spotArguments for socialism

spotCapitalism

spotGlobalisation Anticapitalism

spotMarxism


All keywords


Socialist Party Facebook page
Socialist Party on Twitter
Visit us on Youtube

Capitalism keywords:

1929 (2)

Asset-stripping (9)

Austerity (1090)

Bankers (107)

Banking crisis (14)

Bear Stearns (3)

Bonuses (58)

Bourgeois (4)

Brexit (67)

British economy (18)

British politics (9)

Budget (324)

Capitalism (857)

Capitalist (627)

Carry trade (1)

Coalition government (24)

Competition (26)

Credit crunch (19)

Debt (206)

Depression (19)

Economic crisis (75)

Economy (409)

Enron (2)

Euro (43)

Famine (2)

Great Depression (7)

Hedge funds (9)

Import controls (1)

Inflation (36)

Interest rates (27)

Jpmorgan (1)

Keynesian (7)

Keynesianism (4)

Lisbon Treaty (9)

Marriage (8)

Mortgages (21)

Northern Rock (32)

Oil (281)

Oppression (46)

Populism (3)

Private equity (11)

Profit (79)

Profit system (27)

Recession (120)

Rich (240)

Shares (18)

Shell (8)

Short-selling (2)

Social class (3)

Software (2)

Stock market (10)

Stock market crash (3)

Sub-prime (12)

Sub-prime market (2)

Subprime (10)

Tax (561)

Technology (22)

Universal Credit (11)

Wealth (65)

Wealth gap (14)

World economy (55)

capitalist crisis (30)

capitalist system (32)

Depression


Highlight keywords  |Print this articlePrint this article
From: The Socialist issue 689, 12 October 2011: Cameron’s big ‘them and us’ society

Search site for keywords: Socialism 2011 - Capitalism - Recession - Debt - Socialism - Euro - Banks - Capitalist - Economy - Eurozone - Depression

Sovereign debt crisis, recession... No way out under capitalism

Banks continue to demand government bailouts; an ever-deepening sovereign debt crisis in Europe and the USA; mass unemployment and cuts in services on a level not seen since the 1930s; a widening gulf between rich and poor... the capitalist profit system is in a massive hole and the capitalists can't stop digging!

But, as Robin Clapp explains, it is clear that the super-rich and their political representatives have no solution to these problems, blinkered as they are by the drive for short-term profit. But all over the world anger is growing and resistance is being organised.

In preparing to leave his plush Frankfurt office, with a jaw-dropping pension, outgoing president of the European Central Bank (ECB) Jean Claude-Trichet warned last week that "we are experiencing the worst crisis since 1945".

Mervyn King, his counterpart at the Bank of England, added that "this is the most serious financial crisis at least since the 1930s, if not ever".

The illusion that the Great Recession of 2008-2009 had been vanquished has been brutally exposed in recent months as the world moves towards a double-dip recession.

Then, the private debt crisis saw Lehman Brothers tumble, banks nationalised and unemployment soar. It was triggered by the bursting of the US sub-prime housing bubble and the reliance on the fictitious derivatives market as an alternative to investment in real production.

Governments initially responded to this potential meltdown by carrying through massive bailouts in an attempt to rescue their economies.

Yet three years later it is apparent that the 'cure' did not work, with the crisis mutating into a full-blown sovereign debt crisis in Greece, Portugal, Ireland and now Spain and Italy.

No worldwide consensus exists among governments as to what measures should be applied to try to avert years of stagnation, a return to recession or even the threat of a full-blown 1930s-type depression.

The prevailing capitalist view has been to make the working class pay for the previous stimulus packages and the $14 trillion worldwide bank bailout. But savage attacks on living standards have led to a growing paralysis in consumer demand which in turn means that the deepest recession since the 1930s has been followed by the feeblest recovery.

Capitalism is anarchic and can never be an economically cohesive system. It is a victim of its own limitations - the constraints of both private ownership and competing nation states clash repeatedly with the necessity for an international harmonisation of production, rational planning, science and technology.

But increasingly the viability of capitalism as a system is being questioned. The Occupy Wall Street movement has raised the slogan: "They are 1%, we are 99%".

This slogan not only exposes the savage inequality and rottenness of the system, but reveals the huge potential power of working class and poor people to change the system.

In this battle ideas - increasingly including socialist ideas - will come to the fore.

Low growth

The Organisation for Economic Cooperation and Development expects the world's major economies to limp forward at best in the fourth quarter of 2011. The US will see growth of just 0.4%, Japan will flatline and Germany will contract by 1.4%.

The US has been described as a 'sub-prime nation', over-extended both militarily and economically, living large and beyond its means. Tea Party Republicans are refusing to sanction tax increases for the rich and demanding eye-watering cuts to the budget in order to curb the $14.5 trillion national debt.

Effective government has given way to growing dysfunction. This was underlined by the recent decision of the Standard and Poor credit rating agency to downgrade America's debt status.

Quantitative easing

In Britain, described in the past by Tory MP John Redwood as a large bank with a medium sized government attached to it, a second round of Quantitative Easing (QE) has been announced.

This comes after new figures showed that the downturn in 2008-2009 was even deeper than believed, with GDP (total output) dropping by 7.1%.

QE allows the Bank of England to print money electronically with which it then purchases government bonds from the banks. In theory they then lend this money to businesses, thereby lubricating the economy and stimulating demand.

In practice this has not happened. QE has certainly pushed up share prices and profits and has been used to speculate in food futures, commodities, etc, producing new price bubbles, more profits and heaping more misery upon starving millions.

This measure has been necessitated by the news that Britain's economy has ground to a halt, with the squeeze on living standards the greatest since the depression of the 1870s.

Caught like a rabbit in the headlights, Osborne's 'Plan A' is effectively in tatters and there is a growing clamour from business and even the International Monetary Fund for a more flexible economic policy that can avert a 'car crash'.

No agreement

Every day seems to bring forward a new 'plan' for resolving the sovereign debt crisis, bolstering the euro and creating confidence.

The trouble is that none of the plans concocted in the heads of economists and political leaders can easily be rolled out and accepted by squabbling capitalist governments who increasingly guard their own interests at the expense of rivals.

Europe's leaders are hamstrung by their national interests and the growing mood of anger on their streets. They cannot agree on anything. Should private sector creditors be forced to take losses? How big should the euro zone's bailout fund be and how broad its scope? Germany's chancellor Angela Merkel has one opinion, France's president Nicolas Sarkozy another, while both the ECB and the European Commission wade in with different demands.

Greek contagion

The epicentre of the present economic contagion is undoubtedly Greece and the growing realisation that it is insolvent and in one form or another likely to default on its debts. Greek borrowing rates have now hit stratospheric highs; 62% for two-year money, while a three-year bond maturing in 2012 costs 129% in interest.

This follows a deal in July where eurozone countries sought to contain the crisis through emergency bailout payments with vicious strings attached.

Greece must repay at least €100 billion of debt over three years which is about 40% of its current GDP - a figure comparable to that demanded in reparations from Germany by vengeful Allied powers in 1919.

Another €109 billion would then become available, while the role of the European Financial Stability Facility (EFSF) would be extended to allow intervention to support other governments and banks.

Already Greek workers have been the victims of the sacking of a fifth of the total public sector workforce, swingeing tax increases and the biggest and fastest privatisation programme, relative to national output, ever attempted.

The expansion of the EFSF, the orderly restructuring of the debt of those countries that can never repay it, a shift in the eurozone's macroeconomic policy from its obsession with budget-cutting towards an agenda for growth, a declaration that the European Central Bank will stand behind all solvent countries' sovereign debts and that it is ready to recapitalise Europe's damaged banks, are all being frantically argued over in Berlin, Paris, London and New York.

But none of these measures may be enough to forestall a Greek exit from the euro. Behind this headline moreover and ticking like a time bomb are the vast sovereign debts of Spain and Italy, totalling €2.5 trillion.

Euro crisis

Capitalism's unprecedented financial integration, based on the fallacy that globalisation could continue in an uninterrupted manner, means in this period that a crisis in one sector can detonate a series of damaging aftershocks in others.

Thus the Belgian-French bank Dexia, which has a large exposure to Greek debt, is caught in the whirlpool, causing the cost of insuring Belgian government bonds to rise to record levels and impacting on the UK where it funds 40 PFI schemes, ranging from schools to street lighting.

Fearful of it collapsing, Dexia has now been nationalised by the Belgian state with €90 billion guarantees of French and Belgian government funding for up to ten years.

The undermining of the euro-project has begun. A Greek exit will have incalculable consequences, politically and economically. UBS bank calculates that Greek GDP might plummet by 40%-50% in the first year after withdrawal.

But increasingly the nightmare option is being whispered; that the single currency itself might collapse, causing broken treaties, wild currency swings and bitter political antagonisms. This in turn would cause the single-market to fragment and the EU itself - the symbol of Europe's post-war stability - could begin to crumble. That such a scenario is even being considered, shows how dangerous is the phase that capitalism has entered.

Capitalist failure

Recessions are inherent within the mechanism of the system. With the euro-project in jeopardy, banks facing still huge undeclared losses and a likely lurch back into recession, the world economy indeed faces a crisis as dangerous as that described by Mervyn King (see page 12).

But their class cannot resolve it without making ordinary working class and middle class people bear the price.

Greek, Spanish, Italian and now British workers will not accept that dictat from the unelected bond market vigilantes. Increasingly it will become clear that the rich have forfeited the right to rule. The forces must be built internationally to create the socialist alternative.

It was an anonymous official in Athens commenting on the growing threat of a Greek sovereign debt default, escalating international banking crisis and rapidly accumulating evidence of a worldwide seizing up of economic growth, who best summed up the collective fear that now haunts the bourses and boardrooms of business: "If we default, it's not just the domino effect....This place will become worse off than Bangladesh. People will be killed for a sandwich as they cross the road".

NB: The above article was split into two sections in the Socialist, carried on different pages - page 9 and page 12


Come to Socialism 2011 - join the fightback

Socialism 2011 is a weekend of discussion and debate which will take place in London on 5 and 6 November.

See www.socialism2011.net to buy tickets, see full programme of workshops and rallies and for all the details on accommodation, crèche and accessibility, and the party for socialism after the Saturday rally.

Rally: World in crisis - fight for socialism

The Saturday rally is the centrepiece of Socialism 2011. It takes place from 6.30-8.30pm on Saturday 5 November at Euston Friends Meeting House, 173 Euston Road, NW1 2BJ.

Speakers include: Clare Daly MP, Socialist Party Ireland; Peter Taaffe, Socialist Party general secretary; a Tunisian trade unionist and Jarrow marchers.






Join the Socialist Party Join us today!

Printable version Printable version

Facebook   Twitter

Related links:

Socialism 2011:

triangleVideos of speeches at Socialism 2011

triangleSocialism 2011

triangleJoin the fightback - come to Socialism 2011

triangleCapitalism IS crisis - Fight for a socialist alternative

Capitalism:

triangleTrump's incendiary Jerusalem statement reignites Israeli-Palestinian conflict

triangleA world in crisis, ripe for revolution

triangleThem & Us

triangleBrexit deal no solution to Tory rifts

Debt:

triangleRetail sector crunch: nationalise to save jobs

triangleAmber warning lights flash on British economy

Socialism:

triangleSocialism 2018

Banks:

triangleRBS to sack 1,000: nationalise the banks

Capitalist:

triangleIrish capitalist state: rotten to the core

Economy:

trianglePowerful picture of the Port Talbot steel workers' struggle

Eurozone:

triangleEU-Canada trade deal battle points to Corbyn's Brexit opportunity

Depression:

triangleKids wait 18 months for mental healthcare