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Geopolitical Tensions Increase amid Growing Economic and Political Crises

The compounding economic crises and trend toward greater political, trade, and military confrontations between world powers expose the imperialist epoch as one of crises, wars, and revolutions.

Sou Mi

August 21, 2022
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Credit: istockphoto

In the sweltering heat of July, thousands of protesters stormed the presidential palace in Colombo, Sri Lanka. By then the president, Gotabaya Rajapaksa, had not only resigned but fled the country in the face of massive and escalating protests. Tens of thousands in the island country had been protesting for months demanding that the government resign. For months the country had been steeped in bankruptcy, undergoing historic fuel and food shortages. Power cuts lasted 12 hours every day, and the country faced the prospect of even more austerity.

But the Sri Lankans are not alone. From Thailand to Kenya to Ecuador, popular uprisings are emerging across the world, with hundreds of thousands rising up against inflationary conditions and austerity measures. In a process that began in 2008 and has been deepened by the twin crises of the pandemic and the ongoing war in Ukraine, four decades of neoliberal globalization and growth are beginning to show exhaustion, exposing the structural crisis of capitalism.

Over two years of the pandemic have exacerbated the crisis for globalization, as global supply chains came to a grinding halt, leading to sharp rises in basic goods and commodities across the globe. At the forefront of it was the working class, who not only kept the world running through it all, but, especially in the Global South, were forced to bear the brunt of it both medically and economically. Already affected by weak growth after the economic crisis of 2008, the emergence of the war in Ukraine has further stunted economic recovery. Furthermore, the war marks a new chapter: amid the crisis of neoliberalism and the subsequent declining hegemony of U.S. imperialism, there is now an open contest for a multipolar world, with a new pole emerging in China — forging new alliances with regional powers like Russia and Iran — fighting for spheres of influence.

Although the U.S. still maintains its position at the top of the capitalist world order, these new challenges that arise amid the crisis of neoliberalism pave the way for deepening geopolitical crises. The compounding economic crises and trend toward greater political, trade, and military confrontations between world powers confirm and reactivate the definition of the imperialist epoch as one of crises, wars, and revolutions.

On the War

Almost six months in, the war in Ukraine remains one of the biggest drivers of the current geopolitical situation. Russia’s invasion of Ukraine marked a reactionary offensive, with Putin willing to bomb and unleash untold violence on Ukrainians in order to prevent NATO from expanding and encircling Russia. What seemed like it would be a short-lived offensive in the early days has turned into a protracted war, with much of the fighting now concentrated on the eastern front, which Russia likely hopes to annex. Although numerically stronger, the Russian troops have been matched in firepower, if not often bested, by the Ukrainian forces armed to the teeth with state-of-the-art U.S. and NATO weaponry. Above all, this offensive has breathed new life into NATO and U.S. imperialism, at least in the short term.

Although NATO forces have yet to intervene directly, this war remains essentially a proxy conflict between Russia and NATO. The U.S. and NATO, closely allied with the Zelenskyy regime, have strongly influenced the course of this war, both materially on the ground, as well as geopolitically. The war in Ukraine has led to one of the largest military rearmaments across the U.S. and Europe. In recent months, the U.S. passed a budget of $840 billion for its military and has provided over $7 billion in funding to Ukraine over this war. The funding is in the form of advanced military equipment, ammunition, and intelligence. This has been championed by whole sectors of the bourgeoisie who, in light of the war, have called for increasing defense spending and production. In Europe countries like Germany and the Spanish State have used the war as an excuse to ramp up their own military budgets, setting aside historic spending in the name of supporting Ukraine.

Weakened after years of Trump’s isolationist policies, the NATO alliance has been reinvigorated by this Russian offensive. In the wake of the war, the Biden administration — although domestically mired in a polarized political situation — has been able to lead a bipartisan regime as well as Europe to relegitimize the institutions of U.S. imperialism. Alongside this rearmament, Biden has been able to lead a diplomatic alliance with Europe to impose crippling and escalating sanctions on Russia, which is not only squeezing the Russian working class, but, coupled with other supply chain disruptions owing to the war, is also having far-reaching consequences on the masses globally. Furthermore, although the question of Ukrainian membership seems unlikely, NATO will undergo one of the largest territorial expansions since the fall of the Berlin Wall with the likely membership of Sweden and Finland. Once Finland’s membership is ratified, its 800-mile border will become NATO’s longest border with Russia, marking a significant strategic defeat for the latter.

Furthermore, the revival of U.S. leadership and NATO on the world scale also has long-term consequences in terms of the United States’ eventual confrontation with China. Over the last decades, the restoration of capitalism in China had offered U.S. capital new markets to grow in. With access to a new large and cheap workforce, the project of globalization, especially in being able to access Chinese markets, proved immensely profitable for U.S. capital. Simultaneously, this influx of foreign capital spurred technological and industrial advances in China, which laid the foundations for Beijing to emerge as a strategic competitor to U.S. hegemony. In 2011 Obama launched the “pivot to Asia” program, aimed at containing China’s growth. Indeed, last year, as the U.S. withdrew its troops from Afghanistan, it aimed to do so to consolidate its forces toward this strategic task. Yet, as U.S. capital faced slow economic growth and recovery post-2008, China emerged as a key force, using its relative stability to enter new markets, gaining a stronghold in Africa and the Middle East. Now, through more monetary investments, geopolitical partnerships, and projects such as the Belt and Road initiative, China is firmly attempting to establish itself as a key partner and force to penetrate new markets. The next period is going to be marked by this struggle for hegemony between the U.S, which continues to be the main imperialist power but faces a long-term decline in hegemony, and China, which is an emerging power and an increasing threat to the top.

Today, although the war in Ukraine rages on, containing Beijing is a key concern for Washington. As Secretary of State Anthony Blinken noted in May, for the Biden administration, the task at hand is to lead an international bloc opposed to Russia’s invasion into a broader coalition to contain China, which they see as a more serious and long-term threat. The strengthening of the European alliance has also created fertile ground for building important alliances in the Asia Pacific. The Biden administration, establishing itself as a strong negotiator, has been especially aggressive in advancing strategic partnerships with Australia, Japan, and India to contain China’s influence, not just in terms of economic partnerships but also especially through defense treaties to ensure its influence and presence in the South China Sea.

Contradictions within the Regime

Although the U.S. has been successful in the short term in some spheres of its geopolitical agenda, there are significant countertendencies to its growth, and the situation remains contradictory. This strengthening of U.S. hegemony also takes place amid the historic decline of U.S. imperialism. As the war drags on, the blanket unity of the early days has given way to increasing friction because of the political consequences of both the hot war and the effect of sanctions, especially in Europe. Within NATO, political unity grows tenuous as Germany, Italy, and France emerge as new diplomatic poles. Although Germany has toed the line in NATO, sending troops to Romania and NATO’s eastern flank, and expelling key Russian diplomats from the country, Germany is eager to lead a negotiated solution out of the war. The U.S. has also been unable to lead traditional allies like Brazil, India, and Mexico in confronting Russia, now that the countries are committed to “neutrality.”

The United States’ program to contain China also has significant challenges ahead, especially as China forges its own strategic partnerships, especially with Russia, and grows its own influence across the world, particularly through trade deals and economic treaties. In the U.S., while there is general consensus within the bipartisan regime over China’s status as the biggest geopolitical threat to the U.S., there is less consensus, even within the ranks of the ruling parties, over how to manage that relationship. Such was particularly evident when Nancy Pelosi visited Taiwan, which has only led to rising tensions between the two sides. Although Biden has continued much of Trump’s policies while in office, especially around the question of trade tariffs and export controls, he has steered clear of escalating any further tensions with China in the short term. This strategy is in conflict with members of his own party as Pelosi, even against the advice of the Biden administration and defense officials, continued on with the visit to Taiwan, which has been received as a huge affront by China. This marks the first such trip to Taiwan by a U.S. official in 25 years — and China’s place in the world order has significantly advanced since then. Pelosi’s visit to Taiwan is a departure from the United States’ position of “strategic ambiguity” on the question of Taiwan, and the acknowledgment of Taiwanese sovereignty, for Beijing, is an indication of open hostility toward China.

While the motivations behind this trip are the source of much speculation, it must also be seen in the context of the crisis within the Democratic Party and the domestic situation here in the U.S. Within the legislative chambers, the Democrats have found it difficult to pass key aspects of its agenda and are poised to enter a challenging midterm season. They have been unable to curtail inflation and improve the economy, which are overwhelmingly the main political concerns. Although the Biden administration managed to create some bipartisan consensus to pass the Inflation Reduction Act, it is significantly smaller than Biden’s promised Build Back Better bill and gives the biggest piece of the pie to capital while, in reality, doing little to actually curb inflation. Faced with a rightward situation in the domestic sphere, in which the Far Right has all the political initiative, manifesting in the attacks on abortion rights, trans rights, and other civil rights, it has become imperative for the Democrats to prove that they can govern. In the absence of decisive legislative action, and if China remains in the picture as the next political threat, the Democratic Party will likely need to show to some ranks of capital that it is willing to take a strong position against China. Yet, without making the structural advances that can help decouple the relationship between the two countries, escalations and confrontations only amount to playing with fire.

The domestic crisis in the U.S., in addition, is having a bearing not only on the relationship with China but also with the United States’ ability to continue imperialism as usual across the globe. Biden’s Middle East trip, aimed at reestablishing U.S. imperialism in the region to contain China, Russia, and Iran, was a mixed bag at best. While Biden saw some success in confirming the U.S. position as Israel’s unflinching ally in the region, using U.S. influence to normalize relations with Israel in the Arab world in continuity with the Abraham Accords, it had less success in other parts of its agenda, most notably in failing to guarantee more oil drilling by OPEC countries, which would’ve helped offset rising fuel prices.

In its own “backyard,” Latin America has long been fertile ground for the U.S. to exert significant geopolitical influence through its aggressive interventionist politics. Yet Washington’s power is significantly diminishing in the region. This was especially clear in this summer’s Summit of the Americas where Latin American and Caribbean countries, including Mexico, boycotted the summit citing Washington’s refusal to invite Cuba, Venezuela, and Nicaragua. As the U.S. regime struggles domestically, it is harder for it to impose itself as a beacon of democracy internationally. The fruits of this are especially clear in the region, which has been experiencing ongoing class struggle in the region over the last years; many countries have seen open revolts against imperialist institutions like the IMF, as in Ecuador, Colombia, and Argentina. This pressure from below has paved the way for the triumph of populist governments such as Boric in Chile, Alberto Fernández in Argentina, Gustavo Petro in Colombia, and perhaps Lula in Brazil this year, winning the presidency over Bolsonaro. In each case these leaders feel the pressure to stand up to Washington. This so-called new pink tide faces the contradiction of arising in a period of great economic instability and indebtedness, compared to the beginning of the century, when pink-tide governments benefited from a strong regional economic growth. Although the U.S. remains the biggest imperialist influence in the region, new infrastructure investments and trade partnerships with China are increasing the scope of Beijing’s influence in the region.

A Long Road to Recovery

The twin crises of war and pandemic have further exacerbated the structural crisis around the globe. Economic recovery, which was already slow following the Great Recession in 2008, is yet to bounce back after the disruptions of the pandemic that were compounded by the war in Ukraine. Instead, continuing supply chain disruptions, made worse by the war’s sanctions and blockades, have driven inflation across the world. The Organization for Economic Co-operation and Development (OECD) recently reported that in May, the 38 countries that make up the OECD showed an average annual inflation rate of 9.6 percent.

This is further compounded by the ever-looming energy and grain shortages as the war continues. Heavily dependent on Russian energy exports, Europe’s industrial production has slumped during the war. Germany, one of the biggest consumers of Russian energy and an industrial powerhouse in Europe, has seen its industrial production contract over the last three months. In addition, Russia and Ukraine are the bread basket of large parts of the globe, especially Europe, Africa, and parts of Asia. The International Food Policy Research Institute estimates that grain exports from the two countries represent 12 percent of all the food calories traded in the world. They account for almost 30 percent of global wheat exports, almost 20 percent of corn exports, and more than 80 percent of the world supply of sunflower oil. Food price inflation was already at an all-time high before the war began owing to the supply chain disruptions caused by the pandemic, and it is now only deepening as the war continues, as exports of essential grains are stalled by sanctions and blockades.

This situation is especially dire in the Global South, with inflation far exceeding that in advanced economies. In countries across Latin America, Asia, and Africa, the economic crisis continues to rear its ugly head. In Argentina inflation stands at 64 percent, while in Sri Lanka it is over 70 percent. The inflationary situation has also deprecated the value of local currency against the dollar, compounding the debt crisis that many of these countries already face, with the burden of foreign loan payments increasing even without additional borrowing. To manage these crises and meet public needs, the Global South is stuck in a vicious circle of debt, generating new borrowing from institutions like the IMF and implementing massive restructuring programs and austerity to acquire those loans. These countries become a weak link in the capitalist chain, as we see with Sri Lanka, which recently defaulted on its foreign debt and where the lack of basic commodities tied to a depleted foreign reserve has sparked large-scale revolts.

Further, the economic crisis isn’t limited to the West and its spheres of influence. China’s economy is not only suffering from the ravages of the “zero Covid” policy, which significantly slowed down the economy, but also a large-scale mortgage boycott, which is further threatening economic stability. Today, real estate accounts for a third of China’s economic output. The deflation of the real estate bubble continues to spread. Many real estate companies have already missed foreign debt payments, including Evergrande, which defaulted on its $300 billion debt last year. Furthermore, houses in China are paid for in advance, and builders have been relying on these funds to complete past projects. As delays in construction continue and houses lie unfinished, many people are boycotting mortgage payments, leading to further lack of liquidity.

Further, although the inflation keeps rising for now, major economies are also moving closer to a recession, especially as countries drive up interest rates to control inflation. For sectors of capital, the answer to curbing inflationary pressure is to increase unemployment or cut wages. In the U.S., for example, haunted by the specter of inflation, the Biden administration has given the Federal Reserve free rein to pursue its a strategy of “cooling off” the economy. Fed chair Jerome Powell has stressed that the Fed will continue to raise rates until inflation is under control, even if that means causing a recession. Such a policy has translated to steadily raising interest rates, with the goal of driving down borrowing and thus, new investments, which will eventually lead to lesser productive capacities, and thus, fewer jobs and unemployment. This sector of capital, as the Wall Street Journal notes, blames inflation on the tight labor market and the labor shortage, which came about because there was a rise in wages; according to this sector, capitalists are forced to offset the higher cost of labor onto prices. But importantly, as Marxist economist Michael Roberts writes, in the current situation, wages have been running behind in the race, while capitalist profits have risen far more than prices have. Wages have gained only 5.2 percent — significantly below inflation, marking, in reality, a net decrease in wages. Furthermore, although unemployment numbers are low, so is the labor participation rate. At 64 percent, labor participation is especially low, now that large swaths of workers, whether because of the crisis of social reproduction, long Covid, or other reasons, have permanently left the workforce.

As the economic crisis continues to deepen, the crisis of neoliberalism is laid bare. As capitalism is unable to find new motors of growth, the structural crisis, in turn, fosters global unrest and leaves open the prospect of class struggle.

The Contours of Class Struggle

Indeed, the social and economic crises wrought by the pandemic and deepened by the war have led to the eruption of class struggle across the globe in recent months. Responding to inflationary pressures — such as the rise in fuel and food costs, wages that don’t keep up with the cost of living, deficits in foreign reserves, and more — revolts and uprisings are erupting around the world, from Sri Lanka to South Africa to Panama. In Sri Lanka, faced with bankruptcy and crippling food and energy shortages, the masses have been taking to the streets for six months against the ruling regime. Combative protests against the increasing cost of living have also broken out in Albania, Panama, Kenya, South Africa, and more, as thousands take to the streets against austerity measures. In Argentina, Costa Rica, and El Salvador, the masses have been taking to the streets to reject the IMF, which has imposed readjustment plans against the repayment of debt that impose austerity on the working class. As much of the Global South is not only crippled by preexisting debt crises but seeks more loans to manage the economic crisis, it becomes increasingly important to cancel the repayment of these predatory debts that come off the backs of working people.

What is novel in this renewed situation of class struggle, however, is the role of the working class. Having taken lessons from the pandemic and seeing themselves as essential, the working class has begun to enter the scene as a political actor. Against the cost-of-living crisis, decades of deteriorating conditions, and for better wages and conditions, the organized labor movement has begun to raise its head even in advanced economies in Europe, and especially the U.S. and UK — the two countries that were at the head of the neoliberal offensive.

In the UK, after decades of labor defeat, there is a resurgence in the ranks of organized labor in what is being termed as the “summer of discontent,” as tens of thousands of workers across essential sectors have been going out on strike for better wages and working conditions. This is the biggest resurgence of labor after unions were destroyed under the reign of Margaret Thatcher and in the subsequent advance of neoliberalism. Over tens of thousands of railway workers went on strike in what was the largest strike since Thatcher’s government. Workers are also striking or considering strikes in the education, postal, transport, and logistics sectors. Within the regime, Prime Minister Boris Johnson has been responding with Thatcher-like actions and rhetoric, attempting to pit striking workers against the rest of the working and middle classes, while the Labour Party under the leadership of Keir Starmer threatened Labour MPs with disciplinary action for attending pickets. Despite that, the strikes have enjoyed popular support, which only boosts this wave; not only that but they have also taken place against the backdrop of political crisis in the regime, with mass resignations among Conservative cabinet members, which finally forced Johnson to step down.

Across Europe, furthermore, workers have been going on strike, especially in transport, tourism, and education against the rising cost of living. Armed with a new emerging consciousness shaped by the pandemic and war, workers are refusing to shoulder this crisis, demanding better wages and conditions in the face of inflation. In Belgium, for example, workers went on a general strike, raising the slogan “Block prices, not wages.” In Italy many grassroot trade unions unified the struggle against inflation and the war, raising the slogan “Lower arms, raise the wages.” Through the peak of summer and in one of the biggest tourist seasons since the pandemic, workers at several European airlines and airports went on strike, leading to widespread flight cancellations and bottlenecks.

And in the U.S., although we aren’t seeing large sectors of workers going out on strike yet, there is renewed energy within the ranks of labor over the last months. Most notably, since the pandemic, there is massive support for unions. According to the latest polls, 68 percent of people in America support unions, which is in stark contrast to the fact that only 10 percent of the workforce is actually unionized. The support for unions is especially strong among those aged 18 to 34, 77 percent of whom support unions. This is being expressed especially in the efforts to unionize companies like Amazon, Starbucks, Apple, Chipotle, Trader Joe’s, and more, and the victories of each drive only give more wind to the sails. Many of these union drives are being led by a new generation of workers, many whom came of age during the pandemic and the Black Lives Matter protests. They see unions as tools to fight not only for better wages and conditions but also against the bosses’ harassment. Young workers, mostly women and queer, have been at the forefront of unionizing Starbucks, winning over 250 stores nationwide in less than six months. Among the organized sectors, teachers and health care workers, who were on the frontlines during the pandemic, have been at the forefront of some small but powerful strikes fighting decades of deteriorating work conditions. After the Great Resignation, in which millions across industries quit their jobs after being fed up with low wages and exhausting work conditions, unorganized and organized workers are now increasingly willing to stay at their jobs and find power in a union to fight for better conditions.

That the working class is beginning to responding to these elements of organic crisis as an independent force is a significant development, especially considering that it comes at a time when neoliberalism is  in crisis and imperialist giants like the U.S. and Europe lack the same strength they had during the 1970s to launch an offensive against the workers movement. On the contrary, today this occurs against a backdrop of the pandemic, war, and economic crisis, which have severely delegitimized the institutions of the regime globally and are birthing a new consciousness among the masses. Shaped by a pandemic in which workers had an experience and saw themselves as essential, in which the billionaires made record profits while workers were forced to work in terrible conditions, many are rising up, refusing to pay for the current crisis. Although the working class is still recovering from decades of weakened power, we’re seeing a reorganization within the ranks of labor to meet this moment.

As the situation develops and new tensions develop within an increasingly multipolar world, especially with the deepening climate crisis, capitalist equilibrium is constantly being broken and recalibrated. New possibilities of revolutionary struggles within the ranks of the working class emerge — possibilities that are important for revolutionaries to understand, intervene in, and advance in the fight for a socialist future.

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Sou Mi

Sou Mi is an activist based in New York City.


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