Report on the economic crisis for the 24th Congress of the ICC

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This report follows on from the report adopted by the 24th Congress of RI.[1] Several aspects are adequately dealt with in that report, including the measures taken in the economic field in the face of the pandemic; the violent incursion of decomposition onto the economic terrain, and the attack on workers' living conditions becoming a real nightmare. We will not develop these elements but will concentrate on the perspective: where is the world economy heading after the great cataclysm that erupted with the Covid pandemic?

1. A widely predicted crisis

The Report on the economic crisis adopted by the 23rd ICC Congress announced that: “we must consider the possibility of significant shocks in the global economy in 2019-2020. Negative factors are accumulating increasingly uncontrollable debt; the trade war that is raging; sharp devaluations of overvalued financial assets; a -0.1% contraction of the German economy in the third quarter of 2018, with the Chinese economy falling to its lowest rate in the last decade.

For 2020, the World Bank recorded a global fall in output of 5.2%, which is 7% for the world's top 23 economies and 2.5% in the 'developing economies'. According to the World Bank, the fall in output is the worst since 1945 and "the first time since 1870 that so many economies have experienced a simultaneous fall in output".[2] A very important phenomenon is the fall in world trade. One indicator is the drop in world seaborne trade, which fell by 10% in 2020. But, paradoxically, "container prices have on average quadrupled in the last two months. From around $1,500 to almost $5,000. And in some cases, it has been as high as $12,000. This is because countries like China use their ships and containers for their own use, taking them away from global traffic.”[3]

For 2021 a rebound of the world economy is forecast; however, this would be on condition that the pandemic has been overcome by June 2021, otherwise the forecasts are much more pessimistic. There will be feverish increases in growth, but beyond that, we should consider that the most serious forecasts point to a stabilisation of the world economy from 2023 onwards. The experience of the post-2008 recovery is that it took a long time to take hold (from 2013 onwards), was rather anaemic and in 2018 showed signs of exhaustion. As we will see throughout this report, the current conditions of the global economy are much worse than in 2008, and, rather than making predictions, the important thing is to understand this significant deterioration.

On one hand, the 'experts' give a misleading picture of the effects of the pandemic crisis on the economy. They start from the axiom that such a crisis will not have irreversible effects on the economic apparatus and that the economy will recover at a higher level than in the previous period. Such an assumption underestimates the significant deterioration of the long-standing productive, financial and commercial tissue, which the pandemic crisis is likely to profoundly weaken. It is estimated that 30% of companies may disappear permanently in OECD countries. Behind us we have more than 100 years of capitalist decadence, with the economy deformed by the war economy and the effects of environmental destruction, profoundly altered in its reproductive mechanisms by indebtedness and state manipulations, eroded by pandemics, and increasingly affected by the effects of decomposition. In such conditions it is illusory to think that the economy will recover without the slightest scratch.

On the other hand, the profound weakness of the proclaimed 'recovery' of 2013-2018 already heralded the current situation. Outside the United States, China, and to a lesser extent Germany, production in all the major countries of the world has stagnated or fallen (according to World Bank estimates) - something that has not happened since the Second World War.

2. The irruption of decomposition on the economic terrain

Already at the 22nd Congress we noticed the growing impact of the effects of decomposition on the economic terrain and particularly on the state capitalist management of the crisis. We were aware of this tendency in the economic crisis report adopted by the 23rd Congress that noted this irruption of decomposition as one of the main factors in the evolution of the economic situation and, finally, the report on the crisis adopted by the 24th Congress of RI deepened this analysis and focused on the pandemic in a double sense: as a result of decomposition and of the aggravation of the economic crisis, but at the same time a powerful factor in the acceleration of the latter.

It’s important to underline our approach to the question: one of the features of decadence is that the capitalist system tries to stretch all the possibilities contained in its relations of production to their extreme limits, even at the risk of violating its own economic laws. So,

one of the major contradictions of capitalism is that arising from the conflict between the increasingly global nature of production and the necessarily national structure of capital. By pushing to its limits, the economic, financial and productive possibilities of the 'associations' of nations, capitalism has obtained a significant 'breath of fresh air' in its fight against the crisis, but at the same time it has put itself in a risky situation” (23rd Congress Report).

This 'risky situation' has been demonstrating its serious consequences linked to the impact of decomposition on the economic terrain, especially in the last five years of the 2010s.

The pandemic is the expression of the acceleration of decomposition and, at the same time, aggravates it further. The report on the economic crisis is focussed on this fundamental reality. The Resolution on the Situation in France of the 24th RI Congress shows this central axis quite clearly:

"In 2008, during the 'subprime crisis', the bourgeoisie was able to react in a coordinated manner on an international scale. The famous G7, G8, ... G20 (which were in the headlines) symbolised this capacity of states to agree at the very least to try to respond to the 'debt crisis'. 12 years later, division, the 'war of masks' and then the 'war of vaccines', the cacophony of decisions to close borders against the spread of the COVID 19, the lack of consultation at the international level (except for Europe, which is struggling to protect itself against its competitors) to limit the economic collapse, are signs of the advance of 'every man for himself' and the plunge of the highest political circles of capitalism into an increasingly irrational management of the system.

This tendency is becoming even stronger, particularly in the US where a long trend of economic decline is combined with an unprecedent aggravation of decomposition in its political apparatus and its social tissue.

However, it would be a mistake to think that this tendency is limited to the United States. In Europe, Germany seems to have reacted, but tensions within the EU are increasingly evident, and the shock of Brexit will have consequences that have not yet surfaced. China's 'stability' is more apparent than real.

Consequently, we can say that the effects of the breakdown in the economic sphere and in state management of the economy are here to stay and will have an increasingly strong influence on economic developments. It is true that the bourgeoisie is going to set in motion countertendencies (for example, the EU agreements on partial mutualisation of the debt or Biden's annulment of certain measures adopted by Trump). However, beyond the brakes or the reversal measures, the weight of decomposition on the economy and on the state management of the latter is going to become stronger, with consequences that are for the moment difficult to predict. Rather than making predictions, we need to monitor developments closely and draw conclusions within the overall framework we set up.

3. Bailing out the economy cannot be done under the same conditions as in 2008.

With the response that capital in most countries has been forced to give to the pandemic (the lockdown that has not yet ended), one of the worst recessions in history has occurred.

To prevent a generalised collapse, the bourgeoisie has been forced to inject billions. This has allowed it to 'muddle through', to 'weather the storm'.[4] It will be necessary to 'rescue the world economy'. And how will this complicated operation be carried out?

We can say that it will be done in much worse conditions than in 2008, that it will entail a violent dose of austerity and that the world economy will be left in a much more deteriorated condition, with less capacity for recovery, and will experience greater chaos and significant convulsions.

Five factors explain these worse conditions:

1. The growing weight of decomposition on the economy and state capitalism

2. China will no longer be able to play the role of a locomotive providing a lifeline as it did in response to 2008

3. Environmental disaster

4. The weight of the war economy

5. The crushing weight of debt.

4. The gradual dislocation of the economic edifice of globalisation

With the pandemic we have witnessed a chaotic and irrational response by states, starting with the largest and most powerful ones. The WHO has been ignored by all states, thus preventing the required international strategy based as much as possible on scientific criteria. Each state has tried to close its economy as late as possible in order not to lose competitive and imperialist advantages over its rivals. By the same token, economies have been reopened with the aim of gaining advantages over rivals, and the closures provoked by the worsening of the pandemic have been trapped in the contradiction between the need to maintain and increase production in the face of rivals and the need to prevent the productive apparatus and social cohesion from being undermined by new waves of contagion.

The mask war has been a degrading spectacle: states considered 'serious' such as France or Germany were blatantly stealing shipments of masks destined for other national capitals. The same has happened with equipment such as breathing apparatus, oxygen, personal protective equipment, etc.

In the current war over vaccines: their manufacture, their distribution, and the vaccinations themselves, are all revealing the growing disorder which the world economy is sliding into.

In vaccine research and manufacture, we have seen a chaotic race between states in fierce competition. Britain, China, Russia, the United States ... have been in a race against the clock to be the first to have the vaccine. International coordination has been absent. Vaccines have been tested in record time with no real guarantee of efficacy.

Distribution is equally chaotic. The EU's conflict with the British company AstraZeneca is testimony to this. The richer countries have left the poorer ones unprotected. Israel has vaccinated its nationals while side-lining the Palestinians. Russia uses misleading propaganda to present its vaccine as the best. It is evidence that the vaccine is used as an instrument of imperialist influence. Russia and China make no secret of this and openly proclaim that they will offer lower prices to those countries that bow to their economic, political and military demands.

Finally, the way in which the population is being vaccinated is mind-bogglingly disorganised and undisciplined. In France, Germany, Spain, Italy, to give just a few examples, there is a constant lack of supply, causing delays in vaccination even in the groups identified as priority (health workers, the over-65s). Vaccination plans have been delayed several times. Often the first dose is administered and the second is delayed sine die, thus nullifying the effectiveness of the vaccine. Rulers, politicians, businessmen, the military etc. have bypassed the list of priority groups and have been vaccinated first.

What this degrading spectacle around vaccines shows us is a growing tendency for capitalism to undermine the capacity for 'international cooperation' that had managed to mitigate the economic crisis in the period 1990-2008. Capitalism is founded on competition to the death - and this constituent feature of capitalism did not disappear in the heyday of 'globalisation' - but what we see now is an exacerbated competition, taking as its field something as sensitive as health and epidemics. If in the ascendant period of capitalism competition between capitals and nations was a factor of expansion and development of the system, in decadence it is, on the contrary, a factor of destruction and chaos: destruction with the barbarism of imperialist war; chaos (that also includes destruction and wars) especially with the irruption of the effects of decomposition on the economic terrain and its state management. This chaos will increasingly affect global production and supply chains, the planning of production, the ability to combat 'unexpected' phenomena such as pandemics or other catastrophes.

The repatriation of production to the home country by multinationals was already underway since 2017 but seems to have accelerated with the pandemic:

"A study released this week by Bank of America, on 3,000 companies with a total market capitalisation of $22 trillion and located in 12 major global sectors, states that 80% of these companies have relocation plans to repatriate part of their production from abroad. 'This is the first turning point in a decades-long trend,' the authors proclaim. In the last three years, some 153 companies have returned to the US while 208 have done so in the EU."[5]

Are these measures irreversible? Are we witnessing the end of the phase of 'globalisation', i.e. global production, strongly interconnected with an international division of labour, with production, transport and logistics chains organised on a global scale?

The first consideration is that the pandemic is taking longer than expected. On 28 September 2020, the figure of one million deaths was reached; on 15 January, less than three months later, this reached two million. Although vaccines are being applied, the WHO's scientific director, Soumya Swaminathan, predicts that we will have to wait until 2022 to reach reasonable immunisation of the population in Europe. It is likely that the disruption and interruptions in production will continue throughout 2021.

Secondly, if we look at historical experience, we can see that the measures of state capitalism that were taken in response to the First World War did not disappear completely after the end of the war; and 10 years later, with the crisis of 1929, they made a gigantic leap, confirming the correct prediction of the First Congress of the Communist International:

All the fundamental questions of the world's economic life are no longer regulated by free competition, not even by combinations of national and international trusts or consortiums. They have fallen under the yoke of military tyranny to serve as its safeguard from now on. If the absolute subjection of political power to finance capital has led mankind to imperialist butchery, this butchery has allowed finance capital not only to militarise the state to the end, but to militarise itself, so that it can only fulfil its essential economic functions with iron and blood.[6]

By the same token, it’s likely that the measures taken in response to the pandemic on the economic terrain will remain in place, even if there will be partial setbacks.

This is confirmed by the fact that, since 2015, as we made clear in the report of the 23rd Congress, China, Germany and the United States have been moving in this direction. The measures taken during the pandemic only deepen an orientation that was already present in the 2010s.

That the big powers have not, for the moment, coordinated their financial and economical responses to the danger of bankruptcy is evidence of this. While, in the 2008 crisis, meetings of the G8, G20 etc proliferated, this kind of meeting is now obviously absent.[7]

However, the globalised structure of world production offers major advantages to the most powerful economies, and they will take actions to correct the major disruptions outlined above. A really clear example: the plan to mutualise debts in the EU particularly benefits Germany which will consolidate its exports to Spain, Italy, etc. These countries, presented as 'the great beneficiaries', will in the end be the big losers, as their industrial tissue will be weakened by the overwhelming competition from German exports. In fact, debt mutualisation will help Germany to counter the Chinese presence in southern European countries, which has strengthened since 2013. We are not witnessing a dismantling of globalisation, but rather its increasing dislocation (for example, through the tendency towards fragmentation into regional areas), the much greater weight of protectionist tendencies, the relocation of production areas, the multiplication of measures that each country takes on its own, in breach of international agreements. In short, a growing chaos in the functioning of the world economy.

5. Chinese policy

In the period 2009-2015, China played an essential role with its purchases and investments in the weak revival of the world economy after the severe upheaval of 2008. In the face of the present situation, can China play the same role as the locomotive of the world economy?

We think that this is very unlikely for at least 4 reasons:

1) China's current situation is much weaker than it was then: growth in output continues to decline slowly but surely; according to the IMF, China will have the worst growth in 35 years: only 1.2%. This how the International Communist Party (Bordigist) expressed it:
"in China, the official unemployment rate was 6% at the end of April; but a study by a Chinese organisation estimated real unemployment at the same date at 20.5% (or 70 million unemployed); the study was withdrawn and the organisation's management punished by the authorities, but Western economists put forward figures of the same order.” 
(cited in our internal bulletin, 2020)

China's level of indebtedness is gigantic (300% of GDP in 2019); the situation of many of its companies is very fragile. For example, in China 30% of companies are ‘zombies’,[8] which is the highest percentage in the world (in Germany and France it is estimated at 10%). Also state-owned companies still hold a large share in the economy and these companies have the highest debt burden.

2. The Silk Road project - a 60-country plan of commercial, economic and imperialist expansion - seeks to define a global economic area exclusive to China, with the result that the role it can play in stimulating world trade will diminish. China's rivals and especially the USA have responded with a trade war and in the Asia-Oceania area with the Trans-Pacific Economic Cooperation Agreement that links 12 countries in the area. And, among those countries that had to become indebted to China in their participation in the Silk Road project, some have been hardest hit by the economic consequences of the Corona pandemic, threatening their solvency.

3. These 'agreements' show that the dynamic that will dominate the coming years - barring a change in trend, which is highly unlikely - is not one of 'cooperation' but rather a large fragmentation of world production into reserved areas under Chinese, American, German tutelage.

4. The pile of debts, which after 2008 served to 'fuel' the Chinese engine, managed to allow double digit growth in China and also to create bigger markets in China itself for many exporters from the US, East Asia and Europe. But the conditions for this to be repeated do not exist. All countries have become more protectionist. Moreover, the workforce in China, which had been receiving some of the lowest wages, have been receiving higher wages, which has led to considerable job transfers from China to other, still cheaper countries (South-East Asia, Africa).

6. Environmental disaster

The process of ecological destruction (devastation and pollution of environmental and natural resources) goes back a long way. Imperialist war and the war economy have contributed to this process to an important extent. However, the question that arises is to what extent has this process negatively influenced the capitalist economy by hindering accumulation?

In the framework of this report, we cannot give an elaborate answer. However, it’s likely that in the context of the increasing difficulties in collaboration between countries, with the nationalist manoeuvring of each state, ecological destruction will have an increasingly negative impact on the reproduction of capital and will contribute to making the moments of economic recovery in the coming period much weaker and more unstable than in the past.

Air pollution is estimated to kill 7 million people every year. Consumption of contaminated water causes approximately 485,000 deaths every year.[9]

During the 20th century, 260 million people died from indoor air pollution in the Third World – about twice the toll in all the century’s wars. This is more than 4 times more than died from outdoor air pollution.[10]

Extreme weather, mass extinctions, falling agricultural yields, and toxic air and water are already damaging the global economy, with pollution alone costing 4.6 trillion USD every year.[11]

The mere protection of cities along the coasts will swallow large sums – equal to if not superior to all the rescue packages which have had to be adopted under the Corona pandemic. The economic implications of this chaos are very real and the impact of this process of self-destruction is staggering. It is calculated that if climate change increases the temperature by 4ºC, global GDP will fall from 2010 levels by 30% (the fall during the depression of the 30s was 26.7%). The present fall will be permanent: 1,2 billion jobs could be lost. These figures do not consider the deepening economic crisis or the impact of Covid.

All these damages are considerably aggravated by the Covid crisis, even if will take a while to assess its impact. In fact, the Covid crisis itself is a clear expression of the consequences for the economy of ecological destruction:

"The colonisation of natural areas and human contact with animals that are reservoirs of viruses and pathogens is the first link in the chain that explains the pandemics. The destruction of forest habitats in tropical areas means that many pathogens that were previously confined to inaccessible places can be transmitted to humans. People meet species with which they were not previously associated, thus increasing the chances of becoming infected with animal-borne diseases. Animal markets, transport and globalisation then spread them.[12]

Institutions such as the World Bank clearly warn of the consequences of ecological destruction, for example in terms of the expansion of poverty:

“New research estimates that climate change will push between 68 million and 135 million people into poverty by 2030. Climate change is a serious and specific threat to countries in sub-Saharan Africa and South Asia, the regions where most poor people are concentrated. In several countries, a large proportion of the poor live in conflict-affected areas with a high degree of exposure to flooding, such as Nepal, Cameroon, Liberia and the Central African Republic.”[13]

The breakdown of international cooperation around the Covid pandemic is a foretaste of the dog-eat-dog attitude that will predominate faced with climate change. The increased economic competition resulting from Covid can only accelerate this dynamic. Capitalism's ability to limit the increase in global temperature is growing weaker.

Taken together, rapid action against rising temperatures and a renewed commitment to globalisation would put the world economy on track for 2050 output of $185 trillion. Delaying moves to cut carbon emissions, and allowing cross-border ties to fray, could cap it at $149 trillion - the equivalent of kissing goodbye to the entire GDP of the U.S. and China last year.

The contradiction between the interests of the capitalist nation and the whole capitalist system with the future of humanity could not be clearer. If determined action is taken against climate change, imperialist and economic tensions will be ramped up qualitatively, with the rise of China to becoming the world’s main economy. If no action is taken, the world economy will shrink by 30% with all the consequences that this will bring.

This can only exponentially develop capitalism's destruction of the environment and lay the ground for further pandemics as the conditions for them are expanded, as several internal contributions have shown.[14]

7. The barrier of the war economy

The war economy, as Internationalisme reminded us, is a dead weight on the world economy. In spite of the clear position of the orientation text on militarism and decomposition,[15] parts of the organisation have tended to think that under decomposition, war spending would tend to be reduced and would not have the enormous impact it had in the period of the blocs and the Cold War. This view is false, as the report adopted by the 23rd Congress underlined: "Global military spending experienced - in 2019 - the largest increase in ten years. Over the course of 2019, military spending reached $1.9 trillion (€1.8 trillion) worldwide, an increase of 3.6 percent in one year, the largest since 2010. ‘Military spending reached its highest level since the end of the Cold War,’ said Nan Tian, a researcher at SIPRI.[16]

The need to address COVID has not diminished the rearmament. The Bundeswehr's budget is up by 2.85% by 2021, Spain is increasing military spending by 4.7, France by 4.5, while the UK is rising by an additional 18.5 billion euros.[17]

In the United States, stirring up anti-China hysteria, the Senate has approved an astronomical increase in military spending, which by 2021 will reach 740 billion dollars. In Japan, "Prime Minister Yoshihide Suga on Monday approved the ninth consecutive increase in the military budget, setting the new all-time record at 5.34 trillion yen (about $51.7 billion), an increase of 1.1% over the previous year's budget".[18]

The U.S. wars in Afghanistan, Iraq, Syria and Pakistan have cost American taxpayers $6.4 trillion since they began in 2001. That total is $2 trillion more than all federal government spending during the recently completed fiscal year[19].

There is no available data for China for 2021 but military spending apparently grew less in 2020 than in 2019. However, "the People's Liberation Army reached two major milestones, unveiling its first 100% indigenous aircraft carrier and its first intercontinental ballistic missile capable of reaching the United States. China also built its first overseas military base in Djibouti in 2017. Beijing is also designing a new generation of destroyers and missiles to strengthen its deterrence against its Asian neighbours and the US Navy.”[20]

Russia dramatically increased military spending in the three-year period 2018-21, Australia "has launched in the last two years an ambitious naval programme to create an ocean-going fleet with twelve new submarines to be built by the French shipyard DCNS, nine frigates (a programme for which Navantia is bidding), two logistics ships and twelve patrol vessels; it will also receive 72 US F-35 fighter planes from Lockheed Martin by 2020. The Australian authorities even plan to double its budget within a decade to 21 billion dollars a year". Scandinavian countries "see Russian threats to their airspace and in the Arctic as less and less a work of fiction, and in the case of Sweden, the revival of compulsory military service and significant increases in the defence budget have been announced."[21]

This tour through the bloody jungle of military spending shows that the war economy and armaments, beyond the initial boost they can give, end up being an increasingly heavy burden for it, and we can foresee that they will participate in the tendency to make the economic recovery that capitalism is seeking for the post-COVID period more fragile and convulsive.[22]

8. The crushing weight of debt

In 1948 the Marshall Plan involved a total amount of loans of 8 billion dollars; the Brady Plan to save South American economies in 1985 involved 50 billion dollars; expenditure to get out of the quagmire of 2008 reached the astronomical figure of 750 billion dollars.

The current figures turn these injections into the economy into small change. The EU has deployed a 750-billion-euro package. In Germany “The government is deploying the largest assistance package in the history of the Federal Republic. To finance this package, the Federation will take out new loans totalling roughly €156 billion.”[23] Biden has proposed a $1.9 trillion economic stimulus and support programme to Congress. The total stimulus poured into the US economy in 2020 is estimated at $4 trillion.

World debt in the third quarter of 2020 was €229 trillion, 365% of world GDP (a new historical record). This debt is 382% in industrialised countries. According to the International Institute of Finance this escalation has been accelerating since 2016 with an increase in the last 4 years of 44 trillion euros. It is within this framework that we must address the consequences of the current escalation of global indebtedness.[24]

The accumulation of capital (the expanded reproduction defined by Marx) has as its basis of development the extra-capitalist markets and the areas insufficiently integrated into capitalism. If both become smaller, the only way out for capital, organised by the state, is indebtedness, which consists of throwing ever larger sums of money into the economy on account of the expected production of the coming years.

If there are no inflationary shocks in the major economies, it is for three reasons:

1) The deflationary tendency that has affected the world economy since 2008.

2) The overvaluation of the assets of companies and even states has become chronic and degraded the economic figures that have ceased to be reliable for decades.

3) Zero-interest rates or even negative interest rates.

One of the factors that allowed global capital to cushion the effects of debt was the international coordination of monetary policies, a certain degree of coordination and organisation of financial transactions on a global scale. If this factor is beginning to fail and 'everyone for themselves' has prevailed, what consequences are to be expected?

Capitalism has deployed the equivalent of three and a half years of world production. Is this an unimportant figure that could be stretched to infinity? Absolutely not. This gigantic gangrene is the breeding ground not only for crazy speculative rallies that have ended up being institutionalised in the indecipherable labyrinth of financial transactions, but also for monetary crises, gigantic bankruptcies of companies and banks and even of significant states. Logically, this process implies that the internal market for capital cannot grow infinitely, even if there is no fixed limit in the matter. It is in this context that the crisis of overproduction at the current stage of its development poses a problem of profitability for capitalism. The bourgeoisie estimates that around 20% of the world’s productive forces are unused. The overproduction of means of production is particularly visible and affects Europe, the United States, India, Japan, etc.[25]

Since 1985, when the USA abandoned its position as creditor to become one of the biggest debtors, the world economy has been suffering from the aberrant situation that practically all countries are in debt; the biggest creditors are in turn the biggest debtors, and everyone knows that. Today after decades of gigantic debts these recent rescue packages have surpassed all previous interventions. However now the big players are all so much in debt, the risk of 'detonations'/avalanches of debts is increasing. Now the 'zero-interest' situation is still facilitating the policy of increasing debt burdens, but - leaving all other factors aside - should interest rates go up, something will tumble...

9. A weakened and unstable world economy

The brutal closure of production has consequences. First, China and Germany, as well as other major producing countries, will find themselves with a huge production overcapacity that cannot be immediately compensated. In general, the machinery sector, electronics, IT, raw material supply, transport etc. will find themselves with huge stocks and a slow revival of demand.

Although there will undoubtedly be moments of recovery in production (which will be enthusiastically cheered in capitalist propaganda), and although there will be countertendencies that the most intelligent sectors of capital will set in motion,[26] what is indisputable is that the world economy will be shaken and weakened in the coming decade.

Over the last half century capitalism has shown a capacity to 'carry on' in the face of the many upheavals it has undergone (1975, 1987, 1998, 2008). However, the global conditions we have just analysed allow us to suggest that this capacity has been considerably weakened. There will not be - as councilists and Bordigists hope - a Great Final Collapse, but because it is the heart of the world economy that is being destabilised - particularly the USA and in an increasing manner also parts of Europe - it will make it more difficult to coordinate a response to the crisis on an international level. Along with the crushing weight of debt, this provides a clear confirmation of the perspective outlined by the 23rd Congress report on the crisis:

The destabilising weight of unbridled indebtedness; the growing saturation of markets; the growing difficulties of 'globalising management' of the world economy caused by the irruption of populism, but also the sharpening of competition and the weight of the enormous investments demanded by the arms race; lastly, a factor that should not be neglected, the increasingly negative effects of the galloping destruction of the environment and the uncontrolled upheaval of the 'natural' balances of the planet.

One of the policies that states are going to launch to give a boost to the economy are the so-called 'green economy' plans. These are driven by the need to replace old heavy industry and fossil fuels with electronics, computerisation, AI, lightweight materials and new energy sources that allow for higher productivity, cost reduction and labour savings. For a while, the large investments that such a revival of the economy will require - which will also include arms production - may give a boost to the economies of the countries that are best positioned in the process, but the spectre of overproduction will once again return to haunt the world economy.

10. Workers’ resistance - a key factor in the evolution of the situation

The deterioration of workers' living conditions was very gradual in the period 1967-80.

It first began to accelerate in the 1980s when welfare benefits began to be limited, mass lay-offs took place, and the precariousness of work began to be established.

In the period 1990-2008 the deterioration continued: the systematic reduction in the number of workers employed became ‘normal’. A housing crisis also began. Mass migration put downward pressure on wages and working conditions in the central countries. However, the fall in living conditions in the central countries was still gradual and limited. There was something perverse that masked the fall: the development of massive credit in proletarian households.

In the Report adopted by the 23rd Congress we showed the huge worsening of the living standards of the proletariat in the central countries, significant cuts in pensions, health, education, social services, social benefits etc., the rise in unemployment and especially the spectacular development of job insecurity. The 2010s have seen a major escalation of the degradation of working class living conditions in the central countries. The gradual attacks that we saw between 1970-2008 began to accelerate in the decade 2010-2020.

The pandemic crisis has intensified the attacks on workers' living conditions. First, in all countries, workers have been sent to the slaughterhouse because they have been forced to go to work in overcrowded public transport and have found themselves without protective equipment in the workplace (in fact there were a lot of protests in factories, warehouses etc. at the beginning of lockdown because of this). However, it should be noted that health care workers and workers in old people's homes have suffered a high number of infections and deaths. Workers in the food industry have also been hard hit,[27] as have agricultural workers, most of whom are migrants.[28]

Attacks against the working class in all countries, but particularly in the central countries, are clearly on the agenda. The ILO's report COVID-19 and the World of Work is blunt: “the COVID-19 pandemic has caused the world of labour the most serious crisis since the Great Depression of the 1930s.

Unemployment. The over-capacities in industry, and the slow and weak recovery of demand, will act as a strong stimulus for massive lay-offs. During the period of strict lockdown, the huge state subsidies to the part-time unemployed masked the gravity of the situation of many workers suffering from a drastic reduction in their incomes. However, a gradual ‘normalisation’ of economic functioning will bring about a further worsening of workers' living conditions, making it in many cases irreversible. According to the ILO, a global loss of 36 million jobs is the best-case scenario and 130 million is the worst-case scenario estimated for 2021.[29]

We can illustrate this in an analysis of the dismal perspective for the car industry:

An expert of the German car industry gave the following overview/forecast: According to the forecast, all major auto-mobile markets will shrink by double-digit percentages. France and Italy will be hardest hit, with a decline of 25 percent each, Spain with 22 percent, and Germany, the USA and Mexico with 20 percent each. For the world's largest auto mobile market, China, Dudenhöffer expects a decline in sales of around 15 percent. In the German plants, there is suddenly surplus capacity of 1.3 to 1.7 million vehicles. Short-time work only can bridge short periods. No company could keep unused production capacity for years. That is why 100,000 of the 830,000 jobs at car manufacturers and suppliers in Germany today are at risk – ‘under optimistic assumptions’, Dudenhöffer wrote.”[30]

Precariousness. The ILO calls precariousness "underutilised employment" and estimates that there are 473 million workers in the world in this condition (2020). Equally important is informal work: "more than 2 billion workers are engaged in economic activities which are not sufficiently covered, or not covered at all, by formal systems in law or in practice." According to the ILO, “630 million workers worldwide do not earn enough from their work to lift themselves and their families out of poverty.[31]

Wages. On wages, the ILO has assessed the global decline in wages worldwide at 8.3% up to 2020. Despite government support measures, wages fell in 2020 by 56.2% in Peru, 21.3% in Brazil, 6.9% in Vietnam, 4.0% in Italy, 2.9% in the UK and 9.3% in the USA (ILO data).

The above-mentioned ILO report warns that

"the crisis has had a particularly devastating impact on many population groups and devastating effects on many population groups and vulnerable sectors around the world. Young people, women and low-skilled workers and low-wage earners will find it more difficult to benefit from an early recovery and are at a very high risk of suffering long-term consequences and exclusion from the labour market.

The incredible level of national indebtedness cannot be sustained indefinitely; from a certain point onwards, it will necessarily lead to the adoption of drastic austerity measures affecting education, health, pensions, subsidies, social benefits, etc.

Nothing can be expected from the ‘intelligent management’ of state capitalism: only austerity, misery, chaos and no future. The future of humanity is in the hands of the proletariat, its resistance against brutal austerity, and the politicisation of this resistance will be key in the coming period.


[1] “The irruption of decomposition on the economic terrain: Report on the economic crisis”, International Review no. 165, 2020.

[4] The figures and analysis of this gigantic deployment of monetary injections are provided in the report on the economic crisis adopted by the 24th RI Congress: see “The irruption of decomposition on the economic terrain”, International Review no. 165, 2021.

[6] Manifesto of the First Congress of the Communist International.

[7] Biden proposed to set up an G10 meeting not for economic coordination but to isolate China.

[8] Zombie companies are those that need to constantly refinance their debt to the extent that debt repayment eats up all their profits and even forces them to take on new debt.

[14]the reckless conquest by capital of ‘wild’ territories, as have already seen with Ebola [which] has to do with the hunger for land of this capitalist system, that is to say, with the functioning of rents. Growing urbanisation, the exploitation of every square inch of the planet (…) leads to a forced coexistence be-tween species.” (D). “There is indeed a tendency to underestimate the degree to which the pandemic is product of the ecological dimension, another fundamental characteristic of decomposition. The quote from Le Fil Rouge is interesting in the way the tendency towards pandemics is linked to the metabolic exchange with nature (Marx) - which has reached distorted proportions by the development of capitalism in decadence and decomposition. The idea that this is almost a natural disaster leads to taking its social roots out of picture.” (B)

[15] International Review no. 64, 1991.

[16] Report of the International Peace Research Institute (SIPRI) published on 27.04.2020.

[22] The war economy can initially stimulate the economy but this is deceptive, as can be seen if we look at the long term; there is the example of Russia and more recently Turkey which after a spectacular take-off is today increasingly weakened by the suffocating weight of the war effort. Likewise, Iran and Saudi Arabia, engaged in an extreme rivalry, are increasingly weakened in their economies.

[23] Quoted in an internal communique on Germany

[25] See the Report on the economic crisis adopted by the 24th Congress of RI (“The irruption of decomposition on the economic terrain”, International Review no. 165).

[26] Ibid.

[27]The situation in the meat packaging industry revealed a similar picture as in the slaughter houses of Chicago more than a century ago. Suddenly high infection rates amongst staff in the slaughterhouses became known. It became known that these are the modern sweat shops in Germany, with very cheap labour from Eastern Europe, living in barracks, or very run down, crowded apartments – rented by subcontractors of the slaughterhouses. Hundreds of them got infected, due to crammed working and housing conditions” (Communique by our section in Germany )

[28] In Spain, in April 2020, strawberry pickers, mostly workers from Morocco and Africa, tried to strike against their appalling overcrowding in barracks and the left-wing coalition government immediately sent in the Guardia Civil.

[30] Quoted by the communique on the German situation,

[31] wcms_757163.pdf


Work of the 24th International Congress of the ICC