Economic Crisis

On the morning of Saturday 16 March, the radio informed the million inhabitants of the island of Cyprus that a European aid plan had been agreed for the country that included the introduction of a tax of 6.75% on bank deposits up to €100,000 and 9.9% for deposits above that amount. Obviously, everyone rushed to the banks to withdraw their money. In vain!

The average worker has lost around £4,000 in real wages over the past three years. In 2017, real wages are predicted to be no higher than their 1999 level. And although there has recently been a 7.8% fall in official unemployment figures, there has been an increase in involuntary part-time working and a sharp drop in productivity.

According to the TUC’s pamphlet ‘A future that works’, to the Labour party, to François Hollande in France, to the whole ‘left’, the present economic crisis is the fault of the bankers and need never have happened; but then again, getting into debt isn’t as bad as all that and by using a bit more of it we can grow the economy out of the recession. We want to argue against all these ideas, not from a conservative point of view, but from a revolutionary one.

This is a leaflet produced by our section in Spain to denounce the ruthless attacks on working class living conditions now underway in that country. It’s also an analysis of the situation which tries to make proposals to take the struggle forward.

pdf leaflet

The acronym "BRICs" refers to the four countries whose economies have been most successful in recent years: Brazil, Russia, India and China. But as with Eldorado, this good health is more myth than reality.  All these "booms" are financed largely by debt and end up, like their predecessors, sinking into the horror of recession. Furthermore, that ill wind is upon us right now.

Since last April, a tempest of the same nature as the one initiated by the “Arab Spring”, which itself encouraged a multitude of mobilisations of  “indignant” populations all over the world blew over the Japanese archipelago. And as in a good number of these movements, we again see a real blackout of the bourgeoisie and its media. In Japan itself, outside of the areas where the discontent took place, there's an identical silence.

In the last week of June British banks again made headlines for their greed, dishonesty and incompetence. Politicians talked about the banking culture and how some aspects of it were ‘shocking’. What commentators, academics and other ‘experts’ never mention at such moments (and is the basis of any serious explanation of what is going on in the world) is that we all live in a class society; a society in which the ruling class exploits and controls the working class. The two classes, bourgeoisie and proletariat, stand opposed, each with its own interests and way of struggling.

According to Olivier Blanchard, chief economist of the International Monetary Fund, the Eurozone – and the world economy – are in a very dangerous place. In April Blanchard warned that if Greece pulls out of the euro “it is possible that other Euro area economies would come under severe pressure as well, with a full-blown panic in financial markets. Under these circumstances, a break-up of the euro area could not be ruled out. This could cause major political shock that could aggravate economic stress to levels well above those after the Lehman collapse.” Such a shock, indeed, could “produce a major slump reminiscent of the 1930s”

Since 2008, and the beginning of the present phase of the crisis, growing austerity has developed everywhere. This policy was supposed to reduce the debts and relaunch growth. And then, like a rabbit out of a magician's hat, a new alternative was flourished which was supposed to cure all ills. It was called recovery.  Why this sudden turnaround by the great majority of the leaders of the euro zone? What is the reality of this policy? Has generalised austerity finished? Will the crisis continue to deepen or not in the near future ?

After the replacement of President Sarkozy by Hollande in France, and the electoral slump of the parties of the outgoing Greek government, a commentator in the Guardian (8/5/12) was not alone in declaring that “Revolt against austerity is sweeping Europe.”In reality, whatever the level of dissatisfaction felt at election time, the ruling bourgeoisie will continue to impose and intensify its policies of austerity. Voting against governments can happen because of the depth of discontent, but it doesn’t change anything. For the working class it’s only through the mass organisation of its struggles that anything can be achieved.

After months of suspense, the verdict is in: Britain has suffered a double dip recession, after experiencing two consecutive quarters of economic contraction (0.2 per cent down in the first quarter of 2012, following a fall of 0.3 per cent in the last quarter of 2011).

The question of ‘the economy’ – that is, rising unemployment, debt and inflation, diminishing pensions and wages and so on, ad nauseam – was at the centre of the recent local government election campaigns in Britain, just it was in the French presidential elections and Greek parliamentary elections. All the parties who take part in these, and all other bourgeois elections, tell us to vote for them because they can deal with the economic crisis, while blaming the other parties for getting us into the crisis in the first place. They are all lying. Whatever policies they follow, this crisis can only get worse.

Over the last decade or so, the proletariat in China, and the rest of East Asia  have all been involved in a wave of strikes and protests against capitalist exploitation. It's China we want to concentrate on here and to do so we will largely use the information given by the China Labour Bulletin (CLB), the publication of a non-governmental organisation based in Hong Kong which promotes the idea of a “fairer” Chinese state,  advocating its adoption of “Free Trade Unions”. Ideas which we do not support.

In March, David and Samantha Cameron were received by Barack and Michelle Obama in the White House and accorded a status almost equal to that of a visiting head of state (including a 19 gun salute - just two short of that accorded to a head of state). A few months before Cameron was publicly snubbed by Sarkozy after opposing changes to the EU designed to tackle the economic crisis. To many this showed that the Euro-sceptics now control the Tories and that the ‘special relationship’ is alive and well. In fact, the situation is more complex than this description would suggest.

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.

The government’s change on the rules for its work experience scheme was marked in a Guardian headline as a “U-turn”. Brendan Barber, the TUC General Secretary, described it as a “climbdown” and Socialist Worker called it a “retreat”. In the Guardian’s small print the new emphasis on ‘voluntary’ rather than ‘mandatory’ is described as a “relatively minor concession” and all those campaigning against the government’s schemes are well aware that sanctions for refusing work placements are still in place for Mandatory Work Activity and the Community Activity Programme.

This is an extract from a text prepared for a recent internal meeting of the ICC’s section in Britain. The article clearly shows the increasing level of attacks that workers are faced with.

The working class in Greece is being subjected to another vicious round of assaults on its living standards. But it is not alone. On the day this article was written (18/2/12) there were demonstrations in dozens of locations across Europe, and as far away as New York. With slogans such as “We are all Greeks now”, “In solidarity with the Greek people, One world, One revolution” and others, the demos expressed a basic solidarity, and an elemental acknowledgement that there are no national struggles in the epoch of a global capitalist crisis.

The workers at the general hospital in Kilkis in Greek Central Macedonia recently occupied their hospital and declared it to be running under their control. Here is the public statement they issued on 4 February.

We are publishing a statement by the occupation of the Athens Law School. This seems significant because it directly attacks all nationalist and state capitalist ‘solutions’ to the debacle of debt in Greek, which it correctly identifies as an expression of capitalism’s global crisis. Such positions no doubt reflect the views of a minority in the present social movement, but it seems to be a growing minority.

The pundits of the bourgeoisie include China in their collection of economic ‘powerhouses’ known as the “BRICs”. This also includes Brazil, Russia and India, which are all supposedly going to be the salvation of crisis-ridden capitalism. In an ominous development for the Chinese economy – and for capitalism more generally – there is a massive building boom/bubble swelling up which, like those in the USA, Ireland, Spain and elsewhere, can only burst, with dire consequences. Alongside this there are thousands and thousands of reported “incidents” of strikes and protests in the cities, along with unrest in the countryside which are growing in number and intensity.

After a miserable 2011, characterised by rising unemployment, inflation and increased hardship for workers everywhere, most people were probably hoping that 2012 would offer some hope for improvement or at least some relief from the relentless assaults on living standards.

In the last few months, the world economy has been going through a disaster which the ruling class has found it harder and harder to conceal. The various international summits aimed at ‘saving the world’, from G20s to endless Franco-German meetings, have only revealed that the bourgeoisie is powerless to revive its system. Capitalism has reached a dead-end. And this total lack of any solution or prospects is beginning to stir up tensions between nations, as we can see in the current threats to the unity of the Eurozone and even to the European Union itself, and within each country, between the various bourgeois cliques who make up the national political panel. Serious political crises have already broken out.

The global economy seems to be on the brink of the abyss. The threat of a major depression, worse than that of 1929, looms ever larger. Banks, businesses, municipalities, regions and even states are staring bankruptcy in the face. And one thing the media don’t talk about any more is what they call the “debt crisis”.

There was a time, not so long ago, when revolutionaries were greeted with scepticism or mockery when they argued that the capitalism system was heading towards catastrophe. Today, it’s the fiercest partisans of capitalism who are saying the same thing. It’s not with any joy in their hearts that these defenders of capitalism are admitting that their idol is on the way out. They are obviously shattered by this, all the more so because they can see that the solutions being put forward to save the system are unrealistic. As the journalist reporting Jean-Pierre Mustier’s words put it: “as for solutions, the cupboard is bare”. And with good reason!

If Greece was to default on its loans it would have a widespread impact way beyond its national frontiers. Effectively Greece has already been excused billions. It has been agreed that Greece’s creditors will annul 50% of what’s owed to them, effectively wiping out 106 billion euros at a stroke. This was presented as a ‘haircut’. Capitalism doesn’t have any solutions to its historic crisis, only deepening austerity. None of the alternative measures proposed by different factions of the bourgeoisie offer the prospect of a revival in the economy.

Resistance against the present social order is spreading, from the huge social revolts in Tunisia and Egypt to the movement of the ‘indignant’ in Spain, to the general strikes and street assemblies in Greece, the demonstrations around housing and poverty in Israel, and the ‘Occupy’ movements across the USA, now echoed on a smaller scale in the UK. Awareness that this is a global movement is becoming sharper and more widespread.

The events of July and August all came in such rapid succession that the ruling class seemed dizzied by their speed and depth: the debt-ceiling crisis, the downgrading of the U.S. creditworthiness from AAA to AA+ by Standard & Poor, the plunges and volatility on the stock markets, the news of the insolvencies of countries like Spain and Italy and the impasse at the IMF over what to do, the flight of capital away from U.S. Treasury bonds to gold. The ruling class is running out of arguments with which to reassure an ever more uncertain working class with hopes for a better future. To add insult to injury, its options about how to address an ever-aggravating economic crisis are also wearing thin. What is going on?

The declarations made by London trader, Alessio Rastani, are feeding one of the biggest lies of recent years: that the planet is in trouble because of finance, and only because of finance: “It’s Goldman Sachs that rules the world”. And all the voices of the left, of the extreme left, of the ‘anti-globalisation’ brigade join in this chorus. The real truth is that crisis lies at the heart of capitalism itself.

“Christine Lagarde, head of the International Monetary Fund, said the economic situation was entering a ‘dangerous place’. Earlier, the president of the World Bank, Robert Zoellick, said the world’s economy was ‘in a danger zone’. The comments came after the Federal Reserve warned that the US economy faced ‘significant downside risks’."Last week, this grim chorus from three of the most powerful economic organs in the world sent the markets into yet another tailspin, compounding a summer already punctuated by volatile market swings.