Is the capitalist economic crisis over?

Demonstrators in London against government cutbacks, March 26, 2011.

By Dimitris Fasfalis

June 6, 2011 – Links International Journal of Socialist Renewal – In so far as the global capitalist media are concerned, the global recovery and the boom in Asia and Latin America have created an ideological illusion that hides the unfolding capitalist crisis.

The latest IMF World Economic Outlook (April 2011) sets the tone of established economists concerning the pace of global economic growth: “The world economic recovery continues, more or less as predicted.” The IMF’s line of argument then runs as follows: market economies have always undergone periodic crises, which are a fundamental feature of their functioning, ensuring a healthy and sustainable growth.

The capitalist rulers’ optimism – which is politically aimed at disarming those hit by the crisis – fails however in grasping the changing nature of the unfolding crisis, namely its geographical and sectorial shifts since 2007. The crisis has indeed moved from US banks and then global finance (2007-09), to production (2009-2010), to state finance and disposable income, mainly in the European Union (2010-2011).

Changing form of capitalist crisis

Perhaps the first indicator that the capitalist crisis is still unfolding is the rise in unemployment in many advanced capitalist countries.

How many are affected by this? According to the latest figures of the International Labor Organisation, 205 million workers are jobless and the capitalist crisis has destroyed 30 million jobs since 2007.

Unemployment in the United States rose from around 4.5% in late 2006 to 10% in 2009. In March 2011 it had slightly fallen to 9%. In Europe, the crisis has restored mass unemployment in a number of countries: in Spain (20% in 2010), Ireland (14%), Greece (12.5%), Portugal (11%). Millions of people are thus reduced to idleness since the unfolding of the crisis.

The second form of the continuing capitalist crisis is the crisis in state finance. Sovereign debt has thus become the centre of the crisis since 2010 and the default of Greece.

The global recession, but also state intervention to save the banking sector, led in the advanced capitalist countries to a significant increase of the weight of sovereign debt in national economies. This does not concern only the peripheral economies of the eurozone since the same phenomenon affects the US, Japan and the core EU countries. Hence, the austerity measures adopted by governments (“left” and right) to reduce public spending and satisfy the demands of financial markets (whose criteria is a more or less 60% of GDP in public indebtedness).

No safeguard against new financial bubbles

Despite the process of transformation of the crisis, it could very well hit global finance again in the near future, in so far as the post-crisis framework of banking and finance has not been fundamentally affected by any deep regulatory measures.

In fact the deregulated neoliberal framework put in place in the course of the 1980s to transcend the limits in the process of capital accumulation remains in place today despite all the talk about the "regulation" of global capitalism. Financialisation of the world economy has since then been synonymous with globalisation and growth. The divide between financial accumulation and production can be seen in the figures in 2007 at the peak of the boom. Whereas the average daily trade on financial markets amounted to the astronomic figure of  $5500 billion per day, the daily average of global GDP stood at around $130 billion. In other words, the past 30 years’ growth has relied on an increasing pyramid of fictitious capital.

After the financial meltdown, the IMF estimated in its May 2009 Global Financial Stability Report the total bill of the financial crash at $4.1 trillion. We are still paying this bill, but this hardly seems to bother bankers. For instance, when the British Independent Commission on Banking asks in its April 11 report for higher capital ratios in banks’ balance sheets, Barclays and HSBC answer publicly by threatening to move their headquarters from Britain (See The Economist, April 16 issue). Furthermore, they didn’t hide their opposition to the second proposal of the commission to limit the lending practices between the retail parts of a bank to its investment outfits, and to ring-fence retail from investment banking in the firms’ structures.

Political issues

This brings us to the political question: what is to be done?

Governments, opinion makers, central bankers and big business have a more or less unified and coherent response to this crisis: “left” and right governments in advanced capitalist countries have been slashing public spending and destroying the social wage, i.e. the social rights established following World War II in a context where victory over fascism was also understood as the beginning of a new era of social justice. This is their class project.

This class policy has met massive resistance in Europe since January 2010. Repeatedly, one-day general strikes and mass demonstrations have affected numerous European countries, sometimes almost simultaneously, to reject the austerity measures adopted by the capitalist governments.

Europe thus appears to be socially and politically one of the “weak links” in the chain of the global capitalist economy. With its radical labour traditions, Europe could send a message to the exploited of the world that another world is possible. The struggle against austerity is anti-capitalist in its nature and in that sense it leads to the demand of erasing of the sovereign debts: their crisis, their debts, their losses.

Lastly, a more thoroughly European strategy is needed. Timid attempts at a European convergence of movements took place in the spring 2010, but this wasn’t done in any systematic way. In that sense, we could imagine a campaign bringing together the mass workers’ unions of the different “PIGS” [Portugal, Ireland, Greece, Spain] countries to demand the erasing of the debts. Such a campaign would enjoy support from workers’ unions in the core countries, especially in France, Italy and Great Britain where austerity has already drawn thousands in the streets.

This is the only anti-capitalist answer possible in face of the false nationalist demagogy of recovering national sovereignty through an exit from the eurozone developed by a number of extreme right-wing parties today (from the National Front in France to the Northern League in Italy and the LAOS in Greece).

[Dimitris Fasfalis currently lives in Paris and has written for a number of left publications, including  Socialist Voice, Presse-toi à gauche and Europe solidaire sans frontiers.]