In the following interview, Judy Beishon of the Socialist Party executive committee explains how the coronavirus pandemic is impacting on the capitalist global economy, the ruling classes’ response, and the prospects for working-class struggle in a post-pandemic world.
The coronavirus pandemic is a massive health crisis with wide-spread consequences – including a great economic impact. How badly could the economy be affected?
The speed of decline of economic activity is unprecedented and is hitting every country – mostly at the same time.
The economic consequences are particularly serious because world growth was slowing before the coronavirus outbreak, and it was clear that a recession was on its way.
The chief economist of the International Monetary Fund has recognised that the present plummeting of economies is deeper than the 2008-09 recession – so the worst since the 1930s. Very large falls in output and growth took place last month, and again this month, with great uncertainty over the picture after that.
Whole sectors of industry and services have been strongly hit, and some temporarily devastated, like the airline industry. One commentator described it as whole swathes of the economy being “in cardiac arrest”.
Along with that, there’s a crash in oil prices, and stock markets are highly volatile – they suffered dramatic falls and then made a partial recovery – and there has been turmoil in the credit markets.
So it’s a very rapid and synchronised plunge into recession, at a time when strong economies are needed to be able to put resources into defeating Covid-19.
It’s the working class and poorest who will suffer most from this economic crisis?
Yes, they have the least means to get by during this onslaught on livelihoods. Globally, tens of millions of people are being forced out of work. Many of the lay-offs will be temporary – during the lockdowns – but it’s already clear that many businesses are going bust or will downsize.
In the US, 21.8 million people signed up for unemployment benefit in the past four weeks, pushing unemployment to around 20%.
In Britain, new claims for Universal Credit are up to 1.2 million. It’s been estimated that a fifth of small companies could close permanently.
Not everyone is in a category being helped by the government’s assistance schemes for furloughed workers and the self-employed; and there are unacceptable time delays in accessing the help – likewise with Universal Credit. So people are going without essentials or face the nightmare of destitution for a period.
Only a small minority of struggling small businesses have received the bank loans on offer – which they might not be able to repay.
Overall, many people are suffering big drops in income, with all the consequences that can mean for mortgages, rents and other living costs.
People in the poorest countries of the world face even more severe effects on their livelihoods and health. Tragically, the virus spreading everywhere within a rotten capitalist system, means there’s little help on offer by one country to another.
In the 2007-08 crisis there were articles even in the capitalist media saying ‘Marx was right’. How relevant are Karl Marx’s writings to this crisis today?
Marx’s writings are an indispensable guide, because he worked out and explained the underlying workings and processes of the system; and also the contradictions, which are many.
For instance, big capital becomes concentrated into fewer and fewer companies and hands, which tends to undermine competition – a driver of innovation. Or we could point to the contradiction between developing the productive forces globally and the fact that capitalism is based on nation states. Or that workers as a whole are unable to buy back the goods they produce through the share of surplus value they are given in wages.
And then there are some of the dilemmas that capitalist economists debate: On the ‘opposites’ of protectionism and so-called free trade – neither of which turns out to be an answer. And they puzzle over productivity growth – why it’s generally low. They want higher productivity (more output per worker) so they can be more competitive, but that can lead to increased unemployment.
The capitalists find it useful to have a ‘reserve army’ of unemployed in expansionary phases, and they can benefit from wages being forced down through the competition for jobs. But then lower wages give them less incentive to invest in machinery and new technology… And the cycles and contradictions go on.
Marx and Engels explained that capitalism can’t avoid its inherent contradictions, so its debacles are repeated, even though the triggers, effects, etc, are new.
But of course, there’s also the class conflict, by far the most serious contradiction for the capitalist system, because it will lead to its removal. Capitalism can keep going through all the other contradictions and the cycles they cause – booms and slumps – but not when its ‘gravedigger’, as Marx and Engels called the working class, moves to remove it.
While Marxism provides a crucial understanding of the workings of the system (or rather non-workings!), Marx’s writings aren’t a blueprint for the detail of events as they unfold. Rather, they’re a method of analysis that needs to be continually applied anew to events and perspectives. At the same time, it’s remarkable how much written by Marx and Engels in the 19th century is apt today.
So this downturn is only the latest one in a long-term picture of crises for the system?
Yes, we recognise, as did Marx, Engels, Lenin and Trotsky, the ‘progressive’ role once played by capitalism in developing the productive forces (industry, science, technique, etc) – to a level that creates the prerequisite for socialism. But overall there’s been nothing progressive about the system for a long time.
The capitalist classes of the world preside over a crisis of low productive investment and productivity, showing they’re no longer able to carry out their original historic mission of developing the productive forces.
The chronic rottenness has led to short-term profit-seeking by the ruling class, who have no long-term confidence in their own system.
Instead of investment to advance society, the ‘captains of industry’ have turned in a major way to short-term greed – and particularly in the decades since the post-war economic boom ended, have gorged themselves to an unprecedented degree with obscene pay levels, bonuses, and share dividends.
Meanwhile, they have reduced the share of total wealth produced that goes to their workforces, by grinding workers’ conditions and well-being further into the ground. Part of that has been the moving of production, call centres, etc, to lower-wage countries, and exploiting immigrant workers domestically.
Also, new technology in many sectors is not used to improve the living standards or lives of workers, but to reduce the overall amount paid to them through cutting jobs, hours or pay, and to place them under greater surveillance.
The corporate bosses have also resorted to private equity takeovers, often to asset strip the companies being swallowed up. And financial ‘engineering’ has included companies buying their own shares on a vast scale, which has become a major tool for boosting the stock holdings of company executives and shareholder dividends.
Another feature is the staggering amount of speculation engaged in by the finance institutions – gambling unimaginable sums on the currency markets, stocks, and elsewhere. The short-selling of shares is one means of this, being stepped up now due to the volatile stock markets (short-sellers borrow shares in order to sell them and then buy them back when they’ve fallen in price).
It can contribute to bringing down companies, as it did in the collapse of the multinational Carillion, which employed tens of thousands of workers worldwide.
And the main faultlines that led to the crisis in 2007-08 are still present today?
Yes, capitalist economists keep saying that the banks are better capitalised now, but most of the factors that led to the 2007-08 crisis remained after it. Stock values raced beyond the level of real company growth, trillions of pounds more.
Bonds have been overvalued too. Debt levels are unprecedented – company borrowing is more than double its level before the 2007-08 crisis and there’s an increase in ‘low quality’ debt within that.
Capital still flows around the world in a destabilising fashion; current account imbalances between countries are as enormous as ever; financial speculation continues to be dangerous; and so on.
Do the ruling classes have more friction with each other than before the last crisis?
Tensions between them have increased because economic growth has been so generally weak, so competition for markets has increased. Even before Trump became US president, trade protectionism was increasing and impacting adversely on trade levels.
Tensions have increased both between the main blocs of countries and within those blocs.
This is part of a trend of ‘deglobalisation’ which is apparent in a number of respects; but that’s not to say that the world’s capitalist economies aren’t very interdependent, in financial and currency relations, and production supply networks.
A major aspect of the present situation is the vast sums of money being injected into economies.
To weather the crisis of 12 years ago, there were vast injections of money – over $10 trillion in Quantitative Easing alone (QE – asset purchases using digitally created money), along with very low interest rates.
Those measures guarded against 1930s-level mass bankruptcies and served to temporarily mask the major weaknesses in the fundamental health of capitalism globally.
China’s massive stimulus after that crisis was a lifeline for the whole world. But despite those interventions, growth during the last decade has been weak, and so many of the stimulus measures have remained in place in some form or other.
The coronavirus crisis hit just when the major economies were trying to more vigorously reverse those programmes. Instead, even bigger interventions are now being made – public money is being ploughed into economies to an unprecedented degree in a desperate attempt to try to ward off a spiral into depression.
In the US, a massive $2 trillion is being injected, with the US Federal Reserve (central bank) pledging an unlimited supply of money to the US economy through bond buying.
In the UK, the government, through the Bank of England, is injecting a £350 billion package, along with a reduction in interest rates to the lowest level (0.1%) in the bank’s 326-year history.
These – and similar measures across the developed economies – are raising mountainous debt levels even higher, storing up yet more imbalances and instability.
Then the question will be: who will pay for the debt – which class in society?
That’s one of the fundamental questions that workers’ struggles will be linked to when the coronavirus and economic crises eventually subside. Even before then, anger can erupt over the failure of governments to meet people’s needs in this health and economic emergency. There have already been walkouts over health and safety issues.
It’s clear that the ruling classes across the world fear the reaction that’s coming from below.
Boris Johnson felt the need to say that, this time, public money won’t go to the ‘bankers and rich’ but to struggling workers and small businesses. The Bank of England warned other banks not to pay dividends and bonuses, reflecting its concern about the potential for workers’ anger to be directed at brazen enrichment at the top.
The payments being made directly to every household in the US and the paying in Britain of 80% of furloughed workers’ wages are also attempts to be seen as aiding ordinary people, as well as to try to encourage spending and boost the economy.
However, governments will at some point turn back to trying to ‘balance the books’ at the expense of ordinary people. In this they will meet fierce resistance.
It will be a totally changed situation – one in which people have witnessed this sudden health and economic crisis of the system, and seen capitalist governments’ utter failure to be able to respond to it without mass suffering and insecurity.
So major class battles will come, with a growing realisation that capitalism needs to be removed.
To do that, the working class and its trade unions will need to take the lead in the formation of new mass workers’ parties based on socialist programmes. Crucial elements of those programmes will be public ownership of all the key industries and services and the planning of economies on a democratic, socialist basis.