Goodbye to Taching

CHINA’S THIRST FOR OIL

Geopolitical equations are changing with China's ever increasing thirst for oil, part of its quest for energy security. And, with the changes in class outlook to Mao's "On the Ten Major Relationships" Taching is no more a model to the ruling elites in Beijing with their increasing hunger for affluence.
A few news reports show the country's search for oil from corner to corner of this round earth: Brazil's president Lula visited China for strategic partnership, the Chinese National Petroleum Company (CNPC) opened Iraq's Al-Ahdab oil field in last March, China and Kuwait signed five agreements on areas including energy and finance in last May, an oil pipeline linking Russia's far east to China's northeast is set to start operation by the end of 2010, China and Russia signed seven energy cooperation agreements in February that included the pipeline, a long-term crude oil trading deal and a financing plan between China Development Bank and the Russia Oil Pipeline Transport Company, CNPC signed agreements with Costa Rica to upgrade Costa Rica's oil refinery and to conduct a feasibility study on a new refinery in November, 2008, CNPC to lend US $ 5 billion to the Kazakh state oil company for the joint purchase of a local major oil developer, Brazil agreed to supply crude oil to Chinese refineries along with an agreement for a US $ 10 billion loan from the China Development Bank, China agreed with Russia on a US $ 25 billion loan in exchange of 300 million tones of oil piped from Russia between 2011 and 2030, CNPC is constructing two oil refineries in Chad and Niger, the company agreed to buy Canada's Verenex Energy Inc. for US $ 390 million in its bid to boost its business in Africa, the United Arab Emirates (UAE) and CNPC concluded an agreement to build a $3.29 billion oil pipeline in the UAE, China signed contracts with Qatar and Yemen for long-term oil imports, a $1.76 billion buy-back agreement to develop an oil field in Iran was signed by CNPC, Uzbekistan and CNPC made a deal on joint exploration of an oilfield, a natural gas pipeline extending from Central Asia to China, passing through Uzbekistan and Kazakhstan, is being constructed. The list is much longer. CNPC had invested, by the end of 2007, in 73 oil and gas projects in 28 countries. Angola, Canada, Indonesia, the Republic of Congo, Saudi Arabia, Sudan, Venezuela, and many other countries are in partnership with China. Africa and Latin America are its major areas of energy deals. Sri Lanka is not away from the oil thirst from the Eastern power. B Raman, a former additional secretary, govt. of India, said in a paper titled "China's Oil Quest Across India's Cauvery Basin": "China's oil quest is set to reach the Mannar area of Sri Lanka adjoining the likely oil / gas bearing Cauvery basin of South India." In this paper for the South Asia Analysis Group he mentioned "Chinese energy foothold in this key area..." China's attempt to buy Unocal is an old story. James Woolsey, former director, CIA, termed the attempt as "a threat to US national security."
China, once an importer of oil, turned a net exporter in its Mao-led phase for self-reliance. Taching, China's most famous oilfield and a symbol of its
revolutionary reconstruction, and a few other oil fields eliminated China's dependence on foreign oil.
In 1976 China ranked tenth in the world with an oil output of 84.19 million tons. Before 1949, the victory of the revolution Mao Tse-tung led, China produced little oil. Then, the production increased. But, with the contradictions in a post-revolutionary society and transfers in class dominance in the society changes in relationships and priorities came as time treads the trade routes and transgressions are there by capital. The dominating ruling segments in Beijing need more and more with their growing affluent life style, dominance draws in dreams for deeper and further dominance, oil turns the lifeline, Myanmar and Sudan turn allies in the global game for grabbing oil. Major players in the global energy market were the United States, EU, and Japan. China, along with India, has now joined them as its economy boomed, an average annual 9 percent growth over the last two decades. The country is now the second largest importer of oil, after the US. It turned a net importer of oil in 1993. According to the International Energy Outlook 1999 total primary energy consumption in China increased from less than 18 quadrillion Btu in 1980 to 37.1 quadrillion in 1996. It was projected to reach 98.3 quadrillion Btu by 2020, a level near to that of the projected US demand. The International Energy Agency (IAE) projected, obviously before ‘The Great Financial Crisis’, China's net oil imports would surge to 13.1 million barrels per day (mbd) in 2030 from 3.5 mbd in 2006. About half of its oil imports are still from the Middle East, the identity of a region imposed by the colonial rulers, a region volatile. So the economy compels China to diversify its sources of oil, the life blood for growth. Here enters Africa, with only 9 percent of global proven oil reserves, Central Asia and Latin America in the oil map of Beijing. The Middle East holds 62 percent. But oil industry analysts hope that Africa holds significant undiscovered reserves. Still the US extracts much oil from Africa, a dominant presence there, 33 percent of Africa's 2006 exports while China's share was only 9 percent. China's biggest suppliers in Africa include Angola, the Republic of Congo, Equatorial Guinea and Sudan. Chad, Nigeria, Algeria and Gabon are also its suppliers. A June, 2008 backgrounder, titled "China, Africa, and Oil", of the Council on Foreign Relations said: "China is intent on getting the resources needed to sustain its rapid growth, and is taking its quest to lock down sources of oil and other necessary raw materials across the globe." There is widening gap between China's oil and gas supplies and demands.
China is now Africa's second highest trading partner. The US is in front of it while former colonial masters, Britain and France, fall behind it. China courts governments with debt forgiveness, trade deals, aid package, construction of railway lines, roads, dams, sends physicians, hosts thousands of African workers and students, cancelled $ 10 billion in bilateral debt, and pays bribes, as the Transparency International claimed, a corps perdu, desperate, attempt.
China does not like the US way of raising human rights issues claiming there is no universal standard of human rights. The US supports countries like Pakistan, Saudi Arabia and Egypt. China sells arms to Sudan. Chinese military trainers are in many African countries. Strategic interests are important to both the countries. The US and China broadly stand on the same plane, one goes for maintaining its empire while the other tries to establish it. An article in Foreign Affairs by David
Zweig and Bi Jianhai observed that China has successfully adapted "its foreign policy to its domestic". Swedish foreign ministry and senior researcher at the Defense Research Agency, Sweden, writes: "It seems that the US is genuinely concerned about the long-term consequences of competition with the two Asian giants. America's growing unease towards the Asian powers was reflected in the report titled 'Mapping the Global Future' published in 2005 by the US National Intelligence Council, a government think-tank which advises the CIA and senior US policy makers. The report states that 'the likely emergence of China and India as new major global players ... will transform the geopolitical landscape.' It adds that 'in the same way that commentators refer to the 1900s as the 'American Century,' the early 21st century may be seen as the time when some in the developing world led by India and China come into their own ... (and) will have substantial impacts on geopolitical relations."
Kiesow, in his article "Quest for Oil and Geostrategic Thinking" in The China And Eurasia Forum Quarterly, Nov., 2005, refers to Hitler's plan to attack the erstwhile Soviet Union in the summer of 1941 and writes: the plan "had as one of the two most important parts a push through southern Ukraine in order to get secure access to the oil fields in Baku. To secure the supply of oil for the German forces and to cut off the Soviet supply seems to have been an important reason for his opening of a second front." John K Fairbank and others in their book East Asia : Tradition and Transformation refers to the role oil played behind the Japanese attack on the Pearl Harbour. In September 1941 Japanese leaders decided to go to war with the United States if an agreement regarding oil was not reached by early October. Since American oil embargo against Japan, which had been introduced in July, was still not lifted in October, plans for war were made and on December 7 the Japanese attacked Pearl Harbour. Kiesow says: "The more dangerous side of the problem is the tendency towards geostrategic thinking that has appeared so conspicuously in the US, China and to a certain extent also in Japan, India and Europe." A RAND Corporation book, China's Quest for Energy Security by Erica Strecker Downs, said in its concluding part that the leaders in Beijing perceive the US as the primary threat to energy security and they are largely defensive. Beijing's policy is designed to minimize the vulnerability of China's oil supply to the US power. They try to avoid US control of sea lanes. So the emphasis to the Central Asian oil pipelines. At the same time China tries to strengthen its economic, political and military ties in the Middle East where the US is still the dominant military power. The aim is to secure access to oil from that region.
Other actors are involved in this geostrategic "game." The actors' functions are influenced by many other factors. Stakes and relations determine paces of actions of all these actors. Many of these carry characteristics of duality, sometimes under pulls and pushes of contradictory considerations imposing constraints. Variances in regions multiply these problems. Class character of the ruling elites in respective countries involved has a fundamental role to play and these class characters grow up out of the ruling elites' types of relations with production, out of the character of the involved capital. Other than these aspects there are organizations, emerging and international in type, Shanghai Cooperation Organization, Bank of the South, etc., that have a space to play, but also
influenced by the respective dominating capitals' characters that cannot overcome own needs and inherent historical limitations. A few multinational organizations are either expanding a la NATO or losing hold of grip like the IMF in Latin America. This complex matrix of reality and relations should not be missed while considering the changing geostrategic reality related to the increasing demand for fuel by bigger economies.
The present financial crisis in the world system is a basic aspect that will have influence on the geostrategic issues. None of the predictions made/ assessments done before ‘The Great Financial Crisis’ took into considerations the possibility of bursting out of the speculation bubble in the financialized global system and the impact this could have on the involved actors/capitals/organizations, state and non-state.
The RAND's book says: China's international oil and gas investments are unlikely to bring China the energy security it desires. China is likely to remain on US protection of the sea lanes that bring the country most of its energy imports.
This hunger for nonrenewable fuel, this "mindless" competition for accumulation will, first of all, have environmental impact affecting the people in related countries / regions, environmentally and economically defenseless, while this competition with all the seeds of taking a fierce face have the potential power for affecting peoples' common endeavour for a decent, prosperous and happy life. Defacing the planet is a near-certainty.
Newer equations will emerge with capitals forming and reforming newer alliances, giving up or trying to give up past allegiances and adopting bargaining positions, making friends, foes and the opposite as it is going for ages in the arena of geopolitics.
Despite the clouds accumulating over the horizon there are spaces and scopes for maneuver for "minor characters", smaller countries on the fringe, in this changing geopolitical drama. Exploring and exploiting the opportunities provided by moments of conflicts and competitions among the "main characters" will depend upon the maturity and farsightedness of the capitals involved in these economies on the margin. Whatever, happens with these capitals the peoples in these societies have possibilities for wider scope for exercising their democratic rights.

This article has published in Weekly Magazine Frontier, Autumn Number 2009

People power and end of one-party rule in Japan

There is no certainty that the DJP can materialise its election pledges, and shall not repeat the 11-month chapter of 1993-94, when the coalition that ousted the LDP fell apart. But, whatever happens, the election result brings in a possibility for change and for creating a space, a space both for the Japanese people, and for other countries in the Southeast Asia and South Asia, writes Farooque Chowdhury

THE world’s second largest economy has got rid of one-party rule that went on for more than half a century. The people in Japan, as the winning leader Yukio Hatoyama said, ‘have shown the courage to take politics into their own hands. This has been a revolutionary election, a victory for the public.’ The regime change in Japan, a bourgeois-democratic one-party state and an important donor for Bangladesh, raises many questions and probable prospects within limitations.
The Liberal Democratic Party has been cast out by the voters, the traditionally apolitical electorate, while a landslide victory has been handed over to the Democratic Party of Japan. The DPJ has promised to reverse a generation-long economic decline, change the post-war paradigm, ease increasing social inequality by handing more money and social benefits directly to residents rather than to industry or other interest groups, strengthen the social safety net and raise the low birth-rate by giving families cash handouts of $270 per month per child, free secondary education, free treatment and delivery for expectant mothers and an allowance for children, funded by cutting government spending on unnecessary dams and roads. Japan’s population, now a problem related to pension, of 127.6 million peaked in 2006, and is expected to fall below 100 million by the middle of the century. The DPJ has proposed toll-free highways, income support for farmers, monthly allowances for job seekers in training, a higher minimum wage and tax cuts. A significant promise of the DJP is to fight the bureaucrats and to curb the power of bureaucracy. The party wants to put more MPs into junior jobs in the ministries and to bring into the cabinet the power to formulate policy, and to crack down on the practice known as amakudari, ‘descent from the heavens’ — retiring civil servants securing jobs in the industries that they supervised as government officials.
Hatoyama spoke of the end of the US-dominated globalisation and of the need to reorient Japan toward Asia. The DPJ’s election manifesto called for an ‘equal partnership’ with the US and a ‘reconsidering’ of the 50,000-strong US military presence in Japan. One change on the horizon, New York Times said, may be the renegotiation of a deal with Washington to relocate the US Marine Corps’ Futenma airfield, on the island of Okinawa. Many island residents want to evict the base altogether. The DJP that opposed the US-led war in Iraq has also said it might end the Japanese Navy’s refuelling of the US and allied warships in the Indian Ocean. Hatoyama has taken an outspoken stand against unfettered international capitalism, promising to abandon the country’s ‘worship’ of the US and to break away from decades of unquestioning support for the US foreign policy. ‘Japan now needs to make a clear shift from diplomacy that follows the US lead, to diplomacy based on multilateral cooperation,’ he said earlier this year. ‘We must view the Asia-Pacific region, where we have increasingly close ties with other countries, as the place where Japan will live as a nation.’ The White House, however, has expressed confidence that its alliance with Japan ‘will continue to flourish’. In recent interviews, Democratic leaders have insisted there will be no major changes in that relationship. ‘It is complete nonsense that a non-Liberal Democratic government will hurt US-Japan relations,’ said a Democratic lawmaker. The DPJ has signalled a desire to promote a European Union-style Asian community and common currency.
Japan, even during the LDP rule, took a number of steps that showed its desire to steer away from the US. Japan, Jon Halliday and Gavan McCormack tell in their book Japanese Imperialism Today, ‘was surprisingly swift to recognise Bangladesh’, and through this step ‘[i]t broke with its American ally for the first time’ while the hostility of Nixon and Kissinger to the newly independent Bangladesh was well-known. Similarly, Japan sent an official mission to Hanoi, recognised Mongolia, and allowed a Diet delegation to visit North Korea. Many other steps in the areas of trade and ‘aid’ were taken by Tokyo during the Cold War days that betrayed its desire to have an independent stand. About 50 years ago, Jon and Gavan mention, ‘Mao Tse-tung is reported to have told a delegation of visiting Japanese Socialists that Japan then belonged to one of the world’s two intermediate zones. But Japanese monopoly capital, he noted, “is discontented with the United States, and some of its representatives are openly rising against the United States. Though Japanese monopoly capital now is dependent on the United States, the time will come when it too will shake of the American yoke”.’ Okinawa was, in effect, a US colony since 1945, and its experience of the US is not a happy one. This has been reflected a number of times, in a number of incidents, by the people of Japan over the last years. To the Japanese people the US big brothership is not welcome. It is impossible for them to forget Hiroshima-Nagasaki. The election victory of the DJP reflects on the one hand the Japanese people’s frustration with the LDP and its policies, and desire for change and, on the other, the desire of a section of the Japanese capital.
The LDP, which held or shared power for 62 of the past 63 years, led Japan from bombed-out devastation to economic powerhouse, obviously with the help of a US general, while keeping it firmly in Washington’s camp, has been wiped out from the political map, at least for the time being, by the voters. About 70 per cent of the voters, an unprecedented 14 million, cast ballots, according to NHK, the highest turnout in nearly two decades. The DPJ, a broad coalition of former socialists and Liberal Democrat defectors, has won 308 of 480 seats, a 175 per cent increase, in the powerful lower house. The DJP, which already controls the upper house with two allies, held just 112 seats in the lower house before the Diet was dissolved in July. The LDP with 119 seats saw the humiliating termination of several generations of political career, including those of at least one former prime minister, Toshiki Kaifu, a former finance minister, Shoichi Nakagawa, who disgraced himself last February after appearing drunk at a press conference in Rome, his successor Kaoru Yosano, and of a number of most powerful and experienced LDP politicians. Most of them lost their seats to decades junior DPJ candidates with little experience. The only other time the LDP was out of power was in 1993-94 for less than 11 months.
The LDP, a once-invincible party, was organised by the defeated prime minister Aso’s grandfather, Shigeru Yoshida and his nemesis, Ichiro Hatoyama, grandfather of the present DJP leader Yukio Hatoyama. It was formed as a bulwark against the resurging socialist parties. 1948 carried the prospects of communist revolution in Japan and China. Mao Tse-tung’s victory and the Korean War saw Japan’s position reinforced in the west camp under the LDP. ‘Oligopolies—in the form of the former zaibatsu conglomerates—were supported,’ The Economist wrote in its July 16, 2009 issue, ‘even if they had been implicated in Japanese aggression. A man accused of war crimes became a notable post-war prime minister and Yakuza gang bosses consorted with top politicians and helped put down left-wing protests. The political and bureaucratic system was solidly made and has lasted, like so many things in Japan. But its origins, and its effects on Japan, were ultimately rotten. Outside the radical left, most Japanese were bought off by a social contract in which politicians, bureaucrats and big business arranged the country’s economic affairs. Businesses won preferential finance and in return offered “salarymen” job guarantees and the dream of a middle-class life. But the contract could be honoured only with high rates of growth, and the oil shocks of the early 1970s put paid to these. Perhaps this might have been the end of the LDP, but political competition had been so stifled that there was nothing to take the party’s place. Instead, the crisis of the 1970s led to a steep rise in corruption…. Corruption cemented local baronies and for a good while won votes. Even today the late Kakuei Tanaka, an astonishingly corrupt prime minister, is more often praised than cursed. A 19th-century Russian said that Europe’s democracies were moderated by corruption. Japan had corruption moderated by democracy…. Companies could no longer keep lifetime promises to workers yet the government failed to take over social-welfare obligations….The party [LDP] was the keystone of a political system that has long been crumbling.’
The economy of Japan, a bubble in real terms but a miracle to many of the mainstream economists in Bangladesh, collapsed in the early 1990s, and the late-1990s saw the beginning of Japan’s struggle with deflation. With soaring rates of poverty and inequality the 1990s is considered as a ‘lost decade’. As Japan struggles with its deepest recession since the WWII the LDP has been blamed for the decline of this former economic superpower, its growing uncertain future, and increasing isolation in the Asia-Pacific region. The unemployment rate hit a record 5.7 per cent in July. Many analysts assume that the official number massively understates the real level of joblessness as the official method does not count persons not actually looking for work. Thus, the method may disguise a figure twice the official size. Many economists have warned of Japan’s huge hidden jobless problem and of the likelihood that the extent of the crisis may emerge over coming months and years that could reach 12.2 per cent as companies shed their giant armies of surplus labour. The July unemployment numbers and the latest consumer prices index, made public only days after official GDP numbers showed Japan slowly getting out of technical recession, paint an especially dismal picture of the one of the world’s economic giants. Toyota announced the plan to permanently close one of its domestic car production lines. With stagnating income households are cutting down spending. Heavily exposed to exports and having far too much capacity, for example, eight mobile-phone makers, Japan is suffering as overseas demand has slowed down. Its economy, according to some analysts, may contract by as much as 6 per cent this year, around twice the rate of the US. A plan approved in May allocated $21 billion to prop up the troubled companies that include Japan Airlines, electronics firm Pioneer, and chipmaker Elipda. The recent signs of recovery are hollow: after a period of de-stocking, Economist.com said, inventories fell so low that an upswing in production was inevitable. It was widely forecast to happen as far back as in January. A portion of the growth is due to the government’s stimulus measures. Money has been pumped into the economy through big public-works projects. The economic stimulus packages, however, cannot boost an economy for ever in a country with a ratio of government debt to GDP about 200 per cent, the largest of any rich country.
There is no certainty that the DJP can materialise its election pledges, and shall not repeat the 11-month chapter of 1993-94, when the coalition that ousted the LDP fell apart. But, whatever happens, the election result brings in a possibility for change and for creating a space, a space both for the Japanese people, and for other countries in the Southeast Asia and South Asia. Bangladesh’s trading capital can try to have more favourable and ‘sympathetic’ trade terms, government can try for having ‘easier’ terms for ‘aid’, and democratic forces can call Tokyo to facilitate democratic forces in other countries by withholding Japanese aid to autocratic rulers who are stifling voices of democracy. Steps by Tokyo will show the Japanese capital’s capacity to attain independence from its post-WWII ally.
Farooque Chowdhury mainly translates. One of his edited books is Micro Credit, Myth Manufactured.

This editorial was published at Bangladeshi Daily Newspaper "NEWAGE"

http://www.newagebd.com/2009/sep/05/edit.html

Financial Crisis and Imperialism

A conversation with John Bellamy Foster, editor of the US-based socialist magazine Monthly Review, professor of sociology at the University of Oregon and co-author (with Fred Magdoff) of The Great Financial Crisis: Causes and Consequences (Monthly Review Press, 2009). He was interviewed by Farooque Chowdhury for the Bangladesh daily newspaper New Age. It was published on September 8, 2009.

* * *

Farooque Chowdhury: What is the likely impact of the present financial crisis on geopolitics, especially if the crisis is considered in the context of the energy crisis, including the peak oil issue, the food crisis, the environmental crisis and the declining US dollar? Will the world experience war(s) as an effort to survive? Will monopoly-finance capital attempt to create another bubble, as capital is gripped with contradictions within and without?

John Bellamy Foster: The ``Great Financial Crisis'' and the ``Great Recession'' that followed close upon it has uncovered the depth of the contradictions facing capitalism in this phase, labelled ``monopoly-finance capital''. Specifically, the overall crisis has revealed that capitalism, at its vital core, is caught in a stagnation-financialisation trap with no visible way out.

The geopolitical implications of course are vast. Not only is capitalism weakening in many ways at the centre but US hegemony is also compromised. The US dollar at first strengthened in this crisis, but the long-term implications for the dollar are negative. On top of the worst world economic downturn since the Great Depression, we are also facing, as you indicate, the worst environmental threat in history (indeed what might be viewed as the ultimate environmental threat, with the destabilising of the climate), the rapid growth of world hunger and the prospect of peak oil.

Inequality in the world (both between rich and poor countries and within states) is increasing. The occupation in Iraq continues, while the United States under the new Barack Obama administration has expanded the war in Afghanistan, further destabilising Pakistan. Militarisation is growing across the planet. Washington is acquiring seven additional military bases in Colombia alone — aimed at the Bolivarian Alliance for the Peoples of Our America (ALBA) countries.

Behind all of this is an accumulation system that is increasingly geared to finance rather than production. There is no doubt that the policy priority at the centre at present is to restore the financial status quo ante — that is, to promote financialisation or a new series of financial bubbles. This, however, is a reflection of the corruption of the entire accumulation process of capital. We can speak today not only of the financialisation of capitalism, but also the financialisation of imperialism, in the sense that financial control of the periphery is the central economic issue, and the main lever of the centre, backed up in the end by military power. Samir Amin, in particular, saw this coming, emphasising how the centre continues to control the periphery financially, technologically and militarily, even in the face of some industrial advance in the South.

What apprehensions are there for the periphery of the world system due to the impact of the present crisis of monopoly-finance capital — other than ``receiving'' the brunt of war(s), if any?

Being the brunt of militarism, war and naked imperialism is of course bad enough. But there is no doubt that the current period of economic meltdown has brought other dangers. Today’s deep global crisis represents one of those historical events that serves to clarify developments that have been happening over a much longer period, so that it becomes possible to understand better where we are heading. Building on analysis constructed by Harry Magdoff and Paul Sweezy in Monthly Review, I observed a dozen years ago:

In general, monopolisation, imperialism, globalisation, and the shift from production to finance are ways in which capital seeks to break out of the circle of stagnation, though this simply ``shifts the contradictions to a broader sphere, and gives them a wider orbit'' (Marx, Capital, vol. 2)). Today the pace of this entire process is being set largely by the global expansion of financial capital. On a typical day world capital markets move $1.3 trillion or more, while the exports of the entire world add up to only $3 trillion per year. This means that in just over two days world capital markets move as much money as international trade accounts in an entire year. The increasing integration of global financial markets means that if and when the financial bubble bursts it could well encompass the entire world capitalist system — creating new and unprecedented dangers. Given the ``absurd overvaluations'' that characterise the modern financial system (in Japan prior to the 1990 stock market crash price-earnings ratios had risen to 100-1), MIT economist Lester Thurow argues, ``it is only a question of when the market falls and whether the fall is slow or rapid''. Moreover, in contrast to national economies, where the state is able to act as the lender of last resort and thus to stave off cascading defaults, the world system as a whole lacks any single entity capable of intervening on the necessary scale in the face of a sudden financial collapse….

The point here is not to predict such a financial collapse. Indeed, predictions should be avoided because it is the task of anti-systemic movements to alter the status quo in order to escape from this irrational world order. The point rather is that the system is inherently irrational and on an expanding scale. Globalisation in the face of stagnation only gives the crisis ``a wider orbit''. — (``The Age of Planetary Crisis'', Review of Radical Political Economics, Fall 1997).

There is no doubt that this general way of looking at things, rooted in a Marxist tradition long associated with Monthly Review, has proven to be correct in its broad outlines. Despite the strengthening of capitalist relations in a few ``emerging'’ economies, the system as a whole is in finding itself in a deeper and deeper crisis. I am convinced that we are somewhere in the middle — no longer at the beginning but also far from the end — of a long-term structural crisis of capitalism; one that threatens the continued existence of the accumulation system itself.

At the same time, of course, we are facing grave threats to the planet as we know it and to human civilisation, the very survival of which is in question if present trends continue. In this sense the current economic crisis may prove fortuitous in helping humanity to understand the need to abandon the destructive logic of capital.

History teaches us that the main resistance can be expected to come from the bottom rather from the top of the world system. The negative forces of stagnation and financialisation, emanating from monopoly-finance capital at the centre of the world economy, has a mixed message for the periphery. In the past the periphery has been made to bear the greater part of the adjustment in a crisis, but today that may not be possible. Successful resistance is now conceivable in the global South (as we are seeing today in areas as widely separated as Venezuela and Nepal).

Europe, broadly, watched transfixed while Wall Street was melting down. They talked twice. Then there was trans-Atlantic meeting of finance ministers in Washington DC producing a very brief and vague statement on ways to face the crisis together. Was the whole episode of trans-Atlantic discussions and consultations a show of unity meant to disguise an undercurrent of disunity within monopoly-finance capital?

You are right about the façade of unity. The European ruling elites did not act in unison — indeed they seemed incapable of doing so — nor did the United States and Europe work together. Yet, neoliberal globalisation had linked these economies over the years, in a process that hit at the remnants of the Keynesian social-democratic ``compromise'' within the core capitalist countries. And there was a broad understanding of how to combat the deflationary tendencies that suddenly appeared.

It is hardly surprising, therefore, that they all operated in a kind of indirect collusion (resembling oligopolistic corporations), with the United States as the financial-price leader, so to speak. The universal response was to bail out the financial system, with the object, it soon became apparent, of getting the financialisation process going again — since there was little hope for capital otherwise. In this sense, there were common dimensions to this crisis of monopoly-finance capital that took precedence, over and beyond the inter-imperialist rivalries that had been developing — without generating real cooperation among the leading states.

Nevertheless conflicts have emerged within Europe between countries with current account deficits, notably Britain, and countries with current account surpluses, notably Germany. The former have been accused of being profligate consumers, while the latter have been accused of neo-mercanitilism. (See the interesting analysis by Joseph Halevi, ``G20 and Inter-capitalist Conflicts'', MRzine, April 7, 2009.) The conflicts dividing capitalist states may become still more apparent in the recovery phase of the cycle, as countries feel greater latitude to chart their different courses, and as the strengthening of the dollar in early the crisis, increasingly gives way to its opposite.

What impact will the financial crisis have on the US body-politic?

That of course is the big question in the United States. There is no doubt that the economic crisis is so serious as potentially to threaten the stability of the ruling capitalist regime. So far there is no evidence of a serious rift at the top. Capital as a whole seems to be united in this crisis in bailing out the financial system and restoring what Henry Kaufman, one of the leading financial analysts in the United States, has called ``the financial-industrial complex''.

Talk of regulating finance was always rather empty and is receding now that the outward symptoms of the crisis fade. The US government, which in the present crisis has seen both Republican and Democratic administrations in power, has consistently emphasised salvaging the most powerful banks over all else, with more than $12 trillion in cash infusions, loans, guarantees, subsidies, etc., poured mainly into the financial sector by early 2009 — and more since then. In this respect, there was absolutely no difference in the response of the Bush and Obama administrations.

Things are more complex when the issue of the underlying population is raised. There is no doubt that the economic crisis, the rise in unemployment, the lost wages, the cutbacks in state support, have left much of the population in a state of hopelessness and growing rage. Based on the experiences of the 1930s one might think naturally enough that this would generate a working-class revolt on the left, including growing trade union organisations, strike waves, marches of the unemployed, street demonstrations, etc. The election of what is seen as a ``centre-left'' president might serve to feed such struggles.

There has been a lot of talk on the left of a new ``New Deal''. But the left is weak organisationally due to a long history of repression that goes back to the McCarthy era, and it is effectively invisible in society, due to the media propaganda system’s normal sorting process, which hides any genuine dissent. Hence, the right, with its money, power and media dominance, has been much more effective at visibly channelling the widespread alienation of workers than has the left.

This has been apparent in the right’s attacks on the healthcare changes promoted by the Obama administration, which is seen as strengthening the hand of an oppressive government. Liberals are dismayed by this but most socialists are not surprised in the least. The fact that the government has been bailing out the banks to the tune of trillions and letting them run off with bags of money and exorbitant bonuses while the population has been suffering only served to promote distrust of the state.

Dispatched to the town halls to calm the masses down, Larry Summers, Obama’s chief economic adviser, defended the corporate bonuses, disdainfully saying (to a population that was seeing its retirement pensions disappear, along with jobs, healthcare, etc.), ``We are a country of law. There are contracts'' (quoted by Robert Kuttner, ``Rage the Left Should Use'', Washington Post, August 19, 2009). Ironically, given the stranglehold of the two business parties (in reality two factions of a single party) on US politics, many in the working class are drawn to the Republican Party and its anti-government stance, since they see the state, not entirely without reason of course, as an oppressor — and it at least gives them something to attack.

Whether this will continue, we don’t know. The left as I said is in a weak position, but this is not inevitable or permanent. If a sense of crisis continues, explosive developments could occur weakening the system of political control. Socialists need to speak the truth as they see it, rather than forever trying to be social democrats or ``left liberals'', thereby obscuring and undermining their own message.

You and Fred Magdoff discussed in The Great Financial Crisis the US House of Representaives’ rejection of the bailout plan, when it was originally tabled in October 2008. Was the only reason behind that rejection, the one that you observed in your book (p 112): ``The outburst of grassroots anger and dissent'', i.e. a reflection of pressure from the bottom in the society? Or along with that outburst and dissent was there also an inability, in that moment of cascading financial meltdown, of all the fractions of the system to reach a consensus? And, is that failure to reach a consensus — if that was the case — a result of the blame game immediately after the voting (when the bailout plan was initially tabled) — directed at blaming Nancy Pelosi, the house speaker? Was that in itself a manifestation of an erosion in the dominating political culture; a failure of the system to hold together during the crisis of the dominating capital?

The ``failure to reach consensus'' should not entirely surprise us of course. Marx argued that the antagonism of the principal classes in English society constituted ``the framework of English society'' (New York Tribune, June 7, 1856). The same principle applies today, particularly in periods of deep crisis, during which the normal antagonism, often just beneath the surface, comes to the fore. When we talk of consensus in this context we are speaking of a hegemonic-consensual order designed to integrate the population as a whole into the ruling project, against their own interests.

There is no doubt that in the unexpected and severe financial meltdown that followed the collapse of Lehman Brothers in September 2008, the US ruling class had no thought at first of the exercise of hegemonic power. Faced with a full-fledged financial panic, there was simply one immediate objective: bailing out financial institutions, and corporate capitalism as a whole. When the secretary of US Treasury, Henry Paulson, proposed his bailout plan he was doing exactly what was required of him (and what Obama’s appointee to the same post, Timothy Geithner, continued with no essential change).

But the working population in the United States was outraged by this plan to bail out the banks — at a time when people everywhere were suffering the loss of their jobs and houses. The Republican congressional representatives (House Republicans) saw this as a grand opportunity in the context of an election that was bringing the Democrats to power, and in which they were afraid of losing their seats. They immediately catered to this grassroots sentiment, attacking the government — always the target of their criticisms — over the bailout plan. John McCain, who was running for president on the Republican ticket, was partly swept along by this, while Barack Obama, who, unlike McCain, had the support of all the big financial interests, backed the bailout wholeheartedly — if somewhat quietly given the public sentiment — thereby presenting himself as the responsible party.

Within days, naturally, the House Republicans had been brought back into line, and the normal hegemony of capital reasserted. But in the meantime, these actions had served to highlight to everyone throughout society the widespread outrage amongst the population. A few left democrats also opposed the bailout, but they were far outnumbered by the Republicans who opposed it.

In retrospect, there is no doubt that the House Republicans, although cynically directing their criticisms at the state, were much more effective in exploiting working-class anger than were the Democrats, who had no such goal and were concerned simply with propping up the system. The fact that Nancy Pelosi, the Democrat leader of the House, was turned into a major target — at a time when a Republican administration was still in power and the overall political current was favouring the Democrats — was an indication of the general effectiveness of these tactics.

Although the great majority of the population in the United States has been and remains opposed to the massive bailout, the system has moved to take care of its own: that is, the financial interests. The ruling class as a whole has been able effectively to ignore the masses, who have no economic and no real political power, lacking any organised basis. Now with the crisis ebbing, the media propaganda system is working overtime to convince the public at large that Paulson, Bernanke, Geithner and company saved the financial system and the economy.

There are news reports of sporadic protests and demonstrations by different sections of the people in the United States. News agencies reported protests against the bailout plan, against the auction of homes, against layoffs and demanding compensation, against taxes, and in many other areas. Months ago a group of workers in Chicago occupied a factory, probably unprecedented in recent US history. President Obama offered token support to these factory-occupying workers, one news report said. A number of political commentators have expressed opinions that more protests could arise in the United States. There were protesters in Sacramento holding placards with hard sounding words. A commentator has declared that the elites are aware of the possibility of civil unrest. Is there any real likelihood of major resistance while labour is unorganised, while consumers are hard pressed?

There are certainly a lot of spontaneous protests and demonstrations of all kinds going on in the United States in response to the crisis and the war. I don’t think anyone really knows how much protest is occurring because the media makes a point of not covering left protests, as much as possible.

Strikes have taken place, including, as you note, the dramatic occupation of a factory by members of a United Electrical, Radio and Machine Workers local union early in the crisis. But organised labour can hardly be said to be engaging in struggle.

The AFL-CIO seems almost dormant in this crisis. One is inclined to think that organised labour in the United States today is organised for something else other than struggle. In the 1930s, the Communist Party backed by other smaller left parties played a big role in getting mass protests going. There is nothing equivalent in the United States today.

Still, there are plenty of reasons to believe that resistance could grow dramatically in present circumstances. It is well to remember that although the Great Depression began in October 1929 it wasn’t until 1934 that one saw the truly massive strike waves that constituted what has been called ``The Great Revolt from Below'’, associated with the rise of industrial unionism and the CIO. (The best short account of these developments is to be found in David Milton’s book, The Politics of US Labor.) This happened after unemployment had bottomed out in 1933 and what was to turn out to be a slow economic recovery was beginning.

Today, there has been no bottoming out yet of job losses. Unemployment is still rising and the economic conditions promise to be extremely difficult for workers in the years ahead. It may take some time, possibly years, before we see the development of organised revolt from workers. The New Deal in its more radical phase, it should not be forgotten, was an effect rather than a cause of the revolt from below from 1934 on. It is the responsibility of the left in this crisis to help open the way to such possibilities, by drawing on the lessons of the past. Monthly Review Press has just reissued Nancy Rose’s book, Put to Work, on the federal job programs of the 1930s — the WPA and others — so that those engaged in struggles can learn from the past.

One aspect of the US situation that is not well understood is the level of internal repression marked by a vast growth in the numbers of police and prisons. This is of course a system of racial and class control, with blacks and Hispanics representing the biggest share of inmates. This penal state has been growing rapidly during the last 20 years — the whole period of neoliberal policy associated with the growth of monopoly-finance capital. While India, I believe, has an incarceration rate of around 50 per 100,000, the United States, with the highest incarceration rate in the world, has one of around 750 per 100,000. This a system of social repression that may even expand in the crisis. (See ``The Penal State in an Age of Crisis'' written by Robert W. McChesney, Hannah Holleman, R. Jamil Jonna and myself for the June 2009 Monthly Review).

Is going to war one of the tendencies of military Keynesianism?

Military Keynesianism is the doctrine that military spending can help lift a capitalist economy that is faced with demand shortfalls. This should not be identified directly with Keynes’s views themselves, though he did co-author a famous pamphlet called How to Pay for the War. Rather, the first military Keynesian, even before the publication of Keynes’ book (as Michal Kalecki and Joan Robinson both pointed out), was Hitler, who managed to restore the German economy to a large extent by rearming it, with of course barbaric consequences.

In the post-World War II US system, expenditures on militarism and imperialism were directed mainly at maintaining and enhancing the US empire. But this was also seen as having the secondary benefit of promoting economic demand and profits. In the past half-century or more the United States has devoted vast resources to the military and carried out numerous interventions and regional wars, mostly in Asia. There is no doubt that this has been an important boost to the economy.

Acknowledged US military spending in 2007 was $553 billion. But Hannah Holleman, Robert W. McChesney and I recently did an empirical study (``The US Imperial Triangle and Military Spending’', Monthly Review, October 2008) that determined that the actual amount spent was $1 trillion. This is nearly three times the federal budget stimulus for a single year provided by the Obama administration in order to counteract the current crisis, so the numbers are very significant.

At present the administration is accelerating the war in Afghanistan as part of its larger imperial strategy for controlling the Persian Gulf and Central Asia. But military Keynesian considerations (i.e. economic ends) also enter in at some level to reinforce these imperial objectives. There is what Kalecki in The Last Phase in the Transformation of Capitalism called the ``imperial triangle'' of (1) state-financed military production, (2) a media-propaganda system that supports imperial adventures and (3) the real/imagined employment-income effects. This form of ``Pentagon capitalism'', as it has been called, also feeds into US arms sales, which fuel wars throughout the world.

In 2008 sales of US armaments constituted more than two-thirds of total international arms sales, with the US share amounting to $37 billion in all. This is crucial to the US current account balance.

Is there any geopolitical division within monopoly-finance capital? How does such a division, if it exists, manifest itself globally in ``camps'', alliances, ``surrogate'' countries, etc.? How does it affect countries in the periphery? Are there weak links in the chain of monopoly-finance capital that fastens the globe?

I think of monopoly-finance capital as a new phase, essentially, of the monopoly stage of capitalism (which Lenin said was ``the briefest possible definition'' of imperialism). The combined centrifugal and centripetal tendencies of imperialism that come more and more to the fore under monopoly capital are still there, in magnified, increasingly complex, and largely unpredictable forms.

Simply, because there is and can be no overall state of the capitalist system, developments at the global level are always more contingent and problematic. Wars and inter-imperialist rivalries are part of the system, along with the domination of the periphery by the centre. In terms of the global political economy, we have witnessed, since the resurfacing of stagnation tendencies in the mid-1970s, the rise of the whole era of neoliberal globalisation, which has been a mechanism for re-establishing the control of the global North over the South, and for shifting the main costs of stagnation from centre to periphery.

But this period has also seen the growth of some ``emerging'' capitalist countries, which have been able to benefit from the global sourcing of resources and commodities — thereby also increasing the profit margins of global corporations.

The shifts in economic power in the period have thrown up the whole question of international hegemony, today exerted by the United States (which in the 1990s following the fall of the Soviet Union became the sole superpower) – but increasingly under circumstances that look anything but stable, with the rise of various major, regional powers. To be sure, no state can yet challenge the United States economically or militarily on a global basis. Nevertheless, in the United States, this perceived impending threat to its global rule has resulted recently in calls to create the basis for a ``new American century'', and has led to the growth of naked imperialism, i.e. the increased use of US military power to change the rules of the game in its favour: geopolitically and economically.

There is no doubt that, to use terms introduced by Richard Haass, formerly in the Bush administration and now head of the Council on Foreign Relations, that the United States is the sheriff and that Western Europe and Japan are its posse, or junior partners.

There are outlaw states, from the standpoint of the sheriff, such as Iran, North Korea and Venezuela. The sheriff is not above carrying out lynchings without the approval of the system of justice (in this case the United Nations), and with or without the direct help of the posse.

Geopolitically, there are of course camps, alliances, and sub-imperial powers. The United States under Obama, as already mentioned, has recently helped expedite a coup in Honduras that is aimed at the ALBA countries, of which Honduras was a member. It is leasing/building seven new bases in Colombia, which is its main military platform in South America. At the same time this is a recognition that certain weak links have appeared — that a socialism of the 21st century is arising challenging both capitalism and US hegemony.

As explained in The Great Financial Crisis, Marx used the shorthand M [Money]-M' for the circuit of money capital, in which money begets money all by itself, as opposed to what he called the ``general formula of capital'' in which a produced commodity intervenes between M-M' (p 133). Is this the dominant form of monopoly-finance capital, whereby ``productive'' M is increasingly subordinated to ``exotic'' financial instruments? Can it be said that this process signifies: (1) that this is the way capital, as a whole, degenerates, (2) that this degeneration is part of the decline and decay of the whole system, and (3) that we can now hear the sounds of its last nail?

I would not say that we can hear the sounds of capitalism’s last nail. But certainly we are seeing all sorts of signs of global social and economic decay. Capitalism’s famous ``creative destruction'', so celebrated by Schumpeter (in which he was referring not to our present age but to the entrepreneurial age he saw as disappearing) has now given way to an enormously distorted and uncontrollable destructive creation: financialisation, environmental destruction, war, etc.

As Keynes once suggested, things are likely to be done badly when production becomes a bubble on a whirlpool of speculation. The last shreds of rationality of the system are quickly disappearing. On the one hand, economic stagnation finds its counter in a growing casino economy and military expansion; on the other hand, this expansion is threatening the environment of the planet.

We are living in a time of financial bubble (M-M'), but also an environmental bubble, in which the economy is overshooting sustainability by rapidly using up the last remaining ancient sunshine (fossil fuels). Now the climate is threatened, and world hunger is accelerating with the growth of ``agrofuels'' since the ``free market'' requires that those with money, who desire fuel, will always prevail over those without money who need food. The sheer scale of irrationality of this system of accumulation has become unspeakable, unfathomable.

Cash was infused in the asset bubble to keep it expanding as that was the only way to keep the bubble ``alive''. But is there not a limit to such expansion, as we find in the law of elasticity? Or to put it more dialectically, can expansion reach its limits so that it bursts out? Should the mainstream economics expect expansion forever with cash infusion … expansion without limit?

It is true that asset bubbles by definition expand until they burst. There are obviously limits to the growth of debt and speculation, particularly when the real economy is stagnant. But no one can say for sure what those limits are at any given time, and the situation keeps on changing.

Under monopoly-finance capital the whole system is propped up by the central banks, which are charged with keeping the game going as long as they can, and with protecting the big financial speculators when the bubble bursts. This is even clearer today with the present financial crisis, where a ``too big too fail'' policy has explicitly been adopted.

Today this has resulted in such large amounts of ``lender of last resort'' debt coming into being in the United States, Japan and the UK that — given simultaneous vast budget deficits — any rise in interest rates for the foreseeable future is out of the question. Nothing like this has ever happened before, and no exit path from this extraordinary situation is visible.

But a collapse has been avoided, and future problems are for the future to solve. In the irrational class society in which we live it is ``rational'' for the individual units of capital to proceed as before, in their own interests, with an ``after me the deluge'' philosophy. And the state has no choice but to back this.

Is this rational from the standpoint of society as a whole? Of course not. But forging a socially rational society is not the goal of private capital: rather the object is one of self-aggrandisement. And as a whole this is still working for the ruling elites. In this sense, Naomi Klein is right; a kind of ``disaster capitalism'' is now in place, in which the promotion of growing economic, social and environmental disasters has become the basis of the accumulation of riches for a privileged few.

Class in monopoly-finance capital is discussed in The Great Financial Crisis (p 85). Is there any contradiction, especially because of the autonomy of finance, and due to the progressive shift in gravity from production to finance, between financial capital and manufacturing capital — in class or class-fraction terms? Similarly, is there any tension/contradiction between the class having financial control and capital directly engaged in exploiting cheap labour by outsourcing, engaged in export processing zones/special economic zones, etc. in the periphery?

These are good questions and I have to say that I don’t have entirely satisfactory answers, since a great deal of research needs to be done in this area. The term monopoly-finance capital is meant to refer to a hybrid system of monopoly capital (that is the economy of the giant corporations) and an increasing reliance on financial expansion with the attendant increase in financial control. So far it has not appeared to be a case of a conflict between financial and industrial capital (or between ruling class fractions in that sense).

Rather the dominant tendency, judging by the United States, seems to be the growth of the financial-industrial complex. Even what we consider industrial corporations now have their own financial subsidiaries and are increasingly directed at growth through asset speculation rather than production. I wouldn’t say that financial and industrial capital has melded together entirely, but there also does not appear to be a sharp contradiction between the two sectors in this period. This is because the expansion of speculation (the casino economy) has become the major stimulus, such as it is, to the real economy, which otherwise would sink deeper into stagnation; so objectively all of capital has an interest in keeping the financialisation process going. At the same time there is a stagnation-financialisation trap that embraces the whole system.

A number of things can be said with a fair degree of certainty about the power dimensions of all of this. First, a growing portion of those at the very top of the society in the United States in the last couple of decades have owed their wealth primarily to finance, real estate and insurance (FIRE) and relatively fewer to other areas such as manufacturing, technology, natural resources, transportation, etc.

Second, financial concentration is occurring very rapidly, and in ways that may alter the entire structure of the political economy. Thus, while the top five financial institutions in the United States owned 10 per cent of all financial assets in 1990, today they own 50 per cent of all financial assets. In two decades or so the United States has seen its financial sector radically transformed, so that the major banks are far more powerful vis-à-vis other economic interests than was true 20 years ago. The long-term impact of this is yet to be seen. The same kind of development has been occurring on global level. And much of this is not even taking into account the ``shadow banking'', i.e. financial interests that transcend the traditional banking structure. Neoliberalism reflects this shift toward finance and the need for constant cash infusions to keep a given bubble going, so the result is a system that is more rapacious than ever before — or, as Marx frequently said, more Vampire-like in the sense that it sucks the lifeblood from its victims day by day.

At the global level Samir Amin wrote in his Capitalism in the Age of Globalisation of the ``five monopolies'' that are now key to the dominance of centre over periphery, despite industrialisation of important parts of the latter: (1) technology, (2) financial control of worldwide financial markets, (3) monopolistic access to the planet’s natural resources, (4) media and communications monopolies and (5) monopolies over weapons of mass destruction. I think that this is a good way of understanding the imperial power of monopoly-finance capital. The most important and volatile of these today are (2) and (5), i.e. world financial markets and nuclear weapons, both of which point to possible catastrophic meltdowns/firestorms.

The issue of global outsourcing that you raise is enormously important. The logic behind this development is of course clear. Due to unequal exchange globally — which Amin somewhere defines as a situation where the difference between wages is greater than the difference between productivities — global corporations are able to super-exploit low-wage workers in poor countries, selling the goods at prices that are meanwhile determined in the centre of the world economy, thereby generating enormous profit margins. (This has also propelled the growth of big box stores like Wal-Mart, which through more effective global sourcing is able to sell goods at relatively lower prices, driving smaller competitors out of business, while still enjoying widening profit margins.)

The effects of global sourcing on the restructuring of imperialism — disarticulating economies in both the global South and the global North — are enormous, and are beyond what can be addressed here. Still, to answer your question, I don’t think the internal conflict over outsourcing between sectors of capital is very significant in the United States, because the dominant monopoly (or monopoly-finance) capital is for all practical purposes identical with multinational capital, which is simply monopoly capital abroad.

Can it be assumed that monopoly-finance capital will find itself in a difficult situation as the capacity and authority of the state as the lender of last resort gradually gets eroded, and due to contradictions that arise in the body politic?

It is possible. But we have to understand that this is not a stable system in the first place, so it is already in a difficult situation, and is taking the whole world down a difficult path. When the Lehman Brothers bankruptcy occurred and there were fears that the whole system would meltdown, one fairly rational first response, even for some on the left, seemed to be to bail out the banks and salvage the financial system no matter what it cost. No one really wanted a depression. And that of course is what the system did with the support of almost the entire bourgeoisie, apart from a few gold bugs.

In this respect, the response of the majority of the population, which was against bailing out the banks, was looked at as representing total anarchy and disaster, possibly leading to another second Great Depression. But the truth is that the solution adopted puts off the problem at best, reinforcing long-term stagnation tendencies, and leading to the certainty of far worse crises in the future. The lender of last resort function of the government has become both the saviour of the system in the short run and, quite possibly, its nemesis in the long run.

The problem of servicing (or retiring) the immense debt created in the last year would seem sooner or later to require sharp commodity inflation and/or a sharp rise in the rate of exploitation through cutbacks in social services, hikes in consumption taxes, etc. Such ``solutions'' are destabilising. Already workers are suffering: jobs are vanishing, pension agreements are being abandoned by corporations, workers are losing their houses, wages are declining, hunger is expanding, education is being privatised and downsized, etc. The United States has ended up with both the bailout of the banks and a devastating crisis the effects of which will linger.

What is really important, from a social standpoint is the welfare of the population as a whole. While the financial institutions have been bailed out, the people are suffering worse than ever, with very little done to ease their pain. In fact, the whole direction of social policy is to increase exploitation. It is well to remember that the vast majority of working people are the body politic. The rest are usurpers, from a social and democratic standpoint.

What is the significance of the theory/formulation of monopoly-finance capital: its genesis, its character and its crisis, in the centre and periphery?

This is what we have been talking about more or less all along, so I can be brief. The genesis and character of monopoly finance capital are treated in a forthcoming article entitled ``Monopoly-Finance Capital and the Paradox of Accumulation'', which I have written with Robert W. McChesney for the October 2009 Monthly Review. What we have not addressed sufficiently at this point is the relation of all of this to the global system as a whole. I think what we need today is not so much a theory of the ``new imperialism'' as some have called it, but a theory of the changed economic context of imperialism, rooted in the stagnation-financialisation trap endemic to monopoly-finance capital.

We also need a better understanding of how this relates to the struggle over hegemony in the world economy and to geopolitics (the most dangerous realm of state action since it relates to the strategic control of territory and resources through war or the threat of war). Under monopoly-finance capital the growing industrialisation of parts of the periphery has done less to change the relations of power within the world system as a whole than is sometimes supposed. This is because the rules of the game have been changing, with global corporations and financial institutions of growing importance. At the same time we are seeing a new age of revolution, in Latin America in particular.

Nevertheless, it is important to note that the most significant historical change of the last quarter-century has had relatively little to do with changing relations of power within the system, but has arisen from the changing ``external'' relations to the Earth. The age-old choice of ``socialism or barbarism?'' — raised by Rosa Luxemburg — is giving way today to an even more momentous choice of ``socialism or exterminism?'’ as the prospect annihilation of the Earth, as we know it, lies before us under business as usual.

In this sense, the call for a new socialism for the 21st century, now emanating from the Third World and aimed at overcoming the depredations of capitalism, represents humanity’s best and perhaps only chance.

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The metamorphosis of micro-credit debtor

Farooque Chowdhury

Micro-credit, the well-propagated mantra in the fight against poverty, is now expanding crossing the national boundaries as capital has done for centuries. Countries in the centre and in the periphery in the present world system are near-spellbound by this mantra. The actors include kings, queens, statesmen, bankers, charity foundation initiators, economists, development workers and the poor. Only the last one is at the receiving end.
The metamorphosis of the micro credit debtor exposes the acts the capital plays in the act of micro credit and makes all its pious pronouncements hollow. The metamorphosis takes not only to the debtor, but also to other members of the debtor-household.
The debtor of the micro credit turns owner of the tools or raw materials necessary for producing commodity as the debtor returns home from market after purchasing these with the credit money. But with the joy of ownership a poor debtor enjoys through this metamorphosis there comes a new burden, the burden an industrial proletariat does not have to bear: the burden and responsibility of maintaining, repairing and replacing the tools, equipments or parts of these and the costs that accompany it as the debtor is going to produce and going to be a producer of commodities. It is an extra burden. Usually the job is done not only by the debtor, but also by the other members of the debtor—household. That means time, necessary or surplus labour, depending upon a situation. The proud ownership carries another intricate calculation. An industry owner provides premise, shade, light, water, storage facilities, transport, etc. for producing a commodity and before hiring a wage slave the owner has to spend money for these ranging from construction, power and water connections, supervision, etc. which are calculated before the surplus value is appropriated. But in case of the micro credit debtor turned independent owner of tools of production all these burdens fall upon the debtor. It is the responsibility of the debtor turned owner to repair/replace/heal and to spend money for these. That means the debtor has to arrange the constant capital, and sometimes, the variable capital. The creditor does not always provide the money required for these purposes or the debtor has to set aside a portion of the credit money for these purposes. If the debtor sets aside a portion then the person has to extend extra time to the portion of labour that produces surplus. Moreover, the debtor turned owner has to construct/raise a shed for carrying on the production activity and spend money and labour power belonging to the debtor and the debtor’s household. Actually, the debtor, most of the time, uses own premise, rent for which is paid by the owner of the production unit, the debtor. Maintenance and repair is paid by the debtor, now turned into an independent producer. An industrialist has to pay rent for the premise, utilities and other facilities while they are within the premises producing commodity. But in case of the micro-credit all these are the debtor’s responsibility. The metamorphosis of the debtor to owner of tools, etc., to independent producer thus does nothing but increase the surplus labour time and squeeze necessary labour time so that the repayment of the loan can be made as per schedule.
The debtor turned producer has to plan, search and work out comparative advantage, and procure and transport required raw materials for the commodity to be produced. The debtor, now acting as procurement manager of the household-based production unit, procures and carries or transports the raw materials for the commodity to be produced. Sometimes it is the spouse or sibling who performs the task, unpaid and unaccounted labour power put into the process. Is the equation in favour of the fellow who went to the banker for the poor to realise the fundamental right the banker propagates? Reality is that the shortened necessary labour time and the lengthened surplus labour time, obviously provide the answer. What about the level of appropriation? It is, certainly, not at the level Marx ‘calculated’. It is super-appropriation, never imagined by the mine owners of Rome, the colonial plunderers, the plantation owners, the slave owners in pre-slavery America, the multi-nationals operating in the countries on the periphery, not even the plundering-lumpen capitalists in a number of underdeveloped countries, but only by the multi-national micro credit capital. So, Michael Lipton and John Toye said in ‘Does Aid Work in India?’ : Rates of return on credit projects are particularly high in India; and Joe Remenyi said in ‘Where Credit is Due: Income Generating Programmes for the Poor in Developing Countries’: Credit - based income generating projects may be the most profitable way in which society can invest…Diminishing return has not set in this field…;…banking on and with the poor is a very good thing to do…. The typical successful CIGP …required an investment well below $1,000 per sustained wage - paying position created (one - tenth of the ratio in the formal sector)…[W]hen one is living at the margin of survival earning around $1 a day, an increase in earning capacity of 50 cents a day represents a substantial improvement in cash flow. These statements tell the truth.
The metamorphosis of the debtor moves further as the fellow turns wage labourer. The micro credit finds a new commodity as, borrowing from Engels, the ‘source of new value,’ source of surplus ‘income’ with which the debtor will repay and ‘this commodity is labour-power’. The labour power is stored up in the bodies of the micro credit debtors and other members of the debtor-household who extend respective labour power to extend the surplus labour time so that the repayment could be made on schedule. As an independent producer the debtor has to fix the pace of production and that determines the debtor turned wage labourer’s pace and length of working hour. Even, the debtor wage labourer has to borrow labour power of others in the household, who are actually paid only by bare subsistence. To make the statement complete it is not the debtor only, but other members in the debt ridden household, along with the debtor, also, turn wage labourer, at least, part time. Does it not appear more intense than the conveyor belt or the Taylor system innovated by the industrialists to increase surplus value? Thus, the entire household turns into a household of wage labourers, full time or part time. Actually, the pace of work is determined by the time schedule of the repayment. Within the scheduled time for repayment the independent producer turned wage labourer, along with the co-workers in the household have to produce and sell that quantity or that number of commodity that can bring in at least the amount of money needed to repay the instalment of the debt. If seasonal variations, changes in market, health problems, other unseen troubles, non-availability of raw materials or transport, in short, major and minor forces, i.e. ‘acts of god and acts of reality’, coordination with the marketing day and the instalment day are taken into account then the pace of production of a debtor turned independent producer turned wage labourer can be imagined. The person has to forget 8-hour working day, rest, amusement and attending to family chores. It is only to produce surplus enough for repayment. Does it sound like the sweating system? Does an industrialist having a supervisor or a foreman appear fool? While an industrialist has to devise a mechanism, a supervisory system and keep a physical appearance in the work place the micro credit capital does not require all these. Its mere regimentation, mere providing credit at the doorsteps of the poor and its higher level of ‘consideration’ or attention regarding collection of part of the credit from the debtor’s home so that the poor fellow does not turn a defaulter that determine the pace of production. This is the condition of the micro credit wage labourer, obviously a bit different from an industrial wage labourer. An industrialist ‘purchases the use of one week’s labour of [a] worker’ if the worker is paid on weekly basis, but the micro creditor purchases the labour of the debtor for an entire year, if, assumed that the loan will be repaid within a year, or for the entire period until the loan is repaid. With the payment for necessary labour time, a specific amount of money paid for subsistence of a worker and members of the worker’s family, an industrialist ‘ensures the continuance of labour-power even after his [the worker’s] death’, but the micro-creditor ensures the simultaneous use of labour - power of the household members of the debtor along with that of the debtor. The labour, through persistent struggles, has won, in relative terms, a number of measures to safeguard own body and soul and the capital has to compromise for its own sake. But the micro credit debtor turned wage worker toils without coverage of any such measure. The micro credit capital that finances micro-production units at household level is smart enough to escape, till today, the struggle of the debtor turned wage worker, by pass all rules, even norms attained so far, and stay safe. There is no working hour; no weekly holiday; no law, rule, regulation governing working time, working condition, safety measures, child labour, female working hour, etc.; no inspectorate looking at the working condition. This makes life miserable for the micro credit debtor turned wage worker and for the members of the household including the minors who help create surplus value without any legal coverage.
Now, only a few numbers quoted from Microfinance Statistics (vol.17, Dec., 2004), a publication of the Credit and Development Forum. These will help comprehend, at least partially, the width and length of the micro credit net and the surplus value it appropriates in a single country. In Bangladesh, in 2004, the number of active members in the 721 micro financing organisations (MFO), reporting to the CDF, was 16,622,047 and in 2000, it was 11,021,663 in 585 MFOs. In 2004 the number cumulative borrowers from 721 MFOs was 16,244,242 in a country of 140 million. It was 7,409,773 from 585 MFOs in 2000. There are many other MFOs that have not reported to the CDF, many others are operating in different guises and many other programmes and projects operating not as MFOs but carrying on micro credit business. From how many souls do a group of industrialists in a poor country appropriate surplus value? Are those always more than the number just cited? There are answers, obviously, to this question. It is expected that a reader will search the answers.
The metamorphosis of the micro-credit debtor continues further as the person moves to market with the commodity produced. The debtor then turns to an independent trader competing with peer debtors turned independent traders in the market place and at the same time they together fall prey to the vagaries of market governed by the mighty market forces. While carrying the commodity to the market, sometimes, some other members of the household, shares the load. This labour is unpaid in terms of wage. If counted or paid, the amount comes from the surplus value already generated. If it is unpaid then the amount thus saved stays within the surplus value to be paid to the creditor waiting for the next instalment of repayment. As an independent trader the debtor turned independent producer turned wage worker has to bear all the responsibilities of a trader. But an industrial labourer does not have to take all these responsibilities. The wage slave in a factory just completes respective job and gets compelled to be appropriated of the surplus labour time. Market, supply, demand, transportation of commodity to market, storage, taxes and tolls, speculation, price, etc. are not part of a factory worker’s business. But as an independent trader the micro credit debtor has to bear these extra burdens which are not the creditor’s concern at all. The creditor has tactfully, through the modus operandi, has put it upon the poor debtor’s weak shoulder. There are commodities in the market that are produced in larger, mechanised production units, with higher productivity, which means a cheaper commodity, and, commodities that enjoy facilities created by the WTO. This situation puts the debtor into an unfavourable, uneven playing field, cuts down the debtor’s competitive edge and presses down price of the commodity produced in the household by semi-skilled and unskilled workers and produced with artisan method and tools. There is the packaging, marketing and advertising factor. The person has to reconcile with the situation and that means further tightening of belt. The micro-credit thus pushes the debtor to such a situation with extra burdens while it demands regular repayment of the credit.
The data on the sectors or sub-sectors that use micro credit in Bangladesh show the sources of surplus value appropriated and who ‘offered’ the surplus labour to generate the surplus value. In 2004, according to the data published in the above mentioned CDF publication, of the 379 MFOs reporting to the CDF, 27.94 percent of cumulative disbursement was in the agricultural sector that included crops, livestock and fisheries sub-sectors while only petty trading sub-sector covered 40.61 percent. The percentage of food processing and cottage industries was 6.28 and of transport it was 2.20. In the years 2003, 2002, 2001 and 2000 the petty trading dominated. From where does trading, whatever its size is, produce the profit? A portion of it is surplus value generated by others in other places. What about the transport, the rickshaw van or the boat, and the cow fattening? The same answer. It is also the surplus value generated by and in different segments of the broader society that is appropriated by micro credit capital that gets in through the debtor’s hand. Other sectors and sub-sectors also provide similar explanation found in political economy. The above mentioned CDF publication provides a few more startling facts: ‘utilisation of loan by sector or sub-sector (as percentage of cumulative disbursement)’ in ‘social sectors’ in 2004 was 1.70 (health:0.44, education: 0.06 and housing:1.20); in 2003 it was 1.58 (0.45 for health, 0.04 for education and 1.09 for housing); in 2002 it was 1.41 (0.39, 0.05 and 0.97); in 2001 it was 1.76 (0.42, 0.11 and 1.23); and in 2000 it was 1.69 (0.37, 0.02 and 1.3). The ‘social sector’ meant by the cited publication was health, education and housing which are actually required for ensuring the debtor’s and the debtor household’s survival, keeping the body and soul of the household based producers or of the trader or of the transport operator together, ensuring that production or trading could be carried on or transport could be operated so that surplus value generation or taking share of surplus value generated by some other is ensured, so that the repayment that includes surplus value is ensured. If a debtor does not have a house or a shed the production unit will be inoperative or will face problems in the production activities; the raw materials, the tools, the fuel, the cow or goat or poultry, the commodity produced could not be stored in; the producer and others in the household joining in the production activities could not survive. So, the housing sub-sector was emphasized most while lending out money in the CDF defined ‘social sectors’. Of course, the façade was benevolence by the micro creditor. Then came health with the same arguments. A judicious choice of the appropriator! Material interest tops the list over human consideration. The extent of concern for health of debtor and debtor household is directly related and tied to the extent of concern of continuation of production, etc. activities. It was followed by education. The level of production and the level of transaction determine the extent of education required and the level of emphasis put into education. None can override this rule. The micro-creditor, also, faithfully follows this one and the life of debtor goes through this metamorphosis.
Thus, the circuit of metamorphosis of micro-credit debtor moves on and ultimately it completes a full path: a poor, an appropriated person turns debtor, the debtor turns owner of tools of production., the owner turns household based independent producer, the independent producer turns wage worker, the worker turns independent trader, the trader stays entrapped into debt with worsened condition and bigger debt turning one to debt slave. In its circuit the micro credit debtor only produces surplus value or takes a portion of surplus value produced by some other debtor or some other person or persons in the society producing surplus value and transfers a portion of it to micro credit capital. The circuit is both, a closed and an open, signifying the contradiction. The closed circuit keeps the debtor in perpetual and worsening poverty; sometimes, borrowing from the micro-credit literature, graduating a percentage of the borrowers, but pushing down or entrapping others in increased number; and often, throwing back the graduated debtor to the den of poverty again; and in these cases, the mainstream economics finds the rationale in ‘shocks’, ‘setbacks’, etc., natural and social, as their terminology defines. But whatever happens in the lives of a certain percentage of the debtor that does not change the basic structure of the circuit in the broader social matrix, in the process of appropriation of surplus value. Ignoring the macro scenario and putting forth the micro, a few individual cases, putting forth the exceptions instead of the general rule does nothing but vulgarises the arguments itself pushed forward by the mainstream. The open circuit intensifies and accelerates the pauperisation process and thus creating pressure on the system that creates poverty, makes a person poor, and appropriates surplus value. The vulgar economics with ‘hollow eye and wrinkled brow’ (Shakespeare, Merchant of Venice) extending support to micro credit capital may construct a façade by resorting, again, to vulgar arguments. It may argue that a certain percent of micro credit debtors have improved their living condition with the aid of the panacea as a few days ago they used to mean the micro credit. But this does not nullify the fact of appropriation of surplus value from others in the broader society. Rather, it puts the evidence that surplus value has been appropriated from some other persons. There are many economists in the bandwagon of micro credit who cite cases of increased consumption by the micro credit debtors. But it should not be missed that consumptions are of two types: productive and individual; while the first one is to create products the other is turned into means of subsistence. So, data of debtors’ increased consumption, claims regularly made by the mainstream economics, carry no meaning other than better and ensured supply of surplus labour power which is expropriated. The fact should not be missed that the entire system rests on the appropriation of surplus value and micro credit is a part and, now is an institution of the system. It is sustained by the system and it helps sustain the system.
The socialisation of micro-credit, with its profit profile, allures other capitals in banks and financing companies to join in. The capital engaged in micro-credit ties, quoting from Shakespeare, the ‘poor man’s cottages [to] princes palaces,’ organises and regulates debtors including members of the debtor-households, keeps them entrapped in the micro credit web, appropriates surplus labour power of them and others in the broader society. Moreover, it now regulates, based on its global power, the analytical process of a section of economists who overlook the process of appropriation of surplus value upon which the micro credit thrives, and try to ignore definitions of political economy and propagate vulgar ideas.

Micro Credit : A Few Hidden Facts

Farooque Chowdhury

The Bazaar, market, of micro-credit is growing bigger everyday as the capital has discovered allurement in the micro credit market because, borrowing from Marx, credit “money is breeding money”. Thomas Dichter of the Washington DC based CATO Institute informs in his policy briefing paper A Second Look at Micro-finance, The Sequence of Growth and Credit in Economic History informs: “Microcredit... has grown rapidly in the past decade, reaching tens of millions of individuals around the world and providing billions of dollars in loans.” About 100 million poor families are in the net of micro credit, as the Micro Credit Summit Campaign claims. The mission of the Campaign includes: working to ensure that 175 million of the world’s poorest families, especially the women of those families, are receiving credit ... by the end of 2015. The number tells itself that the issue should not be kept aside. Moreover, the number is related to human being, the poor turned debtors, and overwhelming majority of them is unaware of the name of the game. The debtor is the major factor of capital’s allurement and the debtor is available to capital at cheaper rate, cheaper than many other commodities in the present world economic system. The debtor of micro credit is poor and vice versa, micro credit has made the poor its prey. With the toil, to be specific, the labour power, of the dispossessed debtor the micro credit capital maximizes its profit in many countries in the periphery where the economic, social, political and investment climate is not safe for the capital to invest in manufacturing, etc. sectors and make profit. A closer look at a few facts hidden in the modus operandi of the capital engaged in micro credit help unmask the real face of micro credit.

It takes time, comparatively short or long, to get return, to appropriate surplus value generated from any investment and venture finance capital makes. And, in many cases, ventures turn to adventure for the finance capital and it has to bear the brunt. But in the case of micro credit the capital invested starts appropriating surplus value from the very moment it hands over the capital to the debtor. Whenever an amount of money is handed over as micro credit to any debtor an amount of money is kept with the creditor as the first instalment of repayment of the debt that includes the principal amount, the insurance premium of the credit money, the interest, and, as Marx tells in his Capital, “interest is a mere fragment of surplus-value”. If $50 is lent as micro credit, to be repaid in a year as $52 including the principal amount and the “service charge”, as the micro-creditors use the term instead of calling it interest, in 52 equal weekly installments, then $1, as first repayment installment, is kept with by the creditor while disbursing the credit money. Actually, the debtor receives $49, but the poor fellow’s debt is counted as $50. The $1 includes the principal amount, the interest, the credit insurance premium, recovery costs, the operational expenses, etc. If the creditor disburses micro credit, in a day’s transaction, to 1,000 persons, each of them with

$50, then the creditor actually hands over $49,000 while the creditor’s books of accounts record $50,000 as credit disbursed and $1,000 as repaid as the first instalment and the creditor pockets $1,000 as instant return that is again disbursed, as micro credit, to other guys and it follows the same circuit in a cyclic order. This $1,000, whatever it is, profit or surplus value or part of surplus value, is the money actually owned by the debtors who have received $49,000 in the name of $50,000 but forfeited by the creditor. The scenario described above is hypothetical. Following is a statement on micro credit disbursement : “The Grameen Bank operates its microcredit scheme on a fifty-two-week (one year) fiscal cycle. The first fifty weeks cover 100 percent repayment of the principal amount, that is, the borrower pays 2 percent on the capital amount every week. Te remaining two weeks of the fiscal cycle is scheduled for payment of the interest and borrower’ contribution to the emergency fund. In most investment loans the bank charges the rate of 20 percent interest; the emergency fund contribution of the borrower is 25 percent of the grosly calculated yearly interest on every repaid loan. The interest and emergency fund contribution together are twelve and half times greater than the borrower’s weekly instalment, but the borrower must pay it in the remaining two weeks of the year to become eligible for the next loan from the Grameen Bank. ...By the end of 1996, the Grameen Bank had modified the repayment terms. Now the interest payments are spread over fifty weeks and accepted with the instalment payments. Collection of an emergency fund was terminated in 1996" (Rahman : 1999).

A closer scrutiny of the above statement reveals the truth: from where and how the debtor pays? There are amendments, changes and alterations in the mode of repayment; variations in the mode of loan disbursement; variations among lending organizations and in countries. But the general mode of appropriating surplus value from the hapless debtor does not change. Moreover, there are organizations that tie other conditions to lending that carry implications in monetary terms, transfer of technology favourable to MNCs and to metropolitan markets and harmful to ecology. The mainstream economics, borrowing from the Capital, with “keen eyes of an expert”, hides this fact which history and the debtors will determine that whether that was an honest exercise or not.

Since its inception, as the Credit and Development Forum (CDF) publication Microfinance Statistics (MS) (vol. 17, December, 2004) informs, the cumulative amount disbursed by the world famous Grameen Bank was Taka (Tk) 217,313.9 million. There in the Bangladesh micro credit market the number of formal, institutional micro credit operators is more than a thousand whose cumulative amount of disbursed micro credit, it is assumed, reaches to more than billions of Taka. The MS tells: There were 4,059,632 persons -3,883,383 females and 176,249 males - only in the Grameen micro credit net spread over 48,472 villages (CDF:2005). And, the cumulative amount of micro credit disbursed as loan till 2004 by the 721 micro finance organizations (MFO) that reported to the CDF in Bangladesh? As reported by the CDF in its above mentioned publication, it was Tk 338,635.65 million in 2004, Tk 269,472.09 million in 2003 by 720 MFOs and Tk 125,607.61 million in 2000 by 585 MFOs. Any reader can now assume the

amount of appropriation. What will be the amount if the “$1 business” goes on for years and it is circulated and circulated?

The “$1 business” carries another intricacy that is not also discussed by the romanticist economists. The industrial or manufacturing capital appropriates surplus labour after it makes an investment, labour power turns the wheels and necessary and surplus labour times are passed. Even the capital engaged in trading or transportation takes its share in the surplus value after it provides its services to the industrial capital or completes a stage or a part of its functions and surplus labour time is pocketed after the necessary labour time is passed and surplus value is created. But the capital engaged in micro finance appropriates a portion of surplus value before the debtor actually produces it, even before the debtor goes back to his own home with the credit money, procures tools (a pan for preparing puffed rice, etc.) or raw materials (rice for preparing puffed rice, etc.) or a transport (a rickshaw van, etc.) even before the person procures bare necessities to keep own and household members’ body and soul together so that they can produce the required surplus value to repay the credit money with its interest. The “magic” happens with the $1 appropriated while disbursing the credit money. With the actual credit of $49, not the recorded credit of $50, the debtor has to work for the surplus labour time for repaying $51. This squeezes the necessary labour time and widens the surplus labour time. In other words, the creditor dictates and regulates the debtor’s working hour, pace of work, time for rest and the entire day-cycle. This intensifies the rate and speed of appropriation of surplus labour, and also, actually appropriates in advance a portion of the surplus value before it is produced and the appropriation takes place before the metamorphosis of credit money is completed and even the circuit of micro-finance money gets started. The appropriation by the creditor takes place before a debtor turns wage worker, produces subsistence for one self and for the family by spending necessary labour time. The industrial or manufacturing capital or the trading capital or even the capital engaged in speculation has not, till today, succeeded in making the “magic”. It seems that the circuit of M-C-M’ is “by passed” temporarily at the le premier pas. A working hand is asked to hand over in advance a portion of the surplus value the person will be producing in future. A “great benevolence” of creditors for the poor indeed!

Before a debtor receives a micro credit the person, along with the person’s peers, deposit an amount of money, on instalment basis, and after a certain period of time the persons organized in group appear eligible to be debtors. Then the micro credit is disbursed to one group member or more than one. The fund created with the savings of the poor usually acts as an insurance and collateral for the micro credit to be disbursed. Moreover, it helps the creditor to asses the credit worthiness of the would - be - debtors. During the initial period of depositing the would - be -debtors go through “motivation” and training, that are actually making them habituated to behave “properly” as debtor and disciplining or regimenting them and, “to train, good borrowers ...lowers the operating costs of ... the institutions which subsequently lend to them” (Hulme & Mosley:1996). Now, it is to the readers, to consider that whether the statement of collateral-free credit is true or false. A reader may recall the statement of G M Bell, a Scottish bank director, quoted by Marx: “Banking establishments are ... moral and

religious institutions ....How often has the fear of being seen by the watchful and reproving eye of his banker deterred the young tradesman from joining the company of riotous and extravagant friends? ...Has not the frown of his banker been of more influence with him than the jeers and discouragements of his friends? Has he not trembled to be supposed guilty of deceit or the slightest misstatement, lest it should give rise to suspicion, and his accommodation e in consequence restricted or discontinued? ... And has not that friendly advice been of more value to him than that of priest’.’” (Marx: 1977).

The scene of the “drama” does not drop here. Like wind-fall the fund is wind-blown to the crafty creditor. The poor fellows’ savings are loaned out to other poor fellows as micro credit and it revolves and revolves and it acts like a Geneva motion. The facts tell the “story”: Of the total revolving loan fund (RLF) of 721 micro financing organizations (MFO) that reported to the Credit and Development Forum (CDF) in 2004 the percentage of the “Members’ savings” was 28.50 and the percentage of “Service charge” was 23.69. The MFO’s “Own fund” was only 4.38% (CDF: op. cit.). The guys waiting to be liberated from the shackles of poverty provided more than half of the RLF with their toil and then they again paid the interest that carried a part of the surplus value they produced. Is not there room to be skeptic about the “benevolent” banker for the poor? This reveals only a part of the palm of micro credit.

While the regimentation, seasoning to be a faithful debtor, goes on the deposits, as idle money, continue its function: credited to others and, as usual, appropriating in advance a portion of surplus value before a commodity is produced or a transportation service is provided to a manufacturer, before the credit money is transformed to productive capital, to commodity capital, etc. An example will help understand the function: 10 persons organized as would-be-debtors group creates a fund of $40 in a month by depositing every week $1 each, and, the money instantly, save the transfer time, is lent out. If, there in a village are 2 groups; if, 1,000 villages are in the micro-credit net; and, if the cycle moves on for 12 months, will the amount be a peanut? The revolving loan fund of microfinance programmes of the above mentioned 721 MFOs in 2004 was Taka (Tk), Bangladesh currency, 57,627.97 million. In 2003, the amount was Tk. 47,363 million of 720 MFOs.

Yes, a creditor can / may calculate an amount of money as interest on the deposited amount of money of the group or groups in the books of accounts. What, in reality, happens to the fund generated by the group members? The answer is available in a few studies and is also available in the statistics of the concerned creditors’ reports. The answer is not a positive one. Whatever happens the questions it will generate will further unmask the hidden face of micro credit :

1. Is the rate same as the creditor charges from the debtors? 2. Is it calculated in the same formula for the both: the creditor and the poor depositing the money or separate formulas for the separate parties, simple rate for one and compound rate for the other, or flat method for one and declining method for the other? 3. Do the persons owning the money have the opportunity to decide the utilization of their deposited money? 4. Does a person have the scope of getting back own money if the person decides to withdraw? 5. Where is the insurance of the deposited money? A micro creditor will, obviously, provide sweet answers to

these questions. So, the last, sixth, question: is there any discrepancy between the pronounced answers and actual practice in real life? The embarrassing truth is in the pages of the above cited CDF publication from page 80 to page 169. Data in the pages show that there are wide difference between the two interest rates, one, from the debtor and the other to the depositor. There is also discrepancy, except a negligible number of MFOs, in the method of computing the two interest rates. The discrepancy in the method of computation of interest rates of the two makes the difference wider. A discrepancy between pronouncements and acts or a lie, whatever is termed, will weaken the creditor’s standing. And, facts from field are stranger than fictions produced by the friends of micro credit in the mainstream. Following is a finding:”[Grameen] Bank members report that group fund are not as accessible as they would like....Although it [emergency fund] has accumulated to Tk 145 million, disbursements to date are minimal and, consequently, the fund is unpopular with members, being seen as a disguised borrowing charge” (Fuglesang & Chandler : 1993). There are many other similar findings also which are not referred here.

The appropriation takes a more merciless form since the debtor goes back to own home with the credit money from the creditor. The debtor has to pay the second instalment on the next week or the next fortnight, depending on the style of the creditor. It may happen that the commodity could not be produced by the next week or the produced commodity could not be sold out or the quantity of the sold out commodity could not fetch in the requisite amount of money to repay the second installment or the market was depressed that refrained the debtor from selling the commodity produced with the credit money or the rickshaw van “failed to earn” the required money. Despite this reality the debtor has to repay the second installment. Instead of purchasing food, etc. for the household the debtor has to maintain the commitmeni to repay the next installment and the first and prime concern is the repayment of the debt. The creditor appears at the “door steps” of the debtor, which the micro creditors proudly describe as their “client-friendly” service delivery system that actually carries a different tact, and demand the installment. The failure of the debtor to stand by own oath carries consequences. In similar cases what the sincere efforts the faithful debtor makes to repay the installment? The answer unmasks the crude cruelty of the micro credit capital. The debtor, other than in a distorted situation, either deprives self and the household members by cutting down their subsistence or as wage worker having the means of production procured with the credit money squeezes down the necessary labour time put by self or by members of the household, lengthens the surplus labour time or sells self or other household member’s labour power to some other owner of the means of production and “collects” the promised amount for the loan repayment installment. In the second case, selling labour power to someone, the debtor turned wage worker takes away a portion of the money produced in the necessary labour time to repay the scheduled installment and that means, again, depriving self and the dependents of the subsistence and, at the same time, “extorting”, on behalf of the creditor, a portion of the value produced during the necessary labour time. Whatever “mechanism” is followed the consequence is tearing down the body and soul of the debtor and the dependents upon the debtor, irrespective of age—minor or old, gender, sick or

non-sick. In a distorted situation, the debtor borrows money from a moneylender in the informal sector, at higher rate of interest or from a friend or a relative or from a peer group member with interest or from some other micro creditor (SOM). In this case, borrowing from SOM, the debtor or the debtor’s spouse gets admitted with the SOM–organized group earlier. There is another distorted situation scenario: the debtor, if defaults, is issued a bigger amount of credit by the same micro creditor (SMC), the earlier credited amount is realized and the rest amount is handed over to the debtor as a new loan, which is a bigger one than the earlier one and thus putting a bigger burden of credit on the debtor. And, then what happens to the debtor? As Hemingway provides the answer: “First you borrow. Then you beg” (The Old Man and the Sea). Thus the SMC credits itself with an “amazing” recovery rate that has a role, partly, to construct the myth of micro credit. Whoever the “savior”, SOM or SMC, the debtor’s condition worsens, the “size” of appropriated surplus labour gets bigger. Then it turns out difficult for the debtor to free oneself from the tentacles of micro credit. The debtor thus becomes an appendage to the micro credit machine. And, as these “intricacies” of the credit capital takes place keeping the debtor unaware, in general, the appropriation actually turns to thievery.

Of these debtors referred above the overwhelming majority are the women. “(Female borrowers have proved more reliable than male borrowers: consequently some lenders have found that their financial performance can be improved by focusing on female borrowers” (Hulme & Mosley, op. cit). “[W]omen repay better than men...This may well ... provide an apparent rationale for the decision taken by a number of group –lending NGOs (including Grameen. BRAC.) to lend only to women henceforth” (ibid.). The loan recovery rate for general loans for women was 97 percent compareding to 89 percent for men in 1992 (Khandkar et al: 1993). Though there are two stories on women borrowers, their number and users of credit money borrowed in their names, one, proudly publicized by the media under the spell of micro credit, and the other, the reality found in a number of researches, theoretically it is the women from whom the capital engaged in micro credit appropriates surplus value most as women, according to statistics from literature of the MFOs, are the biggest debtor group and thus micro credit spares the “stronger” and exploits the “weaker” in appearance. The explanations forwarded by the mainstream economics in essence is the evidence of coercion or the fear factor that drives the women to perform as good borrowers who repay regularly. The micro creditors, however, propagate it as empowerment of the women. The reasons behind their “earnest” effort for “empowerment” of women include : possibility of migration or fleeing away or physical mobility of women debtor is least; and “their culturally patterned behavior (shy, passive, and submissive)”(Rahman, op. cit.). Rahman quotes Mafiz, a Grameen Bank (GB) worker. Mafiz said: Women in the village are easily traceable.They regularly attend more group meetings than men. Women are more reliable and are more disciplined (passive/submissive) than men. Working with women is easier than working with me (ibid.). Another GB worker told Aminur: In the field it is hard to work with male members. They do not come to meetings, they are arrogant, they argue with bank workers and sometimes they even threaten and scare the bank workers. It is good that our

superior officers have decided not to recruit new male members, although we do not have any written instruction about it (ibid.). There are other studies revealing similar facts. In patriarchal society women and their honour are more vulnerable than men and micro creditors capitalize this vulnerability under the facade of ‘empowerment”. Anne Marie Goetz, a political scientist and Rina Sen Gupta, an economist in their 1996 study “Women Leadership in Rural Development in Bangladesh” had similar observations. One female informant of Aminur told: When a woman fails to make her installments on time, she experiences humiliation through verbal aggression from peers and bank workers in the loan center (ibid.). Incidents of women debtors committing suicides due to humiliation for failure in repaying credit installments have been reported in press and by studies.

But astonishingly this is fact concerning human and ethics has not been highlighted by the mainstream and the micro credit fed propaganda machine.

The debtor of micro credit has no bargaining power. The virtual wage-slave embodied in the debtor can neither bargain the rate of interest, the size of the credit, the period of repayment, the rescheduling of credit, etc. All these depend upon the creditor with bagful of capital. Each debtor competes with the other one and thus strengthens the creditor’s unilateral power. The hapless position of the debtor and the very nature of the modus operandi of micro credit, along with the barrage of propaganda by the mainstream and the theoretical inconclusiveness of the critics of micro-credit have permitted the micro creditwallahs to avoid, till today, any law and regulation on working condition, working age, toil by women, safety measures, etc., and, any union of the debt slaves turned wage workers. Even, as far evidenced from the available literature, the critics have also missed the aspect. So, there is absence of charter of demands of the debtors the industrialists usually have to face from labour. The household based, individualized, isolated production or servicing units, each competing with the other similar units and in the market, permit, and in essence encourage avoid these aspects. The debtor turned wage labourer tries, on behalf of the creditor, to expand surplus labour time, to use cheaper labour power in own household, even sometimes using common property resource, to sharpen the competitive edge of the commodity produced in the household unit so that the repayment can be made on schedule and these allow prevail the condition. And, obviously a portion of benefits from common property resource (CPR) reaches the micro creditor through the hands of debtors. Who own the CPRs and who reaps profit from these? Is not it the people and is not it the micro creditor respectively? Has this fact of virtual usurpation of public property by micro creditor been discussed by the mainstream?

While the micro creditor has an in-built insurance of the credit money, discussed and calculated in micro-credit literature, the debtor’s production or servicing unit stands without coverage in the face of any accident. What happens when a rickshaw van faces an accident and its part or parts break up or, when a woman debtor faces an accident while producing a commodity with micro credit money in her household or, a rickshaw van puller faces an accident, a fracture in his leg and the rickshaw van was procured with micro credit money? While the micro credit money is insured and the debtors pay the insurance premium the

unfortunate debtors producing surplus value to repay the loan are uninsured. Is it “an inconvenient truth”? With billions in investment, with millions in the appropriation net the avoidance of related regulations has been made possible by the micro credit capital, a variation of usurer capital, in absence of any bargaining power of the debtor-slave. A unique scene of tranquility indeed! An evidence of skill, shrewdness and innovation of the capital engaged in micro credit also.

AN ANNEX

The labour power the staff of micro credit organizations put into collection of “deposits” from the debtors and repayments of credit money by the debtors during visits to the debtors’ gathering or at the individual debtor’s premise, the highbrow the staff exhibit on the debtor’s hapless face and the skill of intimidation they show, their extended, often super-extended working hour, that push many of them to the verge of physical and mental tear down condition is also a “channel” of surplus value that micro credit feeds on, with which it fattens itself. “Intensive loan-collection systems use the labour of bank [the micro creditor] staff (and some capital goods, such as motor cycles) to reduce the cost [of disbursing and collecting back the credit money] ... and mounts a credible threat against default” (Hulme and Mosley, op. cit.). While considering the question of appropriation of surplus value by the micro credit capital the labour power of these staff, mere tools and victims of the system, should not be overlooked, should not miss a sympathetic “mind”.

Source:

1. Rahman: 1999 : Aminur Rahman, Ph. D., Women and Microcredit in Rural Bangladesh, Anthropological Study of the Rhetoric and Realities of Grameen Bank Lending, Westview Press, Boulder

2. Hulme & Mosley:1996 : David Hulme and Paul Mosley, Finance Against Poverty, vol.1, Routledge, London and New York

3. Marx:1977 : Karl Marx, Capital, vol. 3, Progress Publishers, Moscow

4. CDF:2005 : Credit and Development Forum, Microfinance Statistics, vol. 17, Dhaka

5. Fuglesang & Chandler: 1993 : A Fuglesang and D. Chandler, Participation as Process-Process as Growth, Grameen Trust, Dhaka

6. Khandkar et al: 1993 : Khandkar, Shahid, B. Khalily and Z. Khan, Grameeen Bank; what do we know?, World Bank, Washington D.C., unpublished paper, 1993, quoted in Hulme and Mosley, 1996