By Dr. P J James
On the Current World Economic Crisis
1. While humankind enters into the new year, the inherent crisis confronting world economy has intensified in the form of a generalized stagflation in every part of the world. The tendency towards crisis is integrally linked to the existence of capitalism itself on account of the contradiction between private nature of capitalist accumulation and the appropriation of surplus-value on the one hand, and the development of the social character of production on the other. But the present situation must be distinguished from the periodic crises that punctuate the history of capitalism as todays crisis has mutually interpenetrating economic and ecological dimensions. Being identified as the biggest and worst crisis confronting capitalism since the Great Depression of 1930s and the stagflation of 1970s, concerned scholars have characterized this prolonged postwar crisis as the Second Great Depression. The recessionary or depression-like conditions still prevailing without any let up in the US and Euro-zone countries since the sub-prime crisis of 2007 and sovereign debt crisis of 2008 and their rapid spread to Afro-Asian-Latin American countries thereby engulfing the whole world have raised fundamental questions regarding not only the viability of capitalist-imperialist system but, in relation to ecology, also of the survival of humankind itself.
2. The roots of this crisis can be traced to the imperialist response to the advent of global stagflation in the seventies which, in the context of the ideological and political setbacks suffered by international Left, prompted US led imperialism to transfer the burden of it to the shoulders of world people by resorting to a change in neocolonial accumulation process through a shift in economic policy from Keynesianism to neoliberalism or monetarism. The result has been a downsizing and rollback of the welfare state and the unleashing of a financial boom or the so called financialization through the abolition of erstwhile Keynesian restraints and controls on the free international mobility of speculative capital. Consequently, relieved of all controls, speculation and its concomitant decay and parasitism, the essential characteristics of finance capital as identified by Lenin, began to assume horrific proportions since the 1980s such that engulfing production the financial economy along with direct looting of nature has ballooned to several times that of the real economy.
3. The collapse of East Europe and Soviet Union that led to the emergence of a whole set of postmodern and post-Marxist theories along with end of history, and end of ideology type vulgar prognoses by imperialist think-tanks gave an added ideological boost to US led imperialism to strengthen neoliberalism through imperialist globalization led by speculative finance capital since the 1990s. As a result, in search of fabulous profits, finance capital that leads globalization/neoliberal accumulation has totally subjected the material conditions of humankinds existence and every sphere of the economy including agriculture, industry and service sectors to its diktats. At the same time, it is has developed newer and newer avenues of speculation in all kinds of stock and real estate and even commodity markets, resulting in hitherto unknown levels of wealth concentration in the hands of a few financial-corporate elite called global billionaires together with unprecedented inequality, poverty, ecological catastrophe and deprivation of the broad masses of the people.
4. Today, this financial speculation whose undercurrents are stagnation, de-industrialization, joblessness, inflation and price rise, corruption, threat to environment and gruesome cultural degradation, has become a terribly destructive force inflicting incessant attacks on the workers and oppressed people everywhere. The recent American government shutdown stage-managed by both the Republicans and Democrats is a typical example. The threat of a federal default which in the ultimate analysis is inseparably linked up with the systemic crisis of US led postwar neocolonial order, is being used by the American ruling class to create the political framework for ensuring the super-profits of financial aristocracy through an intensification of the attacks on the working class and the oppressed sections in American society. The so called shut down has been a drama enacted on the people to accomplish a neoconservative and extreme rightward shift in American economic policies as desired by the entire ruling political establishment. The threat of default on government debt has been used by the ruling elite with the backing of corporate media to create the political conditions for the imposition of quite unprecedented and sweeping cuts in social and welfare spending.
5. Though in a different form, in essence, an identical situation has emerged in Europe too. As a consequence of the neoliberal diktats and fiscal fundamentalism imposed all over Europe, social cuts totalling hundreds upon hundreds of billions of Euros have already been made across the continent. Followed by Greece, Ireland, Portugal, Italy and Spain are experiencing unprecedented stagflation, where even the official unemployment rate is 25 percent. Ireland, Portugal and even Italy which rigorously implemented all the draconian austerity measures are in recession. Spain, the third largest economy of Europe is being pushed into a downward spiral as the asset deflation and collapse of construction boom coupled with reduction in public spending are throwing more people out of employment where youth unemployment is more than 50 percent. Bankers and finance capitalists in Germany who dominate EU are intent on pursuing policies that benefit their own corporate-financial elites at the expense of their rivals in weak economies of the Eurozone whose manifestations are savage attacks on the working classes of Europe including immigrants. This assault on the working people that is systematically taking away even the remnants of erstwhile Keynesian welfare capitalism or rather the trail of devastation and destitution resulting from the predatory demands of the banks and financial speculators has created an explosive situation leading to unprecedented social unrest and conflict between the ruling elite and the working class all over Europe.
6. The present situation, as already noted, is not an overnight development. The driving force behind the financial boom under neoliberalism has been the unbridled appetite for profit maximization through perfect cross-border mobility of speculative capital and an alarming growth of the speculative sphere or financialisation of the economy on the one hand and an unprecedented squeeze of the working class and immigrants through casualisation and flexible specialization on the other. The result has been a steady decline in real wages and erosion of the purchasing power of the broad masses of working people coupled with widespread inflation and asset price bubble leading to horrific proportions of wealth concentration among the wealthy elite, financial corporations and banks.
7. It marks a further intensification of the inherent crisis of imperialism and belies all hopes of its viability. Rather than a temporary aberration, the continuing stagflation has become part of a systemic crisis that pinpoints to the inherent tendency of neoliberal capital accumulation and fundamental contradictions of the globalized imperialist system. The hall mark of policies associated with Thatcherism and later Reaganomics that came to dominance in Europe, America and elsewhere since late 1970s has been deregulation and decontrol of labor, commodity and financial markets. The collapse of Eastern European and Soviet regimes and gradual integration of these economies with imperialist market in the context of the severe ideological and political setbacks suffered by the Left forces from the late 1980s onward, provided finance capital a large reserve army of cheap labour on the one hand, and an expanded market on the other. Its ultimate outcome has been a dramatic decline in both the bargaining power of labour and absolute reduction in their real wages on the one hand, and super profits for monopolies, especially those in the sphere of extractive industries and finance on the other. Since profits from financial sphere are much higher than that from production, in consonance with the inherent trends of unregulated financial markets, instead of production or asset creation, asset purchase, real estate and money-spinning businesses flourished throughout the world. Backed by neoliberal macro-economic policies that were geared towards retaining the investor confidence of speculative financiers, profit rates have grown rapidly while growth rates of the real economy and earnings of workers went down sharply. The consequent fall in purchasing power of the broad masses of people has led, as manifested in the 2007 meltdown, to a realization crisis for the system as a whole.
8. As a solution to this realization crisis, fiscal specialists from imperialist centres favored what is called an inflationary debt-led consumption growth such as the US housing boom bubble and, as a manifestation of this, both public and household debt has grown at an alarming rate everywhere. But when the question of servicing of the debt behind the boom has come up, the banking system and the entire credit market started experiencing shocks. When the process culminated in the sub-prime crisis in the US in 2007, under pressure from corporate speculators governments worldwide announced attractive stimulus packages that pumped trillions of public funds in to the coffers of corporate giants and finance companies. Neocolonial financial institutions at the service of finance capital issued diktats to the comprador neocolonial regimes to strictly pursue appropriate austerity measures to divert adequate money from public exchequers to bail out the crisis-ridden banks and financial corporations. The neoliberal adherents of austerity also advocated cutbacks in government expenditure for reducing deficits and releasing funds for debt servicing. However, rather than reducing deficits and generate surpluses, the output contraction resulting from austerity naturally led to a contraction of the economy and decline in revenue earnings making it impossible for these countries to meet their commitment on deficit-reduction. Coupled with this, liberalization of tax regime leading to the weakening resource mobilization on the part of governments and declining purchasing power of the masses have pushed several countries to the verge of default. New credit lines from imperialist monetary institutions such as IMF and liberal inflows of finance from neocolonial tax havens have become possible only on condition that the countries opt for further austerity and ensure free speculative flows.
9. Neoconservative economists and neoliberal policy experts in imperialist centres until recently have been spreading the illusion that the capitalist crisis in the US and Europe could be offset or counterbalanced by economic growth in Asia, especially in China which has emerged as the second largest economy today. These hopes are now being shattered with each passing day on account of several developments. A series of economic figures released by official sources such as the World Bank and OECD have fully confirmed a contraction in production and economic growth in China, the biggest exporter in the imperialist world economy. Today the so called super-exporter of Asia is caught in a vicious circle of trade-led recession as one of the main reasons for the economic contraction in imperialist China and neocolonial India has been the sudden collapse in exports to the stagnating US and EU. It is to tide over this crisis by raising the GDP growth rate and profit rates of Chinese billionaires that the CPC Plenum that held in the second week of November, 2013 has decided to deepen the pro-market reforms including privatization of state-owned enterprises currently holding assets worth $7.35 trillion. A report released by the Brazilian Central Bank said last week that Brazil, an important member of BRICS has shown symptoms of recession. Without an elaboration, it can be stated that the global integration of stock, commodity and financial markets through the last two decades of neoliberal globalization has transformed every crisis originating in any part of the world as a global catastrophe. As a manifestation of the global dimension of the crisis, starting from the US and EU, leading global stock exchange indices are plunging down and a sense of gloom is prevailing in world financial markets. What we witness in the imperialist world today is an utter policy paralysis backed by ideological and political confusions.
10. Central to the current imperialist crisis is the convergence of economic and ecological contradictions in such a way that the material conditions of society as a whole and the very sustenance of life itself are undermined by rapacious speculative capital. With the completion of the transition from industrial capitalism to finance capitalism, an erosion in the erstwhile line of demarcation between workplace exploitation and ecological destruction has also taken place. Today, the subordination of real economy or the realm of commodity production associated with GDP to the irrational logic of financial ballooning is inseparably organized around an ever-intensifying plunder of nature threatening the existence of both present and future generations. Nowadays billions of people are denied the most basic needs such as non-toxic air, drinking water, land, food, housing and so on due to unhindered extraction from environment by greedy corporate capital propelled by the rationality of accumulation. In other words, along with the contradiction between capital and labour, the destitution and poverty of billions of people today are to be explained with respect to the mounting contradiction between capital and nature too.
11. Under the present neocolonial relations, as in the case of exploitation of labour of export-oriented economies and in export platforms through a new international division of labour and exchange rate manipulation, the burden of the plunder of natural resources whose manifestations are soil exhaustion, desertification, deforestation, global warming, climate variation, ozone layer depletion, species extinction, loss of fresh water, displacement from habitat, forcible migration, etc. also falls disproportionately more on poor Afro-Asian Latin American countries. Transplantation of bio-technological and biochemical process to neocolonial agriculture is an inalienable component of this plunder and deprivation. Therefore, together with economic contradiction, the ecological contradiction should also be taken into account in the Marxist analysis pertaining to both uneven development and unequal exchange at international and national levels. To be precise, the creation of a financial bubble and undermining of real production generating a vast array of reserve army of labour by corporate capital are leading not only to horrific proportions of destitution and deprivation of the people but also to irreparable ecological catastrophes. This objective situation definitely pinpoints to a broadening of the alliance between the working class and oppressed peoples against capital everywhere through the integration of workers struggles with environmental struggles.
12. Along with these, the fast-growing divergence between the rising wealth appropriation by global billionaires and the declining living standards of the broad masses of people has become the hallmark of world economy now. While the whole world is reeling under recession, the combined net worth of worlds billionaires has doubled since 2009 to reach $ 6.5 trillion in 2013, almost equal to the GDP of China, the second largest economy, and the number of billionaires during the same period has risen from 1360 to 2170. The United States accounted for nine of the top 12 billionaires and 37 of the top 100, while 34 belong to Europe including Russia, 14 in Asia and 11 in Latin America. No doubt, the vast enrichment of this parasitic social stratum is driven by speculation in stock, money, real estate markets and plunder of nature as only less than 10 percent of the billionaires are associated with manufacturing. Producing nothing of value to the society but monopolizing everything, dominating polity and administration and engaging in luxurious consumption, the parasitic financial elite remains as a stumbling block against any further advancement of humankind. And, every phase of the ongoing crisis, with its concomitant corporate bailouts and ever-mounting austerity measures imposed on the backs of common people, is resulting in the largest additional transfer of wealth to the parasitic classes of society. On the whole, inequality in the distribution of income and wealth has assumed epic proportions.
13. No doubt, the current global crisis of capitalism is also sharpening the inter-imperialist contradictions in diverse forms as leading imperialist powers in the interests of their monopolies are engaged in a cut-throat competition for the shrinking global market. Along with the already intensifying contradictions between the US and China in the Asia-Pacific region and between US and Russia in the West Asian and Mediterranean region, the worsening global financial conditions and trade relations have fuelled new tensions between the US and EU. In fact, the recent war of words between US and Germany, the power-house of Europe, over NSAs espionage activities in the latter is only apparent. A key factor behind the acrimony between the two is the growing American concern on the large and persistent current account surplus held by Germany.
14. As a matter of fact, all the shrinking countries have started accusing Germany. According to Obama administration, the present deflationary situation in Europe is on account of the export promotion and import restriction policies pursued by Germany which is currently having one of the biggest current account surpluses in the world. Weaker European powers also are of the opinion that the beggar-thy-neighbour policies of Germany are directly responsible for Eurozone economic contraction. And there is a strong feeling that it is Germany that imposes poverty in the rest of Europe in support of its banks and major corporations. For instance, the European Commission president himself in an interview tacitly admitted that the German export surplus is pulling down the other economies of Europe. This has a dampening impact on the other countries outside Europe including America. But the German spokesperson said there were no imbalances in Germany that needed correction and German imperialists will certainly resist any attempt to strengthen Europe by weakening Germany. In brief, in the context of current crisis confronting the world, each major power is pursuing its own interest to boost up the profits of its own corporate companies. For instance, in order to stimulate its financial sphere, through what is called quantitative easing American Federal Reserve is pumping billions of dollars into the coffers of banks and finance companies with disastrous consequences to the whole world. To counter it Japan and China are resorting to competitive currency policies. The consequent global financial and economic instabilities have accentuated inter-imperialist contradictions more than ever.
15. Despite the intensifying economic crisis and growing conflicts between the major imperialist powers, the ruling classes everywhere have arrived at a consensus to defend the system by imposing the most savage assaults on the working class and toiling people. It is the solemn task of the working class in every country to rise to the occasion with an international perspective. Millions and millions of people all over the world are simmering with discontent. Only the revolutionary working class based on a clear cut ideological clarity and armed with the perspective of a political alternative to the rule of imperialists and their neocolonial lackeys is capable of leading the upcoming peoples struggles and articulating peoples consciousness for overcoming the present global turmoil created by finance capital.
The author worked as Lecturer in Economics, St. Thomas College Pala for 28 years and left that profession at the age of 50 in 2007 to work as a whole-timer of CPI (ML) and presently its polit bureau member. Took Ph.D from the School of International Relations, Mahatma Gandhi University in 2004 for the thesis entitled Political Economy of Participatory Development. Author of Imperialism in the Neocolonial Phase, Nehru to Rao: Neocolonisation Process in India (Massline Publications), Global Funding and NGO Network: The True Mission (New Spring Publication), etc. Also, editor of Sakhav organ of CPI(ML) Kerala State Committee.