In recent years, many bourgeois economists have advanced the theory that capitalist economies around the globe have largely “decoupled” from the world’s largest economy in the U.S. The theory goes that the advent of the European Union and the growth of powerful economies in Asia have limited the risk that an economic crisis in the world’s largest economy could spread globally.
So much for wishful thinking. The global capitalist system is now deep in the throes of the largest economic catastrophe since the Great Depression. The systemic crisis that first emerged in the U.S. housing sector has now spread to nearly every market in nearly every corner of the globe.
As Venezuela President Hugo Chávez said at a recent summit in Brazil, the economic crisis emanating from the U.S. has “the power of one hundred hurricanes.”
Following the dissolution of the Soviet Union, which had provided a counterweight to U.S. imperialism, the U.S. has brutally extended its economic hegemony around the world. The tentacles of U.S. finance capital have been sunk into nearly every market, in every corner of the globe, greatly increasing the risk of contagion. The growing cross-border interconnectedness of production networks and streams of finance capital has made the global capitalist system more unstable.
The increasingly global character of this crisis was evident on Oct. 6 when European and Asian stock markets began the week with steep plunges.
The FTSE in Britain, the DAX in Germany and the CAC 40 in France all fell more than 5 percent on Oct. 6. In Asia, the Shanghai Composite and the Nikkei also fell more than 5 percent on Oct. 6.
The Oct. 3 announcement that the U.S. Congress had passed an unprecedented and criminal $700 billion giveaway to the banks has apparently done little in the way of calming U.S. or international markets. The major U.S. indexes also went into free fall at the opening bell with the Dow down nearly 600 points by midday on Oct. 6.
Treasury Secretary Paulson attempted to sell the U.S. public on the bailout by saying that without passage of the bailout bill, the economy would self-destruct. Despite the passage of the bailout bill, the economic storm is clearly continuing with gale force.
European leaders announced their own round of bailouts of financial institutions over the weekend of Oct. 4-5. On Oct. 5, bailouts were announced for Hypo Real Estate, a large German mortgage lender, and for Fortis, a Belgium-based banking and insurance company.
Apparently fearing the kind of bank runs that have obliterated financial institutions in the U.S., multiple European countries have hurriedly announced plans to guarantee bank deposits. Sweden, Germany, Denmark, Ireland and Spain all announced new deposit insurance plans.
Capitalism: a crisis-prone system that must go
Capitalist politicians and pundits have recently been advancing the claim that this crisis was avoidable, and that it was a matter of a “lack of regulation” in the financial markets that led to the current meltdown
But the reality is that economic crises such as the one the world is currently suffering through are inherent to the capitalist mode of production. These crises result from capitalist overproduction.
As Karl Marx wrote in “Theories of Surplus Value,” “Overproduction is specifically conditioned by the general law of the production of capital: to produce to the limit set by the productive forces, that is to say, to exploit the maximum amount of labor with the given amount of capital, without any consideration for the actual limits of the market or the needs backed by the ability to pay.”
Crises of overproduction erupt when workers can no longer afford to buy all the multitude of goods which the capitalist has directed them to produce. Overproduction leads to glutted markets, which in turn lead to a falling rate of profit for the capitalists. Faced with a falling rate of profit, the capitalist class responds with wage cuts and mass layoffs in an effort to cut costs.
These factors are evident today with housing markets around the globe glutted with millions of unsold homes, profits continuing to hemorrhage out of the banks and corporations, and layoffs and wage cuts continuing unabated.
But an alternative to this rotten crisis-prone system exists, and that alternative is socialism. Under socialism, production is not directed by the capitalist class, and it is not undertaken with the objective of obtaining profits. Rather, under socialism production is organized to meet specific human needs. Under socialism, the absurd calamity of millions of foreclosed homes sitting vacant while homelessness rises would not occur.
The elimination of production for profit eliminates the root cause of crises of overproduction. Faced with a global economic crisis of historical proportions, the need to eliminate capitalism and replace it with socialism has never been greater
Fortunately, the seeds of a worldwide socialist revolution are daily being sown. The seeds are sprouting in the worker-led movements that are fighting against foreclosures and challenging capitalist property relations in the process. They are sprouting in the resurgence of the Latin American left, which is providing a direct challenge to U.S. imperialism in the hemisphere. The seeds of a socialist revolution are sprouting in the militant demonstrations against rising food and fuel costs that have taken place across Africa, Asia, Europe and the U.S. And they are sprouting in the spontaneous demonstrations against the bank bailouts that have been taking place across the U.S.
In his forward to Karl Marx’s “A Critique of Political Economy,” Frederick Engels, referring to crises of overproduction, wrote, “Each successive crisis is bound to become more universal and therefore worse than the preceding one.” He predicted that the end result would be “a social revolution such as has never been dreamt of in the philosophy of the economists.”
With the growth of working-class solidarity, the 21st century working class is capable of proving Marx and Engels were right.
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