Capitalist economic Crisis and Class Struggle
(«Proletarian»; Nr. 4; November 2008)
As we write this, the reality of the recession in the principal world capitalist power, the United States, is hardly in doubt, including among the highest circles of the Americans in charge-except for President Bush and those around him. Even the director of the Federal Reserve (the American central bank) has ended up admitting that economic growth in his country was going to experience a deceleration, even a contraction.
This autumn the majority of official economic experts still swore that in spite of financial problems related to real estate speculation, a recession was not very probable in the United States, and consequently in the rest of the world: “The fundamentals are strong, the economy is healthy! The order books are full” affirmed just one of many. Marx commented 150 years ago that one always hears such remarks just before the onset of crises...
Today these same people recognize that the recession has started: it’s difficult to do anything else when the statistics indicate that employment has dropped by tens of thousands in the United States since the beginning of the year: more than 75,000 jobs lost in January and February, 80,000 in March.
However they estimate that the recession will be of weak breadth and short duration, because of the enormous quantity of credit injected into the economy by the Federal Reserve which should produce stimulating effects in a few months. Moreover the good performance of American exports thanks to the fall of the dollar compared to the currencies of its principal competitors (Europe, Japan and even China), ensures that the export sector contributes to drag the remainder of the economy forward.
In general they also advance another thesis on this subject, that of “decoupling”. This states that because of their powerful internal development, the other great economic areas of the world, Europe and Asia, have become much less dependent on the American market and consequently a recession in the United States would not involve an international recession; on the contrary the continuation of economic growth in these areas could allow the world economy to continue to grow, to some extent “compensating for” an American crisis, and finally allowing the United States to get out of their recession.
This thesis which has become a real commonplace in the publications of the IMF, of the OECD and other similar institutions, was greedily taken up again by European political leaders, anxious to maintain the “confidence” of the consumers and the businessmen, this subtle and imponderable factor without which, it appears, everything would break down (actually the “confidence” of consumers depends intimately on their paycheques as proletarians, and that of the capitalists on their sales turnover).
It is based on a reality, that of the gap which still exists between the various capitalist economies (for example the economy of the large European countries still continues to grow whereas the recession strikes across the Atlantic); and on a wish, that of finding an economic engine somewhere else to jump start the gigantic gummed-up American machine. Again nothing new under the capitalist sun: the search for such an engine was regularly the objective of Yankee capitalists during recessions in previous decades, with less than spectacular success.
Indeed if it is true that the American economy during fifty last years has lost its crushing preponderance over the rest of the world (this economic weakening, relative but quite real, unrelentingly sapping away at the bases of its political domination), it remains however by far the first in the world: no other is strong enough to take its place if necessary.
But especially the 10-15 last years has seen a rapid and important development of economic ties and financial intercourse between them which connect the countries of the planet.
It is this “globalization” praised so much by the bourgeoisie as a major element of economic growth (with good reason) which makes it such that no economy can function independently from the world market (this has been true since capitalism imposed itself on a world scale); but above all that no economy can escape from the repercussions of the crises which erupt in the nerve centre of world capitalism, the United States. A “decoupling” of the economies could occur only at the end of serious catastrophic crises, generalized wars-or revolutions!- which are the only sufficiently powerful events able to break these bonds.
This is the reason why the banking house which lost the most money in the crisis of the American sub-prime real estate loans is... a Swiss bank! The banking losses since November, announced at the beginning of April amounted to the following:
UBS (Union of Swiss Banks): 37.1 billion dollars; Merryl Lynch: 24.4 billion; Citygroup: 18.1 billion, Carlyle Capital: 16.6 billion; Morgan Stanley: 9.4 billion; Crédit Swiss: 5.7 billion; Bank of America: 5.3 billion; Capital One: 4.9 billion; Deutsche Bank: 4.8 billion; Société Générale: 4.3 billion. It should be noted that these losses have accumulated since the beginning of this year and especially in the last few weeks, which have been particularly difficult on the financial markets.
However the largest loss for the year 2007 was not recorded by a bank, but by General Motors, world number one car manufacturer and formerly the symbol of all the power of American industry: 38.7 billion dollars! This record loss is allotted to a severe fall in the sales of motor vehicles and to the losses of its financial branch (which provides the credit to enable consumers to purchase their vehicles). This demonstrates that the crisis is not only limited to the financial sector and the stock market: what is bad for General Motors is bad for the United States...
Moreover, the fall of the dollar which helps the American exporters, consequently penalizes their competitors: giving a breath of oxygen to the U.S. economy, it tends to strangle the European and Asian economies which are the least solid or most dependent on their exports. This is where the ceaseless complaints of French leaders originate, confronted with an increasing deficit in their foreign trade, based on the too high value of the euro.
On the other hand Germany, which remains the leading world exporter because of the competitive advantages of its goods, supports the increase in the euro which mechanically inflates the surplus of its foreign trade (the largest world surplus: 263 billion dollars as of February, ahead of China: 250 billion, whereas the United States has the largest deficit: 819 billion dollars).
This is why the president of the association of the German exporters could still state at the beginning of the year that it “supported” the policy of the euro rigorously followed by the European central Bank (in other words, this policy expresses the interests of the dominant economic power in Europe - and all the gesticulations of a Sarkozy will change nothing), which had also the advantage of attenuating the raises in the price of raw materials.
The massive and repeated injections of liquidity into the economic cycles by the American Federal Reserve in order to mitigate a credit crisis and to stimulate activity, in the final analysis constitute the creation of additional masses of currency; its mechanical consequence is to cause a drop in the value of this currency, i.e. to increase the exchange value of all the goods expressed in this currency, which is called inflation.
The dollar being a world currency, by means of which the value of all raw materials is expressed, its fall thus means a corresponding rise of the price in dollars of these materials. This phenomenon is reinforced by what are known as “speculative” operations: the holders of dollars may find it very beneficial to get rid of some if they do not want to see the value of their capital dissolve, which, when this is done as is the case of billions held by various Funds, the treasury of large companies or state’s reserves, tends to further reinforce the fall of this currency.
This capital is directed either to competing currencies, or, more generally to raw materials which see their price brutally inflated. The famous “insane rogue trader” who caused the 4.7 billion loss at the Société Générale while speculating on the rise in the market price of raw materials on the German Stock Exchange was not all that insane; he only obeyed the capitalist mechanism of the laws of the market which, for him is perfectly insane! Experts estimate that 20% of the increase in the price of oil is due to this speculative mechanism, which caused certain individuals to remark that the American Federal Reserve had become more important a factor than OPEC in the oil trade...
Let us note in passing that capital can be transferred to the traditional refuge of value in the event of crisis, gold, whose price has currently reached historic records. The reappearance of gold fever, this “barbarian symbol”, is an additional sign of the malady of the capitalist economy...
The American authorities allowed their currency to fall completely voluntarily. But, insofar as it is profitable, i.e. insofar as, thanks to this, the American economy makes its competitors take the plunge to keep its own head above water, the fall of the dollar tends to take the shape of a monetary war; and the much vaunted co-operation of the economic and financial institutions of the world to eliminate the risks of crisis is swept away by ferocious competition from all sides. The capitalists cannot save everyone from the crisis; this can be surmounted only by the elimination of weakest and the reinforcement of strongest. This is true of “individual” companies and capitalists, but also of capitalist States: the economic crisis which results in the destruction of capital and the liquidation of companies also brings in its wake competition, confrontations and inter-State wars.
The current recession marks the end of the cycle of expansion opened after the economic crisis of 2001-2002, the starting factor of which had been the bursting of the “data-processing (‘dot/com’) bubble”, the frantic speculation on so-called “high tech” companies.
The recession of 2001-2002 came after an unusually long-almost 10 years-and vigorous period of growth in the United States which had opened up after the first war against Iraq. In addition to the beneficial effects of this war, the American economy had been able to thrive at the expense of its most pressing competitor, Japan, asphyxiated by the unbearably high rate of exchange of the Yen compared to the dollar which the United States had imposed on it. Last but not least, don’t forget that the implosion of the Soviet block had opened a large market with the “Western” economies, while the competitive pressure on German capitalism was partly attenuated by its digestion of ex-Germany of the East.
The American economic restart since 2002 rested primarily on two engines: a new war in Iraq which, like the previous ten, once again set the “military industrial” sector into high gear, so very important to global American imperialism; and the massive recourse to credit which in particular re-launched the real estate sector, another very important sector in the developed capitalist economies. However the exceptionally favorable conditions for U.S. capitalism of the previous decade were no longer present; also economic growth during this time was the weakest in decades, which created fewer jobs, and where wages increased the least. The massive and generalized recourse to credit, which one can strikingly illustrate by stating that the rate of indebtedness of American households reached 130% of their disposable income, was unquestionably used to feed the economic expansion, which could only lead sooner or later to a collapse, the first effects of which we see today.
The current economic crisis will take all the more time to overcome because the traditional methods resorted to at the time of the preceding recession can no longer be easily utilized. The American and world economy is already gorged on credit; interest rates have descended to the level of inflation (which amounts in practice to bringing them close to zero). And in addition the United States is still entangled in the war in Iraq.
The “purge” will thus be severe and it is the proletarians who will pay the full price for it. The only solution for the capitalists hastening to save the rates of profit will be to increase their exploitation, while at the same time internationally the working class has, in general, seen its wages stagnate during the last years.
The president of the European Bank, the priceless Trichet, these days is full of declarations warning the European bourgeoisie against any temptation to preserve social peace by raising wages. In France, Sarkozy who pretended to want to be “the president of increased purchasing power”, can only declare that “the cash-boxes are empty” while the industrialists, like Peugeot, more and more will pose to the proletarians the ultimatum: work more to gain less-or see their jobs disappear.
In all countries, capitalism will push forward its offensive against the workers. At the moment, this has caused social explosions as in Africa and a renewal of workers’ struggles, from the Russia of Putin-Medevev to the Egypt of Mubarak, by way of Bangla Desh or Vietnam-or the America of George Bush.
In calm and opulent Europe itself, one sees the beginning of the first tremors of workers’ struggles (and sometimes more than just tremors!): wildcat strikes in Germany with a general strike in Greece by way of a strike of railway workers in Switzerland (the first since 1918!), from riots in the French banlieues to those in Denmark, everywhere the leaden dome of social peace is slowly beginning to crack.
Obviously illusions should not be nurtured; the difficulties and obstacles to the resumption of the class struggle are still enormous, as we highlighted by analyzing the most significant struggles in France in the preceding numbers of our paper “le Prolétaire”.
But the shock which the crisis will cause in the social equilibrium will bring about an acceleration of this evolution already in progress and which, with inevitable highs and lows, is itself irreversible. The workers inevitably will rediscover not only the need to fight, but how to fight, how to organize and lead their struggles independently of the class-collaborationist organizations of all stripes; they will be forced to gather their forces together not only for their immediate day-to-day defense, but for the more general political struggle; inevitably the day will come when among them the need for political organization will be felt, the need for the party, to wage these struggles and to confront capitalism.
The capitalist world plunged into crisis once again?
It will only hasten the hour of the resumption of the class struggle and the revolution!
(Le prolétaire, March-April of 2008)
International Communist Party