The most serious economic crisis in the history of capitalism

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The bourgeoisie is afraid, very afraid. Between August and October, a real gale of panic was blowing over the world economy. The noisy declarations of the politicians and economists were testimony to it. "At the edge of the abyss", "An economic Pearl Harbor" "A Tsunami on the way", "A September 11 for finance"... only the allusion to the Titanic was missing[1].

It has to be said that the biggest banks on the planet were about to go bust one after another and that the stock exchanges were plummeting, losing $32,000 billion since January 2008, or the equivalent of two years annual US production. Iceland's stock exchange fell by 94% and Moscow's by 71%. 

In the end, the bourgeoisie, going from ‘salvage' plan to ‘recovery' plan, managed to avoid the total paralysis of its economy. Does this mean that the worst is now behind us? Certainly not! The recession we are only just entering is going to be the most devastating since the Great Depression of 1929.

The economists admit it clearly: the present "conjuncture" is "the most difficult for several decades", as the HSBC "the biggest bank in the world" put it on 4th August[2].

"We are facing the most difficult economic and monetary policy environments ever seen" said the president of the American Federal Reserve, going one better, on 22nd August[3]

As for George W Bush televised speech on 24 September?

"We're in the midst of a serious financial crisis....The government's top economic experts warn that without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold: more banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically. And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs. Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And ultimately, our country could experience a long and painful recession".

And now this "distressing scenario" of a "long and painful recession" is coming true, hitting not just the "American people" but the workers of the whole world.

A brutal recession...

Since the famous sub-prime crisis of the summer of 2007, bad news about the economy has not stopped coming.

The hecatomb in the banking sector for the year 2008 alone is impressive. There are those that have been taken over by a rival, propped up by a central bank or quite simply nationalised: Northern Rock (the eighth British bank); Bear Sterns (the fifth bank on Wall Street); Freddy Mac and Fannie Mae (two American loan companies that together weigh about $850 billion); Merril Lynch (another American star); HBOS (Scotland's second bank); AIG (American International Group, one of the world's biggest insurers) and Dexia (the Luxemburg, Belgian and French finance company). Shattering, historical bankruptcies have also marked this year of crisis. In July, Indymac, one of the biggest American loan companies, was put under the control of the Federal authorities. It was the most important American banking establishment to go bust for 24 years. But its record didn't last long. A few days later, Lehman Brothers, the fourth bank in America, also declared bankruptcy. The sum total of its debts amounted to $613 billion. Bang went the record! The biggest failure of an American bank up until then, the Continental Illinois in 1984, was six times smaller ($40 billion). Two weeks after that, another record! Now it was the turn of the Washington Mutual (WaMu), the most important savings company in the USA, to close its doors.

After this heart attack at the very centre of capitalism, the banking sector, the health of the whole body began to vacillate and decline: now the "real economy" was brutally struck. According to the National Bureau of Economic Research, the USA has officially been in recession since December 2007. Nouriel Roubini, now the most respected economist on Wall Street, thinks that a contraction of economic activity in America of around 5% in 2009 and again 5% in 2010 is probable![4] We don't know whether this will be the case, but the mere fact that one of the most reputable economists on the planet can envisage such a catastrophic scenario reveals the deep anxiety of the bourgeoisie. The Organisation for Economic Cooperation and Development (OECD) expects the whole of Europe to be in recession in 2009. For Germany, the Deutsche Bank foresees a drop in GNP of up to 4%![5] To get an idea of the scale of such a recession, you have to remember that the worst year since the Second World War up to now was 1975, when Germany's GNP fell by ‘only' 0.9%. No continent is spared. Japan is already in recession and even China, that capitalist Eldorado, is not escaping the brutal slow-down. Result: demand has collapsed to the point where prices, including that of oil, are tumbling. In short, the world economy is doing very badly.

....and a wave of pauperisation unprecedented since the 1930s

The first victim of this crisis is obviously the proletariat. In the USA, the deterioration of living conditions has been particularly spectacular. 2.8 million workers, incapable of repaying their debts, have lost their homes since the summer of 2007. According to the Association of Mortgage Banks nearly one out of ten mortgage-paying Americans is under the threat of eviction. And this phenomenon is beginning to hit Europe, especially Spain and Britain. 

Lay-offs are also multiplying. In Japan, Sony has announced an unprecedented plan of 16,000 job-cuts, 8,000 of them on permanent contracts. This company, an emblem of Japanese industry, has never before laid off people on permanent contract. With the housing crisis, the building sector is slowing right down. The Spanish building trade expects to lose 900,000 employees between now and 2010! For the banks, it's a veritable massacre. Citigroup, one of the biggest banks in the world, is going to get rid of 50,000 jobs having already shed 23,000 since the beginning of 2008. In 2008, for this sector alone, 260,000 jobs have been cut in the US and Britain. On average, one job in finance generates four directly linked jobs. The collapse of the financial organisms therefore means unemployment for hundreds of thousands of working class families. Another sector that has been hit very hard is the car industry. Sales of vehicles have crashed everywhere this autumn by over 30%. Renault, France's foremost car manufacturer, has more or less stopped production since mid-November: no more cars are coming off its assembly lines, and this on top of the fact that these lines had already been running at only 54% of their capacity for months. Toyota is going to cut 3000 out of 6000 temporary jobs in its Japanese factories. But once again the most alarming news comes from the USA: the famous Big Three of Detroit (General Motors, Ford and Chrysler) are on the verge of bankruptcy. The hand-out of $15 billion from the American state won't be enough to keep them out of it for long[6] (the Big Three were actually asking for $34 billion). Massive restructuring will be taking place in the months ahead. Between 2.3 and 3 million jobs are under threat. And in the US workers who are laid off lose their health insurance and their pensions.

The inexorable consequence of this massive destruction of jobs is obviously the explosion of unemployment. In Ireland, "the economic model of the last decade", the number of unemployed has more than doubled in a year, which represents the highest increase ever recorded! Spain finished the year with 3.13 million unemployed, more than a million more than in 2007[7]. In the US, 2.6 million jobs were axed in 2008, something never seen since 1945[8].The end of the year was particularly disastrous with more than 1.1 million jobs lost during November and December. At this rate, there could be another 3 or 4 million unemployed between now and the summer of 2009.

And for those who survive, those who see their colleagues being laid off, the future is "work much more to earn less"[9]. Thus, according to the latest report by the International Labour Organisation, entitled ‘World report on wages 2008/9', "For the 1.5 billion wage earners in the world, difficult times are ahead....the world economic crisis will lead to painful cuts in wage levels".

How the bourgeoisie explains this crisis

The economic mechanisms which have engendered the current recession are relatively well known. Television has provided us with all sorts of reports which claim to give us all the background to the affair. To keep it simple, for years, the consumption of "American households" (in other words, working class families) has been supported artificially by all sorts of credits, in particular one which met with huge success: risky mortgage loans or ‘subprimes'. The banks, the financial organs, the pension funds...all gave out loans without any concern for the real capacity of these workers to pay them back, as long as they had a mortgage. The worst that could happen, they thought, was that they would be repaid by the sale of houses by debtors who couldn't repay their debts. This had a snowball effect: the more the workers borrowed - above all to buy their houses - the more the price of houses went up; the more house prices went up, the more they could borrow. All the speculators on the planet then joined the dance: they rushed into buying properties, which made them even more expensive and they then started selling each other these subprimes through the mechanism of ‘securitisation' (i .e. the transformation of loans into assets exchangeable on the world market like other shares). Over the decade, the speculative bubble grew to huge proportions; all the financial institutions on the planet were involved in it to the tune of trillions of dollars. Put another way, households which were known to be insolvent became the world economy's goose that laid the golden eggs.

Obviously, in the end the real economy forced this idyllic world to face reality. In ‘real life', all these hyper-indebted workers were also facing rising living costs and frozen wages, unemployment, falling unemployment benefits....In a word, they were getting considerably poorer, so that a growing number of them were less and capable of meeting their repayments. The capitalists then started to forcibly eject the bad debtors so that their houses could be sold...but there were so many houses coming onto the market[10] that prices began to come down and...hey presto, in the sunshine of summer 2007, the whole vast snowball melted away! The banks found themselves with hundreds of thousands of insolvent debtors and all those houses worth nothing. It was bankruptcy, the crash. 

Summarised like this, the whole thing seems absurd. Loaning money to people who don't have the means to pay you back goes against capitalist common sense. And yet the world economy based the essentials of its growth over the last decade on this nonsense. The question is then why? Why such madness? The answer given us by the journalists, the politicians, the economists is simple and unanimous: It's the fault of the speculators! It's the fault of greedy bosses who behave like thugs! It's the fault of irresponsible bankers! Today, everyone is joining the traditional choir of the left and the extreme left, singing about the evils of ‘deregulation' and ‘neo-liberalism' (a kind of unbridled liberalism) and calling for a return to state intervention....which shows up the real nature of the ‘anti-capitalist' proposals of the left and the extreme left. Thus France's right-wing president Sarkozy proclaims that "capitalism must found itself anew on an ethical basis". Germany's Angela Merkel insults the speculators. Spain's ‘socialist' Zapatero points an accusing finger at the "market fundamentalists". And Chavez, the illustrious knight of ‘21st century socialism', commenting on the emergency nationalisations pushed through by Bush, told us that "comrade Bush is about to take certain measures which are the same as those taken by comrade Lenin"[11]. They all tell us that hope today lies in ‘another kind of capitalism', more human, more moral... more state-controlled!

Lies! In the mouths of all these politicians, everything is false, including their so-called explanation of the recession. 

Today's economic catastrophe is the fruit of a hundred years of decadence

In reality, it's the state itself which was the first to organise this generalised household debt. To provide an artificial support to the economy, the state opened the floodgates of credit by reducing the lending rates of the central banks. By giving out cheap loans, sometimes at less than 1%, the flow of money was greatly increased. World debt was thus a deliberate choice of the bourgeoisie and not the result of some kind of ‘deregulation'. How else are we to understand Bush's declaration in the aftermath of September 11 2002 when, facing the beginnings of a recession, he called on the workers to "be good patriots, consume". The American president was giving a clear message to the whole financial sphere: multiply consumer credit or the national economy would fold![12]

In fact, capitalism has been surviving on credit for decades. The graph in figure 1[13], which presents the evolution of total US debt (i.e. the combined debt of state, companies and households) since 1920, speaks for itself. To understand the origins of this phenomenon and go beyond the simplistic and fraudulent story about the ‘madness of the bankers, speculators and bosses', we have to go to the "great secret of modern society: the creation of surplus value", to use Marx's words[14]

Figure 1: Evolution of total US debt since 1920

Capitalism carries within itself, and has done since its birth, a sort of congenital illness: overproduction. It produces more commodities than its market can absorb. Why? Let's take a totally theoretical example: a workers on an assembly line or in front of a computer and who, at the end of the month, is paid 800 euros. In fact, he has produced not the equivalent of 800 euros, which he receives, but a value of 1200 euros. He has carried out unpaid labour, or, to put it another way, he has produced surplus value. What does the capitalist do with these 400 euros he has stolen from the worker (providing that that he manages to sell his commodities)? He puts some of it in his pocket, let's say 150 euros, and the remaining 250 euros he invests in his company's capital, most often by buying more modern machinery etc. But why does the capitalist proceed in this way? Because he has no choice. Capitalism is a competitive system; you have to sell your goods more cheaply than the rival selling the same products. As a result, the boss is forced not only to lower his production costs, i.e. wages, [15], but also to use a growing part of the unpaid labour he has extracted for reinvestment in more efficient machines[16] in order to increase productivity. If he doesn't do this, he can't modernise, and sooner or later, his rival, who has done so, will be able to sell more cheaply and conquer the market. The capitalist system is thus affected by a contradictory phenomenon: by not paying back the workers the equivalent of what they have supplied to him as labour, and by forcing the bosses to give up consuming a large part of the profit extorted in this way, the system produces more value than it can distribute. Neither the workers nor the capitalists put together can ever absorb all the commodities produced. Who is going to consume this surplus of commodities? The system has to find outlets outside the framework of capitalist production - the extra-capitalist markets, in the sense of economies than don't function in a capitalist manner.

This is why in the 18th and above all the 19th century, capitalism conquered the globe: it had to find new markets all the time, in Asia, in Africa, in South America, to realise profit by selling its surplus commodities, on pain of seeing its economy paralysed. And this is what regularly happened when it could not make new conquests quickly enough. The Communist Manifesto of 1848 contains a masterly description of this kind of crisis:

"In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity - the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce".

Nevertheless, in this period, because capitalism was a rising system, because it really could conquer new territories, each crisis gave way to a new phase of prosperity:

"The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere (...) The cheap prices of commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians' intensely obstinate hatred of foreigners to capitulate. It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilisation into their midst, i.e., to become bourgeois themselves. In one word, it creates a world after its own image".

But already Marx could see in these periodic crises something more than just an eternal cycle which would always lead to a new phase of prosperity. He saw them as the expression of profound contradictions which would undermine capitalism. By conquering new markets, the bourgeoisie was "paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented". Or, as he put it in Wage Labour and Capital: crises "become more frequent and more violent, if for no other reason, than for this alone, that in the same measure in which the mass of products grows, and there the needs for extensive markets, in the same measure does the world market shrink ever more, and ever fewer markets remain to be exploited, since every previous crisis has subjected to the commerce of the world a hitherto unconquered or but superficially exploited market".

Throughout the 18th and 19th centuries, the main capitalist powers were engaged in a race to conquer the world; they increasingly divided the planet up into colonies and created veritable empires. From time to time, they found themselves in dispute over the same territory; a short war broke out, and the loser quickly moved on to find another corner of the earth to conquer. But by the beginning of the 20th century, the great powers had completed the domination of the world. It was no longer a matter of scrambling for new areas of Africa, Asia or America, but of engaging in a pitiless struggle to defend their spheres of influence and to seize areas from their rivals at the barrel of a gun. This was a real question of survival for the capitalist nations: they had to be able to pour enough of their overproduction into non-capitalist markets. It was thus not by chance that it was Germany, which had very few colonies and was dependent on the good will of the British Empire to trade in the areas under its control (a dependence which is intolerable for any national bourgeoisie) proved to be the most aggressive power and was the one which unleashed the First World War in 1914. This butchery cost more than 11 million lives, caused terrible suffering and inflicted moral and psychological traumas on entire generations. This horror announced the opening of a new epoch, the most barbaric epoch in history. Having gone past its zenith, capitalism now entered its period of decadence. The 1929 crash strikingly confirmed this.

And yet, after more than a hundred years of slow agony, this system is still standing - ill, certainly, but still alive. How has it survived? Why has its body not been totally paralysed by the poison of overproduction? It is here that the resort to debt enters into the picture. The world economy has managed to avoid a shattering collapse by resorting more and more to debt.

As Figure 1 shows, since the beginning of the 20th century, the total American debt has literally exploded, starting in the 1920s. Households, enterprises and banks crumpled beneath a pile of debt. And the brutal fall in the debt curve in the 1930s and 40s is in fact deceptive. The Great Depression of the 1930s represented the first great economic crisis of decadence. The bourgeoisie was not yet prepared for such a shock. At first it did not respond or responded badly. By closing off frontiers (through protectionism), it accentuated overproduction and the toxins did their worst. Between 1929 and 1933, America's industrial production fell by 50%[17]; unemployment hit 13 million workers and the level of poverty was truly terrible. Two million Americans were made homeless[18]. Initially, the government didn't come to the aid of the financial sector: of the 29,000 banks registered in 1921, there were only 12,000 left at the end of March 1933; and this hecatomb continued until 1939[19]. All these bankruptcies meant a pure and simple disappearance of mountains of debt[20]. On the other hand, what isn't shown on this graph is the growth of public debt. After four years of doing nothing, the American state finally began to take measures: this was Roosevelt's New Deal. And what did this plan, so talked about today, actually consist of? It was a policy of great works based on... a massive, unprecedented increase in state debt (from $17 billion in 1929, the public debt rose to $40 billion by 1939)[21].

After that, the bourgeoisie drew the lessons of this misadventure. At the end of the Second World War it organised monetary and financial institutions on an international level (via the Bretton Woods conference) and above all it systematised the resort to credit. Thus, having hit a low point in 1953-54 and despite the short calm in the years 1950 and 1960[22], total American debt began again slowly but surely to increase from the mid-50s on.  And when the crisis came back on the scene in 1967, this time the ruling class didn't wait four years before doing something. It immediately resorted to credit. These past 40 years can in fact be summarised as a succession of crises and and an exponential rise in world debt. In the USA, there were officially recessions in 1969, 1973, 1980, 1981, 1990 and 2001[23]. The solution of the American bourgeoisie in the face of these difficulties is also visible on the graph: the axis of debt goes up sharply after 1973 and even more sharply during the 1990s. All the bourgeoisies in the world have acted in the same way.

But debt is not a magical solution. Figure 2[24] shows that, since 1966, debt has been less and less effective in creating growth[25]. It's a vicious circle: the capitalists produce more commodities than the market can normally absorb; next, credit creates an artificial market; the capitalists then sell their commodities and reinvest their profits in production and... then you need more credit to sell the new commodities. Not only do debts accumulate, but with each new cycle, you need more and more debts to maintain an identical rate of growth (since production has been enlarged). Furthermore, an increasingly large part of all this credit is never injected into the circuit of production but disappears immediately into the abyss of deficits. Over-indebted households often take out new loans to pay back their old debts. The state, companies and banks work in the same way. Finally, over the past 20 years, with the ‘real economy' in perpetual crisis, a growing part of the money created goes to fuel speculative bubbles (the Internet bubble, the housing bubble, etc...)[26]. It is more profitable and in the end less risky to speculate on the stock exchange than to invest in the production of commodities which will be extremely difficult to sell. Today five times more money circulates in the stock exchange than in production[27].

Figure 2: Weakening effect of the growth of debt on the growth of GNP

But this headlong flight into debt is not simply less and less effective, it inexorably and systematically results in a devastating economic crisis. Capital can't simply pull money out of a hat. It is the ABC of commerce: every debt must one day be paid back or the lender will get into serious difficulties and eventually bankruptcy. We then go back to the beginning: capital can only gain time in the face of its historic crisis. Worse: by putting off the effect of the crisis till tomorrow, it is paving the way for even more violent economic convulsions. This is exactly what is happening to capitalism today.

Can the state save the capitalist economy?

When an individual becomes bankrupt, he loses everything and is thrown out onto the street. A company locks its gates. But a state? Can a state become bankrupt? After all, we have never seen a state shut up shop. Not exactly. But being in cessation of payment, yes!

In 1982, 14 deeply indebted African countries were forced to officially declare themselves in cessation of payment. In the 1990s, countries in South America and Russia were also in default. More recently, in 2001, Argentina crumbled in its turn. Concretely, these states did not cease existing, and the national economy didn't just stop either. On the other hand, each time it happened there was a sort of economic earthquake: the value of the national currency fell, the lenders (in general, other states) lost all or part of their investment, and above all the state drastically reduced its expenses by laying off a large number of civil servants and by temporarily ceasing to pay those who remained. 

Today, numerous countries are at the edge of this abyss: Ecuador, Iceland, Ukraine, Serbia, Estonia... But how goes it with the great powers? The governor of California, Arnold Schwarzenegger, declared at the end of December that his state was in a "fiscal state of emergency". The richest of all the American states, the "Golden State", was ready to lay off 235,000 of its public employees (and those who are left are going to have to take two days of unpaid holiday a month starting on 1st February). Presenting this new budget, the ex-Hollywood star warned that "everyone will have to agree to make sacrifices". This is a very powerful symbol of the profound economic difficulties of the world's leading power. We are still far away from a cessation of payments by the American state but this example shows clearly that the great powers' economic room for manoeuvre is today very limited. World debt seems to be reaching saturation point (it stood at $60,000 billion in 2007 and has swollen by several trillion dollars since); obliged to continue in the same direction, the bourgeoisie is thus going to provoke devastating economic shocks. The FED has lowered lending rates for 2009 to 0.25% for the first time since its creation in 1913. The American state is thus loaning money almost for nothing (and even at a loss if you take inflation into account). All the economies of the planet are calling for a "New Deal", dreaming about Obama as the new Roosevelt, capable of re-launching the economy, like in 1933, through an immense programme of grand public works financed... by credit[28]. The bourgeoisie has been regularly launching plans based on state debt equivalent to the New Deal since 1967, with no real success. And the problem is that such a policy of forward flight can lead to the collapse of the dollar. Today there are many countries who doubt the ability of the US to repay their loans and are being tempted to withdraw all their investments. This is the case with China which, at the end of 2008, threatened, in very diplomatic language, to stop propping up the American economy by buying Treasury Bonds: "Every error about the gravity of the crisis will cause problems both for lenders and borrowers. The country's apparently growing appetite for American Treasury Bonds does not mean that they will remain a profitable investment in the long term or that the American government will continue to depend on foreign capital". And this, in a few words, is how China threatened the American state with cutting off the flow of Chinese dollars which has been feeding the US economy for several years. If China carried out its threat[29], the international currency chaos that would ensue would be apocalyptic and the ravages on working class living standards gigantic. But it's not only China which is beginning to have doubts: on Wednesday 10th December, for the first time in history, the American state had all sorts of difficulties in finding a loan of $28 billion. And since the coffers of all the great powers are empty, staggering under the weight of interminable debts and ailing economies, on the same day the same problem hit the German state: for the first time since the 1920s, it had the greatest difficulty in finding anyone willing to loan it 7 billion euros.

No doubt about it: debt, whether household, company or state, is just a palliative and it doesn't cure capitalism of the disease of overproduction. At best it allows the economy to get out of jail but only by preparing ever more violent crises. And yet the bourgeoisie is going to carry on with this desperate policy because it has no choice, as was shown, for the umpteenth time, by Angela Merkel's declaration on 8th November 2008 to the international conference in Paris: "There is no other way of struggling against the crisis except by accumulating a mountain of debts", or again by the IMF's chief economist Olivier Blanchard's latest statement: "we are in the presence of a crisis of exceptional breadth whose main component is a collapse in demand (...) It is imperative to re-launch private demand if we want to prevent the recession turning into a Great Depression". How is this to come about? "Through an increase in public expenditure".   

But if not through these recovery plans, can the state still be the saviour by nationalising a good part of the economy, such as the banks or the car industry? Once again, no. First, and contrary to the traditional lies of the left and the extreme left, nationalisations have never been good news for the working class. At the end of the Second World War, there was a big wave of nationalisations aimed at putting the apparatus of production on its feet again after all the destruction and at increasing the tempo of work. We should not forget the words that Thorez, General Secretary of the French Communist Party, and then vice president in the De Gaulle government, threw at the working class in France, especially those in the nationalised industries: "If miners have to die at their post, their wives will replace them", or "Roll up your sleeves for national reconstruction!" or again "strikes are the weapon of the trusts". Welcome to the wonderful world of nationalised enterprises! There is nothing surprising about any of this. Since the experience of the Paris Commune in 1871, revolutionary communists have always shown the viscerally anti-proletarian role of the state:   

"The modern state (...) is essentially a capitalist machine, the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over the productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The capitalist relation is not done away with. It is rather brought to a head.".[30]

The new wave of nationalisations will bring no benefit to the working class. Nor will it allow the bourgeoisie to return to long-term growth. On the contrary! These nationalisations presage ever-more violent economic storms on the horizon. In 1929, the American banks that went bust took with them the savings of a large part of the American population, plunging millions of workers into poverty. After that, to avoid such a debacle happening again, the banking system was divided in two: on the one hand, business banks which financed companies and worked in all kinds of financial operations; on the other hand, savings banks which took the money of their customers and put them in relatively safe investments. Now, swept away by the wave of bankruptcies in 2008, these American business banks no longer exist. The American financial system has gone back to what it was like before 24th October 1929! When the next storm breaks, all the banks which have so far been kept going thanks to partial or complete nationalisations risk disappearing, but this time taking with them the meagre savings of working class families. Today, if the bourgeoisie nationalises, it's not to put through a new economic recovery plan but to avoid the immediate insolvency of the mastodons of finance and industry. It's a matter of avoiding the worst and saving the furniture[31].

The mountain of debts that has been building up over the last four decades has become a veritable Everest and nothing can now prevent capital from sliding down its slopes. The economy is truly in a disastrous state. That doesn't mean that capitalism will collapse overnight. The bourgeoisie will not let its world disappear without reacting: it will try desperately and with all possible means at its disposal to prolong the agony of its system, without concern for the ills that this will inflict on humanity. Its mad flight into debt will continue and here and there may still be short moments of growth. But it is certain is that the historic crisis of capitalism is changing its rhythm After forty years of slowly descending into hell, the future will be one of violent convulsions, of recurrent economic spasms shaking not only the countries of the Third World but also the US, Europe, Asia...[32]

The slogan of the Communist International in 1919 is more relevant today than ever: "for humanity to survive, capitalism must perish!" 

Mehdi 10.01.09 

[1] Respectively: Paul Krugman (the last Nobel Prize winner in economics); Warren Buffet (an American investor, nicknamed the ‘oracle of Omaha', so much is the opinion of this billionaire from small town Nebraska respected in the world of high finance); Jacques Attali (economic adviser to French president Nicolas Sarkozy) and Laurence Parisot (president of the French bosses' association.

[2] Libération 4.08.08

[3] Le Monde, 22.08.08

[4] Source :

[5] Les Echos, 05.12.08

[6] This money was found in the funds of the Paulson plan, which is already insufficient for the banking sector. The American bourgeoisie is obliged to "robbing Peter to pay Paul", which shows the disastrous state of the finances of the world's leading power.

[7] Les Echos, 08.01.09

[8] According to the report published on 9 January by the American Labour Department (Les Echos, 09.01.09)

[9] In France, President Sarkozy waged a campaign in 2007 whose main slogan was "Work more to earn more!" (sic!)

[10] In 2007, nearly three million American households were defaulting on their payments (‘Subprime Mortgage Foreclosures by the Numbers',

[11] For once, we agree with Chavez. Bush is indeed his comrade. Even if they have been engaged in a bitter imperialist battle between their two countries, they are nonetheless comrades when it comes to defending capitalism and the privileges of their class... the bourgeoisie

[12] Today Alan Greenspan, the former president of the FED and the conductor of the whole orchestra of economic credit, is being lynched by all the economists and doctors of the dismal science. This fine crowd has short memories and forget that not long ago they were calling him the ‘financial guru'.

[13] Source :

[14] Marx, Capital Vol 1

[15] Or in other words, variable capital

[16] Fixed capital

[17] A Kaspi, Franklin Roosevelt, Paris, Fayard, 1988, p 20

[18] These figures are all the more significant given that the American population at the time was only 120 million. Source: Lester V Chandler, America's Great Depression 1929-1941, New York, Harper and Row, 1970, p24f

[19] According to Frédéric Valloire, in Valeurs Actuelles 15.02.08

[20] To complete the picture, this fall in debt can also be explained by a complex economic mechanism: monetary creation. The New Deal was not financed fully by debt but simply by creating money. Thus on 12 May 1933, the President was authorised to increase the credit of the federal banks by three billion dollars and to print bills without any counterpart in gold to the tune of another $3 billion. On 22nd October of the same year, the dollar was devalued 50% in relation to gold. All this explains the relative moderation of debt levels.


[22] From 1950 to 1967, capitalism went through a phase of major growth, sometimes known as the ‘Golden Age'. The aim of this article is not to analyse the causes of this parenthesis in the economic swamp of the 20th century. There is a debate going on in the ICC in order to reach a better understanding of what underlay this period, a debate which we have begun to publish in our press (see ‘Internal debate in the ICC: the causes in the period of prosperity after the Second World War in International Review n°133, second quarter of 2008). We strongly encourage all our readers to participate in this discussion at our public meetings, by letter or by e-mail

[23] Source:

[24] Source :

[25] In 1966, a dollar of supplementary debt produced another $0.80 of wealth, whereas in 2007 the same dollar only created an extra $0.20 of GNP

[26] Shares and housing are not included in GNP

[27] Thus, contrary to everything the economists, journalists and other experts tell us, this ‘speculative madness' is the product of the crisis, not the other way round!

[28] Just after this article was written, Obama announced his long-awaited recovery plan. In the words of the economists it was "rather disappointing": $775 billion would be released, allowing a "fiscal gift" of $1,000 dollars to every American household (95% of households were concerned) in order to encourage spending, and to launch a programme of grand public works in the sphere of energy, infrastructure and schools. Obama promises that this plan will create three million jobs in the course of the next few years. Since the American economy is currently destroying over 500,000 jobs a month, this new New Deal (even if its most hopeful expectations are fulfilled, which does not seem very likely) is thus far below what is required.

[29] In itself, this threat reveals the impasse and the contradictions facing the world economy. For China, massively selling its dollars would be like cutting off the branch on which it's sitting since the USA is the main outlet for its commodities. This is why up till now it has continued to help prop up the American economy. But at the same time, it is aware that the branch is rotten, and it has no desire to be sitting on it when it cracks.

[30] Engels, 1878 Anti-Dühring

[31] In doing so, it is laying the ground for the development of the class struggle. By becoming their official boss, the state confronts the workers' struggle directly. In the 1980s, the big wave of privatisations (under Thatcher in Britain for example) brought an extra difficulty for the struggle. Not only were the workers called on by the unions to fight to save the nationalised industries, in other words, to be exploited by one boss (the state) instead of another (private), but also they no longer confronted the same boss (the state) but a series of different private bosses. Their struggles were thus often dispersed and ineffective. In the future, by contrast, the ground will be more fertile for a united workers' struggle against the state.

[32] Since the economic terrain is so unstable, it's difficult to see what will be the next bomb to go off. But in the pages of the economic journals, a term often crops up in the worried jottings of the economic experts: CDS. A CDS - ‘Credit Default Swap' - is a sort of insurance which a financial establishment uses to protect itself from the risk of a default in payment. The total market in CDS was estimated at $60 trillion in 2008. In other words if there were to be a CDS crisis on the model of the sub-prime crisis it would be absolutely devastating. It would swallow up all the American pension funds, and thus shatter workers' retirement plans.

Recent and ongoing: