The ‘mini-Ice Age’ which gripped Europe in the early part of 2010 parallels the current frozen character of world capitalism as a system. However, while the weather will improve, there are no sunny economic uplands beckoning for capitalism. Indeed, in sharp contrast to the mood exuded in the 1990s and the noughties (the past decade) by the representatives of capitalism, particularly the soothsayers, there is profound questioning, growing uncertainty and even deep pessimism about the future prospects for their system. Some, lamenting their previous financial ‘irresponsibility’, suggest that the noughties should be called the ‘oughties’: ‘Christ, we oughta have seen this coming’.
This merely underlines the fact that even the most intelligent capitalist representatives are incapable of foreseeing the future because their system is unplanned and determined by the blind play of the market. They lament the consequences of this, wring their hands, fail to find a rational explanation and seek solace in a ‘higher being’. Before and after Christmas, bankers and city sharks, it seems, packed out the pews of churches such as St Paul’s cathedral in London in a demonstration of repentance. However, while seeking salvation in a god, they still worship mammon, as the continued, unprecedented stuffing of massive bonuses into their back pockets indicates. Lloyd Blankfein, chairman of Goldman Sachs, “feared for its Wall Street aggression”, feels compelled to describe himself as “doing God’s work”!
All of this suggests that, in the wake of the most devastating economic crisis for almost 80 years, the cohesion – the ideological underpinning and moral cement used by the capitalists to justify their system – is falling apart. It appears that the working-class victims of the Morgan Stanleys, whose lives have been shattered by the ‘inexplicable’ forces of capitalism, have also been filling out churches. They will not find salvation – of the ‘earthly’ kind, at least – in this quarter. But even this denotes the search for solace, refuge for a “soul in a soulless world”, as Karl Marx explained. Its roots, however, lie in the desperate straits of many workers and the subterranean mass discontent which will break to the surface in the next period. Without the underpinning provided for capitalism by its superstructure – the state, but also the ideological justification provided by its army of professors, academics and political representatives – this system would not last for a month, particularly in this massively-changed economic situation.
Despite the huge growth of income disparity during the boom, the justification for capitalism was that it was a system that provided the “greatest good for the greatest number” (the utilitarians). More prosaically, the now discredited former chairman of the US Federal Reserve, Alan Greenspan, expressed the view that capitalism was the best system for “producing and delivering goods and services”. A never-ending and growing stream of goods to the majority of the peoples of the planet would furnish a ‘golden stairway’ to greater and greater wealth and happiness. No more! The huge army of unemployed, alongside the growing numbers of the poor, falsifies in practice the expectations of these ‘prophets’.
This is underlined by the present catastrophe in Haiti. The programme of the deposed president, Aristide, was to go from “absolute misery to a dignified poverty (the Guardian)”. Yet even this was unacceptable to US imperialism, which helped to evict and exile Aristide (for more on Haiti, see other articles published this week on socialistworld.net).
In Britain, recent figures have shown that in the last five years – under Tony Blair and Gordon Brown – there has been a significant overall drop in the standard of living compared to the previous decade. Britain is now either behind or barely on a par – depending on which economists’ estimate you accept – with Italy in capitalism’s economic league.
The worst possible system
Faced with the ineluctable facts indicating that capitalism is in a blind alley, the system’s theoreticians have fallen back on the threadbare arguments of an earlier British Tory prime minister, Winston Churchill. He argued that “capitalism is the worst possible system apart from all the others”. In a similar period to this, the 1930s, this argument cut no ice as the advantages of the planned economy of Russia – despite the bureaucratic gangsterism of Stalinism – represented a progressive contrast to beleaguered capitalism. The one-party totalitarian regime associated with Stalinism was used even then, however, to blight the consciousness of the mass of the working class by picturing this as ‘socialism’.
This also had some traction during the economic fireworks of 1950-73, and even during the boom of the 1990s. This was reinforced by the collapse of the Stalinist regimes of Eastern Europe and Russia, and the revelations of the monstrosities of Stalinism in its wake. But to associate Stalinism with the genuine and liberating democratic ideas of Marx, Engels, Lenin, Trotsky and Luxemburg is like associating all Christians with the crimes of the Inquisition or Islam with the reactionary methods of right-wing political Islam and the abominations of Osama bin Laden and al-Qa’ida.
Nevertheless, despite the horrors that came with the return to brutal capitalism in the former Soviet Union and Eastern Europe, the populations of these countries were reconciled to their largely miserable lot on the basis of the perspective of ‘blooming landscapes’ once capitalism had been firmly established. That happy scenario never materialised. On the contrary, for Russia, at least, it meant a massive collapse in the productive forces, worse than what we are witnessing today. As those promises turn to ashes, the masses of these countries are reflecting bitterly on the results of this capitalist ‘experiment’. Latvia, for instance, has the highest unemployment rate in Europe. Workers commented to a Financial Times reporter: “It’s just like 20 years ago, except now we are pushed around by the European Union rather than Russia. We’re still slaves, just with different masters”.
For the US, which remains the dominant economic force on the planet with a 22% share of global income, the economic problems are mounting and seem to be intractable. This is reflected in the devastating epidemic of joblessness that has swept across America in the past 24 months. In January 2008, unemployment stood at 4.9% of the workforce but has now risen to 10%, significantly worse even than Britain’s 7.9%, or Germany’s 7.5%, while the EU’s as a whole has risen to 10% (that is just the official rate). Japan’s is ‘only’ 5.2%. Yet Barak Obama predicted that his massive $787 billion stimulus package would prevent a fall in employment with unemployment topping out at 8%.
The fate of Obama and particularly the Democrats in this year’s mid-term congressional elections hinges, in the main, on the economic fortunes of the country. A Gallup poll for USA Today found that 55% of Americans disapprove of Obama’s handling of the jobs crisis – an equal figure of disapproval for his handling of Afghanistan. Little wonder when even the British press like the Guardian shows a full-colour picture of a tent city in Sacramento “filled with unemployed people who have lost their homes after failing to meet mortgage repayments”. In this photograph is summed up the shattering of another firm prop of capitalism, personified by Margaret Thatcher and Ronald Reagan: the so-called ‘property-owning democracy’.
The collapse of Britain’s housing market by 13% so far, with further falls to come – despite the optimism of the so-called ‘property experts’ – means that owning your own home is completely out of the reach of huge sections of the new generation, in particular. In 1997, 42% of under-30s owned properties with a mortgage, compared with around 30% who rented privately. By 2008, these proportions had switched to less than 30% and nearly 50% respectively. According to the Observer: “Very soon, more than half of all twentysomethings will rent with no realistic prospect of buying. Scarcely noticed by policy makers, a structural change in the housing market also signals a cultural shift in the nation. Owner-occupiers see a house as a repository of wealth, an investment vehicle and a source of retirement income. Renters don’t”. In England there are currently 1.8 million families on the waiting list for social housing but council-house building is at an all-time low.
In Europe, a number of countries, such as Ireland and the Baltic states, including Lithuania – an economic basket case with a 15% drop in gross domestic product (GDP) last year – have already been plunged into a ‘depression’. As in the 1930s, the defaulting of countries looms, as the experience of Iceland shows. Moreover, the decision of the Icelandic people – upheld by Iceland’s president – to refuse the repayment terms imposed by the British government indicates ferocious resistance to the masses paying for the capitalists’ economic crimes. They face paying up to 50% of their GDP!
Icelanders, formerly one of the most ‘prosperous’ peoples of the world, have taken to the road that the masses of the colonial world have travelled before, when they demanded ‘no payment of the imperialist foreign debt’. Imagine then the reaction that is coming in Greece to the cuts that the Greek capitalists, in consonance with the global capitalist institutions, such as the International Monetary Fund and eurozone authorities, will seek to impose with the compliance of Papandreou’s social democratic PASOK government.
A period of unparalleled social tension beckons with all the careful ‘plans of mice and men’, such as the eurozone, coming apart. The eurozone faces big centrifugal forces rather than the centripetal process of integration of the previous period. Europe’s underlying economic situation is even worse, in a sense, than in the US. The eurozone economy is almost as big as that of the US and three times bigger than those of Japan and China. But, while the US economy declined from peak to trough by 3.8% between 2008 and 2009, the eurozone dropped by 5.1%.
‘Normally’ – that is, before the creation of the eurozone – the most economically affected countries, such as Greece, Spain, Italy and Portugal, would have seen their currencies devalued sharply against the stronger currencies, such as the old German deutschmark. But in the iron corset of a common currency, the devaluation route is not open to them. Therefore, ‘internal devaluation’ – slashing the living standards of the working class by holding down wages and cutting public expenditure – is the only road on a capitalist basis. But the masses will not roll over and tamely accept this. Therefore, an explosive social situation could result in some or all of these countries either leaving or being ejected from the eurozone itself.
Nor will what the historian Niall Ferguson calls ‘Chinamerica’ offer a long-term solution for capitalism. The economic alliance between China and the US denoted by this phrase did help to sustain world capitalism through the 1990s and the noughties, through an investment boom in China matched by a massive consumer market in the US for the goods produced in China and elsewhere. But this came at the expense of a great piling-up of surplus dollars in China’s reserves and a process of massive de-industrialisation in the US, which went together with its yawning and growing trade deficit. The collapse of the dollar, partly contrived by the US economic authorities, has cheapened US exports but also acted to devalue Chinese reserves. Seeking to mollify the fears of the Chinese, in a recent visit to Beijing, Timothy Geithner, US Treasury Secretary, tried to reassure an audience of students and economists that the Chinese dollar reserves were “in safe hands”, in the guarantees of the US administration that they would not be devalued. This was met with open derision.
This points up the increased tension between China and the US which extends beyond economic rivalry to a conflict of a geo-political character. Obama’s visit to China last year was, in effect, the visit of a debtor to his banker. It also indicates that the Pacific and Asia is much more important now to US imperialism than the Atlantic and the ‘old continent’ of Europe. But Asia is also a theatre where the long-established might of US imperialism is being challenged by the ‘new kid on the block’ in the form of the Chinese regime. The growth of China’s military power – particularly its navy in the last period – is connected to its spectacular economic growth and its attempt to establish a dominant influence in Asia. The GDP of China has increased tenfold in the space of 26 years, according to Ferguson. It took Britain 70 years in the 19th century to experience a similar economic rise. At the beginning of the noughties, the US economy was eight times larger than China’s. Now it is four times the size. There are predictions that it will overtake America as early as 2027 – in under two decades.
But this prognosis ignores the massive imbalances in China’s growth and, in particular, the mass discontent brewing just below the surface, which the Beijing regime cannot hold in check indefinitely. At the same time, in the capitalist sector of the economy, a bubble is under way. The assembly of the massive industrial machine and the seemingly endless production of goods will come up against the limitations of world capitalism, both now and in the future. The US economy can no longer act as the ‘market of last resort’ for China and the rest of the world. A switch towards the markets of Europe, Japan or the neo-colonial world is very problematical given the depression of ‘demand’. The measures to restrict wages and hold down living standards undertaken by the capitalists have reinforced this.
Moreover, this crisis has demonstrated the classical features of capitalism in crisis: of a glut, particularly in manufacturing, in which China specialises, of course. It is not only China but also Germany, the economic powerhouse of Europe, which will come up against the limits of the market in the next period. In Britain, too, even a huge 30% devaluation of the pound cannot be fully taken advantage of by British capitalism because of the eating away of its manufacturing base and the stalled world economy.
A premature sigh of relief
Capitalist economists – at least the more sober of their breed – do not believe their own propaganda that there is evidence of ‘green shoots’ offering a lifeline. The productive forces are hemmed in by the limits of private ownership, on the one side, and the nation state, on the other. They are weighed down with the lead boots of debt and the consequences of past ‘excesses’. All the prognostications for the future of capitalist globalisation have been falsified. A kind of creeping protectionism is under way, although the ruling classes of the world have avoided falling into the trap of repeating the massive trade war which compounded their problems in the 1930s’ depression.
Unless the working class takes power, Lenin and Trotsky pointed out, capitalism will always find a way out of its impasse, and will be able to re-establish an unstable equilibrium. But such is the scale of this crisis that, if the mass of the working class and the poor of the world had a real rallying point of mass parties, even of the limited kind which existed prior to the collapse of Stalinism, an entirely different social and political situation would confront us today.
To say that the bourgeois are breathing a sigh of relief at the absence of such forces is a colossal understatement. As the New Year opened, the Financial Times pointed to the coincidence last year of “the largest ever rescue of capitalist markets on the anniversary of the free marketers’ first election victory in the West (Margaret Thatcher in 1979) and the demise of the socialist economic models in the East (a decade later)”. It even admitted that this was a “welcome comeuppance for a crazy experiment in market fundamentalism, marking a long overdue return of the state to the government of social and economic affairs”. But, jeeringly, it concluded that this was “matched by the failure of those who claim to have alternatives to capitalism. Where is the European left? the Financial Times asked a year ago – and the answer remains that the left is missing in action in what should have been its finest hour”. We have explained the causes of this contradiction many times. The collapse of Stalinism led to an orgy of capitalist triumphalism which completely disorientated the tops of the labour movement, who fell into the bosom of capitalism and abandoned any idea of the socialist project or even class struggle itself.
But this organ of finance capitalism is celebrating too early. The leaders or, to be more exact, ex-leaders of the workers’ parties and organisations – including a big layer of the trade union leadership – have been missing in action it is true. But this is not true of the working class who have borne, and will continue to bear, all the indignities and cost of this crisis on their backs. They are yearning for an alternative. Moreover, as the organs of big business themselves record, there is not just discontent but a growing hatred of the rich, of the ‘banksters’, which is burgeoning into a pronounced anti-capitalist mood.
This could be harnessed in Britain if a new left workers’ party was created – something the Socialist Party is energetically working towards with others – as has been the case in other European countries: for example, Die Linke in Germany, Syriza in Greece, etc. These formations are limited, partly reflecting the undeveloped consciousness of the masses, as well as the deficiencies of their leaderships. Also, these parties have not yet worked out a clear analysis of the present capitalist crisis or a fighting programme which allows them to intervene, not just on a propaganda level but in active assistance to the working class in struggle. But they are not the last word in the kind of workers’ organisations and parties which are required for the coming battles. Even with their inadequacies, however, they provide a broader forum with the potential to develop in a mass way, for discussion, debate and action amongst more workers and activists.
The colossal pro-capitalist barrage in terms of the consciousness of broad layers of the population, particularly the working class, represented a turning back of the wheel of history. It was not an outright military dictatorship, a physical counter-revolution against the rights and conditions of the working class, which has fulfilled such a role historically. The advanced elements were not physically annihilated, as happened under Pinochet’s military dictatorship in Chile or the Argentinian junta.
But the desertion of the leadership of the workers’ organisations to the capitalists, combined with the economic upswing of capitalism in the 1990s and noughties, did act to discourage and wear out a previously politically advanced layer who were crucial in the battles of the working class in the pervious period. Only the small forces of Marxism, together with an important layer of advanced militants in the trade unions, maintained the banner of the class struggle and socialism. But that is changing, and will change even more rapidly in the next period. This is not wishful thinking but is determined by the intractable character of this crisis economically and its social and political repercussions.
The growth puzzle
Even the economic witchdoctors of capitalism puzzle over where growth will come from. Not one serious bourgeois commentator expects economic fireworks. Some, like Will Hutton, an avowed Keynesian, point to the “spectacular growth” in the stock exchange. Along with Adair Turner – now dubbed ‘Red Adair’ for describing some financial business as “socially useless” – Hutton clutches at straws in a desperate attempt to find some light in capitalism’s bleak economic winter. Yes, there will be some growth. The economic cycle of capitalism accurately analysed by Marx – and only by him – means that crises, after destroying value, create the conditions for creating new fields of investment with a higher rate of profit and, therefore, a growth phase once more. But so debt-soaked is capitalism – individuals, families, companies and, above all now, governments – that any growth will be niggardly.
The growth experienced in the last quarter of 2009 and probably in the first quarter of 2010, even for the laggard British economy, is largely accounted for by the rebuilding of stocks – the ‘cash for clunkers’ schemes, for example – and, in the case of Britain, an increase in spending in shops over Christmas because of the looming lifting of reductions in VAT, which New Labour introduced in 2008. A ‘spectacular’ increase in the stock exchange and shares is largely accounted for by governmental stimulus packages, which have gone into the pockets of the bosses. This has not been invested. In fact, investment in industry in Britain has gone back. Even state investment will be cut as New Labour admitted in its pre-budget report. It has been siphoned into speculation in the so-called ‘carry trade’ – speculation in high-interest currencies using capital borrowed in low-interest countries. This is creating the basis for a new collapse this year and, possibly, a double dip in the economy. Illusions undoubtedly exist amongst working-class people that the growth figures signify some light at the end of the tunnel. But these hopes will be dashed.
The banks still have colossal amounts of toxic debt – totally valueless – on their books. They are not lending either to small or big businesses. But, even if they were, the capitalists would be reluctant to take on loans because of the limitations of the market, the stagnation and collapse of demand. At best, therefore, the scenario confronting world capitalism is that of Japan over the two lost decades from 1990. In truth, for the capitalists, this is a better situation than if they were facing an outright ‘depression’.
Preparing for mass struggle
The most important change that will register in the minds of the masses is that this ‘brave new world’ will not be like the pre-crisis one at all. On the contrary, the capitalist economists have lined up to say as much. With one voice they speak of the pain necessary, although not for them, the ‘trustees’ who have landed the world in this situation. No, it is the working class who will pay. They all agree that the problem of problems for this year and beyond is ‘sovereign debt’, just as in the previous two years it was ‘bankers’ debt’. In effect, the actions of capitalist governments represented a colossal swindle perpetrated against the working and middle classes. Private debt was transferred to the state and has become part of sovereign debt.
Yet the Financial Times, in the editorial mentioned above, gloated that this is “no triumphant return of the state”. Truly hypocritical double-dealing! It was precisely the state that stepped in to rescue capitalism in the bank bail-outs. Now, sovereign debt – the accumulated debts of the state – partly the result of these bail-outs and the effects of the economic crisis itself, must be paid for with the pain inflicted on the working class.
But they are not sure that the working class will swallow the medicine. Gillian Tett, one of the more perceptive commentators of the Financial Times, on the BBC programme, Newsnight, blurted out that it was not certain that sovereign debts could be adequately cut without provoking “revolution”! This stunning admission was passed over in silent embarrassment by the other panellists. But she was right. A revolution, first in the outlook and consciousness of the working class, will result from this crisis. Once the working class’s hopes of a quick exit from the present travails are dissipated, a social explosion will take place in Britain, on a European level, and worldwide.
In Britain, there could be a holding back of the working class in the run-up to the general election, but even this is not at all certain. There is an element of what we saw in 1978-79, in the so-called ‘winter of discontent’. Besieged by rising food and fuel bills, an inexorable rise in unemployment, with more workers sinking into poverty, strikes and demonstrations are not at all ruled out. All three main parties can agree that six million public-sector workers must accept a wage freeze. However, that is not how the working class sees it, as illustrated by the poll which showed that the majority of civil servants, for instance, will not accept a restricted 1% increase in wages in the next year. Undoubtedly, they will be joined by teachers and local government workers. Therefore, the scene is set for a mighty collision – whether this is before the election or afterwards is not decisive – which will transform the social and political situation in Britain and internationally.
The alternative to this bankrupt system
It is largely through experience that the mass of working-class people learn about the bitter class realities of capitalist society. But this can be enormously speeded up if they have behind them a party helping them to draw all the necessary conclusions from the crisis and what it means for them, their families and fellow workers, etc. This is where the genuine left has a crucial role to play in preparing the ground for the emergence of a new mass political alternative for working-class people in Britain.
The idea that, perhaps after a defeat, Labour will swing left and will once more be transformed into a vehicle which working people can use in the struggle against capitalism has been dispelled by the disgusting manoeuvres and arguments deployed by the corrupt careerists who infest New Labour today. They are interested in one thing: saving their own political skins, and not protecting and mobilising working-class people for struggle. Brown allegedly gives us a ‘whiff of class struggle’ in his attacks on David Cameron’s privileged background. Immediately, Tessa Jowell and New Labour’s ‘prince of darkness’, Lord Mandelson, rushed to assure the capitalists that relying on the ‘working class’ and Labour’s ‘core vote’ will not guarantee electoral success. The core vote has long dissipated. And the working class is massively disillusioned with New Labour.
True, when the lines are drawn, the older generation may mobilise, not for New Labour but to stop the new version of Thatcherism in the form of Cameron coming to power. But the new generation, who have no memory of Thatcher or the Tories, threaten to abstain in huge numbers. In fact, this is itself a feature of the organic crisis of capitalism. Votes in elections have fallen systematically since 1951, but particularly since the advent of New Labour and the eradication of any class differences between the main parties.
This is a phenomenon that has been repeated worldwide. In Ukraine, a presidential candidate changed his name to ‘Against all’, as voters there are allowed to vote for this on the ballot paper. He has been emulated in one London borough where a potential candidate has changed his name to ‘None of the above’. This political nihilism reflects the total disillusionment of a vast swathe of the electorate with all the capitalist parties. If there was a similar category in Britain to register opposition as in Ukraine, the turnout in elections would probably increase substantially! But this is not the solution. A new mass workers’ party is. Even the enthusiasm for Obama, which led to an increased turnout compared to previous elections in the US, can be dissipated by his retreat on healthcare reform and the inexorable rise in unemployment, as well as Afghanistan, which is now his war.
In Europe, the undermining of ‘traditional’ formations, like the social democracy in Germany, continues apace. Yes, some workers will vote for these parties, holding their noses, but only because a new alternative has not been created. The way to answer the Financial Times and the capitalists is to make sure that a socialist left, in which powerful Marxist forces are present, is built in the coming year. In the first instance, this must be channelled into building a new political alternative and, at the same time, renovating the trade unions to become fighting instruments of the working class once more.
Pessimism and the gloom of the ruling class are well founded. For them, the crisis is not just economic. Their institutions – parliament, the legal system, ‘democracy’ itself – are in crisis. So is their ‘morality’: their ideological raison d’être. Socialists and Marxists counterpose to their tawdry, moth-eaten ‘moral’ code the simple axiom: what enhances the understanding of the working class and its power to change society is moral and progressive. Everything which impedes this is politically amoral, to be opposed. Capitalism and all those parties and leaders who seek to perpetuate this system of inequality, wars, poverty and suffering are condemning the majority to a nightmare world and future.
Their system is in disarray and cannot offer any long-term future for the mass of the people on the planet. Indeed, it threatens further environmental calamity and the depletion of precious resources, which can also lead to wars, like the struggle over water and even massive food shortages in the next period. The only way to banish this horrific prospect is to indict capitalism, to explain that it is the inherent contradictions within it that have led to this situation. At the same time, it is necessary to raise the socialist banner, to explain the kind of society that can eliminate the horrors of capitalism and open up a new undreamed of future for generations to come: socialism in Britain and the world.