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THE WESTERN WORLD AND THE OIL EXPORTERS: AN HISTORICAL ANALOGY

Professor Qstein Noreng Oslo Institute of Business Administration

Oslo, Norway

Class Relations of International Oil

The present energy problems, exemplified by rising oil prices and recurrent oil supply problems. without alternatives being readily available within a reasonable time horizon, in many ways represent an entirely new situation for the Western industrialized oil importing countries. Indeed, throughout its period of consoli- dation, from 1860 to 1970, industrial capitalism was enjoying increasingly abun- dant supplies of energy at steadily lower prices, through the shift from wood to coal and later from coal to oil as the principal source of energy. The change from declining to rising marginal energy costs, which fmt occurred around 1970, and later in the 197Os, has taken on stronger proportions, creating an entirely new situation for industrial capitalism, a situation so new and unexpected that there is considerable confusion and a general loss about what to do. Our under- standing of the situation might, however, benefit from drawing an analogy with a past experience of industrial capitalism.

The modem world is so integrated by trade, transportation, communications, education, science and culture, that it can to some extent be considered as one society. In this society, and making an explicit analogy with the Western industri- al capitalist countries, the Western industrial nations, essentially the OECD area (with a few exceptions) can be identified as the urban bourgeoisie which owns the means of production and essentially controls the key political and economic institutions. The developing countries can be identified as the working-class, not owning the means of production, but having to sell their labour, and raw materials to the bourgeoisie in order to survive. The terms of trade, i.e. the wages, and the income which the working-class gets for its labour and raw materi- als, are essentially determined by the bourgeoiSie. To this rudimentary and highly simplified Marxist model of the world society, it should be added that the Soviet Union and China can be identified as groups of workers who have broken out and isolated themselves, in order to build their own societies, with a minimum of interaction with the bourgeoisie. They are now realizing that isolation impedes their material and intellectual progress, and are, therefore, hesitantly breaking out of isolation.

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In this society, the situation of the bourgeoisie in the 1970s and 198Os, in re- lation to the developing countries, can be compared to that of the Victorian bourgeoisie of the late 19th century, facing the rising labour movement. This part is now played by the developing countries, which more and more actively voice demands for a more equal distribution of income, for structural reform of the economy, and for extended economic and political rights. These countries also increasingly organize politically in order to achieve their goals, just like the workers in the capitalist Countries in the late 19th century. The Group of 77 in this perspective resembles a General Workers’ Association. One group of workers, whose services are essential to the bourgeoisie, to the functioning of the bourgeois economy and even to the stability of the bourgeois institutions, is particularly well organized, namely the workers producing oil for the bourgeoisie. In this perspective, OPEC is a trade-union and OAPEC its ethnic sub-associate club. These workers have just made a successful strike, of a revolutionary charac- ter, not only achieving a substantial increase in wages, but even changing property relations, i.e., taking over their places of work.

Thus, a revolution has taken place in one sector of the economy. The bourgeoisie fear, and the worken hope, that it will generalize. The example is tempting60 the other workers, even if they are less well-organized and often have substantial problems of uniting in order to defend their interests. However, a common front of workers is emerging, and the successful workers have refused to dissociate themselves from the working-class. Therefore, they have refused a deal exclusi- vely between themselves and the bourgeoisie. Instead, they support the demands of the rest of the working-class, and their bargaining position with the bourgeoi- sie, for this reason, has not deteriorated.

The Revolutionary Strike

The action of the oil exporting countries in the 1970s is revolutionary in the terminology of the European labour movement; property relations have been fundamentally changed, old owners have been .kicked out, and the workers have themselves taken over their places of work. In an historical perspective, this is a much more important change than the drastic rise in income for the oil workers. If the action of the oil workers had merely been aiming.at a rise of income, it could have been described as reformist, or trade-unionist in Marxist terminology, with no political perspective. But the action of the oil workers also aimed at their own liberation from bourgeois control. so that they could themselves decide and organize their production. The succcss of this action means that an important structural change took place in the bourgeois economy, with some important decision processes and command chains being interruped.

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This also implies a change in power relations. The background for the strike was that the oil workers, i.e. the OPEC Countries, were heavily exploited by the bourgeoisie, just like the working class of late 19th century capitalism. The oil workers got a low income compared to the value of their work, so that the bourgeoisie could realize a substantial surplus-value, meaning that the OPEC only got a small proportion of the oil rent. In addition, the oiI workers had tough working conditions, with a deterioration of health conditions and life expectancy, meaning that oil was being pumped out at a pace faster than that at which new sources of income could be established, leading to a long-term impoverishment of the OPEC Countries.

The interesting thing about the revolutionary strike is that it was prepared quite openly. The oil workers had become organized more than a decade earlier, but their union was not taken very seriously until a short time before the strike. The union's activities were not clandestine and the union published its demands. but the bourgeoisie did not counteraqanize until after the strike. Even so, the members of the bourgeoisie were quite reluctant to organize, many thinking that the new bourgeois club, meaning the IEA, essentially would serve the in- terests of the biggest capitalist, meaning the United States. Many thought that they might be better off dealing with the oil workers alone. Some of the capi- talists, France, for example, even refused to join the club. .A small member of the bourgeoisie which was working a modest oil-well in a pond in the garden, Norway, was caught in hesitation, decided only to associate with the new club. The new bourgeois club tried to intimidate the oil workers in case they should be think- ing of a new strike, by making an impressive plan on how to deal with them, on paper. After some time, interest in the new bourgeois club declined and many members, more or less politely, expressed the view that its activities were quite boring. Instead they remained fascinated with the oil workers and their union, not only because they were important economically, but also because of their historical and political significance.

As a result of their strike, the oil workers have a much improved situation. Their income is substantially higher than before, and they get a significantly higher proportion of the value of their work, even if the bourgeoisie still realize a hand- some surplus-value, meaning that the f.0.b. price of oil still permits a substantial proportion of the rent of oil to go to traders and consumer governments. Also. the conditions of work have improved for the oil workers, leading to improved health and life expectancy, meaning that the pace of oil extraction has been reduced and is now more compatible with long-term economic interests of OPEC Countries.

However, the overall situation is precarious. There has been a revolution in one sector only, and it is in many ways incomplete, Even if property relations have been changed, wages obviously still have some way to go, and working conditions can still be improved, meaning that the f.0.b. price of oil can increase further and that the pace of oil extraction can be further reduced. Also, the revolution in the oil sector is often seen as insecure unless there is a general structural change in the economy.

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The Dilemma of Bourgeoisie

In this sectorally post-revolutionary situation the bourgeoisie is at a loss what to do next. Given that there is no easy substitute, it will need the services of the oil-workers for a long time to come, and perhaps to an increasing extent. Con- sequently, its bargaining position ih relation to the oil workers is deteriorating. It also fears the strength, the demands and the example of the successful oil- workers, and is not very willing to recognize the common front of workers, not to mention negotiate with it. Therefore, the bourgeoisie hesitates between com- pliance and firmness, between trying to accommodate the opposition to the established order and its distribution of income and power, and trying to repress it. It considers inviting the successful oil-workers to more or less formally join the ranks of the bourgeoisie, as a new labour aristocracy with the option of buying shares in bourgeois property. This is to some extent a move to solve practical problems related to the bourgeois need for oil. Politically, it is a move which could isolate the oil-workers from the rest of the working class, weakening in the short run the common front of workers, in the long run the oil-workers them- selves.

The Victorian bourgeoisie very much had the same dilemma facing the labour movement in the early stages of capitalism. It had the choice between compos- ing with the labour movement, trying to ignore it in the hqpe that it would col-

, lapse, and trying to repress it. The options have historically established names: social democracy, liberal conservatism and fascism. The f i t solution general- ly has led to important structural changes in the societies concerned, but also to a stabilization of the new order, stimulating economic and social development. The second solution often led to a stalemate society, with subsequent economic and social stagnation. The third solution invariably led to a long-term destabili- zation of the society, impeding economic progress, and in some important cases to national disaster.

Dealing with the oil-workers, the present bourgeoisie essentially has the same options. It can be conciliatory and composing. This means agreeing with some of OPEC’s basic demands. not only as concerns oil, but also as concerns the need for a structural reform of the world economy. This also means agreeing to re- organize important Parts of the world economy and to make the key economic institutions more representative of the interests of the developing countries. This is essentially the socialdemocratic option applied on a global scale. The bourgeoi- sie can more or less politely try to ignore the oil-workers’ demands, hoping their strength is quite a transitory phenomenon. This is to a large extent the attitude taken by the OECD countries in the period 1974-1978, when the real price of oil declined. This attitude evidently was based on certain assumptions on the oil and energy situation which by many experts were considered incorrect.

During this time there was a large number of serious studies showing that the relaxed oil market was transitory, not OPEC's strength. The cutback of Iranian production in the Spring of 1979 to some extent gave a taste of what was ex- pected to occur around 1985. Nevertheless, in the coming years, this liberal- conservative attitude may still be adopted by many OECD governments, not the least because it is widely held by the public. Finally, the bourgeoisie if it really fears for its power and wealth, might be tempted to repress OPEC, through in- trigues aiming at coup d'btat in some key OPEC Countries, or even through direct military interventign. If a serious crunch should occur, this option might unfortunately still be considered relevant by some governments. This is not the place to discuss sombre scenarios, and it might be sufficient to point out that at the national level this kind of action has never brought a long-tern solution, re- quiring structural change. However, in most countries of Western Europe and North America, police and military forces have historically been used against labour.

Labour's Choice

The historical analogy can be pursued on the side of labour. The oiI-workers are not only in a fortunate situation because of their success, they also have some delicate choices. On one hand, the oil-workers are aware of the surplus-value still being realized on their work by the bourgeoisie, and for many working con- ditions leave much to be desired, meaning that the OPEC Countries are aware that the upper limit for the price of oil is still far away and that for many OPEC Countries the pace of oil extraction is still to quick when considering long-term economic interests. On the other hand, the oil-workers don't know what price they can charge far their labour, and how drastically they can improve their working conditions, meaning raising the price of oil and reducing output, before the bourgeoisie feels threatened by financial collapse, the performance of the bourgeois economy is severely hit, and the bourgeoisie eventually feels com- pelled to intervene forcefully. Also, the oil-workers are hesitant because of the possibly negative effects upon the other workers whose support they generally feel they need.

Similar problems of choice were often present in the labour movement of West- em Europe and North America. Facing a powerful bourgeoisie, the labour move- ment in the early stages of capitalism essentially had the choice between seeking advantages for some well-organized groups of workers, seeking advantages for the whole working class through a structural reform of society, and seeking to over- throw the bourgeoisie and the existing order. The first option is that of labour aristocracy, the second one is socialdemocratic refomism, and the third is re- volutionary communism or sindicalism. Historically, there are examples of all three.

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The first one has generally been applied in Great Britain and North America, with considerably success for some groups of workers, but not necessarily for the working class. The second one has to a large extent been applied in North-Westem Europe, and not without success according to some observers. The third one has usually been a failure, except in a few very special cases, and some observers claim the result is not particularly interesting. However, it should be noted that the third option usually was chosen out of desperation, because the existing bourgeois order did not permit the second one.

Facing the global bourgeoisie, in the shape of the OECD countries, OPEC today, to some extent, has the same options. It can seek advantages for itself from the bourgeoisie, ignoring the needs and the interests of the other developing coun- tries. This means making a deal with the OECD countries on oil, energy and re- lated matters, forgetting the demand also to negotiate a structural change of the world economy. This means the OPEC Countries behaving as a labour aristo- cracy, ultimately seeking its own embourgeoisement. Such an option would quite certainly be met with a highly positive response from the OECD countries, per- haps suspiciously. so. Indeed, the risk would be that even if the OPEC Countries were to get substantial short-term advantages, their long-term bargaining position might suffer, and so would their long-term economic interests.

OPEC could also persist, more or less as today, in being willing to negotiate with the OECD countries, but only on the condition that structural problems in the world economy be discussed as well. This means using the present bargaining power to obtain long-term advantages, not only for the oilexporters, but for all developing countries in relation to the OECD countries. In this way the OPEC Countries behave as the leadership of a reformist socialdemocratic movement on the global scale, which in many ways is the case today. The moderation of this option does not yet seem to be fully understood by the bourgeoisie, meaning the OECD countries, and i t is only likely to give results over a longer period of time. Finally, there is the possibility of OPEC losing patience, or being forced by unwise moves by the bourgeoisie to take on a much more radical attitude. It could see itself as the leaders of a revolutionary movement, aiming at profound changes that would overthrow the bourgeoisie and its institutions. This means refusing deals with the bourgeoisie, pushing the price of oil to an anticipated maximum and reducing oil extraction to a possible minimum, eventually coupled with special deals for other developing countries. Such a move would certainly be met with severe resistance by the bourgeoisie, and might indeed be seen as a provocation, inviting repression.

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The Stalemate

Given the increasing economic and cultural integration of the world, and in particular the rise of levels of education, there are few chances that the movement of the developing countries to secure their place in the worid will be any less persistent than has been the labour movement in Western Europe and North Arne- rica. Also, given the realities of the energy market, the cost of alternatives to oil and the cost of conservation, as well as the cost of lost economic growth due to oil scarcity, there is little likelihood that the position of the OPEC Countries will prove any less strong than that of the best organized parts of European and American workingclass.

Therefore, attempts to ignore the movement may be inefficient and even naive, and attempts to repress it may be dangerous. Attempts to accommodate the movement may have a high economic price, at least in the short run, but it may in the long run be quite rewarding, both economically and politically. As in the early stages of capitalism, a society characterized by a highly uneven distribution of income and power, may be stabilized if the ruling class agrees to share power through democratic institutions and to a certain redistribution of income. Failure to do so may in the long run be quite destabilizing, creating tensions that ultima- tely lead to economic and political discontinuities. In this process, the bourgeoi- sie has a particular responsibility, not only of taking the general interest into account, but also of recognizing its own long-term interests.

Presently, the movement in the developing countries, and not least in OPEC, is decidedly in favour of a long-term solution worked out in negotiations with the OECD countries, not forcibly imposed upon them. There is thus a clear social- democratic tendency. Concessions from the bourgeoisie, meaning the OECD countries, may strengthen this tendency of the movement. By contrast, an un- compromising attitude or attempts at repression may easily radicalize the whole movement of the developing countries, including OPEC. In this perspective any attempt at intervening physically against oil producing countries appears not only as an act of desperation, but also as extremely unwise for the OECD countries themselves. Perhaps the likelihood is rather that after some hesitation the bour- geoisie will resume its liberal-conservative attitude, wishing that the successful trade-union of oil-workers would vanish. In practice, this means that during a future recession, with economic activity levelling off and the real price of oil perhaps eroding somewhat, the OECD countries will once more try hard to forget the strength of OPEC, just as during the years 1975-1978. At the same time the bourgeoisie could once more try to recuperate some of the oil-workers' income, meaning that the prices of goods exported from OECD countries to OPEC Coun- tries could rise at a fast pace, and that the OECD countries could submit to the temptation of consciously opting for monetary depreciation.

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The bourgeoisie could, of course, hope that such a policy would make the oil- workers more malleable, and more willing to play the role of a labour aristocracy. But there is also a possibility that such a policy would radicalize the oil-workers, and with them the rest of the working-class. The OPEC Countries are now gra- dually realizing that their process of economic development, in particular the creation of new sources of income, is much slower and more painful than was as- sumed a few years ago, because of bottlenecks, structural deficiencies and lack of qualified manpower. This makes it rational for them to extend their planning horizon, and to stretch out the time during which they produce and export oil. Thus, the OPEC Countries have perfectly legitimate reasons to opt for more conservationist policies in relation to oil, to keep more of it in the ground and to extract less. This will necessarily lead to sharper price increases for oil. But as long as the price of oil increases less than the cost of access of the consumers to new sources of energy, there is a rational basis for raising the price of oil. In- deed, this may be the only way to make the bourgeoisie realize the seriousness of the situation.

These prospects indicate that the future class struggle between the oil-workers and the bourgeoisie will be over the rent of oil, meaning the total profits emanat- ing from its extraction and consumption. It would be a rational strategy for the oil-workers to have the price of oil rise gradually in real terms, i.e. each year by a few percentage points more than that of manufactured products. This will increase their freedom of action in economic policy, enabling the financing of development plans and at the same time keeping more oil in the ground. Also, such a strategy of gradual rise would do a minimum of harm to the bourgeois economy, but at the same time give the bourgeoisie persistent signals as to the gradually increasing need to develop new sources of 'energy. Finally, by offering some security of supply, the oil-workers might even be able to pursue the shift of property relations, taking over more of the trading of their oil, which again might increase their part of the oil rent.

Facing such a potential strategy from the oil-workers, the bourgeoisie seems to be divided. Some capitalists, particularly those in Western Europe and Japan, seem fairly willing to accept such a course of events, as they apparently put more emphasis on the security of oil supplies than on the price of oil, and they seem to think that as the oil-workers get richer, they will buy more goods and services from the bourgeoisie, and perhaps even start acting like bourgeois them- selves, But the biggest capitalist, the United States, appears much less willing to accept such a course of events, because the global distribution of income and power will be affected. The biggest capitalist seems quite decided to keep a substantial part of the oil rent for himself, and, facing the possible inevitability of oil prices rising to the cost level of alternatives, seems to prefer a future price shock rather than a gradual evolution, in spite of the harm that will be done to the entire bourgeois economy, because in this way less income and power will be transferred to the oil-workers.

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This is quite paradoxical, and there is an apparent contradiction between the political and the economic interests of the biggest capitalist, with the political interests prevailing. Economically, the biggest capitalist needs higher oil prices more than anyone else, in order to make his own energy resources more profit- able and in order to stimulate conservation. But apparently the United States is giving a higher priority to its political dominance of the world than to economic rationality. Thus, the United States is in many ways the world’s energy problem number one, because of extravagant patterns of consumption and the with- holding of domestic supplies, and because of its upsetting economic rationality by clinging to a position of power. Such a policy is at best short-sighted and it is bound to produce discontinuities that might also seriously affect both the bour- geois economy and the position of the United States.

To sum up, most of the responsibility for the present difficuit situation is with the bourgeoisie, which obviously has serious intellectual trouble understanding that a revolution has taken place in a key sector of the bourgeois economy, and that realistically this process is irreversible. The bourgeoisie obviously, and per- haps understandably, does not want to know about revolutions and prefers to go on living just like before. But realistically, the bourgeoisie will either have to adapt to the new circumstances, or face an economic and political disaster. However, the oil-workers also have their part of the responsibility. Their revo- lution was carried out with much style and politeness, indeed so much politeness that the’message that a revolution was going on did not in all cases reach the members of the bourgeoisie. Maybe the oil-workers overestimated the intellectual capacities of the bourgeoisie. After the revolution the oil-workers for some years showed remarkable restraint, letting the real price of oil decline again, and thus further diluting their message to the bourgeoisie. Perhaps both oil-workers and bourgeoisie would have been better off today if, after the revolution, the. oil- workers had shown more muscle. Then the message that the change is irreversible would have been clearer. Given the evident intellectual laziness of the bourgeoisie, the best thing now is to wish the oil-workers good luck!

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Finally, there is another preoccupying aspect of the situation. The 1970s and perhaps even more so the 1980s appear as the third period of institutional break- down in the 20th century. The two previous ones were the years 1910-1920 and the years 1935-1950. During these periods the established world order, economically and politically, broke down, and a new order emerged. Institutions were broken down and gradually replaced by new ones. These processes were extremely painful, as they involved world wars. The present institutional order dates from the end of the Second World War. It was essentially based upon the power of the United States and it was destined to serve the industrial capitalist countries of the West. The developing countries were excluded when this institu- tiond order was created, and they claim that it does not serve them, and indeed it was not designed to serve them. The breakdown of this order is now visible in several ways, and the energy problem is but one symptom. Other symptoms, perhaps more serious, are the international monetary problems. the erosion of the dollar, international trade problems, and the general decline of the economic and political position of the United States in the world.

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Judging by historical experience, we are going through an extremely dangerous situation, where the risk of a major war is increasing. The point is, therefore, to secure a relatively smooth transition from the old institutional order, which any- way is breaking down, to a new one, yet to be created. In this process both the OECD countries and the OPEC Countries have a responsibility. For the OECD countries, and perhaps particularly for the United States, it is important not t o cling to the old order, as that will reduce the chances of a smooth transition, increasing the chances of a major conflict. For the OPEC Countries, it is im- portant to keep in mind that they are in the forefront in the struggle against the old order, whether they like i t o r not, and that as the old institutional order erodes, it will have to be replaced by a new one. In this process some more constructive thinking and proposals might facilitate the transition, and eventually reduce the risks for all of us.