But this was an economic strategy that raised big political problems. For half a century after the Second World War capital and the state sought to legitimise themselves through the ideology of national consensus while collaborating to various degrees with the trade union bureaucracy. This applied not only to social democracy in Germany and France, but also to the Christian Democrat and Gaullist variants of conservative politics. There had seemed no reason to disturb society by overturning this approach so long as their economies seemed to be advancing in comparison with their major competitors. Now the attempt to attack the reforms granted in the past threatened to tear apart the old ideological hegemonies, driving workers whose social democratic attitudes took for granted "partnership" with capital into an antagonistic relationship to it. Capitalists and states were caught between their economic priorities and maintaining their ideological hold on the mass of people.
Of course, there was also in operation a second option for them-that of physically moving production overseas. But this takes time with most sorts of industrial production (fully equipped factories are rarely easy to move, and even when they are there is then the question of energy supplies, transport facilities, a secure political environment, and so on). So it was that even in Britain 30 years of restructuring and factory closures, with a halving of the workforce, did not permanently cut overall manufacturing output.33
Even when they considered moving production in the long term, the giant European firms still depended in the interim on finding some way to increase the exploitation of their local workforces. In practice few firms envisaged, for the moment, moving all their production abroad (although the German car industry increasingly used cheap labour in Eastern Europe to solve some of its problems) and this made the need to raise the exploitation of the domestic workforce paramount.
Hope in the East?
When people like Samuel Brittan wrote of the future for capitalism lying in Asia in the early 1 990s they meant the small newly industrialising countries of the region-the "tigers" of South Korea, Singapore, Hong Kong and Taiwan, and the "tiger cubs" of Malaysia, Thailand and Indonesia. These had experienced very rapid rates of economic growth, leading the OECD to write of a South Korean "economic miracle" in 1996. By this time Korean living standards approximated to those of the poorer Western European countries; some of the country's firms established themselves as global giants. Posco, the world's third largest steel producer, boasted that its Kwangyang steel complex, opened in 1992, was "the most modern in the world".34 But much of the growth depended on each tiger holding wages down to compete with the others for Western markets. It was a classic case of blind competition between rival capitals (or in this case state monopoly capitals) and eventually led to output that was too great for the existing market to absorb. By June 1997 there was only 70 percent capacity utilisation in Korea and 72 percent in Taiwan,35 and all the countries depended on foreign borrowing to finance trade deficits. Yet when financiers suddenly reacted by withdrawing funds from Thailand, forcing the devaluation of its currency, those enamoured of the "miracle" tried at first to think nothing serious was happening. The Thai crisis, wrote Martin Wolf in the Financial Times, was "nothing more than a blip on the path of rapid East Asian growth" . Within weeks the crisis had spread to all the tigers and tiger cubs, causing economic contraction, reliance on IMF austerity packages, the sudden impoverishment of millions of people and growth rates in the 2000s much slower than in the 1 980s and 1990s. But this did not shatter the faith in many quarters that capitalism in East Asia could see off any problems that might be encountered in the West. Communist China became the new bearer of their hopes.
The Years of Delusion
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