THE NEOLIBERAL OFFENSIVE AND THE BATTLE OVER PUBLIC PROPERTY

By Manfred Szameitat

[This article published in: Marxistische Blatter, 5/22/2007 is translated abridged from the German on the World Wide Web,  http://www.linksnet.de/artikel.php?id=3068.]


1. The battle over public ownership of the means of production has become the hard-core issue in the international class struggle. For or against privatization of public property is the litmus test for leftist policy.

2. This is a defensive battle for anti-imperialist forces. This battle is directed against the offensive of imperialism or the reactionary reorganization of capitalism that is generally described as neoliberalism.

3. For neoliberalism, privatization of public property is the heart of the reorganization offensive.

4. For the left, unions and socialists, resistance against the privatization of public/state property is an important battle front because this privatization worsens the living-, working- and income conditions of the working classes directly and indirectly.

5. The struggle over public property does not involve the end of capitalism but the character of relations of production within capitalism.

6. Nevertheless the struggle over public property is also the proper battlefield for socialists/communists

- Because it focuses attention on the true theme: control over the means of production.

- Many people discover socialism is possible and can be better than capitalism.

- Like the question of war and peace, this is a struggle across the classes necessitating broad anti-monopolist alliances.

- This is closely connected with the defensive battle of people threatened by imperialism defending their resources and industries against monopoly capital.

These theses are foregone conclusions in political practice. Defending public property is hardly controversial among leftists. The dividing line between left and right within the nascent Left party in Germany runs along the question of dealing with privatization, e.g. the sale of public housing in Dresden.

ACCELERATED ACCUMULATION

Since the middle of the 1970s, a massive offensive of international monopoly capital has occurred. This is customarily described as neoliberalism. Whether or not this term is helpful, it is vital to establish that this offensive exists and continues. In its core, this offensive attempts to raise the profit rate or degree of exploitation. This attempt was successful. In all large industrial states, statistics show the share of wages and salaries in total national income has fallen since the 1970s while the share of income from assets has risen correspondingly.

For this offensive of capital, the repression of the state-share in the whole economy and the dismantling of social benefits were central from the start. Why were all possible activities in capitalism first shifted to the state so they now should be dismantled again? The state-share in the whole economy in the western European industrial countries Great Britain, France and Italy has actually shot up. Nationalization of important industrial branches like steel and energy corresponded to the programs of the social-democratic, socialist and some middle class parties. These nationalizations were carried out to jump start accumulation after the destruction of the 2nd World War. The stronger engagement of the state in the finance sector also corresponded to that priority. The center of gravity of the expanded state activity was in the infrastructure: transportation, electricity- and water supply, health care system and education.

To summarize, the expansion of the state sector helped accumulation and rapid economic growth. The vigorous pursuit of this goal at that time had to do with system competition and confrontation with socialism. In retrospect, this growth strategy of capital was very successful. In the 1950s, economic growth was very high in all capitalist countries. The historian Eric Hobsbawm coined the term “Gold Age” for this period. The situation of the working classes improved dramatically.

In the US, state activity remained relatively modest. The state was forced to combat the economic crisis of the early 1930s in Franklin Roosevelt’s New Deal. Instead of nationalizations, strict capital regulations were introduced, some mammoth corporations were smashed and the world of banking regulated to avoid in the future the speculative excesses of the late 1920s. The relative surplus of capital in the US may have been the reason for the correspondingly modest level of the state sector. Private capital did not need any state accumulation. The state’s protective function from foreign competition was less necessary and only loosely fulfilled by selective tariff laws in the richest capitalist country.

The accumulation model of growing state activity was not limited to the largely developed industrial countries. The new states that escaped from direct colonial status tried internationally to jump start industrialization through state investments. System competition enabled them to finance these investments. In the sixties and seventies, decolonialization followed the often successful attempt at gaining control of mineral resources. The union of oil-exporting countries (OPEC) was only an effective cartel for a time because the most important member states (including Iran and Saudi Arabia) carried out effective state control. Further key features were the expropriation of the Suez Canal by Egypt that led to the 1956 war of France, Great Britain and Israel against Egypt and the building of the Assuan dam. This was financed by the Soviet Union after the US refused participation.

The strategic turn to neoliberalism arose historically after the defeat of US imperialism in Vietnam and the threatened defeat in the system conflict. For the US, the Vietnam War was the main cause of an economic defeat suffered against inner-imperialist competition, Western Europe and Japan. Financing the war, investing much money in education, infrastructure and social programs and allowing higher wages weakened the position of the US. The dollar had to be devalued. The bond of the currencies of practically all capitalist countries to the dollar was annulled. This turn introduced a policy with the goal of the free flow of capital across national borders, a goal that seems largely attained today.

1ST PHASE: THATCHER AND REAGAN

Historically (up to now) the offensive of neoliberalism included two phases. The first was introduced through the collapse of the Bretton Woods system and the abandonment of fixed exchange rates to the dollar. This was justified ideologically in economics by the anti-Keynesianism of monetarism. State action was urged against the allegedly pure and biased effects of free markets. The redefinition of state property was the essential point of the ideological program of the Thatcher government that came to power in Great Britain in 1979. In the same year, Ronald Reagan was elected president of the US. Both governments followed a sharply anti-union policy, systematically dismantled the social security systems while reducing the tax burden of mammoth corporations and the rich. Both governments accepted or consciously induced a sharp recession. Great Britain began privatizing its extensive state industrial property. Nearly everything that could be privatized was privatized: the telephone network, the steel industry, coal mining, electricity, oil production, gas station networks, the auto industry, the railroad and the postal service. Ms. Thatcher’s action was the model for other, mostly conservative-reactionary governments.

On the other hand, the conservative Kohl government in Germany was more hesitant. The state sector was largely preserved. The largest privatization in the first eight years before the annexation of East Germany was the Virg, a conglomerate of Bavarian electric power stations and an aluminum industry built by Nazi Germany. The radical advance of the Thatcher and Reagan governments was first seen by the German bourgeoisie as a specific reaction to the special crisis development in the US and Great Britain. The strong preferential treatment of the financial sector and the emphasis on short-term profitability was rejected. At that time, the rapid sale of state assets still seemed dubious and was not taken seriously.

2ND PHASE: LIQUIDATION OF SOCIALISM

The second phase began with the defeat of socialism in Europe and the Soviet Union in 1989/91. De-nationalization of the means of production was pursued on a large scale. Privatization no longer faced the resistance of employees, voters, unions or parliaments. The monopoly capital of the West was formally invited or asked by the new government to seize the means of production east of the Elbe. The new ruling elites were satisfied with the role of junior partner. Privatization programs were tailored for them by western teams of experts that turned out very differently with extremely different property relations.

Its own elites were not allowed in East Germany. Here German capital took control immediately and radically. The DDR (East Germany) was a grandiose experimental field for dismantling a whole economy and distributing productive economic assets among private capital. The trust was the largest privatization institution of the world making its decisions at incredible speed. These decisions could not be rational in the economic sense. The currency union alone made impossible the survival and further development of DDR industry. The destruction and privatization of East Germany’s industrial plants occurred with only isolated resistance.

The massive economic failures in the liquidation of the DDR seem to have stimulated German capital. Even while the trust operated, the Kohl government took the decisive privatization course in the West. The most profitable state enterprise, the telephone network, should be privatized as a shining example. With unparalleled propaganda expense, the shares of the business were sold. The state retained its pension obligations. Since that time, no year has passed in which state assets were not sold. Schroeder’s social-democratic government accelerated the privatization course. Finance minister Hans Eichel sold enterprises to the Russian state at a discount.

…European Union (EU) law became an important lever for forcing privatizations. German governments from Kohl and Schroeder to Merkel took a Pharisaic attitude. Under pressure of the base, they cautiously defended state property. When the opening of the Italian or Polish banking market could benefit German banks or the future of French state enterprises, governments of Germany, Great Britain and the Netherlands were liberalist agitators or rabble-rousers.

In the liquidation of socialism in Russia, the greatest wealth could be gained in a less wild way than in Eastern Europe. The private appropriation of mineral resources and means of production in Russia started already in the time of the Soviet Union. In Boris Yeltzin’s government, the youthful oligarchs ensured their property with the help of their own banks and western banks. The 1998 ruble crisis mirrored the partial bankruptcy of the Russian state. Under Vladimir Putin’s presidency supported by the oligarchs, a screening process against takeovers by western monopoly capital was initiated. Because of the current raw material boom, young Russian predator capital in alliance with the Russian state sector (especially the energy giant Gas prom) became a serious player in global capitalism. Disappointment over not controlling all the raw material resources muddied the warm political relation of the US and Western Europe to Russia after 1991.

In China, a gigantic privatization process also became reality. Unlike Eastern Europe and Russia, no political change in power has occurred. The established state enterprises are not privatized. Rather individual persons receive contracts from the decentralized state and licenses to manufacture, build or export this or that. These contracts pay interest and promise a certain profit with a 10 percent annual growth of the economy. This is a kind of original accumulation under protection of a strong state.

Lastly, the worldwide predatory attack of imperialism also impacts the less developed states of the earth. Since the removal of the socialist camp, imperialism has resolved to repossess important sources of raw materials, particularly crude oil, gas and metals. This appropriation process and its political protection can be best described as the re-colonialization of the world. The wars of the imperialist states against Afghanistan and Iraq are colonial wars. They are waged around Central Asia’s raw material wealth and the oil fields around the Persian Gulf. Remarkably the war goal formulated before the start of the Iraq war to privatize the oil fields of Iraq, Saudi Arabia and the Gulf states was still not reached after four years of occupation in Iraq.

THE LOGIC OF PRIVATIZATION

The confiscation or redefinition of state property and state control over the means of production is the central historical moment of the neoliberal offensive. According to the logic of the capitalist economy, privatization promises crucial advantages to monopoly capital.

Firstly, the advantages of privatization benefit the firms that are directly favored. Privatizations promote a whole branch of investment banks, management advisors, lawyers, tax consultants, PR-agencies, stock brokers and so forth.

Privatized objects are often given a monopoly position. In Germany, state monopolies of the postal service and telecommunications that has slowly weakened in the course of time were first to be sold. Most privatizations of communal enterprises are natural monopolies. For example, they involve the complete water supply in a city or the management of local traffic in established routes. As a rule, monopoly revenue resulting from non-existing competition falls to such monopolies.

The effects of privatization of state property in the economy that seem advantageous in the short-term are even more important.

- The average profit rate increases through this influx of cheap capital values since the capital stock built by the state is usually sold relatively cheaply.

- Through privatization of public assets, the state makes available new investment possibilities. New areas of human labor are changed to surplus value production with the privatization of educational institutions, hospitals, prisons, police, guard duty, military and so forth. The capital base grows from which more profit arises.

- Every privatization weakens the position of employees. Businesses cancel old state collective wage agreements. The private owner has more possibilities than the public employer for closing or selling enterprises, ordering dismissals, forcing down wages and reducing other benefits. This is already praised by privatization advocates.

- Privatizations weaken the position of the state. This phenomenon is true on all planes. The community without public providers cannot act according to the desires of its citizens. The land with no banks cannot offer any cheap credits to rescue businesses. Under today’s conditions, privatizations encourage the international integration of capital. The argument raised by social democrats, Greens and PDSers that the state or city budget can be revitalized by means of privatization is false. A higher selling price above the market price can be realized for the privatized object. The opposite is nearly always the case. Small financed relief in the short term is almost always exchanged for massive burdens in the long term.

- Privatizations are the most important method for weakening the state. The weakness of the nation state vis-à-vis multinational corporations often decried today is firstly a result of the refusal of the state in regulating capital and secondly the result of selling public property.

RESISTANCE

In comparing the situation today with the situation in the 1990s, resistance against privatization of public goods and means of production has intensified. Internationally the successful defense of Russia’s oil- and gas-reserves by Putin’s presidential regime, the subordination of the state oil-producing community under the government authority in Venezuela, the attempts of different Latin American governments (Argentina, Ecuador and Bolivia) to regain sovereignty over the exploitation of their raw materials and the failure of the US in Iraq should be named here.

In Germany, the rigidity or paralysis of the left and unions has slowly given way after the collapse of command socialism. On the communal plane, privatization projects meet resistance today. Referendums and initiatives nearly always gain a majority. The decision of Freiburg citizens to refuse the sale of public housing is exemplary. A broad alliance has formed against the privatization of the railroad that is still planned by the German government. The auctioning of the regional bank including savings accounts urged by the Berlin Senate and the EU commission is vigorously criticized. This is a classic example for the government participation of the PDS/Left party that may have cost the party many votes in the Berlin election.

The Left party fused in the summer out of the PDS and the WASG reflects the strengthening resistance against the neoliberal offensive. In the party, the question of privatizations (alongside the question of military actions) has become the decisive question. The resistance fraction could prevail…

The defensive battle against privatizations is waged in the parliaments, enterprises and simultaneously in the streets. Successes are always possible in this defensive battle. Private businesses and state jobs can closely cooperate for their mutual advantage. Reflecting how control over the means of production can be secured in the long run and used to benefit citizens is vital. This stimulates reflecting about socialism.