Since the spring, the world economy has been the victim of a series of financial tremors: whole states, and some of the developed world's biggest companies, have gone bankrupt, the stock exchanges have rarely been so unstable and fragile. The bourgeoisie's clever economists have trotted out a whole list of explanations for this avalanche of problems: they have 'denounced' the disastrous policies of the IMF, pouring oil on the fire as it came to the 'rescue' of countries in difficulty, the scandal of stock-options encouraging stock market fiddling on a grand scale, the headlong flight into financial speculation and debt by companies, etc.
Obviously, there is a tangible reality to all these elements of capitalism's functioning. But however 'critical' these economists may be of 'bad management', they remain the spokesmen of the ruling class, spreading the illusion that there are remedies to be found. But while their cures may prolong the life of a dying patient, they will never cure it of its mortal sickness.
In fact, we have entered a new phase of capitalism's open recession, which is nothing other than an expression of its historic crisis. The bourgeoisie's pessimistic forecasts for future growth are - with a large degree of understatement - an expression of this reality.
The world proletariat at the heart of the economic storm
The coming recession threatens to be both long and profound. The world working class will bear the cost, in terms of large-scale redundancies and falling wages. The attempts by shaky companies to reduce their debt can only lead to reductions in investment and in wage costs. Stronger companies - whether in the private or the state sector - will inevitably adopt the same measures in order to preserve their own financial health.
The last 18 months have seen repeated announcements of substantial redundancies in every sector of the economy and every size of company. A few figures illustrate the extent of the economic disaster: Hewlett-Packard has cut 4,770 jobs and is preparing for 15,000 lay-offs; Nortel has laid off 59,000 workers since December 2000, and is preparing to sack 7,000 more in one go; WorldCom will lay off 17,000 employees. By themselves, these are only examples: the full extent of the recession is far greater.
We can therefore expect an increase in the rise of unemployment, already revealed in this year's statistics despite the systematic fiddling that these are subjected to by the ruling class, in order to make workers believe that things are not really as bad as they can sense that they are in their own daily lives.
We are at the beginning of a period of brutal attacks on workers' living conditions, and not just in terms of unemployment. Employee shareholding in large companies, and shares-based retirement plans, will become important factors in the pauperisation of the working class. The collapse in share prices has wiped out workers' savings and pensions. The collapse in Vivendi Universal's share price (-70% since January) has affected the savings accumulated by 160,000 employees over as much as 20 years for some. For pensioners, the situation is even worse, especially (but not only) in the US: WorldCom's pension plan has lost 90% of its value.
An unprecedented plunge into economic crisis
The last months' economic tremors did not come out of a blue sky. They represent an acute episode in a 'creeping' - but nonetheless violent - stock exchange crash that has been going on for the last two years: since summer 2000, Europe's stock exchanges have halved in value, while New York's technology stock index has fallen from 5300 to 1300. The US Federal Reserve started the movement in order to put the brake on a speculative frenzy that threatened to run out of control. The crash has been accelerated this year by a series of bankruptcies and the subsequent discovery of financial fiddling on a grand scale in some of the world's most powerful companies. By July 2002, $6.7 trillion had gone up in smoke. Capitalism is balancing on a mountain of debt
In the final analysis, indebted companies can only survive to the extent that they are able to honour their commitments and pay back their debts. This they are finding more and more difficult as it becomes more and more difficult to achieve sufficient sales on the market.
In many cases they have only been able to borrow on the strength of their stock market valuation, seen as a guarantee of the banks' confidence in their health. In order to improve their share value, companies became less and less scrupulous in the dodges they used. Some sold capital just before the year's financial statement in order to show an increase in cash flow� only to buy it back again immediately afterwards. Others, more pragmatically, simply faked the accounts. Today, such 'immorality' on the part of CEO's is the target of outraged denunciation by the media, under orders from the bourgeois state. The cheating that they pretend to discover today was an open secret that served the interests of the whole bourgeois class as long as everything was going ok. It's common practice to find a few scapegoats for the fundamental failings of a system, which only survives by systematic cheating - above all by those self-same states. States are the greatest speculators, and stock market speculation is only a consequence of the crisis of over-production. The less attractive the productive sector becomes for investors, with low and uncertain returns, the more they turn to speculation, which is equally uncertain but which offers higher returns.
Debt can never be a real solution to the world crisis. This was demonstrated at the beginning of the year by the sudden bankruptcy of hyper-indebted countries like Venezuela and Argentina.
The collapse this August of the Uruguayan banking system, and worse still the financial crisis in Brazil, have once again shown that these countries still survive only thanks to massive and repeated injections of dollars, whose interruption inevitably drops them into economic chaos at the mercy of the upheavals of the stock exchange. The only 'cure' able to prevent a total rout in Brazil - an economically central country - was a $30 billion 'recovery plan', in other words a new plunge into still more debt which may put off the day of reckoning but can only make it more painful.
The most developed countries are also in debt, and so confronted by the same contradictions that have turned a country like Argentina into an industrial desert. While their greater strength means that they are not about to go the same way as the latter, these contradictions are going to become an ever more devastating social scourge.
The spectacular financial convulsions of 1987-88 and 1997-98 (the crisis in South East Asia) were comparatively brief and limited in extent, because they occurred at a time of relative (though drugged) economic growth, which the bourgeoisie was still able to maintain. Today's collapse on the world's stock markets and among its biggest companies comes at a time when the world economy is in open recession. Inevitably, this will seriously affect their ability to confront the problem.
Intervention by the state
This does not mean that the state is completely impotent, but its measures to soften the crisis can only aggravate the disease. Some members of the US administration envisage a recourse to budget deficits, which means nothing other than the state itself using debt to hold up an exhausted economy. After proclaiming the victory of 'economic liberalism' behind Reagan and Thatcher, as the only way out of the crisis in the 1980s and 90s, the bourgeoisie is now being forced to return to the 'old methods' of direct state intervention. The effects will be limited, but also damaging since the European states' budgets are already badly in deficit. It will only liberate the inflationary tendencies that they all fear.
While the present deepening of capitalism's crisis will not cause the system's complete collapse, or sudden blockage like that of 1929, the present crash demonstrates once again capitalism's utter bankruptcy as a social and economic system. It cannot be reformed or improved, contrary to what the trade unionists, leftists, and left parties of every description tell us. It cannot be reformed by better accounting methods or improved business morals, any more than by a struggle against globalisation.
The bourgeoisie has no solution to offer to the devastating consequences of its system's crisis. Witness the solution proposed by the 'humanitarians' appointed by our exploiters to handle the monstrous growth of poverty, for example in the one-time Latin American 'miracles' where 44% of the population lives below the poverty line and unemployment has doubled in ten years: a 'new' method of economic exchange, barter. In other words, a return to prehistory and resigned acceptance of generalised poverty!
The working class is confronted by economic crisis and unprecedented attacks looming all over the world. It must become aware that it cannot remain passive and that it must develop its struggles. To fail to take the path of active and resolute resistance against a disintegrating capitalism, is to leave the bourgeoisie's hands free, and to open the road to the unlimited exploitation of the workers and to the unleashing of chaos over the whole planet.