The global economic crisis deepens, and capitalism launches more attacks on the working class

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The most respected economic institutions of the bourgeoisie boast of a rather positive assessment of the current state of the world economy, which “has shown remarkable resilience in the face of the pandemic, the war in Ukraine and a surge in inflation”[1]. The IMF, the World Bank and other institutions are forecasting slightly more growth in 2025 than in 2024, despite their concerns about major uncertainties and risks, due in particular to rising geopolitical tensions. But the reality is quite different: the capitalist system is well and truly continuing its trajectory into the abyss of a chronic economic crisis, plunging the world further into stagnation and poverty.

The unprecedented downturn of the world economy

In 2024, the world economy has not recovered from the Covid-19 pandemic and its strict confinements, resulting in a global economy weaker than ever. How could it be otherwise? Before the appearance of Covid-19, capitalism was already facing a very fragile monetary and financial system and massive national debt, which presaged a period of serious convulsions[2]. The pandemic that developed in 2020 only accentuated these trends, notably by further disrupting production chains and global commerce.

Over the past 25 years, the global economy has been kept afloat mainly by the administration of a massive dose of credit, leading to a soaring public debt. “Global public debt has more than quintupled since 2000, clearly outstripping global GDP, which has tripled over the same period”[3]. The UN talks of an alarming increase in world public debt (i.e. mainly that accumulated over several years by government bodies) which was scheduled to reach a record figure of 97,000 billion dollars in 2023, while total world debt (a total debt which also includes that of companies and households) was on course reach the delirious figure of 300,000 billion dollars, for a world GDP of only 105,000 billion dollars.

In recent years, the global economy has been hit by the eruption of extremely violent wars in the Middle East and Ukraine. The latter has caused inflation to soar in the two warring countries with a contagion phenomenon in several neighbouring countries, such as the Baltic States, where inflation exceeded 20% in 2022. The sanctions against Russia have had a negative impact both on the Russian economy and on those countries located close to the war zone. The most notable impact has been on the German economy, which has broken off trade relations with Russia and lost supplies of cheap gas.

The years 2020-2024 were the weakest half-decade of GDP growth for thirty years. In 2024-25, growth is expected to be below the average growth of the 2010s in almost 60% of the world's economies. This deplorable situation raises the real possibility that major economies such as the United States, Europe and China will be hit by stagflation.

The central countries are hit hard by the crisis

Europe's already fragile economy is being severely tested by relatively high energy prices and colossal national debts. The German economy is on the brink of recession. Its manufacturing sector (automotive and chemicals), once renowned, is being affected by high energy costs and fierce international competition. It is also suffering from a significant drop in foreign demand. In 2024, industrial production was 15% below the 2016 peak and tens of thousands of workers are on the verge of redundancy. France has lost control of its public finances, with debt levels well in excess of 100% of GDP, a problem also faced by Greece, Italy, Portugal, Spain and Belgium. One of Europe's leading economies is therefore on an unsustainable economic trajectory. The French manufacturing sector is also in crisis, and there are no signs of recovery on the horizon. Escalating imperialist tensions and growing chaos, fragmented world trade, rising inflation and energy costs are all pointing to an unprecedented deepening of the crisis in the European economy.

In China, the impact of US sanctions and containment measures adopted during Covid-19 had already severely weakened the Chinese economy. But the bursting of the property bubble made the crisis even worse, with the total value of unfinished and unsold housing amounting to around 4.1 trillion dollars. The burst bubble has also led to the failure of 40 small banks, and around 3,800 other banks are now in serious difficulty. Finally, it has wiped out around $18,000 billion in household savings, seriously affecting consumer confidence and curbing consumer spending. Combined with a steady decline in export earnings, this situation is leading to a slowdown unprecedented in decades. Today, the Chinese economy will certainly not be able to function as the engine of the global economy[4], as it did after the 2008 financial crisis.

Trump has announced an aggressive protectionist policy, with the intention of imposing customs barriers on all his competitors, including his ‘partners’. This policy will provoke a bitter trade war, with other countries setting their own tariffs. It is likely to fuel inflation and further slow global growth, particularly in China, and probably in Europe too. The tariffs announced represent a new stage in a policy that is throwing the global economy into turmoil, exacerbating its fragmentation and foreshadowing a further dismantling of globalisation. Their implementation will give considerable impetus to the global crisis, which will spare no power, not even the United States.

War is the way of life of capitalism in its decadent phase, so the economy naturally follows the path of militarism which dominates most national economies. With the proliferation of armed conflicts around the world, this tendency is becoming much more pronounced. For example, global military spending increased for the ninth consecutive year in 2023, reaching a total of 2,443 billion dollars, the highest level ever recorded. Germany has doubled its military budget, while the US budget is close to $1,000 billion. Unproductive spending is a net loss for the national economy and could even bankrupt it. Remember that this heavy spending led to the bankruptcy of the ‘Soviet’ economy which contributed to the collapse of the Eastern bloc.

The acceleration of decomposition pushes the global economy into the abyss

Today, capitalist society is in such a state of decomposition that, beyond its ideological superstructure, its own economic foundations are themselves affected by the destructive effects of this social decay. The accumulation of the combined effect of these factors (crisis, war, global warming, every man for himself) is producing “a devastating spiral with incalculable consequences for capitalism, hitting and destabilising the capitalist economy and its production infrastructure ever more seriously. While each of the factors fuelling this ‘whirlwind’ effect of decomposition risks leading to the collapse of states, their combined effects far exceed the simple sum of each of them taken in isolation.”[5]

So the two wars in Ukraine and the Middle East are not only causing catastrophic destruction to the infrastructure of the countries concerned, but also fragmenting and destabilising whole swathes of the global economy. The ‘New Silk Roads’, for example, the land and sea link between China and Europe, one of which passed through the territory of Russia and Belarus, has been completely paralysed since the start of the war. Planes from North America and Europe can no longer fly over Siberia, and these diversions have led to a dramatic increase in the cost of the flights concerned. Various maritime trade routes, such as the Red and Black Seas, are risky for traffic because of the threats posed by the ongoing wars. These serious impediments to world trade are driving up sea freight costs, with the threat of a food crisis in some parts of the world.

Recurrent, random and potentially severe climate shocks lead to the destruction of infrastructure, soil degradation, the collapse of ecosystems and human populations, while nature is less and less able to recover from these catastrophic events, leading to a permanent loss of production capacity. Between 2014 and 2023, around 4,000 climate-related events appear to have resulted in economic losses estimated at 2,000 billion dollars. And since capitalism, due to fierce global competition, is unable to curb global warming, these losses will increase at an accelerating rate.

Under the growing influence of populism, bourgeois measures are becoming increasingly irrational, sometimes to the detriment of national economic interests. Take, for example, the sabotage during Trump's first presidency of the work of the World Trade Organisation, an institution designed to maintain a minimum of stability in the world economy, giving free rein to the international development of every man for himself. Similarly, the British bourgeoisie's decision to withdraw from the EU has created major obstacles to trade with the continent, with a significant negative impact on its economy. Finally, Bolsonaro and Modi's totally irrational handling of the Covid-19 crisis has resulted in many more casualties in these two countries than the general average, adding to the economic crisis.

Capitalism makes the working class pay for the crisis

In recent years, the crisis has already led to significant impoverishment in the most important economic regions of the capitalist world. According to Eurostat, in 2023 16.2% of European citizens were at risk of poverty, which means that around 71.7 million people are suffering material and social deprivation and do not have enough income to lead a decent life. The United States has one of the highest poverty rates in the Western world. According to the Brookings Institute, 43% of all American families are unable to meet their basic needs[6].

In China, there is officially no poverty. But in 2020, 600 million Chinese were still subsisting on the equivalent of 137 dollars a month, struggling to meet their needs[7].

As the economic situation deteriorates, this tendency will continue in the years to come, as the series of redundancies already announced testifies. According to Layoffs.fyi, 384 US technology companies, for example, had already laid off more than 150,000 workers by 2024, adding to the 428,449 workers in the same sector who have lost their jobs in the previous two years. In Europe, massive redundancies have been announced at Bosch (5,000 jobs), Volkswagen (35,000 jobs), Schaeffler AG (4,700 jobs), Ford (4,000 jobs), Airbus (2,043 jobs) and Air France KLM (1,500 jobs). China's largest private companies have cut 300,000 jobs. Youth unemployment in China has reached 20%. These figures illustrate how the slowdown in the Chinese economy is affecting the workforce. The staggering plans of Trump's second term will certainly deal a further blow to workers' living conditions.

In response to the worsening global economy and deteriorating living conditions, the working class must prepare for struggle, as the workers in different countries have done since 2022[8] when they clearly demonstrated that they would not accept economic attacks without a fight and took to the struggle with more confidence. This should encourage all workers to overcome their hesitations and to follow the example of their class brothers and sisters and join their struggle.

Dennis, 15 January 2025

 

[1] ‘Harnessing the Power of Integration: A Path to Prosperity in Central Asia’, IMF Report (2024).

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World economy