The trade war: The infernal machinery of capitalist competition
'War, 'battle', 'invasion': the language of war has taken over the sphere of trade and the economy. As the economic crisis gets more severe, competition for shrinking markets gets sharper and sharper, and is now turning into a real trade war. Economic competition is a constant feature in the life of capitalism, one of its foundations, inherent to its being. But there is a fundamental difference between periods of prosperity during which capitalist enterprises fight to open up new markets and increase their profits, and periods of acute crisis, like the one we're in now, where the question isn't so much to increase profits but to limit losses and ensure your survival in an increasingly savage economic brawl. Irrefutable proof of the economic dogfight going on today: the record number of bankruptcies in all countries of the world. In 1991 they rose by 56% in Britain, by 20% in France. It's a cull that has hit all sectors of the economy.
One example among many: Air transport
One example among others, but a particularly significant pointer to the trade war, is the air transport sector. The airplane has for decades been the symbol of the development of the most modern aspects of world trade.
From the Second World War to the beginning of the 1970s, the boom in this sector enabled the air companies to carve up a market in full expansion, leaving each other with a wide margin for development in a situation where competition was not severe. The biggest companies grew steadily under the cozy protection of the laws and regulations introduced by the state acting in the role of patron. Bankruptcies were rare and only affected second-rate companies.
With the return of the capitalist crisis, competition becomes increasingly rough. The rise of the 'charter' companies which came along to compete with the big companies for the most profitable routes, thus breaking their monopoly, was the harbinger of the terrible crisis which really got going in the 80s. Under the growing pressure of competition, the regulations which had previously limited it broke down. The deregulation of the American domestic market, at the beginning of the Reagan presidency, brought the curtain down on the period of prosperity and security which the big air companies had enjoyed up till then. In one decade, the number of big US domestic companies fell from 20 to 7. In the last few years, some of the biggest names in US air transport have crash-landed into bankruptcy: TWA has recently joined Pan Am, Eastern, Braniff and others in the cemetery of broken wings.
Losses are accumulating: In 1990, Continental lost $2,343 million; US Air $454 million; TWA $237 million. In 1991 the situation was even worse. United Airlines and Delta Airlines, which were the only big American companies to announce a profit in 1990, have just declared respectively losses of $331 million for the year and $174 million for the first two months.
In Europe, the situation of the air companies is no brighter. Lufthansa has just announced provisional losses of 400 million DM; Air France consolidated losses of 1.15 billion francs in the first two months of 1991;. SAS 514 million crowns of losses for the first quarter of 1991. Sabena is up for sale, while the small regional companies are going down like flies.
As for the world's biggest air company, Aeroflot, it doesn't have enough kerosene for its planes and is threatened with break-up by the disappearance of the USSR.
At first, this somber balance-sheet was officially explained as the result of the Gulf War, which did of course reduce the frequency of flights for several months. But once the war was over, the situation didn't improve, and the excuse wore thin. The recession in the world economy wasn't caused by the Gulf War; air transport merely provides us with a perfect resume of its devastating effects.
The least profitable airlines have gone to the wall and entire regions of the globe, the most underdeveloped ones, are less and less linked up to the industrial centers of capitalism.
On the most profitable routes, competition is intense. North Atlantic flights have multiplied, resulting in overcapacity and a reduction in maintenance standards, while the price war is leading to a policy of dumping that is reducing the profit on fares.
In order to make themselves more competitive, at a time when the market was flourishing more, the air companies had, over a period of some years, launched ambitious programs of buying new planes, getting deep into debt in the perspective of future prosperity. Today they're landed with brand new planes which they can't use and are obliged to cancel their orders or to ask the plane makers to delay delivery. The planes have no takers on the market and dozens of jets are standing idle in the airplane parking lots.
In order to plug the hole in their treasuries, the air companies are trimming their budgets in all sorts of ways:
- they are laying off workers in droves: over the last two years, there's not one company which hasn't laid off workers. Tens of thousands of highly qualified workers are out of work with no prospect of re-employment;
- - maintenance of planes has been 'lightened': in the last few years several companies have been caught out for failing to respect the very strict rules for keeping the vehicles in proper order;
- - training budgets have been reduced and the qualifications demanded of pilots and technicians have become more 'flexible' ;
- flight crews are subjected to more severe conditions of exploitation.
Such measures lead only to a deterioration of air safety and a multiplication of accidents.
While on the one hand the companies are involved in a policy of drastic economies in order to patch up their balance sheets, the same laws of competition force them to make massive expenditures. One of the laws of survival in a situation of exacerbated competition is the search for the ideal size through the development of commercial alliances, fusions and the buying up of other companies. But while this policy eventually leads to 'economies of scale' through a better management of personnel and planes, it can also involve heavy initial outlays. One example among others: Air France, which has just bought up UTA, fused with Air Inter, and is participating in the newly privatized Czech company, now wants to buy the Belgian firm Sabena, not because the latter is particularly interesting economically, but above all because the competition mustn't be allowed to grab it. Such policies are very costly and mean big increases in debt. In their will to survive, all the companies are playing this game of 'the loser wins', where victories are purely Pyrrhic affairs that merely mortgage the future.
The trade war shaking up the air transport sector is one illustration of the absurdity of a system based on competition, of the catastrophic contradictions into which capitalism is sinking. This reality dominates all sectors of the economy and all firms, from the smallest to the biggest. But it also lays bare another reality, characteristic of capitalism in its decadent phase: the dominant role of state capitalism.
The state at the heart of the trade war
The air transport sector is strategically essential to any capitalist state, not only on the strict economic level, but also on the military level. When it comes to transporting troops, as in the Gulf conflict, the requisition of civil aviation by the army becomes a necessity. Every state, as soon as it has the means to do so, sets up an air company bearing its colors and enjoying a quasi-monopoly over internal routes. All the airlines of any importance are under the control of one state or another. This is obviously the case of companies like Air France which is the direct property of the French state, but it's also true for the private airlines which are totally dependent on the juridical-administrative arsenal which each state has set up to keep a strict control over them. And sometimes this involves capitalism's most esoteric lines of control, as during the Vietnam war, where the Air America company turned out to be owned by the CIA. Behind the trade war in the air transport sector, as in all other spheres, it's not just firms confronting each other, but states.
The offensive discourse of American capitalism, which drapes itself in the standard of 'liberalism', of the sacrosanct 'law of the market' and 'free competition', is a complete lie. Each state needs to protect its internal market, its enterprises, its economy. Here again, air transport is a good example. While the USA pretends to be the champion of deregulation in order to allow 'free competition', the US domestic market is protected and reserved for US aircraft. Each state passes a panoply of laws, rules and norms whose essential aim is to limit the penetration of foreign products. The speeches about liberalism are mainly aimed at getting other states to open their internal markets. The state everywhere is the main economic agency and companies are no more than the champions of one or other brand of state capitalism. The juridical form of property, private or public, doesn't change this. The myth of 'multinationals' propagated by the leftists in the 70s is well-worn by now. These firms aren't independent from the state; they are simply the vectors of the economic imperialism of the world's great states.
Economic rivalries in the Logic of imperialism
The collapse of the Russian bloc, by putting an end to the military threat of the Red Army, has taken away the cement which enabled the USA to impose its discipline on the countries that made up the western bloc. Countries like Germany or Japan, which were the USA's main economic rivals, had still been its faithful allies. In exchange for America's military protection, they accepted the economic discipline their guardian imposed on them. Today, this is no longer the case. The dynamic towards every man for himself, towards unrestrained trade war, has now been unleashed. Logically, the weapons of economic competition will go together with the weapons of imperialism. This reality was expressed very clearly by US Vice President Dan Quayle when he declared in Germany in early February: "We mustn't replace the cold war with a trade war," then adding, to make himself quite clear, that "trade is a question of security" and "national and international security requires a coordination between political, military and economic security."
In the economic battle, all the propaganda arguments about 'liberalism' have little connection with reality. The last meeting of the G7 and the GATT negotiations are a striking example of the current situation of trade war in which, in the name of 'liberalism', it's the states which do the negotiating.
The time when the USA could impose its diktat is over. The G7 didn't come to any agreement about an ordered 'relaunch' of the world economy. Germany, preoccupied with inflation, acted the lone cavalier by maintaining high bank rates, limiting the capacity of other countries to lower theirs and so facilitate this hypothetical recovery. President Bush's trip to Japan, whose explicit aim was to open the Japanese market to American exports, was a fiasco. The GATT negotiations got bogged down despite the pressure from the US, who were using all their economic and imperialist strengths to try and impose economic sacrifices on their European rivals.
It's significant that these negotiations have taken on the appearance of a free-for-all between the USA and the EEC. Each one accuses the other of subsidizing their exports and thus of subverting the holy laws of free exchange, and both are right. The European states directly subsidize the makers of the Airbus through grants, loans, guarantied sales, while the American state directly subsidizes its aeronautic construction firms through military orders or research budgets. In 1990, the OECD countries dedicated $600 billion to assist their industries. In the agricultural sector, in the same year, subsidies in the OECD grew by 12%. The average American farmer gets $22,000 in subsidies; in Japan it's $15,00; in Europe $12,000.
All the fine liberal words about the 'magic of the market' are pure hypocrisy: we're seeing the heightened, permanent intervention of the state at all levels.
Despite all the phrases about 'free competition', 'free trade', the 'fight against protectionism', every nation state uses any means at hand to ensure the survival of its economy and its enterprises in the world market free-for-all: subsidies, dumping, bribes are all current practices of firms acting under the benevolent eye of their guardian state. And when that's not enough, the statesmen become representatives of commerce, adding their imperialist strength to arguments about economics. At this level, the USA sets a fine example.
Although its economy is deep in recession and less competitive than those of its rivals, its resort to the concrete arguments provided by its imperialist strength has become an essential means for opening up markets that the game of economic competition doesn't permit it to obtain. And all the other states do the same thing, as far as their means allow.
The only law is survival, and in this battle all means are justified. This is the law of the trade war, as it is in any war. 'Export or die' said Hitler: this has become the obsessive slogan of all the states of the world. Anarchy and disorder reign on the world market. Tension is mounting and a formal GATT agreement isn't going to stop this slide into chaos. Although negotiations have been going on for years, with knives drawn, to try and put some order into the market, the situation is already out of control. There are more and more underhand deals which don't follow GATT regulations. Each state is already looking for ways of getting round future agreements.
The prospect isn't the attenuation of tension. The more the world economy sinks into recession, the sharper international competition will be.
With the dive into recession, The trade war can only intensify
Despite the hopes and expectations of the world leaders, the American economy has not climbed out of the recession in which it's been stuck officially for a year. The measures aimed at initiating a recovery - the lessening of the bank rate by the Federal bank - have merely slowed down the slide and limited the damage. In the end, the year 1991 saw a 0.7% fall in GNP for the USA. The other industrialized countries are about to follow the American economy in its descent into the Hades of recession.
In Japan, industrial production fell by 4% during the twelve months preceding January 1992. Out of the first three months of the year 1991, industrial production fell by 4% in the western part of Germany, by 29.4% in Sweden (!), by 0.9% in France. In 1991, the British GNP diminished by 1.7% in comparison to the previous year. The dynamic of the recession affects all the industrialized countries.
President Bush's recent speech about the state of the Union, which was supposed to announce measures that would take the US economy out of the mire, was a great disappointment. Essentially it was a sprinkling of recipes which have already proved ineffective for months, and which had more to do with electoral demagogy than economic efficiency. The tax reductions will basically have the effect of increasing the budget deficit which already stood at $270 billion in 1991 and which according to official predictions will reach $399 billion in 1992, posing the problem of America's debt even more dramatically. As for the reduction in the arms budget, the famous 'peace dividend', its sole result will be to push the US economy deeper into the mud, by diminishing state orders for a sector that's already in crisis - 400,000 redundancies are envisaged in the coming .years.
In fact, the only slightly positive aspect for American capital in 1991 is an improvement in its balance of trade, even though it's still mainly in deficit. In the first eleven months of 1991, it stood at $64.7 billion, a 36% improvement over the same period in the previous year when it reached $101.7 billion. However, this isn't the result of the American economy becoming more competitive, but of the USA's capacity to use all its economic and imperialist strengths at the same time. It's this which gives it its status as the world's number one economy in the current global trade war. The improvement in the US balance of trade means above all the deterioration of those of its rivals, and thus an aggravation of the world crisis and even sharper competition on the world market.
The nationalist lie - a danger for the Working class
The other side of the trade war is economic nationalism. Each state has to mobilize 'its' workers in the economic war, calling on them to pull in their belts in the name of solidarity with the national economy, launching campaigns to get them to buy home-produced goods. "Buy American" is the new slogan of the protectionist lobbies in the USA.
For years workers have been asked to show wisdom and responsibility by submitting to austerity measures, so that 'tomorrow' things will get better; and for years, things have been going from bad to worse. Everywhere, in all countries, the working class has been the first victim of the trade war. Its wages, its buying power, have been amputated in the name of economic competition, lay-offs have been pushed through in the name of the survival of the firm. It would be the worst of all traps for workers to believe that the lie of economic nationalism is a solution to the crisis, or a lesser evil. This nationalist propaganda, which today aims to get workers to give more sweat for the capitalists, will tomorrow be used to get them to give up their lives for the 'defense of the country'.
The trade war, with its ravages on the world economy, is the expression of the absurd dead-end reached by global capital, now stuck in the greatest economic crisis in its history. At a time when poverty and penury rule over the major part of mankind, production is falling, factories are closing, land is being sterilized, workers reduced to unemployment, the means of production left unused. This is the logic of capitalism, of a system based on competition. It is leading to the desperate struggle of each against all, to wars, to destruction after destruction. Only the working class, which has no particular interests to defend, whatever country it is in; which everywhere suffers from exploitation and misery - only the struggle of this class can offer an alternative future to humanity. By defending itself, by going beyond all the divisions and frontiers of capitalism, by forging its international unity and solidarity, the working class alone can show the way out of the increasingly awful tragedy which capitalism is lining up for the planet. JJ 28.2.92.
- (1) G7: the group of the seven biggest industrial countries, who organise regular meetings in order to 'try' to coordinate their economic policies in the face of the economic crisis.
- (2) General Agreement on Tariffs and Trade: international negotiations aimed at establishing 'regulations' for international competition.
The law by which a constantly increasing quantity of means of production, thanks to the advance in the productiveness of social labor, may be set in movement by a progressively diminishing expenditure of human power, this law, in a capitalist society -where the laborer does not employ the means of production, but the means of production employ the laborer - undergoes a complete inversion and is expressed thus: the higher the productiveness of labor, the greater is the pressure of the laborers on the means of employment, the more precarious, therefore, becomes their condition of existence." (Marx, Capital, Vol 1, part 7, chap xxv)