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Thursday, December 24, 2009

Is US economic model obsolete, like was that of the USSR

I have more than once argued myself that the USSR disciplinary model of economy and society belonged to a long gone period, the one described in Marxist theory as that of "formal
subsumption" of Work into Capital, also known as Fordism. However I have instead assumed that the Western economies and in particular that of the USA had managed to make it into the next phase foreseen by Marx in an long unpublished chapter of Capital and confirmed by modern authors like Toni Negri as beginning c. 1968: the "real subsumption" of Work into Capital, also known as Toyotism, change also defined by the vanishing of the "mass worker" that fed the totalitarian states of the early and middle 20th century and the construction of the "social worker", the renewed revolutionary subject (in theory at least). Negri suggests 1968 as the defining transition event because it was in that year, the year I was born, when the clash of paradigms became more evident, both in the West as in the East, with the people radically questioning massively the old notions of authority and hierarchy.

However I might have been somewhat naive at the assumption that the West truly adopted the change demanded by the social and economic circumstances. It might well have been just a makeup, a partial imperfect adaptation... at least that is what John Kozy argues at Global Research: that the implementation of Toyotism by the US economy was faulty, that the paradigm of excellence in production and worker feedback, among others, were never assumed by the US entrepreneurial oligarchy, that they only responded with top-to-bottom designed "reforms" and with a total focus in the maths of lowering costs only.

This process of cost reduction culminated in the total sell-off of the national economy to those countries where the production was outsourced to, notably China. Logically China has found now its way into producing and exporting these products on its own, even to the USA itself. That's, Kozy argues, the root of the current economic crisis, which is much deeper than the final bubble and the current generalized depression.

So I wonder if I have oversighted the fact, every day more obvious, that the Reaganomics' boom was just a bluff and that the apparent success was just from the very beginning just short-term profit all the time. If the system failed to adapt in the USA (and this should be a warning to China, that has adopted also the maximum benefit model) to the real challenges of the phase transformation. The high dependency of the US economy on the Military-Industrial Complex all the time makes me suspect it is the case.

If so, we are witnessing a second chapter of the decomposition of the USSR in the 80s, just that now it is happening at this side of the former iron curtain.

Also, like in the apogee and decline of the Spanish Empire, we see the emperor fighting in way too many fronts against way too many and elusive enemies, indebted well beyond its possibilities and sunk in a major inflationary nightmare even at the bottom of an economic pit.

It's perfectly possible that the system has totally collapsed in fact but that we don't really realize yet. Such things happen: I'm quite sure that ancient Romans were not really aware of their decadence until it was too late, and the same happened with the Spaniards who fought war after war in vane attempts to reverse it (without ever addressing the causes with any seriousness). However in our age things happen always much faster than in old history: it's not any bug, it's a feature of Capitalism and globalization. Even in a quite modern moment, the French Revolution, a courier would take 7 days to cross the country between Paris and Marseilles, now any message arrives almost instantly to anywhere on Earth. Things must change fast with such huge communicative powers. Even in the pre-Internet age, the USSR collapsed in a matter of few years, almost "months". It was totally unexpected, except maybe for a few experts.

Is the Obama reign our "Gorbachev era"? With timid reforms that fail to address the real problems. Problems that I reckon are very difficult to address properly (they would need a true innovative leadership and, specially, popular movement - this kind of stuff can't really be done only through leaders, no matter how good they are).

We'll see.


Ken said...

The USSR's backwardness was due to the fact that Russia is a backward region, as it has been for half a millenium. No economic system was going to change that, Russia today is a third world country with a first world lifstyle, paid for by extraction industries. Another important difference: nobody wanted to go to the USSR (or wants to go to Russia today) while everybody wants to go to the USA.

Maju said...

Well, sorry. Russia/USSR become a quite developed country under Stalin... with massive development, specially in heavy industry.

The current situation is largely because they dropped the socialist system instead of improving it, adapting it to the challenges of Toyotism. Much of the same is true for some other countries like the former Yugoslavia, which was the Sweden of the Mediterranean until it collapsed in the bloody way we all know about.

Anyhow, there are are no perennially forward or backward regions. Italy, Greece, Syria, Persia or Egypt used to be the most advanced regions of the Western World... but "third world countries" like Belgium or Britain, or even Russia in this last century, replaced them at some point. This is evidence that management does matter and that no country should sleep on the glories of the past... because when they wake up they may find themselves displaced and subdued.

I don't want to go to the USA. I have been there once and I had enough. Cuba is probably a better place.

But it's not my opinion only: my uncle was a priced brainiac who worked for IBM. He worked in many countries (Brazil, Germany and USA among others) but when faced to choose between a high-pay contract in Connecticut or have some social security in Europe. He chose the latter. In his opinion the extreme competitivity of the US system just sucks.

Also, as you may know, as the USA is not investing enough in quality education, it is highly dependent on foreign workers, who migrate there only or mostly for the better salaries. But as they sink in this economic nightmare they are in... they are becoming less and less able to attract qualified aliens, what will unavoidably damage their economy.

This process is even more apparent in the UK, that has applied to a large extent the extremist US system of competition without having the imperial clout anymore: it relies heavily on foreign qualified workers who are the only ones willing to work for the low salaries they offer. However, as the pound sinks, its ability to attract foreign workers is heavily reduced and people that 10 years ago would emigrate to Britain now prefer to stay at home, what leaves this country with a growing shortage of qualified workforce.

Ken said...

USSR/Russia has never had a lead in any aspect of science or technology. The Stalin era USSR lacked metalled roads and the late USSR didn't have all weather roads on important routes (Russia still doesn't in many cases) .

I agree Britain is in bad shape compared to comparable countries like Germany, but that's maybe due to generations of the the most enterprising people leaving for America while the immigrants we get are not so good.

Some people might come back when they are old but young Europeans will increasingly leave to get away from the very high taxes that will be required when the time comes to pay the pensions of the Hungarian and Romanians as well as he rapidly aging W. Europeans. The European young professionals will choose to emmigrate to the US rather than suffer to support the pensioners.

Your uncle is a case in point, talented people from all over the world are going to continue to go to America, there will be additional reasons to do so in future. A very powerful advantage for the USA that its competitors lack : a flood of qualified young professionals. Comparisons with the USSR are hardly apt for another reason American popular 'culture' is totally dominant; people would want to go for that reason alone.

Even low skilled immigration to the US is going to expand the economy and over time send house prices up. There is a long way to go before that process runs out of steam. (It certainly can not go on for ever though).

I've spoken to someone who has visited Cuba and he said they were dirt poor ( he donated $20 to a social work charity and the woman started crying with gratitude) He towered over almost everybody at 6 foot, the soil has been ruined by excess fertiliser. Also no one talked about politics because they were too scared.

Maju said...

USSR/Russia has never had a lead in any aspect of science or technology.

Say what?! Even for a country that arrived to the industrial revolution 100 years after the USA (and other western countries) the USSR managed to have a lead in several aspects, like space exploration (Sputnik, MIR) or eye surgery. I don't know in what alternate planet do you live, really.

Probably you are just too young to realize how important and advanced was the East in the 80s and before. Sure, in most cases, the USA and Japan kept an advantage but that doesn't mean that the USSR was not very advanced for a country that had just broke with underdevelopment.

Compare it with Mexico or even China. Even today Russia is the only power on Earth able to fight a nuclear war with the USA effectively (though apparently it's the only aspect of Soviet progress they have managed to keep).

I'm not sure what you mean by "metalled roads" (never heard that concept before: a road is just a path with asphalt on top) but consider that in a collectivist society private road transport is not central. They had trains, a famous barocco-decorated subway and buses, something that the USA largely lacks of (think LA). About half of Russia is as inhospitable as the Canadian NW territories, so maybe that's what you're thinking about with your road speculation.

In fact I recall we liked better the NY subway because (then) it used to be full of graffiti, something we considered a lot better than the opera-like hyper-clean Moscow subway. But objectively speaking...

Maju said...

I agree Britain is in bad shape compared to comparable countries like Germany, but that's maybe due to generations of the the most enterprising people leaving for America while the immigrants we get are not so good.

I don't think so. It is due to the fact that Britain is not anymore any empire nor can dictate the value of things and the sterling pound. It is an average country trying to play with rules of an empire and that's sure failure. Minor countries have to be particularly careful about what they do with their economies of they'll get robbed soon.

The main problem now is that 10 years ago a Briton living off a pension in Spain was "rich" and now is poor. So Spaniards (who largely supplied some sectors of the British workforce, like nurses and physicians or even bartenders) are less attracted to get a British salary (low) and pay for a British home (still costly)... they prefer to be paid in Euros. This is just anecdotal to some extent but it's a generalized pattern. Indians also find better opportunities at home and so on...

And the heavy reliance of the UK on the financial (speculative) sector is no help of course. Countries with solid productive sectors like Germany have done much better. True that Germany had absolutely no problems nationalizing banks at the first sign of serious trouble, even with a right-wing government: they know that if the state doesn't protect the national economy, nobody will.

Some people might come back when they are old but young Europeans will increasingly leave to get away from the very high taxes that will be required when the time comes to pay the pensions of the Hungarian and Romanians as well as he rapidly aging W. Europeans. The European young professionals will choose to emmigrate to the US rather than suffer to support the pensioners.

Most aren't. Only certain branches that can't find "good" job at home do. US universities are still in the frontline and in many European countries there's nothing like that, so sure some scientists do leave. But Europe is not Ethiopia and offers more than just pensions for the elderly (for instance good gratis health care, more vital cities, unemployment insurance and in many countries cheap state-sponsored homes... and of course "there's no place like home").

None of my career syblings has emigrated for more than a few years, essentially to get experience and not out of Europe (Spain, Ireland, France). One of them is a chief engineer (small company though, so low salary for an engineer) and lives in a social-protection home. And when he went to the bank to ask for a credit for that he was told "for that yes because it's not much money but for more we are just not giving credit right now".

Go figure!

Your uncle is a case in point, talented people from all over the world are going to continue to go to America, there will be additional reasons to do so in future.

I don't say no but I would not be too enthusiastic either. The USA is not anymore what it used to be and things will likely get only worse in the years to come. Not that things are rosy for the rest of the world, of course... but if you are at the edge of losing your global hegemony, which has financed all your luxuries for so many decades... I'd be concerned.

The USA just consumes too much and produces too little. That imbalance won't stand this depression and US citizens should consider who has to tighten the belt: only the poor (status quo) or specially the rich (revolution).


Maju said...


A very powerful advantage for the USA that its competitors lack : a flood of qualified young professionals.

They can easily attract them if need be. The weakest point of the USA in this sense is that by relying on qualified foreign workers so much it has allowed its own worker pool to shrink. A prosperous country, specially nowadays, largely relies on an excellent educative system, a key aspect that the USA has disdained for too long.

Comparisons with the USSR are hardly apt for another reason American popular 'culture' is totally dominant; people would want to go for that reason alone.

True to a point. But in the past other countries were global cultural references and they succumbed to decadence anyhow.

In culture anyhow Hollywood (that is about all the export US culture) is too shallow and merely effectist. Sure we like special effects and all that... but up to a point. When we get serious we prefer normally non-US stuff (though there are of course honorable exceptions in US culture, most of it is junk relying on too weak pillars). In "serious culture" (not just empty brainless entertainment) I'd say that Europe is still more of a reference than the USA (Hollywood just can't produce anything of that) and that other countries are also approaching more and more that respectability. Disneyworld just won't... ever. It'd be like bringing Ronald McDonald to a cuisine contest...

By the way I remember the Czech cartoons of the Soviet era. I don't recall any relevant cultural product of the post-Soviet era. As some surprised East German official said when the Berlin Wall fell: "they want their bananas!"

But classical East German products were often of great quality and are now making a comeback. There was less diversity but quality was generally excellent. Even my uncle (another one) bought his binoculars "made in DDR" because they were the best. However I recall also the Romanian chocolate sucedaneous and it was total junk. To each one as it deserves but more or less like Kraft "cheez", that is not cheese nor makes up for it.

There is a long way to go before that process runs out of steam.

Sincerely I don't think so. I am going to go soothsayer now and my forecast is that in 2011 there will be huge turmoil (and I mean much worse than the 2008 crisis), then some unstable stabilization (long crisis without effective recovery) and then by 2016-21 a brutal showdown that will totally change things.

But I may be wrong and could be a lot faster. 2011 should be most complicated in any case.

Of course climate change won't help, as it's going to have demolishing consequences on its own right for the global economy and status quo.


Maju said...


I've spoken to someone who has visited Cuba and he said they were dirt poor...

I haven't been to Cuba myself so I can't say. I know that things have been hard since the USSR fell but that they are recovering. I also know (watch Michael Moore's documentary) that they have excellent healthcare, that nobody is hungry nor homeless, even if meat does not abound (maybe the reason for your friend being taller than most). Anyhow 6 feet (>1.80 m.) is pretty tall for an Iberian male - and for what I know for an Englishman too (they are supposed to be slightly shorter than Basques on average and my experience does not contradict that datum). I am average for my generation and I am 1.75 m. I'd expect most Cubans to be somewhat shorter, though I have also known very tall ones.

Dollars and other hard currency are very valuable for common Cubans because there is a strict monetary system and with dollars you can purchase in shops for tourists things that the average Cuban can't buy most of the time.

Socialist poverty is not the same as capitalist poverty: in a socialist system you have the basics granted though maybe you cannot expect much more. In a capitalist system you can dream (and occasionally achieve, depending where and who - think Guatemala or Haití or the Bronx, which are also capitalist) with luxuries but if you are really poor you are thrown to the streets to rot until you die.

There are no homeless in Cuba. You won't see people sleeping in the streets asking just to pay for some basic food. There's no one who can't access medical care because they lack money, nor anyone ever goes bankrupt because of the prohibitive costs of doctors and medicines, as happens in the USA everyday.

I don't say Cuba is perfect and I agree that the political system needs a deep reform but it is a valid counterpoint anyhow, very specially if you compare with other countries of its environment (Latin America and the Caribbean Basin).

Ken said...

I don't know enough about economics to be able to argue that side of things but as to the culture

era of US dominance is over?.
Felipe Fernández-Armesto
Professor of Global Environmental History:-

" I make my living in the US, I work there, and long acquaintance with America has made me viscerally democratic and egalitarian.

This debate is about values: it is values that have made America great. It is in American values that the origins of the real dominance that the US has exerted in the world lie. It is very interesting to me that those of us who have spent a lot of time in that country really know the US – and, because I was in jail there, I can add a whole new meaning to knowing America from the inside! My confidence in American dominance does not arise from the efficiency with which the police beat me up. I do not think it has got anything to do with the crudities of power which may fascinate philosophers like John Gray, or experts on culture like Pankaj. It is not about that. It is about something much more visceral, much more fundamental, and much more enduring than the banalities and trivialities of military power, and (dare I say it) of economics. I shall probably forfeit my entitlement to the chairman’s impartiality when I say that economics is a dreary subject. It tells you an awful lot about the costs of things, but tells you nothing about the real value. I am, of course, a great admirer of Oliver Kamm’s work in this field; the readers of the paper which he works on are of course famous for their amusement value. However, he is an ex-banker, and therefore nobody here is going to take what he says about economics seriously.

Yet even if this debate were about economics, I can absolutely promise you, ladies and gentlemen, that the state of the American economy is irrelevant. I live there, I can see it crumbling around me, and I am happy to acknowledge that the economy of the US is in a dreadful state. I would say that it is so dreadful, that it is almost as bad as it is over here! It is only somewhat better than in the EU. That does not matter, however, as what matters is not how much money you have got (as long as you have got a certain level of sufficiency) but what you do with it, where you put it and how you invest it. Of course, I am very happy to acknowledge that the US has erred grievously and actually traduced all of its own best traditions by wasting a lot of resources on evil, criminal and stupid acts like the Iraq war, which Oliver Kamm has so ably defended.

Ken said...

American intellectual leadership

The twentieth century

The great bulk, however, of American investment, if you take what really matters in America, which is what people, not the government invest in: it is the Land of the Free, and what the state does really is not what the country is all about. You should not judge the US by the iniquities of its government, but by the greatness of its people and, overwhelmingly, by what Americans have invested in, over the period of their dominance. I would define that dominance, incidentally, in the areas that really matter, as being roughly conterminous with the twentieth century: it seems to me to be utterly ridiculous to speak of an ‘era’ of dominance which dates only from 1945 – that is just a blip in history! An era must be longer than that. If you look at the way American dominance and American leadership in the world has been exercised in that period, if you look at the way American culture has influenced the culture of the rest of the world, if you listen to the echoes of American native and traditional and popular music in the music of the world, if you look at the images of America which have animated the art of the world, and if you look at those American thoughts which have inspired the rest of the world, in the twentieth century, overwhelmingly, it is because Americans have invested in culture, learning, research and, thank god, in universities, that they have established what is the genuine form of leadership they exercise in the world: intellectual leadership. This is why all the great technological advances and inventions, all the great intellectual initiatives of the period have come from the United States. What has happened in wars and in dreary regions of economics do not matter compared with these really important, fundamental, world-transforming forms of American leadership.

Cultural leadership

I have to tell you, like it or not, that in that respect, America’s dominance in the world is growing. I would define this American system of values, these American ideals which explain why the US is disproportionately such a big investor in learning, scholarship, culture and research, as civic-mindedness and neighbourliness. It is a myth that the US is the land of gross, madcap individualism and gun-toting capitalism: in fact, the US became great by being a land of solidarity, of support for each other, and of community collaboration.

Ken said...

For every gun-slinger in Main Street, there are thousands of decent citizens on the wagon trains, in the stockades, in the frontier towns who made their country great by supporting each other. That is how they turned the prairies of the great American desert into the bread basket of the world, full of glorious cities.

When I was a visiting professor in Minneapolis, my wife would not accompany me. She had that European prejudice that, while America may have one decent coast on the West, and another on the East, everything in between is an intellectual and cultural vacuum. When she visited me, she was really sorry she had not spent the whole time there – because, let me tell you, Minneapolis has more theatre seats per head of population than London, because they created this great culture because they needed it. Those were their values and that is what they wanted to do with their money.

Leading the 21st century

If you look at the current situation, the US is spending, on average, two and a half times as much per head on every student in university than we are spending in Europe. The gap in research investment is phenomenal: it is $1,000 per person in the US, but it is only $450 per head in the EU. That gap has been increasing over the last decade, and it will continue to increase, and that is why America is going to exercise leadership in the world. All of the students who come there from all over the world – in my university we have 140 countries represented – will go back, they will become leaders of their countries, they will carry those values with them, and they will rebuild their countries ever more faithfully in the image of America. The students back home who stay there with me will have a renewed confidence in their own relationship with the world, I can tell you that from my own classroom experience."

John Gray disagrees with the above
The Way of All Debt

Maju said...

No need to copy-paste long texts, it's much better to express things with your own words and thoughts most of the time.

Anyhow, what I read above sounds totally naive and propagandistic. Not just that I have to raise an eyebrow each time someone refers to the USA as "America" (wtf, what happened with Brazil, Mexico, Canada, Cuba, Argentina, etc.?), which is an obvious signal of US/Imperial patrioterism, but really there's not a single sentence in all that bunch of text that says anything that is not just idealist crap, either pseudo-poetic propaganda or naivety.

It is the economy, yes it is!

Ken said...

"Pseudo-poetic propaganda"

It's not just him, I have noticed a pattern: academics/media types who have worked in the US come back raving about how much better things are there and how civic minded (most) people are.

Maju said...

I lived in the USA for some months and I can only agree that there are some values (civism, some instances of participative democracy at local level) that are very positive (others not so much maybe like hyper-religiosity, hyper-competitivity, emphasis in being popular instead of smart, implicit racism) but I doubt that is enough alone to either raise an Empire or to prevent it from falling.

Also I think all those are being too one-sided to take them seriously.