[The following statement is reprinted from the International Communist Seminar in Brussels, 2-4 May, 2002. The list of organizations who signed it are at the end of the document. Click here to go to the seminar's website.]
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Economic crisis and the crisis of imperialism
International Communist Seminar
‘Economic Crises and Possibility of a Major World Crisis’ Brussels, 2-4 May 2002
A world crisis comparable in magnitude to the one of 1929 is in the offing. The factors that may provoke such a crisis are accumulating. This makes the monopoly bourgeoisie tremble and offers new opportunities for the revolutionary movement.
1. The capitalist system has always generated economic crises. The first one erupted in 1825, in the most developed economy of that time, Great Britain. In The Capital, Marx laid bare the basic laws of capitalist production and determined the cyclical character of the crises. The first worldwide crisis emerged in 1848. There have since been 24 periods of economic crises.
At the end of the 19th century, capitalism experienced its first structural crisis, which lasted from 1873 to 1895. Lenin described in Imperialism, the highest stage of capitalism, how this crisis led to the transformation of liberal capitalism into monopoly capitalism. In this stage, the monopolies divided the world among themselves. Imperialism followed the first big crisis and the imperialist powers fought during the First World War for the repartition of the world.
2. Bourgeois economics fails to explain the origin of the crisis and its cyclical character. Not that it is not sufficiently smart but that its class view obscures the exploitative nature of the productive system. The bourgeois class view obscures the laws of motion and processes that cause the crisis because it advances the superiority and immortality of the capitalist system. Hence it sticks to superficial and erroneous analysis in order to preempt the masses from attacking the economic system.
3. Only the Marxist dialectical and historical materialist view can provide the key to a comprehensive understanding of the crisis and to overcome it.
On one hand, the drive for profit pushes each capitalist to increase production, creating additional capacity over and over again. On the other hand, the cut-throat competition intensifies the exploitation of the toiling masses in order to produce cheaper and to conquer of the markets of the competitors. This entails a constant pressure on the wages, either in the form of direct or indirect wages. An insoluble contradiction between the growing production capacity and the decreasing purchasing power of the masses is its result.
Marx explains that every crisis is essentially a crisis of overproduction. He writes: "The ultimate reason of every true crisis remains the poverty and the limited consumption of the masses, in the face of the tendency of capitalist production to develop the productive forces as if they would have as their limit the absolute capacity of consumption of society."
This is the heart of the capitalist system, its basis, its system of constantly reproducing and increasing exploitation. Engels adds: In these crises, the contradiction between socialised production and capitalist appropriation ends in a violent explosion. The circulation of commodities is, for the time being, stopped. Money, the means of circulation, becomes a hindrance to circulation. All the laws of production and circulation of commodities are turned upside down. The economic collision has reached its apogee. The mode of production is in rebellion against the mode of exchange, the productive forces are in rebellion against the mode of production that they have outgrown.”
Overproduction is relative and not absolute. This means simply that the amount of commodities being produced is beyond the buying capacity of the working people. Thus under capitalism the absurd situation is reached whereby the people starve because too much food is produced, the people are cold because too many clothes are produced, the people are homeless because too many houses are built.
At the same time, the capitalist crisis reflects the overaccumulation of capital. In their drive for the highest profits, the capitalists constantly rationalize production by increasingly using ever more technologically efficient machines. Thereby the organic composition of capital tends to grow and at the same time the source of value, labor is undermined. This results in the tendency of profit rate to fall.
The crisis of overproduction is manifested as a surplus of production on the one hand, and as a surplus of capital on the other. Capital is not lacking, but it finds investments in production not sufficiently profitable. It turns to finance speculation.
On this basis the financial sector becomes overdeveloped. "Virtual" capital (in the form of such financial derivatives as hedge funds, warrants, options, etc.) may give the illusion of a solution to the economic crisis by momentarily providing easy returns, but it inevitably prepares the bursting of the financial bubble. The exaggerated growth of the financial, speculative sector does not correspond to the reality of production. "Virtual" capital is a guarantee for more indebtedness that in turn feeds the speculative bubble. This is why economic depression has always been preceded by a financial and stock market collapse. This gives the false impression that the nature of the crisis is financial, but the deeper source of it is to be found in the productive system. It is rooted in the private ownership of the means of production, in the contradiction between the social character of production and the private appropriation of the of the social product.
The passage to monopoly capitalism has brought this contradiction to the fore and has also strengthened all factors of the crisis.
4. These processes have been manifested even more brutally and with more destruction in the 1929 crisis leading to the Great Depression.
The crisis started with a stock market crash of a magnitude never seen before. In one day, on October 29, 16.5 million stocks were exchanged. The stock market index lost 43 points, which represented the profits of a whole year. And the crash continued.
This financial crisis revealed the underlying crisis of underproduction. Until 1932, production fell by 46%. It was not until 1937 that it again reached its 1929 level. In 1933, nearly 13 million workers were jobless, or almost 25% of the work force. In 1938, unemployment still stood at 20%.
The crisis expanded to Europe and the entire world. In Germany, unemployment reached the figure of 5 million, or 40% of the workers, in 1932. In Great Britain, it reached 3 million. While millions of people (without doubt some 40 to 50 million) lost their job, in 1931 in the Soviet Union, joblessness had been eliminated. The Soviet Union had shown that production could grow, even at an unprecedented rate of 18%, without leading to periodic crises. On the contrary, this went together with the continuous improvement of the living standard of the population.
The Nazi’s came to power by riding on the misery of the masses and the inability of the traditional parties to resolve the crisis. They imposed an open dictatorship on the German workers and pursued a foreign policy of war and expansion, primarily directed against the Soviet Union.
The crisis of 1929 has led indeed to the misery and the intensified exploitation of the workers, to the militarisation of the economy, to fascism and, finally, to a world war. But, in the final analysis, it also defeated Nazi Germany and its allies. It led to the victory of socialism in many countries in Europe and Asia. While the capitalists found a way out of the crisis through fascism and war, peoples found the way through revolution and socialism.
After 70 years the same process is at work.
5. Twice in the course of the last century, imperialism has found no means other than war to overcome its crisis. The ‘cleansing’ effects of the Second World War were so ‘wholesome’ that the bourgeoisie hasn’t known another major crisis like the Great Depression for a relatively long period. This led some people to believe that capitalism had finally found in Keynesianism or in Keynesian macroeconomic fiscal policy (1930s to early 1970s) the miracle remedy to master its contradictions. Since 1974-1975, however, world capitalism has found itself once more in a period of slow growth, interrupted by strong cyclical downturns. Faced with this new structural crisis, the imperialist bourgeoisie has launched a neoliberal offensive in order to take back the concessions to the upper section of the working class and to a few client states. It had had to make such concessions to safeguard its power in the face of the challenge of the Soviet Union and of the advancing revolutionary forces all over the world.
This offensive started in the United States and in Great Britain and encompassed the entire world through the intervention of the international institutions (IMF, World Bank, WTO),
6. This offensive jived with the counter-revolution in the USSR. Thirty years of revisionist degeneration resulted in the complete liquidation of the Communist Party. The bourgeoisie, which had developed under revisionism took power openly with the help of imperialism. In 1989, the triumphant imperialist bourgeoisie announced its victory over socialism. It shouted from the rooftops that capitalism was the only viable system: the "end of history". Supposedly peace and prosperity would reign. An era of growth was supposed to be around the corner. Thanks to the new markets of Eastern Europe, capitalism was supposed to have gained a second wind.
This pipe-dream was dispelled in less than ten years. There has never been as much dire poverty in the world. Economic crises are occurring one after the other. All over the capitalist world, political regimes are increasingly acquiring a fascist character. The hyped dividends of peace have in fact become dividends of war.
In the ex-Socialist countries, the promised "industrial development" has turned into the catastrophic destruction of all that socialism had set up in the Soviet Union and the rest of Eastern Europe. The Russian president Putin has admitted that the Russian bourgeoisie transfer some $25 billion annually to bank accounts in the United States and elsewhere.
In the ten years of capitalist perestroika, about $45 billion have left the Ukraine, in return for $5 billion of goods. It is no accident that the Ukraine, in Soviet days highly industrialized and comparable to the ten most highly developed countries in Europe, in 2000 had a gross domestic product of $ 661 per capita.
German imperialism shows its greedy face in the East, not to build new production outfits but to systematically destroy real and potential competitors to the German monopoly capitalists. NATO bombs destroyed the Zastava factory in Yugoslavia. For other factories, the dumping of surplus goods and capital from the West has the same destructive effect as bombs. This is particularly the case in the former German Democratic Republic.
Bourgeois propaganda pretended that the collapse of the socialist camp in Eastern Europe and the Soviet Union would mean the end of the ideals of socialism, thus ignoring the resistance and the will of the countries that are trying hard to maintain and develop socialism. Facing a complex international situation, these countries continue to advance along this road and today constitute a point of reference for the peoples of the world, by demonstrating that a socialist alternative to capitalism can be realized.
7. Since 1989, the world has been shaken by economic storms. Japan, the imperialist country with the highest growth rate since the Second World War, was the first to sink. Since 1990, Japan has increasingly sunk into a severe depression. Its unemployment rate, a practically invisible 2.1% in 1990, has risen to 5.3% in 2002. The traditional factors of severe depression have been generated : over-production, inflated financial and property markets, speculation, inordinate debt, bursting of the financial bubble and stagnation. Cases of suicide is on the up, especially among older workers : 3000 people of about 55 killed themselves in 2000 (against "only" 1700 in 1995). Since 1990, the Japanese state has injected more than $1000 billion in the economy to no avail.
8. The victory of the counter-revolution in the USSR and Eastern Europe has led further on to an aggressive drive for imperialist "globalisation". A profitable outlet for excess capital is being sought in the opening up and the liberalisation of all Third World markets. According to this neo-liberal logic, there is a part of the world which is marginalised where 85% of mankind live who could be doing much more to fill the pockets of the transnational corporations. Capital export is causing new disasters. Far from the free hand of the market bringing growth and benefits, globalisation has brought about monopoly capitalist stranglehold by the multinational firms.
In Bangladesh, for instance, the clothing industry contributes 73% to the country’s export revenues (compared with 1% in 1982). This industry is composed in its majority of women workers, who work for next to no wages 12 to 14 hours a day, when they do not have to stay the night to finish an order. They have to walk 3 or 4 miles a day to get to work. And they know all about insecurity : many are killed at work as victims of the frequent fires that ravage their work-places, where 500 to 600 workers are most often crammed into a few hundred square yards.
9. How could this "new international division of labour", which is only looking to produce more and to pay less wages, bring about a harmonious world development, without economic crisis?
At the end of 1994, Mexico, land of the Latin American "miracle", kept going by the US, had to devalue the peso. Mexico had already set off the Third World debt crisis of 1982. Like many other Latin American countries, it fell victim to worsening social and economic conditions in the eighties. It attached itself to its powerful neighbour’s economy, however, exporting textile goods, electronic components and cars and borrowing heavily from abroad by selling treasury bills at high interest and attracting portfolio investments in the in telecommunications industry. Speculators feared a social explosion, capital fled the country and the government devalued the peso. The United States bailed it out, however, by according a credit line of $50 billion, the highest ever loan at the time in the history of the IMF.
Today, the country is in a similar situation. The slowing down of American growth has severely affected the export sector. Employment in the Mexican export processing zones is diminishing rapidly, as Guatemala and Asia are becoming privileged production places for the transnational companies.
10. In 1997, the Asian financial crisis broke out, signaling in particular the collapse of "models" and "economic miracles". It completely destroyed the illusion created by the economic success of the four Asian "Dragons" (Taiwan, South Korea, Hong Kong and Singapore). These countries had had the advantage of US support and complete protection because they served as a bastion against communism. The new "dragons" that were thinking of joining the league table (Thailand, Malaysia, Indonesia) now found themselves in the role of suppliers of semi-manufactured goods of low added-value. The dismantling of their local economies made them wholly dependent on imports, whose cost greatly exceeded export revenues. Commercial deficits accumulated, the country went into debt and joined the group of overindebted countries in the permanent stranglehold of the international financial institutions. To balance commercial budgets, these countries opened up to the vultures of speculation, issuing short-term state bonds often with astronomical interest rates.
Thailand was obviously the weakest link, devaluing its currency by 15% on July 2, 1997. In a trice the "old dragons" were sucked into the whirlpool. South Korea collapsed having previously incurred heavy debts from the Japanese banks in its bid to beat its export competitors by overextending plant capacity. When the Asian crisis broke out, the banks abandoned their protégés and the economy collapsed in an avalanche of bankruptcies and lay-offs. This time, the United States did not come to help, but to buy up bankrupt businesses.
During the Asian financial crisis, 90 % of the population became poorer. The whole economic and political system was shaken and paths were opened up for revolutionaries.
11. In the summer of 1998, it was Russia’s turn to expose its economic rottenness under the impact of the Asian crisis. The international speculators took flight with their foreign exchange holdings. On August 17, the value of the rouble against the US dollar fell from 6 rubles to 22-24 roubles.
While the masses suffered delays in the payment of their salaries, the new rich further enriched themselves by speculating on short-term state bonds with interest rates of up to 300% per year and by misappropriating choice state properties at rock-bottom prices.
The workers, who were hardly being paid, were now paid in devalued roubles. Their purchasing power was sharply reduced. Production continued to fall. It hardly reached 60% of its 1989 level. Life expectancy decreased.
12. In September 1998, Brazil suffered a currency outflow of one billion dollars every day. The biggest Latin American country fell victim to the speculation fever. It received US$41 billion from the IMF and the United States to avoid the contagion. In return, it had to reduce its budget deficits by cutting on social expenditures and devaluating its currency, the real. This put its commercial partner in the Mercosur, Argentina, in the worst of difficulties. Heavily indebted, by over US$150 billion, the country practically had to allot its total export earnings to service its foreign debts. The country was bled dry. The economic crisis led to a political crisis.
13. And the United States?
At the start of the decade, the bourgeois ideologues praised the new virtues of the US growth. According to them, the United States had entered a new phase, that of the "new economy", an era of the knowledge and information society. Accordingly, classes would disappear because manual work would be replaced by knowledge and information being at the center of the production process. This would allow for economic growth without obstacles, thus without crises. Capitalism itself would be replaced by a new social form, the post-industrial society.
Since then, a spectacular collapse has shown that these concepts were not based on any reality. The so-called "new economy" functions just like the old and starts a crisis of overproduction, as in the purest capitalist mode.
The US economy had been propelled by enormous speculation on the financial markets. Since 1982, the level of US production has increased 2.5 times, while that of the financial markets increased tenfold.
The United States progresses by means of the fact that they consume 450 billion dollar more than what they produce, or 4.5% of their GDP. For this to happen, 450 billion dollar need to be attracted every year in the form of capital (investments, stock market or speculative investments, bank loans, etc.). This system is also based on the ever more dominant position of the US dollar on the international scene. The imperialist privilege that this continuous flow represents may in the future be put into question by the competition of the Euro or a possible common Asian currency.
Households, enterprises and even the US State are heavily indebted. Private savings are close to zero (meaning that the Americans spend on average all what they earn). This renders the economy particularly fragile and vulnerable.
Social inequalities increase. In San Francisco, the site of Silicon Valley, only 10% of the inhabitants can buy themselves a house. 20% are homeless. On a national scale, 798,000 people are homeless. And the financial development only increases this social injustice. At Enron, with the company bankrupt, the managers go home with compensation payments of several hundreds of millions of dollar, while the workers lose not only their job, but also their savings plans, which were placed in company funds.
Since April 2000, the NASDAQ, the stock market exchange of technology assets, has gone into a steep decline. In one year, it lost 60 to 70% of its value. This has brought about a major restructuring in the entire industry, especially in the new technology sector. In 2001, in the sector of the information technology alone, 188,000 workers lost their job.
This shows that the so-called "new economy" is and remains capitalist in nature. Hence it is prone to recession, depression and crisis.
The main federal interest rates have been lowered six times in the course of 2001, reaching the extremely low level of 1.75%. Energy prices are maintained at a low level. This has allowed private consumption to be maintained but has not stimulated industrial production. Unemployment has risen up to 6 percent. In three years’ time, the Bush administration will inject 500 billion dollar in the economy, in the form of tax cuts, assistance to sectors in difficulty and military orders. By this injection, the stock markets appear to remain afloat, even after September 11.
But the fragility and vulnerability of the US economy will remain a basic feature. An attack on the dollar could engender a storm that could shake the entire world economic system.
14. The same factors that generated the crisis of 1929 are present today at a much larger scale. "Globalisation" has reinforced all the contradictions of the system. The elements of destabilization have grown. The problems are accumulating and worsening
15. Conditions are building up for a crisis to break out, more serious and more destructive than that of 1929, . A striking illustration of this is the financial turbulence that has shaken the world since 1997 and has shown the extreme fragility of the imperialist world and the probability of a major collapse in the years ahead.
To head off the crisis, the IMF had to intervene. It has had to remit 50 billion dollar to Mexico, 63 billion to Thailand and Indonesia, 57 billion to South Korea, 41 billion to Brazil... The United States has had to bring together in one day the main American bankers in order to avoid the bankruptcy of the LTCM speculative fund that would have disrupted the whole financial system.
In 2001-2002, the overproduction crisis emerged simultaneously in the three major imperialist centres. The degree of synchronisation of the 2001 recession, that means the rate at which the crisis spread over the whole system, is today of 90/100. In 1975 it was only of 50, in 1982 of 60 and in 1991 of 65.
The ascent of financial globalisation leads inevitably to a synchronisation of the crises. It favours chain reactions: chain of the Asian crisis, Russian crisis, LTCM debacle, capital flight in Brazil, crisis in Argentina, NASDAQ crash in the USA and deceleration of demand, which in turn strikes all the suppliers in the Third World, etc.
The consequences of a financial collapse will be more disastrous. All experts are conscious of the fact that the situation is explosive. All dream of a "soft landing". But all fear a "hard landing", a real crash.
16. The magnitude of these phenomena leads us to conclude that there are practically no more than two major solutions for capitalism in the present situation: either the road of a new world war, provoked by the aggravation of all contradictions of the system and itself pushed forward by the current economic crisis; or the overthrow of capitalism and its replacement by a superior mode, socialism.
The Bush administration has pushed massive military production. It has increased the military orders and the defense budget will be raised from 299 billion dollar in 2001 to more than 379 billion dollar in 2003. Robert Barro, professor at Harvard, estimates that every dollar increase in the Defense budget has an impact of 60 or 70 cents on the economy. Such arms monopolies as General Dynamics, Lockheed Martin, Northrop Grumman, Raytheon have seen their stock prices rise.
September 11 has been used as the pretext for wars and aggressions against any country or movement that opposes imperialist domination and for further fascisation of the political regimes of the West. The United States, followed by the other imperialist powers, have launched a major campaign of "anti-terrorist struggle". But it is clearly meant to suppress all forms of people’s resistance and all attempts to anti-imperialist sovereignty. With the war in Afghanistan, the declaration of war against the "rogue states", with the announcement of a long and comprehensive offensive, the United States clearly affirm their will to dominate the world. In the first place, they aim at the Middle East, East Asia and Latin America.
This brings about stronger and even more devastating antagonisms that may translate themselves into conflicts of worldwide consequence. We can no longer exclude a US war of aggression against China, in which the United States see a major threat to their hegemony. In the long run, the inter-imperialist contradictions may also result into a new world war.
17. While bourgeois propagandists whip up dreams of a capitalism under one world government, the world is becoming increasingly turbulent and ungovernable. The imperialist powers intensify exploitation and oppression. But the people of the world and independent-minded states resist. The imperialist powers find themselves increasingly at odds with each other. They act on behalf of their respective monopoly capitalist firms and manage world problems for their profit. This results in a growing disgust for bourgeois democracy, the veil behind which the control of the financial powers over the State, the parties and the media is hidden.
Amidst the current crises, everywhere in the world the struggles for national liberation and democracy multiply. Whether it is in Palestine, Philippines, Argentina, Nepal, Colombia, Ecuador or elsewhere, the peoples rebel against imperialism, its crisis and its consequences. Never before has imperialist oppression and exploitation incurred hatred so intense as to provoke attacks on the most obvious base of domination as the WTC, the Pentagon and the White House.
The wars started by imperialism, with their series of cruelties and massacres, will bring about the rejection of capitalism by the broad masses of the people. They will accelerate the revolutionary process and, as was the case between the previous world wars (1914-1918 and 1939-1945), they will be the point of departure for revolutionary wars, leading to the destruction of the capitalist States and to the construction of a socialist State. As Lenin pointed out in Imperialism, the highest stage of capitalism, the communists must not allay the antagonisms which imperialism engenders, but "go forward to their further intensification and deepening".
18. We have to state in a more affirmative way than ever: the only alternative to guarantee a world without misery, domination and war is to fight imperialism and build socialism.
This means a society in which human beings are the main concern, in which the logic of private property and of the market is eradicated, in which the resources and the technology are put at the service of the needs of the population, in which social justice and solidarity play a central role. Related to this renewed resolve is the very important task of learning lessons from the revisionist betrayal of socialism and of building socialism on stronger foundations.
If the XXth century has seen the battle between imperialism and socialism, with some people thinking that the former had definitively triumphed over the latter, the XXIst century will be the one of the victory of socialism. It is at this task, in this framework that the communists of all countries have to work.
Karl Marx, The Capital, Volume 3 [Le Capital, tome 3, éditions sociales, Paris, 1976, p.446].
Friedrich Engels, Anti-Dühring, third Part, Chap.2 [L’Anti-Dühring, éditions sociales, Paris, 1977, p.313].
Lénine, Imperialism, the Highest Stage of Capitalism, Chap.9 [L'impérialisme stade suprême du capitalisme, Œuvres tome 22, éditions sociales, Paris, 1960, p.309].
(list of 26th June 2002)
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