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Notes
From
the Editors
A Planetary
Defeat: The Failure
of Global Environmental Reform
by John Bellamy
Foster
Neoliberalism
and Resistance
in South Africa
by Ashwin Desai
The Political
Economy
of Intellectual Property
by Michael
Perelman
The Philosophy
and Politics
of Freedom
by Paul Le Blanc
Occupation’s
Mixed Legacy
by William K. Tabb
Adam Hanieh
is a researcher and human rights worker living in Ramallah,
Palestine. |
Jonathan Nitzan and
Shimshon Bichler, The Global Political Economy of Israel (London
and Sterling, Virginia: Pluto Press, 2002), 407 pages, cloth $75.00, paper
$24.95.
One of the characteristics of much academic writing is an obsession
with theory at the expense of empirical investigation. It is rare to find
a book that combines genuinely novel theoretical exploration with rigorous
empirical study, the more so in fields such as political science where
abstraction seems to have become the norm. It is for this reason that
The Global Political Economy of Israel is such a gripping read. A
remarkable investigation into the concrete workings of the Israeli and
U.S. economies that avoids the fatuous generalities of much of the
globalization literature, it presents a challenging theoretical framework
that not only clarifies the past but also seeks to understand the present.
Nitzan and Bichler start by challenging the traditional view of Israel
as a “unique case” characterized by a strong state guided by socialist
ideology. Their argument instead looks beyond the apparent form and seeks
to identify the essence, using as their guiding principles the concepts of
capital accumulation, ruling class formation, and Israel’s place in the
global political economy. In so doing, they attack key premises of
neoclassical economics; assumptions such as an economy in equilibrium,
full employment, and obsession with so-called neutral aggregates such as
GDP and inflation rates. Instead they ask the questions: Who are the
winners and losers in the economy and how is power exercised?
In contrast to the standard approaches, Nitzan and Bichler argue that
the key issue underlying political economy is that of capital accumulation
by groups of dominant capital. The aggregates that we are told are “bad
for the economy” often obfuscate massive gains for these dominant groups,
at the expense of other sections of capital and, of course, those who have
nothing to offer but their labor power. This is most clearly demonstrated
in the case of stagflation—a period of little or no growth combined with
high rates of inflation. The accepted wisdom is that these periods, which
emerged as a global phenomenon during the 1970s and early 1980s, were bad
for the economy as a whole. Instead, Bichler and Nitzan demonstrate with a
rigorous examination of profit rates for dominant capital that these
periods were in fact extremely profitable for dominant capital.
In the United States for example, the authors examine inflation figures
and profit-per-employee figures for the Fortune 500 companies relative to
figures for the economy as a whole. The results are a startling
confirmation of their thesis: that the movement of inflation correlates
almost precisely with dominant capital doing dramatically better than
average capital—i.e. winning a greater share of profits. Inflation is
therefore demonstrated to be a powerful redistributional phenomenon.
Between Depth and Breadth
At this point the authors introduce a theoretical framework that sees
the political economy of the twentieth century as moving between two
alternating regimes of capital accumulation—depth and breadth. A breadth
regime is characterized by attempts by capital to increase the size of its
workforce through green-field investments or corporate amalgamation. These
periods tends to be structurally dynamic and are commonly less
conflictual. A depth regime, on the other hand, is marked by attempts to
increase the rate of profit per-employee through either cost-cutting
measures or stagflation. In the latter case, dominant groups of capital,
acting in collusion, use higher prices to offset the loss in reduced
volume sold. These periods of depth tend to consolidate rather than change
institutions and structures, and are usually more conflictual and often
violent.
There are two important points to be made in regards to this framework.
Firstly, Nitzan and Bichler argue that accumulation must be seen in a
relative context. In other words, it is not the absolute level of
accumulation that is important but rather the level of accumulation
relative to the average—what the authors term differential
accumulation. Modern capitalists don’t seek to maximize profit, but
rather aim to beat the average.
Flowing from this stress on differential rates of accumulation is the
second key concept introduced by Nitzan and Bichler. Taking issue with
traditional Marxist approaches to capital accumulation, they argue that
the differential struggle between different capitals is at heart a
struggle for power. As capitalism has developed over the last
century—essentially becoming more universal—it has become more and more
urgent to integrate the concept of power into an understanding of the
nature of capital itself.
This point bears some examination, as it is probably the most novel
—and hence controversial—argument that the authors make. Essentially,
Bichler and Nitzan argue that traditional Marxist approaches to concepts
such as capital, accumulation, and profit have attempted to find a basic
unit with which to measure exactly what is being accumulated. To
neoclassicists, this basic unit is money, which supposedly expresses a
quantitative measure of “well-being.” For Marxists, the authors argue, the
basic unit was “abstract labor.”
In contrast, according to the argument of Bichler and Nitzan, the
process of accumulation cannot be understood solely in terms of the
productive labor process. Instead, accumulation should be understood as an
interaction between productivity and power. In the modern capitalist
world, accumulation comes to depend not just upon ownership and the inputs
into the productive process, but also critically becomes a function of
social power. Drawing on the work of Thorstein Veblen and Lewis Mumford,
the authors attempt to develop an institutionalist theory of capital that
encompasses this aspect of power. They argue that we cannot understand
accumulation solely in terms of physical inputs such as land, labor, and
machinery but must also ask what enables these quantities to become inputs
in the first place.
Following Veblen, the authors argue that under modern capitalism there
is a growing separation between “industry” and “business.” The source of
capitalist earnings is not only found in the productive process, but in
the politics of production. In other words, accumulation increasingly
relies upon distribution that in turn derives from power over production.
The modern nature of business—characterized by absentee ownership—means
that the nature of this power takes the form of the ability of absentee
owners to limit production below its full potential. How do the means of
this power today differ from that found in the nineteenth century?
According to Nitzan and Bichler, “In the twentieth century, these means
further expanded to rely on the broader political realm of the state,
including aspects of policing, propaganda, taxation, tariffs, subsidies,
patent laws and intellectual property rights, as well as on international
institutions such as trade zones, regional investment agreements and
global, government-backed corporate alliances” p. 35.
The Israeli Case
Turning to Israel, this understanding of the nexus between power and
capital accumulation is clear. The early Israeli state played a critical
role in creating the institutional context for the development of favored
capital groups in Israel. The state directed external “gifts” (initially
from German reparation payments and then later aid from the U.S.
government) to the five key conglomerates that dominated the Israeli
economy. The state also established the framework that permitted these
groups rapidly to expand at the differential expense of lesser capital,
through policies such as encouraging joint investment with the government,
permitting the manipulation of banking shares that precipitated a collapse
of the banking system in 1983, granting special development assistance,
and directing the process of proletarianization of Jewish immigrants from
Arab and African countries who were to become the core of the industrial
working class.
It is this obsession with the apparent dominance of the state in
Israeli society that has led the majority of observers to label Israel as
embracing some form of socialism up until the recent decade. In contrast,
the Global Political Economy of Israel presents an analysis that
reads like a breath fresh air in a stultified body of literature so
obviously at odds with reality. Bichler and Nitzan demonstrate beyond a
shadow of a doubt that the Israeli economy has always been about
capitalism and enabling accumulation by the dominant conglomerates. They
painstakingly document how this process happened historically with an
array of sources ranging from dense economic literature to mainstream
Israeli daily newspapers. Indeed, one of the most delightful aspects of
this book is the almost gossipy way in which the authors deal with some of
Israel’s most “respected” business leaders.
Oil and Arms
Returning to the notion of dominant capital, the authors identify what
they term the weapondollar-petrodollar coalition as a key component of
global dominant capital as a whole. They show an increasing interaction
between the major oil companies and arms manufacturers and examine how the
pursuit of differential accumulation by this coalition is linked with
so-called energy conflicts in the Middle East.
In a remarkable series of graphs, the authors plot the rate of return
of the major oil companies (dubbed the petro-core) in comparison with
dominant capital as a whole. They then show that each sustained period of
negative differential accumulation for this sector (i.e., where dominant
capital has outpaced the petro-core in terms of differential profits) has
been immediately followed by an “energy-conflict” such as the 1967 and
1973 wars, the Iran-Iraq war, and the 1990–1991 Gulf War.
Turning once more to an analysis of the concrete, the authors take each
of these conflicts in turn and trace an increasing interaction between
arms exporters and the oil companies over time. Around the 1973 War, the
arms business became more commercialized (expressed by the Nixon Doctrine)
and in conjunction with the petro-core began to exert a greater influence
on U.S foreign policy.
The increasing confluence between the interests of the oil-arms
coalition and foreign policy continued until just after the 1990–1991 Gulf
War. At this point, the global regime of accumulation moved from depth
back towards one of breadth. Dominant capital was able to take advantage
of the collapse of the Soviet Union, reduction of tariffs and dismantling
of barriers to capital mobility, and the opening up of “green-field”
investments in the South. This new stage of breadth marked the onset of
globalization, characterized by the rise of a new section of dominant
capital, the technodollar-mergerdollar coalition. This group sought
differential accumulation through absorbing technological innovation
through mergers and acquisitions, expanding into new areas that became
known as “emerging markets” and benefiting from the privatization of
government-owned enterprises.
It is this shift towards a breadth regime, according to Nitzan and
Bichler, that explains the so-called peace process in the Middle East.
Profits were to come from open markets in both goods and people instead of
war and conflict. One of the consequences of this process for Israel was
the increasing transnational ownership of the Israeli economy—the key
conglomerates that had dominated the economy under the shelter of the
state were taken over by capital from the core, particularly the United
States.
Although the reason underlying the shifts between different regimes of
breadth and depth is somewhat unsatisfactorily dealt with by the authors,
they stress that these shifts should not be understood mechanically but
rather as an outcome of the interactions of real people with real choices
in front of them. In a certain sense they argue that the economy tends to
follow a path of least resistance, with different sections of dominant
capital taking advantage of different regimes of accumulation (although
all sections of dominant capital benefit relative to capital as a whole).
A New Regime of Depth?
The 1990s shift to breadth had important implications for both the
Middle East and the global economy. Globalization, marked by an expansion
of markets and investment, set in train a process of excess capacity and
this began to eat into the large differential profits. At first this hit
the periphery of the global economy—precipitating a series of financial
crises in Asia, Russia, Mexico, and Argentina. But it increasingly seems
to be attacking the very core of global capitalism.
The authors end with a speculation that has perhaps been answered as
this review goes to press. They raise the open question of whether we are
now seeing a shift back towards a global regime of accumulation through
depth, with its attendant features of war and conflict. The analysis
offered by Nitzan and Bichler offers a powerful conceptual framework for
understanding this latest crisis in the global political economy. It also
points to a way out of the crisis by asking the simple question: Who
really gains? |
