World-Wide Economic Crisis

August 11, 2011

For the last several years, the finance ministers, bankers and political leaders from the world's leading capitalist countries have been forced to return again and again to the agenda of the deepening global financial and economic crisis.

Barack Obama and Ben Bernanke, leaders from European and other countries, from the International Monetary Fund and the World Trade Organization, have all issued statements about the gravity of the situation and are now admitting that the crisis is "far more severe than anyone imagined." Repeated calls have been given to "stop the contagion" and "restore confidence" and "encourage growth."

The only proposals for avoiding the spread of the crisis which have been seriously taken up by the economic and political elites all center around only one aspect of the financial and economic crisis: bailing out the biggest financiers and bankers. In short, these elites of the capitalist world have issued themselves a certificate of bankruptcy – admitting that the capitalist system is leading humanity to disaster and revealing that the world's "leaders" are not going to stop this disaster from happening.

And it can be no other way. The capitalists, their financial advisers and political representatives cannot solve the problem because they are the problem. The current financial and economic crisis is a typical capitalist crisis of overproduction, one that is occurring in the context of the general and all-sided crisis of this backward economic system.

The current crisis first made itself manifest in the 2007 "financial crisis" in the United States. Corporations defaulted on their debts, stock prices fell, capital markets shrunk, etc.

The financial collapse led, in turn, to drastic reductions in production – to depression conditions in which goods remained unsold and stockpiled in warehouses, corporations went bankrupt, factories closed down and tens of millions of workers lost their jobs.

More recently, Europe has been thrown into the same kind of financial and economic crises. The crisis is also making itself manifest in China and elsewhere.

The capitalist politicians and economic "experts" claim that the "contagion" can be checked and further crises averted if only the "confidence" of investors can be restored. But this is pure nonsense. The deepening, world-wide economic crisis is not caused by the subjective thinking or wishes of anyone but by the real economic contradictions of the capitalist system.

For the last several years, capitalist spokespersons in the U.S. and elsewhere have been advertising the program of "increasing international competitiveness" and "globalization" as a panacea for the lack of domestic demand which is an inherent feature of capitalism. On the basis of this program of "producing for the global market," the biggest U.S. monopolies and bankers forced down the wages of U.S. workers and spread their investments to every continent in search of cheap labor and new markets for capital and trade. Of course, the capitalists in every country marched along the same road, trying to escape the internal contradictions of their system through the export of capital and commodities – through "globalization." The result, of course, is that the crisis of overproduction has been duplicated and intensified on a world scale. It is this contradiction which is at the root of the current financial crises and economic "bust."

In industry after industry global capacity far outstrips the limited market. This puts downward pressure on prices and forces many companies out of business. As profits fall and companies default on debt, the shockwaves batter the financial system and stock prices, both of which have been over-extended in anticipation of the "boom" cycle lasting forever. Completing the vicious cycle, the financial crisis rebounds again on production, drying up credit and capital markets, further reducing both demand and production.

Since its very emergence, capitalism has undergone such periodic "boom and bust" cycles which arise from the very contradictions at the base of this economic system. Under capitalism, the production of material wealth is based on the social character of the productive forces – on the fact that through modern industry and a vast division of labor, millions and hundreds of millions of workers cooperate to set in motion a vast productive capacity. But this enormous productive capacity remains fettered by the fact that, under capitalism, these socialized productive forces are owned privately by the capitalists and set in motion only with the narrow aim of maximizing profit for those owners, not with the aim of guarantying the economic well-being of humankind. One manifestation of this contradiction is that the capitalist market always remains restricted by the low wages of the workers, who receive only a small portion of the wealth they themselves create. Thus society as a whole is unable to absorb the vast quantities of commodities which it is able to produce. The capitalist crisis breaks out precisely when this contradiction reaches a bursting point. Society has everything at its disposal to insure an abundance and the well-being of everyone, yet capitalism prevents the economy from producing this abundance and instead imposes unemployment and destitution on millions and hundreds of millions of workers.

And throughout the last century and a half, these cycles have continually intensified precisely because capitalism has entered the stage of general crisis and decline. History shows that capitalism can only "get out" of such crises, brought on by its own internal contradictions, through the forcible destruction of the productive forces – through the wiping out of smaller capitalists (and whole countries) by bigger capitalists and the "downsizing" of productive capacity. In fact, the fierce struggle amongst the rival monopoly groups and capitalist states, brought on by the struggle to remain "competitive" in the conditions of economic crisis, has repeatedly lead to both small-scale and world wars. It is not hard to see that history is repeating itself.

In other words, as the world-wide crisis of capitalism deepens, the monopoly groups and capitalist states will fight with every means at their disposal to consolidate themselves by wiping out others and by shifting the burden onto the working masses at home and abroad. The workers will get no cure from the Gods of Plague.

All along the line, the intensifying crisis confronts humanity with fundamental questions – must the livelihoods of the workers be wiped out while the biggest capitalists consolidate their monopolies by destroying productive capacity?; must wages be cut in order to protect the "competitiveness" and profits of the capitalist exploiters?; must social investments in health care, education and so forth be slashed in order to guarantee the loans and profits of the international financiers?; must the world's productive forces be destroyed by the narrow aims of capitalism or will humankind go forward by recognizing the real, social character of economic life and organizing society on that basis?

The working class must provide the political leadership and program to answer such questions and to lead humanity out of the crisis. The workers must fight to transform the very foundations and aim of economic life so that the vast productive capacity, finally available to humanity, can be used by and for humanity.