The events in Greece graphically underline the international turmoil. In speeches and in the pages of the Socialist and Socialism Today, we warned that unless the alternative of a conscious movement to change society was organised, social explosions of an inchoate character would inevitably unfold.
Greece – which is perhaps the weakest link of European capitalism at this stage – has demonstrated this in spades.
Saddled with the pro-capitalist leadership of the former socialist party PASOK and a supine official trade union leadership, with general strikes that were only seen as ‘letting off steam’, the violent eruptions in Greece were inevitable.
The Greek events will, if anything, reinforce the determination of the capitalists to avoid a 1929-type situation and a consequent ‘depression’.
Hence the watchwords of capitalism today, ‘No more Lehmans’, and the determination to do ‘whatever it takes’ to avoid a depression.
However, some of the capitalist commentators, witnessing the seemingly unstoppable economic meltdown, have even concluded that there was nothing in the short term they could do to prevent it.
What a 1929-type situation would look like is provided by Iceland. From being the sixth richest country in the world and, allegedly, the ‘happiest’ country six months ago, it has now plunged into an economic abyss, with one third of the population wanting to emigrate, much like Argentinians in the early part of this decade.
As the economic woes of the country deepen, so the political temperature rises, with mass anger directed at the handful of plutocrats who plunged the country into this dire situation.
Everywhere they go in Iceland, bankers, financiers and politicians are booed, and the government has now been forced to resign; nor will this mood be confined to Iceland.
As the crisis deepens and millions are thrown out of work, the financial aristocracy – both financiers and the heads of banks – will be in the dock.
‘Jump you scoundrels!’ on the placards of demonstrators on Wall Street, will be accompanied by ‘Try them!’ as the hearings before Congress in the US have already shown.
Even writers in the sober Financial Times have denounced the bankers’ ‘economic crimes’, claiming that “capitalism itself is the victim”.
It is important that in our propaganda we refute the idea of the ‘evil’ bankers and ‘good’ industrial capitalists.
An essential feature of the 20-year process of ‘financialisation’ was not just the ‘excesses’ of the banking and financial system but the fact that the industrial capitalists also participated in the orgy of speculation.
In fact, Marx pointed out that the only justification for the capitalists – which he designated as the ‘trustees’ of this system – was their ability to preside over the development of the productive forces: science, technique and the organisation of labour.
Now, the masses discover that the claimed ‘economic fireworks’ of the system were bought with a colossal debt bubble, as well as the transfer of productive investment to China, Asia, Eastern Europe accompanied by virtual slave labour there.
This helped the continuing hollowing out and de-industrialisation of capitalism in the US, Britain and even, to some extent, throughout Europe.
In this atmosphere, it is not excluded that individual capitalists and bankers – most guilty of fraud – could be put on trial.
We spare no tears for the financial aristocracy but any such measures must be accompanied by the demand that the system itself is put on trial, and that capitalism will be guilty of further destroying the lives of billions if it is allowed to continue.
Not just individual factories but whole industries could go to the wall and even countries, as Iceland demonstrates.
In Eastern Europe, Hungary, Latvia and other countries threaten to collapse as well. In desperation, those academics in Latvia who have innocently charted the collapse of the economy in that country have been arrested by the state.
If they could get away with it, the British capitalists might similarly arrest BBC business editor Robert Peston, FT associate editor Gillian Tett and others attacked recently for gloomy economic news and forecasts; a case of ‘shooting the messenger’ because you don’t like the message! In Eastern Europe, an alleged showcase for capitalism in the ‘new territory’ created by the implosion of Stalinism, countries threaten to collapse like dominoes.
This, in turn, could severely impact on Sweden, whose banks have lent billions of dollars to the region.
Such is the pace and scale of the crisis that the first immediate effect, as we anticipated in advance, could be a certain stunning of the working class.
The torrent of job losses could cower the working class or sections of it for a time. But if accompanied by immediate savage cuts, it could provoke a swift mass movement of historic proportions, as southern Ireland has demonstrated.
Tens of thousands flooded the streets of Dublin, Cork and other cities in December against the attacks of the Fianna Fáil government on the elderly and sick.
In effect, capitalism, and with it, unfortunately, the working class, now face the famous scene in the Roadrunner cartoon; ‘Wile E Coyote’ runs out of road and goes over the cliff, treads air for a moment before suddenly looking into the camera and realising that he is about to plunge to the ground! The sudden drop is chastening and painful.
It is the severity and rapidity of the crisis which has made sections of the working class initially draw back.
Many are hoping against hope, Micawber-like, that ‘something will turn up’ to save them from the economic abyss.
Fear of deflation
The same feelings, but from an opposite class point of view, motivate the capitalists and their representatives today.
They instinctively fear that an era of mass radicalisation, of revolution and counter-revolution, will open up if they do not ‘fix their system’.
Hence the scramble for all capitalist governments and most capitalist parties, with the notable exception of the Tory party, to try on Keynes’s clothes.
Not just in the US but in Britain and worldwide, there are attempts to reintroduce elements of Franklin D Roosevelt’s ‘New Deal’ policies of the 1930s.
We have even seen ‘Helicopter Ben’ Bernanke, the US Federal Reserve Chairman, prepared to tolerate a ‘little bit of Zimbabwe’ with a rise in inflation in a desperate attempt to avoid Keynes’s famous ‘liquidity trap’.
This is, in effect, a deflationary trap, when the rate of interest is so low – as is rapidly becoming the case in the US, Britain and elsewhere – that lending and borrowing seize up and a generalised fall in prices ensues.
The example of Japan in its ‘lost decade’ of the 1990s haunts the US and world capitalists to this day.
It is one thing for Britain and other capitalist countries to benefit from the 1990s until this year from ‘NICE (Non-Inflationary Constant Expansion) inflation’, with cheap Chinese goods holding down the cost of living and thereby helping to hold down wages and the general living standards of the working class.
It is another thing entirely when a generalised drop in prices takes place, as actually happened in the latter part of the 1920s and early 1930s, possibly trapping the economy in an economic Bermuda Triangle for a lengthy period.
Japan experienced this, with land prices, for instance, which were grossly inflated prior to Japan’s crisis, plunging and never recovering to their level in the 1980s, even today.
Therefore, Obama in the US and Brown in Britain, joined by capitalist governments and commentators throughout the world, have advocated and sought to implement a ‘fiscal stimulus’, through promised decreases in taxes and a boost to public expenditure.
They are prepared to do this despite the cost of a ballooning budget deficit. In Britain, the deficit could reach £120 billion, amounting to up to 8% of British GDP.
Will this amount to a ‘New Deal’ which could drag capitalism away from the precipice and thereby save the lives and jobs of millions of working-class people? Trotsky once commented that the New Deal of Roosevelt could only be afforded by the richest nation, then the US, which had accumulated plump savings.
For the lesser powers, this road was closed off. How things have changed today! The US from being the biggest creditor in the world at the end of the Second World War finds itself as the greatest debtor.
Increased consumer spending in the US was at the expense of the ‘denial’ of consumption and therefore the continued impoverishment of the masses in the neo-colonial world and particularly Asia.
It was Asian ‘savings’ which were used to plug the growing gap in the deficits of the US economy. The Asian capitalists bought up ‘dollar assets’, government securities in particular, which plugged huge gaps in federal spending.
This debt is likely to increase dramatically through Obama’s promised measures. However, Asia may not indefinitely continue to buy these assets as the dollar itself depreciates in value.
Capital, bereft of a safe and lucrative ‘home’ at the moment, continues to pile into US government bonds despite the low interest rates at an average of 3% in late 2008.
The ‘flight to quality’ away from risky financial assets or investment in industry, which offer low or even no returns, means a piling in of capital to ‘gilts’, government debt, even in increasingly bankrupt Britain!
