Join the Socialist Party Join us today!

Printable version Printable version

Facebook   Twitter

Link to this page:

From The Socialist newspaper, 28 September 2011

Editorial of the Socialist

World economy in meltdown - we won't pay for capitalist crisis

24 Hour Public Sector General Strike Now - Socialist Party placard, photo Paul Mattsson

Photo Paul Mattsson

In a recent address to the Canadian parliament, David Cameron bluntly said: "Growth in Europe is stalled. Growth in America has stalled. The effects of the Japanese earthquake, high oil and food prices have created a drag on growth. We're not quite staring down the barrel, but the pattern is clear".

Global trade has started to sink. Stock markets have fallen. Even the Chinese economy is slowing, with a contraction of manufacturing activity for the third successive month in September.

"Double-dip, here we come", an economist at Scotia Capital commented, although many working class and middle class people would deny there was ever any recovery when judged by their own experience.

"I have not been at a prior meeting at which matters have had more gravity", remarked Obama's former chief economic advisor, Larry Summers, while attending his 20th annual IMF meeting on 23-25 September in Washington. Yet the G20 finance ministers were too divided at the meeting to agree on what to do.

Earlier this month, IMF leader Christine Lagarde warned governments in the US and Europe to take immediate "growth intensive measures" to ward off renewed recession. But it may be too late - some major economies could already be back in recession.

The danger is real of a 1937-style slide into a global economic slump unless governments and central banks rapidly implement measures to prevent or postpone it.

Futhermore, leading economists admit that even if recession is staved off, the prognosis is not one of good growth rates in Europe, the US or Japan; rather an ongoing 'stalling' or sluggish growth for the foreseeable future.

This means continued high levels of unemployment - a catastrophe for a generation of young people - and even higher unemployment if renewed recession sets in.


Within this overall situation is the eurozone crisis, described during the IMF meetings as the "most serious risk now confronting the world economy" by US treasury secretary Tim Geithner.

Britain's chancellor, George Osborne, dramatically argued that there are just "six weeks left" to save the eurozone.

However, European finance ministers tried in vain in Washington to formulate a new package of measures to rescue the eurozone. With the certainty of Greece defaulting at some stage on its mountain of debt, they are desperate to lessen the knock-on effect on banks and governments elsewhere. Fears have escalated of contagion spreading to heavy 'sovereign borrowers' like Spain and Italy, considered 'too big to bail', and on banks in France and Germany that are exposed to the debts of these countries as well as to Greek debt.

Italy has debts of €2.3 trillion, but the 'European financial stability facility' (EFSF) contains just €440 billion. There are proposals to increase the EFSF funds to over €2 trillion.

This is nowhere near enough to prevent meltdown in the debt-ridden banks or wider finances of some of the larger European countries that could be the outcome of a worsening of the Greek crisis.

But incredibly, as if economies the world over haven't been burnt enough by financial manipulations that mask reality, these proposals include making the facility's funds appear to be four or five times larger by using leveraging devices - in particular by borrowing via the European Central Bank.

This would be a smokescreen for a route yet again towards making working class and middle class people pay for the economic crisis, through drawing on public money.

In addition, more public money may be injected into at-risk eurozone banks, as previous bailouts have not handed the banks a healthy enough ratio of cash assets relative to their debts. They could presently be ‘undercapitalised’ by as much as €500 billion (Financial Times, 26.9.11. This would be to try to prevent the money markets from suddenly cutting off funding to some banks - the scenario of 2007 when inter-bank lending dried up.

Also, a third measure is being considered, a further write-down of Greek debt beyond the 21% agreed in July. Barclays Capital has questioned this figure and estimated the loss to European banks as a result of the deal to be nearer 5% than 21% - so that particular package could be less significant than first thought and even less likely to prevent a default by Greece.

However, some governments have still to ratify the July deal - the German Bundestag votes on it this week. Moreover it is clear, even before that action is implemented, that it is inadequate.

"Rescuing the eurozone requires an action plan of a scale hard to fathom", has commented Wolfgang Munchau in the Financial Times (26.9.11).

European ministers have discussed writing off 50% of Greek debt, passing further losses to European banks and taxpayers. German workers, who would be expected to bear the greatest burden of this and other measures, are understandably mostly against it and are applying great pressure, restricting the room to manoeuvre of German prime minister Angela Merkel.

Workers' struggles

Workers both inside and outside the eurozone are being forced by their ruling classes to pay the price of the economic crisis. Greek workers have suffered a massive onslaught of austerity, British workers are facing unprecedented cuts in jobs and services, and so the list goes on across Europe and indeed the world.

But Wolfgang Munchau asked in the FT: "Do we really believe the Greek government can implement one austerity plan after another with a majority of five seats?" - and we can add: 'with massive workers' opposition?'.

"The global economy appears to be rudderless", noted the economics editor of the Times. But the markets are not mysterious, supernatural phenomena to which there is no alternative. As many commentators in the media admit, this is a crisis of capitalism, a period in which the debt levels of households, banks and governments have impacted heavily on demand for goods, so there are fewer profitable outlets for manufacturers.

This is a drawn-out agony that working class people do not have to accept. There have already been major struggles, such as the eleven general strikes in Greece, and many more battles will come that can force governments back from their attacks.

Alongside this fight, the crying need for an alternative form of society will be increasingly recognised, a socialist one with public ownership and planning of financial institutions and the main parts of the economy, under full, genuinely democratic control.

NB: This article is a slightly longer version of the one printed in The Socialist

Why not click here to join the Socialist Party, or click here to donate to the Socialist Party.

In The Socialist 28 September 2011:

Building for 30 November strike

Mass strikes can kick out Con-Dems

Jarrow march for jobs

Marching for a future

Join the Jarrow marchers on their 330 mile journey!

Why are you marching?

Why are you supporting the march?

Jarrow march - council puts high price on right to protest

The Socialist's editorials

World economy in meltdown - we won't pay for capitalist crisis

Pro-business Labour offers crumbs and promises cuts

Socialist history

1911 - Bermondsey women's uprising

Socialist Party youth and students

£6,000 uni fees? An offer we can refuse!

Fight fees and cuts - join Socialist Students!

Youth demand a future in Tottenham

What I spent my EMA on

Socialist Party news and analysis

As Murdochgate scandal goes on - release Tommy Sheridan!

Scotland: SNP do the Con-Dems' dirty work

Dale Farm - call off the evictions of residents

Metal thefts - The hidden crime of capitalism

Socialism 2011: A weekend of discussion and debate

News in brief

International socialist news and analysis

As debt crisis deepens... Greek workers and youth in revolt

Socialist Party workplace news

Construction workers strike to defend agreements

Greenwich Unite takes fight to cuts councillors

Workplace news in brief

Socialist Party reports and campaigns

PFI schemes - a national scandal

Salford says: Save Lancaster House!

Stop coastguard cuts!

Stroud demo against private sharks killing the NHS

Socialist Party review

Film review: Tinker tailor soldier spy

Readers' comments

My impressions of the Work Programme

More whacko ideas from Tories

Standing up for our pension rights


Home   |   The Socialist 28 September 2011   |   Join the Socialist Party

Subscribe   |   Donate  

Related links:

World economy:

triangleBuilding workers' struggle and the forces of international socialism

triangleBuild 100 days of resistance to Trump's agenda!

triangleSocialist Party national congress 2016

Capitalist crisis:

triangleSheffield North Socialist Party: The causes of capitalist crisis

triangleLambeth Socialist Party: USA - Fighting Trump and the struggle for a socialist alternative

triangleRight wing attempts to use single market against Corbyn


triangleA socialist approach to Corbyn and a customs union

triangleSocialist Party congress 2018

triangleSpring Statement 2018: Tory austerity staggers on despite economic and political weakness


triangleLewisham & Southwark Socialist Party: Reform or Revolution?

triangleTories fear youth revolt - fight for our future


triangleCapita in crisis: bring all outsourcers back in-house


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


triangleLecturers strike around country in defence of pensions


triangleMay's EU speech kicks the can down the road

News and socialist analysis

News and socialist analysis



RMT Labour Party affiliation debate - where do socialists stand?



Windrush scandal: Tories and Blairites must go



Tories out!



Enoch Powell's racist 'Rivers of Blood' rant 50 years on


Them & Us

Them & Us



Billions for the bosses, benefit cuts for us



1,400 beds empty as patients lay in corridors: health unions must act now



Young people need homes



For a fighting, democratic Labour Party



A socialist approach to Corbyn and a customs union


Child poverty

Child poverty to hit 5m by 2021 - strikes can stop the cuts


Equal pay

Gender pay gap figures show need for trade union action


Young people

Alienation and austerity behind London deaths - fight for socialism



Fight the Tory enemy


Northern Ireland

Northern Ireland: peace process on the brink

triangleMore News and socialist analysis articles...

Join the Socialist Party
Subscribe to Socialist Party publications
Donate to the Socialist Party
Socialist Party Facebook page
Socialist Party on Twitter
Visit us on Youtube



Phone our national office on 020 8988 8777


Locate your nearest Socialist Party branch Text your name and postcode to 07761 818 206

Regional Socialist Party organisers:

Eastern: 0798 202 1969

East Mids: 0773 797 8057

London: 020 8988 8786

North East: 0784 114 4890

North West 07769 611 320

South East: 020 8988 8777

South West: 07759 796 478

Southern: 07833 681910

Wales: 07935 391 947

West Mids: 02476 555 620

Yorkshire: 0114 264 6551



Alphabetical listing

April 2018

March 2018

February 2018

January 2018