Re: world systems & "Israel"

<URL: http://www.monthlyreview.org/0103hanieh.htm >
Global Capitalism and Israel
by Adam Hanieh



Adam Hanieh is a researcher and human rights worker living in Ramallah, 
Palestine.

Jonathan Nitzan and Shimshon Bichler, The Global Political Economy of 
Israel(London and Sterling, Virginia: Pluto Press, 2002), 407 pages, cloth 
$75.00, paper $24.95.
One of the characteristics of much academic writing is an obsession with 
theory at the expense of empirical investigation. It is rare to find a book 
that combines genuinely novel theoretical exploration with rigorous 
empirical study, the more so in fields such as political science where 
abstraction seems to have become the norm. It is for this reason that The 
Global Political Economy of Israelis such a gripping read. A remarkable 
investigation into the concrete workings of the Israeli and U.S. economies 
that avoids the fatuous generalities of much of the globalization 
literature, it presents a challenging theoretical framework that not only 
clarifies the past but also seeks to understand the present. Nitzan and 
Bichler start by challenging the traditional view of Israel as a “unique 
case” characterized by a strong state guided by socialist ideology. Their 
argument instead looks beyond the apparent form and seeks to identify the 
essence, using as their guiding principles the concepts of capital 
accumulation, ruling class formation, and Israel’s place in the global 
political economy. In so doing, they attack key premises of neoclassical 
economics; assumptions such as an economy in equilibrium, full employment, 
and obsession with so-called neutral aggregates such as GDP and inflation 
rates. Instead they ask the questions: Who are the winners and losers in 
the economy and how is power exercised? In contrast to the standard 
approaches, Nitzan and Bichler argue that the key issue underlying 
political economy is that of capital accumulation by groups of dominant 
capital. The aggregates that we are told are “bad for the economy” often 
obfuscate massive gains for these dominant groups, at the expense of other 
sections of capital and, of course, those who have nothing to offer but 
their labor power. This is most clearly demonstrated in the case of 
stagflation—a period of little or no growth combined with high rates of 
inflation. The accepted wisdom is that these periods, which emerged as a 
global phenomenon during the 1970s and early 1980s, were bad for the 
economy as a whole. Instead, Bichler and Nitzan demonstrate with a rigorous 
examination of profit rates for dominant capital that these periods were in 
fact extremely profitable for dominant capital. In the United States for 
example, the authors examine inflation figures and profit-per-employee 
figures for the Fortune 500 companies relative to figures for the economy 
as a whole. The results are a startling confirmation of their thesis: that 
the movement of inflation correlates almost precisely with dominant capital 
doing dramatically better than average capital—i.e. winning a greater share 
of profits. Inflation is therefore demonstrated to be a powerful 
redistributional phenomenon. Between Depth and Breadth
At this point the authors introduce a theoretical framework that sees the 
political economy of the twentieth century as moving between two 
alternating regimes of capital accumulation—depth and breadth. A breadth 
regime is characterized by attempts by capital to increase the size of its 
workforce through green-field investments or corporate amalgamation. These 
periods tends to be structurally dynamic and are commonly less conflictual. 
A depth regime, on the other hand, is marked by attempts to increase the 
rate of profit per-employee through either cost-cutting measures or 
stagflation. In the latter case, dominant groups of capital, acting in 
collusion, use higher prices to offset the loss in reduced volume sold. 
These periods of depth tend to consolidate rather than change institutions 
and structures, and are usually more conflictual and often violent. There 
are two important points to be made in regards to this framework. Firstly, 
Nitzan and Bichler argue that accumulation must be seen in a relative 
context. In other words, it is not the absolute level of accumulation that 
is important but rather the level of accumulation relative to the 
average—what the authors term differential accumulation. Modern capitalists 
don’t seek to maximize profit, but rather aim to beat the average. Flowing 
from this stress on differential rates of accumulation is the second key 
concept introduced by Nitzan and Bichler. Taking issue with traditional 
Marxist approaches to capital accumulation, they argue that the 
differential struggle between different capitals is at heart a struggle for 
power. As capitalism has developed over the last century—essentially 
becoming more universal—it has become more and more urgent to integrate the 
concept of power into an understanding of the nature of capital itself. This 
point bears some examination, as it is probably the most novel —and hence 
controversial—argument that the authors make. Essentially, Bichler and 
Nitzan argue that traditional Marxist approaches to concepts such as 
capital, accumulation, and profit have attempted to find a basic unit with 
which to measure exactly what is being accumulated. To neoclassicists, this 
basic unit is money, which supposedly expresses a quantitative measure of 
“well-being.” For Marxists, the authors argue, the basic unit was “abstract 
labor.” In contrast, according to the argument of Bichler and Nitzan, the 
process of accumulation cannot be understood solely in terms of the 
productive labor process. Instead, accumulation should be understood as an 
interaction between productivity and power. In the modern capitalist world, 
accumulation comes to depend not just upon ownership and the inputs into 
the productive process, but also critically becomes a function of social 
power. Drawing on the work of Thorstein Veblen and Lewis Mumford, the 
authors attempt to develop an institutionalist theory of capital that 
encompasses this aspect of power. They argue that we cannot understand 
accumulation solely in terms of physical inputs such as land, labor, and 
machinery but must also ask what enables these quantities to become inputs 
in the first place. Following Veblen, the authors argue that under modern 
capitalism there is a growing separation between “industry” and “business.” 
The source of capitalist earnings is not only found in the productive 
process, but in the politics of production. In other words, accumulation 
increasingly relies upon distribution that in turn derives from power over 
production. The modern nature of business—characterized by absentee 
ownership—means that the nature of this power takes the form of the ability 
of absentee owners to limit production below its full potential. How do the 
means of this power today differ from that found in the nineteenth century? 
According to Nitzan and Bichler, “In the twentieth century, these means 
further expanded to rely on the broader political realm of the state, 
including aspects of policing, propaganda, taxation, tariffs, subsidies, 
patent laws and intellectual property rights, as well as on international 
institutions such as trade zones, regional investment agreements and 
global, government-backed corporate alliances” p. 35.
The Israeli Case Turning to Israel, this understanding of the nexus between 
power and capital accumulation is clear. The early Israeli state played a 
critical role in creating the institutional context for the development of 
favored capital groups in Israel. The state directed external “gifts” 
(initially from German reparation payments and then later aid from the U.S. 
government) to the five key conglomerates that dominated the Israeli 
economy. The state also established the framework that permitted these 
groups rapidly to expand at the differential expense of lesser capital, 
through policies such as encouraging joint investment with the government, 
permitting the manipulation of banking shares that precipitated a collapse 
of the banking system in 1983, granting special development assistance, and 
directing the process of proletarianization of Jewish immigrants from Arab 
and African countries who were to become the core of the industrial working 
class. It is this obsession with the apparent dominance of the state in 
Israeli society that has led the majority of observers to label Israel as 
embracing some form of socialism up until the recent decade. In contrast, 
the Global Political Economy of Israelpresents an analysis that reads like 
a breath fresh air in a stultified body of literature so obviously at odds 
with reality. Bichler and Nitzan demonstrate beyond a shadow of a doubt 
that the Israeli economy has always been about capitalism and enabling 
accumulation by the dominant conglomerates. They painstakingly document how 
this process happened historically with an array of sources ranging from 
dense economic literature to mainstream Israeli daily newspapers. Indeed, 
one of the most delightful aspects of this book is the almost gossipy way 
in which the authors deal with some of Israel’s most “respected” business 
leaders. Oil and Arms
Returning to the notion of dominant capital, the authors identify what they 
term the weapondollar-petrodollar coalition as a key component of global 
dominant capital as a whole. They show an increasing interaction between 
the major oil companies and arms manufacturers and examine how the pursuit 
of differential accumulation by this coalition is linked with so-called 
energy conflicts in the Middle East.
In a remarkable series of graphs, the authors plot the rate of return of 
the major oil companies (dubbed the petro-core) in comparison with dominant 
capital as a whole. They then show that each sustained period of negative 
differential accumulation for this sector (i.e., where dominant capital has 
outpaced the petro-core in terms of differential profits) has been 
immediately followed by an “energy-conflict” such as the 1967 and 1973 
wars, the Iran-Iraq war, and the 1990–1991 Gulf War. Turning once more to 
an analysis of the concrete, the authors take each of these conflicts in 
turn and trace an increasing interaction between arms exporters and the oil 
companies over time. Around the 1973 War, the arms business became more 
commercialized (expressed by the Nixon Doctrine) and in conjunction with 
the petro-core began to exert a greater influence on U.S foreign policy. The 
increasing confluence between the interests of the oil-arms coalition and 
foreign policy continued until just after the 1990–1991 Gulf War. At this 
point, the global regime of accumulation moved from depth back towards one 
of breadth. Dominant capital was able to take advantage of the collapse of 
the Soviet Union, reduction of tariffs and dismantling of barriers to 
capital mobility, and the opening up of “green-field” investments in the 
South. This new stage of breadth marked the onset of globalization, 
characterized by the rise of a new section of dominant capital, the 
technodollar-mergerdollarcoalition. This group sought differential 
accumulation through absorbing technological innovation through mergers and 
acquisitions, expanding into new areas that became known as “emerging 
markets” and benefiting from the privatization of government-owned 
enterprises. It is this shift towards a breadth regime, according to Nitzan 
and Bichler, that explains the so-called peace process in the Middle East. 
Profits were to come from open markets in both goods and people instead of 
war and conflict. One of the consequences of this process for Israel was 
the increasing transnational ownership of the Israeli economy—the key 
conglomerates that had dominated the economy under the shelter of the state 
were taken over by capital from the core, particularly the United States. Although 
the reason underlying the shifts between different regimes of breadth and 
depth is somewhat unsatisfactorily dealt with by the authors, they stress 
that these shifts should not be understood mechanically but rather as an 
outcome of the interactions of real people with real choices in front of 
them. In a certain sense they argue that the economy tends to follow a path 
of least resistance, with different sections of dominant capital taking 
advantage of different regimes of accumulation (although all sections of 
dominant capital benefit relative to capital as a whole). A New Regime of 
Depth?
The 1990s shift to breadth had important implications for both the Middle 
East and the global economy. Globalization, marked by an expansion of 
markets and investment, set in train a process of excess capacity and this 
began to eat into the large differential profits. At first this hit the 
periphery of the global economy—precipitating a series of financial crises 
in Asia, Russia, Mexico, and Argentina. But it increasingly seems to be 
attacking the very core of global capitalism. The authors end with a 
speculation that has perhaps been answered as this review goes to press. 
They raise the open question of whether we are now seeing a shift back 
towards a global regime of accumulation through depth, with its attendant 
features of war and conflict. The analysis offered by Nitzan and Bichler 
offers a powerful conceptual framework for understanding this latest crisis 
in the global political economy. It also points to a way out of the crisis 
by asking the simple question: Who really gains?

--
Michael Pugliese

"Without knowing that we knew nothing, we went on talking without listening to 
each other. Sometimes we flattered and praised each other, understanding that 
we would be flattered and praised in return. Other times we abused and shouted 
at each other, as if we were in a madhouse."
-Tolstoy


On Sun, 9 Feb 2003 08:21:21 +0000, <kodetalah@swissinfo.org> wrote:

> Hello
>
> What world systems research say about "isreal" and its role in the 
> contemprarory
> world system?, Are  there any writings about the subject ?
>
> regards
>
>
>
>
> ________________________________________
> Dreaming of a Swiss Account? Get it here: http://freemail.swissinfo.org


--
Michael Pugliese

"Without knowing that we knew nothing, we went on talking without listening to 
each other. Sometimes we flattered and praised each other, understanding that 
we would be flattered and praised in return. Other times we abused and shouted 
at each other, as if we were in a madhouse."
-Tolstoy