The economic war, the war that is already happening
Capitalism is not only a way of organizing the economy of a society, it is a social relationship, that is, a certain way of producing and globally reproducing the life of society and, as such, it is tied to the course of history. This system in which we live has already accumulated several centuries, and its evolution has transferred its reflection to all the spheres that participate in this social relationship; whether it is the economy, politics, productive organization, territorial organization, or even daily life itself. In this sense, the historical development of capitalism has also had an undeniable impact on the way in which tensions and military conflicts are expressed. On the one hand, the exponential technological development of recent decades opens up a new battlefield in the network. Dependence on computer systems and the Internet, the influence of social networks, or the need to protect information through cybersecurity, are new variables that influence the way in which imperialist struggles unfold in the 21st century. On the other hand, growing globalization and delocalization are making global production chains increasingly fragmented and complex, and involving more and more actors.
Imperialist wars have never been fought solely in the military sphere, but the trend towards global expansion and technological development, caused by the development of capital itself, have brought that now more than at any other time in history the economic, technological and media battlefields occupy a place of the first order. In the last few days, it has been very clearly perceived how the language of war has been rapidly transferred to the economic scenario with the development of events and Russia’s invasion of Ukraine. A clear example: on March 1st, after the numerous sanctions that the EU has announced for Russia, the French Minister of Finance, Bruno Le Maire, warned that the West was going to «provoke the collapse of the Russian economy», adding that «we are going to wage an all-out economic and financial war». Hours later the deputy chairman of Russia’s Security Council, replied to him via Twitter, «Watch your tongue, gentlemen! And don’t forget that in human history, economic wars quite often turned into real ones». While it is true that the countries that conform NATO cannot afford direct military intervention in the Ukrainian war, they are taking direct action in economic terms. Unlike the «real war», the international economic war is already. This is a battlefield on which protagonists of the capitalist order such as Canada, Australia, the USA, Japan or the European Union can indeed afford to fight.
Weapons deployment
To this day, numerous sanctions have been implemented against Russia, and the impact on its economy, and on the world economy, is strong. One of the main measures has been the so-called «financial nuclear weapon» by the French Minister of Finance, the disconnection of the international payment system (SWIFT). The United States, the United Kingdom, Canada and the European Union have agreed to exclude a large number of Russian banks from the SWIFT system, a messaging system that allows international payments to be made securely and facilitates transactions. It is worth mentioning that the disconnection is not total at the moment. The payment of gas and oil continues to be allowed, since Russia produces 10% of the world’s oil, and therefore, war or no war, dependence is extremely high. It is important to underline, moreover, that in the case of gas, approximately 40% of the gas consumed in Europe comes from Russia, and this figure is as high as 60% in Germany. Also, during the last week, a long list of countries (EU, Switzerland, Japan, Canada, USA, UK, etc.) have been progressively announcing their decision to freeze Russian funds in their different economic systems. This implies excluding the largest Russian banks from all the aforementioned economic systems, and making it impossible to access payments in euros, Swiss francs, dollars or pounds sterling. Finally, another series of sanctions related to restrictions on the exchange of goods and raw materials have been reported. Among others, Canada has banned oil imports, Japan will impose export controls on semiconductors and other products for the defense sector, the EU has announced sanctions related to export control and financing and visa policy, and the USA will impose restrictions on the import of military and IT equipment to the Russian Ministry of Defense.
The aim of these measures related to the limitation of banking transactions, the blocking of funds in other countries or the restriction of foreign trade, is to try to strangle the country’s finances by disconnecting it from the international markets. The direct and coordinated response to the Russian invasion of Ukraine by the aforementioned countries and many others has had immediate consequences on the Russian capitalist economy and, consequently, on the global economy. The hindering of access to international reserves in foreign currency, the limitation of banking transactions and the restrictions on the exchange of goods actually entail a sharp drop in the demand for rubles, and a strong obstruction to the international convertibility of the Russian currency.
Widespread distrust about the currency’s economic capacity and the fall in demand have caused the ruble to experience a historic fall, losing 30% of its value in a single day, last Monday, February 28th. The loss of the currency’s purchasing power will result in higher prices for goods in Russia, due to the rise in production costs, and the loss of corporate profits of foreign companies, which depend on the ruble exchange rate to be paid in their domestic currency. Rising technology costs are proving to be a thermometer of price escalation. For example, the iPhone 13 has increased in price by 23% after the sanctions became known. There have been two immediate reactions from the Russian Central Bank to avoid the free fall that its economy is experiencing. On the one hand, to raise interest rates on deposits to 20%, to «compensate for the risks of depreciation and inflation, and to protect citizens’ savings from devaluation», according to a communication from the organization. On the other hand, to establish a capital control by asking its intermediaries not to meet the sales of Russian debt. In other words, if some clients want to sell Russian debt, the bank will reject that sale order.
Russian capitalism has other possibilities outside the traditional tools of its Central Bank to try to mitigate the collapse of its economy in the medium-long term, and here China can play a fundamental role. China has its own SWIFT, the CIPS, a system that already has the participation of several Russian banks and could help to avoid the drawbacks of expulsion from the SWIFT system. However, while about 40% of the world’s international payments are paid in dollars, CIPS has a 3% share, so for the time being it would not represent a global alternative. Cryptocurrencies may be another option for making international payments. Russia is developing its own digital ruble, hoping to be able to use to trade directly with other countries, without the need to convert to dollars, which would make it less dependent on the United States, and more able to resist sanctions. Also, the digital yuan could prove to be an alternative when it comes to facilitating cross-border payments via cryptocurrencies.
While it is true that over the past few days there has been a lot of talk of China’s role in softening the blow of the various sanctions, China is performing balancing acts in trying to avoid a confrontation with Russia while at the same time marking a subtle distance from the country. If China clearly tipped the balance in Russia’s favor, then it could face the possibility of secondary sanctions, or an erosion of its reputation both within its own borders and beyond. The forcefulness and synchronicity of the reaction by the G7, the major powers of Western imperialism as a whole, is a mirror in which China does not wish to be seen.
A war against the proletariat as a world class
In any case, in spite of the maneuvers that the Russian Central Bank may carry out, the backing that Chinese capitalism may give it, or the support it finds in the expansion of cryptocurrencies, it is indisputable that the sanctions imposed will have very harsh consequences on the life of the Russian proletariat. So much so that the French Minister of Finance, Bruno Le Maire, did not hesitate to add in his statements that «the Russian people will also pay the consequences» of this economic war. Long queues for cash have already begun in the face of the collapse of the ruble. People’s distrust is increasing due to the fear that credit cards will stop working or that cash withdrawal limits will be established, in a context in which there are already serious complications to obtain dollars, and Russia has forbidden to take out of the country more than 10,000 dollars in foreign currency. As a consequence of the collapse of the ruble, it is expected that there will be a generalized increase in prices and, therefore, hyperinflation sustained over time. The prices of all medicines not regulated by the State will increase due to the fact that they are imported in dollars and euros. Pharmaceutical industry will not be the only sector affected; other strategic sectors such as food, automobiles and technology will experience a sharp rise in prices in the coming weeks and months.
Yes, the economic war that has begun as a result of the clash of imperialist tensions will have serious consequences in the daily life of the Russian proletariat, but not only. Capitalism is a system full of contradictions. On the one hand, its DNA drives it relentlessly to produce commodities in order to obtain profits to be invested again in generating new commodities, and thus to carry the cycle of production of value to infinity. It is precisely this vital need to squeeze the maximum out of profit that explains the tendency towards delocalization that capitalism has experienced in recent decades, and which causes supply chains to become increasingly complex, segmented, and incorporating more and more links. On the other hand, it is also an inherently competitive system, with capitals fighting each other over and over to corner a greater profit than their rivals. The mixture of these two opposing forces results in a perpetually tense social system in which capitals need to expand and tend to generate relations of dependence in which one drinks from the other; and at the same time, they strive to destroy their competitor.
Dependence and the need for the adversary to exist, and at the same time the threat and tendency to annihilate it. This is what has come to light in recent days with the declaration of economic war on Russia. The Minister of Economy of Germany, a country highly dependent on Russian gas, explained it clearly: «we have to make sure that we do not impose sanctions on Russia that we ourselves cannot bear». Yes, this is an economic war against Russia, against the Russian proletariat, but also against the world proletariat, because we cannot forget that capitalism, inevitably, is a world system. It is not a secret. Both the media and various institutional bodies around the world have repeatedly stressed the boomerang effect that sanctions will have on the world economy. The fear of the dearness of different raw materials has caused gas to reach historic highs in its price, the oil barrel has reached prices not seen since 2014 and wheat has soared to its highest historical maximum in 14 years. These are just a few examples, but as we have seen, rising prices in essential raw materials has an inescapable capacity to spread price escalation to other types of goods. We insist, it is not a question of the war in Ukraine, Russia, or NATO; the economic war will affect the proletariat as a world class. Rising energy prices and sustained high global inflation over time contain the risk of a domino effect of sanctions that could be felt in other regions not involved in the conflict, such as Latin America, where high oil prices could lead to trade deterioration. That is why they are calling for their sacrosanct national unity in the name of democratic civilization, which always hides a brutal attack on our living conditions.
Neither crisis, nor war. It was, is and will be class struggle
There is another element to be taken into account which is essential for an adequate analysis of the present situation. The development of the historical events that accompany the life of capitalism cannot be analyzed solely from an immediate perspective. It is necessary a dynamic vision that allows us to understand the history of capitalism not as a set of moments, but as the course of a process. In this sense, it is not possible to understand the crisis that is brewing, without looking back to relate it to so many other elements that are buried, but visible. Because capital never resolves its contradictions, but rather raises them to a higher scale and reproduces them on an enlarged scale.
We said it at the time: the economic crisis that arose as a result of the coronavirus is no different from that of 2008. Nor will this one be. A clear example of the accumulation of these contradictions is the rise in the price of gasoline and diesel. On Wednesday, March 2nd, gasoline reached an average price of 1.65 euros per liter in Spain, and diesel was at 1.53 euros per liter. Indeed, the invasion of Ukraine has caused prices to rise to an all-time high. However, we must not forget that the previous all-time high was already broken at the beginning of last February. Yes, the upward inflationary pressure is a very worrying fact for the proletariat as a whole, which has been aggravated by the Ukrainian conflict, but it is a trend that has been observable for some months in the world economy.
A World Bank publication last month went so far as to comment that 15 of the 34 economies classified as «advanced economies» had inflation above 5% in 2021, a level not recorded in more than 20 years. In the case of the Spanish economy, inflation soared in February to 7.4%, a figure not seen since 1989 and which does not reflect the impact of the recently initiated war. As we are trying to explain, the strong inflationary trend that has been shaking the world economy for some months is not the result of a specific current event, such as the invasion of Ukraine, but can be explained by the conjunction of a whole series of factors that are profoundly structural and characteristic of the decomposition suffered by capitalism in the current historical period. The unstoppable rise in the price of electricity, the shortage of some fundamental raw materials, the tendency to generate bottlenecks in the production processes and the mismatch of supply and demand of goods caused by the pandemic, are some of the elements that come into play when it comes to raising the level of prices across the board. What is evident is that the inflationary perspectives at the global level are not at all encouraging, since even the ECB has opened the door to stagflation[1] after the war in Ukraine, which translates into a brutal deterioration of the material living conditions of the proletariat at the world level.
Only from this panoramic vision we can observe the great breeding ground that capital is creating with all the elements already mentioned, which represent nothing more than a sum and a continuation of the contradictions accumulated by this system. This perspective is also important because it is necessary to have an approach that understands capitalism as a global system, in which the economy is not something separate from the territorial or the military area. The escalation of imperialist tensions between Russia and NATO and the contradictions of capital manifest themselves in multiple ways, and this is one of them. The propaganda machine has been set in motion, and we have been able to hear how the President of the Government, Pedro Sanchez, acknowledged on March 2nd in Congress that the sanctions imposed will have a negative impact on our cost of living, but that the cost of non-response would be even greater. At the same time, Josep Borrell, in charge of coordinating the EU’s external action, stated categorically that the EU is not at war with Russia. The economic war is a real war because, whether with bombs or sanctions, it is the proletariat which suffers misery and death so that the capitalists may share among themselves the benefits of their exploitation. It is therefore essential that, as we commented a week ago, we ask ourselves the right questions and identify what is our terrain as revolutionaries. In this struggle, whether in its military or economic form, it is not our lives that matter, but the survival of capital. The military and the economic represent the two sides of the same coin which is war. The war of a dominant class, the misery and the dead of our own. For all this, our perspective is to choose the terrain that is ours and not that of the bourgeoisie. Let us transform the imperialist war into class war.
[1] Stagflation is characterized by slow economic growth and relatively high unemployment—or economic stagnation—which is at the same time accompanied by rising prices (i.e. inflation). Stagflation can be alternatively defined as a period of inflation combined with a decline in the gross domestic product (GDP).