The Third World War

08 November 2007 / 17 Aqrab 1386

Writing the essay on October 19, and then presenting and discussing the paper yesterday has clarified a few things for me. It seems that the Third-World War is underway. Simply put, it is a struggle by the elite against social justice, a struggle to assert extraordinary impunity. However it is an extremely complex war, because it is happening at all scales at once. It is at the scale of an employer abusing an employee. Of a superpower or cartel dictating unfair trade terms, and of elected leaders flouting the law with no consequences. So the pattern is not the whole First World is attacking the whole Third World, because the elite in the First World are attacking people in their own country as well, and elites in the Third World are likewise attacking their lower classes. Combat is usually difficult to see: it can be observed indirectly in income/living-cost ratios, and in shifts in the distribution of wealth shown by changes in the Gini Coefficient. So under most circumstances, you have to be a geek to actually find hard evidence of this process. It has been easier to spot here in Kabul, where everything is a bit more raw and blunt.

Several things have happened in just the last two days that have highlighted this for me. First, Pervez Musharraf has suspended the Constitution of Pakistan. He claimed he did this to defend Pakistan from “suicide” at the hands of Islamic extremists, but Barnett Rubin notes that he has only been arresting judges, lawyers, and dissident military personnel, and is allowing jihadi radio broadcasts to continue even as he has shut down virtually all independent media. It seems pretty obvious to political observers of Pakistan that he wanted to disband the Supreme Court of Pakistan before it made a judgment against him this week, rendering him ineligible to continue as president. The process of elite impunity is pretty obvious here; no need to belabor the point.

Second, a large bomb killed more than thirty people in northern Afghanistan yesterday, including six Parliamentarians and a score of children. One of the Parliamentarians killed was Kazemi, a very popular opposition leader. Today Kabul was gridlocked for the funeral procession of the Parliamentarians, and the route that the procession took was lined for more than a kilometer with people holding pictures of him. Somebody did not want him to be opposing Karzai, and it does not seem to be the Taliban (in an very unusual move, they denied responsibility). I suspect it was some of the criminals in the government who stand to lose if Kazemi managed to reduce corruption and increase transparency. A violent defense of impunity.

Third, on the other side of the world, a housing crisis is transferring billions of dollars of wealth from working-class Americans to the elite who are defined by the fact that they are net lenders. Not all of these elite are American: increasingly, private debt in the US is being held by an international class. Note how much harder it is to see the impunity here, unless you are working hard and still facing the threat of having your house repossessed. Who has that unaccountable control over you? Why is it that they deny creditworthiness to extremely reliable, steady-working people? As far as I can tell, the class of people who set the terms of credit are, loosely speaking, the class of people who set the prevailing wages. Company towns are the classic, simplified example of this. In a company town, wage-earners pay back their wages to the company owners through rents of company houses, and purchases at the company store. The economy of a country is much more complex, indirect, and open-ended. It is not even contained within the country itself. The company owners have a less direct, more abstracted influence over prices and prevailing wages. So the full-blown political economy of a globalized world is significantly different from a company town, but some principles are the same: most people work for owner-lenders at variable wages, and most people have debt which they must pay back at terms dictated by owner-lenders. And the difference is also important, because the abstract complexity of the world economy masks the ethical obligations and failures of the owner-lenders. To begin with, we rarely work for the same individuals to whom we owe money. So the “owner-lender” is not an identifiable individual, and they may not see that they are even part of an elite class. They think of their lending as investments, handled either by mutual-fund managers or personal finance managers. They do not see the people to whom they are lending. They perceive changes in investments as personal gain or loss, not the benefit or harm that borrowers experience. They will never be the people who come and repossess your house in person. Low-paid bank employees (or subcontractors) carry out such miserable work. And owner-lenders can dismiss your distress by saying that ‘you should have known better than to take out an interest-only, adjustable-rate mortgage.’ Or if you suddenly lose your job, they can just say that is bad luck, with no connection whatsoever to their own ethics or responsibilities. But since only a few hundred Americans have effective steering control of the US economy, they have a lot more choice over aggregate economic circumstances than you do. Under neo-liberal ideology, the emphasis is on personal responsibility; but that only seems to apply to the lower 80% of the population who are doing worse, year-by-year. The elites who have the real choices in this process seem to have exempted themselves from this simple equation: with authority and power come responsibility and accountability.

Note how different this is from a classic Marxist analysis. The classic Marxist conception of elite focuses on their economic role, and it assumes that they are somehow fundamentally different, malicious, mendacious people. It also assumes an all-or-nothing revolution in which the bourgeois class must be violently overthrown. The classic Marxian model oversimplifies the relationship between owner-lenders and worker-debtors by ignoring the idea that it is a dynamic balance. There is tension and antagonism at times, but there is usually an expectation of balance. Most worker-debtors don’t want to go through the effort and risk necessary to shift from the lower class to the upper class, nor do they want to tear that system down (but this is also why they resent inherited, unearned wealth and not competitive workaholics who gain their own wealth). My sense is that most worker-debtors have no problem with owner-lenders amassing a lot of wealth, so long as the system works well enough for the worker-debtor to live a decent and rewarding life. In this view, the Marxist-Leninist argument that “the vanguard” must impose material equality has two basic flaws. The obvious flaw is that “the vanguard” must obtain and exert brutal power in order to enforce material equality, which means that “the vanguard” must retain a grotesque inequality of political power in order to (try unsuccessfully to) enforce material equality. This undermined the legitimacy of the communist project. But the second flaw is that most people will tolerate significant material inequality, especially if they feel that they are being treated fairly and allowed to live their lives and take their chances as they choose. The Adams-Franklin ideal of “equality before the law” has had much more popular support than the Marxian ideal of “from each according to his ability, to each according to his need.” So long as people are being treated fairly by the system of government–including the governing of public behavior and business practices–they not only tolerate government mistakes, but actively fight to push that system towards its own ideal. The Civil Rights movement in the US was, in this framework, a pro-government movement. It challenged individuals within the government, but it was demanding that they adhere more closely to the ideals of the government itself.

Perhaps a lasting effect of the Cold War is that capitalists lost sight of the dynamic balance as well. For decades, a strong emphasis of American social investment was out of competition against the Communist threat. The US invested heavily in Japan and Germany not just because we thought reconstruction leads to stable peace, but also because these two countries were front-lines against Communist expansion, east and west. I do not think it is a coincidence that, immediately after the collapse of the USSR, Americans did not enjoy a ‘peace dividend’ from the end of the arms race; rather, a relatively liberal president pushed for major cuts in the welfare system. China was no longer espousing Maoism, so the US no longer needed to practice capitalism with a social conscience. So I think the neo-Liberal ideology omitted a crucially important aspect of the older Liberal ideology: regardless of communist, Salafist, or other external ideological threats, there is a vitally important sociopolitical balance that must be maintained within a capitalist system in order for it to function. Owner-lenders control the process of capital-production and capital-accumulation. Through relatively higher salaries to worker-debtors, owner-lenders can reduce the aggregate debt and increase the base of ownership in the society. Furthermore, owner-lenders will always be the primary tax base for social investment. Since they profit most from the productivity of a society, it is not only fair that they should be taxed relatively more, but note also that in the medium-run, those taxes mostly benefit the owner-lenders.

The American billionaire Warren Buffet has made a similar argument. He wants social investment and higher taxation going to social services because that benefits him. Given the vast diversification of his holdings, that benefit is quite direct: if Americans are more educated, and produce more value, he profits from that. So elites like him, who understand their disproportionate influence over whole economies, should be thinking at least in terms of enlightened self-interest. Regardless of their ethics or social conscience, there should be a “gentleman’s agreement” about the limits of wealth-concentration and the benefits of social reinvestment. Buffet goes beyond this and also makes the ethical argument that he has an interest in the quality and civility of the society that he lives in. In that sense he understands his situation and expresses real social leadership.

So the process of the US debt (housing) crisis, and the devaluation of the dollar is a little mysterious to me. These are both reducing the value of the US as a whole. For the elite, it is directly reducing their wealth because they own a big chunk of the aggregate assets of the US. I can’t imagine that a major private shareholder in Citibank wants several million families to lose their creditworthiness. Families are shifting to higher credit-card rates because they are missing payments in order to make their mortgage payments. Elite owners of bank assets profit either way, because they own both “mortgage-products” and “credit-card products”. But it should be clear that excessive debt-pressure on all those working families is quickly impoverishing them, making it harder to profit from them. Won’t devaluation of the whole economy also hurt the elite?

In Kabul I see a similar process at a smaller scale. Elites are building massive mansions, which everyone can see. Perhaps they see it as a “strong display of virtuous wealth” but every Afghan I have talked to sees these ostentatious mansions as hard evidence–and a continuous reminder–of the corruption of this government. So the government has lost credibility; security has deteriorated since 2004; and the land-value and rentability of these mansions has dropped dramatically. Again, why have the elite acted so directly to damage the value of their own assets? How does this happen? What is their perception of the process? Are they deceiving themselves? Do they have such contempt for commoners that they have not thought about the consequences–the possibility that those commoners would turn against them economically, and eventually militarily?

Kart-e Sakhi

70% of Kabulis live in neighborhoods like this. They do not own their land, and live under constant threat of eviction.

Jamal Mena

There are middle-class neighborhoods as well, where people actually own their land. This is about 30% of Kabul.

Shir Pur

0.5% of Kabulis live in this neighborhood. Any more questions about why the Karzai regime has lost credibility and is losing to the insurgents? This is not rocket science, guys…

Perhaps the problem is that elites are still thinking in terms of the vanished threat of nasty old Leninist-Maoist Communism. Certainly that threat is gone. But that puts us back at pre-1917 Robber-Barons-versus-huddled-masses stage. For centuries there had always been an obvious and volatile dynamic, of elite exploitation balanced with noblesse-oblige and charity. That might sound like a cynical description, but it is even stranger to see the nobility ignore that dynamic and endanger themselves where they care the most: their wealth. Even without violent revolution in the streets, the negative consequences to them should be pretty obvious. So what is going on?

That is not a rhetorical question. I am still at a loss. I think I can see the shape of the conflict now, but not the motivations and viewpoints of some of the key players. If I extrapolate that these elites are basically humans like the rest of us, then there is a lot that does not add up. Perhaps, through the abstracted, opaque process of present-day capital accumulation they cannot see the harm they are doing; perhaps it is now so opaque that they cannot even see how their choices will hurt even their own wealth very quickly. Something is not making sense here.


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