Economy

As they danced away the Old Year and welcomed the New with, as usual, copious quantities of the finest champagne, the bourgeois from New York to London must have felt a satisfying glow of confidence. Seven years after the 2008 calamity, are they not still firmly in command? The earlier fears that the crisis must lead to some terrible social and political Apocalypse have dissipated. Capitalism is alive and well. The profits are flowing freely and the rich are ever richer. In short, everything is for the best in the best of all capitalist worlds.

Tectonic shifts are taking place in the world economy. The price of oil has fallen dramatically in the past six months. The price of Brent Crude has now fallen to less than $60 a barrel. This marks a near fifty per cent drop in price from $115 a barrel in June. It heralds a new stage in the capitalist crisis, and its impact is being felt throughout the world.

“Six years on from the financial crash that brought the world to its knees, red warning lights are once again flashing on the dashboard of the global economy.” Such ominous statements may sound familiar to our regular readers. However, these words are not those of a Marxist, but of the British Prime Minister, David Cameron, who returned from a meeting of political leaders at the G20 summit in Brisbane, Australia, with deep concerns about the state of the world economy. As the fires of capitalism crisis spread and continue to ignite in one country after

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Signor Mario Draghi, president of the European Central Bank, has tried to call up spirits from the deep like the Shakespearean characters Glendower and Hotspur. “I will take whatever it takes”, he said a few years ago. Such spirits were supposed to save the euro and restore growth. However, while the euro has stabilised, temporarily, the European crisis has certainly deepened. This time it is threatening to plunge the European Union into the nightmare of a Japanese-style deflation.

Thomas Piketty, a French economist and academic, has become an overnight sensation thanks to his book “Capital in the Twenty-First Century”, a bestseller that has sparked debate on all sides for its detailed analysis of inequality under capitalism, with elation and praise from the reformist left, and horror and fright from the free-market right.

The fall of the Berlin Wall, the collapse of the Soviet Union and the capitalist degeneration of the Chinese bureaucracy led to mass euphoria and ridicule of Marxism by a sea of imperialist experts, intellectuals and politicians howling against socialism and communism. What is far worse is how quickly the former sycophants and disciples of Moscow and Beijing jumped on this bandwagon, justifying their betrayals, ignorance and opportunism by capitulating to this exploitative and inhuman system. The capitalists and the imperialists started to use them as a tool to spread venomous propaganda against an ideology they proclaimed to adhere to and ‘confessed’ it to be wrong and a historical

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Capitalism is a chaotic system of production beyond the contol of humanity. It is doomed to plunge society into ever greater crises. But why does it enter a crisis and what is the alternative?

The digital currency Bitcoin has hit the headlines in recent times for its novelty, as well as for its phenomenal rise in price over the past few years. But how much of the Bitcoin sensation is hype, and what is the reality?

Recently the Food and Agriculture Organisation (FAO) released a report that came up with a novel idea: convince the world population to eat insects to avert mass hunger. In reality it is already possible to feed everyone without the need to eat bugs. What stands in the way is the “market”, i.e. capitalism.

As 2013 came to a close, many economists and politicians drew a collective sigh of relief: the Eurozone remains in one piece; the USA has not defaulted; and a triple-dip recession was avoided in Britain- there is even much talk of a recovery! But for the more far-sighted commentators amongst the bourgeoisie, the New Year – far from offering any light at the end of the tunnel – simply brings with it increasing uncertainty, instability, and crisis.

Class struggle is alive and kicking, and it’s the working class that’s getting kicked. The Economist reports that in the four years leading up to 2012 wages in the USA grew at just 2.1% per year, whereas in the four years prior to that the figure was 3.4% per year.

It has often been noted that the serious bourgeois analysts frequently arrive at the same conclusion as the Marxists, albeit with a slight delay. Nowhere has this aphorism been more aptly demonstrated than in a recent article by Paul Krugman, the Nobel prize-winning economist, entitled “A Permanent Slump”.

Despite the international corporate media’s relentless propaganda, the gap between the haves and have nots is continuously increasing on a global scale. In spite of what they would like us to believe, what we have before us is a transfer of wealth from the poorer countries to the richer on a scale never seen before in history.

When the current crisis began, there were some who painted it as simply a Western crisis; a crisis that was unique to Europe – due to problems caused by its common currency – and America – due to its sub-prime mortgage scandal and ensuing credit crunch.

In the past week, the mood of the global financial markets has once again turned sour. The disastrous position in the Eurozone, coupled with a slow-down in China and poor figures from the United States has led to a new sell-off. All the indicators are now pointing at that we are entering into a new down-turn.

The world economic crisis has led to such a deterioration of the health of public finances worldwide that the recent World Economic Outlook (WEO) of the IMF has the apt title “Coping with High Debt and Sluggish Growth”. One chapter of the WEO is specifically dedicated to analysing examples from the past to see if there are lessons for today1. The results are quite interesting.

The latest “decisive” EU summit-to-end-all-EU-summits-and-fix-the-Eurozone-crisis-once-and-for-all has signally failed to do so – just like all the previous “decisive” and “final” summits. As in previous meetings, within days the results were declared completely unsatisfactory by the markets. These gatherings of EU heads of state are now a thoroughly debased currency. Nothing has changed except that the national contradictions are sharper and more insoluble than previously thought.

Another variation on the demand to “tax the rich” is the call for a tax on financial transactions, otherwise known as a “Financial Transactions Tax” (FTT), “Tobin Tax” (after the Nobel economics laureate, James Tobin, who first proposed the idea in 1972), or “Robin Hood Tax” (i.e. taking from the rich and giving to the poor). [Part 1]

The present economic crisis has been described in various ways by mainstream commentators. All manner of “solutions” have been posed, both by the bourgeois politicians and economists, and by the reformist leaderships of the working class. What these commentators and representatives cannot admit is that this crisis will not be solved by this or that reform. Society is living through a crisis of capitalism and the choice facing mankind is simple: socialism or barbarism.

The crisis of capitalism is accompanied by a crisis of bourgeois thought: philosophy, economics, morality – all are in a state of ferment. In place of the earlier optimism that stated confidently that capitalism had solved all its problems, there is an all-pervading mood of gloom. Not so long ago, Gordon Brown confidently proclaimed “the end of boom and bust”. After the crash of 2008 he was forced to eat his words.

The Eurozone is passing through the most serious crisis in its entire history. After Greece comes the Italian crisis. This places a big question mark over the future of the euro. We predicted long ago that in a serious crisis all the national contradictions come to the fore, as we now see with the fractious relations between Greece, France, Germany and Italy. The European Union is facing the day of reckoning.

In a scene reminiscent of the attempt to save the world by science fiction superhero Flash Gordon, the leaders of the European Union have given themselves a two-week deadline to resolve the eurozone crisis. While in the fantasy world Flash Gordon saved the world, in the real present-day crisis-ridden world the EU leaders are staring failure in the face, with all the consequences that this will mean in terms of growing political instability and, more importantly, of growing class struggle.

In an interview which shocked the BBC News presenter, “independent trader” Alessio Rastani gave a very frank appraisal of his perspectives for the world economy. "This economic crisis is like a cancer, if you just wait and wait hoping it is going to go away, just like a cancer it is going to grow and it will be too late,” he said, adding that governments would not be able to fix the economy.

Capitalism isn't working - Photo: Jeff Mcneill

Europe is standing on the edge of a precipice. This is the judgement, not just of the Marxists, but of the most serious strategists of Capital. Barely six weeks have passed since the latest Greek rescue package, and it is already unravelling. There is now a general crisis of confidence in the ranks of the bourgeoisie internationally. The panic, which is reflected in the wild gyrations of the stock exchanges, has spread rapidly from Europe to America. It is a kind of deadly contagion that has infected all the euro zone’s big countries.

Events are moving at lightening speed. Stock markets are in freefall around the world. Some days bring temporary relief only to be followed by greater convulsions. The whole situation is reminiscent of 2008, or more correctly the 1930s.

The euro zone is heading into stormy waters. The crisis that opened with the near collapse of the world banking system in 2008 has now deepened into a crisis of insolvency of entire nations. The bourgeois has no idea of how to get out of the crisis, which is sweeping like an uncontrollable tsunami from one country to another in Europe. In the words of Italy’s finance minister, “There should be no illusions about who will be saved. Like on the Titanic, the first class passengers won’t be able to save themselves.”

As I write these lines the destinies of Greece are being decided in a titanic struggle in which the Greek working class is confronting the big banks and capitalists of all Europe. The EU is subjecting Greece to the most shameless blackmail. They say: either accept draconian cuts in your living standards, or else we will refuse to hand over the next tranche of 12 billion euros.

Capitalism isn't working. Photo: Jeff McNeil

Everywhere you look there is upheaval and crisis, from Europe to Japan and to the United States. This reflects the worldwide malaise of capitalism that is struggling to emerge from the recent slump. This is a confirmation of Marxist ideas, which explains that capitalism is a crisis-ridden system.

A recent edition of The Economist (April 7, 2011) complained about “Capitalism’s waning popularity”. One does not have to be a genius to understand that thirty years or more of cuts in welfare, large scale privatizations and constant pressure on workers in the workplace was sooner or later going to end up with ordinary working people questioning the system that is responsible for these policies, i.e. capitalism.

Yesterday, the US federal reserve announced another round of so called “quantitative easing”, or “printing money” as most people know it. Another $600bn are to be injected into the US economy in order to stave off a double dip recession and to lower unemployment. The US ruling class are worried and are continuing their extraordinary measures, which will further intensify the contradictions in the world economy.

Although everyone has claimed that they have learned the lessons of the 1930s, the ruling classes are again engaging in the same policies that proved so calamitous 80 years ago. Deep tensions inside the International Monetary Fund (IMF) have recently emerged over currency manipulation, as countries take action to defend their own national interests against their rivals. Like gangsters, they can divide out the loot in ‘good times’ but are at each other’s throats in times of difficulty.

Recently the world’s central bankers gathered in Jackson Hole, Wyoming for their annual meeting. Having experienced the biggest banking crisis in history, there was a sense of relief at having avoided a complete collapse. The talk now was of the dust settling. Ben Bernanke, chairman of the US Federal Reserve, despite saying a month earlier that the outlook was “unusually uncertain”, said he was now “confident”. But such confidence is very much misplaced. With the world economy facing at best a painful recovery, and slow anaemic growth, the world’s bankers are deeply troubled as to what steps to take next.

The recent G20 summit in Toronto brought to the surface all the contradictions of global capitalism. Every capitalist nation wants to climb out of the crisis at the expense of its competitors. Everyone is calling for demand to be kept up, while at the same time applying cuts in public spending at home. At the heart of this are the mountains of debt that have accumulated everywhere.

Goldman Sachs has been accused of fraud and is up before the American Securities and Exchange Commission. What is coming out of all this are the clever tricks of the trade, i.e. how to make money from money, without actually investing in the real economy, and in the process “advise” people on how to lose their money while making the likes of Goldman Sachs very rich... until it all crashes of course.

As the world economy emerges from recession it is clear that the recovery is going to be weak. All governments also face a huge debt overhang, which means that whoever is in power will have to carry out stringent economic measures and it is the working class who will be made to pay. This opens up the prospect of huge class contradictions opening up in the coming period.

Billion dollar refineries are closed in one part of the world, while others open elsewhere. This is the craziness of the global capitalist economy. It wastes huge amounts of material and human resources, whereas these same resources could be used in a global plan to develop the economy in way more in line with the interests of all the people of the world.

Banks are paying out huge bonuses to the very same speculators who were responsible for the credit crunch in the first place. Banking is to remain a financial wild west. If we want a financial system that works for the interest of the people we need to get rid of the whole capitalist system.

The world of international finance has been shaken by the default in Dubai. Commentators have suggested that this could be the cause of the recession moving into a double dip. Now the Greek government is running a government deficit of 12.7% of GDP, which is more than four times the permitted European maximum. Capitalism stalks one country after another, probing for weaknesses and laying the weakest low. This system is inherently unstable. As long as it exists, it threatens all our livelihoods.

Big banks like Goldman Sachs have become flush with free money and have been announcing mega-results for the third quarter of last year. They have also started to pay huge bonuses again for bankers and directors. So it’s business as usual for capitalism - at a time when a record number of Americans (32million) are on food stamps, unemployment of various sorts has reached 16% of the workforce and people are losing their homes.

Why is New Labour hurling yet more of our money at the banks? The latest handout has been described as the ‘world’s biggest bank bailout.’ It’s costing every household in Britain £2,000, on top of all the money wasted last time round.

The world of international finance has been shaken by the default in Dubai. Shares have taken a tumble all over the world. Commentators have suggested that this could be the cause of the recession moving into a double dip, of a further downturn in the world economy.

For the capitalists, this Great Recession could be more or less over, but the level of spare capacity in industry and construction together with the level of debt still owed by businesses, government and households alike mean that this recovery may be stunted. Every major capitalist economy now finds that it has more than 30% more capacity than it needs to meet demand. That is a record high of overcapacity in industry.

The capitalist system is passing through its deepest crisis since the 1930s and the Great Depression. The apologists of capitalism – including those in the labour movement – had completely ruled out such a scenario. After all, they explained, capitalism has changed and governments are now able to over-come any deficiencies experienced by the markets. They have learned the lessons of the 1930s.

Some economic commentators and financial journalists have divined the ‘green shoots’ of economic recovery’ growing out of the present crisis. Perhaps the wish is father to the thought. Are they right?

The knock-on effects of the crisis have already hit Hungary, Lithuania and Latvia. Other countries in the region are also in the firing line. Governments are going down like ninepins. There is no end in sight to the economic and political turmoil. The so called "emerging" economies have been brought to their knees.


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It is the working class of the world who will really suffer from the present crisis. Globally, the UN estimates that unemployment will reach 220m this year. Out of a global workforce of about 3 billion, that’s "only" 7%. But this figure leaves out millions of hidden unemployed who just cannot even begin to look for work. And as a percentage of those working in sweat shop and factories around the globe, it is more like 20%.

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The crisis in the auto industry has reached huge proportions and is now affecting nearly every country. Demand for vehicles has fallen sharply all over the globe, with sales reaching lows not seen for three decades. If the main auto manufacturing companies go under, there will be millions of jobs lost and a massive blow to the rest of the economy, which would have a disastrous effect on the living conditions of millions of workers around the globe. So what is the answer?

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