Has Paul Krugman been reading Lenin?

Paul Krugman

V.I. Lenin

Having reread Lenin’s “Imperialism, the Highest Stage of Capitalism” as part of a Yahoo-based reading group on Marxism, the arguments are fresh in my mind. So much so that when I read Paul Krugman’s August 15, 2008 N.Y. Times op-ed piece “The Great Illusion“, I wondered if he had been dipping into Lenin himself :

So far, the international economic consequences of the war in the Caucasus have been fairly minor, despite Georgia’s role as a major corridor for oil shipments. But as I was reading the latest bad news, I found myself wondering whether this war is an omen – a sign that the second great age of globalization may share the fate of the first.

If you’re wondering what I’m talking about, here’s what you need to know: our grandfathers lived in a world of largely self-sufficient, inward-looking national economies – but our great-great grandfathers lived, as we do, in a world of large-scale international trade and investment, a world destroyed by nationalism.

Writing in 1919, the great British economist John Maynard Keynes described the world economy as it was on the eve of World War I. “The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth … he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world.”

And Keynes’s Londoner “regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement … The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion … appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalization of which was nearly complete in practice.”

But then came three decades of war, revolution, political instability, depression and more war. By the end of World War II, the world was fragmented economically as well as politically. And it took a couple of generations to put it back together.

So, can things fall apart again? Yes, they can.

I was especially struck by the Keynes quote: “The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth … he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world.” The similarity with Thomas Friedman’s “flat world” ideology is striking:

In an interview with YaleGlobal, Friedman was asked how nationalism and a flat world intersect. He answered:

That’s a good question. I really tried to develop that idea beyond Lexus. You know in Lexus I wrote that no two countries would fight a war so long as they both had McDonald’s. And I was really trying to give an example of how when a country gets a middle class big enough to sustain a McDonald’s network, they generally want to focus on economic development. That is a sort of tipping point, rather than fighting wars.

In “Flat World,” I take that theory one step further into what I call the “Dell Theory” – you know, Dell Computers. The Dell Theory says that no two countries that are part of the same global supply chain will ever fight a war as long as they’re each still part of that supply chain. Now, the big test case is China and Taiwan. Both are suppliers of the main parts of computers. If they go to war, don’t try to order a computer this month because you’ll have a real problem.

In the early 20^th century the notion that the growth of international trusts would reduce tensions between nations that even the left viewed this development as progressive. Karl Kautsky, the leader of the German social democracy, basically held the same view as Thomas Friedman. As long as big corporations were jointly owned by different national fractions of capital, they would tend to avoid war. As Kautsky put it in 1914, just as WWI was about to break out:

The subsiding of the Protectionist movement in Britain, the lowering of tariffs in America; the trend towards disarmament; the rapid decline in the export of capital from France and Germany in the years immediately preceding the war; finally, the growing international interweaving between the various cliques of finance capital-all this has caused me to consider whether the present imperialist policy cannot be supplanted by a new, ultra-imperialist policy, which will introduce the joint exploitation of the world by internationally united finance capital in place of the mutual rivalries of national finance capital. Such a new phase of capitalism is at any rate conceivable. Can it be achieved? Sufficient premises are still lacking to enable us to answer this question…

In my introduction to Lenin’s “Imperialism”, I posed the question: “Whatever happened to World Wars? Did the seeming ability of capitalism to stave off both worldwide economic depression and world war reflect to some extent that Kautsky was on to something? Are we living in something like ‘ultra-imperialism’ today, a point that is made in Hardt-Negri’s Empire?”

Perhaps this question has been answered partially by growing tensions between the U.S. and Russia. The left has had a tendency to dismiss the idea of inter-imperialist wars since the end of WWII. With such a close affinity between the U.S., Western Europe and Japan, it is impossible to imagine a new world war. Of course, there was always the Cold War but that was focused more on conflicts between imperialism and non-imperialist 3^rd world nations that lacked the firepower to recreate anything like WWI and WWII.

There is also the lack of a Hitler type figure in the post-WWII period who could have served as an antagonist to Anglo-American imperialism as was the case in the late 1930s. Of course, Hitler’s attempt to expand into Africa and Eastern Europe was driven by economic necessity. The Great Depression made it imperative for the German bourgeoisie to resolve its contradictions through foreign conquest. It was merely following Cecil Rhodes’s advice as recounted by Lenin:

I was in the East End of London (a working-class quarter) yesterday and attended a meeting of the unemployed. I listened to the wild speeches, which were just a cry for `bread! bread!’ and on my way home I pondered over the scene and I became more than ever convinced of the importance of imperialism…. My cherished idea is a solution for the social problem, i.e., in order to save the 40,000,000 inhabitants of the United Kingdom from a bloody civil war, we colonial statesmen must acquire new lands to settle the surplus population, to provide new markets for the goods produced in the factories and mines. The Empire, as I have always said, is a bread and butter question. If you want to avoid civil war, you must become imperialists.

We should also recall that WWI was not preceded by a huge economic collapse. For all practical purposes, the pre-WWI period was marked by apparent economic vigor and limitless expansion just as his been the case since the end of WWII-of course until the recent shocks to the system over oil. Once again, Lenin’s Imperialism is most instructive on this matter:

“The world oil market,” wrote Jeidels in 1905, “is even today still divided between two great financial groups-Rockefeller’s American Standard Oil Co., and Rothschild and Nobel, the controlling interests of the Russian oilfields in Baku. The two groups are closely connected. But for several years five enemies have been threatening their monopoly”: (1) the exhaustion of the American oilfields; (2) the competition of the firm of Mantashev of Baku; (3) the Austrian oilfields; (4) the Rumanian oilfields; (5) the overseas oilfields, particularly in the Dutch colonies (the extremely rich firms, Samuel, and Shell, also connected with British capital). The three last groups are connected with the big German banks, headed by the huge Deutsche Bank. These banks independently and systematically developed the oil industry in Rumania, for example, in order to have a foothold of their “own”. In 1907, the foreign capital invested in the Rumanian oil industry was estimated at 185 million francs, of which 74 million was German capital.

A struggle began for the “division of the world”, as, in fact, it is called in economic literature. On the one hand, the Rockefeller “oil trust” wanted to lay its hands on everything; it formed a “daughter company” right in Holland, and bought up oilfields in the Dutch Indies, in order to strike at its principal enemy, the Anglo-Dutch Shell trust. On the other hand, the Deutsche Bank and the other German banks aimed at “retaining” Rumania “for themselves” and at uniting her with Russia against Rockefeller. The latter possessed far more capital and an excellent system of oil transportation and distribution.

While the same alignment between oil companies and nations might not exist today as it did in 1914 (Germany would tend to align with Exxon), you still have the same explosive contradictions as the N.Y. Times reported on August 13:

When the main pipeline that carries oil through Georgia was completed in 2005, it was hailed as a major success in the U.S. policy to diversify its energy supply. Not only did the pipeline transport oil produced in Central Asia, helping move the West off its dependence on the Middle East, but it also accomplished another American goal: It bypassed Russia.

U.S. policy makers hoped that diverting oil around Russia would keep it from reasserting control over Central Asia and its enormous oil and natural gas reserves, and would provide a safer alternative to Moscow’s control over export routes that it had inherited from Soviet days. The tug-of-war with Moscow was the latest version of the Great Game, the 19th-century contest between Imperial Britain and Czarist Russia for dominance in the region.

A bumper sticker that U.S. diplomats distributed around Central Asia in the 1990s summed up Washington’s strategic thinking: ”Happiness is multiple pipelines.”

Now energy experts say that the hostilities between Russia and Georgia could threaten U.S. plans to gain access to more of Central Asia’s energy resources in a year when booming demand in Asia and tight supplies helped push the price of oil to records.

”It is hard to see through the fog of this war another pipeline through Georgia,” said Cliff Kupchan, a political risk analyst at Eurasia Group, who was an official at the U.S. State Department during the administration of President Bill Clinton. ”Multinationals and Central Asian and Caspian governments may think twice about building new lines through this corridor. It may even call into question the reliability of moving existing volumes through that corridor.”

Long ago I learned that Marxists are not in the business of predicting the future, especially when it comes to the question of global economic crises and inter-imperialist war. I was especially inoculated against predicting Armageddon when I saw the foolish predictions made by Jack Barnes, the leader of the SWP-a group that I had the misfortune to spend 11 years in.

That being said, we should remain vigilant. Clearly, we are entering a new stage of world politics that even a liberal economist like Paul Krugman can recognize.