This is a  introduction that was done a few weeks ago at a meeting of Labor's Militant Voice.

"U.S. fears over long-range missiles", read the headline in the May 25th edition of the Financial Times.  A few days earlier, U.S. president, Bush, made it clear to the world that the responsibility for Iraq's future lies with the international community and appealed to the U.N.   Sarkozy's victory in France has improved U.S. Franco relations and no doubt the U.S. will urge it's French counterparts to engage further in the Middle East.  How things have changed.

While the weakening of U.S. imperialism's influence is a general process, I think that China in particular has to be seen as a key player in this scenario as it continues to challenge U.S. imperialism in  various spheres of influence.

The missiles the Financial Times was referring to that were of such concern to the U.S. are China's.  Not only is the U.S concerned about the missiles which have a range that can reach U.S. shores, but the Chinese are in the process of building five nuclear submarines capable of launching these missiles: "When they develop five vessels like these" remarks one U.S. official, "they are making a statement." (1) 

The U.S. wants China to back off.  Mike Pillsbury, who the FT describes as a "Pentagon consultant in the Chinese military." says that China's President Hu needs to "cut back this development and head off a cold war style arms race."  (2) The Chinese find this somewhat comical as its military budget is but a fraction of the U.S. and is well aware that, despite Russian concerns, the U.S. is placing missile interceptors in eastern Europe risking the escalation of tensions there.  These developments are inevitable as countries like China seek to develop their economies and the military power to protect their interests.

The Chinese are not easily swayed by American military might and are resisting US pressure on the economic front also.  At the same time as the military build up issues have arisen, the U.S. and China are engaged in trade talks.   There have been ongoing efforts by the U.S. to force China to increase the value of its currency and talks last week were not productive from the U.S. point of view. 

Such is U.S. frustration that there have been threats in congress of imposing huge tariffs on all Chinese goods.  But the Chinese are unfazed.   "Putting pressure on China," warns, Ms Wu Yi, a Chinese vice-premier and trade negotiator, "can only make the situation more complex." (3) The Chinese want "equal consultation" and have made it clear that they "would not let the US dictate the agenda." (4)

China is also investing globally at an unprecedented pace.  It has become a major player in Africa accusing US and European capitalism of stinginess.  It is pretty well known that the US has simply abandoned Africa.  China's trade with Africa has risen ten times in as many years while its consumption of raw materials for its booming economy and subsequent infrastructure growth has driven up commodity prices, a benefit to Africa that has contributed to the longest period of growth on the continent in 30 years.  China is also increasing its influence in Latin America, an area of the world that US imperialism considers its own back yard.  These developments and the rapid growth of the Chinese economy are leading some strategists of capital to predict that China will overtake the U.S. and Germany as the world's biggest exporter by 2008.

So in many ways, US capitalism is under assault from many fronts.  Its failure in Iraq has strengthened Islamic reaction and terrorist groups, as well as giving new life to Iran as the majority of Iraq's Muslim population is Shia like Iran's majority.  This is what is driving the U.S.  to increased cooperation with the EU in these areas.  Also, in North Korea, the U.S. has pretty much acceded to the six nation talks.

These developments do not go unnoticed by the bourgeois themselves as the Financial Times clearly showed in a recent headline explaining that Condoleeza Rice was learning to "play a weaker U.S. hand."

Having recognized this shift in the relationship between the U.S. and its global competitors we should not overestimate it.  The U.S. economy is still a, powerful force particularly when it comes to capital ,accumulation and ownership of capital.  The top 25 hedge fund managers on Wall Street earned $15 billion last year, more than the GDP of Jordan. Two of them made over $1 billion each.  One of the weaknesses in the Chinese economy is its deployment and use of capital, something restrained by the power of the old Stalinist bureaucracy, the Chinese Communist Party.

These developments, in particular foreign policy and Iraq, have had a severe impact domestically. The Neo-Cons and the Bush administration are falling apart, propped up only by the class solidarity of their Democratic allies.   Wolfowitz has gone from the World Bank.  The Europeans refused to budge on this issue and threatened to challenge the selection procedure that allows the U.S. to select the World Bank head while they select the head of the IMF.

Numerous cabinet members have resigned and more and more military brass are openly criticizing the administration albeit, after retirement. It looks like Gonzales' head will eventually roll and Condoleeza Rice is pretty much off the radar screen.  Such is the state of US politics that Donald Trump can launch a tirade against Rice and the administration on CNN calling it the worse government in history while Lee Iacocca's equally critical commentary appears on liberal websites.

We should have no illusions in thugs like Iacocca and Trump but it reflects the change in mood that has occurred in this country over the past period.  In a recent poll, six in ten Americans polled said that things are going badly; 50% said that things are going very badly.  Domestically and internationally, the present administration and US capitalism is far from the position it found itself in after 911.

World/US Economy
I think it important to touch on another war going on.  It is a war between the bourgeois themselves on how best to utilize the capital they have accumulated on the backs of the working class. It is a war over what they call private and public equity.

This issue has become more important as Private Equity (PE) has gone from a relatively minor sector of finance capital to a much more significant player.

What is Private Equity?
SEIU's recent report on the industry defines PE as. "a broad term that encompasses a range of strategies for investing in industrial and service companies whose common stock is not traded on public stock exchanges." (5)

An economic system has rules.  Feudalism had rules, laws and social structures that served the interests of the ruling classes of the time.  Capitalism, a system dominated by commodity production, is no different and structures like the stock exchanges, currency exchanges etc. that the capitalists have set up to provide some stability to the system exist to facilitate the creation, distribution and exchange of surplus value.  They are an integral part of the system functioning in a managed way.

These structures have certain rules. Publicly traded companies have to comply with certain federal securities laws and regulations.  They have to give reports on the financial status of the company, normally every three months.  They are open to a certain mount of scrutiny by financial experts and other interested parties.  They have what is referred to in the business as a certain amount of transparency.

Not so with the private equity firms.  They operate outside of these exchanges and are not subject to the same scrutiny.  As the SEIU points out, "they operate virtually free of oversight and public accountability, their profits and practices largely hidden from view." .  This is referred to in the trade as being "opaque".  The customers are predominantly well-healed investors.  "In contrast to public institutional fundsŠ" comments the Financial Times "..the private equity fund is limited by law to deep-pocket investors whose identities are not disclosed." (6) What is known is that more and more hedge funds, credit derivatives and other risky financial "instruments" are being arranged in private deals and this is a major cause for concern.

Banks sell loans to investors who sell them to other investors who sell them to other investors and so on.  The frenzy is so rapacious that some investors have no idea of the health of the collateral or company on which the loan is derived and therefore the risk involved.  The owners of the private equity companies (they are called General Partners while the investors are called Limited Partners) earn huge fees for their transactions.

Public equity has a certain amount of transparency if you like.  The problem with private equity as described above is that it has the potential to de-stabilize the system.  Just like buying an auto without having it checked out can leave you with a lemon, so with buying debt or loans.  Many of these speculators have limited knowledge of the real risk involved as debt is packaged and re-packaged many times over. 

To give an example of the vast sums of money involved, the Bank for International Settlements claims that the total outstanding value of all global derivative contracts occurring in private deals (outside the regulator's watchful eye) is now at $400,000 billion.  That is 400,000,000,000,000 or $400 trillion dollars.  This is ten times global GDP. To further illustrate the insanity and waste of the market economy, the fastest growth area is in the credit derivative sector.  And what do the individuals in this sector of the economy do? "They bet on the chance that a bond will default." the Times informs us-not what I'd call a very productive and socially necessary activity.

The area of most concern is that PE is moving more and more in to buying major sectors of the "real" economy.  Cerberus just bought Chrysler.  Cerberus is a PE firm that has the likes of Dan Quayle and John Snow on its team. It also owns a huge chunk of Albertsons, bought after the defeated strike. It owns national and Alamo car rental as well as Reamington Firearms.

In the last year alone, PE firms have taken ownership of the nation's largest office landlord, and the nation's largest hospital chain to name a few. This is a major concern for the more established and astute thinkers of the capitalist class.  An example of how easy credit is to come by and the massive amounts of money around, it is worth quoting a CEO of a major money managing firm.  Apparently, when you buy in to an investment, say a loan, you participate in what is called "diligence" a sort of disclosure so you know what you're getting in to.  This CEO describes a conversation with a hedge fund manager who had invested, had bought, part of a loan he was selling. ""..we syndicated a loan for one of our companies recently and I noticed that one of the hedge funds had bought it, bought a small piece, a $10 million piece, but never came to any of the diligence meetings.  So I called the fellow who runs the hedge fund, because I know him, and said: thank you for participating, but I was surprised nobody came for diligence.  He said: for a $10 million loan it is not worth sending someone to a meeting." (8)

Pension funds are also looking at PE as the returns are greater. And with the recent $3 billion investment in PE group Blackstone by the Chinese government, a new "financial instrument" the Sovereign Wealth Fund, has come on the scene increasing the clout of PE.

The more sober and far-sighted bourgeois want to rein in this secretive and risky section of their class.  There is a certain amount of jealousy involved as the PE folks are taxed at better rates and earn more money but the main concern is the potential destabilizing of the system which is made more dangerous with increased purchases of what the bourgeois call "the real economy".

In the 1990's upswing, many bourgeois argued that the business cycle was over, that it was a thing of the past.  The more serious of them have not forgotten this and the 2000 market crash that introduced them once again to the business cycle and the savagery of the market. 

On CNBC a couple of days before this conference, two economists interviewed agreed that there will be a definite credit market correction by 2008-09.  They explained that the argument in favor of optimism that argues that there have been almost no defaults is misleading.  It is misleading because the existence of cheap credit has simply meant investors have refinanced their loans; just like occurs in housing. It is important to remind ourselves here to look at a loan as a commodity, to see money as a commodity just like a house or a car.

Snapping Point
In the event of a credit crunch, the potential for a serious global recession or slump cannot be ruled out.  It is ironic that despite the massive amounts of money floating around the world economy, major sections of the capitalist class can be so pessimistic.  "We are close to a time when we'll look back and say we did some stupid things." says BofA's Chairman in the FT. "We need a little more sanity in a period in which everyone feels invincible and thinks this is different."  In the same column, John Moulton head of Alchemy PE group comments, "There are plenty of reasons to think we are near the top---one tremor could tip things over." (9)

And lastly on this subject, John Dizard in the Financial Times writing on the global economy referred to it as a "global ponzi scheme." (10)

The continued opposition to the global capitalist offensive
Other major factors that could derail and/or cause serious disruption to the global capitalist offensive are developments abroad.  The invasion of Iraq has the US bogged down materially and at great cost. The war has strengthened Iran, that, like China, has not been cowed by U.S. threats.  Since our meeting, the U.S. has now begun to warn its long time ally, Turkey, against intervening in northern Iraq to curb Kurdish fighters who are seeking an independent Kurdistan which would include a huge swath of Turkey.  Bush also made it clear to the Saudi's and other Sunni governments in the area that there will never again be a Sunni government in Iraq and that they should support the Shia dominated government there in order to deter it from seeking greater alliance with Iran.

There is also increased tension in Lebanon between the pro-US government and Palestinian groups. It is unclear what the nature of the Islamic group is that they are fighting and some have suggested they might even be provocateurs but Sheik Nasrallah, the leader of Hizbollah has called for the Lebanese not to fight against the Sunni there and become a proxy for the US against Al Qaida..

In Asia, there have been further uprisings and protests. One of the latest being against the one child law but beneath the surface more a protests against corruption and favoritism. It is most likely we will see more upheavals in China.  The country sends 15 million new workers in tot eh workforce every year but created fewer jobs than Brazil between 1982-2006 (as percentage of pop).  Globalization has increased the wealth at the tom but generally it has increased inequality and wealth disparity.

In Pakistan there has been a general strike against Musharraf's attack on the independent judiciary which has strengthened a independent and secular democratic movement there.  Gideon Rachman of the FT has called for the abandonment of Musharraf by the west.  Pakistan is a particular concern as a country with a large Muslim population and a nuclear bomb.

In Turkey, one million people protested against religious interference in the state and for secularism. There have been wildcat strikes in Egypt also.

It was interesting that both Morales and Chavez condemned the pope and demanded he apologize for his remarks about the Catholic Church's history in Latin America. The pope had commented that the Catholic Church did not impose its religion and culture by force.  Another aspect of the opposition to global capitalism in Latin America is that it is political in nature and has political leadership. Also, I think it would be a mistake to see the indigenous peoples who are the dominant force in much of the opposition as a sort of rural peasantry.  From what I can gather, and my experience in Latin America is limited.  The indigenous population are rural proletarians meaning they work on huge agricultural concerns and are miners and urban workers.

 I think that in Latin America, where the opposition to the global offensive is probably most extensive, we will see increased struggles along these lines following the recent elections of left governments in Ecuador, Chile, Uruguay, Bolivia and of course, Chavez himself.

I think it goes without saying that events in France will no doubt play a significant role in the future as Sarkozy is expected to go after the 35 hour workweek and other worker protections.


(1)       Financial Times: 5-25-07
(2)     ibid
(3) Financial Times: 5-23-06
(4)     ibid
(5) Behind The Buyouts: http://www.seiu.org
(6)      Private equity is a problem for public media: FT 2-20-07
(7)     FT: 5-21-07
(8)  FT.com: Interview With Wilbur Ross 4-18-07
(9)   FT 5-23-07
(10)  FT:5-22-07