> Date: Fri, 22 Jun 2001 14:23:18 -0700
> From: Michael Perelman <[EMAIL PROTECTED]>
> I don't know what the biggest risk is for capitalism: Third World
> upheavals, financial implosion, global warming, overcapacity, or
> resource constraints. I think it would be very useful to think
> about how these various forces relate to each other.
Let's say, these crisis-symptoms all occur in a more amplified form
because of, at root, the tendencies of overaccumulation/unevenness,
right? I think the merits of my PhD advisor David Harvey's work (e.g.
the newly reissued Limits to Capital) is the focus on the role of
finance in crisis-displacement, and geopolitical processes that
logically follow. (Finance displaces overaccumulated capital across
time throught the credit mechanism--allowing consumption now, surplus
extraction to pay for it later--and finance moves money across the
world in a twinkling of an eye, so the geographical devalorisation
can occur wherever resistance is weakest.)
A few more words on Jim's post, and then I ask comrades to help us
on some Zimbabwe deliberations.
> Date: Fri, 22 Jun 2001 18:19:57 -0700
> From: Jim Devine <[EMAIL PROTECTED]>
> Unfortunately for Marx, his volume III theory of the rising organic
> composition of capital doesn't work very well on either a theoretical or a
> practical level. Not only can the capitalists compensate for any rise in
> the organic composition of capital by cutting wages relative to
> productivity (raising the rate of surplus-value),
Jim, there are always countervailing tendencies (absolute/relative
s.v. extraction), of which I think the most important since the
current int'l slowdown in accumulation began three decades or so ago,
has been the temporal/spatial *displacement* of the devalorisation of
overaccumuled capital. Third World lending has been one vehicle
(even if not, in the whole scheme of things, a particularly large one
in volume terms... but we've really felt it down here!).
Consider, for instance, the Suter/Eichengreen studies of financial
crashes: every 50 years like clockwork since 1820s, involving 1/3 of
all nation-states (the WB's 2000 Global Finance report actually
promotes the financial-Kwave theory, I guess because Stiglitz still
had his hand in and Eichengreen refused to draw the logical
conclusions). It seems that the big difference during the 1980s was
the concentrated power of the WB/IMF--as cops for NY/London/Frankfurt
banks--to NOT ALLOW the devalorisation of financial capital by
instead rescheduling debt (Nyerere and Castro failed to get the
debtors' cartel up and running).
But the point here is that this process of displacing the
overaccumulation crisis South didn't solve it. Racing to repay
unpayable debt, the Third World glutted most raw material and light
mfg. markets. So the displacement -- the recent spatio-temporal
countervailing tendencies Marx did not really foresee or theorise --
simply means that the overaccumulation problem grows worse, right?
> but any crisis that
> occurs purges imbalances from the system, destroying capital and allowing
> accumulation to recover -- to drive itself into crisis once again.
A matter of the balance of class forces, right? Including territorial
struggles? So, that's why helping to more surgically identify the
pockets of resistance and empower them--instead of comrade Chris'
utopian global-regulatory strategy--becomes ever more crucial. To
link the pockets of resistance obviously also calls for the need for
solidarity--the globalisation of people (not of capital or state
functions, which will overwhelm us if they maintain their
current international capacities, without nation-states reigning in
capital, e.g., through a new round of exchange controls).
> Even this doesn't inevitably lead to capitalism's demise. Instead, it
> encourages collective solutions, i.e., the monopolization of markets and
> the rise in the role of the state. The last time capitalism had a gigantic
> Crisis -- the 1930s -- it encouraged the rise of state solutions, from
> social democracy to fascism, with the U.S. New Deal in the middle, on a
> national level. The next Crisis will likely see its solution on the global
> level, as seen in embryonic form in the Kyoto accords. (Somehow, the
> Bushwackers aren't anti-abortion on _this_ issue.) If the current US
> slowdown turns into a global depression, it encourages further development
> of collective control, perhaps the creation of a global Fed. "Human
> ingenuity" would show up in the form of a New Bretton Woods conference, a
> global-statist version of social democracy or fascism or something
> in-between. This eventually would allow the re-establishment of capitalist
> accumulation ....
Why are you so sure, comrade Jim, about global "solutions"
(restructuring of relations of production)? The old familiar
intercapitalist-competition plus bloc-formation process plus
geo-military conflict seems just as likely, doesn't it?
Let's return to geopolitical problems associated with the economic
crisis, because I still think that, whether we like it or hate it
(yeah Doug, we know where you stand!), the nation-state (and maybe
subsequently the region) is the single most important unit of control
for defending territorial alliances of those social forces resisting
the devalorisation of, e.g., NY financial capital... via,
logistically/mechanically, delinking from the most destructive
circuits of global K.
Actually, that's one reason Zimbabwe's quagmire is so fascinating
right now.
This is draft and not for circulation, possibly to go into Z, but
I'd love to get a sense of whether the economic argumentation
associated with aggressive debt management is convincing...
Zimbabwe's lurch
towards a pauper's burial?
by Patrick Bond
(Bvumba mountains, Zimbabwe, 19 June)
Last year, I spent June rambling the roads of
Zimbabwe's Eastern Highlands mountains.
The human warmth of the Shona people and
physical beauty of the rural landscape are
world-class. My job should have been inspiring:
election-observation for a regional team trying
to document whether the parliamentary vote was
free and fair.
But last June was a tragic time (1), because
of the decay of Robert Mugabe's once-
liberatory nationalist politics. Exhausted,
corrupted, desperate and prone to violence,
the Zimbabwe African National Union
(ZanuPF) barely held off a challenge by the
nine-month old Movement for Democratic
Change (MDC), winning just over half the
120 contested parliamentary seats.
Mugabe's socialist vision evaporated long
ago, although he calls forth radical rhetoric
periodically to confuse matters. "Talk left,
act right" is the chosen formula, as
Zanu(PF) continually seeks to revive popular
memory of a time when the party was
indeed a fish in the sea of the masses, while
concurrently repressing those who protest
vigorously from the Left.
In early June, for example, Zimbabwe
National Students' Union president
Nkululeko Sibanda was tortured by
Mugabe's secret police, the Central
Intelligence Organisation, after the CIO
accused him of "working with the MDC to
topple the government." Sibanda is leading
widespread student protest over unaffordable
university fees and privatisation of campus
facilities and services.
But the topic of the gloomy present was
replaced, during a recent weekend visit, by the
question of Zimbabwe's very uncertain
financial future. I flew two hours from
Jo'burg to Harare, drove east for four hours
and joined a dozen civil society strategists in
a sunny, wintertime seminar up in the
mountains bordering Mozambique.
We gathered to debate the country's most
durable economic problem, the buildup of
foreign and domestic debt: $5 billion and
$1.5 billion, respectively. Zimbabwe is
considered only "moderately" indebted by
the World Bank, but the burden of
repayment is so brutal that Mugabe finally
said no around a year ago.
For two NGO activists, Davie Malungisa of
the Zimbabwe Coalition on Debt and
Development (Zimcodd) and Eunice
Mafundikwa of the African Network on
Debt and Development (Afrodad), the
protests they joined at the spring meetings of
the World Bank and IMF over the past two
years took on new meaning as we reviewed
a new debt study. The report's author,
Masimba Manyanya, was formerly a chief
economist for Mugabe's finance ministry but
quit to join the trade union movement in
1999.
All three thirty-somethings are progressive
professionals who, while differing on party-
political affiliations, share the concern that a
national debate over economic policy has not
yet even really begun, and that resolving the
debt crisis has to be central.
Zimcodd was founded last year by the main
organisations in the social justice, church,
women's, NGO and trade union movements.
"Debt is already genocidal in Zimbabwe,"
insists Malungisa, "because so few of our
urgent social priorities can be met. The last
budget saw a 26% crash in health spending,
for instance."
Indeed, debt peonage couldn't have come at
a worse time, given that life expectancy is
falling into the thirties because of
HIV/AIDS. By cutting living standards so
dramatically, structural adjustment
contributed to the opportunistic infections
and breakdown of the state health system
through which AIDS flourishes.
Continues Malungisa, "Debt is a threat
against which all Zimbabweans can and must
unite. Otherwise we face a pauper's burial.
Zimcodd is even joining the World Bank Bonds
Boycott campaign to drive this point home
where it counts: Jim Wolfensohn's wallet."
Malungisa and the others are far out ahead
of the political curve here. In next April's
presidential elections, the MDC will
probably win, vindicating the political
courage of its founders, the Zimbabwe
Congress of Trade Unions and its
supporters, the mass of the urban poor, the
youth, and the working-classes.
But here arises another hurdle. In February
2000, the impoverished young party also
welcomed big business, white farmers and
even overseas supporters with imperialist
designs, who gave enthusiastic financial and
logistical support once the MDC defeated
Mugabe by 55% to 45% in a referendum
over a new constitution.
If the MDC becomes the ruling party, it is
likely to be pressured into adopting hard-
core neoliberal economic policies (2). But
that won't do the country any good, given
the neoliberal roots of the current political
tumult.
The disaster of neoliberalism in Zimbabwe
is not surprising news, no doubt (3). But it's
worth returning to the debt issue because
Harare has adopted some interesting
emergency policies which any genuinely
progressive government would want to
consider amplifying.
In particular, three recent government
decisions are considered insane by
conventional economists: running such a
relaxed monetary policy since January that
interest rates (15%) are at least 45% below
the inflation rate; pegging the currency at 55
Zimdollars to one US$ when the black
market rate is at least double that; and
servicing foreign debt only haltingly.
We need to look at these objectively, and the
post-independence context is crucial. My
own theory is that the foreign debt burden
and the failure of the 1991-95 structural
adjustment programme designed by the
World Bank together drove Mugabe around
the bend, in classical nationalist zig-zag
mode, in mid-1997.
Ironically, in 1995, the Bank had judged
Mugabe's turn to neoliberalism as "highly
satisfactory" (the highest possible ranking).
Most macroeconomic, sector and financial
objectives were "substantially" achieved
(again, the highest mark), said an official
Bank evaluation.
In reality, the formerly well-balanced
economy became deindustrialised and
massively indebted. The social wage
collapsed as budget cuts bit deep. Gender,
race and class inequity soared. And
Zimbabwe became much more vulnerable to
international shocks.
Over the period 1990-95, gross domestic
product fell by a fifth, from $8.50 billion to
$6.80 billion, as foreign debt soared 55%,
from $3.25 billion to $5.05 billion,
according to the World Bank's own debt
tables.
Meanwhile, grassroots protest was relatively
erratic and easily contained. Finally in 1996-
97, trade unions, civil servants and
farmworkers all challenged Mugabe from the
left.
Simultaneously, Mugabe was berated by
several thousand of his former comrades
from the 1960s-70s struggle who had
received none of the spoils of liberation. In
late 1997 he struck a deal with these war
veterans, giving them a few thousand dollars
as a pension in exchange for allegiance.
Within a year, some of the most aggressive
war vets had become a quasi-paramilitary
force, harassing trade unionists and others
who staged periodic strikes. (And within two
and half years, the war vets had staged
bloody occupations of more than 1,000
white-owned farms, which aided Mugabe's
2000 election campaign by reviving
nationalist memories of the need to rid
settlers from the best land.)
But the pincer squeeze on Mugabe was
tightening hard during the late 1990s, as
local democracy activists and international
financiers made contradictory demands. In
1998, the last full year Mugabe authorised
repayment of the foreign debt, there was
only one other country in the world (Brazil)
paying higher debt-servicing charges in
relation to its ability to earn exports. (That
fact, embedded deep in the World Bank's
latest Global Development Finance report,
has never been reported in Zimbabwe.)
After several years of spending $650 million
annually on debt servicing, Zimbabwe
coughed up $981 million in 1998, against
just $2.57 billion earned from exports, an
untenable ratio of 38%. But even though
over the period 1994-98, Zimbabwe had
paid $910 million more in debt servicing
than it received in new loans, the debt
actually rose over those five years from
$4.54 to $4.72 billion. (At the same time,
grant aid fell by half, from a peak of $310
million in 1995 to $150 million in 1998.)
Because of repayment scheduling and the
tyranny of compound interest, Mugabe found
himself sliding backwards on the debt
treadmill. Finally in early 1999, he jumped
off, refusing to pay the IMF and Bank,
thereby joining a list of rogue-financial states
like Yemen, Iraq and the Democratic
Republic of the Congo (DRC).
The costs of short-term IMF "help" now
finally outweighed the benefits. Those costs
included three main conditions attached to
$200 million in IMF credit promised in
1999. Mugabe was ordered to immediately
reverse the only redistributive policies he
had adopted in a long time, namely a) a ban
on holding foreign exchange accounts in
local banks (which immediately halted the
easiest form of capital flight by the country's
elites); b) a 100% customs tax on imported
luxury goods; and c) price controls on staple
foods in the wake of several urban riots.
Mugabe resisted the IMF, and was cut off
after the first small tranche of the loan. But
hatred of the Zanu(PF) leader continued to
grow in the cities when he deployed 10,000
troops to the DRC war, partly as an act of
solidarity against the US-backed
Ugandan/Rwandan invasion of the east of
the DRC.
However, Zimbabwe's intervention was soon
unveiled as a ghastly mercenary-style
arrangement with the soon-to-be-assassinated
Laurent Kabila. The deal allows Harare's
military and state elites to loot the wretched
DRC's cobalt, copper and diamonds.
Tellingly, the IMF permitted Mugabe to
continue his DRC adventure at a crucial
negotiating stage in mid-1999: "We have had
assurances" about Mugabe's plans for
further deployment, an IMF source told
Agence France Press. "If there is budgetary
overspending, there will be cuts in other
budget sectors."
In other words, health, education and other
badly-defended sectors would suffer more
pressure on behalf of Mugabe's military
cronies.
These are some of the reasons Malungisa
says Zimbabwe's foreign debt should be
considered "odious," not subject to
repayment by a democratic successor.
The foreign loans that Robert Mugabe
signed for during the 1980s and early 1990s
backed the ruling Zanu(PF) party's worst,
most self-destructive tendencies, and were
contracted in a non-transparent manner
contrary to society's interests.
A full audit of Zimbabwe's foreign debt
would reveal systemic failure. Not only did
loan conditionality throughout the post-
independence period screw the poor. The
credits also created space for degeneracy by
elites, who used the hard currency to import
inappropriate luxury goods and unsustainable
machinery, to be repaid by the future
generations.
But the days of easy foreign credit ended by
the mid-1990s, so government turned
increasingly to domestic borrowing. The
interest bill on local and foreign loans was
projected by the finance minister late last
year to reach a phenomenal 48% of the
annual government budget--of about $2
billion--in 2001. (And that's even after
Mugabe absurdly projected privatisation
revenues of $200 million this year, a
promise which no one believes he'll keep
since parastatal corporations are vital to his
political patronage system.)
The only light I see at the end of the debt
tunnel is that whatever party is ruling after
the April 2002 election might, perhaps, learn
from present circumstances that it's ok to
default.
Having failed to make key foreign debt
payments since 1999, the government is now
$600 million in arrears. Zimbabwe finance
minister Simba Makoni promised the World
Bank and IMF he'd spend about that sum
this year to repay foreign loans, but it seems
that Mugabe won't let him.
Makoni, who is considered a reliably
neoliberal technocrat, conceded to the World
Economic Forum meeting in Durban a
earlier this month, "We are committed to
fulfilling these obligations, but it's clear that
our economy is in no state to generate
sufficient funds to clear these arrears."
Even if the debt was serviced, the IMF's
Stanley Fischer told Makoni that there won't
be any new loans until Mugabe fulfills a set
of new conditions, including getting war vets
off the commercial farms they occupied last
year.
With the prospect of net repayment outflow,
Mugabe appears justified in ignoring IMF
repayment demands and instead hijacking a
portion of foreign exchange earned by
tobacco and other exports, for emergency
purchases, including fuel. Even so, the price
of petrol, which has been in very short
supply this year, was raised overnight by
70% last Thursday. (A two-day general
strike has been called by the unions for the
beginning of July to reverse the increase.)
An interesting geopolitical/economic
question immediately arises: in the wake of
having effectively defaulted on foreign debt
and now facing chronic foreign exchange
shortages, what further material punishment
can the world economy impose on Mugabe?
Aid has been withdrawn by most donors, or
redirected to civil society. Trade sanctions
proposed by Jesse Helms--which are not
supported by the Zimbabwean opposition--
would in any case not bite much harder.
The only country that could really finally
push Zimbabwe over the economic cliff if it
wanted to, is South Africa, through which
most exports and imports flow. But Thabo
Mbeki has repeatedly come to Mugabe's aid
in various ways (although it appears that
Pretoria is now finally ready to recognise the
Movement for Democratic Change as the
likely next government).
In sum, Zimbabwe is down but not out.
Periodic shortages--including essential drugs
and California-style electricity load-
shedding--contribute to the misery of daily
life.
Government justifies maintaining an official
exchange rate half that which is available on
the black market, on grounds it can't afford
to pay for vital imports at the market rate.
The private sector reverts to the higher rate
for its own imports, while government
insists on exchanging a quarter of all the hard
currency revenues earned by exporters, but at the
lower rate.
And then there's the 15% rate of interest
government decided to pay domestic
creditors for short-term loans, at a time
inflation is roaring above 60%. The state
forces institutional investors to purchase
Treasury Bills, and in the process spreads
the pain of debt payback to relatively
wealthier savers who get a negative rate of
return, after discounting inflation.
The upside of the negative real interest rate
is that only half the amount that was
anticipated (nearly $1 billion) will be
required to service domestic debt this year.
And productive investment can be financed
more cheaply than at any time in the last
decade, for those very rare businesses
interested in expanding during the midst of
depression.
But because institutional investors aren't
getting the return on interest-earning assets
that they want, they've pushed
unprecedented funding into the Zimbabwe
Stock Exchange, which was the fastest rising
in the world over the last year. And the
stocks they're buying are absurdly
overvalued, so they'll lose again when
normalcy returns and the market crashes.
These contradictory policies aren't tenable
over the medium-term. But if the MDC is
ruling Zimbabwe next year it may have to
drop the overall neoliberal formula for one
simple reason. The debt has become so
oppressive that there is only one way out:
defaulting the foreign lenders and cheating
the local institutional investors (and by
extension savers, including some workers
whose pension funds are now shrinking
quickly).
This leaves three other residual challenges:
* redirecting financial capital which is
now flooding away from interest-bearing
assets into the stock market;
* protecting the pensions of ordinary
workers; and
* shielding the poor from inflation, for
instance through well-conceived subsidies
on basic needs.
Even if he acted on these forcefully (which
he won't), it's hard to envisage Mugabe holding
on to power, no matter how much he
intimidates the rural electorate to again vote
Zanu(PF). Over the past few weeks, he lost
three key nationalist militants--defense
minister Moven Mahachi, employment
minister Border Gezi and war vets leader
Chengerai Hitler Hunzvi--in unexpected
deaths (two accidental car crashes and
illness, respectively). Rumours have
circulated that a Zanu(PF) military clique is
anxious to take over, possibly via a coup, if
Mugabe continues to falter.
Other support is also waning for the 77-year
old president. Controversial information
minister Jonathan Moyo, on whom Mugabe
has come to rely for spindoctoring, had his
wings clipped this month by cabinet
colleagues. The judiciary still leans against
the ruling party. And a string of smaller
elections coming up will tire Mugabe in the
run-up to the presidential race.
But matters are not much rosier for the
opposition. Former trade union leader
Morgan Tsvangirai is likely to be the
MDC's candidate for president, although
Mugabe has him awaiting trial for
threatening violence last September, which
potentially could disqualify Tsvangirai from
the election. And even if the MDC wins
next April, it would not control parliament
immediately, and would have an enormous
struggle to establish political stability in such
a divided society.
The biggest struggle, though, looks to be
about ten months away: if the MDC can
extricate itself from the grip of big money
and orthodox economic ideas (and right
now, I'd bet no), how would they slay the
debt monster? Tsvangirai, after all, said in
an uncharacteristically slippery way last
year, "I still hate the World Bank and IMF,
like I hate my doctor."
If the MDC can't shake off neoliberalism,
will civil society groups offer as vibrant
advocacy on socio-economic rights as they
do today on political and civil rights?
Late at night, next to the blazing Bvumba
fireplace as our seminar came to an end,
Davie Malungisa, Eunice Mafundikwa,
Masimba Manyanya and the other folks
chatting over local beers swore that in
coming months, they'll be at the forefront of
linking Zimbabwe's best grassroots activists
to the international anti-neoliberal
movement.
(For those readers who want to see a
democratic Zimbabwe without the burden of
a $5 billion foreign debt, Zimcodd and the
Jubilee South movement--http://aidc.org.za--
promote 100% cancellation. The best ways
to help out are to join Davie, Eunice,
Masimba and other Zimbabweans protesting
at the Washington annual meetings of the
World Bank/IMF in early October, and to
support the World Bank Bonds Boycott:
http://www.worldbankboycott.org)
(1) ZNet, Commentary, 6/22/00:
"Zimbabwe's Election: Who's Right, Who's
Left?"
(2) I address this dilemma more fully in the
Journal of World Systems Research, current
issue (http://csf.colorado.edu/jwsr).
(3) ZNet Commentary, 4/30/00:
"Zimbabwe's Crisis Showcases Reasons for
IMF/World Bank Protest"
