Economic Dimensions of the Struggle against Imperialism in Pakistan

[Following was written just after American attack on Afghanistan, and was published in major English newspapers in Paksitan. We will be excerpting important parts of it in few installations here. The piece was written by Muhammad Riffat].

The 11th September counter attack in the United States has created a new situation in Pakistan and policy makers are confronted with a series of choices. This paper seeks to provide a framework for a dispassionate analysis of these choices. We begin with an assessment of the impact of the counter attack on the global economy. This is followed by a brief section on Pakistani nationalism to identify the objectives that can be regarded as politically legitimate bases for the choices that our country makes. The paper ends with a discussion of the strategy that should be adopted to preserve Pakistani sovereignty and prevent the transformation of this country into a new South Vietnam.

The Impact of the Counter Attack

In terms of America’s total wealth and global capitalism’s gross physical and financial resources the direct loss caused by the September counter attack is trivial – a few hundred billion dollars worth of assets and 6500 easily replaceable workers (most of those killed were secretaries, janitors, low grade officials etc.) Most firms which, suffered are already back in business.

But the indirect costs are enormous. The counter attack was a counter attack on capitalist rationality. In my judgement there is a reasonable likelihood that it will precipitate a depression – which was already on the cards since early 2001. Most forecasters (EIU, Merrill Lynch, Goldman Sachs) are now predicting zero growth for Europe, USA and Japan for 2001 but most also predict a modest “recovery” (1 to 2 percent) for 2002. This does not appear plausible since what has been hit is consumer and investor “confidence” (the essence of capitalist rationality) and there is no reason why this could be revived unless America demonstrates that it has won the war against the anti –capitalist forces and made at least the prosperous parts of the world once again safe for capitalism.

That this is becoming increasingly impossible is reflected in the synchronized nature of the present capitalist downturn. When the hard currencies fall commodity prices rise but this is not happening today – gold and oil and base metals remain depressed. In 1990 – 91 when the US was depressed Japan and Germany boomed. Today capital desperately wants to flee America but where shall it flee to? There are no safe havens anywhere, any more.

So the global synchronization of the downturn and the global decline in consumer / investor confidence. But what have the consumers / investors been confident about? Without answering this question we cannot understand the nature or limits of capitalist rationality.

Capital is takkathur – (our master Muhammad Marmaduke Pickthall translated this as “rivalry in worldly increase”).

A capitalist society is dominated by the universal duty to accumulate (human rights are merely the resources required for the fulfillment of this universal duty). But accumulation is primarily the accumulation of debt.

A capitalist society is compelled to accumulate debt for the creation of money is the creation of debt. In Britain for example 97 percent of the money created is debt – money created by banks in the form of credit to consumers and investors.


In America total household debt exceeds annual income and household savings are typically negative and on average zero.

The dependence on debt is graphically illustrated by the fact that soon after real wages started to rise in America (somewhere in the second quarter of 1998 depending on the figures you trust) the bottom fell out of the American boom.

It was the growth of debt which had sustained profitability and productivity growth in both finance and manufacturing in America during the 1990s.

In a mature capitalist system the central bank is a slave of the commercial banks. The creation of money is entirely dependent on creation of debt. If debt stops growing accumulation is impossible.

But debt can only continue to grow if:

(a)Consumers and investors are confident that they can continue to roll over an increasing volume of debt in order to prevent the repossession of their assets by their creditors (ultimately the banks which have created and which “own” the credit financing the acquisition of these assets).

(b)The banks which create this debt are reasonably confident that it can be profitability lent and will be repaid on time.

When consumers and investors loose confidence they stop borrowing and spending. When banks loose confidence they stop creating money / debt. There is an immediate fall in demand and the downturn phase of the business cycle sets in.

The consumer / investor / lender confidence in capitalism depends upon Riffat’s faith in:

(a) the efficiency of the market
(b) the ability of the state to correct market failures.

Riffat’s world can collapse instantaneously like a house of cards for under mature capitalism her debt obligations exceed her income and all her assets are mortgaged to the banks, building societies and credit companies.

The September counter attacks have undermined Riffat’s faith in the financial markets’ ability to match claims and obligations in a growth-enhancing manner. But has she also lost confidence in the State’s capability as a defender of capitalism?

I don’t think so although there is no doubt that globalization has weakened the state. But perhaps this weakening is only a temporary phenomenon and some may argue (Meszaros for example) more apparent then real.

Greenspan has after all been pursuing a sort of bastardized Keynesianism since the early 1990s by using declining interest rates – rather than rising public expenditure – to stimulate aggregate demand.

He pumped in $100 billion into the American economy in the wake of the September counter attack. But nominal interest rates are, as Keynes pointed out long ago, sticky downwards in capitalism. They cannot fall much below the 2 percent Fed Fund’s rate predicted for the end of this year.

Ultimately the American budget surplus must vanish and deficit financing religitimized. The corporate sector in America, Europe and Japan is urging “big government to get back into business” promptly.


Nevertheless there are three factors which make a return to Keynesianism difficult if not impossible.

First government intervention cannot grow with out imposing restrictions on the movement, specially cross border movements, of capital. There must be a tightening of state regulation of financial markets. This is already evident in the American attempt to impose restrictions on transactions suspected to finance the September 11 and future counterattacks. Ultimately this must involve a comprehensive overhaul of the bank regulatory regime as the Bank of International Settlements has already pointed out. But there are few signs – at least as yet – that the major players in the money markets are ready to countenance such systemic changes.

This reflects a fundamental weakness of post modern capitalist order – the impossibility of constructing a global state. A global state could legitimately regulate global capital for it could claim to represent the General Will – the interests of capital in general. But as John Gray, capitalism’s most enlightened apologist today, keeps reminding us, several capitalisms must learn to coexist and the quest for universality abandoned.

The economic authority of the Fed and the US Treasury is not likely to acquire global legitimacy and American pawn international organizations have become a laughing stock. The IMF is not even a minor player in world financial markets. The World Bank has been recently described as “a failed institution” by the Financial Times. The WTO is still born and the development of the UN security system is in tatters. Who will guarantee global debt contracts in such circumstances?

Moreover the West, capitalism’s heartland, is now in a post democratic phase. Ralph Dahrendorf spoke of a “withdrawal from citizenship” twenty years ago. Today less than 50 percent of Americans vote in Presidential elections and less than 20 percent Europeans vote in elections for the European parliament – the withdrawal of the young in both Europe and America is far greater.

Differences in party manifestos have disappeared and no new collectivities have emerged to take the place of the working class which sustained social democracy.

In the wake of the September counter attacks Americans and Europeans have widely welcomed the abandonment of liberal values and statecraft practises. This is a welcome retreat not just from citizenship but an abandonment of liberalism’s universalist claims.

If Asmat is a Muslim there is decreasing room for her in European / American society – even if she is a muslim Liberal. Liberalism is an exclusive project of Western civilization. It can become universally dominant (through imperialist conquest) it can never be universalized. Universality is realizable only in Islam – this is a point we will return to later.

The West seeks liberalism’s universal domination (globalization) – not its universalization. But the resources at its disposal for pursuing global hegemony are limited and declining.

Like the Rome of the second century (AD) onwards the native populations of the post modern West have embraced hedonism – women are refusing to have children. Hence native populations are declining throughout the West. They are also ageing rapidly and given the universal commitment to hedonist values no Western governing elite can call for sacrifice from its people.

If political legitimacy is to be retained every regime must guarantee a continued rise in (debt financed) consumption levels. Ageing must be accompanied by massive increases in social security spending. This must involve a fall in defense expenditures unless this too is debt financed. As noted earlier it is growth in debt which sustained the boom of the 1990s but the slow down of the year preceding the September 11 counter attack showed that consumer / investor confidence was being strained by the growth in debt. Perhaps government debt financed expenditure may rekindle this confidence. But this possibility is limited by the fact that an increase in deficit financing must limit capital’s freedom (as Keynes foresaw).

Since the early 1980s global capital has become a privileged dominant force in all metropolitan states – it has seized control of both conservative and social democratic parties. Surrendering its privileged dominance to a nation state will not become easily palatable.

For no nation state, not even America, can sacrifice its national interest – the commitment to procure continuously rising (debt financed) standards of living for its declining, ageing native population – for the interests of global capital. It is only as long as accelerating global capital accumulation is synchronized with the metropolitan national commitments (of rising consumption levels for natives) that a growth in public debt financed expenditure can enhance investor / consumer confidence.

The inability to construct a global state – through consensus or conquest – is thus a fundamental, non contingent limit on global capitalism.

When a capitalist nation state is threatened the specific capitals involved assess the consequence of its victory / defeat for themselves. The typical response of global capital is to flee the territory.

But America is of course special – it is a nation state illegitimately claiming to represent the interest of capital in general.

A threat to the global hegemony of the American state is a threat to global capital in the sense that though the American claim to the representation of capital’s general interest is illegitimate there are no legitimate claimants for the exercise of this representation.

This is a genuinely new situation in the history of capitalism. Prior to the abandonment of the Bretton Woods System global capital did not exist. Global capital has been brought into the existence by the collapse of the Bretton Woods System.

Habermas and Rorty see this as an “over determination” of liberal order and argue for a retreat to national capitalism. History is littered with such “over determinations” which typically characterize the early phases of a civilization’s downfall. The point today is that capital cannot flee America. Not only is there nowhere to flee to, America’s global political hegemony is essential for capital’s global dominance. This is so because the construction of a global state is impossible.

Since the end of the Second World War America has rarely won its guerilla wars. There have generally been negotiated settlements as a result of which the guerrillas have formed or been incorporated into governments committed to hedonism. America’s guerrilla wars have usually been fought by non Americans and the costs to the American economy and to global capital have been limited. The exception of course is the Vietnam war which America lost comprehensively but which also resulted in the formation of a government committed to hedonism.

America is fighting a suicidal war in Afghanistan and elsewhere. It cannot win this war because even within the West the core values of Western civilization have become hollow shells. The only commitment is to hedonism and hedonism makes sacrifice impossible. The West worship the world and as Wittgenstein reminds us. “There is neither truth nor value in this world”. The West has in practise retracted from its universalist claims in the post modern era. The pretence of promoting human rights universalism today is merely ridiculous.

America can choose to fight on in Afghanistan killing and maiming hundreds of thousands of people, propping up puppet administrations and extending the war to Pakistan, the Gulf and the Fertile Crescent in defense of Israel. Or it can choose to withdraw first from South Asia and then form the Middle East. Whichever course it adopts will tantamount to it’s defeat for neither provides a basis for relegitimizing capitalist and democratic values in these regions or indeed in America itself. America must loose for it cannot make the world safe for global capital either by fighting in Afghanistan or by withdrawing from the region. Globalization died on September the 11th, 2001. It cannot be resurrected.