In 2007, when the debt bubble burst, it was the big banks that were on the verge of collapse. They only kept going thanks to massive infusions of credit from the treasuries of the world’s states. This was done not because governments do what the greedy bankers tell them to do, but because the capitalist system could not tolerate the implosion of its global financial machinery.
But the bail-out of the banks did not solve capitalism’s problems. On the contrary: in the space of a few years we have gone from the bail out of banks to the bail out of entire states. First Greece, then Ireland, then, in April 2011, Portugal. Unable to meet its sovereign debt obligations, Portugal has had to appeal to the European Union to rescue it to the tune of 80 billion euro. Speculation is rife about who will be next: the most likely candidate is Spain, but Britain, whose government is taking desperate preventive action with its programme of savage cuts, looks equally shaky in the eyes of the world’s economic think-tanks. The need to keep the weaker members of the EU afloat is putting an enormous strain on the stronger economies, like Germany, and is threatening to undermine the stability of the euro and of the EU itself. And it’s not just in Europe: Japan, whose national debt is twice the size of its GDP, and even the mighty USA, are heading in the same direction. A spokesman for the International Monetary Fund, Jose Vinals, recently expressed the view that US government bonds are no longer without risk. And who will bail out the USA if it too defaults on its gigantic debts?
There could hardly be a more graphic illustration of the bankruptcy, not of this or that company, this or that country, but the entire capitalist system. In an article in this issue, ‘The demise of credit’ we look at the causes of the present world economic crisis, which has opened up a new chapter in the long historical decline of the capitalist system. It is vital to understand that the capitalist system has no route out of this crisis, not least because it means that the capitalist class, whatever the country and whatever the shade of government, has no alternative but to attack the living standards of the vast majority of us, to force us to accept austerity, poverty and sacrifice – not because they are ‘ideologically driven’, but because they are driven by the very material needs of a dying system of production.