To try to understand the economics underpinning the never-ending stream of crises, Rusere Shoniwa caught up with Professor Fabio Vighi who teaches critical theory and film at Cardiff University. Professor Vighi’s current research focuses on ’emergency capitalism’ and his recent books include “Unworkable: Delusions of an Imploding Civilization” (State University of New York Press, 2022); and “Critical Theory and the Crisis of Contemporary Capitalism” (Bloomsbury, 2015; co-authored with Heiko Feldner). You can watch the interview with Professor Vighi here on Odysee. This article extracts the pith of it and includes some perspectives that weren’t discussed.
As we glide smoothly from two years of authoritarian Covid containment diktat into the theatre of war, the image to hold in mind courtesy of Professor Fabio Vighi, is of continuity editing in a movie: as one crisis begins to lose its momentum, a new one is seamlessly edited into the movie to keep you in a febrile state, free from the tedious constraints of critical analysis.
Be afraid, be very afraid: of virus apocalypse, nuclear apocalypse, economic apocalypse, cyber apocalypse. Be enraged: first at the unvaccinated, then at the evil Dr Strange-Putin. Clap and cheer: for the NHS, for plucky little Ukraine. Pick a side, goddammit! Root for the actual Ukrainian neo-Nazi Azov Battalion as it repels the make-believe ‘Putin-Nazi’ invaders from Russia. (Disclaimer: previous sentence not to be construed as an endorsement of Putin, who is just as dangerous to humanity as nearly all Western political leaders have proven themselves to be over the past two years.)
For those in need of guidance on who and how to hate, Facebook has relaxed its rules on hate speech, generously giving you a free pass to call for violence against Russians so long as you make clear in your post that you are referring to the invasion of Ukraine. Always check the small print! Tip – begin every hate-filled post directed at Russians with, “In reference to the invasion of Ukraine…” and then proceed carefully, perhaps along the lines of: “It’s remotely possible that the Russians might love their children too, but that Putin chap is asking for a bullet in his head and if I were a crack marksman…I’m not saying I am…but if I were, I might be minded to go to Davos next January to see what could be done.”
Whatever you do, just don’t think too hard about it because thinking will inevitably spoil the drama of endless crises in the movie called Emergency Capitalism.
When the Covid crisis hit in Spring 2020, a badly wounded global monetary system had been limping for 10 years through an unresolved debt crisis. In September 2019, the credit markets began seizing up again with junk debt and, having kicked the can down the road for as long as possible, there is compelling evidence that, by the end of 2019, the spectre of a far more dire replay of the 2008 Global Financial Crisis was stalking the markets.
Covid lockdowns…it’s the economy, stupid
The immediate and desperate response of the Federal Reserve in the US was to create liquidity with a repeat of the money-printing of 2008. Between September 2019 and March 2020, the Fed injected more than $9 trillion into the banking system, equivalent to more than 40% of US GDP. Essentially this was another bailout, only much bigger than the first one but silent and virtually unreported. That extraordinary move triggered threats and opportunities that required extraordinary management.
While throwing that amount of money at the financial markets was necessary to prevent a repeat of the 2008 panic and contagion, that mass of money could not be allowed to reach the real economy (‘Main Street’) through retail lending, because it would trigger overheating and hyperinflation.
Professor Vighi posits that the global lockdowns of Spring 2020 provided an economic shutdown which played the vital role of an ‘induced economic coma’, allowing the US Fed, under a programme of government bond purchases managed by BlackRock, to temporarily plug holes in the interbank lending market and avert hyperinflation. This was known to be a case of kicking more cans down the road, but global financiers don’t have anything else in their playbook on debt and liquidity management.
This theory completely reverses the role of the economy in the Covid drama and demands a paradigm shift from one where we tend to view the economy as simply another victim of pandemic measures to one in which the severely ailing economy and monetary system are in fact the driving force for pandemic measures.
The opium of debt
Critiques of global capitalism almost always refer to a ‘financialised economy’. This is a simplistic term to describe the departure from capitalism’s traditional MO which centres on creating profit or ‘surplus value’ by leveraging labour, goods, and services in the productive process to using the inflation of debt as a means to make fictitious profits. Exciting while it lasts but painful when the Ponzi scheme collapses, as it did in 2008.
The creation of surplus value in the ‘old fashioned’ way hit a ceiling in the late 1970s and early 1980s when real wages in the West peaked and it became harder for corporations to extract profits through wage exploitation. So global capitalism, an extremist ideology par excellence, did what it does best through the extreme exploitation of the economic concept of competitive price advantage: it ‘offshored’ huge swathes of Western manufacturing to economies with cheaper labour in the developing world.
What happened to blue collar workers in the West? They were effectively handed a copy of global capital’s staff handbook – Adapt or Die. Transplanting real jobs and factories and transitioning to ‘service’ economies (which, let’s face it, is a euphemism for bureaucracy on steroids) was sold as something that ‘mature’ economies did. Immature Germany didn’t get the memo and remained a net exporter of manufactured goods, which may have something to do with why it is Europe’s powerhouse economy.
This tectonic shift in global finance created a flow of cheap goods from Chinese and other sweatshops into the West but the demand for those goods, previously fuelled by a real productive economy, would now be fuelled by debt. Credit and money markets were revamped to feed the new addiction to debt.
Traditionally, banking used to be an appendage, albeit a vital one, to the real economy. It provided a key ingredient in the profit leverage process – capital, either to get a leg up at the start of a venture or to expand existing operations. Leon Wansleben of the Max Planck Institute for the Study of Societies explains that, under the old model, banks used to issue loans to businesses in order to hold those loans on their books. Now, they turn these loans into ‘securitised assets’ that can be transacted with other banks and non-bank firms. This is a form of credit expansion on which financialisaton rests as a driving force.
Professor Vighi explains that “the more the financial market grows, paradoxically…the more the real economy free falls. The two things are not connected anymore as they were before.” Using the Apple corporation as an example, he points out that “there’s no correlation with the value that is produced by Apple as an industry and the market capitalisation of Apple”, which is “astronomical in relation to the real value of Apple”. Inflating debt in order to make money from money is a compensating mechanism for the shrinking real economy.
Having arrived at a position in March 2020 where it was clear to monetary authorities and governments that the debt crisis of 2008 was very much unresolved – the pumping of $9 trillion by the US Federal Reserve into the banking system in the lead-up to lockdown is very clear proof of that –why would all Western governments be content to make a bad public debt situation far worse by drastically inflating the public debt through the Covid support programmes and bank lending schemes that were supposedly intended to keep individuals and businesses afloat?
I accept that it is by now tedious for most readers to see writers pre-emptively batting away the naïve answer which claims that governments didn’t know how bad Covid was going to be and therefore had to prioritise saving lives above all else, but it must be done to avoid accusations of preaching to the converted.
Firstly, no government in the West bothered to do a cost/benefit analysis vis-à-vis saving lives. There is no escaping such analyses because throttling economies and cutting off access to health care can kill as effectively as a virus. Governments knew that even the most rudimentary cost/benefit analysis would have shown that their lockdown pill was worse than the ill. So, they didn’t dare do one. The UK Government itself implicitly acknowledged before the first lockdown that Covid could be dealt with in a conventional way because it downgraded the seriousness of Covid on the eve of lockdowns, taking it off the list of High Consequence Infectious Diseases, citing low mortality rates among other things as the key factor.
So, the refusal to do a cost/benefit study combined with the knowledge acquired before lockdown that Covid was not the Black Death are clear signposts that lockdowns, along with the huge increase in public debt that they would entail, were a foregone conclusion with not the slightest regard shown for social or economic cost.
With that out of the way, we can return to Professor Vighi’s answer to the question of why governments across the West decided to double down on the public debt Ponzi scheme:
“Because they don’t have any other strategy…They have no plan B…There’s no other way of dealing with the problem except kicking the can down the road a bit further and pretending that the problem is not there [by] inflating the financial sectors. And at the same time, yes, creating a public debt situation which is very problematic, which is even as [Jerome] Powell, the chairman of the Fed, said that the US public national debt is unsustainable… I don’t think they are endowed with an intelligence large enough to consider a plan B to this situation. They continue with plan A because they are part of a mechanism which is blind…The mechanism is about profit making.”
In the UK, debt as a percentage of GDP has nearly quadrupled from 27% in the early 90s to 104% post Covid in 2021. In the US, over the same period, it has jumped from 54% of GDP to 124% of GDP ($3.2 trillion to $29.6 trillion). The pre- to post-Covid rise in the UK is 83% to 104% (£1.87 trillion to £2.2 trillion). In the US it’s 107% to 124% ($ 22.7 trillion to $29.6 trillion). That’s a hell of a price to pay for something the authorities knew would be on a par with a bad flu season.
Ukraine: an entirely avoidable war is by definition a war of choice.
To appreciate that the engine of global capital, of which the war machine is an integral and vital part, is fuelled by crises, we must appreciate that the Ukrainian conflict is as much a choice as it is a tragedy. We can then question who is choosing it and what they have to gain from it. And crucially, who will lose?
How avoidable was this state of emergency emanating in Ukraine? The short answer is entirely avoidable. NATO and the US (really one and the same thing) have spent a great deal of time, energy and money inviting war…and then denouncing it. If you’re looking for a lucid explanation by one of the most accomplished and distinguished political scientists in the world as to why the situation in the Ukraine is almost entirely the fault of the West, a really good starting point would be two lectures by Professor John Mearsheimer. The first pre-dates the invasion by about 7 years and can be viewed as an accurate prediction of what would eventually happen if NATO continued to push unreasonably for Ukraine to become a NATO bulwark on Russia’s borders. The second is confirmation of Professor Mearsheimer’s theory in a talk he gave to Cambridge University two weeks before the invasion in February 2022.
The inescapable conclusion is that Ukraine is being used as a pawn or proxy in a NATO/Russia superpower play in which only ordinary Ukrainian citizens and the economically weakest global citizens will be the losers.
These lectures don’t delve too deeply into the interesting side story of Ukraine’s love affair with neo-Nazis and the role they’ve played in Ukrainian politics since the Maidan coup in 2014. The Nation reported in 2019 that “post-Maidan Ukraine is the world’s only nation to have a neo-Nazi formation in its armed forces.” Is Ukraine’s flirtation with the far-right just a storm in a little Nazi teacup? Probably not. The corridors of power in Ukraine might just be so littered with copies of Mein Kampf that there is speculation that Mr Zelensky’s hands may be tied in peace negotiations by the country’s Neo-Nazi militia.
This is not some minor detail in the backdrop to the Ukraine conflict. It’s part of the important story of how the US has backed two coups in Ukraine to help install NATO/US friendly regimes, how those coups have strengthened the hand of neo-Nazi and far-right forces in the country and why its president may be powerless to intervene against those forces who have alienated Russian-speaking citizens of Ukraine to further their own divisive nationalist and NATO agenda. Something is seriously wrong with the official BBC narrative if your so-called pro-democracy and anti-racist governments in the West are backing neo-Nazi forces in a conflict that could spark a nuclear exchange between Russia and NATO.
Here’s the key takeaway from the linked analysis:
“Like any other US puppet regime, Ukraine doesn’t have any real independence. Kiev has been actively pushed to confront Russia by every US administration, against the will of the majority of Ukrainian people. The fact that most Ukrainians wanted peace with Russia was reflected by the fact that they voted for the peace candidate Zelensky in such overwhelming numbers, 73%. And the fact that Zelensky did a total 180° [turn] on that promise shows how little political power he actually has.”
So, if this conflict was entirely avoidable and if Ukraine “has emerged as a new hub for the far right across the world”, as this Al Jazeera report claims, shouldn’t NATO actually be joining forces with Russia to stamp out the threat of Nazism?
Facebook doesn’t think so. It has come down on the side of Neo-Nazis by making “a narrow exception for the praise of the [Neo-Nazi led] Azov regiment strictly in the context of defending Ukraine”. That’s alright then. The Azov soldiers may be SOBs but they’re Facebook’s SOBs. The System is constantly telling you what its true values are. Facebook, owned and operated by global capital, a major cog in the Big Tech machine with its monopoly on the online public square, is a proxy for global capital’s values – it censors doctors (and anyone else) who express concerns about the safety and efficacy of vaccines, and it backs neo-Nazis.
How Cold War II will pan out for global capital’s serfs – the 99%
In recent piece Professor Vighi wrote for Philosophical Salon titled “From Covid-19 to Putin-22: Who needs friends with enemies like these?”, he described Putin’s war as “the ideal continuation of the war on Covid.” It’s a continuation of emergency capitalism with all the same monetary policies employed to keep the house of cards afloat. For example, Germany will be giving the equivalent of €300 per taxpayer to soften the blow of surging energy costs.
Meanwhile, citizens across the West are now being told that inflation, food shortages, and supply chain disruptions are unavoidable and arch villain Putin is the scapegoat. Italy has just transmuted its virus state of emergency to a war state of emergency…for a war in Ukraine. ‘State of emergency’ is a euphemism for dictatorship and, for one of the EU’s largest member states, the exacting threshold for a ‘state of emergency’ is some kind of problem, anywhere on the planet.
The fact that this conflict was entirely avoidable implies that it was a choice. Therefore, by extension, everything that flows from it is a choice: sanctions on Russian energy supplies making energy prices unaffordable for the most economically vulnerable; supply chain disruptions creating food shortages; declaring economic warfare on Russia, which will only immiserate working class Russians. All squeezing the mass of humanity in an ever-tightening vice and enriching elites who run the machine. More disaster capitalism.
If sanctions are intended to bring Russia to heel by halting its military venture and/or toppling its government, will they work? As Professor Vighi points out, sanctions are in many ways a fig leaf from a global corporate perspective because Russia is part of an inextricably connected international finance system and trying to hurt it could backfire in a number of ways. Firstly, there is significant exposure to Russian debt among US and EU banks so hurting Russia too much comes with serious financial risks.
JP Morgan has recommended that clients take buy positions on Russian corporate debt, which implies a bet on a quick Russian recovery. Cutting raw material supplies from Russia will worsen inflation. Kicking Russia out of the SWIFT banking system will likely push it to trade in other markets and currencies, which damages the USD. Russia has announced that payments for its energy exports must now be made in rubles, which has just boosted the exchange rate for the ruble and has given further impetus to something the US fears – de-dollarisation of the energy market.
That is not to say that Russia will not be hurt by sanctions. However, the primary outcome will be economic shocks to the weakest which, in turn, will be used to justify greater control to purportedly administer and ‘ameliorate’ these shocks. If food shortages result in rationing, then digital IDs combined with programmable Central Bank Digital Currencies (CBDCs) could be pushed as the most efficient way to administer control over and spending on rationed goods. But don’t take my word for it. BlackRock’s CEO says the invasion of Ukraine could be used to accelerate the use of CBDCs.
Meanwhile, the UK government is powering ahead with its nationwide digital ID plans, despite half of the responses to its public consultation on digital identity opposing the idea.
Professor Vighi summed up the link between the freefalling real economy and measures like Central Bank Digital Currencies:
“The only way in which this crazy situation can be sustained is by making sure that, whilst the real economy free falls, there are ways of controlling that free fall…it’s a kind of controlled demolition of the real economy. That’s the way I define it. So, some kind of state control…to make sure that either people don’t realise it or, when they realise it, their reaction is somewhat contained by some form of authoritarianism. We should be quite honest here. We are moving towards a kind of authoritarian type of capitalism, more and more explicit, which I think whose purpose is precisely to try and make sure that the controlled demolition of the real economy takes place in the way they want it to take place. I think central bank digital currencies, insofar as they would enable some kind of monetary slavery, are precisely a step in that direction, although we don’t know yet when or even if it will actually happen. But certainly, they are thinking about eliminating physical cash and replacing it with digital currencies which would allow them to control the monetary flow from top to bottom.”
Geopolitics and the economy
If the unipolar US-led world that was ushered in by the fall of the Berlin Wall in 1989 is now fracturing, which dynamic will drive societal and economic developments – the World Economic Forum’s Great Reset or the Cold War II Great Fracture? And does a Cold War II play into the hands of global capital’s elites? Professor Vighi believes that:
“the geopolitical chess board is related to the economic cause of everything. So, Cold War II could play into the hands of global capitalist interests, because once again, you have an ongoing emergency, maybe with some hot wars as well here and there to keep the tension high and to keep all the emergency precautions in place, to justify, again, more restrictive measures on societies and populations around the world. And, of course, the monetary system going the same way. So, I see this playing into the hands of the big financial elites and what the central banks are trying to do. It kind of makes sense, irrespective of the real geopolitical frictions that, of course, are there. There are also real geopolitical problems and antagonisms, but I think they are, in a sense, part of the bigger game that is being played here, the theatre of war remains a theatre. It’s a tragic theatre, no doubt, because people are dying…but it’s still a theatre that is part of a wider agenda, which fundamentally has to do with keeping this kind of economic system, which is hyper indebted and hyper financialised, going. Making sure that those wheels don’t come off the global capitalist bus, which is the main concern. And that’s why I see politicians… don’t really have a role to play. They play the roles that they are told to play. Those really in control of big government are elsewhere. Big government is where you don’t see it. It doesn’t have the face of the politicians that we know. It has faces that we don’t probably know either. And those are running the show from above, from up there, we don’t see them. They give orders, politicians execute the orders, and things happen.”
From the perspective of geopolitical rivalry, isolating Russia certainly increases the likelihood of strengthening ties between Russia and China, creating a formidable China/Russia bloc against the West. However, Professor Vighi emphasised that:
“a Cold War could be beneficial to everyone because that would justify certain measures… like the nuclear threat would come back…and that would create, again, justification for more and more authoritarian measures…It’s all baked into the same cake, and the cake is the economy, I’m afraid…The US probably has some interest in trying to divide Europe from Russia, for example, to create a division and to prevent the EU from being part of that bloc, which would be a threat to the US as such. So definitely, this is something that might have justified what we’re seeing now. But I think overall, the concern is the logic I’ve been talking about earlier. The concern is to keep that system going in the way in which it is reproducing itself now in these extreme circumstances.”
The system cannot afford not to have an emergency
Rounding off the discussion, Professor Vighi emphasised the continuity editing image with these powerful words:
“We know that as soon as this emergency loses some of its appeal, as it were, we will see immediately another one coming in. I don’t know from where yet, but there will be another one taking over again.
Remember that idea of continuity editing. Something will be edited into the film and pretty quickly. We won’t even realise it.
We won’t have time to because the system cannot afford not to have an emergency.”
You can find more of Rusere’s work at https://plagueonbothhouses.com