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By Juan Kornblihtt and Bruno Magro The eruption in North African countries is the expression that the global crisis has entered its State phase, reaching the structural functions of the state form. Although the scale of the social conflict is greater than those seen before in other countries due to the political conditions in the region, we face the same phenomena that were experienced in the general strikes in Greece, the demonstrations of English students, and recent demonstrations against adjustments in Wisconsin (U.S.). Many saw in the capacity of state intervention a quick exit to the problems of capital. But this same intervention is the one which gives the current phase of the crisis its particular character, which changed from a bounded sector to the whole of social relations. As we have pointed out in previous editions, it has a magnitude and quality of historic character. Hence, the unleashed conflicts have not reached a democratic or liberal resolution, and neither a nationalistic one. The State phase of the crisis The outburst of the housing bubble was the catalyst that revealed the weaknesses of the post-2001 recovery. Since the fall of the profit rate in the mid 70's and its nadir in 1982, although there were subsequent recovery cycles, a growing mass of production cannot find a way to realize itself by appealing to the expansion of fictitious capital so as to avoid an explosion of overproduction. In the '80s, there were the petrodollars and foreign debt, and then there was the informatics bubble in the '90s. The new century turned to mortgages and real estate. This last bubble was combined with an increasing weakness of the dollar and the expansion in the issuance of U.S. Treasury bonds. The latter were not only a way for the U.S. government to escape its difficulties, but also allowed China to continue exporting as if nothing happened. However, the outburst of 2008 was of such magnitude that it barred the growth of a new lasting bubble. It is true that the market grew disproportionately in commodities, particularly food and oil. But given its historical volatility this is far from being a steady source to shelter capital. Instead, government deficits emerged with greater importance as the form of intervention. In the U.S. the key was to bailout the banks along with the expansion of foreign debt coming from the issuance of the Treasury bonds mentioned above. The result is that the fiscal deficit at the federal level reaches 10 percent of GDP, while foreign debt is close to representing 100% of GDP. These are the worst figures since the Second World War. In the so-called "developing" countries central bank reserves grew massively (as for example in Latin America and Asia) along with some degree of state policy for public works and investment on the basis of undermining the fiscal surplus (e.g. Argentina, Venezuela and Brazil). In the first two, the strength of these economies is pinned down to the state's ability to keep part of the ground rent through direct and indirect taxes. In the latter, adding to ground rent there is a significant portion of financial capital which it receives from the regions where the crisis hit first. Ultimately, the crisis is incubated in them just as well, because their strength is the result of the weakness of the others and hardly an expression of any sort of fundamental changes. In short, what looked like a solution (state intervention), starts to become the problem. As this expansion is not supported by an increase in the production of social wealth, fiscal adjustment was a result which would eventually put the State at the center of the crisis. Not only in the weakest countries in the euro area, like Greece, but also in England and France. The United States seemed to follow an alternative path. At least some analysts believed that, based on the expansionist policy proposed at the G8 meetings, against the austerity plans driven by Germany. However, boosting the U.S. economy helped to increase corporate profits at the cost of high unemployment and a sharp rise in the fiscal deficit. Thus, the state adjustment had to come to the U.S. also. What they did not count on was that the hitherto passive working class would rise up with the magnitude it did in Wisconsin. As we can see the prospects of a State crisis are widespread, and not only affect the "center" but also the "periphery." The weakest links and those which stood in contradiction the fastest are those where the state has more relative weight in the economy. So the outbreak in North Africa was even more significant. After nearly a decade of strong growth, the region completely collapsed. One of the key elements is that this region, as will be discussed in the next section, depends heavily on transfers from abroad. Among them, in recent decades the economic and military "aid" provided by the U.S. were instrumental. With the crisis, such transfers began to fall and with them the viability of the economies of the region. The economic particularities of the Arab world Characterizing the combined economies of North Africa is not so simple. The first thing that comes to mind is the predominance of oil. Among the countries in conflict, its economic weight is crucial in Libya. In addition to representing 95% of its exports, it is the country with the largest reserves in the region. In the rest of the region it is also fundamental in Saudi Arabia, the UAE and in small states like Bahrain and Yemen. In Egypt, even though the importance of gas has risen in recent years, it has no direct weight in the economy, although royalties for its transport through the Suez Canal are quite significant. Finally, Tunisia, where the conflict broke out early, is characterized by a strong industry and tourism. That is why this country was considered a model by virtue of favoring a non-rentier bourgeoisie. In short, there is no doubt about the importance of oil in the region, but it does not act as the sole trigger of the conflict, it is rather a part of more complex relationships. Another perspective of a nationalistic type suggests that imperialism is behind the mobilized masses. However, all governments in crisis had not only political but strong economic ties with the world powers, including the Libyan regime which passed from being blockaded by the U.S. in the '80s to becoming a close partner. The argument that "they are coming for our oil" should have been raised years ago. Currently, all major oil companies are present in Libya and do business with the state company NOC. Among them there is the Italian company ENI, and China is increasingly appearing in the scene advancing its investments in Africa everyday. But in addition to direct foreign investment in oil and being the major export destination, the weight of the U.S. and the OECD in the region goes through the direct transfer of dollars as "economic and military aid." The leading role in the region is played by the first. Particularly through transfers to Egypt and Israel, the main beneficiaries. As shown in the graphs below, the boom of aid to the region took place in the '70s and '80s. But it remained significant until 2001. For example in the case of Egypt, it came to represent up to 5% of GDP. However, after the crisis of 2001 the transfers declined. The fall was not too large throughout the whole region, but a growing part stopped going to Egypt and Israel (the two main receiving countries) to go instead to Iraq. The need for such external support to these States and the instability that the decrease in such flows led to shows one of the clearest particularities of the region: the weakness of the local bourgeoisie. Given the small weight of the domestic markets and that the exports from these countries outside of the raw materials are almost nonexistent; there is no capital which is likely to sustain itself. These capitals depend on the transfers from the state to make money. In turn, this explains why all the accumulated wealth goes almost directly to the financial markets of Europe (from the accounts of the Gaddafi family in Switzerland to buy football clubs in Spain by Egyptian businessmen) instead of being reinvested. The result is a scarce accumulation of capital which leads to the existence of a consolidated and growing relative surplus population not only of the poorest sectors but also of the skilled workers and petty bourgeoisie. Unemployment reaches record levels, even in Tunisia, where industry has greater weight. But the mass of relative surplus population for capital is even greater than the number of unemployed. In Egypt 25% of employment is in government hands. Almost another 25% live in rural small holdings which are unprofitable. If to this it is added that private employment is taken over by nonviable companies that survive through transfers from the state, we find that the whole of reproduction in these countries depends on fiscal revenues. The state's role in sustaining the economy in these countries is far from new. External resources are key to understanding their evolution since they have no other sustainable revenue source. In countries with oil and gas exports, ground rent appears as the main source of income. In the weaker ones the key was the relationship with some advanced country that would finance them. In the mid-50s nationalizations and the state structure grew throughout the region by the hand of popular demonstrations which brought nationalist movements to power. Indeed, many were supported by the former USSR, which led some analysts to conclude that there was an Arab socialism in the region, although it was very far from it. The 70's marked the first crisis of the state in these countries, which deepened in the '80s. As in Latin America, a process of privatization and "neoliberal" reforms supported by the IMF and the World Bank emerged and deepened in the '90s. However, the weight of the state apparatus was hardly diminished. But now it was the U.S. and Europe who came to occupy the role of support that was previously played by the USSR. >From mini boom to eruption The first years of the new millennium found the region with a similar growth to that experienced by most of the “developing" countries. In the same way that growth rates were above average in Latin America, countries such as Egypt and Tunisia grew at rates close to 9% (e.g. Egypt in 2006). This occurred despite the aforementioned decline in U.S. economic aid. Which seemed to indicate that the region had found an independent pathway to development, or that it had at least reduced its dependence. A key element in this growth were the free trade agreements signed with Europe in 1995 and deepened in 2005 (the Euromed), which led to, as for example in Egypt, exports which grew by 62% between 2007 and 2008. Another factor was the tourism boom, which in Tunisia is more than half of GDP, while in Egypt it reached 19% of foreign exchange earnings. However, these figures do not express a fundamental change in the economies of the region. Surplus population continued to be as or more important than before. Unemployment was at 13.3% in 2010, but it was worse among youth and women. In the case of Egypt, although the overall level stood at around 9%, in the age group between 20-24 years the rates are around 27-30%. In the case of Egyptian women between 20 and 24 years the rate may be around 50%. Even with such high unemployment, low wages and the possibility of selling to Europe, there was no consolidated accumulation of manufactured exports, as in China or in the maquiladoras in Mexico and Central America. Although there was an improved participation in the global market share, the weight of the Arab bourgeoisie (or of foreign capital located in these areas) except for fuel remained insignificant. The structural weakness appeared in all its magnitude with the 2008 crisis. The springs which had enabled the small boom collapsed as a whole. If we focus on Egypt, we see that remittances from emigrants fell by 17% compared to 2008, tourism also went from a rise of 24% in 2008 to a fall of 1.1% in 2009 and the Suez Canal revenues fell by 7.2% compared to 2008, because the travel passages fell by 8.2% and tonnage of goods transported decreased by 9%. The situation in Tunisia was not very different: its growth of GDP decelerates from rising at 6.33% in 2007 to 4.5% and 3.1% in 2008 and 2009 respectively, while exports of goods fell by 25%, largely due to the decline in textiles and apparel and petroleum-related products. Libya for its part saw the price of oil fell in 2009 almost 40% compared to 2008, but recovered in 2010, though it was only by 20%. Due to the direct primacy of state relations the conflict is very fast taking on a political character, not only in regard to union demands, as for example occurs with general strikes which do not manage to challenge the established power, but fully attacking the political regimes. The fact that the primacy of state is not supported by a material basis to ensure minimum living conditions prevents the formation of a hegemonic, that is, democratic, domination. Personalist dictatorships trimmed up to the point of ridiculousness, as in the case of Khaddafi, are thus common. In short, the crisis of the state shows the bankruptcy of a social system. Behind the rebellion there is a mixture of interests because not only the working class is concerned, but also fractions of the weak local bourgeoisie and imperialist economic powers. In Libya, it is not only U.S. and European capitals that do business but also the Russians and Chinese are starting to appear with force. In fact, since the unleashed conflict directly affects their operations, China abandoned its position of non-intervention and supported sanctions against Khaddafi in the UN, together with the U.S. The proposals which have appeared up until now are far from providing any solutions. The local bourgeoisie only has to offer more of the same, since they represent no viable response and require for their survival the same broken and authoritarian state they are now fighting. The big companies behind the world powers bet on oil and gas and the most they have to offer is maquiladoras, so long as workers agree to high unemployment and low wages which, given the degree of mobilization, requires more than the existing repression. The working class, although it has the weight of the mobilization on its shoulders has failed to hoist a direction which puts the realization of its interests on the table. What is clear is that beyond circumstantial impasses that other classes which aim to direct the mobilization may achieve, they are far from being able to repeat the formation of a nationalist experience in the state as that incarnated by Nasser. In contrast, bourgeois factions who are aiming to direct the movement are closer to turning the region into a scene of civil wars and social massacres like those happening in Sub-Saharan Africa or in Iraq. Only a working class alternative can offer a better solution. Graphs can be seen at http://www.razonyrevolucion.org/ryr/index.php?option=com_content&view=article&id=1395:el-norte-de-africa-en-el-epicentro-de-la-crisis-mundial&catid=201:el-aromo-nd-59-qcunado-digo-futuroq&Itemid=120 Epigraph: Since the '70s, the U.S. took the place of the USSR in supporting the weak states and bourgeoisie of the region. Although fundamental, such support has been falling steadily since the 80s and especially since 2001, as seen in the case of Egypt (Figure 1). This is a general trend at the regional level, except for the sharp rise which involved the Iraq war as expressed in transfers to that country at the beginning of the millennium (Figure 2). This fall expresses the diminished capacity of the U.S. to act as "locomotive" of the world as a result of the general crisis of capital and that social upheaval are far from being temporary. ________________________________________________ Send list submissions to: Marxism@greenhouse.economics.utah.edu Set your options at: http://greenhouse.economics.utah.edu/mailman/options/marxism/archive%40mail-archive.com