The economic crisis is not a never-ending story
Since 2008, not a week has gone by without a new draconian austerity plan. Reductions in pensions, tax increases, wage freezes... nothing and nobody can escape. The whole of the world working class is sinking into poverty and insecurity. Capitalism is being hit by the most acute economic crisis in its entire history. The current process, left to its own logic, can only lead to the collapse of capitalist society. This is shown by the complete impasse facing the bourgeoisie. All the measures it takes are revealed as vain and fruitless. Worse! They are actually aggravating the problem. This class of exploiters no longer has any answers, even in the medium term. The crisis did not level out in 2008; it is getting worse and worse. And the impotence of the bourgeoisie is leading to tensions and conflicts in its ranks. The economic crisis is turning into a political crisis.
In the last few months, in Greece, Italy, Spain, the US... governments are becoming more and more unstable, increasingly unable to impose their policies as divisions between different factions within the national bourgeoisie grow in strength. The different national bourgeoisies are also often divided amongst themselves on a global scale when it comes to deciding what measures to take against the crisis. The result of all this is that measures are frequently only taken after months of delay, as we saw with the eurozone’s plan for bailing out Greece. As for the current anti-crisis measures, like the ones that came before them, they can only reflect the growing irrationality of the capitalist system. Economic crisis and political crisis are banging simultaneously on the door of history.
However, this major political crisis of the bourgeoisie is not in itself something that can be celebrated by the exploited. In the face of the danger of class struggle, the bourgeoisie maintains a sacred union, an iron discipline against the proletariat. However difficult the task facing the working class, it holds in its hands the power to destroy this dying world order and to build a new society. This goal can only be attained collectively, through the generalisation of the proletariat’s own struggles.
Why can’t the bourgeoisie find a solution to the crisis?
In 2008 and 2009, despite the gravity of the world economic situation, the bourgeoisie breathed a sigh of relief as soon as the situation seemed to stop getting worse. To believe them, the crisis was just a passing event. The ruling class and its servile specialists claimed in all languages that they had the situation in hand, that everything was under control. The world was merely seeing an adjustment of the economy, a small purge needed to eliminate the excesses of previous years. But reality has mocked the lying discourse of the bourgeoisie. The last quarter of 2011 has seen a whole series of international summits, every one of them described as “last chance meetings” aimed at saving the eurozone from falling apart. The media, conscious of this danger, talk of little else but the “debt crisis”. Every day the papers and the TV are filled with their analyses, each one in contradiction with the next. There is a real note of panic in their voices. And even then they often forget that the crisis is continuing to develop outside the eurozone: the USA, Britain, China, etc. World capitalism is faced with a problem which it cannot solve. This can be represented by the image of a wall that cannot be scaled: the “wall of debt”.
For capitalism, its overall debt has become fatal. It’s true that a debt in one part of the world is equal to a loan somewhere else, so that some people claim that world debt actually stands at zero. But this is a pure illusion, a clever accountant’s trick, a game written on paper. In the real world, all the banks for example are in a more or less permanent situation of bankruptcy. And yet their accounts are “balanced”, as they like to put it. But what is the real value of their shares in the Greek or Italian debts, or the ones in Spanish or US housing loans? The answer is clear: virtually nothing. The tills are empty and all that remains is debt and more debt.
But why, at the beginning of 2012, is capitalism facing such a problem? What is the origin of this ocean of money loans which has for so long been totally disconnected from the real wealth of society? Debt has its source in credit. These are the loans agreed by central or private banks to all the economic agencies in society. These loans become a barrier for capital when they can no longer be paid back, when it becomes necessary to create new debts to pay the interest on previous debts or to reimburse a small fraction of the actual debts.
Whichever organism gives out the money, whether central banks or private ones, it is vital, from the standpoint of global capital, that enough commodities are sold for a profit on the world market. This is a condition for the survival of capital. But this hasn’t been the case for the last 40 years. In order for all the commodities produced to be sold, it has become necessary for money to be loaned to pay for the goods, to reimburse previously contracted debts, and to pay back the interest accumulated on them. And this has meant contracting new debts. The time comes when the overall debt of particular banks or states can no longer be honoured, and in more and more cases this goes for the servicing of the debts. This marks the general crisis of debt. This is the moment when debt and the creation of growing amounts of fictitious money have become a poison contaminating capitalism’s entire body.
What is the real gravity of the world economic situation?
The beginning of 2012 has seen the world economy fall back into recession. The same causes always produce the same effects, but at a more serious and dramatic level. At the beginning of 2008, the financial system was on the verge of collapse. The new credits injected into the economy were soon eaten up and the economy went into recession. Since then, the American, British and Japanese central banks, among others, have injected further billions of dollars. Capitalism bought itself some time and was able to revive the economy in a very minimal way while preventing the banks and assurance companies from going under. How did all this turn out? The answer is now known. States are massively in debt to the central banks and the markets are taking over a very small part of the debt of the banks. Nothing has really changed.
At the beginning of 2012, the impasse facing global capital can be illustrated, among other things, by the €485bn earmarked by the European Central bank to save the banks in the zone from immediate bankruptcy. The ECB has lent money to the central banks of the zone in exchange for toxic shares. Shares which are part of the state debts of this zone. The banks in turn then have to buy up new state debts for those which are not collapsing. Each is holding up the next, each one is buying the next one’s debt with what is in effect money printed for the purpose. If one goes down, they all go down.
As in 2008, but in a much more drastic way, credit is no longer going into the real economy. Each player protects his own money in order to avoid collapse. At the beginning of this year, at the level of the private economy, investments in enterprises are becoming very rare. The impoverished populations are pulling in their belts. The depression is with us again. The eurozone, like the USA, has a near-zero growth rate. The fact that the USA saw a slightly better economic activity in comparison to the rest of the year does not mean any lasting change in the general tendency. In the short term, according to the IMF, growth in 2012 will be between 1.8% and 2.4% depending on the country. And then again, that’s if “everything goes well”, ie. if there is no major economic event, something noone would care to bet on right now!
The “emerging” countries, like India and Brazil, are seeing a rapid reduction in activity. Even China, which since 2008 has been presented as the new locomotive of the world economy, is officially going from bad to worse. An article on the website of the China Daily on 26th December said that two provinces (one being Guandong which is one of the richest in the country since it hosts a large part of the manufacturing sector for mass consumer products) have told Beijing that they are going to delay the payments on the interests for their debt. In other words, China is also faced with bankruptcy.
2012 is going to see a contraction of world economic activity on a scale which no one can yet predict. At best, world growth is calculated to be around 3.5%. In December, the IMF, OECD and all the economic think tanks revised their predicted growth figures downwards. It seems clear that the colossal injection of new credit in 2008 created the present wall of debt. Further debts contracted since then have only made the wall higher, and have been less and less effective in getting the economy moving. Capitalism is thus on the edge of a precipice: in 2011, the financing of debt, ie. the money needed to pay debts that had reached their deadline, and the interest on the overall debt, reached $10,000bn. In 2012, it is predicted to reach $10,500bn, while the world’s reserves are estimated at $5,000bn. Where is capitalism going to find the money to pay for this?
At the end of 2011 we saw not only the debt crisis of the banks and assurances, but also the growing implication of the sovereign debts of states. It is legitimate to ask who is going to go down first? A big private bank and thus the whole world banking system? A new state like Italy or France? The eurozone? The dollar?
From economic crisis to political crisis
In the previous International Review we pointed to the very wide disagreements between the main countries of the eurozone in facing the financial problem of the cessation of payment by certain countries, whether this was already happening (as in the case of Greece) or threatening to happen (as in the case of Italy), and the differences between Europe and the USA in dealing with the problem of world debt.1
Since 2008, all policies have led to a dead-end, while disagreements within the different national bourgeoisies about the debt and the problem of growth have led to tensions, disputes and open confrontations. With the inevitable development of the crisis, this “debate” is only just beginning.
There are those who want to reduce the debt through violent austerity budgets. For them, there is one slogan: drastic cuts in all state expenditure. Here Greece is a model showing the way for everyone. The real economy there has been through a 5% recession. Businesses are closing; the country and the population are sinking into ruin and poverty. And still this disastrous policy is being taken up all over the place: Portugal, Spain, Italy, Ireland, Britain, etc. The bourgeoisie has the same illusion as the doctors of the Middle Ages who believed in the virtues of a good bleeding. But the economy will do no better from such a remedy than their patients did.
Another part of the bourgeoisie wants to monetise the debt, ie. transform it into issues of money. This is what the American and Japanese bourgeoisies have been doing on an unprecedented scale, for example. It’s what the ECB has been doing on a smaller scale. This policy has the merit of making it possible to play for time. It makes it possible to deal with debt deadlines on a short-term basis. It makes it possible to slow down the recession. But it has a catastrophic side effect: eventually it will result in a general fall in the value of money. Capitalism can no more live without money than a man can live without breathing. Adding debt to a debt, which is already, as in the US, Britain or Japan, preventing a real revival of the economy can only lead, in the end, to a more profound collapse.
Finally, there are those who think you can combine the two previous approaches. They are for austerity and growth based on the creation of money. This orientation is probably the clearest expression of the impasse facing the bourgeoisie. And yet it’s what they’ve been doing for the last two years in Britain and what Monti, the new chief of the Italian government, is calling for there. This part of the ruling class reasons as follows: “if we make an effort to drastically reduce expenditure, the markets will regain confidence in the capacity of states to repay their debts. They will then lend to us as tolerable rates and we can again go into debt”. The circle is complete. This part of the bourgeoisie really thinks it can go back in time, to the situation before 2007-8.
None of these alternatives are viable, even in the medium term. They all lead capital into an impasse. While the creation of money by the central banks seems to lead to a bit of respite, the journey will still end up at the same destination: the historic downfall of capitalism.
Governments are more and more unstable
Capitalism’s economic dead-end inevitably engenders a historic tendency towards political crisis within the bourgeoisie. Last spring, in the space of a few months, we saw spectacular political crises in Portugal, the USA, Greece and Italy. In a more discreet manner, the same crisis is advancing in other central countries like Germany, Britain and France.
For all its illusions, a growing part of the world bourgeoisie is beginning to grasp the catastrophic state of its economy. We are hearing increasingly alarmist statements. As this anxiety, disquiet and even panic spreads amongst the bourgeoisie, they are beginning to go back to some of the old, rigid certainties. Each part of the bourgeoisie is fixating on the best way to defend the national interest, according to the economic or political sector it belongs to. The ruling class is coming to blows over the various hopeless solutions we looked at above. Each political orientation proposed by the government team provokes violent opposition from other sectors of the bourgeoisie.
In Italy, the total loss of credibility in Berlusconi’s ability to impose the austerity plans that are supposed to reduce public debt led the former president of the Italian Council to quit, following pressure from the “markets” and the main representatives of the eurozone. In Portugal, Spain and Greece, over and above the national specificities, the same reasons led to the hurried departure of the governments in place.
The example of the USA is historically the most significant. This is the world’s leading power. This summer, the American bourgeoisie was torn apart around the question of raising the ceiling on debt. This has been done many times since the 1960s without posing any major problems. So why this time did it provoke such a crisis that the American economy was a hair’s breadth from total paralysis? It’s true that a faction of the bourgeoisie which has acquired a growing weight in the political life of the US ruling class, the Tea Party, is totally irresponsible even from the standpoint of defending the interests of the national capital. However, contrary to those who would like us to believe it, it’s not the Tea Party which is the main cause of the paralysis of the American central administration but the open confrontation between the Democrats and the Republicans in the Senate and the House of Representatives, with each one thinking that the solution put forward by the other is catastrophic, suicidal for the country. This led to a dubious, fragile compromise, which will probably, only last a short time. It will be put to the test during the forthcoming elections. The continuation of the economic weakening of the USA can only fuel the political crisis there.
But the growing impasse of the present policies can also be seen in the contradictory demands that the financial markets are making on governments. These famous markets are demanding at one and the same time draconian plans of “rigour” and at the same time a revival of economic activity. When they start losing confidence in the ability of a state to repay significant parts of its debt, they quickly raise the interest rates on their loans. The end result is guaranteed: these states can no longer borrow on the markets. They become totally dependent on the central banks. After Greece, the same thing is beginning to happen for Spain and Italy. The economic noose is tightening on these countries, adding more fuel to the political crisis.
The attitude of Cameron at the last EU summit, rejecting the same budgetary and financial discipline for everyone, spells the eventual end of the line for the Union. The British economy only survives thanks to its financial sector. Even thinking about controls over this sector is out of the question for the majority of British Conservatives. Cameron’s position has led to conflicts between the Tories and the Liberal Democrats, making the governing coalition weaker than before. It has also sharpened dissensions in Wales and Scotland over the issue of belonging to the EU.
Finally, a new factor favouring the development of the political crisis of the bourgeoisie has raised its head in recent debates. An old demon, held in check for a long time, is now straining at the leash: protectionism. In the USA and the eurozone, many conservatives and populists of right and left are calling for new customs barriers. For this part of the bourgeoisie, which is now being joined by a number of “socialists”, the way forward is to reindustrialise your country, to “produce nationally”. China is already protesting against the measures that the USA has taken towards its imports. In Washington itself there is still much tension over this question. The Tea Party but also a significant part of the Republican party are pushing these demands to the limit, forcing Obama and the Democrats (as with the question of the debt ceiling) to dub these sectors as locked in the past and as irresponsible. This phenomenon is only just beginning. For the moment, no one can foresee how far it’s going to go. But what’s certain is that it will have an important impact on the coherence of the bourgeoisie as a whole, its ability to maintain stable parties and government teams.
However we look at this crisis within the bourgeoisie, it can only go in one direction, towards the growing instability of governing teams, including those in the leading powers of the planet.
The bourgeoisie divided by the crisis but united against the class struggle
The proletariat cannot celebrate the political crisis of the bourgeoisie in itself. Divisions and conflicts within the ruling class are no guarantee of success for its struggle. All proletarians and above all the young generations of the exploited need to understand that, however deep the crisis within the bourgeoisie, however acute its internal faction fights, it will always unite against the class struggle. This is known as the Sacred Union. This was the case during the Paris Commune of 1871. Let’s remember how the Prussian and French bourgeoisies managed to unite in time to crush the first great proletarian uprising in history. All the big movements of the proletarian struggle have come up against this Sacred Union. There is no exception to the rule.
The proletariat cannot count on the weaknesses of the bourgeoisie. Political divisions within the enemy class don’t guarantee its victory. It can only count on its own forces. And we have been seeing these forces emerging in a number of countries recently.
In China, a country where an important part of the world working class is now concentrated, struggles are taking place almost daily. There are explosions of anger involving not only the wage workers but the more general impoverished population, such as the peasantry. Miserable wages, unbearable working conditions, ferocious repression... Social conflicts have been developing, notably in the factories where production is being hit by the slow-down in European and American demand. Here in a shoe factory, there in a factory in Sichuan, there at HIP, a subsidiary of apple, at Honda, Tesco etc. “There is a strike almost every day, said labour rights activist Liu Kalming.”2 Even if these struggles remain, for the moment, isolated and without much perspective, they show that the workers in Asia, like their class brothers and sisters in the West, are not ready to just knuckle down and accept the consequences of the economic crisis of capital. In Egypt, after the big mobilisations of January and February 2011, the feeling of revolt is still very much alive in the population. Generalised corruption, total impoverishment, the political and economic impasse, have pushed thousands of people onto the streets and the town squares. The government, currently led by the military, responds with slander and bullets, a repression made all the easier by the fact that, unlike last year, the working class has not been able to mobilise itself en masse. For the bourgeoisie this is where the danger lies: “you can understand the army’s anxiety about the insecurity and social turbulence that has developed in the last few months. There is a fear of the contagion of strikes in the enterprises where the employees are deprived of any social and union rights while any protest is seen as a form of treason” (Ibrahim al Sahari, a representative of the Centre of Socialist Studies in Cairo3).
Here it’s said clearly: what the bourgeoisie fears is a workers’ movement developing on its own class terrain. In this country, democratic illusions are strong after so many years of dictatorship, but the economic crisis can limit their impact. The Egyptian bourgeoisie, whatever faction is in government after the recent elections, cannot prevent the situation from worsening and the unpopularity of the government from growing. All these workers’ struggles and social movements, despite their limitations and weaknesses, express the beginnings of a refusal, by the working class and a growing part of the oppressed population, to passively accept the fate reserved for them by capitalism.
The workers in the central countries of capitalism have also not been inert in the last few months. On 30th November in Britain, two million people came onto the streets to protest against the permanent deterioration of their living conditions. This strike was the biggest for several decades in a country where the working class, which in the 1970s was the most militant in Europe, was crushed under the heel of Thatcherism in the 1980s. This is why seeing two million people demonstrating on the streets in Britain, even though it was a sterile, union controlled “day of action”, is a very significant sign of the revival of working class militancy on a world scale. The movement of the “Indignados”, especially in Spain, has shown in an embryonic way what the working class is capable of. The premises of its own strength appeared very clearly: general assemblies open to everyone, free and fraternal debates, the attempt to take charge of the struggle by the movement itself, solidarity and self-confidence (see the numerous articles about these movements that we have published on our website4). The ability of the working class to organise itself as an autonomous force, as a unified collective body, will be a vital element in the development of massive proletarian struggles in the future. The workers of the central countries, who are best placed to unmask the democratic and trade union mystifications which they have faced for decades, will also show the proletariat of the world that this is possible and necessary.
World capitalism is in the process of collapsing economically, and the bourgeois class is being more and more shaken by political crises. Every day, it becomes a little clearer that this system is totally unviable.
Counting on our forces also means knowing what we lack. Everywhere a movement of resistance against the attacks of capitalism is being born. In Spain, in Greece, in the USA, the criticisms coming from the proletarian wing of this movement are directed against this rotten economic system. We are seeing the beginnings of a rejection of capitalism. But then the key question is posed to the working class. We can see the necessity to destroy this system, but what are we gong to put in its place? What we need is a society without exploitation, without poverty and war. A society where humanity is at last united on a world scale and no longer divided into nations or classes, no longer separated by colour or religion. A society where everyone will have what they need to fully realise themselves. This other world, which has to be the goal of the class struggle when it launches its assault on capitalism, is possible. It is the task of the working class (those at work, the unemployed, future proletarians still in education, those who work behind a machine or at a computer, manual labourers, technicians, scientists etc) to undertake this revolutionary transformation and it has a name: communism, which obviously has nothing in common with the hideous monstrosity of Stalinism which has usurped the name! This is not a dream or a utopia. Capitalism, in order to develop itself, has also developed the technical, scientific and productive means which will make a world human society possible. For the first time in its history, society can leave behind the realm of scarcity and reach the realm of abundance and of respect for life. The struggles which are developing now all over the world, even if they are still very embryonic, have begun to re-appropriate this goal under the lash of a failing social order. The working class carries within itself the historic capacity to reach this goal.