The global financial crisis is a political, as well as an economic, implosion, writes Hassan Nafaa* The international order is in the grips of a three- dimensional crisis. One dimension is economic, connected with the immediate causes that triggered the crisis. The second is political and pertains to existing balances of power while the third is ideological and concerns the impact of the current crisis on the future of capitalism and liberal thought. At the economic level experts speak of the "mortgage bubble" that US loan and credit agencies have been carrying for years. When the bubble burst the effects ricocheted not only through financial institutions but spread to the real US economy and from there to the rest of the world, dragging the entire global economic order towards stagnation. The crisis has been described as the worst to hit the capitalist system since the stock market crash of 1929. The immediate economic causes of the crisis conceal a number of significant political aspects for the eruption took place at the heart of the global order, in the country that insists upon dominating this order. It occurred at a time when the political and moral credibility of this dominating power has faced unprecedented erosion. US standing in the world has collapsed as Washington fell into the hands of an extremist neoconservative clique whose policies, on virtually every level, have proved a complete failure. The economic crisis also took place during a transitional period in which it appears that Russia has now regained sufficient leverage to rebel against Washington's unilateral hegemony and in which emerging powers such as China, India and Brazil are seeking regional and international roles commensurate with their economic status. The international order is clearly undergoing major shifts, a result of the gap between the status quo and the actual strength and ambitions of several major players. At an ideological level, many argue that the current crisis throws into relief contradictions in the capitalist order and the extent to which neo- liberalist economics is capable of resolving the problems of this order in a globalised age. The industrial revolution that first emerged in Europe some three centuries ago and that eventually spread through the rest of the world caused a radical transformation in the modes and means of production. These, in turn, necessitated a new division of labour the effect of which was to create new relations of production and generate the rise of social classes that would eventually supersede the agrarian and feudal classes that had previously prevailed. The new socio- economic was termed the capitalist system. It evolved in several phases before taking root as a global order. The first was the colonialist phase during which European powers occupied most of Africa, Asia and the American continents in order to transform them, first into sources that supplied nascent European industries with the raw materials they needed and, second, into markets for the products of these industries. The second phase was characterised by the growth and spread of transnational companies. If these initially enjoyed the protection of colonial powers, after the colonial era they evolved to become the most important bastions of the global economy and one of the most powerful mechanisms for the globalisation of the capitalist system. The road to a capitalist system, and to some extent to political liberalism, was not strewn with roses. It was riddled with obstacles and humanitarian catastrophes. The working classes were brutally exploited by the emerging bourgeoisie. Their humanitarian plight inspired many political thinkers to propose "socialist" ideas, often regarded as unrealistically romantic until Marx formulated them into a cohesive doctrine The Marxist dialectic of the development of human societies rests on a simple premise, which is that the cumulative evolution of the modes of production must inevitably lead to qualitative changes in the relations of production, i.e. forms of property ownership, the class systems this creates, and the types of ideas the ruling classes use to justify the pursuit of their interests and to perpetuate their position of power. On the basis of this premise Marx divided pre-capitalist history into three consecutive stages: primitive communism, slavery and feudalism. He then proceeds to demonstrate how modern technologies in the late feudal era gave rise to the bourgeoisie whose interests conflicted with those of the feudal aristocracy. In the inevitable clash between the two, the bourgeoisie prevailed and capitalist society superseded the feudal order. However, Marx predicted that the development of capitalist society would give rise to new contradictions, this time between the dominant bourgeoisie and the growing proletariat which would become increasingly aware of its own rights and interests. Again, a class conflict would ensue culminating in the victory of the proletariat and the emergence of a socialist order, which, in turn, would pave the way to the ultimate phase of social evolution: modern communism. One is struck by how starkly Marx's intense interest in analysing the contradictions of the capitalist phase contrasts with the total neglect of any analysis of the nature and form of the socio- political order that the industrial proletariat is charged with establishing and which it is presumed will usher in the communist order in which all contradictions vanish and in which each man contributes according to his ability and obtains according to his needs. I would also like to draw attention to another important point, which is that according to Marxist logic, the proletariat should erupt where the capitalist system is most advanced stage. In Marx's time that meant Britain or Germany. This prediction did not come true. The first revolution that was inspired by Marxist ideology occurred in Tsarist Russia, one of the weakest links in the capitalist order. In an attempt to justify this "deviation" Lenin argued that founding a socialist order on the margins of the capitalist world would hasten the rise of universal socialism. The Marxist-Leninist notion of "building socialism in one country" did not appeal to a significant branch of the movement that ignited the Bolshevik revolution. Leon Trotsky felt that there was no future for a socialist order outside the context of a global socialist movement that would ultimately supplant capitalism. He feared that the establishment of a socialist state in a country on the margins of the capitalist world would obstruct the evolution towards socialism, not hasten it. History proved Trotsky correct. True, the Soviet model of socialism managed to last seventy years, but it ultimately collapsed due to its failure to evolve into a global order capable of offering better solutions to mankind's economic and social problems than Western liberal capitalism. At the same time, we should note that the economic depression that swept the world from 1929 to 1931 alerted leaders of the capitalist world to the fact that some of Marx's theories on the nature of the contradictions in capitalism were valid. Accordingly, some Western thinkers, most notably the famous British economist John Maynard Keynes, began to reconsider the bases of conventional economic liberalism, which were essentially founded upon Adam Smith's laissez-faire maxim, and to advocate an element of state interventionism in the economy in order to remedy the periodic crises that result from flaws in market mechanisms and to remedy distortions in the distribution of wealth. Keynesian thought held sway for several economically robust decades. However, some hard core liberals, including Francis Fukayama, proclaimed the victory of economic liberalism and the end of history. They overlooked two important points. First, establishing a socialist regime in a country the size of the Soviet Union posed an enormous challenge to the liberal capitalist order and enhanced that order's innovations in all fields, enabling it to constantly renew its blood. When the Soviet Union and the socialist order collapsed, the capitalist system grew sluggish and fell prey to the most rigid and extreme capitalist thinkers. Neoconservative control at the helm of the capitalist system was one of the major factors that propelled the world towards the current crisis. Secondly, liberal capitalist forces did not hesitate to ally with the socialist Soviet Union when it came to confronting a greater peril to them both: the fascist militarist regimes that emerged in Germany, Italy and Japan and triggered World War II. The victory of the Allied over the Axis powers gave additional impetus to efforts to found the UN and paved the way to the end of the colonialist era. The end of the Cold War between the capitalist and socialist camps and the US's rise to the pinnacle of the world order reopened the possibility of direct colonisation. The new colonial epoch, dressed in American garb, has cost mankind far greater human and material losses than the Cold War, which is why it is not that odd that the crisis should erupt in the centre of the new order and threaten its collapse from within. Hard core laissez-faire economists will probably try to renew their confidence in the ability of the capitalist system to sort out the current economic crisis, as it had resolved periodic crises in the past, such as the Great Depression of the 1930s. I doubt whether their hope will come true. Today's crisis is qualitatively different from previous crises in two respects. It took place against a backdrop of an almost totally globalised economic order, at least in terms of the financial and credit markets and the solutions, therefore, must be equally global and embrace all financial institutions, including the World Bank and IMF. It has also happened at a time when the mechanisms of economic globalisation are totally out of sync with the mechanism of political, social and cultural globalisation, which are faltering. This means that the solutions needed to overcome the current crisis must also take into account the interests of other countries in a non- globalised political order that lacks an agreed upon leadership. Such a task will be far from easy. In the 1930s a great thinker such as Keynes was all it took to rescue the capitalist system. But at that time this system was a long way from the current era of globalisation and there also existed a rival, antithetical socio-political economic order. Today, the rescue process must be of an entirely different order. To succeed will require a fundamental change in the way the American economic system works and a new global political order. * The writer is secretary-general of the Arab Thought Forum, Amman, Jordan.
