G20 Summit: The bourgeoisie is powerless faced with the economic crisis

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With the economic crisis now ravaging the planet, on 15 November there was a grand international meeting, which at the time was billed as a summit to 'change the world' and bring about a radical transformation in the rules by which capitalism operates. This extraordinary summit was attended by the members of the G8 (Germany, France, USA, Japan, Canada, Italy, Britain and Russia) plus South Africa, Saudi Arabia, Argentina, Australia, Brazil, China, South Korea, Indonesia, Mexico and Turkey. It was supposed to create the bases for a new kind of capitalism, not only healthier but also more humane.

Back in September, when the world's stock markets were being swept by a real gale of panic, all the great and the good, Bush, Merkel, etc, announced with great ceremony the calling of a major international conference. Nicolas Sarkozy, the president of France and of the European Union, even made a ‘radical' speech at the UN on 23 September, calling for a a ‘regulated' and ‘moralised' capitalism, even going so far as to demand the ‘re-founding' of capitalism.

This meeting has now taken place. The result? Nothing, or next to it. Even the international press has been obliged to recognise that the mountain gave birth to a mole hill. Evidently, no one was seriously expecting it to produce a more humane capitalism. Such a thing doesn't exist and the world leaders talk about it like parents talk to their children about Father Christmas. But even from the point of view of the struggle against the economic crisis, the results of this conference were particularly thin. Here are the conclusions, in the rather incomprehensible jargon of the initiated:

  • - limiting the "pro-cyclical effects" of the current regulations for financial markets
  • - aligning compatible norms on a world scale, particularly "for complex financial products"
  • - making "derivative markets" more transparent so as to reduce "systemic risks"
  • - improving "compensation practices"
  • - evaluating the mandate, modes of governance and resource needs of international financial institutions
  • - defining those institutions which have a "systemic importance" and whose collapse would threaten the entire world financial system, thus demanding coordinated action to prevent their failure

In short, playing at in-house fireman by supporting key financial institutions and the strategic sectors of the economy. Nothing that hasn't been done already.

The bourgeoisie isn't repeating the errors of 1929...but is still unable to get out of the crisis

Still, one thing should be recognised. It's true that today, unlike in 1929 (when the world's major states initially failed to react and allowed whole swathes of the economy to go to the wall), all the bourgeoisies of the world have rapidly mobilised themselves. By pumping in billions and billions of dollars, they are trying to save vital sectors like banks and large-scale industry...and, to this end, they have got together, tried to plug the most alarming gaps, tried to act in concert whereas in 1929 they did exactly the opposite (pulling in different directions, resorting to frenzied protectionism, closing their frontiers to foreign commodities, all of which served to aggravate the world crisis). It is this international mobilisation which has allowed them to prevent the brutal collapse of the financial system and the failure of the biggest banks, which has been the major fear of the economists in the last few months.

But while they have avoided the failure of the banking sector in particular, no real solution, no perspective for a lasting recovery, could have emerged from all the discussions that have taken place over these months, whether at the G7, the G8, or the G20.

The bourgeoisie is powerless. It can't regulate the historic crisis of its system because it is affected by a mortal disease: overproduction. This is why capitalism, which has been a system in decline for almost a century, is plagued by irreversible convulsions and has dragged humanity through a whole series of wars (the two world wars being the most powerful expression of this) and economic crises. The result of the G20 is a visible demonstration of this powerlessness: as the crisis rages, as famine threatens whole sectors of humanity, as unemployment and poverty explode in the world's most developed countries, all that the great powers of the planet can do is to vote for vague and abstract resolutions in favour of "stricter rules and better control over speculators and bankers". Even more ridiculous, these decisions by the G20 are not even applicable straight away but have to be discussed by a commission of experts whose conclusions will be discussed again on...April 30, 2009! Nothing can be hoped for from these summits.

The economists can prattle on about a second New Deal or a new Bretton Woods, but they are incapable of understanding what is really happening. A second New Deal? But the use of credit which, under Roosevelt's presidency in the USA, launched a policy of great public works between 1933 and 1938 and got the economy on the move again, has already been tried ten times over in the last few decades. States, companies, households are already staggering under the weight of unbearable and growing debt. No, there will not be a second New Deal! What about a new Bretton Woods then? In 1944, the setting up of an international financial system based on the dollar made it possible to stabilise exchange and make it more fluid, an essential basis for economic growth. But today there is no superpower in a position to stabilise world trade: on the contrary, we are witnessing the discrediting of the USA and its dwindling capacity to play the role of locomotive to the world economy. What's more, at the G20 all the other powers challenged American dominance, beginning with France and its spokesman Nicolas Sarkozy. And there is no new power on the horizon capable of playing this role, certainly not the so-called European Union, which is scored through by conflicts for the defence of entirely contradictory national interests. No, there will be no new Bretton Woods. At most there will be mini-measures to limit the damage. All of which will do no more than spread out the crisis over time and prepare the ground for even bleaker tomorrows.

Towards brutal impoverishment

The bad news about the economy and the redundancy plans raining down everywhere already enable us to see what these tomorrows will be like. All the international institutions, one after the other, foresee recession in 2009. According to the OECD, the Euro zone is going to see its level of activity fall by 0.5%. Britain will be harder hit, with predictions of -1.3%, and its economy will carry on diving the year after. For the USA, the Federal Reserve Bank predicts a negative growth of -0.2%, but Nouriel Roubini, the economist who is the most listened to on Wall Street because his predictions about the deterioration of the world economy over the past two years have been so spot on, thinks that it is perfectly feasible to envisage a nightmare scenario with a contraction of around 5% in the next two years, 2009 and 2010!

We don't know if this will be the case and it's useless to speculate, but the simple fact that one of the most reputable economists on the planet envisages such a catastrophic scenario reveals the disquiet of the bourgeoisie and the real gravity of the situation.

At the level of redundancies, the massacre in the banking sector continues. Citigroup, one of the biggest banks in the world, has just announced the elimination of 50,000 jobs when it has already slashed 23,000 since the beginning of 2008! Compared to this disaster, the recent announcement of 3200 job cuts at Goldman Sachs and 10% of the jobs at Morgan Stanley almost passed unnoticed. Let's recall that the financial sector had already destroyed more than 150,000 jobs since January 2008.

Another sector which has been hit really hard is automobiles. In France, Renault, the country's main car manufacturer, quite simply stopped production in November; no more cars are coming out of the plants, and that's on to of the fact that its assembly lines have already been running at 54% of their capacity in Europe[1]. PSA Peugeot-Citroen have just announced 3350 job cuts and new measures of technical unemployment.

But within the automobile sector, it's again the USA which offers the most alarming news: the famous Big Three of Detroit (General Motors, Ford and Chrysler) are on the verge of bankruptcy. If the US state doesn't keep them afloat, 2.3 to 3million jobs, many of them in supply and components, will be directly threatened. And in such a case, the workers laid off will not only lose their jobs but also their medical insurance and their pensions! Even if, as seems likely, the American state will pull a finance plan out of its pocket, there will still be very violent reorganisation in the months ahead, involving many lay-offs.

The result of all these attacks will evidently be a huge surge of poverty. In France, ‘Secours Populaire announced in September that there had been a near 10% increase in people living from soup kitchens, with the young being especially affected.

The prospect is not for a more human or moral capitalism as all the liars assembled in the G7, G8 or G20 would have us believe, but a capitalism that is more barbaric than ever, spreading hunger and misery in its wake.

In the face of the crisis and capitalist attacks, there is only one way forward: the development of the class struggle.  

Pawel 12.11.08

[1] This example shows the whole absurdity of the capitalist economy. On the one hand, the development of poverty, on the other hand factories operating at half capacity. The reason for this is simple: capitalism does not produce for human need but to sell and realise a profit. If a part of humanity doesn't have the wherewithal to pay, it can just starve. The capitalists prefer to close their factories and destroy unsold commodities than to give them away.