The crisis: into the abyss

The plunge into an open recession which will be still deeper than its predecessors - some are even talking of "depression" - is silencing the "experts’" talk about lasting economic growth. If the latter are to be believed, the domino collapse of the South-East Asian economies since summer 1997 should have been no more than a blip, without any great effect on the economies of the developed countries. Since then, a tidal wave has passed over countries from Russia to Brazil, from Venezuela to Japan, to strike the heart of the great capitalist powers: "the time has come for an agonising reappraisal". has come for an agonising reappraisal".

Perspectives for the main countries - Annual GDP in %

		1997	1998	1999
OECD	3.2	2.0	1.2
US	3.9	3.3	1.0
Japan	0.9	-3.0	-1.0
Germany	2.3	2.6	1.5
France	2.2	2.2	2.8
Italy	1.5	1.4	2.0
UK	3.3	2.3	0.8
Spain	3.0	3.6	3.1
Holland	3.3	3.3	2.4
Belgium	2.7	2.7	1.9
Switzerland	0.7	1.8	1.9

 

Between July and December 1998, at least $3.5 trillion have gone up in smoke as the stock markets collapsed: the equivalent to 12% of annual world production has been lost, half in the USA, the rest in Europe and Asia. In Japan, the state has decided to inject $520 billion "into its banks, in order to save them from sinking and to reanimate the world’s second economy". Everywhere, "analysts are revising abruptly downwards forecast company profits, just as the first massive redundancies are being announced". The self-satisfaction among the West European ruling classes at the launch of the euro can barely hide their deep anxiety. They are talking less and less about Europe’s supposedly "sheltered" status from the rest of the world economy. Everywhere, "the forecast of 2% growth for 1999, originally considered too pessimistic, may well turn out, on the contrary, very difficult to achieve".

All this would be laughable, were it not that the first to suffer the cost of this new and dramatic acceleration in the crisis will be the hundreds of millions of workers and unemployed, who willemployed, who will be plunged into growing poverty with no hope of a way out. The African continent has already been virtually abandoned to its fate, prey to the ravages of famine, disease, massacres, and constant "local" wars. Now it is the turn of the South-East Asian countries to be dragged down in the spiral of social decomposition sweeping all before it. In the USA, the losses on the stock exchange directly affect millions of workers whose savings and pension funds are invested in the stock market. In the developed countries, despite all the reassuring talk, the ruling class is unleashing new attacks against working class living conditions: cuts in wages and in all kinds of social benefits, "flexibility", lay-offs, "job cuts", savage cuts in health service budgets, housing and education; the list of measures being concocted in the "democratic" countries is a long one, as the bourgeoisie tries to save its profits in the world financial storm.

What is happening is neither a "healthy purge" nor a "readjustment", in the face of excessive speculation, which need simply be regulated to stave off disaster. Unbridled speculation is only a symptom of the dead-end in which the world economy finds itself. It is the result of the impossibility of countering the shrinking world market and the falling rate of profit. In a merciless trade war between all the world’s capitalists, the capital that cannot be invested in production because the inanadequacy of the market means that it would make a loss, takes refuge in a financial speculation which is all the more hazardous in that it corresponds, not to any production in the real economy, but simply to massive and generalised debt. The shattering failure of the Long Term Capital Management hedge fund is a striking illustration: "Although this speculative fund only had $4.7 billion of capital, its debt had risen to $100 billion. According to some estimates, its total commitments on the market represented $1.3 trillion, almost the value of France’s GDP! A giddy rise in commitments involving some of the great names in world finance". We are certainly confronted with unbridled speculation. But those who today are outraged at "such practices" neglect, above all, to mention that these are the "normal" functioning of capitalism today. "All the great names of world finance" - banks, companies, private and state financial institutions - behave in the same way, following the instructions of the states which fix the rules of the game, and the advice of international organisms like the World Bank, the IMF, the OECD and others, which can be summed up as "reduce the cost of labour by every means possible!".

With disaster at the heart of the industrialised world, the "experts" seem to have discovered the "damage" done by the "reduction in the state" and "globalisation" that for almost 20 years have been the main themes of p propaganda for a "rich, free, and prosperous" capitalism. During the same 20 years, the working class has learned to its cost what this propaganda is worth: a mystification to justify the attacks on workers’ living conditions, and a proliferation of measures intended to maintain the competitiveness of each national capital against its rivals in the economic war. Apart from its use against the working class, the defence of "less state" and "globalisation" has above all been a weapon of the powerful against the weak. The "less state" and the denunciation of "protectionism" by the North American bourgeoisie has not stopped the US increasing from 20% to 35% the proportion of imports subjected to draconian controls in the name of "safety" or "pollution", or any other alibi to hide its own protectionism. While the state has disposed of a whole series of responsibilities in the management of large companies, through privatisation, this does not mean that it has given up its prerogative of political control over the national capital, or that the framework of capitalist economic management has gone beyond national frontiers. Quite the contrary: "less state" was nothing but the form of each national capital’s necessary adaptation to the intensification of an economic war in which the state has always played the commanding role, hand in hand with the major companies. "Globalisation" was nothing but the imposition of rules for the same economic war, to give the great capitalist powers as much of a free hand as possible to pillage their rivals on the battleground of the world market. Today, the idea of "more state" is making a comeback in the bourgeoisie’s propaganda, especially on the part of Western Europe’s social-democratic governments, because the new acceleration of world capitalism’s inexorable bankruptcy has once again brought to the fore the elementary demands of capital: close ranks against each national capital to confront the competition and attack the living conditions of the working class.

After 30 years of descent into the abyss of economic crisis (whose main characteristics and moments of acceleration since the 1970s we summarise in the article that follows), today the heart of the capitalist "world economic order" is unsteady. Behind the international solidarity put forward to confront the "Asian crisis", and the apparent common desire to "rethink the international monetary system", or to "reinvent Bretton Woods", the bourgeoisie of the main industrialised countries has in fact been drawn into an ever sharper struggle of "each against all", a considerable reinforcement of state capitalism as the policy of determined defence of each national capital, whose main target in every country is the working class, and a flight into conflict as we can see from the sharpening imperialist tensions that we also deal with in this issue.

4 January 1999

Note: Sources for this article include L’Expansion, December 1998; World Bank, December 1998; Le Monde Diplomatique, "Anatomie d’une crise financière", November-December 1998.