that great? Herrmann’s radical crisis theory, for years thoroughly marginalized, not least in the taz, now seems to be becoming “mainstream”! The former Keynesian Herrmann, who still in her 2018 bestseller Kein Kapitalismus ist auch keine Lösung (No Capitalism Is Also No Solution) refused to part ways with her beloved capitalism, thoroughly misinterpreting Karl Marx in the process, now sees no alternative to an alternative system. Unlike many arch-conservative leftists who are still stuck in the 19^th century, Herrmann seems to have undergone an enormous change of heart within a few years, from a healthy worshipper of capitalism to a post-capitalist. Better late than never!

What does it matter if some of the central statements of her new book give the impression of having been simply copied from texts of the critique of value, without a citation or a simple reference to where Herrmann suddenly gets her wisdom, which includes the inevitability of the “demise” of capitalism? Take, for example, when she writes that there is no alternative to “renouncing growth,” because otherwise things would end violently in the long run, having “destroyed the foundations of life.”[7] This is an – admittedly rather hairy – rendition of a central thesis of the critique of value.[8] The same applies to the (former?) Keynes fan’s observation that Keynesian stimulus programs boost the economy in times of crisis, but at the same time literally fuel the climate crisis.[9]

In the late-bourgeois media and political establishment, where competition and copyright are sacred, intellectual theft is considered a serious offense; it is pursued by “plagiarism hunters” and can end the career of a politician or journalist. Without saying so, Herrmann seems to be shamelessly drawing on the resources of value-critical crisis theory, which has been systematically marginalized for years, not least in her newspaper. Measured by the standards of the liberal middle class to which she belongs, this is unacceptable; it comes close to intellectual theft.

But within the left, within progressive, emancipatory forces, different rules apply. Ideally, an open-source approach prevails, so to speak. Here, insights and theoretical findings are common property that can and should be disseminated and, above all, criticized and further developed by all interested parties. Insight is a collective process gained in dialectical discussion, in dispute. And Herrmann’s book – in contrast to most of the intellectual exhalations of the “Left Party,” which is passing into open decay – seems to fulfill a central progressive claim in the manifest systemic crisis: It clearly emphasizes that overcoming capitalism is necessary for survival. Por la causa, for the sake of the cause, it is also important to remember that Herrmann acts as a multiplier. In her media appearances, with the support of the green and liberal media, she can reach tens or even hundreds of thousands of people, not hundreds or – if all goes well – thousands, as is now common in the left-wing scene.

So, is the struggle for a post-capitalist future finally becoming mainstream in the face of the manifest systemic crisis? Or, to put it another way: Is Herrmann’s book a progressive contribution to the crisis debate? First of all, one might have doubts about this after reading the effusive praise Herrmann heaps on capitalism for its alleged merits (democracy! prosperity! comfort!) before discussing the ecological barriers of its development. Here, of course, the narrow-minded perspective of the German, white middle class comes into play, which confidently ignores the catastrophic conditions in the periphery of the world system and the underclass in the centers.

But here, too, one could argue that the praise of capitalism is intended to soften the necessary rupture that the middle class itself would suffer if it were to part intellectually from its golden capitalist thought-cage. On the other hand, it becomes more difficult to maintain a positive assessment of her argumentation when Herrmann starts to develop quite concrete specifications for an “alternative” way of doing business – which look suspiciously like the old state capitalism of the 1930s – with reference to the slogan “System Change, not Climate Change.”

The economics editor of the taz refers quite specifically to the wartime economy of Great Britain, which is supposed to serve as a model for a post-capitalist alternative (the wartime economy of the Nazis, by the way, differed little in its basic features, with the exception of forced labor in the last years of the war). State planning, rationing and a renunciation of consumption are cited as methods by which the reduction of emissions would have to be achieved quickly. Finally, Herrmann demands that every citizen be assigned the same CO₂ limit of one ton per year, so that the rich would have to cut back far more than the middle class or the poor.

This plea for state capitalism is flanked by ideas from the alternative ecological milieu of the Greens: the degrowth movement, the barter economy, or the public goods economy. The sharing of goods, the reduction of working hours, an unconditional basic income, and vocational reorientation are mentioned in this context as supporting measures of a state-planned “survival economy.”[10] A state capitalism with a green tinge, so to speak. The renunciation of consumption in the face of state-organized rationing of goods and joint yoga courses – this is what Herrmann’s “system alternative” seems to amount to, and it can only be sold as such because the taz journalist takes great care not to elaborate a concept of capital, as even the weekly newspaper Freitag noted in its review of the book.[11] That capital is a process of the unlimited valorization of waged labor in commodity production, a totality that shapes the entire society in its image,[12] Herrmann, in her previous book, at least still suspected in her discussion of Marx.[13] All that remains of this is the regressive and nebulous talk of “growth.”

It is simply not clear what Herrmann means by capitalism, so capitalist institutions, processes or phenomena can be sold as post-capitalist. A renunciation of consumption, as Herrmann demands, implies the continued existence of consumption, which is, after all, only an expression of commodity production. Consumption, as opposed to the satisfaction of needs, is always commodity consumption, that is, a by-product of the pursuit of maximum profit. In a post-capitalist society, however, human needs would have to be freed from the constricting corset of the commodity form. Herrmann thus wants to abolish capitalism while retaining the “elementary form” (Marx) of capital, the commodity as the bearer of value. A necessary liberation of needs from the consumption compulsion of the commodity form in post-capitalism, however, could save resources on a massive scale without being perceived as a “renunciation of consumption.”

Oh yeah, and private ownership of the means of production is also supposed to be a part of the overcoming of capitalism, in the “Democratic Private Planned Economy” (Thus Herrmann on British wartime capitalism). Hermann’s post-capitalist labeling fraud, however, applies above all to the state, which is not a counter-principle to the market and capital, but, in its capacity as the “ideal total capitalist” (Marx/Engels), a necessary pole of capitalist societies, guaranteeing the functioning of the overall system as a corrective agent. Historically, the state was also the midwife of capital, by means of the monetization of feudal levies in the firearms economy (Robert Kurz) of absolutism, and it is dependent on the valorization process of capital through taxes.[14] Without sufficient capital valorization there is no state – and vice versa. That is why, in the crisis episodes of the past decades, many states on the periphery collapsed one after the other and became the notorious “failed states,” because in these places the economic crisis of capital had grown to such an extent that even the state apparatuses had gone wild.

In her middle-class-compatible fetishism of the state, the taz author is thus once again completely Keynesian. At this point, at the latest, the fact that Herrmann only copied the ecological side of the crisis process of capital from the critique of value, without adequately perceiving its economic dimension, takes its revenge.[15] The current systemic crisis is not a mere re-enactment of the crisis of enforcement (Robert Kurz) of the 1930s and 1940s, when Fordism made its breakthrough as a new regime of accumulation with the total mobilization for war.[16] There is no prospect of a new regime of accumulation, which is why the tendencies of state erosion are spreading more and more, even in the centers. In Germany, this takes the form of right-wing networks and rackets, which are acting with increasing self-confidence (the taz reported, for example, on the coup plans of Uniter & Co.) – and to whom Herrmann now wants to entrust control of the reproduction of society as a whole. State capitalism is already a crisis reality in many places: for example in China, in the form of the Russian state oligarchy, or even in Egypt, where the Egyptian military is building a “war economy” without war.[17] State expansion and state erosion often go hand in hand.[18]

Of course, Herrmann would indignantly reject suggestions that she would look to Russia or Egypt as models. But this is – like the state Nazi networks in the FRG – the harsh reality of the crisis, not the Keynesian ideal of the impartial regulating state. The capitalist state, too, is caught up in the socio-ecological crisis of capital. And at the same time, it is a common capitalist crisis reflex, as the above shows, that the role of the state increases in times of crisis. The authoritarian and “brutalizing” state will play a greater role in the further course of the crisis. And that is why Herrmann’s statements must be called ideology, justification. It provides the justification for the coming era of authoritarian state crisis management in the capitalist systemic crisis, which is now not only devastating the periphery, but is also fully taking hold in the centers. The German middle class’s fear of the crisis is likely to provide mass support for this authoritarian flight into the arms of the seemingly strong state – from which the German right is likely to benefit (the AfD is already on the rise).

This justification takes place through the gutting of the concept of capitalism, which degenerates into a mere empty phrase that can be filled with content at will. It is a strategy borrowed from the advertising industry, where it has become a habit to fill words with content at will. Since capitalism has fallen into disrepute due to its permanent economic and ecological crisis, its form of crisis must be given a new label, a new tag: the capitalist crisis management that Herrmann propagates is no longer capitalism, according to the central ideologem of the taz editor. That is why Herrmann does not give a definition of capital, as Freitag criticized; she has to remain vague so that this ideological sleight of hand can succeed.

Actors from the Green Party, the party of the social austerity of Agenda 2010 and the wars of aggression that violated international law, are thus leading the production of ideology in the climate crisis: the chimera of “green capitalism” that has been successfully propagated for years is now giving way to a mere relabeling of the looming authoritarian crisis management as post-capitalism. This is a Mephistophelian trick that takes ideology to a new level: it is a rebranding of capitalism that operates with empty words while capitalism has a very bad reputation due to its permanent crisis.

And that is why it is also legitimate to be outraged by the fact that Herrmann, here completely the bourgeois competitive subject, is basically committing intellectual theft, taking central insights of value critique out of their theoretical context and incorporating them distortedly into her state-capitalist ideology. But this approach is characteristic of this rapidly brutalizing middle-class milieu in its ruthless crisis competition, which we must also judge by its own copyright standards.

Finally, it should be noted that this late Keynesian fetish of the state, even in its idealized and largely unrealistic version, has nothing to do with emancipation, if this is to be understood as the overcoming of capitalist fetishism and its absurd regime of coercion, which is driving towards socio-ecological collapse. Emancipation is not “hollow talk” pursued by “do-gooders,” but the necessary, conscious shaping of the reproduction process in a thoroughly conflictual, egalitarian discourse encompassing all of society. And this liberation of democracy from the fetishistic fetters of capital would ultimately be more efficient than any state economy, which inevitably tends towards authoritarianism, as a look at the history of the GDR or the Soviet Union shows. But the most efficient social reproduction possible, freed from the capitalist irrationality of limitless valorization, would be urgently needed, especially in view of the escalating climate crisis.

Ulrike Herrmann, Das Ende des Kapitalismus. Warum Wachstum und Klimaschutz nicht vereinbar sind – und wie wir in Zukunft leben werden, kiwi, 2022

I finance my journalistic work mostly through donations. If you like my texts, then you are welcome to contribute – either via Patreon, or via Substack.

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[1] https://www.konicz.info/2008/07/14/mit-vollgas-gegen-die-wand/

[2] https://konkret-magazin.shop/texte/konkret-texte-shop/66/tomasz-konicz-kapitalkollaps

[3] https://www.mandelbaum.at/buecher/tomasz-konicz/klimakiller-kapital/

[4] https://www.konicz.info/2020/04/11/konjunktur-fuer-gesundbeter/

[5] https://www.xn--untergrund-blttle-2qb.ch/politik/deutschland/linkspartei-opportunismus-in-der-krise-7288.html

[6] https://www.deutschlandfunk.de/ulrike-herrmann-sieht-kapitalismus-am-ende-100.html

[7] https://www.deutschlandfunk.de/ulrike-herrmann-sieht-kapitalismus-am-ende-100.html

[8] https://www.konicz.info/2019/05/27/minimalprogramm/

[9] https://www.nd-aktuell.de/artikel/1147322.klimaschutz-die-weltverbrennungsmaschine.html

https://www.heise.de/tp/features/Das-Virus-die-Weltwirtschaft-und-das-Klima-4679329.html

[10] https://taz.de/Kapitalismus-und-Klimaschutz/!5879301/

[11] “Unfortunately, the author does not give us a clear concept of what she wants to call capitalism in essence, although that would actually be necessary if one wants to explain the necessity of the end of capitalism.” Source: https://www.freitag.de/autoren/der-freitag/das-ende-des-kapitalismus-ulrike-herrmann-will-geplante-kriegswirtschaft

[12] https://www.untergrund-blättle.ch/politik/theorie/emanzipation-in-der-krise-7306.html

[13] https://de.wikipedia.org/wiki/Kein_Kapitalismus_ist_auch_keine_L%C3%B6sung#Karl_Marx

[14] See also: Robert Kurz, The Bang of Modernity. Innovation through Firearms, Expansion through War: A Look Back to the Origins of Abstract Labor. Online at : https://www.exit-online.org/textanz1.php?tabelle=transnationales&index=3&posnr=167&backtext1=text1.php

[15] https://www.untergrund-blättle.ch/wirtschaft/schuldenberge-im-klimawandel-7112.html

[16] Robert Kurz, Die Demokratie frisst ihre Kinder, Bemerkungen zum neuen Rechtsradikalismus. https://exit-online.org/textanz1.php?tabelle=autoren&index=37&posnr=49&backtext1=text1.php

[17] https://carnegie-mec.org/2022/01/31/retain-restructure-or-divest-policy-options-for-egypt-s-military-economy-pub-86232

[18] https://exitinenglish.com/2022/08/12/a-new-quality-of-crisis/

Originally published on konicz.info on 12/14/2022

Some reflections on the anti-fascist transformation struggle in the manifest systemic crisis.

Tomasz Konicz

 “It is indeed my opinion now that evil is never “radical,” that it is only extreme, and that it possesses neither depth nor any demonic dimension. It can overgrow and lay waste the whole world precisely because it spreads like a fungus on the surface. […] Only the good has depth that can be radical.” – Hannah Arendt

Where did all the “extremists,” who seek to dominate the current social protests by using social demagogy, suddenly come from?[1] In the German media circus – where ignorance is a competitive advantage – the extremist threat to the democratic “center” of society is always seen as coming from the fringes, or, to put it more precisely, from an imaginary outside. As if extremist aliens were hijacking our good bourgeois democracy. All this rampant delusion[2] couldn’t possibly come from the seemingly rational capitalist mainstream, could it?

The concept of extremism, as it is commonly used in public discourse, is in fact hollow; it refers not only to the political and ideological “distance” between the moderate center and the militant “fringes” of the political spectrum. By listing outward characteristics and extreme methods, it is also an expression of the political majority conditions that prevail at the moment. The center is the political place where the majority of people are, while the “extremes” of the “lunatic fringe”[3] are thought to be the small, lunatic minorities. Thus, the commonly used term extremism refers only to the fringes of the political spectrum. This spectrum, however, is subject to change, and for years it has been marching sharply to the right, in interaction with ever new waves of crisis.

But every actor in the bourgeois political establishment wants to be part of the center. The AfD is no exception.[4] Starting with the Sarrazin debate and continuing with the euro crisis, the refugee crisis, and the AfD’s march through the country, culminating in the Corona mania of the lateral thinkers, the political spectrum has begun to shift. If only because other parties and political forces are reacting to the successes of the right – mostly by trying to copy or adapt parts of the ideological “recipe for success” of the New Right, which is what Ms. Wagenknecht is trying to do.[5] Views of what is considered “normal” and part of the “center” consequently changed during the rise of the New Right. What was once considered agitation and “brown” becomes normal.[6] This calculation is also part of the strategy of the New Right, which seeks to achieve its hegemony of discourse precisely by deliberately breaking taboos and trampling on the most basic norms of civilization.[7]

Ideology and Extremism of The Center

“Extremism” finds supporters in the center of society, thus rendering the bourgeois concept of extremism – which is located in the environment of the ideology of totalitarianism – completely meaningless and therefore “extremely” useless.[8] In the eastern part of the FRG, the AfD has long been the strongest of the parties. So can it really be called “extremist”?[9] And yet, a modified concept of extremism is indispensable for understanding the rise of the New Right in the crisis. But it has to be understood precisely as a crisis-related “extremism of the center,” as an ideological reaction primarily of the middle classes, of the bourgeoisie, to the crisis-related dislocations.

Ideology is not to be understood here as a mere fantasy or figment of the imagination, but rather as a distorted perception of social reality that seeks to justify and legitimize it despite its contradictions and distortions. Ideology, therefore, always refers to the contradictions of the society in which it emerges. Consequently, a critique of ideology is also a critique of society. Ideology is fabricated precisely in the center, in the culture industry and in the media business, and it always carries an ideologically distorted moment of truth; it fabricates half-truths in order to make people resign themselves to a self-destructive mode of economy that is devastating society, climate systems and the environment, a devastation that is becoming more and more obvious.

In response to waves of crisis, right-wing crisis ideology thus pushes the legitimation patterns and narratives prevailing in the “center” to their ideological extreme in a kind of conformist rebellion. The concept of centrist extremism can thus only shed light on the foundations of right-wing crisis ideology – which is rooted precisely in the existing and seemingly “everyday” – if it is taken seriously and not merely used as a purely formal conceptual shell to which forces at the fringes of the political spectrum are assigned in a totalitarian-theoretical manner.

On the one hand, the New Right thus draws on views, values and ideological frameworks that prevail in the mainstream of the societies in which it is successful. This middle-class ideology, whose form has been decisively shaped by the neoliberal hegemony of the last three decades, is being sharpened and taken to an ideological extreme in response to the dynamics of the crisis. It is thus not “external” forces opposed to the bourgeois center that are now questioning many civilizational norms. The center, unsettled by the crisis, is incubating ideologies of human inequality entirely on its own. Thus, it is not the desire to change the world that fuels centrist extremism, but the reactionary reflex to cling to crisis-ridden late capitalist society.

Therefore, it is necessary to show the continuities between the center and the right-wing populist ideology. It is not a matter form, but of concrete ideological content. It is only by examining the concrete content of new-right ideology – as well as its rooting in the mainstream of late-bourgeois societies – that the aforementioned concept of centrist extremism becomes fully comprehensible. And this ideological continuity also explains why the New Right was able to achieve such rapid electoral success. It is precisely because there is no need for an ideological break. It is the same, well-worn ideological path on which the paranoid and fearful citizen drifts to the extreme.

Competitive Pressure and Location Nationalism

Which ideological concepts, then, that have become hegemonic in the “center,” especially in the era of neoliberalism, are being sharpened and taken to extremes by the New Right? First and foremost is the idea of competition, which under neoliberalism has taken hold in almost all areas of society.[10] And of course, right-wing populism and right-wing extremism in all their varieties have always enthusiastically embraced the principle of competition, modifying and sharpening it in many different ways. Right-wing ideologies give this basic principle of the capitalist economy, market competition, a “higher,” timeless meaning by imagining competition as an eternal basic principle of human coexistence: The ideological spectrum here ranges from Social Darwinist ideas to culturalism, racism, economic chauvinism, and the Manichean delusion of German National Socialism, which hallucinated an eternal competition and struggle for survival between Aryans and Jews.

The hatred of “do-gooders” and of moral action is an expression of this crisis-induced barbarization of capitalist competitive pressure, which is characteristic of fascism. The extent to which the hegemony of the New Right has already advanced in this respect is made clear by the right-wing friendly Querfront protagonists of the rapidly eroding left. Christian Baron, for example, denigrated in Freitag (40/2022) as “moral” any criticism of Wagenknecht’s longstanding promotion of the AfD in the financial and refugee crises.[11] This not only confused radical criticism of the activities of the brown fringe of the “Left Party” with morality, but also reproduced the usual resentment of the New Right, which pushes the crisis-induced barbarization of the principle of competition through hatred of the basic principles of civilization.

However, a corresponding drift to the extremism of the center also takes place at the identitary level, in national identity. The era of neo-liberal globalization produced a special form of nationalism and a modification of national identity in the middle class of the “export world champion” Germany, which was very strongly influenced by economic thinking. This locational nationalism, which drew its chauvinism from successful competition on world market, was accompanied by a change in nationalist patterns of exclusion. Culturalism, racism and xenophobia were often economically mediated.

In these economically based resentments, the cultural or racial hierarchization of nations and minorities is derived precisely from their economic position in the world economy or in the national economy concerned. Economic success is said to indicate superior genes or culture, in Germany especially the right attitude towards work, while impoverishment and marginalization are inversely attributed to genetic or cultural deficiencies. These sentiments already found their public breakthrough during the Sarrazin debate,[12] and they became public consensus during the euro crisis, when Schäuble harassed Greece with ever new “austerity packages.”[13]

Moreover, right-wing crisis ideology falsely imagines that the victims of the crisis are its perpetrators. The Hartz IV recipients, according to Sarrazin, are responsible for their misery due to their deficient genetic make-up; the lazy Southern European, according to Schäuble, are to blame for the euro crisis; the refugees, according to Wagenknecht, abuse the “right to hospitality.” This personification of the causes of the crisis in corresponding scapegoats also shows quite concretely that the crisis is a historical process that takes place in stages and promotes the ideological “driving to the extreme” of the existing ideology: The Agenda 2010, which brought about the misery of Hartz IV, which Sarrazin then wanted to attribute to genetic defects, the European debt crisis, the mass migration movements from the periphery, which is collapsing in civil wars, to the centers – these are concrete phases of a crisis process of the capitalist world system that takes place in stages.[14]

National Response to the “Social Question”

The social demagogy of the New Right, which is currently especially successful in the former GDR and which made the AfD the strongest party, is based precisely on giving a national answer to the “social question” in the familiar patterns of thought formed in the brutalization of neoliberalism: “social peace” is to be achieved at the expense of all those who do not belong to the national collective. The right-wing narratives of foreigners who only want our money, of conspiracies to cut off our natural gas, are accompanied by complaints of rising prices and social erosion. This national-socialism that is developing and that has reached the “left”[15] thus seeks to externalize, to project outward, the internal contradictions of capital that are coming to a head as a result of the crisis. These are the same reflexes that appeared, for example, in the euro crisis, when the Greeks, Italians, Spaniards or Portuguese were declared to be the cause of the debt crisis, a crisis that would not have existed without the extreme trade surpluses of the burnt-out republic of Germany.[16]

This process of extremist “brutalization” of the center can thus be traced quite concretely: Since the beginning of the 21^st century at the latest, an ideological “rearmament” has taken hold in the Federal Republic, in which the familiar line of thought is not abandoned but taken to the extreme. In the systemic crisis, the logic of the capitalist system is not questioned by the vast majority of the population, but driven into the barbaric. For right-wing populism, therefore, a public that has been conditioned by neoliberalism for decades is a guarantee of electoral success in times of crisis. All it has to do is to continue to stir existing fears, to fuel existing resentments, and to further push ideological armament by means of “courageous taboo-breaking” (similar centrist extremism brought someone like Donald Trump to the White House in the US).

The maxim of the right-wing populist “extremism of the center” is fully effective. What emerges from the frightened – and the fear is only too justified – center of society in response to the misunderstood crisis is poured into politics: Close the borders! Foreigners out! Forced labor for useless deadbeats! Germany first!

And after all, it’s quite easy to become a Nazi. In almost all European states right-wing populism can triumph precisely because it is so easy to understand – no fundamental break with the dominant ideology is required. And it is easy because, as a conformist rebellion, it does not seek alternatives but remains on the surface of appearances. The well-trodden ideological lines of thought do not have to be abandoned; they lead almost naturally into the barbarism that is emerging.

To Be Radical Is to Go to The Root of The Matter

What is needed, however, is not a parroting of the rising resentments that feed on the decaying forms of capitalist ideology, as practiced, for example, by the “Left Party” of a Wagenknecht,[17] but a clear break with the logic of the system in order to initiate a broad social discourse that seeks to initiate a transformative movement.[18] Clinging to categories and concepts such as state, people, nation, market, money, and capital, whose real social equivalents are disintegrating due to the crisis, can only lead to disaster. The radical break with the dominant capitalist discourse of the crisis, which is rapidly running amok, is a bare necessity in the face of the crisis.

To be radical means to tackle a problem fundamentally, to penetrate to the root (radix) of the problem. That is why radicalism is not a preliminary stage of extremism, as is repeatedly suggested in the hollow, late-bourgeois discourse on extremism. Radicalism is the opposite of extremism. While the latter remains on the surface of phenomena, pushing the ideology that prevails in the center to the extreme, radicalism strives for depth, in order to penetrate to the core, to the essence of phenomena. Thus, the struggle against the New Right, if it is to be consistent and ultimately successful, would also have to be accompanied by radical reflection in order to produce an adequate practice.

A radical anti-fascism would therefore have to fight against the re-emergence of fascism not only as an external phenomenon, but also as a terrorist form of capitalist rule during the crisis. The crisis ideology of the New Right, which is rooted in the neoliberal center, is an expression of very concrete contradictions that escalate because of the crisis: the social as well as the ecological crisis of capital, which has reached the limits of its development and threatens to drag humanity into the abyss, into barbarism. The New Right, on the other hand, is the political subject that concretely carries out this objectively threatening crash in the systemic crisis. This is especially true of the climate crisis, to which the New Right responds with trivialization and denial on the one hand, and with a drift toward eco-fascism on the other.[19]

A radical anti-fascism that understands fascism as a potentially mass-murderous crisis form of capitalist rule would thus seek to understand and conduct the struggle against the fascist danger as part of an inevitable transformative struggle for a post-capitalist future.[20] Broad anti-fascist alliance building, as it was already successfully practiced in the 90s, would have to go hand in hand with the open thematization of the systemic crisis and the role of the New Right as the executor of the barbaric and destructive potentials unleashed in the process.[21]

Thus, in the current phase of the unfolding world crisis of capital, the anti-fascist struggle has the central role of keeping open the possibility of an emancipatory course of transformation – in the struggle against the extreme right.[22] Actually, emancipatory forces would have to be the exact opposite of the right-wing friendly social demagogy of Sahra Wagenknecht’s “Left Party.”[23]

The break with capitalism, which is sinking into a permanent crisis – and which carries fascism with it like a storm cloud carries rain – is necessary because it is objectively imminent. Either the transformation of the system will take place in forms of fascist barbarism, or we can fight for an emancipatory transformation. The social reality shaped by the frothing fascist crisis ideology is the yardstick of radical anti-fascist practice, which must go to the root of the very real capitalist systemic crisis. And this would not be mere voluntarism, but insight into the necessity of a transformative anti-fascism.

I finance my journalistic work largely through donations. If you like my texts, then you are welcome to contribute via Patreon.

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[1] https://www.mdr.de/nachrichten/deutschland/gesellschaft/wer-protest-ost-deutschland-inflation-100.html

[2] https://www.konicz.info/2020/05/25/die-verbrechen-des-bill-gates/

[3] https://en.wikipedia.org/wiki/Lunatic_fringe

[4] https://www.zeit.de/politik/deutschland/2016-03/afd-analyse-erfolg-landtagswahlen-partei-waehler

[5] https://www.konicz.info/2021/06/29/schreiben-wie-ein-internettroll/

[6] https://www.kontextwochenzeitung.de/politik/444/neue-braune-normalitaet-6213.html

[7] https://www.konicz.info/2018/01/17/oesterreich-mit-permanenten-tabubruechen-wird-eine-neue-normalitaet-geschaffen/

[8] Cf. Eva Berendsen et al: Extrem unbrauchbar – Über Gleichsetzungen von links und rechts, Berlin 2019.

[9] https://www.facebook.com/photo/?fbid=645182253946598&set=a.122195239578638

[10] https://www.konicz.info/2017/09/22/national-und-neoliberal-2/

[11] There, with an evident misuse of a Droste quote, it literally says: “[…] ‘If the brain has come up short, morals are taken very readily,’ wrote the sadly deceased writer Wiglaf Droste. This can be seen in all the major debates of recent years. During the financial crisis from 2007 onwards, ‘good’ left-liberals interpreted the ‘bad’ protests against big banks as ‘truncated capitalism’ that was ‘structurally anti-Semitic.’ During the ‘refugee crisis’ in 2015, those who pointed out that there was a need not only for a ‘welcoming culture’ for refugees, but also for locals who felt fear of social decline, because otherwise the democratic legitimacy of refugee aid was at risk, saw themselves defamed as ‘racist’ […]” Source: https://www.freitag.de/autoren/cbaron/wagenknecht-putin-afd-querfront-einwurf-in-eine-bezeichnende-debatte

[12] https://www.sopos.org/aufsaetze/4ca59c0843dfe/1.phtml.html

[13] https://www.heise.de/tp/features/Willkommen-in-der-Postdemokratie-3374458.html?seite=all

[14] https://oxiblog.de/die-mythen-der-krise/

[15] https://www.konicz.info/2016/08/11/die-sarrazin-der-linkspartei/

[16] https://www.konicz.info/2010/05/04/krisenmythos-griechenland/

[17] https://exitinenglish.com/2023/01/23/opportunism-in-the-crisis/

[18] https://www.untergrund-blättle.ch/politik/theorie/transformationskampf-statt-klassenkampf-7289.html

[19] https://www.konicz.info/2019/08/30/der-alte-todesdrang-der-neuen-rechten/

[20] https://www.konicz.info/2022/10/05/transformationskampf-statt-klassenkampf/

[21] https://www.konicz.info/2019/08/30/der-alte-todesdrang-der-neuen-rechten/

[22] https://exitinenglish.com/2023/02/22/emancipation-in-crisis/

[23] https://exitinenglish.com/2023/01/23/opportunism-in-the-crisis/

Originally published on konicz.info on 10/27/2022

The threat of nuclear war is greater than it has been since the end of the Cold War

Tomasz Konicz

By now it should have dawned on even the last German Putin troll that the Kremlin’s war of aggression in Ukraine is not going according to plan. The best indication of this is Russia’s annexation of the four Ukrainian oblasts of Luhansk, Donetsk, Zaporizhzhya, and Kherson, which came in response to a dramatic defeat of Russian troops east of Kharkiv in mid-September. By partially mobilizing – for the time being – 300,000 reservists and annexing the four eastern and southern Ukrainian regions, the Kremlin opted for further escalation. This was exacerbated by intense Russian missile attacks on energy infrastructure and civilian targets across Ukraine, including the capital Kiev, following an explosion on the strategically important bridge linking Russia to the peninsula it annexed in 2014.

Adjustment of The Goals of the War

The current annexation of the four territories was motivated by several factors. On the one hand, it represents an adjustment of the goals of the war, which on the one hand are being massively scaled back in order to make them unavailable for any negotiations. These are Putin’s minimum goals, which are no longer to be the subject of negotiations – at the same time, there is less talk of regime change in Ukraine or anything like that. The Kremlin must adapt its imperial ambitions, which only a few months ago saw Ukraine as part of Russia, to military realities in order to simultaneously satisfy the Russian right, the imperialist and nationalist hardliners who are constantly pushing for a further intensification of the war. In the course of the war so far, Putin has been pressured not by liberal forces, but by right-wing forces, which have been calling for total mobilization and unrestricted warfare for months.

With the annexation of large parts of eastern Ukraine –accompanied by offers of negotiations to Kiev – the Kremlin is not only signaling to the West what it intends to take with it as the minimum spoils of its imperial adventure, it is also paving the way for nuclear war, for the final stage of escalation. Since the beginning of October, the Kremlin has considered the annexed Ukrainian regions as part of Russia, and Russian military doctrine provides for the use of nuclear weapons for national defense, even against conventional forces. The danger of nuclear war is now greater than at any time since the end of the Cold War, precisely because the Kremlin, in its imperial megalomania, has overestimated the military capabilities of the Russian army and is still barely able to stabilize the front in eastern and southern Ukraine.

At the latest since the partial mobilization, which is also an admission of the weakness of the Russian armed forces, Vladimir Putin’s political – and ultimately physical – survival is also at stake in the war. Authoritarian regimes encourage apathy, the indifference of the population, in order to secure their rule, which is why Putin has long resisted mobilization because it will inevitably politicize Russia. Without imperial gains, Putin cannot end the war and survive politically, because partial mobilization is already destabilizing the state-oligarchic, kleptocratic ruling structure in Russia. This is currently evident at its borders, where tens of thousands are leaving the country, even before the expected heavy losses among the reservists. Putin thus needs a victory in his imperial war, even though he has no ability to secure it. In view of this power-political impasse, the Kremlin’s flight to a nuclear attack, which is constantly threatened, seems quite possible. The use of weapons of mass destruction by the ailing Russian military machine would even become likely in the event of an advance by Ukrainian units into Crimea or into the eastern regions that had already seceded during the 2014 civil war.

Instrumentalization Of The Systemic Crisis

For Ukraine, Russia’s partial mobilization and annexation means that everything is now riding on a military escalation. Kiev is pressing ahead with the so far successful offensives in the east and south of Ukraine with all its might in order to, despite all the losses, take advantage of the window of opportunity that remains for the Western-equipped and modernized army before the Russian partial mobilization materializes on the front. Putin’s annexation is rendered meaningless by Russia’s inability to hold these “new” territories militarily, which at the same time should help destabilize the “power vertical” around Putin. This is why Kiev responded to Putin’s offers of negotiations with a decree that categorically rules out negotiations as long as Putin is president. This is meant to encourage revolts in the palace.

Meanwhile, not only Kiev but also Washington seems to be banking on the very regime change in Moscow that Putin’s invasion aimed to bring about in Ukraine. The stakes in this crisis-imperialist “Great Game” over Ukraine are getting higher and higher, the warring parties have more and more to lose, which in turn makes de-escalation more and more difficult. The blowing up of the North Sea pipeline, which had been a thorn in the side of the former Central Eastern European transit countries and the US in particular, illustrates the readiness for escalation that exists on all sides. Sometimes crisis tendencies, state erosion and state disintegration are deliberately promoted: the Ukrainian right sees the disintegration of Russia as a strategic goal. There are similar considerations in Western think tanks, where it is currently being debated whether Putin is still needed as a “factor of order.” Russia, for its part, is trying, not entirely unsuccessfully, to bring Western Europe to its knees in the coming winter through its economic war. The capitalist systemic crisis is being instrumentalized to some extent by all the warring parties.

Pre-apocalyptic Conflict Constellation

The West’s political stability is therefore also at stake in the face of increasing economic distortions. This does not only apply to Germany, where the New Right is already smelling the morning air and the Querfront of parts of the Left Party and the AfD is already marching together, for example in Brandenburg an der Havel, for Russian natural gas. Rising inflation, the renewed threat of a global financial crisis, the recession – these are the very concrete internal contradictions of the crisis that are also driving the West into confrontation. The intransigent, escalationist attitude of Washington and Berlin towards the imperialist Putin, which is a sharp contrast with their laissez faire towards the bloody imperial adventures of Western ally Erdoğan, is driven by the same crisis-imperialist logic as in Russia’s crumbling “power vertical.” The internal crisis is to be bridged by external expansion: The dwindling dollar must be defended as the world’s reserve currency at literally any cost, and access to the raw materials and energy sources that Moscow uses as an economic weapon must be restored – even if this requires regime change and state collapse.

For many of the main parties to the conflict, there is little turning back from the spiral of escalation.  In early October, Moscow warned the West of a “direct confrontation” if the recently negotiated resumption of arms deliveries to Kiev went ahead. A distanced view of this crisis-imperialist war reveals a pre-apocalyptic constellation of conflicts. As capital breaks down from its internal and external contradictions, as climate and economic crises escalate, the crisis-ridden late capitalist state behemoths, driven by these contradictions, threaten to attack each other – until the self-destructive urge of capital is unleashed in a nuclear exchange.

Originally published in analyse & kritik on 10/18/2022

Why the state-capitalist People’s Republic will not be able to succeed the USA as a hegemonic power

Tomasz Konicz

Launched in 2013, the New Silk Road, Beijing’s ambitious investment program in developing and emerging countries, was supposed to usher in an era of Chinese hegemony and make the 21st century a Chinese century – after the 20th century went down in history as the period of US hegemony. Beijing has budgeted more than a trillion US dollars for this strategic development program, which evokes memories of the US Marshall Plan in devastated postwar Europe. Just as Washington used Marshall Plan funds to rebuild Europe after 1945, while emerging as the undisputed leading power of the West in the second half of the twentieth century, the huge Chinese loans to many peripheral countries were motivated by a similar strategic calculation.

According to this calculation, the infrastructural development boost that the construction of power plants, railways, or roads should trigger in the “developing countries” would go hand in hand with close strategic ties between these countries and China. Beijing would thus buy geopolitical dominance through credit-financed economic development in many regions of Asia, Africa and even Latin America. China, which has long since become the leading trading power in most regions of the global South, would thus become the most important lender and strategic partner that could build up its own alliance system around the People’s Republic – similar to the “West” with the US as the leading power.

A Gigantic Investment Program and Its Spiraling Debt

By the end of 2021, the People’s Republic had invested the equivalent of $838 billion in this ambitious development program, which made China “the world’s largest bilateral lender,” according to the Financial Times (FT).[1] This preeminent position is especially true for the periphery of the world system, as Beijing has lent more to the 74 countries classified by the World Bank as low-income than all other “bilateral creditors combined.” The Belt and Road Initiative, as the “New Silk Road” investment strategy is known in English, was not only the People’s Republic’s largest foreign policy venture since its founding in 1949, but also the “largest transnational infrastructure program” ever undertaken by a single country. Even the Marshall Plan, which today would be equivalent to around 100 billion dollars of investment, pales in comparison to the “New Silk Road.”[2]

And it is precisely this gigantic investment program that is causing China’s first major international debt crisis. More and more of the debtor countries on the “New Silk Road” are being forced to ask China to defer payments or renegotiate loan terms. According to calculations by US think tanks, about $118 billion in Chinese loans are at risk of default, or about 16 percent of the total investment in the “New Silk Road.”[3] Countries in Africa, South Asia and Latin America – the Financial Times (FT) continues – that have been set back economically by the latest wave of crises triggered by the pandemic are affected. According to the report, Beijing had to renegotiate the terms of foreign loans worth $52 billion in the pandemic years 2020 and 2021, compared with only $16 billion in debt in 2018 and 2019.

Negotiations between Beijing and borrowers from the global South revolve around partial write-offs of the loan amount, payment delays, or interest rate cuts. In addition, Beijing is increasingly having to provide emergency loans in order to maintain the solvency of its debtors on the periphery of the global system. As a result, according to the FT, China increasingly finds itself in a “role usually played by the International Monetary Fund (IMF)” in many of the large-scale credit-financed investments under the “New Silk Road.” Ironically, the IMF, whose crisis loans have been tied to draconian austerity measures for decades, called on China and other creditors in mid-July to make concessions to faltering debtor countries as large parts of the global South threaten to collapse in the face of a dramatic debt crisis. According to the IMF, “one-third of emerging market economies and two-thirds of developing countries are in distress because of high debt.”[4]

Meanwhile, Beijing has emerged as a “serious competitor to the IMF” after the People’s Republic had to issue secret “emergency loans” and bailout packages worth tens of billions of dollars to over-indebted states to prevent defaults or debt crises, the FT said, citing studies by US research institutions.[5] According to the report, Beijing’s three biggest debtors alone – Pakistan, Sri Lanka and Argentina – have received bailouts worth $32.8 billion since 2017. The list of countries that have had to be stabilized by Beijing through crisis loans includes Kenya, Venezuela, Angola, Nigeria, Laos, Belarus, Egypt, Turkey and Ukraine. For the most part, these emergency loans have prevented infrastructure projects financed under the New Silk Road from going bankrupt.

In this way, Beijing has often been able to prevent failed major projects from leading to payment crises or sovereign defaults. And China is a more popular creditor than the IMF because, according to the FT, the People’s Republic keeps its debtor states “afloat with ever new emergency loans” without demanding that the debtors “restore economic discipline” or carry out the infamous “structural adjustments” with which the IMF has wreaked economic havoc on much of the periphery of the world system since the debt crises of the 1980s. One Western analyst told the FT that there is a suspicion that countries with debt problems prefer Chinese loans in order to “avoid going to the IMF,” which demands “painful reforms.” But this only delays the inevitable “adjustment” and makes it “even more painful.” In any case, many of China’s Silk Road loans follow a geopolitical logic of creating dependencies with debtor countries in order to “limit the strategic options of the US and the West.”

Geopolitical Dimensions of Investment

The geopolitical component of China’s investment strategy is particularly evident in the high level of lending in the post-Soviet region, where Beijing has invested a good 20 percent of the funds it has earmarked for the “New Silk Road.”[6] At $125 billion, the largest share of Chinese loans has gone to Russia, followed by Belarus with eight billion dollars and Ukraine with seven billion dollars. These gigantic investments by Beijing are now threatened by the war in Ukraine, which Russia currently appears to be losing – and which could lead to a collapse of Russia’s sphere of influence. China’s investment strategy in the region literally depends on the outcome of the war. After all, even in such a case, Beijing can hope to recoup some of its loans through in-kind payments. Under loan agreements, Russia can settle outstanding payments in oil or natural gas, making a total default on loans extended to Russia unlikely.

Another focus of Chinese investment activity is sub-Saharan Africa, where, according to Western estimates, the People’s Republic granted loans worth around 78 billion dollars.[7] Although this represents only a small share (12 percent) of the foreign debt held by this largely economically isolated region of the world, with private Western lenders holding 35 percent of the total debt, China has been able to make up ground here in recent years. Between 2007 and 2020 alone, Beijing lent $23 billion in public-private partnerships in the sub-Saharan region, while the United States, Japan, Germany, the Netherlands and France together invested only $9.1 billion.[8] China is in demand as a lender in the region because Beijing’s lending terms are far more favorable than those of Western institutions. Interest rates on Western loans are said to be twice as high as those offered by the People’s Republic.

And it is not only developmentally nonsensical, corruption-ridden prestige projects, as was the case in Sri Lanka, that are being implemented in Africa. In Ethiopia, for example, Chinese capital financed a railroad that cut travel time between the capital and neighboring Djibouti from three days to 12 hours. In Kenya, a new line was built between Mombasa and Nairobi; a new rail link between Tanzania and Zambia also drastically reduced travel time; dams were built in Uganda; and roads and infrastructure projects for water supply and electrification were pushed forward in Africa or Central Asia. The Chinese strategy of accumulating geopolitical influence through economic development seemed to be working in Africa until the recent crisis.

The Illusion of Recuperative Development

But even projects that make sense in terms of development policy are increasingly reaching their economic limits due to the growing global crisis: The railway line between Nairobi and Mombasa, built in four years by the state-owned Chinese Road and Bridge Corporation, is said to have incurred a loss of some $200 million within three years. Meanwhile, China is said to have accumulated by far the most default-prone loans in sub-Saharan Africa. More than a hundred loan agreements have had to be renegotiated in the region, compared with 21 in Asia and only 12 in Latin America.[9] A prime example of the collapse of this Chinese development and hegemonic strategy in the face of late capitalist crisis realities is provided by the South African country Zambia, which went bust on its foreign debt of $17 billion in 2020. China had previously built a railroad to Tanzania, a hydroelectric power plant, two airports, two sports stadiums, and a hospital in Zambia in investment projects worth six billion dollars.

Outside of Africa and the post-Soviet space, it is not Sri Lanka but Pakistan that has seen the most rapid influx of Chinese investment in recent years. In Sri Lanka, Chinese loans amount to a mere five billion dollars, or just ten percent of the total liabilities of the economically collapsed state, where corruption and mismanagement culminated in absurd investment projects that contributed to the disastrous aggravation of the current crisis.[10] $62 billion flowed from the coffers of the Belt and Road Initiative went to Pakistan, which has always been of high strategic importance to Beijing as a counterweight to China’s geopolitical rival India.

Beijing’s investment activities have ranged from infrastructure projects, with funds flowing into energy generation and transportation, to the strategic expansion of the port of Gwadar, to the establishment of manufacturing facilities in Pakistan to take advantage of the country’s very low labor costs.[11] This development of “extended workbenches” in Pakistan, to which labor-intensive manufacturing activities were outsourced, sometimes took place not only in the economic centers of Pakistan, but also in the unstable periphery, such as the province of Chaibar Pachtunchwa, which was plagued by Islamism and ‘tribal struggles.’

Hopes for capitalist modernization were dashed by 2020 at the latest, as some of China’s investment projects were put on hold after the outbreak of the pandemic and the ensuing economic crisis, while the crisis quickly made Pakistan’s debt burden unsustainable. Work on the Gwadar port project, for example, is said to have largely stopped.[12] In order to avoid bankruptcy as a result of the unfolding downward economic spiral,[13] in which inflation, rising borrowing costs and collapsing government revenues rapidly eroded foreign exchange reserves, Islamabad had to resort to emergency loans from both the IMF and China – by July 2022, Pakistan’s foreign exchange reserves were only enough to cover the cost of the country’s imports for two months. Chinese banks had been extending “a number” of loans to the country on an ongoing basis, most recently to the tune of $2.3 billion in mid-2022, to shore up its dwindling “supply of hard currency.” The IMF, meanwhile, has pledged more than seven billion in crisis loans to Islamabad.

At least until early August, the impoverished country, plagued by Islamism and state erosion, appeared to have averted acute national bankruptcy after reaching a new loan agreement with the IMF, accompanied by the usual harsh austerity measures, such as higher taxes and cuts in energy subsidies.[14] But then came the historically unprecedented floods, the frequency of which, like other extreme weather events, is increasing because of the climate crisis.[15] About one-third of Pakistan’s land area was inundated, and more than 33 million people were affected by the floods. The country now faces a hunger crisis and rising extremism,[16] while the economy is on the verge of collapse.[17] Initial estimates by Pakistani government ministers put the cost of the floods at around ten billion dollars.[18]

The increasingly manifest interaction of a debt crisis and the climate crisis,[19] of internal and external limits to capitalism’s ability to develop, devastated entire regions of Pakistan in August that were already suffering from a severe economic crisis, devastation that was largely ignored in the West. This is the global crisis environment of a late capitalist world system that is collapsing because of its contradictions, in which China has launched its grand attempt to build its own system of alliances through an ambitious investment program in order to emerge as the new hegemon. Mounting global debt and the escalating climate crisis are throwing a wrench into Beijing’s imperial calculus, which sought to emulate the rise of the United States after World War II.[20]

Washington’s hegemonic rise after the end of the Second World War, however, took place against the backdrop of the long Fordist boom period of the 1950s and 60s, the “economic miracle,” as it is idealized in Germany. Mass motorization and the total penetration of all areas of post-war societies by the logic of valorization, heralded by the total mobilization of the war economies,[21] made it possible to utilize gigantic masses of labor in the labor-intensive accumulation process for almost two decades. This Fordist regime of accumulation, with the automobile industry as its leading sector, formed the economic basis of US hegemony until it was phased out in the 1970s,[22] only to be replaced under neoliberalism by the financialization of capitalism – in effect, the increasing global accumulation of deficits leading to ever new financial bubbles and debt crises.

In the “Cold War,” the USA was able to emerge as the unchallenged and accepted leading power of the “West,” the hegemon, not least because the prolonged economic boom enabled Washington to grant its allies room for economic development – which Japan and West Germany also made ample use of in the course of the “economic miracle,” soon surpassing US industry in terms of quality. The rapidly rising tide of Fordism lifted all boats. As long as capital was able to expand into new markets (cars, “white goods,” consumer electronics, etc.) that had only emerged during Fordism, the competition between the “economic locations” remained in the background – even in the face of the “clash of systems.”

The Impossibility of a New Hegemonic System in The Crisis of Capitalism

China, on the other hand, has to operate in a crisis-ridden world system in which the extremely high global productivity level of commodity-producing industry has led to a systemic crisis of overproduction, resulting in constantly rising mountains of debt, since the hyper-productive system is effectively running on credit. Moreover, the lack of a new leading sector and regime of accumulation leads to an increasing export fixation of economic policies and corresponding trade wars, in which the core capitalist countries try to support their economies with export surpluses – at the expense of the competition, which often reacts with protectionist measures. The pursuit of export surpluses, perfected above all by the FRG within the framework of this beggar-thy-neighbor policy, with which the systemic crisis of overproduction is to be “exported,” is thus a source of permanent inter-state tensions between the “economic locations” threatened with decline.

And these are precisely the reasons for the almost insurmountable obstacles that stand in the way of the construction of a hegemonic system in the current world crisis of capital. Hegemony, i.e. the leading position accepted or tolerated by the subordinate powers of a power system, is now only conceivable at the price of credit financing, since there is no economic basis for it in the form of a new regime of accumulation. According to the FT, China’s foreign exchange reserves have already shrunk from four trillion dollars to three trillion dollars, partly due to the massive investments in the “New Silk Road,” and Beijing’s lending abroad has also collapsed massively. While the People’s Republic made more than 55 loans worth more than a billion dollars each in 2015, it made less than ten in 2021. But the drying up of Beijing’s generous financial flows, which used to stimulate the economies of Africa and Asia, is exacerbating the current crisis on the periphery of the world system. China can thus lend and gain influence in the short term, over a number of years, but because of the high level of global productivity, it cannot create a new leading sector that would utilize a sufficient mass of waged labor in the production of commodities.

And China itself, as part of the world system, is affected by the world crisis of capital. This is particularly evident in its tendencies towards a beggar-thy-neighbor policy, since the state-capitalist People’s Republic is also striving to achieve the highest possible export surpluses at the expense of its competitors, which counteracts the formation of hegemony. Due to the simmering debt crisis[23] in China’s anemic real estate sector[24] and the pandemic-induced slowdown in the domestic economy, export surpluses are becoming increasingly important in terms of economic policy, even for Beijing. Last June alone, China ran a trade surplus of $98 billion – a new record![25]

It is not only in the US that China’s surpluses are reflected in corresponding deficits. The group of ASEAN countries in China’s immediate Southeast Asian neighborhood ran a $17 billion trade deficit with China in the same period. Instead of building a hegemonic system in which China’s neighbors also benefit economically from the rise of the People’s Republic, a fierce battle for market share is now underway, Reuters noted, as we find ourselves in a world where “absolute demand” is falling and there will be “brutal price wars” for shares of the “shrinking pie.”

China’s Changing Position in The World Economy

The “workshop of the world” thus seems to be returning to the origins of its meteoric rise, which in its initial phase was driven by an extreme export orientation, by the achievement of gigantic export surpluses. Until the global financial crisis of 2007/2008, triggered by the bursting of the transatlantic real estate bubble in the US and the EU, the export industry functioned as China’s main economic engine. The extreme Chinese trade surpluses vis-à-vis the “deficit economies” of the USA and parts of Europe, which were running on credit, not only drove the export industrialization and modernization of the People’s Republic, but also went hand in hand with the export of debt. The Federal Republic of Germany, the multiple “export surplus world champion,” also engaged in the practice of exporting debt until recently.[26]

However, the Chinese accumulation model changed fundamentally with the crisis surge of 2008, the bursting of the housing bubble in the US and Europe, which was countered globally with enormous economic stimulus measures. In fact, the massive government demand stimulus that Beijing unleashed through several economic stimulus packages made the Chinese economy the global economic locomotive in 2009.[27] But the Chinese government’s gigantic support measures in response to the 2008 crisis also provided the initial spark for a transformation of China’s economic dynamics: exports lost weight, and the credit-financed construction industry, infrastructure, and the real estate sector became the central drivers of economic growth – culminating in today’s absurdly high 29 percent share of GDP.[28] China’s export-driven modernization, with its export of debt that at times made the US the People’s Republic’s largest debtor, thus turned into a state-fueled deficit economy – one that has long since escaped state control.

China’s Real Estate Bubble

The Chinese deficit economy, which created a gigantic real estate bubble, experienced its first major crisis in the summer of 2021, when one of China’s largest real estate companies, Evergrande, was on the verge of bankruptcy. The group, which was saved from bankruptcy by the Chinese government in early 2022 through a “restructuring program,”[29] has accumulated $300 billion in debt, $20 billion of which is owed to foreign investors. Domestically, more than 1.5 million real estate buyers are waiting for the completion of homes already planned and paid for at 500 construction sites. Meanwhile, the group’s creditors are fighting over who will bear the inevitable losses.[30]

How big is the real estate and debt bubble created by Chinese state capitalism– and can it stand up to comparison with the housing speculation in the US in 2008? In a study of this speculative dynamic, US economist Kenneth Rogoff concluded that China’s construction and real estate sectors directly and indirectly generate about 29 percent of China’s gross domestic product (GDP).[31] This means that the bubble in the state-capitalist “People’s Republic” need not fear comparison with the West, not only in absolute terms, but also in relation to its economic output. In Spain, at the height of the transatlantic housing bubble in 2006, the real estate sector accounted for about 28 percent of GDP, while in Ireland it was about 22 percent.

The situation is even more dramatic when the price level in the main housing markets of the People’s Republic is compared to the wage level. In Beijing, Shanghai and Shenzhen, more than 40 average annual salaries are needed to buy a property, compared to 22 in London, one of the most expensive cities in the West, and ‘only’ 12 in New York. Rogoff spoke of the “breath-taking” and, for large economies, “unprecedented” extent to which China’s financial market-driven state capitalism drove its housing bubble. This is also evident from the ratio of living space to population, which, according to Rogoff, has long since reached the level of France and Great Britain in the People’s Republic – and even exceeds that of Spain. If the construction fever were really about providing people with housing, China’s real estate market would have been saturated long ago.

Thus, the Evergrande debacle is indeed only the proverbial tip of the iceberg in an authoritarian Chinese state capitalism that shares a fundamental crisis tendency with its Western competitors: it runs on credit. In 2020, all of China’s accumulated liabilities (government, private sector, financial sphere) amounted to about 317 percent of the People’s Republic’s GDP,[32] which was only slightly behind the global average of 356 percent.[33] Despite declarations by the leadership in Beijing and intensified efforts to curb lending, China’s mountain of debt has been growing faster than the GDP of the “workshop of the world” since 2008 – as is the case in many of China’s debtor countries.

But all of Beijing’s official figures should be taken with a grain of salt, as much is simply swept under the rug in China. China’s local governments are also said to be saddled with a gigantic mountain of debt, which Goldman Sachs estimates could be as high as $8.2 trillion – the debt has been outsourced to “financing vehicles,”[34] so as not to show up in the statistics.[35] That would be about 52 percent of the People’s Republic’s GDP. Incidentally, in the course of the real estate boom, the over-indebted municipalities have tapped into an important source of financing: they sell land to real estate companies, which build their speculative properties on it. The officially unrecorded mountain of debt that China’s shadow banks are said to have accumulated is estimated at $13 trillion.[36]

Multiple Crises as An Expression of The Crisis of Global Capitalism

As a result, China’s leaders are facing not only an external but also an internal debt crisis that is not only strikingly similar to the real estate bubble that burst in the West in 2008, but also reminiscent of the distortions in many of the People’s Republic’s debtor states. So far, Beijing has been able to delay the bursting of this bubble through a series of interventions and financial injections, but at some point the devaluation process will inevitably have to take place – especially as the political fallout from China’s internal debt bubble grows: In Zhengzhou, the capital of the central Chinese province of Henan, for example, angry bank customers recently clashed with police as they protested the freezing of their accounts after local banks were embroiled in a scandal and collapsed.[37] The Chinese Communist Party has also had to deal with a mortgage strike by angry home buyers who have stopped paying their mortgages en masse while waiting for their homes to be completed.[38]

Finally, the climate crisis is not stopping at the People’s Republic, which, with its global investment program, is trying to export its own fossil-fuel driven modernization model, which has made China the world’s largest emitter of greenhouse gases, to the periphery and semi-periphery of the capitalist world system, since the new “renewable” industries that are supposed to enable the ecological transformation of capitalism are too capital-intensive and utilize too few workers.[39] Not only Pakistan, which is indebted to China, but also the People’s Republic itself suffered historically unprecedented weather this summer with a combination of prolonged drought and an extreme heat wave[40] that put pressure on energy supplies, economic activity and food security.[41] The sweltering heat literally shut down production, not only diminishing China’s growth prospects, but also threatening to put a strain global supply chains.[42]

The struggle against climate-induced societal collapse that emerged in this year’s summer of horrors, not only in China but also in the EU and the US, is thus likely to make the very idea of global hegemony seem absurd in the years ahead. With the crisis-induced increase in inter-state tensions and struggles, which escalated into a neo-imperialist war in Ukraine, the rotten late-capitalist state behemoths will be more concerned in the coming years with passing on the consequences of the crisis to their competitors in order to delay their own collapse.

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[1] https://www.ft.com/content/ccbe2b80-0c3e-4d58-a182-8728b443df9a

[2] https://www.nature.com/articles/s41599-018-0077-9

[3] https://www.dw.com/de/g%C3%B6rlach-global-die-vielzahl-der-krisen-wird-f%C3%BCr-china-zum-problem/a-62618116

[4] https://www.diepresse.com/6164054/iwf-draengt-china-zu-steuererleichterungen-fuer-entwicklungslaender

[5] https://www.ft.com/content/f27a543b-7678-4130-9c05-db0492d9c240

[6] https://cepr.org/voxeu/columns/chinas-overseas-lending-and-war-ukraine

[7] https://www.merkur.de/politik/china-afrika-schulden-investitionen-eu-global-gateway-kenia-wahlkampf-zr-91714454.html

[8] https://www.voanews.com/a/china-s-loans-to-sub-saharan-africa-outweigh-those-of-western-nations-/6436250.html

[9] https://www.ft.com/content/ccbe2b80-0c3e-4d58-a182-8728b443df9a

[10] https://timesofindia.indiatimes.com/world/south-asia/sri-lanka-opens-china-funded-white-elephant-tower-to-tourists/articleshow/94245383.cms

[11] https://www.dw.com/en/china-pakistan-investment-ties/a-58734281

[12] https://www.ft.com/content/ccbe2b80-0c3e-4d58-a182-8728b443df9a

[13] https://foreignpolicy.com/2022/08/05/pakistan-sovereign-debt-imf-inflation/

[14] https://www.cnbc.com/2022/08/10/pakistans-finance-minister-says-country-headed-in-right-direction.html

[15] https://www.nytimes.com/2022/09/14/world/asia/pakistan-floods.html

[16] https://www.rescue.org/press-release/pakistan-floods-will-devastate-economy-likely-leading-widespread-hunger-and-violence

[17] https://www.aljazeera.com/economy/2022/9/7/after-record-floods-now-pakistan-has-to-worry-about-economy

[18] https://www.bbc.com/news/business-62719659

[19] https://www.xn--untergrund-blttle-2qb.ch/wirtschaft/schuldenberge-im-klimawandel-7112.html

[20] https://www.xn--untergrund-blttle-2qb.ch/politik/theorie/krise-krieg-ozeanien-eurasien-7070.html

[21] Robert Kurz, “Freie Fahrt ins Krisenchaos: Aufstieg und Grenzen des automobilen Kapitalismus” in exit! Krise und Kritik der Warengesellschaft, no 17, 2020, 23-44.

[22] https://www.untergrund-blättle.ch/wirtschaft/theorie/stagflation-inflationsrate-6794.html

[23] https://www.konicz.info/2021/11/27/einstuerzende-neubauten/

[24] https://www.faz.net/aktuell/finanzen/umfrage-schwache-prognosen-fuer-chinas-immobilienmarkt-18054854.html

[25] https://www.reuters.com/breakingviews/chinas-economy-could-beggar-its-neighbours-2022-07-15/

[26] https://www.konicz.info/2022/07/26/schluss-mit-ueberschuss/

[27] https://www.zeit.de/online/2008/46/boerse-tokio-konjunkturprogramm-china

[28] https://www.cnbc.com/2021/11/09/chinas-property-market-debt-an-issue-for-the-economy-george-magnus.html

[29] https://www.faz.net/aktuell/finanzen/staat-eilt-krisenkonzern-china-evergrande-zu-hilfe-17748055.html

[30] https://www.faz.net/aktuell/finanzen/glaeubiger-von-evergrande-lehnen-vorschlag-fuer-zahlungsaufschub-ab-18164421.html

[31] https://cepr.org/voxeu/columns/can-chinas-outsized-real-estate-sector-amplify-delta-induced-slowdown

[32] https://www.chinabankingnews.com/2020/05/20/chinas-total-domestic-debt-hits-317-of-gdp-for-record-quarterly-increase-iff/

[33] https://www.axios.com/2021/02/18/global-debt-gdp

[34] LGFV: local government financing vehicles. Financing companies established for the purpose of financing specific infrastructure projects. Their liabilities are traded on the financial markets, but do not appear in the statistics as government debt.

[35] https://www.scmp.com/economy/china-economy/article/3150556/china-hidden-local-government-debt-rises-over-half-gdp-us82

[36] https://asia.nikkei.com/Spotlight/Caixin/China-s-13tn-shadow-banking-sector-gets-clearer-definition

[37] https://www.fr.de/politik/china-protest-zhengzhou-demonstration-banken-xi-jinping-henan-zr-91663184.html

[38] https://www.handelsblatt.com/finanzen/immobilien/immobilien-wer-hat-mein-geld-immobilienkaeufer-in-china-streiken-die-politik-ist-alarmiert/28533716.html

[39] https://www.konicz.info/2019/07/05/kann-ein-green-new-deal-den-klimawandel-aufhalten/

[40] https://multimedia.scmp.com/infographics/news/china/article/3190803/china-drought/index.html

[41] https://www.voanews.com/a/china-s-drought-threatens-nation-s-energy-food-and-economic-security-/6725241.html

[42] https://www.cnbc.com/2022/08/19/chinas-heatwave-could-have-knock-on-effect-on-its-economy-economist-.html

Originally published on oekumenisches-netz.de in 10/2022