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“The interpretation of fascism as an instrument of big business has been classic since Daniel Guerin. But the seriousness of his analysis conceals a central error. Most of the “marxist” studies maintain the idea that, in spite of everything, fascism was avoidable in 1922 or 1933. Fascism is reduced to a weapon used by capitalism at a certain moment. According to these studies capitalism would not have turned to fascism if the workers’ movement had exercised sufficient pressure rather than displaying its sectarianism. Of course we wouldn’t have had a “revolution”, but at least Europe would have been spared Nazism, the camps, etc. Despite some very accurate observations on social classes, the State, and the connection between fascism and big business, this perspective succeeds in missing the point that fascism was the product of a double failure; the defeat of the revolutionaries who were crushed by the social democrats and their liberal allies; followed by the failure of the liberals and social democrats to manage Capital effectively. The nature of fascism and its rise to power remain incomprehensible without studying the class struggles of the preceding period and their limitations.”

– Gilles Dauve, Fascism/Antifascism. Translation of 

« Bilan » Contre-Révolution en Espagne. Edmonton, Black Cat Press: 1982. 

(via forestrebel)

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“In April 2000 Rolf Breuer, the head of the Deutsche Bank, told Die Zeit “politics would ‘more than ever [have to be] formulated with an eye to the financial markets’: ‘If you like, they have taken on an important watchdog role alongside the media, almost as a kind of “fifth estate”.’ In Breuer’s view, it would ‘perhaps not be such a bad thing if politics in the twenty-first century was taken in tow by the financial markets’. For, in the end: Politicians … themselves contributed to the restrictions on action … that have been causing them such pain. Governments and parliaments made excessive use of the instrument of public debt. This entails – as with other debtors – a certain accountability to creditors. … If governments and parliaments are forced today to pay greater heed to the needs and preferences of international financial markets, this too is attributable to the mistakes of the past.” In 2007 former Fed chair Alan Greenspan summed up the wisdom of the new era of globalization. In an interview with the Zürich daily Tages-Anzeiger on 19 September he opined that in the upcoming US Presidential election it mattered little which candidate he supported, since ‘(we) are fortunate that, thanks to globalization, policy decisions in the US have been largely replaced by global market forces. National security aside, it hardly makes any difference who will be the next president. The world is governed by market forces.’

That was in 2007, before the financial crisis hit. The question is how this narrative stands up in the wake of a decade of financial turmoil. Is the image of sovereign debt politics shaped between the 1970s and the early 2000s still plausible?

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On the face of it, it seems that the crisis must have further tightened the grip of financial markets on politics. The increase in public debt after 2007 was the most dramatic ever seen in peacetime, dwarfing the debt shock of the 1970s and 1980s. In the US alone the increase in Treasury liabilities between 2008 and 2015 came to $ 9 trillion. According to the logic espoused by the likes of Breuer, it is hard to see how this could not have increased the leverage of bond markets.

In May 2009 as the scale of the fiscal shock became clear, Bloomberg and the Wall Street Journal reported that markets were up in arms. Yardeni was once more to the fore warning that “Ten trillion dollars over the next 10 years is just an indication that Washington is really out of control ….” On May 29 2009 the WSJ announced that in light of “Washington’s astonishing bet on fiscal and monetary reflation” the bond vigilantes were swinging back into the saddle. “It’s not going too far to say we are watching a showdown between Fed Chairman Ben Bernanke and bond investors, otherwise known as the financial markets.” “When in doubt,” the Journal advised its readers, “bet on the markets.” It was a message that had particular resonance inside an Obama administration staffed by veterans of the Clinton years and haunted by memories of the 1990s. In May 2009 Obama commissioned his budget director Peter Orszag to prepare contingency plans for a bond market sell off. Orszag was a protégé of Clinton-era Treasury Secretary Robert Rubin. In the locust years of the Bush Presidency, Orszag had worked with Rubin to craft an agenda of budget consolidation for the next Democratic Presidency.

In early 2010 the appearance of “Growth in a time of debt”, a highly influential paper by Professors Carmen Reinhart and Ken Rogoff, added intellectual weight to fear of the bond market. The two former IMF economists claimed to have identified a critical threshold. When debt reached 90 percent of GDP, growth declined sharply leading to a vicious downward spiral. As Reinhart and Rogoff warned: once debt reached critical levels towards 90 percent of GDP or above, there was always a risk of a sudden shift in market attitudes. “I certainly wouldn’t call this my baseline scenario for the U.S”, Reinhart admitted in one interview – “but the message is: think the unthinkable.” On Fox TV historian Niall Ferguson invoked the collapse of the Soviet Russia to make the same point. A world power could be brought down by financial excess with catastrophic speed. Ferguson’s message to American audiences was stark: “The PIIGS R US”.

As the Greek debt crisis went critical in the spring of 2010, debt fear spread around the world. By May 2010 as Alan Blinder put it, the vigilantes were “riled up” and had formed “an electronic mob” circling the globe “faster than Hermes”. The sovereign bond spreads not only for Greece, but Ireland, Portugal, Italy and Spain were all moving upwards. And the tension spilled beyond the Eurozone. The hotly disputed and inconclusive UK election of 6 May 2010 took place in the midst of the most acute early phase of the Eurozone crisis. As British voters cast their ballots, rioting convulsed Athens and the “flash crash” disrupted US financial markets. Not surprisingly, in the aftermath nerves were on edge. Getting Britain’s deficit under control was the central preoccupation of the coalition negotiations. For the Tories and their advisors, it was clear that the budget talks would be “regarded by the financial markets as a test” of their government’s credibility. Market pressure would become the main justification for Britain’s severe austerity course. Even more drastic was the experience of Ireland, Portugal, Italy and Spain, all of which underwent budget tightening enforced by the threat of rising bond yields. In the Geek case, debt restructuring would become a brutal trial of strength. Negotiations stretched for 9 months and resulted in 2012 in a deal that only partially disencumbered the Greek state

What were the forces, who were the decision-makers moving the bond markets? In the wake of the crisis, this was no longer a question only for market insiders. Campaigning organizations such as the Trade Union Advisory Committee to the OECD and the International Trade Union Confederation began compiling statistics on global asset managers. The sheer size of the capital accumulated by these firms gives an impression of formidable power. The largest of them manage portfolios comparable to the sovereign debt of large European countries.

The giant bond funds recalled not so much the vigilantes as the robber baron railway capitalist that displaced them. Truer to the Wild West imagery were the hedge funds. These were far smaller but they were also more aggressive and willing to take risks on massively discounted sovereigns bonds. A handful of so-called “vulture funds” snapping up a few billion dollars worth of devalued debt could exercise huge leverage in complex debt negotiations.

And the spokesmen and women of the bond market were not shy about announcing their power. In the spring of 2011 “bond king” Bill Gross of PIMCO gave an interview in which he attacked the deficits of the Federal government in language reminiscent of the Tea Party. Gross told Atlantic magazine: “Sale of Treasury bonds is the easiest way of staging a mini-revolution …”. A Wall Street Journal Op Ed on 23 November 2011 explained: “There is a significant disconnect between the every person has a vote doctrine of representative government and the blunt collective power of money and markets. Most of the time this disconnect is hidden and doesn’t really matter. In times of crisis, as we have seen in Europe, it can become the only thing that matters, overshadowing coalition governments, parliamentary squabbles, constitutional prohibitions and all the rest.” As Kathleen Gaffney who co-managed $ 80 billion in bonds for the Loomis Sayles group, owned by Natixis, put it to the FT, Greece and possibly Portugal would “pay the price for not being harder on the populace”.

Such talk made perfect raw material for a revived interest on the left in political economy. Not surprisingly, the crisis renewed critical approaches to finance and debt. Slavov Žižek, enfant terrible of the radical scene asked rhetorically, “What, then, is the higher force whose authority can suspend the decisions of the democratically elected representatives of the people? As far back as 1998, the answer was provided by Hans Tietmeyer, the then governor of the Deutsche Bundesbank, who praised national governments for preferring “the permanent plebiscite of global markets” to the “plebiscite of the ballot box”.” At a conference hosted by the Soros-funded platform for alternative economic thought, INET, German literary theorist and critic Joseph Vogl remarked: “the markets themselves have become a sort of creditor-god, whose final authority decides the fate of currencies, social systems, public infrastructures, private savings, etc.”The most systematic and influential analysis of public debt from the left was that offered by sociologist Wolfgang Streeck. Indebted capitalist democracies, according to Streeck, face a systematic double bind. They were answerable not just to their citizens, but to a new constituency, the owners of governments bonds. Unlike citizens, credit markets are internationally organized. Their claims are enforceable in law. They have the capacity to exit. The interest rates set by bond auctions “are the ‘public opinion’ of the Marktvolk (AT: market citizenry), expressed in quantitative terms and therefore much more precise and easy to read than the public opinion of the Staatsvolk (AT: state citizenry). Whereas the debt state can expect a duty of loyalty from its citizens, it must in relation to its Marktvolk take care to gain and preserve its confidence, by conscientiously servicing the debt it owes them and making it appear credible that it can and will do so in the future as well.”

Of course, this left critique of capital markets has a pedigree. The idea of bond markets acting as a countervailing force against left-wing governments stretches back at least as far as the early twentieth century when social democratic parties first took the gamble of trying to govern capitalist states. In 1924 the government of the Cartel des Gauches in the French Third Republic was hobbled by what they dubbed the “mur d’argent” (wall of money). In 1931 the British left denounced the “bankers ramp” that split the second Labour government of Ramsay MacDonald’. In the 1940s Polish economist Michael Kalecki theorized about a capital strike. It was an idea that gained further currency as capital flows were liberalized in the 1970s and foreign investors could once again easily withdraw from an economy whose government they did not trust. In 2012 Streeck positioned his Adorno Lectures entitled Buying Time, self-consciously as a revival of crisis theories of the 1970s. The hobbling of Mitterrand’s government by capital market panics in the early 1980s reawakened memories of the 1920s. Thirty years later, the breaking of PASOK in Greece and the Spanish social democratic administration followed a familiar script and the enormous pressure directed against the left-wing governments of Greece and Portugal in 2015 made the rule of capital seem more absolute than ever.”

– Adam Tooze, “Notes on the global condition: bond vigilantes, central bankers and the Crisis, 2008-2017,” November 7, 2017.

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