We begin today the publication of the
IMT’s analysis of the world situation. This is a draft document that is
the basis of discussion within the Tendency and will be voted on with
possible amendments at this year’s world congress of the IMT. Part One
deals with the general crisis of world capitalism, to be followed by an
analysis of specific areas of the world.
We begin today the publication of the
IMT’s analysis of the world situation. This is a draft document that is
the basis of discussion within the Tendency and will be voted on with
possible amendments at this year’s world congress of the IMT. Part One
deals with the general crisis of world capitalism, to be followed by an
analysis of specific areas of the world.
The
situation is moving at lightning speed on a world scale. After the Arab
Revolution, events followed in quick succession: the movement of the indignados in
Spain; the wave of strikes and demonstrations in Greece; the riots in
Britain; the movement in Wisconsin and the Occupy movement in the U.S.;
the overthrow of Gaddafi; the fall of Papandreou and Berlusconi; all
these are symptoms of the present epoch.
These sudden sharp turns indicate that something fundamental has
changed in the entire situation. Events are beginning to impinge upon
the consciousness of ever-broader layers of the population. The ruling
class is increasingly divided and disoriented by the depth of a crisis
they never expected and have no idea how to solve. Suddenly they find
themselves unable to maintain control of society by the old methods.
Instability is the predominant element in the equation at all levels:
economic, financial, social and political. Political parties are in
crisis. Governments and leaders rise and fall without finding any way
out of the impasse.
Most important of all, the working class has recovered from the
initial shock of the crisis and is moving into action. The advanced
elements of the workers and youth are beginning to draw revolutionary
conclusions. All these symptoms mean that we are entering the opening
chapter of world revolution. This will unfold over years, possibly
decades, with ebbs and flows, advances and retreats; a period of wars,
revolution and counterrevolution. This is an expression of the fact that
capitalism has exhausted its potential and has entered a phase of
decline.
This general observation, however, does not exclude the possibility
of certain periods of recovery. Even in the period 1929-39 there were
cyclical variations, but the general tendency will be in the direction
of longer and deeper recessions, interrupted by shallow and ephemeral
booms. The “recovery” that followed the slump of 2008-9 is indicative of
this tendency. It is the weakest recovery in history—the weakest since
1830, according to the bourgeois economists—and merely paves the way for
an even deeper slump.
This reflects the fact that the capitalist system has arrived at a
dead end. Capitalism has been piling up contradictions for decades. At
bottom, the crisis is a manifestation of the rebellion of the productive
forces against the narrow straitjacket of the capitalist system. The
main barriers that are blocking the development of civilization are, on
the one hand, private ownership of the means of production and on the
other hand, the nation state.
For a period, this contradiction was partially and temporarily
resolved by an unprecedented expansion of world trade (“globalization”).
For the first time since 1917 every corner of the globe is united in
one vast world market. However, the contradictions of capitalism were
not abolished by this, but merely reproduced on a vast and unprecedented
scale. Now the bill is being presented.
“Globalization” now manifests itself as a global crisis of
capitalism. The tremendous productive capacity that has been built up on
a world scale cannot be used. This crisis has no real parallel in
history. The scale of it is far greater than any crisis in the past. The
strategists of capital are like the ancient mariners who have entered
an unexplored ocean with neither map nor compass. There is now a general
crisis of confidence in the ranks of the bourgeoisie internationally.
The bourgeoisie postponed the evil day by using up the mechanisms
that would normally be used to get out of a slump. Now this is
impossible. The banks are not lending, the capitalists are not
investing, the economies are stagnant, and unemployment is growing,
indicating that the feeble recovery after 2009 will at a certain stage
collapse into a new slump.
The crisis of European capitalism finds its mirror image in the
fluctuations of the bond markets that demand an increase in risk
premiums for one country after another. Greece, Ireland, Portugal,
Spain, and Italy have fallen one by one into the trap of the market,
which condemns them to pay usurious rates of interest on their already
swollen national debt. By so doing the “markets” render a difficult
situation completely impossible.
Now the international rating organizations are threatening to
downgrade France and Germany, and in fact the whole of the eurozone. It
is a kind of deadly contagion that has infected all the eurozone’s big
countries. The constant turmoil on world markets shows the nervousness
of the bourgeoisie, which at times borders on panic. They are like a
thermometer that measures the intensity of a fever. The bourgeois
economists stand around the bed of the patient and shake their heads,
but have no effective medicine to prescribe.
The panic, which is reflected in the wild gyrations of the stock
exchanges and bond markets, has spread rapidly from Europe to America.
In vain, Merkel and the others rail against the irresponsibility of the
rating agencies. The latter reply that they are merely doing their job:
they are accurately reflecting the general anxiety about the global
economy and lack of confidence in the politicians to address it. But in
so doing, they give a further push to economies that are tottering on
the brink of the abyss.
<h4 >Change of epoch
Lenin explained that there was no such thing as an impossible
situation for capitalism. Until it is overthrown by the conscious
exertions of the working class, capitalism can recover from even the
deepest crisis. As a general proposition, this is undoubtedly correct.
But this general affirmation tells us nothing about the concrete
situation we are now facing, or the likely outcome. We must analyse the
historical moment concretely, taking into consideration where we have
come from.
In the history of capitalism definite periods can be observed. For
example, the period before the First World War was a long period of
economic upswing that lasted right up until 1914. This was the classical
period of Social Democracy. The mass parties of the Second
International were formed in conditions of full employment and a
relative improvement of living standards for the European working class.
This led to the nationalist and reformist degeneration of the Social
Democracy, which was exposed in 1914, when they nearly unanimously sided
with “their” bourgeois in the war.
The period that followed the Russian Revolution of 1917 was of an
entirely different character. It was a period of class struggle, of
revolution and counterrevolution that lasted until the outbreak of the
Second World War. The slump that began with the Wall Street Crash of
1929 and turned into the Great Depression was preceded by a period of
feverish speculation, which has many analogies with the boom that
preceded the present slump.
The Depression of the 1930s was only ended by the war itself. In
1938, Trotsky predicted that the war would end in a new revolutionary
upsurge. This was correct, but the way in which the war ended was
different to what Trotsky had expected. The military victory of the USSR
strengthened Stalinism for a whole period. The Social Democracy and
Stalinists were able to abort the revolutionary wave in Italy, France,
Greece and other countries. This was the political premise that prepared
the way for a new upswing in capitalism, which Lenin and Trotsky had
regarded as a theoretical possibility in 1920.
The reasons for the upswing of 1948-74 have been explained in previous documents (See Ted Grant’s Will There be a Slump?,
http://www.tedgrant.org/archive/grant/1960/slump.htm, 1960). It is
sufficient here to point out that this was the result of a peculiar
concatenation of circumstances that is impossible to repeat. Such a
perspective is ruled out at the present time. The upswing in capitalism
lasted for almost three decades and, like the period before the First
World War, led to a further degeneration of the Social Democracy and the
Stalinist parties and unions in Europe and the other advanced
capitalist countries. However, even at this time we saw the biggest
general strike in history in France in 1968.
This period was interrupted by the first recession since the end of
the Second World War that began in 1973-4, coinciding with a wave of
revolutionary upsurge: revolutions in Portugal, Spain and Greece, mass
strikes in Britain, a revolutionary ferment in Italy, and revolutionary
upheavalin Latin America – particularly in the Southern Cone: Chile,
Argentina and Uruguay – and in the rest of the ex-colonial countries.
The working class in Europe and in other zones at that time was moving
in a revolutionary direction. But the betrayals of the leaderships of
the Social Democracy and the Stalinists created the conditions for the
recovery of capitalism.
The period that followed in the 1980s can be described as a period of
mild reaction. The bourgeoisie attempted to reverse the policies of
Keynesianism, which had resulted in an explosion of inflation and an
intensification of the class struggle. This was the period of Reagan and
Thatcher, of monetarist economics and a counter-offensive against the
working class.
<h4 >Collapse of Stalinism
This was further intensified by the collapse of Stalinism. New areas
of the globe were pried open to the capitalist market and investors. A
vast pool of hundreds of millions of cheap workers, formerly
inaccessible to the capitalists, and growing consumer markets in South
East Asia, China, the former USSR and India (which also saw the opening
up of its markets through the destruction of protectionist barriers)
provided the oxygen that prevented the recession of 1990 from becoming a
Depression, and temporarily gave the system a new lease on life.
In the 1990s and 2000s, the bourgeoisie and its ideologues were
puffed up like the frog in Aesop’s fable. They succumbed to the delusion
that the “free market” could solve all problems, if only it was left to
itself. Previously, the bourgeois worshipped the state as a bountiful
God, now they cursed it as the source of all evil. The only thing they
demanded of the state was that it should leave them alone.
The tendency towards growing statization (the “encroaching socialist
society”) was thrown into reverse. In place of nationalization there was
a wave of privatization. The new situation was rationalized by the
economists in the theory of the “efficient market hypothesis”, according
to which markets had a built-in tendency towards equilibrium, in which
demand and supply would automatically balance each other out, and
therefore crises of overproduction were impossible. This was not a new
idea but only a regurgitation of Say’s Law that Marx answered long ago.
[See, Theories of Surplus Value, Marx 1861-3, Chapter XVII, Ricardo’s
Theory of Accumulation and a Critique of it. (The Very Nature of Capital
Leads to Crises),
http://www.marxists.org/archive/marx/works/1863/theories-surplus-value/ch17.htm]
The 2008/09 crisis marked another turning point. It completely
undermined all the theories of the bourgeois economists. It unleashed
powerful shocks that are still reverberating. It marked the end of a
prolonged period of apparent financial stability and order. It punctured
the dream of the bourgeoisie that they had discovered the philosopher’s
stone that would finally put an end to the vicious cycle of booms and
slumps.
In reality they had discovered nothing new. The boom was a hut built
on chickens’ legs: a model based on a massive expansion of speculation
in housing, fed by an unprecedented credit expansion and the absolute
domination of finance capital. The parasitical service sector expanded
exponentially at the expense of genuine productive activity. The stock
exchanges became even more like casinos, addicted to gambling on a
massive scale, and the bankers threw themselves into this merry carnival
of money-making with reckless abandon.
The purely parasitic element in capitalism flourished in the last
period. This in itself was an indication of the senile decay of
capitalism: the crushing domination of finance capital and the rise of
“services” at the expense of manufacturing industry; a massive expansion
of credit and fictitious capital; all kinds of swindling and unbridled
speculation on the stock exchange and in the big banks.
The speculative element has been present in every capitalist boom since the Dutch Tulip Bubble of the 17th
century. But the extent of it in the recent period surpasses anything
seen in the past. The trade in derivatives alone amounts to US$650
trillions of dollars and represents a massive fraud. The capitalists
employ an army of people who specialise in making derivatives as
complicated as possible in order to conceal this fraud from the public.
This was supposed to provide greater stability to the markets, but in
fact it is a major element in increasing instability. This has
contributed powerfully to the present collapse, and the aftermath of
debt renders it all the more difficult to get out of the slump. At the
same time there has been an unprecedented development of the
concentration of capital.
Our tendency expected the slump to occur before now. However, it was
postponed due to the factors outlined above, and this had a certain
impact on our perspectives. But the first thing we have to ask ourselves
is this: by what means was the slump postponed and what were the
consequences? We explained the fundamentals in a perspectives document
12 years ago (OnaKnife‘sEdge: Perspectivesfortheworldeconomy,
http://www.marxist.com/world-economy-perspectives141099.htm). We
pointed out that the bourgeoisie had postponed the slump by using the
methods that ought to be used for getting out of a slump. They held down
the rate of interest while expanding credit to an unheard of degree.
That is to say, they avoided a crisis but only at the cost of making the
eventual slump all the deeper.
The capitalists always try to get around present contradictions by
putting off the inevitable crisis to the future, when the whole unsound
edifice will fall on their heads with even greater force. Credit has
definite limits and cannot expand endlessly. At a certain stage the
whole thing begins to unravel. All the factors that drove the boom turn
into their opposite. The seemingly endless upward spiral turns into a
downward spiral that cannot be controlled.
The problem faced by the bourgeois is easily stated: they can no
longer use the usual instruments to get out of the slump as they have
already used them up during the boom. Interest rates are near zero in
the U.S. and Europe, and zero in Japan. If you account for inflation,
which in the U.S. and Europe is higher than the rate of interest, it
means that in real terms the interest rate is negative. How can they
decrease interest rates any further than this to instigate growth? How
can they increase state expenditure when all governments are burdened
with colossal debts?
How can consumers spend more when they must first pay back the
current massive debts inherited from the boom? And what is the point in
investing in more production when the capitalists see no markets to sell
their goods? For the same reason, lenders have no interest in expanding
credit. Since they see no point in investing in producing goods for
saturated markets, the bourgeois prefer to make money by speculating on
the money markets.
A vast amount of money is constantly moving around the world seeking
to make more money by speculating against currencies like the euro. They
act like a pack of hungry wolves following a herd of reindeer, seeking
out the weakest and sickest animals. And now there are plenty of sick
animals to choose from. This speculative activity is adding to the
general instability, imparting an even more convulsive character to the
crisis.
<h4 >Protectionist tendencies
If you accept the market economy, you must accept the laws of the
market, which are very similar to the laws of the jungle. To accept
capitalism and then complain about its consequences is a futile
exercise. The reformists (especially the left reformists) continually
harp on the Keynesian idea of solving the crisis by increasing public
spending. But there is already a huge public debt to be paid off.
Instead of increasing public spending, all governments are cutting
spending and laying off public sector workers, thus further exacerbating
the crisis.
It is an expression of the desperation of the bourgeois that they are
grasping at straws. In America and Britain they once again reverted to
“quantitative easing”, i.e. printing more money. This will not solve any
of the problems, but will intensify them in the long run. When it
eventually feeds its way into the economy, it will produce an explosion
of inflation, preparing the ground for an even deeper slump in the
future.
The hopeless confusion of the economists is illustrated by the
strange spectacle of Jeffrey Sachs, the man who unleashed neo-liberalism
onto Eastern Europe, calling for a global version of the New Deal. The
problem is that any such suggestion is anathema to the
Republican-dominated US Congress, which is hell-bent on pursuing the
opposite policies.
Neither free market economics nor Keynesian stimulus policies have
worked, or can work. Governments and their economic advisers are in a
state of despair. There is no more money for fiscal stimulus, but
austerity policies only serve to depress demand even further, thus
aggravating the slump.
The greatest fear is that a new recession will provoke a resurgence
of protectionist tendencies and competitive devaluations, as happened in
the 1930s. This would have catastrophic effects on world trade and pose
a threat to globalization itself. All that has been achieved in the
past 30 years can unravel and turn into its opposite.
The measures announced by the Swiss National Bank (in September 2011)
to push down the value of the Swiss franc is a warning of the way
things are drifting in the direction of protectionist policies and
competitive devaluations. It was this that turned the 1929 Wall Street
Crash into the Great Depression of the 1930s. Something similar can
happen again.
<h4 >Downward spiral
Trotsky wrote in 1938: “The capitalists are tobogganing towards
disaster with their eyes closed.” We need one change to that statement:
The capitalists are tobogganing towards disaster with their eyes wide open.
They can see what is happening. They can see what is coming with the
euro. In America they can see what is coming with the deficit. But they
have no idea what to do about it.
Since the collapse of 2008, the authorities have committed trillions
of dollars to rescue the financial system, but to no avail. The European
Commission has continually downgraded its outlook for economic growth
in the eurozone, which has now come to a virtual standstill. Stagnation,
however, is only the most optimistic variant. Everything now points to a
new and even steeper fall than in 2008-9.
In the months after the bailout of the banks, the bourgeois tried to
console themselves with talk of a recovery. But, as we have seen, this
is the weakest recovery in history. There are no “green shoots”. In
reality, the world economy has not recovered from the slump of 2008, in
spite of the trillions of dollars pumped into the economy. By such
desperate means they succeeded in avoiding an immediate slump on the
lines of 1929, but these panic measures did not resolve anything
fundamental. On the contrary, they have produced new and insoluble
contradictions.
The bourgeoisie avoided the collapse of the banks, but only at the
cost of provoking the bankruptcy and collapse of entire states. What
happened in Iceland is a warning of what awaits one country after
another. They have turned the black hole of the private financial system
into a black whole of public finance.
Now the European politicians are moaning that the Greeks falsified
financial data to conceal the true state of their finances. “If we had
known this we would never have allowed Greece to join the eurozone”,
they complain. But it is supposed to be the job of bankers to analyse
data from loan applicants and to uncover falsehoods. The charge against
the Greeks can thus be extended to the bankers. How could they not have
discovered the Greek deception?
The answer is that they didn’t want to. The financial institutions
were all involved in the speculative racket and making huge profits out
of speculating in everything from home mortgages to the purchase of
government bonds. In this speculative orgy of money-making the bankers
were not particularly interested in assessing the quality of a given
loan. On the contrary, they connived with borrowers to make their debt
look more attractive.
The U.S. subprime crisis tells exactly the same story. The banks lent
a lot of money to people who did not have the means to buy their own
home. In fact, they pressurized people into buying on credit. The
resulting debts were then sliced up and repackaged and sold on for
speculative purposes. Huge amounts of money were made from this
speculation. As long as the money was rolling in, they did not worry
about the finances of the Greek government, or of insolvent homeowners
in Alabama, Madrid or Dublin.
It is no exaggeration to say that the capitalist class in this period
completely lost its head. Like a drunken libertine, the bourgeois
became intoxicated with its success. They lived only for today, and the
devil take the future! Like most libertines, they overlooked the
inconvenient detail that they were living on credit, and incurring debts
that sometime would have to be paid. And like most libertines, they
eventually woke up with a bad headache.
But here the analogy ceases. The headache was immediately transferred
to the state, which obligingly passed it on to the whole of society.
The bankers arose from their bed refreshed by a transfusion of billions
of public money, while the rest of society was presented with the bill.
The public is now waking up to the fact that our so-called democratic
society is in reality ruled by the unelected boards of directors of the
banks and big corporations. These are linked to the state by a thousand
strings, and also to the political elites who represent them. This
realization has led to the abandonment of the old comforting belief
systems, and a fracturing of consensus. Society is rapidly being
polarised. This presents a colossal danger to the ruling class.
Dialectically, all the factors that drove the economy upwards are
combining to drive it down. Society is entering into an agonizing
downward spiral that seems to have no end. The working class in Europe
and the US has conquered through struggle what we may call the
conditions for a semi-civilized existence. The continuation of these
social conquests has now become intolerable to the capitalist class. The
capitalist system is bankrupt in the most literal sense of the word.
Who will pay for these debts? The economists have no idea how to get
out of the crisis. The only thing they agree on is that the working
class and the middle class must pay the bill. But for every step back
the people take, the bankers and capitalists will demand ten more. That
is the real meaning of the attacks that have been launched everywhere.
But certain things must flow from this. Both the English and French
revolutions began with a crisis over the debt. Both states were
bankrupt, and the question was posed, “Who pays?” The nobility refused
to pay. That was the initial cause of the revolution. We face an
analogous situation today. The workers will not sit with their arms
folded while the ruling class systematically destroys all the gains of
the last half century.
The Greek working people rose up in revolt against these impositions.
Their example will be followed by the workers of Italy, Spain and every
other country in Europe. Debt servicing (interest) is the third largest
expense of the Spanish government, after healthcare and unemployment
benefits: $35bn annually. The Spanish crisis expresses itself most
acutely in unemployment. There are nearly 5 million people out of work: 1
in 5 of the population. In the South there is nearly 30 percent
unemployment. Half of the youth are unemployed. This was what produced
the movement of the “indignados”.
“Contagion” is on the order of the day, not only on the economic but
also on the political plane. Protests over spending cuts and tax
increases have spread from Madrid to Athens, from Athens to Rome, and
from Rome to London. In the U.S., the Occupy movement has spread like
wildfire, expressing the same pent-up discontent and frustrations. The
stage is set for an explosion of the class struggle everywhere.
[To be continued…]
