Economic Crisis

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.

The dramatic worsening of the world economic crisis over the summer gives us a clear indication that the capitalist system really is on its last legs. The ‘debt crisis’ has demonstrated the literal bankruptcy not only of the banks, but of entire states; and not only the states of weak economies like Greece or Portugal but key countries of the Eurozone and on top of it all, the most powerful economy in the world: the USA.

July and August were marked by some stunning economic developments. We saw a general panic involving governments, politicians, central banks and other international financial bodies. The masters of this world seem to have totally lost it. Every day, there were new meetings between heads of state: G8, G20, the European Central Bank the US Federal Bank....there were all kinds of ad hoc, improvised declarations and decisions, but none of them stopped the world economic crisis continuing its catastrophic progress.

After negotiations with the EU, IMF and the European Central Bank, the Greek government got parliamentary backing for a further array of austerity measures. The responses to the blows from the economic crisis and the attacks by the state have varied.

In a few days at the end of June a range of High Street names showed what effect the continuing crisis is having. Thorntons is closing 120 and maybe up to 180 shops. Carpetright is closing 94 stores. Jane Norman is shutting 33 shops. TJHughes is looking at going into administration. Habitat is going into administration and closing most of its shops. Clinton Cards is to be restructured. Lloyds TSB is cutting another 15,000 jobs, making more than 40,000 since 2009. Inflation is running at 4.5% (5.2% on the higher RPI measure), there’s a public sector pay freeze, the state pension age is rising. Council workers in Southampton, Shropshire and Neath Port Talbot have faced the ‘choice’ of pay cuts or job losses.

This article has already been published on our site here.

Everywhere it’s been shouting from the rooftops, on the TV, the radio, in its newspapers and journals: Look: there it is – a light at the end of the tunnel! So, do these gleams of light announce an imminent resurrection of the economy? Or is this the classic hallucination of a dying creature?

The capitalist crisis continues to deepen despite increasingly desperate proclamations to the contrary. Nestled behind the claims of recovery, class conflict and internecine bourgeois rivalries threaten to tear the social landscape of capitalist society apart. For all of the grandstanding and optimistic rhetoric, there is a noticeable silence about even the possibility of rolling back of austerity measures.

The weakest of the super-indebted national economies must be rescued before they go bankrupt and ruin their creditors; austerity plans designed to contain the debt only aggravate the risk of recession and a cascade of bankruptcies; attempts at recovery by printing money merely re-launch inflation. There is an impasse at the economic level and the bourgeoisie is incapable of proposing policies with the slightest coherence.

Revolt is contagious, above all when more and more of the world’s population are facing a future of misery thanks to the deepening of capitalism’s economic crisis. The ruling class has no real control over the crisis and is becoming increasingly concerned about the growth of resistance to its austerity plans. This concern is manifested in two ways: the attempt to make concessions and ‘democratise’ its rule, coupled with the strengthening of its whole apparatus of repression.

The attacks we face are class-wide, across the board, attacks on the young, but also on pensions, job losses in the public and private sector, attacks on benefits for the unemployed and the sick, but also benefits needed by families in work (child benefit, Sure Start grants, housing benefit). They are attacks orchestrated by the state on behalf of the entire capitalist class. And they aren’t going to stop – capitalism is in an impasse and can only come back for more attacks again and again.

At the very moment that Ireland was negotiating its rescue plan, the International Monetary Fund admitted that Greece would not be able to fulfil the plan that they and the European Union devised in April 2010. Greece’s debt would have to be restructured, even if they didn’t use this word. According to D. Strauss Khan, the boss of the IMF, Greece must be allowed to repay its debt not in 2015 but in 2024. That is, on the Twelfth of Never, given the course of the present crisis in Europe. Here is a perfect symbol of the fragility of some if not most European countries undermined by debt.

When we are taking part in demonstrations, whether local rallies or big national marches, let’s use them to make links between different centres of resistance, different sectors of the working class. Let’s organise our own street meetings where instead of listening to celebrity speakers we can freely exchange experiences from our own struggles and prepare for the battles of the future. Let all those who stand for independent, self-organised workers’ struggles use them as an opportunity to meet up and decide on how to connect to wider numbers of their class.

The shock contraction of 0.5% in the last quarter of 2010 has been somewhat unnerving for British capitalism. Labour immediately seized on the figures as evidence that the Coalition cuts agenda was ill-advised and risked tipping the economy back into recession. Chancellor Osborne responded by saying that backing down on cuts would create worse turmoil in the markets and weaken the economy further.

At the time of writing, the social situation in Egypt remains explosive. Millions of people have been on the streets, braving the curfew, the state regime and its bloody repression. At the same time the social movement in Tunisia has not gone away: the flight of Ben Ali, the government reshuffle and the promise of elections has not succeeded in damping down the deep anger of the population. In Jordan thousands of demonstrators have expressed their discontent with growing poverty. In Algeria the protests seems to have been stifled but there is a powerful international black-out and it seems that there are still struggles going on in Kabylia.

A tide of revolt is sweeping through Tunisia, Egypt, Algeria, Jordan, and Yemen. The Syrian regime has cut off the internet in fear that the contagion will spread to them. These are not Islamist movements, as apologists for Mubarak have been claiming. The whole population has taken part, irrespective of their exact stance on matters of religion. In Egypt thousands defied the instructions of their imams not to go onto the streets; there have also been examples of a conscious rejection of sectarian divisions between Muslims and Christians, in a country where the latter minority has been subjected to massacres very recently.

For several weeks now we’ve seen an uprising in Tunisia against the misery and unemployment which is particularly hitting the young. All over the country, street demonstrations, meetings, strikes have spontaneously broken out protesting against the regime of Ben Ali. The protestors are demanding bread, work for the young and the right to live in dignity. Faced with this revolt of the exploited and youth deprived of a future, the dominant class has responded with a hail of bullets.

The bourgeoisie’s calls for sacrifice are heard more thoroughly and the recent mid-term elections have potentially provided the bourgeoisie with the political pieces necessary to institute a harsher round of austerity. This article will turn its attention towards the elements of austerity that the working class are faced with today and try to present these elements within a historical framework of global capitalism’s permanent crisis.

It's not for fun that the capitalists refuse to exploit a growing number of workers or to carryon exploiting the old ones.