Long wave theory, globalisation’s end, and the coming crises: An interview with William Jefferies

William Jefferies is Senior Lecturer at SOAS University of London and author of the recently published War and the World Economy: Trade, Tech and Military Conflicts in a De-globalising World. Jefferies sat down with Federico Fuentes, from LINKS International Journal of Socialist Renewal, for this wide-ranging discussion on the usefulness of long wave theory for understanding the current moment, how globalisation fundamentally reshaped the world economy and working class, and why it has paved the way to a new period of crisis. 

This interview is the latest in an ongoing series by LINKS on the issue of imperialism today.

Over the past century, the term imperialism has been used to define different situations and, at times, been replaced by concepts such as globalisation. Does the concept of imperialism remain valid? If so, how do you define imperialism?

Imperialism certainly remains a vital concept. Vladimir Lenin defined it in 1916 as the synthesis of banking and industrial capital into finance capital, and that remains essentially correct. Lenin also wrote that great powers seek to divide the world into their own spheres of influence, and that also clearly defines the current period.

However, some things have moved on since Lenin’s time. For example, there is not as much direct colonisation today and we have China’s rise as a great power, which is new and different. One hundred years later, things have moved on, but in some ways they have not. For me, the definition of imperialism as monopoly capitalism remains correct, so long as you look at the situation today concretely.

Are there particular changes that stand out for understanding imperialism today?

One particularly interesting current feature is the scale of deindustrialisation in the United States and Britain. Today, the proportion of manufacturing workers in Britain is about 7%, and many of them are in industries such as food production. The situation in the US is not as extreme, but there is still a steep decline in industrial production.

So, to what extent can you still talk about finance capital in the US or Britain being the merger of banking and industrial capital? Instead, there is the dominance of near banking in the form of huge financial organisations, such as Blackstone, which developed after the 2008 financial crisis.

They clearly dominate the US economy and essentially function by earning the rate of interest rather than the rate of profit. This is important because the rate of interest is not earned through buying or producing commodities, it is dependent on financial flows (even if, underpinning it, is the buying and producing of commodities). If imperialism is the merger of financial and industrial capital, then in the US and Britain today, it is clearly weighted towards banking and finance and away from industrial capital.

China, on the other hand, is the other way around. China has financial capital in the form of huge state-owned banks, but it also has industrial capital in the form of huge industrial conglomerates. In China, we see the reassertion of the primacy of industrial production over banking and finance. This matters because, in the end, the producer of commodities has the most power. They can produce what everyone needs and have a direct means of extracting surplus value (as opposed to an indirect means via interest flows to financial institutions).

In the next 5-10 years, China will seek to assert the primacy of industrial production. China wants to take back a portion of the rate of interest that currently flows to banks in the West. That will create an inherent contradiction between China and the US (and the West more generally). Hence the great power struggle we see playing out.

In your book you refer to the period that followed the end of the Cold War as the “ long wave of globalisation”. Could you outline the dynamics within global imperialism during globalisation?

Imperialism as a concept remains essential, because without it you cannot really understand the period we are coming out of or the period we are entering. But that does not mean there is no value in terms such as globalisation.

People mistakenly counterpose globalisation to imperialism, but globalisation did not abolish imperialism. Globalisation helped conceal the rapacious nature of imperialism for a period, as US hegemony became so dominant due to the dynamism of its economy. But globalisation is coming to an end and new contradictions are starting to unfold. That is also why the US is rediscovering the need to be more rapacious — we see that every day.

I view the long wave of globalisation in the context of long way theory, which originated with Alexander Parvus, even though it is traditionally attributed to Nikolai Kondratiev and Leon Trotsky. Parvus said there would be long periods of Sturm und Drang (storm and stress) in the world economy.

He was specifically thinking about the period at the end of the 19th century, with the end of the scramble for Africa, the shift towards monopolies, technological revolution in electricity and the opening of new markets in Russia and China. Parvus said that changes such as extending or opening of new markets, the rise of new sectors of capital accumulation, the cuts in turnover times, and new technological advances, would define an entire period in the world economy.

This would not end the usual business cycles, but these cycles would develop within this longer wave, cycle, period or whatever you want to call it, with crises sharpening and their duration shortening. He foresaw this continuing until the forces of development unfolded to their full potential, only to be followed by a sharp commercial crisis, and then an economic depression.

My book looks at the long wave of globalisation that started in 1989-91, with the collapse of the Soviet Union and its conversion to the market, along with China’s crushing of the democracy movement and its transition to the market. I define the Soviet Union and China prior to that as centrally planned economies because I want to focus on what we agree on: that they were not market economies as we understand it in the West.

With the Soviet Union’s collapse and China’s transition to the market, there was essentially a doubling of the number of workers worldwide that could be exploited by capital. Remember, the mid- to late-’90s features China’s marketisation of state-owned enterprises and the sacking of about 70 million workers. To put that into perspective, the entire workforce in Britain today is about 35 million. We are talking about twice as many workers as the whole British workforce being sacked over a few years. 

Also, you had huge quantities of means of production that were not paid for but simply stolen by capital: we are not talking about inconsequential things but cities such as Warsaw, Prague, etc.

There was also the collapse of national liberation struggles, which in many cases depended on the Soviet Union: South Africa, Palestine, Ireland, all these struggles were to some extent resolved in the ’90s. And you had the defeat of the working class, exemplified by defeats such as the British miners’ strike, and more broadly the defeat of the idea of socialism, which has been identified with the Soviet Union.

All this fundamentally transformed the world economy and began a new long period. It also created the preconditions for hyperglobalisation — as the International Monetary Fund calls it — which followed from roughly 2001 until the financial crisis of 2008. This was a phase of very strong growth. This phase also saw Russia’s economic recovery, which began when [Vladimir] Putin became president, as well as China’s entry into the World Trade Organization in 2001 and subsequent huge growth.

So, everything was firing on full cylinders during hyperglobalisation — right up until the 2008 crash. Importantly, this crash was not the result of falling profit; it was a straightforward financial crisis arising from mismanagement, which was resolved by bailing out the banks. Then from 2008 onwards, you still had steady growth and high profits, but not like we saw during hyperglobalisation. The period after 2008 was not as dynamic.

Now, if we fast forward to today, the long wave of globalisation is starting to come to an end. You have to be careful to not be too definitive while such shifts are still taking place, but there does seem to be a shift towards deglobalisation. People deny this, but look around: we have sanctions, we have the breaking up of the world into blocs, wars, etc.

A good way to think about it is this: if globalisation is not going forward, then it is going back. The world was becoming more globalised, now it is becoming less. We are clearly seeing a process of deglobalisation, which is the economic expression of the political contradiction expressed in wars, among other things.

Yet the economies of the US and China are more integrated than ever. Does that not mean we are unlikely to see the kind of great power rivalry Lenin wrote about? Or is open war a realistic possibility?

The US certainly thinks war is a possibility — they are planning for it. The US Air Force’s research and development institution, the RAND Project AIR FORCE, has done modeling that estimates there could be a war over Taiwan in the 2020s. We are already in 2025.

In 1914, Kautsky published a very poorly timed pamphlet on the eve of World War I called Ultraimperialism. He argued a war between imperialist powers was impossible because of their close economic relations. So, the idea that countries are too closely integrated to go to war is not new.

In fact, it is precisely because they are so closely linked that we see issues over how to resolve differences between them. There is no world court that can adjudicate over who gets the biggest share of the surplus value sloshing around the world economy. The only way to decide this is through economic and military conflict — it is the only way capitalism knows.

This takes us back to the contradiction I mentioned, and which is rooted in the nature of the US and China’s mutual dependence. While globalisation and the transition of the Soviet Union and China to the market bolstered the West, it also set in train the process of deindustrialisation and subsequent rise of China. As the US deindustrialised, its industries moved to China, where it was cheaper to produce, and exported back what they had previously made in the US. These companies also repatriated profits back to the US and Europe.

This process led to the rise of factoryless goods producers (FGPs), such as Apple, which outsource their entire production. Apple makes 98% of its iPhones in China, but it only has 14,000 direct employees there. These employees simply supervise the contract manufacturing services (CMSs), that is third-party manufacturers who produce the iPhones for Apple. How do these FGPs maintain control over production? Via what Stan Shih, founder of Taiwanese tech company Acer, calls the “smiling curve”.

The idea of the curve is that at one end you have the inputs (chips, high tech components, etc), which are owned by Apple, Intel, etc. Then, at the bottom of the curve, you have companies such as Acer, which simply assemble components. Finally, at the other end of the curve is controlling access to rich Western markets, which are controlled by the FGPs. The end result is a smiling curve, in which FGPs reap the profits through their control of technology and access to markets, while producers hardly make any money at all.

This is unnatural under capitalism, because the producer is the most important part. Moreover, as Karl Marx explained, given the tendency of profit rates to equalise, profits tend to flow to nations with a higher organic composition of capital. Today, that is China, because it has more factories, more industrial robots, more everything. China is more efficient, has a higher productivity rate, and therefore can sell its output at a slightly lower price.

But most of the main FGPs are US-owned.

True, the main FGPs are still owned by the US. But China wants to replace them with its own brands: Huawei, ZTE, OnePlus, etc. That will take time, however. It cannot happen instantly. In the meantime, Chinese brands seek a bigger slice of the profit pie because capitalists always want the biggest possible slice. The higher composition of capital always wants its bigger slice of profits to reflect the investments it has made.

That is why China seeks to move up the technological curves to control inputs (produce its own high tech components) and outputs (sell to a greater variety of markets). That is also why the US seeks to defend the smiling curve by investing in high tech and applying tariffs. But that will not work because, in the end, the producer has the power. The West produces so little, it is now completely dependent on Chinese imports. The West can threaten tariffs, but ultimately there is nowhere else to buy iPhones from than China. That is why consumers, not China, will end up paying the tariffs.

Hence the conflict: China wants a bigger slice of the pie to reflect its role in global production, the US wants to maintain its slice from the rate of interest. That contradiction needs to be resolved. Therefore, conflict is inevitable. Will it end in war? I obviously do not know — hopefully not. I am not saying there will be a world war — even if US analysts are. But I am saying there will be conflict, and it will not end well.

Given what you say about China, can we define it as an imperialist power? You seem to prefer calling it a “great power”.

One reason is that this is a very controversial question. Most academic journals will not publish you if you call China a capitalist economy; you can call it a market economy but not a capitalist economy. The same is true when it comes to referring to China as an imperialist power; you can call it a great power, but not an imperialist one.

Another reason is that you have to be careful with the term today. When Russia invaded Ukraine, British foreign secretary David Lammy was quick to call Russia an imperialist power. The term is used by the West as an insult against anyone they disagree with. Everyone is imperialist according to them — except, of course, the West.

So, I refer to China as a great power instead, as it is more ambiguous. But the issue is not really that ambiguous. If you go down Lenin’s five criteria of imperialism and ask whether China fulfills them all, you can only really answer yes.

Furthermore, China’s economy is nearly as big (or bigger, depending on how you measure it) than the US economy, is home to the second largest number of multinational companies in the world, and has US$6 trillion worth of foreign assets. China also has the world’s second largest army and a huge war potential.

Lord Nicolas Kaldor did a study after World War II to estimate Germany's war potential. He said war potential could be calculated based on the sum population plus industrial power. If we compare the US and China, we see that the US has about 15 million manufacturing workers, while China has about 240 million industrial workers. China is adding about 300,000 industrial robots a year, the US is adding about 35,000 a year. China represents about 60% of global shipbuilding, the US makes about 0.2% of the world’s ships. If China devotes just 1% of its shipbuilding resources to its military, that is three times more than what the US can build.

This is what you have to consider when thinking about war potential. US military power is enormous, there is no doubt. But, in the end, your industrial capacity determines your military power.

What role does Russia play within global imperialism? Can it also be viewed as an imperialist or great power?

In Lenin’s pamphlet, Russia was already an atypical great power, as it was not a fully developed capitalist economy. But Lenin insisted that Russia was imperialist because of its internal colonies; in other words because it oppressed other nations.

National oppression is a central idea underpinning imperialism. For Lenin, Russia was not an imperialist power because it had huge industrial conglomerates or because it exported finance capital, but because it had an internal empire and oppressed nations. It is not difficult to see that the same is true today.

This is why you have to be careful about being too mechanical in your definition of an imperialist power. Its power is essentially built on its capacity to oppress other nations, and Russia certainly does that. Clearly, since 2001, Russia has sought to reestablish its internal colonies within the Russian Federation. So, I define it as an imperialist power, because it oppresses other nations.

The other thing to note is that Russia is very big, and size matters. Russia has 180 million people and a lot of natural resources. Russia has also reestablished its industrial base as a result of the war in Ukraine, in part to build tanks. It wants to build 3000 tanks a year, up from 60 before the war, which is a huge expansion. Compare that to Britain which plans to just buy 140 of its new Challenger 3 tanks. The same applies for jet fighters, etc. So, Russia has seen some development in terms of industrial capacity and manufacturing.

We can also add the fact that, because of Russia’s history, it is not scared of state industrial policy. Britain and the US have always had half-baked state industrial policies: they want an industrial strategy but end up leaving it to the private sector. That is not the case with Russia and China. They do not mind having state-owned enterprises. So, industrial policy in Russia is much more active compared to the West.

How do you explain the intense confrontation between the West and Russia?

Out of the ashes of the Soviet Union emerged a market economy. Western banks and oil companies rushed into that market, seeking not just to buy up whole swathes of it but ultimately control it. Putin basically put a stop to that when he came to power in 2000, saying he would reassert Russia’s national independence. Putin did this by nationalising some oil and gas companies, and driving out some pro-Western oligarchs. Alongside reconfiguring Russia’s capitalist economy, Putin embarked on several local wars to reestablish the old Russian empire’s zone of influence.

Throughout this early period, Russia’s links with the West declined but were still strong. The process of confrontation sped up after 2014, when Russia experienced a currency crisis. At the time, Russia wanted to pay back some Western bonds using rubles it printed — essentially, quantitative easing. This is something the West had done in response to the 2008 financial crisis, but opposed Russia doing. Western banks responded by fleeing Russia, leading to a huge collapse in the ruble.

But Russia’s economy did not collapse. Instead it shifted further away from the West, to the point that today, especially after the Ukraine war, there is hardly any Western investment in Russia. Where did Russia turn? The only place it could: China.

Importantly, China today provides countries with an alternative to the West. If the West will not buy Russia’s oil and gas, then China will. The same for Iran, which can now evade sanctions by selling its oil to China. This is true of countries such as Saudi Arabia, which has traditionally been a US ally but now has split allegiances. Saudi Arabia now exports twice as much oil to China as it does to the US, while China oversaw a peace deal between Iran and Saudi Arabia that was signed in Beijing.

Countries now have an alternative to the West. Whether China wants it or not, it is an alternative. And that represents an objective change, one that undermines US power. Of course, China does want this; but even if it did not, it would not matter.

Given what you say about China and Russia, and talk of an emerging “multipolar world”, how should the left view initiatives such as BRICS? Do they provide a progressive, or even anti-imperialist alternative, for countries of the Global South?

Well, we are in a multipolar world and BRICS is an alternative — but is it our alternative? No. Fundamentally this is a significant re-carving up of the world. We should not understate its importance: it is going to define international relations for the next period. And we can definitely say it will not lead to socialism.

It is important to come to grips with the social implications of globalisation for the left and working class. The social roots — and, fundamentally, the economic roots — for the decline of the left and the working class can be found in globalisation.

Remember, the capitalist mode of production has lasted hundreds of years. Throughout that time, there have been periods when almost nothing happened — unfortunately, one of those happened to be when we are alive. But we need a social explanation for that. It is not enough to say it was due to subjective failings of the left. That is not a social explanation for the left’s profound marginalisation throughout the past 30 years. The social explanation is globalisation.

We need to be honest about globalisation. There is no point pretending it was a period of social upheaval, that the rate of profit was declining, etc. It was actually a period of huge expansion for capitalism in which both profits and people's living standards went up. Otherwise, you can not explain why there are no strikes, no revolutions, no riots — at least compared to the ’70s, when we had revolutions in Portugal, Iran and Nicaragua, the US defeat in Vietnam, miners’ strikes in Britain, etc.

Today we have very low class struggle, very low class consciousness. In his pamphlet, What Is To Be Done?, Lenin said you have to turn trade union consciousness into socialist consciousness. But we do not even have trade union consciousness. And you cannot just magically conjure this up. I used to think you could, but unfortunately not.

Neither the subjective factor nor the objective factor is there. Why not? Has capitalism resolved all its contradictions? Well, in a sense, it did — at least for a while. Globalisation represented a whole period of very dynamic capitalist growth, during which people were able to make their way within the system, and class struggle and the left virtually disappeared.

Of course, we still have capitalism. The system is very unequal. There is still oppression. But we do not yet have social opposition to the system. What is happening today with China, BRICS, etc is not that; it is not our alternative. A capitalist redivision of the world is certainly not a socialist alternative.

In your book you say we are entering a new period of crisis, but differentiate between a crisis of capitalism and a crisis for capitalism. What do you mean by this?

In the coming period, wars will become more intractable and vicious. Look at Gaza: they are massacring people every day, and they no longer even pretend to “accidentally” bomb a hospital. The contradiction between China and the US is also going to deepen. The US will use its enormous extra-economic tools to defend its power, as it can no longer use traditional economic tools given it has lost its industrial base. We will also see inflation, which really means an attack on people’s living standards. Even the IMF has identified this; they are worried it will recreate wage struggles.

You have to be careful about telescoping such things; it is very tempting to fall into wish fulfillment. But I think these things will unfold. That will recreate the objective conditions for class conflict — and with it, the subjective conditions too. Again, you have to be careful about being overly schematic, but I think there will be a recreation of the conditions for class struggle in the next period. We can already see a certain change. We might not have a social crisis but there is grumbling discontent: people are fed up, they see no future. This is important, but it has not yet expressed itself as social conflict.

That is why I differentiate between a crisis for capitalism and a crisis of capitalism. Crises for capitalism do not threaten capitalism. For example, we have had regular financial crises, most notably the 2008 financial crash, but the system has coped. These crises did not threaten the system’s existence as a whole, and were resolved at least to the extent needed to ensure extended reproduction.

The only real crisis for capitalism is a crisis of capitalism — that is, a social challenge capable of doing away with the capitalist order. That does not exist yet. But with the end of the long wave of globalisation, we see multiple crises for capitalism opening up: trade and military wars, climate change, migration, environmental degradation. And, as they recreate conditions for social conflict, we may yet see these transformed into a crisis of capitalism. What is certain is that these crises will provide opportunities for socialists.