Economic crisis: Thirty years of the open crisis of capitalism

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The ruling class' speeches about the "good health" and perpetuity of its system of exploitation have been increasingly exposed by the numerous economic convulsions over the last 30 years: the recessions of 1974-75, of 1980-82 or the especially acute one of 1990-93; cataclysms on the stock market like that of October 1987, or the "Tequila effect" of 1994 etc. However, the swelling stream of bad economic news since August 1997 - the collapse of the Thai currency, the debacle of the Asiatic "tigers" and "dragons", the brutal purge of world stock markets; the bankruptcy of Russia, the fragile situation of Brazil and other "emerging" economies in Latin America, and above all the serious state of the world's second economy, Japan - constitutes the most serious episode in the historic crisis of capitalism. It clearly confirms the analysis of marxism and demonstrates the necessity for the overthrow of capitalism through the world proletarian revolution.


The form taken by the crisis over the last 30 years, above all in the main industrialised countries, has not been that of the brutal depression that occurred in the 1930's. What we have seen is a slow and progressive descent into the hell of unemployment and poverty, through successive recessions. At the same time, the worst ravages have been most concentrated in the countries of the periphery: Africa, South America, Asia that have sunk irremediably into a total morass of barbarism and decomposition.

For the bourgeoisie of the main industrialised countries, where the most important proletarian masses are concentrated, this hitherto unknown form taken by the historic crisis of capitalism has the advantage of concealing the death agony of capitalism and creating the illusion that its convulsions will be transitory, and that they will correspond to the cyclical crises typical of the previous century, which were followed by periods of intense development.


As a weapon in the struggle against such mystifications we are publishing a study of the last 30 years. On the one hand, it will demonstrate that the slow and escalating rhythm of the crisis has been the result of the state's "managing" the crisis by cheating the laws of the capitalist system (notably through the recourse to astronomical levels of debt, the likes of which have never been seen in the history of humanity) and on the other hand, that these policies are not any kind of solution to capitalism's incurable disease. The price of deferring its most catastrophic expressions in the most important countries is: increasingly explosive contradictions and the aggravation of the incurable cancer of world capitalism.

Crash or progressive collapse?

Marxism has made clear that capitalism has no solution to its historic crisis, a crisis that goes back to the First World War. Nevertheless, the form and causes of this crisis have been the object of discussion amongst the revolutionaries of  the Communist Left[1]. Is the form that of the deflationary depression typical of the cyclical crisis of the ascendant period (between 1820 and 1913)? Or rather, is it one of a process of progressive degeneration during which the whole world economy collapses into an increasingly acute state of stagnation and decomposition?


In the 1920s, some tendencies in the KAPD put forward the "Theory of the crash" according to which the historic crisis of capitalism would take the form of an irreversible brutal collapse that would impose on the proletariat the need to make the revolution. Some Bordigist currents who think that a sudden crisis will force the proletariat to resort to revolutionary action also express this vision.

We cannot enter here into a detailed analysis of this theory. However, it is to clear that the evolution of capitalism since 1914 has disproved it at the political as much as at the economic level. Historical experience has confirmed that the bourgeoisie is capable of moving mountains to prevent the spontaneous and sudden crash of its system of production. The problem of the outcome of the historic crisis of capitalism is not strictly economic but above all and essentially political, dependent on the evolution of the class struggle:


* Will the proletariat develop its struggles towards the imposition of its revolutionary dictatorship which will rescue humanity from the present morass and lead to communism as a new mode of production that overcomes and resolves the insoluble contradictions of capitalism?

* Will the survival of the system plunge humanity into barbarity and definitive destruction, be it through generalised world war, or through the slow agony of progressive and systematic decomposition[2]?


The bourgeoisie has responded to the permanent crisis of its system with the universal tendency of state capitalism. State capitalism is not only an economic response, but also a political one, as much a necessity for the carrying out of imperialist war as for confronting the proletariat. From the economic point of view, state capitalism constitutes an effort not so much at overcoming or solving this crisis, but at managing and slowing it[3].


Just as the proletariat's international revolutionary wave of 1917-23 made clear the threat to its system at the decisive political level, so the brutal depression of 1929 demonstrated to the bourgeoisie the grave dangers that its historical crisis contained at the economic level. The bourgeoisie did not give up on either of these two fronts. It developed the totalitarian form of its state to serve as a defensive bastion against the proletarian threat and against the economic contradictions of its system of exploitation. This totalitarian state expressed itself on the economic level as the general tendency to state capitalism, which took different forms: Nazi, Stalinist, and "democratic".

In the la 30 years, marked as much by the open reappearance of the historic crisis of capitalism as by the rebirth of the proletarian struggle, we have seen the bourgeoisie perfect and generalise its state mechanisms for managing the economic crisis in order to avoid its abrupt and uncontrolled explosion, at least in the main industrial concentrations (Europe, North America, Japan) which is where the historic outcome of the incurable crisis of capitalism will be determined[4].

The bourgeoisie has tried every conceivable trick with its own economic laws to avoid a repetition of the experience of 1929, with a catastrophic fall of 30% in world production in less than 3 years and an explosion of unemployment from 4% to 28% over the same period. It has not only launched endless ideological campaigns aimed at hiding the gravity of the crisis and its real causes, it has also used all of the arts of its "political economy" to maintain the appearance of an economic edifice which functions, progresses and can have some future.

At its formation, our Current stated that "At given moments, the confluence of some of these indicators could trigger a massive slump in a given national capital such as Britain, Italy, Portugal, or Spain. This is a possibility that we don't dismiss. However, although such a collapse would give an irreparable blow to the world economy (British assets and investments abroad alone amount to £20 billion), the world capitalist system could still drag on as long as a modicum of production were maintained in some advanced countries such as the US, Germany, Japan and the Eastern European countries. All such events of course lend 10 engulf the whole system, and crises are inevitably world crises today, But for the reasons we have outlined above, we have reason to believe that the crisis will be drawn-out - extremely convulsive and with jagged curves, but more like a snowballing effect than a steep sudden fall. Even the disintegration of a national economy will not necessarily send all the capitalists to hang themselves, as Rosa Luxemburg remarked in a slightly different context. For this to happen, the personification of national capital, the state, must be strangled by none other than the revolutionary proletariat"[5].

Similarly, after the violent economic events of the 1980s we showed that "the capitalist machine has not completely collapsed. Despite the record number of bankruptcies, despite the increasingly frequent and serious cracks in the system, the profit machine continues to junction, concentrating new and gigantic fortunes - the product of the carnage among different capitals - and boasts with cynical arrogance of the benefits of ‘liberalism'".[6]


A ruling class does not commit suicide or lock up shop and give the keys to the class that is replacing it. We can see this with the feudal class which after a furious resistance made a pact with the bourgeoisie that gave it a place in the new order. It will be even less the case with the bourgeoisie which knows full well that it can expect nothing but its own disappearance from the social order represented by the proletariat.

As much for the mystification and defeat of the proletariat as to keep its economic system afloat, it is necessary that members of the bourgeoisie do not become demoralised and throw in the towel. This means that the state has to maintain at all costs the economic edifice, to give it the best possible appearance of normality and effectiveness, in order to assure the minimum of confidence and credibility in the economy.

At all events, the crisis is the best ally of the proletariat for the completion of its revolutionary mission. However, this is not something spontaneous and mechanical, but takes place through the development of its struggle and its consciousness. If the proletariat is to develop its reflection on the fundamental causes of the crisis the groups of the Communist Left have to carry out a tenacious and obstinate struggle to show the reality of the death agony of capitalism and denounce all the efforts of state capitalism to avoid the crisis through, slowing it down, hiding it, deflecting it from the nerve centres of world capitalism on to the more peripheral regions where the proletariat has less social weight.

Managing the crisis

The notion of "managing the crisis" to use the terms of the Report from our last International Congress[7], is crucial. Since 1967, world capitalism has responded to the open reappearance of its historic crisis through a policy of managing the crisis, which is central to understanding both the course of economic evolution over this period, and the success the bourgeoisie has had until now in hiding the gravity and magnitude of the crisis from the proletariat.


This policy of managing the crisis constitutes the most finished expression of the general historical tendency to state capitalism. In reality over the last 30 years the Western states have developed a practice of manipulating the law of value, of massive and generalised debt, of authoritarian state intervention towards economic agents and the productive process, of tricks with money, foreign trade and public debt, which make the state planning methods of the Stalinist bureaucracies look like child's play. All of the Western bourgeoisie's chatter about the "market economy", the "play of free market forces", the "superiority of liberalism" and the like is in reality an enormous mystification. For the last 70 years, as the Communist Left has affirmed, there have not been two "economic systems", one of them "a planned economy" and the other a "free economy", but one system: capitalism, which in its long drawn out death agony is sustained by increasingly enveloping and totalitarian state intervention.

This state intervention to manage the crisis, that seeks to adapt itself to it and seeks to slow it down and postpone it, has allowed the main industrial countries to avoid a brutal collapse, a general disintegration of the system. However, it has neither solved the crisis nor resolved any of its most acute expressions such as unemployment or inflation. The only achievement of 30 years of "managing the crisis" is a kind of organised descent towards the abyss, a chance for the planned fall through successive recessions whose only real result has been to indefinitely prolong the suffering insecurity and desperation of the working class and the immense majority of the world's population. On the one hand, the working class of the great industrial centres has been subjected to a systematic policy of gradual but progressive cuts in its wages, its living conditions, its stability of employment, its very survival. On the other hand, the great majority of the world's population, which lives in misery in the enormous periphery that surrounds the nerve centres of capitalism, has been submerged in a situation of barbarity, hunger and death that could well be classed as the greatest genocide ever suffered by humanity.


This policy of managing the crisis however, is the only one possible for the whole of world capitalism, the only one that can keep it afloat even if it is at the price of leaving increasingly large parts of its own economic body to fall into the abyss. The most important and decisive countries from the imperialist and economic point of view, but above all for the confrontation between the classes, concentrate all their efforts on deflecting the crisis onto the weaker countries, with less resources faced with its devastating effects and with less importance in the struggle against the proletariat. Thus, in the 1980's, a large part of Africa, a good slice of South and Latin America and a series of Asian countries collapsed. Since 1989, it has been the turn of the countries of Eastern Europe, Central Asia etc, which until then had been subject to the domination of that giant with feet of clay called Russia. Now it is the turn of the former Asian "dragons" and "tigers", that in the case of Indonesia is confronted with the most brutal and rapid fall of any country's economy for 80 years.

We have had a lot of talk from politicians, union leaders, or "experts" in "economic models", about "appropriate economic policies" and "solutions to the crisis". The harsh reality of the crisis over the last 30 years has shown up all this talk for what it is: unutterable stupidity, or the vulgar tricks of mountebanks. The "Swedish model of the social market economy" is no longer heard about, the "Japanese model" has been hurriedly withdrawn from the propaganda catalogues, the "German model" has been discreetly consigned to the museum, the endlessly repeated scratched record of the "success" of the Asian "tigers" and "dragons" has been dropped from the ideological jukebox in the course of a few months. In practice the only possible policy for all governments, be they Right wing, Left wing, dictatorial or "democratic", "liberal" or "interventionist", is to manage the crisis, the planned and most gradual possible descent into the inferno.


This policy of managing and accompanying the crisis cannot have the effect of keeping world capitalism in a static situation, where the brutal contradictions of the regime of exploitation can be perpetually contained and limited. Such "stability" is impossible because of the nature of capitalism itself, the dynamism of its internal contradictions that unceasingly push it to seek the valorisation of capital, to compete for the re-division of the world market. For these reasons, the policy of palliatives, of slowing the crisis has the perverse effect of aggravating, making more violent and profound capitalism's contradictions. The "success" of capitalism's economic policies over the last 30 years can be reduced to the avoiding of the worst of the crisis but, meanwhile, the time-bomb has increased in size, it has become more explosive, more dangerous, more destructive:

* Thirty years of debt have increased the overall fragility of the financial mechanisms that make their use for managing the crisis much more difficult and dangerous.


* Thirty years of generalised overproduction has meant successive amputations of the industrial and agricultural apparatus of the world economy that reduces the size of the market and makes this overproduction much more serious and burdensome.


* Thirty years of postponement and dosage of unemployment mean that today it is much more serious and causes an endless chain of lay-offs, the casualisation of work, underemployment etc.


All of capitalism's cheating of its own economic laws means that the crisis has not taken the form of a sudden collapse of production as happened in the cyclical crisis of ascendant capitalism last century or as we saw in the depression of 1929. Nevertheless, the crisis has taken a more widespread form, more destructive for the living conditions of the proletariat and the whole of humanity: a descent by successive, progressively more brutal, stages towards a situation of increasingly generalised stagnation and decomposition.

The convulsions that have been taking place since August 1997 mark a new stage in the descent towards the abyss. We can have no doubt that this is the worst episode of the last 30 years, the biggest step that capitalism has taken in this descent. In order to better grasp its effects on the living conditions of the proletariat and on the aggravation of the capitalist crisis it seems to us necessary to go back over the entire period.  


In International Review no.8 (article on "The international political situation"), we showed that capitalism's policy of "managing and accompanying the crisis" has three axes: "Deflecting the crisis onto other countries, the intermediate classes, and the proletariat". These three axes have marked the policy of managing the crisis and had been defined in the different stages of the collapse of the system.

The policy of the 1970s

In 1967, the devaluation of the pound sterling was one of the first clear signs of a new open crisis of capitalism after the years of relative prosperity granted by the reconstruction of the world economy following the enormous destruction of the Second World War. There was the first shock of unemployment that rose to 2 % in some European countries. Governments responded with policies of increased public spending which rapidly hid the situation and allowed a recovery of production during 1969-71.


In 1971, the crisis took the form of violent monetary storms concentrated around the world's main currency: the dollar. The Nixon government was able to postpone the problem temporarily, but this had serious consequences for the future evolution of capitalism: it dismantled the Bretton Woods Agreement adopted in 1944, and which since then had regulated the world economy.

Bretton Woods itself definitively abandoned the gold standard and replaced it with the dollar standard. At the time, this already marked a step towards the weakening of the world monetary system and a stimulus to the policy of debt. In its 'ascendant period capitalism tied currencies to the reserves of gold and silver, which established a more or less coherent correspondence between the extension of production and the monetary mass in circulation avoiding or at least alleviated the uncontrolled recourse to credit. Linking currencies to the dollar standard eliminated this control mechanism and, leaving aside the substantial advantage it gave to American capitalism over its competitors, it involved a considerable risk of monetary and credit instability.


This threat remained latent as long as reconstruction provided the room for the sale of continually expanding production. However, it exploded from 1967 when this margin for manoeuvre was dramatically reduced. The abandoning of the dollar standard and its replacement by IMF Special Drawing Rights allowed each state to issue its currency without any guarantee beyond itself. The threat of instability and the uncontrolled growth of debt became more tangible and dangerous.

The 1972-73 "boom" not only hid these problems but brought with it one of the illusions which capitalism has used to disguise its mortal crisis: in these two years production reached record levels. These were essentially based on the unleashing of consumption.


Drunk with this ephemeral "success", capitalism boasted about overcoming the crisis and the failure of marxism in its assertion of the system's mortal collapse. These proclamations were soon unmasked by the so-called "oil crisis" of 1974-75, the worst since the Second World War: levels of production in the industrialised countries fell by between 2% and 4%.


The response to this new convulsion was based around two axes:


* the striking growth of public deficits in the industrialised countries, especially in the United States;


* but above all, the enormous growth of debt in the Third World and the countries of the East. The years between 1974-1977 saw what the biggest wave of lending in history was then: $78 billion were loaned to Third World countries, not including those that belonged to the Russian bloc. To give some idea of the unprecedented nature of the level of these loans one only bas to compare them to those issued to European countries between 1948-53 under the Marshall Plan: a total of $15 billion which was already a record for the time.

These measures brought about a recovery of production although this never reached the levels of 1972-73. However, the cost was the explosion of inflation which in some central countries surpassed 20% (in Italy it reached 30%). Inflation is a characteristic feature of decadent capitalism[8], due to the immense mass of unproductive spending that the system bears in order to survive: war production, hypertrophy of the state apparatus, gigantic financial costs, advertising etc. These costs are incomparably greater than the costs of circulation and growth typical of the ascendant period. However, in the mid-1970s, this permanent and structural inflation became galloping inflation because of the accumulation of public deficits brought about by the uncontrolled emission of money without any counter-part.


The evolution of the world economy in the second half of the 1970s oscillated between recovery and recession. Each effort to revive the economy lead to the outburst of inflation (which the capitalists called "overbeating"), which meant that governments bad to impose a "freeze" on growth by increasing interest rates, sudden reductions in the rate of circulation of money, etc, which led to recession. This clearly demonstrated the general impasse of the capitalist economy due to over-production.

The balance-sheet of the 1970s

After this brief description of economic evolution during the 1970s, we can draw some conclusions at two levels:


* the economic situation,


* the decline in working class living conditions .


The general economic situation


1. Levels of production were high. The average level of growth in production during the decade in the 24 countries of the OECD was 4.1 %. During the 1972-73 boom it reached 8%, and even 10% in Japan. Nevertheless, it is possible to see a clear tendency towards decline in comparison to the previous decade:

Average levels of production in the countries of the OECD







2. Massive lending to the Third World allowed the exploitation and incorporation into the world market of the last, although very small, pre-capitalist vestiges. We can thus say that the world market underwent a very limited expansion, as it bad during the reconstruction period after 1945.


3. The whole productive sector grew, including the traditional sectors such as ship-building, mining, iron and steel that experienced a great expansion between 1972-78. However, this expansion was their swan song: from 1978 the signs of increasing market saturation led to the infamous "restructuring" (euphemism concealing massive lay-offs) that began in 1979 and made their mark in the following decade.


4. The phases of recovery affected the whole world economy more or less evenly. With a few exceptions (a significant example was the decline in production in Argentina, Chile, Uruguay) all countries benefited from the increase of production. There were no countries "disconnected" from recovery, such a we saw in the 1980s.

5.The price of raw materials maintained a constant tendency to increase, which peaked with the speculative oil boom (between 1972 and 19 after which the tendency began to reverse.


6. Armaments production took off in relation to the 1960 and increased spectacularly from 1976.


7. From 1975 levels of debt accelerated strongly. although in comparison to what was to come they were minuscule. They were characterised by:


* fairly moderate growth in the central countries (although from 1977 there was a spectacular . e in the United States during the Carter administration);

* but a massive increase in the countries of the Third World.

"Underdeveloped" countries' debts
(source: World Bank)


$70,000 M


$170,000 M


$580,000 M

8. The banking system was solid: loans (for consumption and investment, to families, businesses, and institutions) were subject to a series of very rigorous controls and guarantee .


9. Speculation was still a limited phenomenon although the feverish speculation in oil (the famous petrodollars) heralded a tendency towards its generalisation in the following decade.


The situation of the working class


1. Unemployment remained relatively limited although it grew constantly from 1975. In the 24 OECD countries, there were 7 million unemployed in 1968; by 1979, the figure had risen to 18 million.


2. There were significant nominal increases in wages (these reached 20-25 %) and in countries like Italy sliding wage scales index-linked to inflation were introduced. This growth in wages was misleading since globally wages lost ground faced with galloping inflation

3. Permanent jobs massively predominated and in the most important countries there was a strong growth in public sector jobs.


4. Social spending, subsidies, social security systems, housing, health and education benefits, all grew significantly.


5. During the decade, the decline in living conditions was real but fairly smooth. The bourgeoisie, alerted by the historic rebirth of the class struggle and enjoying considerable room for manoeuvre on the economic terrain, preferred to concentrate its attacks on the weakest sectors of the national capital rather than on the working class. The decade of the 1970's was the "years of illusion" characterised by the political dynamic of "the left in power".


In the next part of this article we will draw a balance-sheet of the 1980s and 1990s which will allow us on the one hand to evaluate the violent degradation of the economy and the situation of the working class and on the other to comprehend more clearly the sombre perspectives of the new descent towards the inferno, that the period opened up by August 1997 contains.



[1] There are essentially two theories as to the cause of the crisis: the saturation of the world market and the tendency for the rate of profit to fall. See in relation to this question the articles in International Review nos. 13, 16, 23, 29, 30,76 and 83.


[2] See International Review no.62 "The decomposition of capitalism".


[3] See International Review no.21 "On state capitalism" and International Review No 23 "The proletariat in decadent capitalism".


[4] See International Review no.31 "The proletariat of Western Europe at the centre of the class struggle".


[5] See the article on the international situation in International Review no. 1.

[6] See International Review no.56.


[7] See the Report we published in International Review no.92.


[8] See our pamphlet The decadence of capitalism

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