July 23, 2011 at 19:31:00

The End of the World as We Know It

By Dr Stuart Jeanne Bramhall (about the author)

This is the first of two articles exploring the likelihood that capitalism is on the verge of collapse and what a post-capitalistic world might look like.

Global Capitalism: a House of Cards

As the global recession and debt crisis worsens, even mainstream analysts are starting to speculate that global capitalism is on the verge of collapse. At the moment, most attention is focused on European "debt contagion." European Union economists are terrified that the Greek government will default on their debt. A Greek default makes it inevitable that Spain and Italy will also default. The mechanism here relates to the totally unregulated, speculative way in which "sovereign debt" (the money countries borrow from private banks to finance government operations) is financed.

Investment banks in France, Germany, London and New York have already jacked up the interest rates they charge Italy and Spain -- high risk investments always command higher interest rates. Higher debt repayments will make Italian and Spanish default inevitable, which will increase interest rates on Japanese, British and US debt -- as all three countries have very high debt levels. Owing to the size of their economies, default in Japan or the US is very likely to crash the global economy.

The Endgame

There are three schools of thought as to how the capitalist endgame is likely to play out. The first predicts a scenario in which the Asian tiger economies (China and India) collapse when the US, Japan and UK do -- given that national economies are hopelessly intertwined as a result of globalization. This school also predicts that any serious global instability will pop the Chinese real estate (debt) bubble. When this happens, the Chinese economy will crash, like the US economy did when the subprime derivatives bubble burst in 2008. The creation of debt bubbles (the bubbles leading to the 1987 market crash and 2001 dot com collapse are examples), involves the creation of vast amounts of credit (i.e. wealth that only exists on paper), which are all wiped out simultaneously when the bubble bursts. This sudden loss of economic wealth inevitably bankrupts large numbers of businesses and causes massive job loss.

The second school believes that only the US, Europe and Japan will collapse, while the economies of China, India and its Asian and non-Asian trading partners (for example, Australia and New Zealand) will continue to prosper. In this scenario the coming debt crisis and crash will merely accelerate the gradual role reversal of the past two decades -- with China rising to the status of economic superpower and the US, Europe and Japan becoming third world nations.

The third school supports the scenario I believe Wall Street and the Pentagon have in mind, in which the US and its NATO allies confront China militarily to prevent it from replacing the US as the world superpower. Evidence that the Pentagon has already chosen this tact is seen in the strategic alliances it has formed around Middle East and North African oil resources. Many foreign analysts believe that the US wars in the Middle East and Libya are really proxy wars with China over oil resources. They worry that these proxy wars have the potential to degenerate into a full scale war between the US and China -- which would surely destroy both economies.

China's regional allies in this global struggle are Pakistan, Iran, Saudi Arabia, Angola, Russia, Palestine and (indirectly through Pakistan) a Taliban-controlled Afghanistan. US allies are NATO, India, Israel and Iraq (thanks to permanent US military installations in Iraq).

America's Proxy Energy Wars

Obama's and Hillary Clinton's recent threats against Pakistan for allegedly promoting Taliban terrorism are pure rhetoric. Their purpose is to conceal the strategic importance of Pakistan (and Afghanistan) in US competition with China over oil and national gas resources. It also conceals the reality that the undeclared US war against Pakistan (approximately 2,000 civilians have been killed since the drone attacks started in 2004 -- see http://en.wikipedia.org/wiki/Drone_attacks_in_Pakistan) is really a proxy war against China.

Pakistan is China's strongest ally in protecting the oil supply critical to its booming economy is Pakistan. At present China imports 46% of its oil. In contrast the US imports 60%. (See http://english.peopledaily.com.cn/90001/90778/90860/6891500.html). Twenty percent of Chinese oil imports come from Saudi Arabia and somewhat less from Angola (see http://www.presstv.ir/detail/183746.html.) Ten percent of China's oil imports come from Iran.

Growing Military Tensions in Pakistan

Until recently, all oil originating from Saudi Arabia and Iran had to be transported via the Persian Gulf and the Strait of Hormuz, which is under the control of the US Navy (see http://www.foreignaffairs.com/articles/62604/dennis-blair-and-kenneth-lieberthal/smooth-sailingthe-worlds-shipping-lanes-are-safe). To counterbalance this de facto US control over their oil transhipments, China built a port in Gwadar (in Balochistan province) Pakistan to facilitate overland oil transport -- via an extensive Chinese-built super highway and eventually the IPIC (the Iran- Pakistan- India-China) pipeline.

Since 2002, covert CIA support for the Baloch separatist movement and daily "terrorist" bombings and assassinations have seriously disrupted operations at the Gwadar Port (see "Our CIA Freedom Fighters in Pakistan" at "Our CIA Freedom Fighters in Pakistan"). As this obviously has more effect on the Pakistan economy than on China, the Pakistani government has recently given China permission to build a naval base in Gwadar http://corredorbioceanico.wordpress.com/2011/06/14/great-game-in-the-indian-ocean/\. This move is also partly motivated by continued US violation of Pakistan's sovereignty with CIA drone strikes in Waziristan.

China's Other Strategic Alliances

As US influence in Saudi Arabia declines (in 2003 they demanded the US withdraw their troops from Saudi military bases -- see http://en.wikipedia.org/wiki/United_States_withdrawal_from_Saudi_Arabia), the Chinese also strengthen political and economic ties with the Saudis.

Meanwhile as the US prepares to withdraw from Afghanistan, the US State Department is increasingly concerned about growing Chinese investment and influence in Afghanistan, especially in view of China's strong alliance with Pakistan and the latter's historic links with the Taliban (which seems positioned to take power following US withdrawal). Important context often omitted by the US media is that the CIA collaborated with Pakistan to create the Taliban in CIA-funded Madrassas (fundamentalist Islamic schools) to fight the Soviet occupation of Afghanistan (1979-1988). The subsequent Taliban takeover was fully supported by both Bush senior and Clinton, in the belief that it would bring peace and stability to a country devastated by decades of civil war. Both were essential to enable US oil companies to employ Afghanistan as a transit route for newly discovered Caspian Sea oil and gas. It was only when the Taliban balked at the Bush administration's proposed oil-gas pipeline in 2001 that they became the enemy.

It's no surprise that China is also one of the strongest political and economic supporters of Hamas and the Palestinian peace process (see http://www.chinadaily.com.cn/china/2011-03/26/content_12231765.htm). At present Israeli terrorist victims are suing a Chinese bank that provided major financial support to Hamas (http://www.jpost.com/International/Article.aspx?id=228728).

US Allegiances in the Middle East

India, Pakistan's long time enemy, is a strong ally of the US (second only to Israel) in this strategic war over resources. Indian intelligence (RAW) is a longstanding supporter of Afghanistan's Northern Alliance. With US military support, the Northern Alliance installed Ahmed Karzai as president of Afghanistan following the US invasion, although Karzai only controls a small area around Kabul. RAW provided the Northern Alliance with weapons, training and financial support while the US and Pakistan were still supporting the Taliban. In addition, RAW provides major support for the Baloch separatist movement in Pakistan (see http://stuartbramhall.aegauthorblogs.com/2011/03/07/our-cia-freedom-fighters-in-pakistan/ ). According to many Pakistani analysts, Indian intelligence is also responsible for cross border terrorism on the Kashmir-Pakistan border (see http://www.newscenterpk.com/indian-double-game-with-bangladesh.html).

What Will Post-Capitalism Look Like?

Marx predicts that the collapse of capitalism will be followed by either socialism, characterized by full political and economic equality, or "barbarism," his term for brutal totalitarian feudalism. Richard Heinberg of the Post Carbon Institute offers three possible scenarios for post-capitalistic society (see http://stuartbramhall.aegauthorblogs.com/2010/10/27/how-resource-scarcity-threatens-democracy). The first is totalitarianism; the second a somewhat more liberal "Green New Deal" that preserves class society; and the third the break-up of large nation states into small, democratically-run regional units. However unlike Marx, Heinberg predicts that any totalitarian governments that form will be short lived. He believes that global resource depletion will make it impossible to maintain the large centralized police and intelligence networks required to maintain totalitarian control over large populations. Thus the collapse of the global capitalist economy will cause large empires and nation-states like the US, Russia and China to break up into smaller regional units, as occurred during the Middle Ages following the collapse of the Roman Empire.

As a passionate advocate of participatory democracy, I strongly believe that the people living in post capitalistic communities will determine for themselves how they will operate. Nevertheless I believe we can predict some features of the post-capitalist world -- namely the ones forced on us by resource scarcity and catastrophic climate change. As a psychiatrist, what I've always hated most about capitalism is the way it destroys human potential. It has always seemed brutally unfair to deny certain population groups access to adequate nutrition, education, and health care and then arbitrarily write them off as inferior human beings. Thus I'm most interested in the ability of these small regional communities to reclaim "the Commons" -- an expression referring to communally shared access to the basic necessities of life, as well as more intangible human needs, such as education.

Will Capitalism Degenerate into Feudalism?

Following the collapse of the Roman Empire, Europe broke up into small regional units (city-states). These were eventually seized as personal property by aggressive feudal lords, who enslaved the other occupants to work their land for them. Yet history suggests that regional feudalism is a very impermanent social structure. Peasant revolts against feudal lords were incredibly common and could only be suppressed by merging city-states merged into nation-states, run by kings who formed large national armies to enforce stability. As Heinberg suggests, maintaining large nation-states and empires requires guaranteed access to resources (food, energy, metals and other raw materials for weapons and telecommunications systems) that are rapidly being depleted.

Bottom-Up Government

Unlike the Bolshevik Revolution, which had the immense resources of the Tsarist empire at its disposal, most of the small, regional units that emerge following the collapse of global capitalism will be forced to rebuild themselves from the ground-up. They all have the potential to be built according to democratic and egalitarian principles, though this is by no means guaranteed.

A study of early New England efforts to govern via "town hall" direct democracy reveals that self-governance is always more effective in small groups and communities. Early colonists found that once authority shifted from the town to state and eventually federal government, ordinary people lost the ability to have input into decision making. They could only elect representatives, without any ability to ensure the individuals they chose would actually represent their interests.

Reclaiming the Commons

"The Commons" is a historical concept present in all cultures that views certain property, material goods and intangibles (such as the air people breathe and the public airwaves used to transmit radio and TV) as belonging to the community as a whole to be managed in a way benefiting the public interest, rather than that of a particular individual group. The eighteenth century (British) Enclosure Act is considered the watershed event enabling individual and corporate interests to take precedence over the pubic good. Under the Enclosure Act, the landed gentry banned peasant farmers from raising crops or grazing on the "village commons," which now became "enclosed" as the gentry's private property. Subsequent enclosure laws enabled early capitalists to drive even more farmers off communal land to build factories.

Many communities around the world have already made a good start in reclaiming "the Commons" from the corporate elite. In some American towns and cities, this entails taking over functions state and local government have ceased to perform, owing to major budget difficulties. Examples include local citizens groups who have successfully fought corporate infringement on their communities (for example, protecting their water supply against bottled water companies seeking to drain their aquifers or giant agricultural conglomerates who threaten to pollute their ground water by building massive factory farms -- see http://www.landstewardshipproject.org/programs_factoryfarms.html and http://www.thealliancefordemocracy.org/water/). Other examples include citizen groups who have opted out of the corporate banking and food production system by taking responsibility for these services themselves -- by creating community and state banks, local currencies and bartering systems, as well as community gardens and orchards, farmers markets and community supported agriculture schemes.