The crash: When the debts have to be paid
What point has the crisis reached?
The crash: When the debts have to be paid
Some weeks after 1929's famous "Black Thursday", the USA's President Hoover declared: "Prosperity is awaiting us just around the corner". We know what followed: the dark years of the 1930's, the crisis that was never overcome, and in the end, the world war. Thirty years later, the reassuring statements on the health of the world economy no longer reassure anyone. While the powers that be remain obsessedwith the need to "reassure", a new and extremely serious step forward in theworld recession is considered inevitable, even by the most optimistic. The veryday that the USA, through its famous spokesman Reagan, announced, to calmthings down ("reassure the markets" as the specialist press puts it), that itwas ready to reduce the budget deficit by several billion dollars, a study bythe renowned and powerful Morgan's Bank published an analysis forecasting acoming recession "three to four times more destructive than that of 1981/82".Already in 1981/82, unemployment rocketed in the developed countries, while theothers were plunged in misery. If we bear in mind the wounds inflicted onmankind's social body by the recession of 1981/82, this kind of perspectivegives food for thought. Let there be no mistake: the October 87 stock marketcrisis is only the foam on the waves, the forewarning of a fantasticallypowerful tidal wave, whose consequences it is still hard to measure.
Amuch more serious situation than in the 30's
It is only natural that thelatest quakes in the international financial system should call to mind thecrisis of the 1930's, and by analogy the stock market crash of 1929. But overand above immediate appearances, the historical situation is radicallydifferent today, and any comparison of the two periods only highlights, fromthe strictly economic viewpoint, the seriousness of the present situation.
As at the end of the 20's, thestock market crisis was preceded by an orgy of speculative drunkenness, wheremoney and profit seemed to engender themselves in an infinite spiral. All thecapital and social savings, whose thirst for profit could not be slaked bytraditional markets and industry, were sucked into an unprecedentedspeculation. As in 29, tine speculative bubble burst at the first sign of arecession, and again as in 29, the stock market crisis was triggered by a withdrawal of European capital, marked in 1929 by arise in the Bank of England's base rate and in October 87 by a rise in WestGerman interest rates.
This is where any resemblancebetween the two situations stops.
It is true that the 1929 crashdid not come out of the blue. It matured slowly throughout a period of chronicover-capacity in traditional industries like the railways, the mines, coal, andtextiles, and of a constant drop, between1920 and 1929, in workers' andfarmers' buying power. But alongside these sectors, the years before the crashwere highly prosperous for new and increasingly powerful industries like thecar industry, steel, electricity, gas, and oil.
In 1929, the stock market crashdid indeed open up the economic crisis. Today, crash follows crisis. And infact, the financial speculation at the origin of the crash only lasted for ayear. Simply from the standpoint of speculation, which reveals profit-seekingcapital's flight from the sphere of production, the speculation preceding theOctober 87 crisis is not a recent phenomenon, lasting one year as in 1929.Today, speculation has been for years an integral part of capitalist activity,and as such expresses all the difficulty capitalism has in valorizing itself inthe productive sphere.
Speculation has been going onfor 10 years, although a mounting crescendo did precede the delirium of 1986.Speculation on futures prices of raw mateials like oil in the 1970's;speculation on currencies like the dollar at the beginning of the 80's;speculation through company takeover raids for the last two years....
The fact that capital, after itsflight en masse from the sphere ofindustrial production, has been tracked down and trapped in the stock exchangetemples, where it has been barricading itself these last years, feverishly seeking refuge in financial speculation,shows, not that the economic crisis is born of the stock market crash but thereverse. And, above all, it reveals the depth of the contradictions that areundermining capitalist relations of production.
The relationship between themovement of trade and of capital is a sign of this reality:
"Capital movements have grown out of all proportion to those ofcommodities: the ratio is 50:1, since to every $5 billion of daily commercial trade, there correspond $200 billion ofinternational capital transfers" ("Dossiers et Documents", Le Monde, November 87)
Today's crisis is more seriousthan that of 1929 because of the greater weight of accumulated contradictions,but also and at the same time, because all the remedies intended to confront orat least to get around it, have been worn to the bone. Just as, contrary to1929, the present crash has been long preceded by the crisis (a historical signof the present situation's gravity), so the same is true of the economicpolicies aimed at confronting this historic crisis of over-production. The NewDeal, state construction projects, reflation through consumption and inflation,in fact everything that is referred to under the heading of Keynesianism -- ie,the state's increasing intervention in the economy, the development of statecapitalism -- are no longer ahead of us, but behind us. The present crisis ismore serious than that of 1929 not only because the mass of accumulatedcontradictions is greater, but because the means adopted to confront, or atleast avoid it, are worn out.
Financial manipulation hasalways been an essential tool of these policies. Today, after years ofexcessive credit, inflation, deficits and speculation, the internationalfinancial system cannot take any more: its very foundations are rotten withdebt, and closer to collapse with each passing day.
Nor would this sketch becomplete if we did not consider the questions of the budget deficit and thearms policy linked to it.
Here again, contrary to the1930's when the still relatively healthy condition of state treasuriesnourished on years of prosperity made possible an illusion of reflation thanksto huge arms production, today it is arms production, which ever since WorldWar II has absorbed a major part of society's creative power, which is one ofthe major causes of national budget deficits, especially in the USA and USSR,and so acts in the present historical situation as an important accelerator onthe world economic crisis (see the article on "War, Militarism..." in thisissue).
The whole world bourgeoisie,especially in Europe, points an accusing finger at the US budget deficit. Andyet the US budget deficit's underlying cause is this gigantic military effort,which nobody opposes, but which all the world bourgeoisie's grumble about paying.
There is no getting around thesefacts, which is why the European bourgeoisie's recriminations are condemned toremain mere gesticulation; essentially they will end up, as usual, signing onthe dotted line. They can't have their cake and eat it.
Whichever way it turns, fromWashington to Moscow, from Peking to Paris, from Tokyo to London, worldcapital is in a jam.
Theperspective of a major acceleration of the world recession
The economic history of the lasttwenty years is nothing other than the history of the world capitalisteconomy's race towards its present dead-end. Several phases can bedistinguished in the period running from 1968 to the present day:
"With the definitive end of the mechanisms of reconstruction in themid-sixties, western capitalism has had to adapt itself to a life of perpetualdownward swings whose scope is increasingly large and violent. Like an enragedanimal striking its head against the bars of its cage, western capitalism hasmore and more violently come up against two dangers: on the one hand deeper anddeeper recessions and on the other hand more and more difficult andinflationary recoveries. The graph (...) which traces the evolution of thegrowth in production for the seven major powers of the western bloc (the US,Japan, West Germany, France, Great Britain, Italy and Canada) shows how theseswings have been more and more drastic, ending in the striking failure ofreflationary policies from 1976 to 1979.
The major stages of thecrisis in the western economy since 1967 can be summarized as follows:
-- in 1967 slowdown in growth,
-- in 1968 recovery,
-- from 1969 to 1971 a new recession, deeper than 1967,
-- from 1972 to the middle of 1973 a second recovery breaking up theinternational monetary system with the devaluation of the dollar in 1971 andthe floating of the major monetary parities; governments financed the generalrecovery with tons of paper money;
-- at the beginning of 1973, the seven major powers had the highestgrowth rate in eighteen years (8-1/3 as an annual base in the first half of1973);
-- the end of 1973 to 1975 a new recession, the third, the longest anddeepest; in the second half of 1973 production increased at the rate of only 2%a year; more than a year later in 1975 it regressed at a rate of more than 4.3%a year;
-- 1976-79, third recovery; but this time despite recourse to theKeynesian policy of reflation through the creation of state budget deficits,despite the new market created by the OPEC countries which due to the rise inoil prices represented a strong demand for manufactured goods from theindustrialized world, despite the enormous deficit in the US balance of tradewhich due to the international role of the dollar, created and maintained anartificial market by importing much more than it exported, despite all thesemethods put into place by governments, economic growth after the economicrecovery in 1976 kept losing ground, slowly but surely..."
"It is clear that both the "budget deficit" remedy and the "US tradedeficit" remedy ("injecting dollars into the economy") have been administeredin massive doses over the past few years. The mediocrity of the resultsobtained proves only one thing: their effectiveness is steadily decreasing. Andthat is the second reason we foreseean exceptionally deep recession for the beginning of the 1980's". (International Review no 20, 1st quarter1980)
These forecasts were made at thebeginning of the 1980's. They have been amply born out.
Today, after capital throughoutthe world has deserted the sphere of industrial production, throwing millionsof workers on the streets, in order to finance the Western bloc's arms effortby financing the US budget deficit, or to feed the speculation in the stockmarket, we have arrived at the present situation, where the deficits are socolossal and the financial machinery and monetary structures have become sofragile, where every branch of the economy -- whether it be agriculture, rawmaterials or manufacturing industry -- is so badly hit by over-production, thata new recession combined with a new period of inflation is inevitable.
The illusion of "liberalization"in the Eastern bloc no longer works: it is too obviously a mere ideologicalcover for a massive reduction in the cost of maintaining the labor force --wages, housing, health, transport.... The riots in Romania bear witness to anunbearable pauperization. The intolerable conditions of wartime are spreadingeverywhere under the pressure of the crisis: rationing and militarization....
What is the choice facing theWestern bourgeoisie, and its American band-leader in particular?:
-- either support the dollar bya policy of high interest rates, given the dollar's weakness they will have tobe correspondingly high, which implies an immediate recessionist storm in theUS, and by extension in the rest of the world;
-- or, let the dollar fallthrough a policy of low interest rates in order to support exports andproduction; this cannot help but provoke a tidal wave of inflation -- all thestronger in that markets and banks, and especially the state with its colossaldebt, are literally starving for lack of currency.
Although uncertainty reigns --and we can be sure that this uncertainty as to which direction to take isessentially due to the size and stubbornness of the problem rather than to anytactical attitude -- for the moment, it seems that the latter option has beenadopted: a fall in both interest rates and the dollar, and therefore in theshort term a policy of inflation. Political analysts attribute this to theelectoral situation in the USA where talk of recession is taboo. To a certainextent, this may well have an effect. But fundamentally, it must be admittedthat the world economy has no choice: room for maneuver is very limited.
Thus, although for the momentthe USA has adopted an inflationist policy, letting the dollar drop thanks tolow interest rates, the other alternative of deep recession is nonetheless onlytoo present. How long can the USA go on letting the dollar drop towards itsreal value?
During the last two years, wehave already seen that a 50% devaluation of the American currency has not madeit possible to correct the US balance of trade. Given the American economy'sdegree of competitivity and its accumulated deficits (ie, the basis of acurrency's value), the dollar is no longer worth very much and the USA cannotallow it to drop too near zero. Nor can they take the risk of this policyprovoking a collapse of the American banking system, already severely weakenedby the pressure of inflation.
Inflation and recession aretherefore immediate, joint, and inevitable perspectives.
In October 87, the gale of thefinancial crisis abruptly swept away the colossal bluff of the "American recovery",the "life-giving return to the fountain-head of market laws". The economicsituation has laid bare for all to see the world economy's total dilapidation.And what is true for the world economy is also true for the condition of theworking class, and especially for unemployment.
Following the unprecedentedexplosion of unemployment to an average 12% of the working population in theindustrialized countries, we have seen, alongside the bluff of the "Americanrecovery", a cosmetic job being done on the general state of what is called the"labor market". First of all in the US, where the pseudo-recovery wasaccompanied by a pseudo-fall in unemployment (though it never, even officially,returned to pre-1980 levels), what lay behind the official figures was anunprecedented pauperization of the working class and sectors of the middleclasses. In figures, jobs seemed to disappear at about the same pace as newones were created; but where once there had been skilled, stable, and more orless "well-paid" industrial employment, now there are unskilled, unstable"service" jobs, paid at half the previous wage. Such is the American miracle.
In Europe, we have been treatedto unbelievable contortions and manipulations of statistics to camouflage the"shame" of unemployment. Better still, the bourgeoisie has combined "the usefuland the agreeable" by creating jobs for young people that are supposedly"useful to the community" (in many European countries), paid four times lessthan the guaranteed minimum wage. As the present crisis develops, the pretenseof "good living conditions for the workers" is going to collapse as wretchedlyas the bluff of "the world economy's new-found health", to reveal the nakedtruth of poverty in this world. And with the new and powerful recessionarywave, this poverty is going to take an unprecedented step forward. Nobody canescape this truth: we can only accept it, and all its economic and militaryconsequences, or we can fight back. We need only remember the impact of the1981-82 recession to imagine the effects of a new recession on the still openscars of the old one.
The 1970's were years ofillusions; the 1980's have been years of truth, masked by an enormous bluff.The years to come will be years of truth that none can escape.
Animmense crisis of overproduction
Most people, if asked, wouldadmit to understanding nothing about the evolution, nonetheless only tooconcrete, of the world economic crisis. True, nothing is being done to helpthem -- and for good reason. But fundamentally, the reasons behind this crisis,which has gone on deepening for years, are much simpler to grasp than all thatis said about them might lead one to suppose. The crisis' very development alsohelps to clarify things.
The immediate cause behind thecollapse of the New York stock exchange, and of all the others in sympathy, wasthe fall of the dollar. At the root of the dollar's fall lie the US trade andbudget deficits. At the root of these deficits, lies world over-production. Thewidespread effect of the collapse is essentially due to the fact that the stockexchange was pumped up by speculation. The main cause of this speculative feverwas the flight of capital from the sphere of production, itself provoked byworld over-production.
Take the problem whichever wayyou like; you always end up with the same essential determining factor: worldover-production. And in the end, compared with the scale of the problemconfronting humanity, the crash of October 87 is a joke.
Society engenders povertybecause it produces "too much". What is expressed in this crisis ofover-production, which would have seemed absurd in other epochs, is the factthat today's so-called "modern" relations of production in reality belong tohuman prehistory. Anachronistic production relations dominated by productionfor profit and as a function of the market; characterized by the producers'separation from the productive forces, ie by the exploitation of labor, thedivision between intellectual and manual labor; production relations that determinethe world's division into nations, a division that ends up tearing humanityapart in world wars.
And what do the ruling classesask of us, in this crisis of over-production where nations confront each other,East and West, if not to serve as soldiers, first in the economic war, and thenin the final, definitive, total war?
From the capitalist viewpointthe overproduction crisis is the war of all against all, war in all its forms:first economic, then military. From our viewpoint -- the viewpoint of thefuture -- the crisis demands mankind's unification and the destruction of allfrontiers. Either we will be capable of setting in motion the vast project ofabolishing all separations, or we will go down the wretched road to the world'send.
Prenat : 30/11/87