Socialist Alternative

Economic Crisis Opens New Era — Socialism Back on the Agenda

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During the last week of November 2008, in a small coastal town in Belgium, over 70 leading socialist activists from 28 countries spanning the globe met for six days of dialogue, debate, and planning. Against the background of an historic crisis for the capitalist system, this was a particularly important meeting of the International Executive Committee (IEC) – the elected international leadership of the Committee for a Workers’ International (CWI), with which Socialist Alternative in the U.S. stands in political solidarity.

The annual meetings of the IEC are always invaluable political exchanges, but this year the mood of the IEC members could not have been more confident. Everywhere the ideologues of capitalism are making a clumsy retreat, unable to explain the contradictions of their system. Meanwhile, the Marxist perspectives and analysis of the CWI have been fully confirmed. At the same time, on an international scale the movements of workers and the oppressed have continued to grow.

We are republishing here an edited version of an article by Peter Taaffe, General Secretary of the Socialist Party of England and Wales, the full version of which appears in The Socialist (1/7/09) and online at Taaffe gave the opening speech on world perspectives at the November IEC meeting.

“GOODBYE AND good riddance to all that,” declared the Financial Times, the mouthpiece of big business, as it said farewell to 2008. Its despondency, along with all other capitalist soothsayers, is well merited given the economic meltdown that, it confessed, it had not foreseen.

Yet Marxists, particularly the Committee for a Workers’ International, did foresee this situation.

We wrote in March: “The present world situation is characterized by the worst economic scenario for capitalism since the Great Depression of the 1930s. In turn, this has aggravated the already weakened position of the dominant world power, U.S. imperialism. Together with the fallout from the Iraq War, this has laid the basis for political convulsions and a fundamental change in geopolitics in the next period.” (“The Consequences for Workers’ Struggles in Europe,” CWI Thesis, March 2008)
At that time, most capitalist economists completely discounted such a development. Now the Financial Times wails: “We are flying blind.”

This is a complete admission of our analysis. We say capitalism is an anarchic system in which the blind play of the productive forces periodically plunges into crises, with devastating consequences.

The past chief “pilot” of world capitalism, Alan Greenspan, former chairman of the U.S. Federal Reserve, now tells the U.S. Congress that, because of this crisis, he was in a “state of shock to disbelief… I still do not fully understand why it happened.” Even Bernard Madoff, who was allowed to perpetrate the greatest financial fraud in history, an estimated $50 billion, claimed before he was found out that “in today’s regulatory environment, it is virtually impossible to violate the rules”!

It is not just one or two “bad apples” but the capitalists as a whole who swindled the working class and poor in the free-market, free-wheeling era of capitalism that has now come to a juddering end. During these 30 years of neo-liberalism, wages were held down in a “silent recession” while profits were sky-high.

Now that some capitalists have been burnt by Madoff, they are wailing. One of his rich victims complained that she will now have to fire her maid and will therefore have nobody to “iron 40 white shirts.”

Over the Cliff

But not everybody among the super-rich is affected. Scandalously, some of the authors of the present dire financial situation – the so-called masters of the universe – are still rewarded with obscene bonuses. Goldman Sachs, for instance, will dole out $2.6 billion in bonuses despite a fourth-quarter loss of almost the same amount! Meanwhile, the working class of the world will pay a terrible price for the economic mess created by capitalism.

The capitalists’ vogue phrase is that the economy, whole industries, and even countries, as Iceland indicates, have gone or are about to go ”over the cliff.” The crisis is not restricted to the financial sector but has, as we predicted, spread to the so-called real economy and now to virtually the entire world.

The so-called emerging markets in the neo-colonial world are likely to be submerged under the economic wave emanating from the rich world. The Economist Intelligence Unit forecast for 2009 predicted that no fewer than 29 countries would see their economies contract.

Deregulated, unrestrained capitalism threatens unrestrained slump, and all the efforts of capitalist governments may not succeed in avoiding this catastrophe. They are desperately trying to shore up the system with state economic intervention in order to cushion the effects of the crisis and avoid a complete slump or depression.

Ben Bernanke, the chair of the U.S. Federal Reserve – a student of the 1930s Depression – completely ruled out a repetition of that event in the U.S. or the world today. But others, such as Larry Elliott, economics editor of The Guardian, openly write of the prospect of a slump.
This fear has been reinforced by the rapid deterioration in the U.S. economy and its repercussions worldwide. During November 2008, U.S. employment decreased by half a million, the biggest rise in job losses in a single month since 1974. If part-time workers seeking a job are included, these are the worst figures since 1940!

2.6 million people who lost their jobs in 2008, three-fourths of which happened between September and December 2008 – just four months! This underlines the speed and depth of this crisis. Even worse, recent estimates allow for more than one million workers per month losing their jobs in the U.S. until mid-2009, making an increase of four to seven million unemployed possible.

Obama, who now admits he doesn’t know where to start when he gets up in the morning, says that the U.S. government will not be able to stop this economic catastrophe. All the “levers” of economic control have so far failed to work. The financial system – the arteries of capitalism – remains frozen, particularly in the crucial interbank lending sector.

The “recapitalization” of the banks does not alter the banks’ reluctance to lend to big or even small businesses because they correctly fear that they will not receive their money back. As one European bank executive remarked: “If GDP is shrinking, how can lending grow?”.

Gross Domestic Product in the U.S. economy is projected to shrink in the fourth quarter of 2008 by 4-5%, with a continued decline predicted throughout 2009. Economists predict that there will be a real decline in the world economy this year for the first time since the 1930s.

A desperate situation requires emergency measures. Consequently, capitalist governments are reaching out for “Weapons of Mass Desperation.” Led by the Brown government in Britain, eagerly supported by Obama and even Ben Bernanke, they will be forced to resort to “quantitative easing, a fancy name, in reality a disguise, for the government’s use of the printing press to print pound notes or dollars in a desperate attempt to stimulate demand.” (The Independent)

Even cutting interest rates to almost zero may not work. That is why Bank of England Governor Mervyn King, trying on Fidel Castro’s battle fatigues, threatens to nationalize British banks if they do not “do their job.” The head of U.S.-based Merrill Lynch, himself a banker, has urged the government to create its “own bank” to get lending moving!

Worldwide, governments’ support for nationalization today is for the same reasons as they supported neo-liberalism yesterday – to rescue not just the bankers but the capitalist system itself. These are seen as “temporary” measures until the banks are renovated and handed back to the capitalists after being rescued by the taxpayers, the working and middle classes.

All the capitalist governments are frowning upon anything but an “arm’s length” relationship with the nationalized banks, and completely rule out “popular control” or workers’ control, which socialists demand.

But so dire is the situation that Keynesianism – the idea of deficit financing – and Roosevelt’s New Deal in the 1930s are invoked. All the previous economic “principles” have gone out the window, with government deficits now the order of the day.

Obama already admits there will be a $1.2 trillion U.S. government deficit in 2009, 8.3% of GDP. Such is the panic of the U.S. ruling class that $7 trillion has been earmarked – not all of it yet spent – to shore up their system. This amounts to almost half the U.S. GDP.

Yet despite these measures, it is not at all guaranteed that capitalism will prevent its descent into a depression and/or a deflationary trap, as was the case in Japan in the 1990s. Roosevelt’s New Deal in the 1930s, while it introduced some reforms, did not fundamentally end the U.S. depression.

The U.S. was on the verge of another devastating crisis in the late 1930s but was saved from it by the onset of war. It was massive government intervention during the Second World War rather than the New Deal that temporarily saved capitalism. An economic crisis of capitalism – particularly as serious as this one promises to be – is like a war in the “slaughtering” of capital, including the lives and conditions of the working class, before the seeds of a new upswing are created.

There are no “final crises” of capitalism, as Lenin pointed out. The system will always find a way out if the working class and the poor fail to seize the opportunity to effect socialist change in society. This is the decisive question facing the working class if a new, prolonged era of suffering for the majority is to be avoided.

Reviving Socialist Ideas

This crisis has already had a profound effect in reshaping the outlook of the working class. Iceland was the world’s sixth richest country and, allegedly, the “happiest” six months ago. Plunged into an economic abyss, it gives a picture of what a 1929-type situation would represent: one third of the population wants to leave the country and bankers are booed wherever they go.
One worker told the Financial Times: “For the first time in my life, I have sympathy with the Bolsheviks, with the French revolutionaries who put up the guillotine.”

The plight of Greece is a warning. In place of the celebrations of the Athens Olympics in 2004, the city’s streets, and those of the rest of Greece, are filled with protesters. A massive number of educated, unemployed youth in Greece coexist with impoverished workers, many of whom at 40 and 50 years old are on poverty-stricken €700 per month wages.

The most devastating consequence of this crisis will be the dramatic rise in unemployment in the U.S. and around the world. We reject the dead end of unemployment. We demand living-wage jobs for all.

We stand for socialist planning, which has become more crucial now in the teeth of this crisis. Capitalism “reallocates” resources through the forcible eviction of workers from industries that are no longer profitable and, in the present situation, only some will be gradually absorbed into the growth sectors of capitalist production.

However, under a planned economy, as Marx argued, this change would assume mainly an “administrative” shift of workers and production without the horrors of mass unemployment characterized by capitalism.

Marx pointed out that the capitalists plan to the last detail in individual factories. A planned economy is, in essence, this example taken to a national and international scale with the added vital factor of democratic workers’ control and management. This, however, is only possible through the establishment of a socialist planned economy.

The world has entered a decisive period of change. Socialists will be at the forefront of all the battles that loom in the next period. Many workers, shocked by the scale and speed of this crisis, may be reluctant to go into battle on the issue of pay, for instance. But a decisive struggle for jobs is now posed, above all to save young people from a return to the 1930s.

We must take the case for socialism to wider and wider layers of the working class. From a world viewpoint, capitalism has made a mess. It maintains unacceptable poverty, perpetuates endless wars like the present carnage in Gaza, and plunges millions into even greater misery. This year can open a new chapter in which socialism will come roaring back onto the agenda.

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