Tag: Crisis

  • Ask the Editor: Oil Demand and Destruction

    Ask the Editor: Oil Demand and Destruction

    To the editor,


    Is the energy crisis stemming from the war on Iran a simple matter of supply and demand?

    Cheers,

    Breezy.

    [Sent from Substack]

    Dear Breezy,  

    The world is staring at a billion barrels of oil lost due to military actions undertaken by the belligerent governments of Israel and the United States. This number will only go up with each passing day of disruption to maritime traffic in the Persian Gulf. To put that number into context, it is roughly equivalent to ten full days of total global consumption. This kind of supply squeeze will present itself unevenly; the higher cost of gas and transported goods can be either a nuisance or a calamity depending on the financial capacity of consumers.

    Turning to Karl Marx the political economist, he himself did not live to see oil come into dominant use and it was coal that reigned supreme during his Victorian era. But he recognized fossil fuels as a foundational mean to the capitalist mode of production because their dense energy content allowed for the intensification of human labour and factory output.

    The utilization of this new mean of production is what ultimately lead to the standardization of wage labour and industrial processes. Whereas water mills depended on the ebbs and flows of natural streams, the coal-fired steam engine could be plunked wherever potential workers were, with trains and ships doing the rest. Oil merely advanced the technological revolution that coal set into motion regarding production and circulation.

    Because oil is so foundational to the capitalist mode of production, its presence in the marketplace cannot be reduced to the dollars and cents of each barrel. Countless wars have been fought, governments toppled, acres fracked, blockades raised—all to influence the direction that precious crude flows black. If the price is too high, economic activity will be suppressed. If the price is too low, Big Oil bleeds profits. It’s a fragility that puts Goldilocks to shame.

    In Marxian economics, supply and demand “play a vital surface role in generating price movements for a particular commodity” without which “there could be no equilibrium price.”1 With the economic rise of China and the Global South, oil prices routinely clocked in over $100 per barrel as new demand pressured existing supply. While oil companies blistered with cash, high prices suppressed potential consumption in virtually all other areas of the global economy. After all, only 15 countries export meaningful quantities of oil that another 160 countries must bid on. 

    As the process of capital accumulation in one sphere became a contradictory force suppressing accumulation in others, the economic system demanded a way to get beyond it.2 Fracking technologies were unlocked by American public–private partnerships and they opened up vast supplies of oil in the United States and around the world. Fracking is what brought the supply and demand of oil back into an equilibrium that guaranteed both stable profits and continued future growth. 

    What the war against Iran has accomplished is to throw disequilibrium back into the oil markets, this time because of disruptions to shipping in the Strait of Hormuz. As many Gulf producers go toward zero, oil operations outside the region see their profits soar. The sudden scarcity of oil and its byproducts has led to the cancellation of tens of thousands of planned flights, MRI screening is pressed by helium shortages, semiconductor manufacturing in Asia is throttled and a lack of fertilizer is scarring agriculture in Africa and South Asia.

    Disruption to supply inevitably leads to destruction of demand. Free market orthodoxy dictates that price adjustments alone bring about equilibrium in commodity markets. But it will be shown that the value of oil to labour processes and capital accumulation transcends the spot price of each barrel. The oil market is an artifact of economic planning carefully designed to keep the downstream tributaries trickling outward. With those plans now buried under Middle Eastern rubble, capitalism is confronted with yet another “constantly overcome but just as constantly posited” barrier.3 

    In sols.

    Send your questions to the Reclamation: editor@thereclamation.co

    Footnotes:


    1. David Harvey, A Companion to Marx’s Capital (Verso, 2010): 166. ↩︎

    2. The barriers that capital imposes on itself before leaping over them are explored by Karl Marx in his Grundrisse (Penguin, 1993): 410. ↩︎

    3. Ibid. ↩︎
  • Ask the Editor: ‘The Rupture’

    Ask the Editor: ‘The Rupture’

    To the editor,

    Canada has been targeted with threats from Trump since Prime Minister Carney’s Davos speech. Can you tell me why it was so provocative?

    Thank you,

    Kay.

    [Sent via WordPress]

    Hi Kay,

    Mark Carney’s diagnosis of “a rupture” in the world order has been hailed for its clarion call to middle powers to band together and form a counterweight to American global hegemony. Under threat of U.S. economic reprisals, Carney explained, a variety of demands are now being made on the allies that have benefitted from Pax Americana. As if trying to prove Carney’s point, Trump replied the next day: “Canada lives because of the United States. Remember that, Mark, the next time you make your statements.” By acknowledging Trump’s coercive demands, Carney invited another one—stop complaining or Canada might not live.

    Since 2016, Trump has promised to shake down the world on behalf of America and Carney only affirmed that fact in Davos. It is unclear if Trump really understood the content of the message or if he was merely offended that headlines were grabbed by another world leader. The psychological pathologies of the current U.S. leader are difficult to overstate. Unintentionally, Trump’s threatening response to Carney’s speech elevated its importance and imparted a lot more aura to its content than it would have otherwise had.

    Carney only described a rupture in the appearance of the world order. Not its substance. Speaking as an elite financier, Carney cited a controversial former president of Czechoslovakia and said it was only a sign in the window that made people believe in the working class power of former socialist states. As an analogy for the present, Carney implied that the concept of a liberal “rules-based international order” was only ever a guise for operational U.S. global hegemony. Strategic allies such as Germany, Saudi Arabia and South Korea enjoyed market access in exchange for adherence to “American interests”—but this was the extent of the norm.

    The U.S.-led global order has always been transactional and never about hifalutin “democratic values” or rational global governance. The trail of human rights violations, democratic overthrows, targeted assassinations and full-scale invasions is too long to claim otherwise. The revival of state-sanctioned piracy and gunboat diplomacy targeting Venezuela, Cuba and Iran only adds to a long-established pattern of lawless American aggression abroad.

    The shockwave of U.S. military rampage felt for decades in the Global South harkens Karl Marx: “The profound hypocrisy and inherent barbarism of bourgeois civilization lies unveiled before our eyes, turning from its home, where it assumes respectable forms, to the colonies, where it goes naked.”1 Trump is not a rupture to the American hegemonic order. He is the ruling class without clothes. He offends the elitist sensibility of a Davos crowd not accustomed to being slapped about the head by the swinging dick of America’s president. But let’s exit the world of posh Swiss resorts in the Alps. How about those crowds of Baghdad, Caracas, Mogadishu, Havana, Jakarta, Ramallah or Tehran? Threats of annexation and tariffs against middle powers must appear positively trifling next to the suffocating economic embargoes, CIA-managed torture chambers, genocidal carpet bombings and rock-ribbed support for right wing dictatorships that have visited the Global South.

    As a central banker, Carney is well aware of the vital function that international debt bondage and structural adjustment programs play in securing cheap labour and resources to middle powers. If he seemed to gesture toward the brutal and ongoing excesses of American control without denouncing any examples—this is why. The middle powers lack the scale of the hegemon but they lean on a system of dramatic capitalist exploitation all the same. Carney may be able to capture the zeitgeist of the World Economic Forum but a man with his pedigree will never apprehend the economic basis that is needed to construct a true new world order. 

    In sols,

        Your editor.

    Send your questions to the Reclamation: editor@thereclamation.co

    Footnotes:


    1. Karl Marx, “The Future Results of British Rule in India,” in Dispatches for the New York Tribune: Selected Journalism of Karl Marx (Penguin, 2007): 124. ↩︎
  • Ask the Editor: The Demonic Nature of Global Rearmament

    Ask the Editor: The Demonic Nature of Global Rearmament

    To the editor,



    There are huge increases to military budgets around the world and a lot of talk about a wider war with Russia, conflict with China over Taiwan and the “Donroe Doctrine” in the Western Hemisphere. Are countries preparing for  World War III?

    Thank you,

    Kyle.

    [Sent by email]

    Hi Kyle,

    The situations in Ukraine, Venezuela and Iran demonstrate an aggressive push for hegemonic consolidation: the U.S. is determined to put all of Latin America into a stranglehold and knockout Israel’s last major stronghold of resistance in the Middle East, while Europe is now tasked with keeping Russia out of their sphere. Throw in the rise of China, and these developments have the world starting to resemble the European balance of power that collapsed into World War I.

    In a world balancing on the weight of military strength, countries are compelled to invest in armaments or be tossed from the scale. Japan has rubber stamped a record-setting military budget and Taiwan has done the same. Canada wants to triple its military spending; Australia is under pressure to raise theirs by 75%. India, Germany and France all have proposals to double their military spending, with Emmanuel Macron adding: “To be free in this world we must be feared. To be feared we must be powerful.” Without parsing what that means to the freedom of those cowering in fear, Trump seems to agree with Macron by proposing a 50% increase to America’s already-whopping $1 trillion military budget. His proposed $1.5 trillion military spend doesn’t sound like a peacetime budget—that’s a budget for war. 

    In this political context, worrying about World War III is not unreasonable. Against a similar arms race backdrop in 19th century Europe, Friedrich Engels predicted World War I:

    I imagine that the plan is not to push things to extremities, to more than a sham war. But once the first shot is fired, control ceases, the horse can take the bit between its teeth…Eight to ten million soldiers will massacre one another and in doing so devour the whole of Europe until they have stripped it barer than any swarm of locusts has ever done.1

    Bombing countries like Iran or kidnapping the presidents of countries like Venezuela might not get us there. But desensitization to this uptick of radical interventionism makes a miscalculation more likely, as happened between the Austro-Hungarian Empire and Serbia once upon a time.

    The timing of this global rearmament could not be worse, given the present state of the environment and the residue of an inflationary crisis already aggravated by global conflict. Marx held complex views about the role of the military within the broader capitalist economy, but in the Grundrisse he noted: “The impact of war is self-evident, since economically it is exactly the same as if the nation were to drop part of its capital into the ocean.”2 Warfare vanquishes the resources that could be used to build an economy of human flourishing into plumes of blood and fire. In a competitive world of amplified scarcity such as it is, the proliferation of advanced weaponry and nuclear bombs adhere to a quest for economic dominance—consequences to human survival be damned.

    The ominous parallels between the first world war and a possible third recall Freud’s compulsion to repeat: we live in a neurotic civilization containing “a demonic character” whereby repressed traumas override the pleasure principle and are revisited again and again and again in order to “re-encounter our identity.”3 Given the violent and domineering history of capitalism, revisiting past demons in a nuclear-armed multipolar world would be nothing short of biblical.

    In sols,

        Your editor.

    Send your questions to the Reclamation: editor@thereclamation.co

    Footnotes:


    1. There was an estimated 8.8 million military deaths during World War I, making Engels’ prediction exceptionally accurate. A further 6–13 million civilian casualties are estimated, resembling that “swarm of locusts” stripping Europe bare. ↩︎

    2. Karl Marx, Grundrisse (Penguin, 2005): 129. ↩︎

    3. Sigmund Freud, Beyond the Pleasure Principle (Broadview Press, 2011): 74-75. ↩︎