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# Zombie Capitalism Global Crisis and the Relevance of Marx

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Arms, profits and of the Cold War

The arms budgets of the great powers were central to their economic development. But their roots were not narrowly economic. They flowed from a new struggle to divide and redivide the world between the main victors of the Second World War, the US and the USSR-the Cold War.

The US had aspirations for its industries, the most advanced and productive in the world, to penetrate the whole world economy through "free trade" . The Western European powers, exhausted by the war, were in no position to challenge it directly (although British politicians often expressed a private desire to do so). Russia's rulers were in a different situation. The war's end left them dominating virtually the whole of northern Eurasia, from the borders of Western Europe right through to the Pacific. With levels of industrial productivity less than half those of the US, they were in no position to sustain themselves in economic competition through free trade. But they could contest the US attempt at global hegemony by blocking its access to the economies under their control-not just the territory of the old Russian Empire, but also the countries of Eastern Europe which they subordinated to their military-industrial goals. The US, for its part, rushed to cement its hegemony over Western Europe through financing pro-American Christian Democrat and Social Democrat political parties, the Marshall Plan for reviving European industry within parameters favourable to US interests, and the creation of the NATO military alliance and setting up US bases in Western Europe.

The pattern was laid for the next 40 years, of each of the two great powers reaching out to draw as much of the world as possible into its sphere of influence so as to gain a strategic advantage over the other. They fought a bloody war over control of the Korean peninsula, not because of the little wealth it then possessed, but because of the strategic implications for the whole of the East Asian and Pacific region. Each tried over the following decades to extend its sphere of influence by giving aid and arms to states which fell out with its rival.

The Cold War conflict could not be explained by economics as often understood, in terms simply of profit and loss accounting. The armaments bills of both great powers soon exceeded anything their rulers could hope to gain from the increased exploitation of the lesser powers under their control. At no stage in the 1 940s or 1 950s did total US overseas investment (let alone the much smaller return on that investment) exceed US spending on arms. Even in the period of "disarmament" prior to the outbreak of the Korean War "military expenditure totalled something like \$ 1 5 billion a year. Thus it was 25 times as high as the sum of private capital exports" .51 By 1 980 total expenditure on "defence" had risen to around \$200 billion-less now than total overseas investment of \$500 billion, but still substantially more than the profits that could possibly accrue from that investment.

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The picture for the USSR was somewhat similar. In the years 1945-50 it pillaged Eastern Europe, removing plant and equipment wholesale from East Germany and Romania, and forced the region as a whole to accept prices below world market levels for goods going to the USSR proper.52 But even in that period the economic gains from this must have been substantially less than the escalation of the USSR's arms budget once the Cold War had well and truly begun. And from 1955 onwards fear of rebellion in Eastern Europe led the Soviet government to relax the direct economic pressure on its satellites.

The imperialism which necessitated arms spending was not that of a single empire in which a few "finance capitalists" at the centre made huge super-profits by holding billions of people down. Rather it was the imperialism of rival empires, in which the combined capitalists of each ruling class had to divert funds from productive investments to military expenditure in order to ensure that they hung on to what they already possessed.

The calculation in both Washington and Moscow was simple. To relax the level of military spending was to risk losing strategic superiority to the rival imperialism, enabling it to extend its sphere of dominance. So the Russians lived in fear of an attempted US "rollback" of Eastern Europe, which would have broken these economies from the USSR's grasp, leading in turn to the possibility of an unravelling of the ties which bound the other constituent parts of the USSR to its Russian centre (something that did in fact happen eventually with the great economic and political crisis that shook the whole Eastern bloc in the years 1 989 to 1991). At the same time, the US feared for its hegemony. As one US spokesman put it at the time of the Korean War, "Were either of the two critical areas on the borders of the

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Communist world to be overrun-Western Europe or Asia-the rest of the free world would be immensely weakened . . . in economic and military strength . . . " 53

It was necessary, in other words, to turn vast amounts of value into means of destruction-not in order to obtain more value but to hold onto that already possessed. Such was the logic of capitalist competition applied to the relations between states. So the Cold War amounted to a new inter-imperialist conflict of the sort described by Bukharin, and it soon overshadowed the old imperialist conflicts between the West European powers.

Decolonisation and developmentalism in the Global South

Eighty five percent of humanity lived outside the advanced industrial countries. Their experience of the "golden age" was very far from golden. The great majority still lived in the countryside, and there was little change in the poverty that plagued their daily lives.

One important political change did, however, take place. The West European powers were forced, bit by bit, to abandon direct colonial rule, a process starting with a weakened Britain ending its 190 year old empire in India in 1947 and ending with Portugal handing over power to liberation movements in Africa in 1975. The US replaced Western European influence in some regions. It took control of South Vietnam when the French withdrew in 1954-until it too was forced to withdraw after the most bitter of wars in the mid-1970s. It became the dominant influence in most of the Middle East and parts of Africa. But, like the European powers, it retreated from formal colonisation, granting independence to the Philippines and keeping direct control only over Puerto Rico.

This retreat from direct colonisation had as a direct corollary the end of the old clashes between the Western powers over the partitioning of the rest of the world. The drive to war between them seemed to have gone once and for all. It was also accompanied, as we have seen, by something else unexpected by the classic theories of imperialism-losing their colonies did not stop Western economies participating in the long boom and conceding regular rises in living standards to their workers. And the advanced countries without any colonies-West Germany, Japan and Italy-had the economies which expanded fastest of all. Meanwhile, for the first two post-war decades, exports of capital stayed down at the very low levels they had sunk to in the great slump of the 1930s. As Mike Kidron pointed out in 1962:

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Even in Britain . . . the significance of capital exports has declined tremendously: latterly they have run at about 2 percent of gross national product compared with 8 percent in the period before World War One; they now absorb less than 10 percent of savings compared with some 50 percent before; and returns on foreign investment have been running at slightly over 2 percent of national income compared with . . .10 percent in 1 914.54

The foreign investment that did take place was decreasingly directed towards the less industrialised parts of the world: "The concentration of activity is increasingly within the developed world, leaving all but a few developing countries outside the reach of the new dynamism". 55

There was also a shift in the demand for Third World products. Raw materials from agricultural countries had been indispensable for industrial production in the West before the First World War, and colonial control was an important way for industrialised countries to ensure their own supplies and block access to their rivals. But now there were synthetic substitutes for most raw materials-artificial fertilisers, synthetic rubber, rayon, nylon, plastics. A parallel transformation of agriculture in Western Europe and North America reduced food imports from the rest of the world. By the late 1 950s withdrawal from colonies in Africa and Asia was no longer the threat it would once have been to the industrialists of the European countries. Companies which had made their fortunes from plantations and mines of the Global South began to diversify their investments into new lines of business.

There was one great exception to this picture-oil. Here was the raw material of raw materials, the ingredient for manufacturing plastics, synthetic rubber and artificial fibres, as well as providing for massively expanding energy needs and propelling the ever greater proliferation of motor vehicles, tanks and aircraft. And the supplies of it were increasingly to be found outside Europe and North America. By the mid-1970s Saudi Arabia, Iraq, Iran, Kuwait, and the petty sheikhdoms around the Arabian Peninsula were the countries that mattered-as was shown by the temporary interruption of supplies during the Arab-Israeli war of 1 973. It was not an accident that the one version of old style colonialism that continued to get untrammelled support from all the Western states was the settler state of Israel-fostered in its early years as a "Jewish homeland" by British imperialism, armed for its seizure of 78 percent of Palestine in 1 948 by the US and the USSR, allied with Britain and France in their attack on Egypt in 1 956, and backed wholeheartedly by the US in the aggression that gave it control of the rest of Palestine in June 1967.56

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Indigenous governments and capitalist development

The dismantling of the European colonial empires was a fact of immense importance for something like half the world's people who had lived under their thumb. It also raised very important questions for those who had, in one way or another, fought against the hold of those empires. What happened to imperialism-and the fight against it-if empires no longer existed?

The reaction of many social democrats and liberals in the West was to say that imperialism no longer existed. This was, for instance, the conclusion drawn by John Strachey. In End of Empire (1959) he argued that rising living standards meant businesses no longer needed colonies to absorb the surplus and prevent overproduction. In effect, he was saying that Hobson's alternative to imperialism, a reflation of the domestic economy, had prevailed and solved the system's problems.

An important section of the left rejected such reasoning. They could see that the former colonial countries were still plagued by poverty and hunger-and that the Western firms that had benefited from empire remained entrenched in them. What is more, the end of the European empires was not the end to the violence inflicted on the peoples of Third World, as the US state picked up the cudgel of the departing Europeans.

Yet rejection of facile talk about an end to imperialism was often accompanied by quotes, parrot fashion, from Lenin's 1916 analysis without recognising the changes that had occurred since it was written. His insistence that the great Western powers were driven to divide and redivide the world between them through direct colonial rule hardly fitted a situation in which colonies had gained independence. The response of most of the left was quietly to redefine imperialism to mean simply the exploitation of the Third World by Western capitalist classes, dropping the drive towards war between imperialist powers so central to Lenin's theory for what was in reality a version of Kautsky's ultra-imperialism. At the same time they simply replaced talk of colonialism with talk of "neo-colonies" or "semi-colonies".

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Lenin had written of "semi-colonies". For him these were places like China at the time of the First World War, where "independence" concealed continued political subordination to foreign armed forces in partial occupation of the country. There were some places where things did seem like this after the end of direct colonial control in the 1950s and 1960s. In many cases the departing colonial administrations were able to ensure that their place was taken by their own creatures, with enormous continuity in the per�onnel of the state, especially when it came to key positions in the armed forces. So, for instance, France had granted "independence" to huge areas of West and Central Africa by handing power to people who continued, as in the past, to work with French companies, use the French currency-and periodically invite French troops in to maintain "order".

But in some of the most important cases independence did mean independence. Governments proceeded not only to take seats in the United Nations and set up embassies all over the world. They also intervened in the economy, nationalising colonial companies, implementing land reforms, embarking on schemes of industrialisation inspired by the preaching of theorists of economic development or often by Stalin's Russia. Such things were undertaken with varying degrees of success or failure in India, Egypt, Syria, Iraq, Algeria, Indonesia, Ghana, Equatorial Guinea, Angola and South Korea, as well as by the more radical regimes of China, Cuba and Vietnam. Over time even some of the "docile" ex-colonial regimes began to follow the same path. This was true, for instance, of the Malaysian regime,57 of the Shah's regime in Iran in the 1960s and early 1970s, and of the Taiwanese regime. Even the dictator Mobutu, brought to power with the help of the CIA in Congo-Zaire in 1965, nationalised the mighty Union Miniere de Haut Katanga mining corporation along with 70 percent of export earnings three years later.

To call regimes like Abdul Nasser's Egypt or Jawaharlal Nehru's India "neo-colonial" or "semi-colonial" was a travesty-as it was with "populist" regimes in Latin America or the Fianna Fail governments in Ireland. Attempts were made in each case to establish not only independent political entities, but also independent centres of capital accumulation. These still operated within a world dominated by the much stronger capitalisms of the advanced countries, but they were by no means mere playthings of them.

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A new "developmentalist" orthodoxy pointed the means by which such economies were meant to close the gap with the advanced industrial nations. It held that capitalist market mechanisms could not achieve that goal. As the staff of the World Bank later recalled of "the dominant paradigm at that time":

It was assumed that in the early stages of development markets could not be relied upon, and that the state would be able to direct the development process . . . The success of state planning in achieving industrialisation in the Soviet Union (for so it was perceived) greatly influenced policy makers. The major development institutions (including the World Bank) supported these views with various degrees of enthusiasm.58

Just as Keynesianism was dominant within bourgeois economics in the advanced countries at the time, so statist, "import substitutionist", doctrines were hegemonic when it came to the Third World. The main proponent of these in the 1940s and 1950s was the very influential United Nations Economic Commission for Latin America, directed by the Argentinian economist Raoul Prebisch. It argued that development could only take place if the state intervened to block imports to foster the growth of new local industries,59 since otherwise "dependence" on the advanced capitalist economies would prevent industrialisation. "60

More radical versions of such "dependency theory" dominated much of the left worldwide in the 1960s. The writings of Paul Baran (especially The Political Economy of Growth) and Andre Gunder Frank (who talked of the "the development of underdevelopment" )61 dominated most Marxist thinking on the subject (even though Gunder Frank did not see himself as Marxist).62

Baran wrote that:

Far from serving as an engine of economic expansion, of technological progress and social change, the capitalist order in these countries has represented a framework for economic stagnation, for archaic technology and for social backwardness.63

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Adding:

The establishment of a socialist planned economy is the essential, indeed indispensable, condition for the attainment of economic and social progress in underdeveloped countries.64

Gunder Frank was just as adamant:

No country which has been tied to the metropolis as a satellite through incorporation in the world capitalist system has achieved the rank of an economically developed country except by finally abandoning the capitalist system.65

"Socialism" for Baran and "breaking with capitalism" for Gunder Frank meant following the model of Stalinist Russia.66

The "dependency" argument, whether in its mainstream or radical form, was a weak one. It assumed that capitalists from the advanced countries who invested in the Third World would deliberately choose not to build up industry even when it would have been profitable. This did not fit the facts. There was considerable foreign finance of industrial development in Tsarist Russia, Argentina and the British dominions before the First World War. Nor did Western states at all times use their power to prevent industrialisation. Sometimes they did and sometimes they did not. Finally, a ruling class of one country which depends on bigger capitalist countries for much of its trade and investment does not completely lose its ability to forge an independent path of capital accumulation. The European economies, for instance, have long been to a high degree dependent on what happens in the US economy without the European ruling classes simply becoming American puppets.

So pervasive was the view that "capitalism means underdevelopment" that people read it back into some of the Marxist classics. Baran quoted Lenin to back up his case, while even someone as perceptive as Nigel Harris could ascribe such views to "the Bolsheviks in 1917". 67

Lenin's writings on imperialism had in fact put forward a completely different view, as did Leon Trotsky's writings of the late 1920s. Lenin wrote that the export of capital "accelerates the development of capitalism in the countries to which it is exported", 68 while Trotsky wrote that capitalism "equalises the cultural and economic development of the most advanced and most backward countries", 69 even if as it did so "developing some parts of the world economy while hampering and throwing back the development of others" .70

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What mainstream dependency theory did do for a period was provide an ideological justification for methods which enabled the rulers of some politically independent states to achieve impressive levels of accumulation, even if only for a period. Argentina's rate of economic growth through the 1950s and 1960s was comparable with that of ltaly71 and by the early 1970s a third of its workforce was in industry, with only 1 3 percent on the land.72 Brazil's 9 percent growth rate was one of the highest in the world73 and by the mid-1980s the Economist could refer to Sao Paulo as "a Detroit in the making" .74 South Korea experienced rapid economic growth of about 8 percent a year after a general, Park Chung Hee, seized power in 1961 and forced the big firms (or chaebols) to work within a framework established by the state and embarked on state capitalist industrialisation.

China, where state control of the economy came closest to the Russian model endorsed by the radical dependency theorists, had an economic growth rate no higher than these figures once it had completed the first short stage of economic recovery from 20 years of civil war and Japanese invasion. The imposition of plans which diverted resources towards new heavy industries-steel, cement, electricity-in a very poor, overwhelmingly agricultural country like the China of the early 1950s meant squeezing the living standards of the mass of the population. What the peasants had gained through land reform in the previous decade, they now lost through rigorously enforced taxation of their output. Then came the ultimately disastrous attempt at collectivisation through so-called People's Communes, in an attempt to bring about a "Great Leap Forward" in economic development. The leap cut total agricultural output, led to famine in vast areas of the countryside and had to be abandoned. Much of the new industry was far from efficient. The growth of heavy industry out of all proportion to what was happening in the rest of the economy led to acute shortages of inputs needed to keep plants running, and to the production of other goods which had no immediate use. There were massive swings between spells of fast industrial expansion and spells of near stagnation, and many of the grandiose new giant plants were only able to work at a fraction of their capacity.

There was usually growth even in countries that were not as successful as Brazil and South Korea. The manufacturing output in India grew by 5.3 percent a year from 1950 to 1981, and agricultural output by 2.3 percent, even if there was continual disappointment at the economy's inability to exceed a "Hindu" growth rate of 4 percent. Sub-Saharan Africa had "per capita growth rates of around 2 percent in the early 1960s" which "rose to nearly 5 percent by the end of that decade" .75 Egypt, whose leader Abdul Nasser nationalised almost all of industry, grew about 6 percent per year through the first half of the 1960s. Such outcomes in terms of levels of economic growth were enough to convince one "revisionist" Marxist, Bill Warren, to come to the conclusion in the early 1970s that most of the rest of the left were wrong. Countries in the Third World could catch up with the West without breaking with capitalism:

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The prospects for successful capitalist economic development (implying industrialisation) of a significant number of major underdeveloped countries are quite good... Substantial progress in capitalist industrialisation has already been achieved . . . In so far as there are obstacles to this development, they originate not in current imperialist-Third World relationships, but almost entirely from the internal contradictions of the Third World itself . . . The imperialist countries' policies and their overall impact on the Third World actually favour its industrialisation . . . 76

He provided figures showing the real per capita economic growth that was in fact happening. In challenging the assumption of the radical version of dependency theory he was on strong ground. So too was he when he made the point that if the left saw its main priority as supporting industrialising regimes as "anti-imperialist" it could "find itself directly supporting bourgeois regimes which, as in Peru and Egypt, exploit and oppress workers and peasants while employing anti-imperialist rhetoric" .77

But lacking from his analysis was any real accounting for the enormous unevenness between Third World countries, even though his own figures showed that per capita annual growth in two of the most populous countries, India and Indonesia, was only 1 .2 percent and 1 percent (compared to 6.8 percent for South Korea, 4.9 percent for Thailand and 7.1 percent for Zambia). He also failed to see that rapid capitalist development was not necessarily smooth and uninterrupted through time:

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