Modern knowledge, as organised by the universities, falls into three broad classes: the natural sciences, the social sciences and the humanities. This is to say that the academic division of labour in our day is concerned with nature, society and humanity, of which the first two are thought to be governed by objective laws, but knowledge of the last requires the exercise of subjectivity or critical judgement. Whereas nature and society may be known by means of impersonal disciplines, human experience is communicated between persons, between individual artists and their audiences.

Nature and humanity are represented conventionally through science and art, but the best way of approaching society is moot, since social science is a recent (and in my view, failed) attempt to bring the methods of the natural sciences to bear on a task that previously had fallen to religion. If science is the commitment to know the world objectively and art the means of expressing oneself subjectively, religion was and is a bridge between subject and object, a way of making meaningful connection between something inside oneself and the world outside. Now that science has driven religion from the government of modern societies, we must find new forms of religion capable of reconciling scientific laws with personal experience.

The onset of the age of machines coincided with various attempts to develop a science of society, of which British political economy (Ricardo), French sociology (Comte) and German philosophy (Hegel) all achieved a high level of definition in the years immediately following the end of the Napoleonic wars (the Congress of Vienna in 1815). [i] What interests me here is classical political economy, since it was more closely attuned to the rise of capitalism, the subject of these two chapters. Political economy was an argument about how the distribution of the value generated by an expanding market economy might best be deployed in the interest of economic growth. Smith, Ricardo and their followers identified three types of resources, each thought to be endowed with the power of increase: land, money (capital) and human creativity (labour). These in turn were represented by their respective owners: landlords, capitalists and workers (the latter rapidly taking the form of an industrial proletariat). Their interest was in specific sources of income, the distribution of which contained the key to the laws of political economy: rent, profit and wages. The main conflict was at that time seen to be between landlords and capitalists; and the policy recommendation was to ensure that the value of market sales was not diverted from the capital fund to high rents. Only later did the issue of the conflict between the interests of capitalists and workers arise.

I contend that the basic division between classes formed by an interest in land, money and human creativity persists today. Indeed, as we saw, writers as diverse as Locke and Marx have constructed visions of history in which a state of nature or society based on the land gives way to an age of money (our own) whose contradictions should lead to a just society based on fair reward for human creativity. So the question posed by our latest phase of the machine revolution, whose symbolic and practical expression is the internet, is how these broad classes of interest are manifested in the struggle for the value generated by electronic commerce. If the class alliance was first presumed to be between the owners of money and labour against the landlords (industrial capitalism) and then took the form of landlords and capitalists against the people (state capitalism), how are the classes aligned in the present phase of virtual capitalism? I will return to this question in the final section of the present chapter.

World	Nature	Society	Humanity
Knowledge	Science	Religion	Art
Subject-Object Relations	Object	Subject-object	Subject
Resources	Land	Capital (Money)	Labour (Creativity)
Income	Rent	Profit	Wages
Classes	Landlords	Capitalists	Workers

The original claims made by the classical political economists arose from a perception that the rising forces of industrial capitalism were running up against the entrenched institutions of agrarian civilisation. They found that the land was in the hands of an hereditary aristocracy who could charge what they wanted for its use; and that the price of the food eaten by their workers was similarly tied up in traditional agriculture. They sought to change both. But they soon found themselves faced with two potential antagonists, not just the traditional ruling class, but increasingly the industrial working class which the combination of money and machines called into being. In Britain, the capitalists ended up sharing power with the aristocracy in order to keep the workers tied to an unequal labour contract. This class compromise ensured that the country’s lead in the industrial revolution would soon be lost.

The moneyed class was at first in the vanguard of the struggle against agrarian hierarchy, before they eventually formed a reactionary alliance with its representatives against the people they employed. Put simply, mechanisation is the consequence of human effort being put into improving the efficiency of production rather than into controlling the distribution of whatever is produced. All agrarian civilisations were ruled by groups who owed their power to control over distribution. They cared little for the effectiveness of production and even less for the material welfare of producers, many of whom were serfs or slaves. That is why technology was broadly stagnant in such societies. Many parts of the world retain regimes which reward those with the power to grab what has been produced by others. Indeed, it can be argued that even the industrialisers have relapsed into an economic condition where distribution dominates production.

For a brief period, in Britain and a few other places, a class emerged which saw profit in cheapening the costs of production, mainly through the introduction of machines. If, as was normal before the machine revolution, producers received, let us say, a seventh of what consumers pay for commodities, there was little point in an enterprising young man busying himself with making goods; the largest slice of the action lay in distribution processes (banking, haulage, protection rackets, middle-men’s profits, taxation, theft etc). Better by far to become an agent of those who wield political power or, failing that, to become a highway robber. The middle-class revolution, with its emphasis on the autonomy of “civil society”, sought a radical reduction in rents, interest rates, transport costs and political extraction which, at least temporarily, shifted the emphasis of money-making towards improvements in the efficiency of production.

The theory of political economy held that competitive markets lowered the margins available to distributive agents and forced capitalists to reduce their production costs through innovations aimed at improving efficiency. This was achieved through economies of scale, division of labour and ultimately the introduction of machines to factories. The productivity of labour was thereby raised, allowing the resulting profits to be ploughed back into an expanded level of operations. By lowering the cost of producing basic goods like clothing, society’s manpower was freed up for more elaborate forms of commercial production. The only threat to this upward spiral was if those who controlled the land raised their rents to take advantage of these newly profitable industries. This meant that value would be diverted into wasteful consumption of imported luxuries. Worse, whereas the capital fund was inherently limitless, land was very definitely in limited supply. Economic expansion meant population growth, thereby driving up food prices and squeezing the capital fund on the other side through wages. The solution was to expose Britain’s landowners to competition with cheap overseas suppliers of food like America; and this made free trade, specifically the repeal of the corn laws, the great political issue of the mid-19^th century.

Later, when capitalist power was thoroughly consolidated, the economists came up with a theory which claimed that distribution in the old sense had been replaced by competitive market exchange. [ii] The question of who gets what was now reduced to an allocative process which was both rational and fair: everyone gets what they are worth in the market; and any residual anomalies of distribution were best resolved by ensuring greater market competition. There is an underlying truth (as well as a lot of mystification) in this. The economic historian, Douglas North, has argued convincingly that a large part of America’s economic growth may be attributed to reductions in “transaction costs”, in other words, to innovations lowering the share of consumer prices accountable to distributive processes. [iii] At the same time, Jean-François Bayart has argued that all African ruling classes, precolonial and modern, have been exercised to preserve the sources of revenue they live off, what he calls “the politics of the belly”. [iv] This is undoubtedly true; but there is nothing specifically African about it.

What is abnormal is the political experiment, launched by people like Locke in 17th century Britain, to build an economy favouring production. The success of mechanisation in a few countries since then has reinforced the value of that experiment; but it is still insecure. The social forces which concentrated economic power in the state during the 20th century had a strong distributive logic, derived in part from a mission to protect the weak; and latterly the ability of virtual capitalism’s protagonists to make money with money in a circuit which is increasingly independent of production may also have shifted economic power back to those who place themselves between producers and consumers. Most of this chapter is concerned with these two phases of capitalist development and their significance for global political economy. The 20^th century itself may be conceived of as having been framed by these stages in the evolving relationship between capitalism and the machine revolution: at one end, by the bureaucratic revolution and the shift from market to state capitalism; at the other, by the communications revolution and the shift from state to virtual capitalism. This in turn can be understood in terms of changing relationships of alliance and conflict between the three classes of political economy. An alliance of capitalists and workers against the landlords was replaced by an alliance of capitalists and landlords against the workers. The last section of this chapter will ask how they shape up in the struggle for the resources of the internet.

The twentieth century

Hegel’s owl has been winging it through the gathering twilight for some years now. The debacle of the Balkans has brought back memories of genocide in Europe and of events like the Spanish civil war; and Yeltsin’s resistible rise has forced us to reassess the events of 1917. But, if Hegel’s famous remark about the wisdom of hindsight has never seemed more apt than today, it is hard to avoid concluding that the dominant feature of our world has been violence on an unprecedented scale. The 20^th century has been, in effect, one long war, a war to rule the world, waged by rival versions of the modern state. We would be justified in asking, as it draws to a close with yet another European war, how we might avoid repeating the experience in future. So far, Eric Hobsbawm has weighed in with a 600-page retrospective account, Age of Extremes: the Short Twentieth Century, 1914-1991. [v] He is right to see the first world war as the formative moment of the century’s dominant form of political economy, state capitalism (although he wouldn’t call it that); and the collapse of Stalinism and apartheid in the period 1989-91 was obviously a watershed of some kind, even if we don’t yet know what. The heyday of the modern state was, according to Hobsbawm, 1947-1973; and, as a former communist, he cannot resist feeling nostalgic for those “golden years”.

In order to sketch out my own version of recent history, I need to talk of the long twentieth century. Its origin was the revolutionary decade of the 1860s and it is by no means over yet, although we can but hope that the 1990s are at least the beginning of the end. All the major powers of the twentieth century took a political form conducive to state capitalism in the decade which began in 1861 with the American civil war, the completion of Italy’s risorgimento and the abolition of serfdom in Russia. It ended with German unification, the Franco-Prussian war, the Paris Commune and its successor, the French Third Republic. In between Britain passed the second Reform Act, the cornerstone of Victorian democracy, and Japan’s Meiji restoration took place. In all these cases a deal was struck between military landowners, industrial capitalists and the professional middle classes; and a deadly struggle began between this new ruling coalition and the growing mass of urban workers. The latter in turn began to organise: the First International was formed and Marx published Capital.

The transport and communications revolution of the 1860s laid the basis for a rapid expansion of the world market in subsequent decades. This in turn stimulated imperialist rivalry between the newly formed industrial states. Marx and Engels were almost alone at first in recognising that the overwhelming movement of society was towards centralisation. This had its roots in machine production and the concentration of people in cities. They believed that capitalism was undermining itself by giving working people an unprecedented opportunity to organise themselves in the new centres of mass production and consumption. But there was a corresponding mobilisation at the top of society, based on the resources of capital and machines, which gave the state, an archaic agrarian institution, a new lease of life.

The period from the 1870s to the first world war saw an economic revolution. It had several aspects. Most important was the development of mass production for an expanded mass market of consumers. Mass production entailed standardisation and an increased scale of operations. New forms of corporate enterprise dominated the economic stage, joint stock companies whose directors had limited liability for their firms’ losses (i.e. they were no longer ruined when a company they owned went bankrupt). This was the age of the first department stores, concentrating under one roof a wide range of commodities which would previously have been sold in separate shops. It was also the age of the modern office block, when bureaucracy came to dominate both commerce and government.

The shift towards more impersonal forms of economic organisation had important consequences for marketing. Bureaucracies limit the personal discretion of employees, hedging their activities around with rules which can only be broken at risk of dismissal. In the new stores, customers dealt face-to-face with assistants who had no power to negotiate. That power rested with owners and managers who were now removed from the point of sale, unlike the small shopkeeper who had retained a personal relationship with his clientele. The main imperative of management was to control subordinates; and this ethos stretched back to the production lines as well as outwards to an anonymous market of consumers whose tastes were manipulated by public advertising.

The remarkable thing is that this bureaucratic revolution passed unnoticed by the economists, who chose the same moment (the end of the 19th century) to reinvent their discipline as the study of individuals making rational decisions in competitive markets. When economics was born two centuries earlier, a new system of “natural rights” linking political citizenship to private property in production protected the interests of the small property owners who made up the new middle classes. Later, the science of political economy addressed the historical struggle between broad classes of economic agent for control of the wealth realised in production. Now the second machine revolution in Western Europe and America launched giant corporations onto the economic stage whose successors dominate the world market today. Through an extraordinary act of legal manipulation, these corporations were granted the privileges won by individual citizens in the 17th and 18^th centuries, so that General Motors, for example, is in legal fiction an individual with the same rights as you and me.

At the same time, the concentration of workers in rapidly expanding cities gave impetus to their drive for political recognition; and the heirs of Marx and Engels were not slow to offer that drive a revolutionary content. The period leading up to the outbreak of the first world war was touch-and-go. Fifty million Europeans left for lands of temperate zone new settlement and the same number of Indians and Chinese were shipped to the tropical colonies. The ruling classes did not know how to cope with all the people piling up in the cities. The brilliant moment of modernism lit up the intellectual and artistic firmament. Global humanity was on the move and the scent of revolution was everywhere. The newly organised parties of the working class were wooed by promises of greater security. The middle classes prepared themselves for service in an expanded welfare state, Hegel’s recipe for containing the contradictions of capitalism; [vi] and in the process they invented the social sciences. But it could have gone either way. In the event, revolution was headed off and a massive counter-revolution reasserted the power of the few to control the behaviour of the many.

The modern era had been ushered in by a series of revolutions of which the French version had by far the greatest impact. Here Napoleon led the movement to restore elite rule against the popular democracy unleashed by the revolution. In England too the monarchy was restored after a period of parliamentary rule in the 17^th century. This reaction has been called a counter-revolution, a term I find extremely useful in trying to understand how our 20th century world has maintained the rhetoric of freedom and equality, while instituting societies controlled from the top by state-made elites. How else can one explain a situation in which despotisms more powerful than any known to history are able to persuade their victims that they are the beneficiaries of modern freedom?

There have been two moments of general social upheaval which defined the course of the 20th century. Each spawned a major revolution and an even more decisive counter-revolution. We call them the first and second world wars. The carnage of 1914-1918 revealed state powers which no-one before had imagined could exist. Governments raised and killed off huge armies; they organised production; controlled markets and prices; discovered propaganda. The Russian revolution threatened to undermine the transfer of these powers into peacetime control of economy and society; and, for a couple of years after the war, Europe hung on the edge of revolution. Then the 1920s saw such an effective reinstatement of centralised bureaucracy (not least by Stalin) that the political question was no longer whether the people would revolt, but rather which form of state — fascist, communist, welfare state democracy — would prevail universally. The period, 1914-1945, was named by Winston Churchill “the second thirty years war” and he should know. It was an unmitigated disaster for humanity, with economic misery compounded by brutality of an unprecedented kind.

The outcome of the second world war was determined by the duel between Hitler and Stalin, pioneers in the use of state terrorism against their own people and various out-groups. Once again whole societies were set in irreversible movement around the globe. Once again a major revolution was unleashed, this time the revolt against European colonial empire in Asia and ultimately in Africa. Once again the immediate aftermath of the war was a rocky period for the governing establishments in Europe. And once again a counter-revolution was launched to preserve the power of rule from above. Its name was the United States of America. The USA used its newfound leadership to put down every popular movement it encountered and to prop up every unsavoury dictator whose support made the world safer for nation-states and capital. At the same time, the threat of communism was wildly exaggerated in order to institute the Cold War, a regime of nuclear terror lasting four decades.

This was Hobsbawm’s golden age. It is true that the co-ordination of public policy in the leading industrial states generated the biggest economic boom the world has ever seen. Moreover, I can attest to the fact that many of us found the end of empire exhilarating: students challenged the authorities in the name of Third World leaders like Fidel Castro, Kwame Nkrumah and Mao Tse Tung. Historical judgement on the political significance of the 60’s is still out. Edmund Leach argued that there was a lot of fear and conservatism beneath the brave talk of liberation then; and he may have been right. [vii] Even so, we have to make up our minds what was right and wrong about that decade, which I would place as 1964-1972, if we are thinking of a general uprising of the young in America and Western Europe.

My short answer is that patriarchy (the dominance of father-figures at all levels of society) was fatally undermined in the 1960s, with its one irrefutable legacy being the women’s movement. There was an expansion of subjectivity and consciousness, mainly among college kids who could look forward to well-remunerated careers whenever they chose to resume normal middle-class careers. But domestic life will never be the same again. What was wrong was the political analysis of the scope for change in state capitalism. The bureaucracy was never stronger than at that time, the state’s management of the economy never more legitimate. Inflation, interest rates, unemployment and taxation were all low and incomes were rising fast. Personal liberation without an adequate historical perspective on society at large usually ends in tears.

There is a watershed in post-war history and its moment is the mid-1970s. Some would point to the two OPEC oil price hikes of 1973 and 1979 as marking the end of the economic boom; others to the end of empire, the American defeat in Vietnam and the Portuguese revolution; perhaps the most important change in the long run was the invention of money markets in Chicago in 1975. In any case, soon after Richard Nixon announced in 1972 that “We are all Keynesians now”, the economic mechanism of the welfare state began to show the strain of lifting the western economies out of the Great Depression for four decades. This was manifested chiefly as general rates of inflation well above normal. In 1975 the global rate was 25% per annum, which may not seem much by some standards; but when shoppers find that supermarket prices are regularly increased by 2% a month, they get nervous. This nervousness was noticed first by the right who, through a series of national leaders such as Reagan, Thatcher and Kohl, found a winning message by the end of the 1970s: a retreat from state intervention and a return to sound money through the revival of market disciplines. These politicians heard and amplified the rumble of the tax revolt gathering momentum in western societies.

In any case, before the mid-70s the state was universally strong and the world economy was booming; afterwards the state became weaker and the world economy stagnated. Before, there was an attempt to reduce the gap between rich and poor nations; after, the gap widened rapidly. The end of the Cold War and now the communications revolution have exacerbated these trends, so that we are entitled at the millennium to ask whether state capitalism is now on its last legs and what its successor is likely to be. In recent decades it has become obvious that the promise of universal state provision cannot be fulfilled; and the revival of a Victorian faith in free markets has produced too many crooks and too many losers for most people’s liking. As Daniel Bell said, the nation-state now seems to be too big for the small things and too small for the big things. [viii] It is probable that power will leak upwards and downwards, into more inclusive political associations and to more devolved local arrangements. But there is a dearth of radical thinking about such possibilities. The left has had so much at stake in the nation-state as a means of defence against the power and mobility of capital that it leaves discussion of this terrain largely to right-wing thinkers. We will return to this question in Chapter 7.

The salient fact of society today is the communications revolution brought about by the convergence of telephones, television and computers. This also sets up a terrain for political debate in which the right currently predominates. For the first time, the machine revolution may be swinging towards decentralisation, thereby lending technological support for greater democracy. Although its contours are too close to us to be obvious, it seems likely that capitalism is also being reformed to take advantage of new global conditions. I discuss the possibility of a stage tentatively identified as “virtual capitalism” below. It is, in any case, abundantly clear that the major players in our world economy are a handful of transnational corporations and that Bill Gates deserves to be seen as the most successful monopolist since Rockefeller. We need to ask, in the aftermath of the Cold War, which forms of political association are best placed to check the powers of these corporations. I doubt if many would now say the existing nation-states.

1860s	Formation of leading capitalist states Transport and communications revolution
1870s -1914	The bureaucratic revolution Corporations, mass production / consumption Formation of the modern world market Imperialism and mass migration
1914 -1945	‘The second thirty years war’ The Russian Revolution and the rise of fascism The counter-revolution of corporate states Collapse of the 19th century economic system
1930s -1970s	The welfare state consensus
1945 - mid70s	The long post-war economic boom The Cold War at its hottest End of European empire; American hegemony The heyday of state capitalism (‘golden age’)
1960s	The youth rebellion
mid 70s-now	Stagnation and polarisation of the world economy Money markets and the rise of virtual capitalism Decline of state capitalism
1980s	Neo-liberal conservatism The market revival
1989 -1991	Collapse of Stalinism and apartheid End of Cold War
1990s	The communications revolution, the internet World society as a single interactive network

There is then a universal history of the 20^th century and its periodisation is summarised above. But every place and individual has their own particular trajectory through it, so that our experience of that history is highly variable. To repeat the conclusions of the last chapter, the causes of the variations are as important as the overall pattern. But we need a sense of that pattern, especially as we approach a phase in which the need for common regulation of world society and ecology is likely to take on a degree of urgency. The greatest obstacle to any such co-ordinated programme for humanity is global inequality; and it is to the 20^th century sources of that inequality that we now turn.

The development of global inequality

West Africa is separated from the Mediterranean world and Europe by the Sahara desert and an inhospitable Atlantic coastline. [ix] Despite sporadic contacts with Carthaginians and Romans, the region remained largely isolated from the North until the spread of Islam in the late first millennium provided a common ideological framework for trade and migration. One reason for this isolation lies in the rich ecological diversity of West Africa itself, including rainforest and savanna, the sea and major rivers, substantial mineral deposits and a long history of interlocal trade in textiles, ironware, pottery, vegetable products, animals and slaves.

A thousand years ago, the gold-rich West African state of Awdaghust produced traders with bills of credit larger than any known to Islamic civilisation. When the Malian king Mansa Musah went on a pilgrimage to Mecca in the middle ages, his expenditures in Egypt caused runaway inflation there for thirty years. For more than three centuries after they reached West Africa around 1500, European trading settlements on the coast exchanged manufactures for slaves on terms of rough political equality with African societies (such as Ashanti and Dahomey) which themselves grew strong as a result of the trade. The Atlantic slave trade may have been bad for West Africa’s economic development; but, if so, it was because it reinforced the wrong indigenous elements, predatory aristocracies who were full partners in the trade. It was only in the late 19th century that the Europeans were emboldened by their new industrial power (specifically, the machine gun) to establish colonies inland.

The last century (roughly 60 years of colonial rule and 40 years of independence) has seen a rapidly widening gap between West Africa and Europe. The former’s governments have been reduced to economic and strategic impotence, leaving them prey to any policy the rich countries wish to impose. This uneven pattern of development cannot be explained in terms of a colonial exploitation model alone. West Africa did not have to suffer a settler class nor an extensive mining industry and, as we saw in the last chapter, generated an indigenous export sector of capitalist and peasant production. The highest rates of wealth extraction have been as a result of international debts incurred long after the region became nominally independent. There was an indigenous pattern of urbanisation, especially in Western Nigeria; [x] and in the course of the 20th century this has now grown to levels of 30-40%. The main reason West Africans have slipped so far behind is that they have failed to mechanise production to any significant extent. Their countries have acquired modern states, but these have not lifted the productivity of at least some sectors of their economies to a level capable of sustaining such a superstructure. Is it any wonder then that West Africans are leaving their home region in droves to find work where the prospects are better, if necessary as illegal migrants?

The postwar population boom in the Third World has, for the most part, spawned an urban revolution without that rate of mechanisation which accompanied the rise of cities in Europe and America during the 19th century. [xi] This means that the economies of these cities must sustain proliferating numbers of people living by their own efforts at a very low standard of living (”the informal economy”). The poverty of the inhabitants of large modern cities has always provoked more anxiety in their rulers than the plight of the peasantry, since the city mob is closer to home and less easily controlled. Moreover, these cities contain in microcosm all the pathologies of global economic inequality exaggerated to tragi-comic effect. Gilded palaces protected by bars, dogs and guns look down on squalid slums familiar to middle-class readers since the publication of Oliver Twist. A poem I wrote while spending a couple of years in Jamaica in the 1980s expresses something of this contrast. You might say it is a considered reaction to the encounter with Alvin (see the epigraph).

View From a Balcony

1

The evening sky parades its wonders just for me:

Here towering columns, residue of rainclouds,

Boiling black smoke, hellfire of blast furnaces;

There thin purple islands, feathered archipelago

Floating in an unmapped, turquoise lake.

Encircling hills, reduced to pristine dormant shapes,

Stretch out familiar fingers to the golden sea.

A forest city spreads its winking lights beneath my feet.

This surge of elevated power intoxicates,

Brings on wild fantasies of flight,

Makes all things possible from here.

2

We clasp cold Red Stripe in the still warm air,

Hands slipping on the bottles’ icy dew,

Our senses captive to the evanescent spell

Of sunset’s lurid melodrama,

Brief recapitulation, daytime’s curtain call.

But Herman was uneasy. “It isn’t right

To be up here when they are all down there.”

The godlike seeming was dissolved

And cooling beer now mixed with clammy sweat.

3

My home’s a hillside fastness, garden paradise,

Container walls like fortress ramparts,

Far more lovely, twice as safe as any bank.

Here yelping curs outnumber people,

Harrass dark strangers night and day.

White mansions show the world a surly shuttered face.

Grim burglar bars, sham rococo,

Cannot disguise the prisons that they make.

Guns guard the inmates, rich inviolate,

From unseen dangers, bleak reminder of their wealth.

4

The restful cool of breezy night

Is shattered by rounds of canine choirs,

Redundant drone of airconditioners

And TV movies broadcast for the world to hear.

Then daylight brings the peaceful sun

To light this magical profusion –

Royal palms, wild ferns and clinging vines,

Banana’s crazy leaves, cascading banks of flowers –

And then at last to lull abandoned dogs to sleep.

5

Each morning sleek new German cars,

Evading potholes and debris of rainstorms,

Carry the masters down the winding, unkept road,

Past servants trudging slowly up that steep incline,

Eyes averted from their rulers and the sun,

Their unpaid journey almost done,

An hour or more from Kingston slum

To bright, fantastic cages on the hill.

6

For all their fortifying bulk

This colony’s foundations are not firm.

The fluid earth escapes the shoring walls

And leaks away in swift corrosive streams.

The race threat grasps them by the throat.

The sound of distant jungle drums

Drifts up to fill the owners’ restless dreams

Of dread invasions, crime and death.

Subversive nightmares are transformed

In frantic talk of hurricanes and land slides,

Elemental cataclysms, nature’s revolutions,

Displaced symbols of a deeper terror,

Monstrous fear of fellow men.

7

This fragile platform on the edge of empty space

Suspends me over chasms of despair,

Until the evening sky parades its wonders once again

And idle torment shifts to fantasies of flight

Where contradiction’s black and white,

Made gaudy by the dying sun’s strange light,

Fade into nothing and the night.

The beleaguered elites are afraid of the poor majority whom they only see from afar or in threatening circumstances on the streets. Should they anticipate an explosion or can the cracks in the social facade be papered over? In the 19th century, the journalist Henry Mayhew ventured into the vast unknown desert of London’s East End to report on London Labour and the London Poor for the benefit of his readers’ curiosity. [xii] His conclusion was that they were extraordinarily busy and enterprising. Even so, the incorporation of what Gareth Steadman Jones calls Outcast London into mainstream 20th century society has itself been an uneven process and was never completed. [xiii] The crisis of America’s inner city ghettos is as acute today as at any time before. The contradictions of massive inequality are intrinsic to the huge urban agglomerations growing everywhere from Lagos to Los Angeles.

In the Great Depression of the 1930s, Maynard Keynes offered a solution to national elites concerned that their ability to govern would be overwhelmed by the mass of poor and unemployed generated by the economic system they supervised. [xiv] The rich countries today are similarly cast adrift in a sea of human misery which includes most people alive, but especially the inhabitants of Africa and South Asia. Marx used to say that “the social relations of production act as so many fetters on the development of the productive forces”, by which he meant that capitalist markets could not organise machine production for the benefit of society as a whole. At the most inclusive level the main fetter on human development today is a United Nations world order (dominated by the USA) which prevents the evolution of new forms of economic life more appropriate to the conditions of mechanisation and global integration into which we have so recently stumbled. It also, of course, prevents the implementation of a Keynesian programme aimed at alleviating world poverty by means of redistribution of purchasing power.

In the film Annie Hall, Woody Allen says that he doesn’t feel like eating out tonight because of all those starving millions in the Third World. [xv] The audience laughs, uneasily. The gesture rings false: why tonight and not every night?. No-one could live consistently with that proposition — could they? We might well ask how people live with economic inequality. And the short answer is that they don’t, not if they can help it. Most human beings like to think of themselves as good. This normally involves being compassionate in the face of others’ suffering. The worst thing would be to imagine that we are responsible for that suffering in some way. Better to explain it away as having some other cause: perhaps the people deserve to suffer or are just pretending to be poor. Better still not to have to think about it in the first place. In the last resort it is possible to ignore them by defining them as less than fully human (not like us). Distance (in every sense — physical, social, intellectual, emotional) is the answer to the unwelcome conflict between inequality and human compassion. And, while each of us engages in thousands of voluntary acts distancing ourselves from the suffering of others, the task is performed more reliably, at the communal level, by institutions.

An institution is an established practice in the life of a community or it is the organisation that carries it out. [1] What they have in common is the idea of a place to stay, in opposition to the movement, flux and process of life itself. Institutions and agriculture go together. The conflict between fixing society in the ground and reinventing it on the move underlies our contemporary global crisis. The maintenance of inequality depends on controlling the movement of people. If the poor are to be kept at a proper distance, it would not do to have them invade the protected zones of privilege established by the rich. Better by far that they should know their place and stay there.

The two principal institutions for upholding inequality, therefore, are formal political organisation (laws administered by states) and informal customary practices widely shared by members of a community (culture). The most important task of both is to separate and divide people in the interest of maintaining rule by the privileged few. Classifying people is as old as language and society themselves; and, as Durkheim and Mauss pointed out, it can be constructive in defining solidarity within and between groups. [xvi] But, it is equally well-known that labelling people differently is a means of preventing them from combining. One of the main ways that modern ruling elites everywhere have come to terms with the anonymous masses they wish to govern is to pigeon-hole them through systems of classification. The intellectuals have devoted their efforts overwhelmingly to devising and maintaining such categories. Social science itself would be impossible if individuals were not subordinated to these impersonal systems of thought and enumeration.

To the extent that society has become a depersonalised interaction between strangers, an important class of categories rests on overt signs which can be recognised without prior knowledge of the persons involved. These are usually visual — physical and cultural characteristics like colour or dress; speech styles may also sometimes be taken as revealing social identity. Modern states are, of course, addicted to documentation, identity cards, preferably with a photograph of the bearer. [2] By a standard symbolic logic, these sign systems are often taken to reveal underlying causes of behaviour — trustworthiness, ability and much besides. On this arbitrary basis,

• personal destinies are decided,

• people are routinely included and excluded from society’s benefits,

• inequality is both made legitimate and policed,

• the world is divided into an endless series of “us” and “them”,

• monstrous crimes against humanity (like genocide) are carried out.

After the second world war, South Africa’s ruling National Party set out to institute what they called apartheid. Despite the close integration of people of European and African origin in the country’s economic system, they decided to separate the “races”, by allocating to “blacks” a series of homelands (themselves fragmented according to “tribal” origin) and denying them the right to reside in the cities, where the “whites” mainly lived, except with a pass (work permit). Within the cities, black and white areas were kept apart and were very unequally endowed with resources. Establishing and maintaining such a system required the systematic use of force, although collaborators were, as usual, not hard to find. Internal resistance built up gradually and the rest of the world expressed variable degrees of outrage, eventually translated into an intermittent boycott. The release of Nelson Mandela in 1990 signalled a retreat from this policy which culminated quite soon in African majority rule. An end to apartheid perhaps? Or perhaps not.

The South African experiment was ugly, but not the most extreme form of inhumanity known to the 20th century. Stalin and Hitler between them were responsible for much worse; and even as the ANC was being peacefully elected, a million people lost their lives in Rwanda, while Bosnia revealed that genocide was alive and kicking in Europe. Yet the Afrikaners managed to provoke the most co-ordinated international opposition since the second world war. Why? What they did was obnoxious, but was it so exceptional?

Perhaps their main crime was to be explicit, even boastful about their method of maintaining inequality. For the same method could be said to operate everywhere, without being acknowledged so openly or practised so violently. I believe that South Africa became a symbol of a universal institution which people were feeling generally uneasy about. It offered a limited target, outside the societies of its international critics, which could be vilified and rejected as an alternative to more painful introspection. For do not people like to think of themselves as good? Opposing evil elsewhere is a way of displacing our ambivalence over how we handle inequality closer to home. Whether this analysis holds true or not, it is indisputable that, after the official demise of apartheid in South Africa, something similar to it is the ruling principle of organisation by which the inequalities of world society are managed today.

This principle can be stated briefly as follows. Inequality is intrinsic to the functioning of the modern economy at all levels from the global to the local. The rich and poor are separated physically, kept apart in areas which differ greatly in their standards of living. It is impossible to prevent movement between the two areas in any absolute sense, if only for the fact that the rich need the poor to perform certain tasks for them on the spot (especially personal services and dirty work of all kinds). But movement of this sort is severely restricted, by the use of formal administrative procedures (state law) or by a variety of informal institutions based on cultural prejudice. These rest on systems of classification of which racism is the prototype and still the single most important means of inclusion and exclusion in our world.

There is a great lie at the heart of modern politics. We live in self-proclaimed democracies where all are equally free; and we are committed to these principles on a universal basis. Yet we must justify granting some people inferior rights; otherwise functional economic inequalities would be threatened. This double-think is enshrined at the heart of the modern nation-state. Nationalism is racism without the pretension to being as systematic or global. So-called nations, themselves often the outcome of centuries of unequal struggle, link cultural difference to birth and define citizens’ rights in opposition to allcomers. The resulting national consciousness, built on territorial segmentation and regulation of movement across borders, justifies the unfair treatment of non-citizens and makes people blind to the common interests of humanity.

There are other ways of classifying the poor, of course, besides visible signs of “natural” difference encoded as race. Nationality, ethnicity, religion, region and class can be signalled in many other ways. But the pervasive dualism of modern economies derives from the need to keep apart people whose life-chances are profoundly unequal. Engels noticed it when he came to Manchester in the 1840s. [xvii] In medieval cities, the rich and poor lived together. Here the rich lived in the suburbs and worked in the city centre; and they rode to and from their businesses along avenues whose facades of shops concealed the terrible housing conditions of the slums which lay behind. Post-apartheid Johannesburg takes this to a latterday extreme, with its rich white Northern suburbs policed by private security firms and poor blacks still crowded in monochrome townships like Soweto.

The apartheid principle is to be found everywhere in local systems of discrimination, more or less blatant. But there are also grounds for asserting that 20th century world society has been constructed along the same lines. Arthur Lewis makes a plausible case for this as follows. [xviii] In the period from the 1880s to the first world war, as we have seen, 50 mn Europeans left home to go to the lands of temperate zone new settlement (37 mn to the USA, the rest to Australia, Argentina etc). A similar number of Indians and Chinese (“coolies”) were shipped to the tropical colonies as plantation and transport workers, indentured labourers who signed away their freedom for a sea passage. These two streams of migrants had to be kept separate since, although their work was often similar, the first was paid on average 9 shillings a day, the second 1 shilling a day. And in the areas where Asian workers were allowed to settle, the price of local wage labour was driven down to the same level. Seen in this light, the paranoid fear of Asian immigration which was commonplace then among Australian workers of European origin makes a lot of sense.

Lewis goes on to argue that this division of the world by western imperialism into countries of dear and cheap labour had profound consequences for their subsequent economic development. For high wage economies sustain higher levels of demand than their low-wage counterparts. Moreover, world trade has been organised ever since in the interests of the better-paid, with tax-rich states subsidising their farmers to dump cheap food overseas at the expense of agricultural development there and preventing the imported manufactures of poor countries from undermining the wages of home industrial workers. South Africa and the United States were two countries which allowed heavy immigration of working class Europeans, while seeking to retain a reserve of poorly paid, mainly black labour. The resulting dualism is inscribed on their shared 20th century history of racist urbanisation. That is not hard to see. Lewis’s feat was to show how we might think of contemporary world society as a whole in similar terms.

The unequal world made by Victorian imperialism was sustained by a cultural theory based on presumed biological difference. Our late 20th century world is more unequal. Underlying this process is the uneven development of mechanisation and money-making (capitalism). The boundaries between rich and poor in this world are not static: some Asian countries have begun to challenge western hegemony, for example. The cultural theory is now more overtly nationalist than racist, but the coercion and prejudice exercised in its name are much the same. They maintain economic inequality at the local level and block any appropriate response to human misery on a world scale. People may be less triumphalist about their sense of superiority these days; but it is their culture, with its curious mix of self-congratulation and indifference, of rationalism and mystification, that enables them to sleep at night.

How can a world which has seen the end of formal colonial empire maintain racial inequality at the heart of its economy? The answers lie in the failure of post-colonial development. Kwame Nkrumah, leader of Africa’s first state to win independence from colonial rule (Ghana in 1957), told his followers, “Seek ye first the political kingdom”. [xix] If the anti-colonial revolution posed the main threat to the prevailing world order in the second half of the 20th century, it was also widely assumed that political emancipation would be a source of economic liberation for the impoverished masses of the Third World. Quite the opposite has been the case; and now, four or five decades after independence, the gap between rich and poor countries has grown wider. Many parts of Africa are in real terms worse off now than in 1960. [xx] At the same time, the world economy, which boomed in the decades immediately after the second world war, has been stagnating for over two decades now, since the turning point of the mid-70s identified above.

The financial crisis of 1929 triggered off a general slump (the Great Depression) which was felt acutely in the West, but affected the whole world. The discovery of demand management by governments (welfare state capitalism) and the boost to production provided by the second world war ended the slump. After the war, America pumped aid into a shattered Europe (the Marshall plan), but economic growth was slow and only took off in the early 1950s under the stimulus of the Korean war. Now, with the world in thrall to a potentially terminal conflict between the western and eastern blocs, the global economy enjoyed two continuous decades of expansion. This was the context both for the anti-colonial revolution and for the youth rebellion in the West, with its links to the civil rights and women’s movements, especially in America. It should be remembered that, until well into the 1970s, many intellectuals believed that the communist experiment would prove to be economically superior to the “free enterprise” system.

Under these circumstances the essence of political economy everywhere came to be known as “development”. At one level, this meant the relationship between rich and poor countries, a new contract sponsored by the United Nations world order whereby the richer countries agreed to help the newly independent Third World to close the gap between them. This involved the transfer of money, technology and skills (“aid”) which people imagined could be afforded out of an economic growth many thought of as permanent. At first, the recipe for development offered by the Americans was called “modernisation”. [xxi] Societies considered to be traditionally backward needed an infusion of what I have called “the middle-class package”: cities, capital, technology, democracy, education and the rule of law. There was some optimism in the 1960s that prosperity could be diffused in this fashion.

But by around 1970, it was clear that something was wrong. Most poor countries was not getting any richer and for some the situation was deteriorating. This provided the context for a critical analysis, rooted in Marxism, the other side’s ideology in the Cold War, which was known variously as underdevelopment or dependency theory, eventually as “world systems” theory. [xxii] The common core of these approaches was the idea that the poor were poor because their economies had been structured by western capitalism in the interests of accumulation which effectively transferred wealth to the rich countries from the Third World. It followed that involvement with the West in the hope of becoming modern was the problem, not the solution. The latter required some form of isolationism or withdrawal from the capitalist system. This theory was associated at first with certain Middle Eastern and Latin American writers. [xxiii]

Cracks were already beginning to show in the West’s postwar boom by 1970. The Vietnam war introduced financial instability to world markets, as well as indicating that American pretensions to global hegemony had clay feet. The oil price hike of 1973 then threw the world economy into a depression from which it has never recovered. The OPEC countries were a cartel dominated by a group of small countries in the Persian Gulf with a lot of sand and next to no people, led by the Saudis. Oil production was organised by American and one or two European companies (“the seven sisters”). It is not for this book to investigate how an economic disaster of this magnitude could be pulled off by a few Arab sheiks sheltering under the military umbrella of the United States. Let us infer that the collusion of the oil companies and of the US government implies that their interests were also served by what transpired. [xxiv]

The consequence of the oil price rise was an immediate reduction in aggregate demand within the industrial economies, as consumers were forced to pay substantially more for energy. The oil producers received a windfall surplus which most of them could not spend, since their populations were too small and there is a limit to how many fancy weapons they could buy. They made huge transfers to the US government, their patron, in the form of purchasing Treasury bonds; [3] which meant that US citizens were indirectly financing additional government expenditures by paying more for gas, a tax hike by the back door. There was still a lot of money left over which was deposited by the producers in the banking system, much of it the new off-shore Eurodollar circuit which offered higher interest rates. In order to pay the interest the banks had to lend on the money. There were few takers in the West, since the sharp reduction in demand discouraged investment there. The communist bloc at this time was not considered to be reliable and had little to sell that the rest of the world wanted. So the bankers turned to the Third World. [xxv]

If the oil price rise was bad for the industrial countries, it was a full-scale disaster for the non-oil producing Third World countries. These had been encouraged by the World Bank and other international agencies to concentrate on exporting a few primary products. The resulting oversupply kept prices down, while rapid urbanisation in their countries raised demand for the manufacturing exports of the industrial countries. As a result the terms of trade between the two blocs were worsening from the perspective of the poor agricultural economies. The oil shock depressed demand in the rich countries for Third World exports; yet when the latter were faced with increased energy bills, all they could do was try to sell more of their traditional exports, thereby driving world prices even further downwards.

Into this desperate situation came the western banks looking for ways of lending on the oil surplus. They found takers, of course, usually corrupt leaders of bankrupt governments who were prepared to sign any piece of paper to get their hands on some money. The premise of the loans was that they would be invested in productive projects out of whose yields the interest and capital repayments would be made. But more often than not, the money went into private Swiss bank accounts or the projects failed, as most “development” projects did at the time. [xxvi] By the end of the 1970s there was a huge banking crisis, since Third World debtors were in no position to pay off the loans. This was exacerbated by the second oil price hike in 1979. The gains of 1973 had been eroded in the meanwhile; so the producers tried to claw some of them back. This time, the dollar was undermined and the Federal Reserve responded by raising interest rates to 20%. The subsequent regime of high interest rates coincided with the shift from postwar Keynesian demand management to the “monetarist” (sound money = deflationary) policies identified with Reagan and Thatcher.

The 1980s and afterwards saw a massive transfer of money from the Third World to the West in the form of interest repayments which often amounted to as much as a third of government revenues in any given year. [xxvii] This drain of income from the poor countries was greater than any extracted under previous colonial and neo-colonial arrangements. At the same time, the International Monetary Fund and World Bank imposed draconian measures known as “structural adjustment”, designed to reduce each government’s financial obligations. The threat to the western banking system was averted by a combination of rescheduling agreements (which only increased Third World liabilities) and covert support to the most vulnerable banks. The governments of poor countries were caught without any alternative to playing along. In any case they had long ago abandoned any sense of responsibility towards their own people in exchange for dependency on their foreign creditors.

In the process of this catastrophe, which is the specific context for escalating impoverishment in much of Africa, Asia and Latin America, the idea of “development” was quietly dropped. The international agencies now have just one goal, the survival of governments whose task is to supervise passively the international flow of money into the coffers of western banks and corporations. Aid levels have been much reduced since the 1960s; indeed non-governmental organisations of a bewildering number and variety have stepped in to perform functions which neither Third World states nor their international sponsors are prepared to undertake any more. But the obscene transfer of wealth from the poor to the rich, honouring debts contracted under highly dubious circumstances, reveals how far world society has degenerated from the high ideals generated by the defeat of fascism and colonial empire in mid-century.

A brief note should be added on the communist bloc. [4] That great statesman, Richard Nixon, made a sort of peace with Brezhnev’s Soviet Union, as well as with China, at the beginning of the 1970s. This opened up the possibility of trade between East and West. Nixon’s solution was the so-called “vodka-cola” strategy; the point being that there was no way that Americans could drink enough vodka to pay for all the Coke that Russians would want to buy. What was it that the communists had plenty of? Docile, reasonably skilled, cheap labour. They could buy western goods with the proceeds from selling that labour to western corporations. Consequently, the World Bank and other institutions lent money to the Poles, Hungarians etc to go in for joint sponsoring deals with these companies, setting up factories there, for example making up clothes for sale in the West. The hard currency earned by repressing their own labour force was spent by the political elites in special shops for whisky and Marlboro cigarettes which served to mark off their status from that of the masses, who ate bread and potatoes, if they were lucky.

There was a snag. World trade was rigged to prevent countries with cheap labour, like Taiwan or Poland, undermining their high-cost western competitors. North America and Western Europe erected tariff barriers against such competition which were potentially prohibitive for the trade initiated under the auspices of the vodka-cola strategy. A solution was found. When West Germany signed the Treaty of Rome, to join the European Common Market, it signed in the name of Germany as a whole; so that East Germany was in theory a member of the western trading circle. Manufactures from the communist bloc were shipped into the West through East Germany acting as a sort of port-of-trade. When the Berlin Wall fell, several Eastern European countries had accumulated billions of dollars in debts to finance this scheme. The resulting popular governments then embarked on a privatisation programme which ruined their economies; and the attention of the western powers shifted to doing what they could to protect their trade and investment there. It may eventually dawn on them that having participated actively in the economic ruin of the second and third blocs of postwar humanity (which is to say, the great majority), they are merely preparing the way for their own downfall. Certainly, there are fewer triumphalists around today ready to claim that the West “won” the Cold War. The shadow of the 1930s presses closer in on us all.

In the meantime, whether they actively sought it or not, many countries have effectively been ejected from the movement of world trade. At the time of the first world war, when Lenin claimed that accumulation through the colonies was the main concern of western capitalism, [xxviii] these accounted for something like a third of world trade. It was still the heyday of a world market based on exchange of raw materials for simple manufactures. By the end of the 1970s, the Third World’s share of international trade had fallen to 10% and, in the last two decades, this has fallen sharply even further. Increasingly, world trade is dominated by exchange between a few countries capable of entering the sophisticated system of money, information services and hi-tech manufactures which constitutes “virtual capitalism”. If the underdevelopment theorists once advocated withdrawal from the world system as a positive strategy, most non-western governments are now desperate to keep a toe-hold in a market which threatens to exclude them for good. The priorities of ordinary people in these countries may be somewhat different, however. They at least, unlike their governments, have the option of leaving home and trying their luck in the centres of world economy.

State capitalism and the informal economy

In the twentieth century capitalism took the specific form of being organised through the state. Three world wars were fought to determine which form of state would predominate; but in the end it was the state itself which lost. Now there is not a popular government in the world and people everywhere are looking for ways of getting the state off their backs, especially by reducing their obligations to pay taxes. The antithesis of state capitalism is the so-called “informal economy”, a term which originated in the early 70s. Beginning as a way of conceptualising the unregulated activities of the marginal poor in Third World cities, “the informal sector” has become recognised as a universal feature of the modern economy. [xxix] Evasion of the state’s rules unites practices as diverse as home brewing, street trade, the drugs traffic, political corruption and offshore banking. The issue of informal economic activities is thus intimately tied up with the crisis of state capitalism in our times. [xxx]

In 19th century Britain, the “nightwatchman state” was content to provide the conditions in which market capitalism could flourish. This included putting down workers’ riots, when necessary. The Germans and later the Japanese pioneered a national system of closer co-operation between government, the banks and industry. But no-one then dreamed of the state being able to regulate the workings of the economy in fine detail, down to fixing prices and taking on responsibility for boosting the number of jobs. A capitalism whose principal organ of reproduction was the state itself arose out of the conditions of the first world war. During the “Great War” of 1914-18 millions of working people were killed in the trenches, which solved the problem of popular pressure for change in one way. But the greatest discovery of their rulers lay in the powers of intervention unleashed by the bureaucratic revolution of recent decades.

For a century or more, intellectuals had been grappling with the problem of how to rule the anonymous masses of the new industrial cities. Statistics, classification and professional specialisation were part of the answer. Hegel proposed, around the end of the Napoleonic wars, a state-made “universal class” of bureaucrats trained in universities to administer the common good. Not long afterwards, Marx and Engels argued that, if there was to be a universal class taking responsibility for the guidance of society, it would be the mass of ordinary working people themselves. [xxxi] This set the stage for a gigantic struggle to determine the locus of power in modern society. The industrial working classes flirted with revolutionary politics, but eventually settled for a welfare state administered by professionals - an army of doctors, teachers, lawyers, social workers and, eventually, economists. In other words, it was Hegel’s vision which won out in our century, not Marx’s.

This was obscured by the revolutionary consequences of the first world war which exploded in Russia and for a time (1917-19) threatened everywhere to overturn the system of rule in the interests of big money (capital). Less noticeably, however, the rulers of the industrial countries acquired massive powers of direction and mobilisation in the course of the war. Faced with the possibility of universal insurrection afterwards, they deployed these new powers to launch a counter-revolution, a reassertion of the state’s right to rule, if necessary by taking on its own people. This was true even of Russia which, after Lenin’s death in 1923, was ruled by Stalin as a totalitarian bureaucracy only nominally committed to world revolution. From the 1920s to the end of the 1980s, there was one system of political economy in the world and several variants bent on winning overall control.

After 1945, the rhetoric of the Cold War did not disguise the convergence of the American and Russian systems towards a common model of accumulation. C.L.R. James pointed out that both sides organised workers in factories to produce surpluses which were ultimately managed by the