There is a very strong law of unintended consequences taking place after all the bank bail-outs. We will see more and more activist government policies that distinguish economic activities according to the nationality of the actors. It should be a big concern to everybody. 82
At the time of the World Economic Forum in January 2009 Gordon Brown warned against "financial protectionism", and he was then denounced in turn for that very sin as he pressurised British banks to lend domestically and not abroad;83 the German government was criticised for not boosting its domestic economy but relying on exports to the countries that did; it in turn criticised the French and British rescue packages as a form of subsidy to their firms which would damage German interests; the new US government denounced China's government for "manipulating" its currency to aid its industries; the Chinese government retorted that US finance had caused the whole mess;84 and "less wealthy countries fretted" that the US would "use force majeure to soak up capital".85
The ideologists of free trade warned that protectionism risked deepening the recession as the Smoot-Hawley Act in the US supposedly did in the summer of 1930 by raising tariffs on certain imports. As Peter Temin has noted, "The idea that the Smoot-Hawley tariff was a major cause of the Depression is an enduring conviction . . . and has found its way into popular discussion and general histories" . 86 But he adds, " Despite its popularity, this argument fails on both theoretical and historical grounds." Exports only fell by 1.5 percent of US GNP between 1929 and 1931, while "real GNP fell 15 percent in the same years" .87 And the first real movement from the depths of the slump two and a half years later came after measures by Roosevelt which included putting national capitalist interests first with an effective devaluation of the dollar. Even more effective, as we have seen, were those measures taken by the Nazi state in Germany.
For those firms that produced mainly for the national market (the great majority in early 1930s), it was better to be in a protectionist state than a non-protectionist one. That was the rationale for state capitalism and its ideological correlates: Keynesianism, dependency theory and Stalinism. If the state could get control of the most important investment decisions in the national economy, it could assure that the mass of surplus value was absorbed in new accumulation even if the rate of profit continued to fall. This, however, was a policy that could only work up to the point at which the drive to accumulate collided with the restrictions imposed by the narrowness of national boundaries. This limitation showed itself in the drive of Germany and Japan to expand their national boundaries through war in the mid to late 1930s, in the declining efectiveness of the US arms economy by the early 1970s and in the crisis that tore the USSR apart in 1 989-9 1 .
302
The New Age of Global Instability