(Paper presented at an international forum on the ‘Global Financial Crisis’ held last June 19, 2008 in Hong Kong, SAR)
The deep problems of the world capitalist system are in very sharp focus today. The majority of humanity has long suffered unremitting poverty and exploitation. But the people are being pushed into even greater difficulties by the current episode of intense economic and financial crisis which is feared to be the worst since the Great Depression of the 1930s. The current descent into greater socio-economic turmoil does not just underscores the inevitability of crisis under capitalism – it also exposes how imperialism’s dogged and vicious efforts to secure profits are precisely what create the conditions for ever greater instability. All this affirms how there can never be true socio-economic development or equity for the people under the oppressive and exploitative capitalist system.
The global capitalist system has seen a generalized growth slowdown in the nearly four decades since the early 1970s. Even the relatively high finance- and speculation-driven growth of the last few years has not been able to reverse this trend, aside from such hollow growth being unavoidably short-lived and unsustainable. The people are further and further away from the false promises of prosperity through neoliberal “globalization”. The number of those living on a conservative $2 or less a day has doubled in the last three decades and stands at 2.8 billion or nearly half the world’s population. A billion people go hungry everyday, and two billion do not even have clean water.
The current explosion of crisis appears to begin from financial excesses in the United States that led to domestic troubles which had subsequent repercussions on the rest of the world. Yet while the sub-prime loan crisis in the US housing market is the most immediate trigger, this merely reflects the system-wide problem with world capitalism, i.e. unprecedented reliance on paper profits and digitally conjured capital. There are initial estimates that financial losses could reach up to US$30 trillion worldwide.
In its effort to maintain its profits, monopoly capital forced greater trade and investment liberalization on the neocolonies to exploit their cheap neocolonial labor, plunder their raw materials, and capture their markets. But these have been less and less effectual, and so it has relied more and more on paper profits and digitally conjured capital. The financial crisis manifesting first of all in the US merely exposes world capitalism’s system-wide problem of an unprecedented reliance on this largely fictitious capital. At the root of all this is capitalism’s crisis of overproduction exacerbated in the last decades by the neoliberal “globalization” offensive.
The people are also now severely burdened by rapidly increasing food and energy prices. Neoliberal globalization of agricultural production and trade has destroyed backward rural food systems and depleted food supplies aside from worsening the poverty of agricultural producers. Subsidized food imports flooded domestic markets at the same time as producers have found themselves ever more tied to overpriced inputs from big foreign agri-business. The giant transnational oil corporations have used their monopoly control to drive prices up which has been exacerbated by speculation in oil futures markets. Rising energy prices drive up food prices even further.
Imperialist aggression
The intensification of the global crisis in the 1970s and the severe profit squeeze on the advanced capitalist powers drove them to seek deeper in-roads into neocolonial markets through their neoliberal globalization offensive. The people of the world have since been challenged to confront the big powers’ ever more calculating rapacity and increasing economic aggression to multiply their exploitation. Imperialism has become increasingly aggressive in seeking to relieve its crisis and maintain its superprofits.
Monopoly capital forced greater trade and investment liberalization on the neocolonies. Backward agricultural systems were overrun and vast numbers of the peasantry thrown into greater hardship. At the same time there were more vicious attacks on labor even in the advanced capitalist countries. An economic assault pressed down wages, salaries and benefits across the globe while political assaults pummeled unions and other organized workers. Usurious debt burdens were used to directly extract surpluses from the neocolonies on a massive scale. They were quickly plunged into a debt crisis in the early 1980s which has since been opportunistically used to increase imperialist economic and political control over them.
The limits of these wide-scale efforts to support capitalists’ profits – at the expense of deepening misery on a global scale – could not but assert themselves. The large-scale economic dispossession of the people further constricted opportunities for investments which in turn further accentuated the glut of finance capital. By the 1990s, imperialism increasingly relied on getting its profits from purely financial schemes that were disconnected from any productive activity. Parasitic capital took advantage of advances in information and communications technology not just to facilitate its global production networks but also to fashion complex financial instruments for creating profits outside of any actual productive activity.
Previously unseen levels of profits were derived from sheer speculation. But while seemingly increasing the capital stock, these huge amounts of capital existed only digitally and were greatly diverging from real economic values. The eventual economic impact upon massive financial losses are however very real. Imperialism sought to surmount its crisis with a bewildering array of financial instruments that created unprecedented debt- and speculation-driven illusions of prosperity and growth. Global financial assets include equities, private and government debt securities and bank deposits. These have bloated sixteen-fold from US$12 trillion in 1980 to an estimated US$190 trillion in 2007, over a third of which are in the US. In 2006 the value of global financial assets was equivalent to 350% of global gross domestic product (GDP). Superconductive finance capital destabilizes economies of entire regions at a time and there were a record US$8.2 trillion in cross-border capital flows just in 2006.
The self-limiting and destructive nature of this conjured economic dynamic was soon exposed. The financial crisis that engulfed in Asia in 1997 and that quickly spread around the world, including to the US in 2000, showed up the vagaries of financial markets. The adverse effects on the real economy of footloose international capital rapidly crossing borders were clearly seen.
The 1990s also saw the expansion of global labor markets for capitalism to exploit. In particular, the opening up of China, the former Soviet Union, Eastern Europe and the greater openness of various Southeast and South Asian economies effectively doubled the number of people for exploitation. Imperialism tapped these hundreds of millions both through setting up investment enclaves overseas as well as by directly bringing in migrant labor or taking advantage of displaced refugees. Social services and public utilities were turned into opportunities for profit.
All those problems only continued to mount in the 2000s and are now coming to a head. Global markets kept on constricting in the face of the imperialist economic offensive. The relentless “globalization” of trade and investment continued to destroy productive forces in neocolonial agriculture and industry: subsistence farming, backward agriculture and incipient manufacturing industry. The working people in the advanced capitalist economies continued to suffer low remuneration for their labors. Debt and speculation were used not just to generate financial profits but also to artificially inflate demand and counter stagnation. But the resulting shallow growth in construction, real estate, commercial trading and finance sectors could not for long compensate the pressures narrowing global markets. Despite the supposedly rapid growth in the last few years there remain shrinking opportunities for genuinely productive investment.
Global capitalism is fundamentally limited in how it deals with the crisis because this is rooted in the system’s basic contradiction between private profit and social production, and in the resulting crisis of overproduction. Among the false solutions it is floating are neo-Keynesian New Deal-type fiscal stimulus, financial lifelines and bail-outs, and “reforming” the global financial architecture towards greater financial governance. These will all ultimately fail not just for being limited efforts but more so because they pretend that the problem is merely about financial excesses and resulting inadvertent instability.
Imperialism’s financial crisis
The situation of the US economy is useful in showing aspects of the problems of the capitalist system in sharp relief. Real average and minimum wages were steadily increasing since the 1940s and 1950s. These however became basically stagnant since the onset of intensified crisis in the early 1970s. This has caused the share of wages and salaries in national incomes to fall since 1970 and by 2006 already reached the smallest share of income on record. The share of corporate profits on the other hand has correspondingly been rising and by 2006 was at its highest since 1950.
There was a seemingly rapid accumulation of capital since the 1980s and particularly since the 1990s. US financial assets were equivalent to less than four times GDP in 1980 but by 2007 had soared to over nine times GDP. In the late 1990s the share of financial profits in total corporate profits conspicuously increased from less than 20% to over 40 percent. And yet the financial services sector accounts for only 5% of US private sector jobs.
But since these were largely merely paper capital it is inevitable, albeit unpredictable, for the financial bubbles to burst – hence the bubble-driven finance, construction, real estate and retailing boom now going bust. Combined household, corporate and public debts have risen to an unprecedented and clearly unsustainable US$51.1 trillion in 2007 which is equivalent to nearly four times US GDP of US$13.8 trillion. Public debt breaks down into federal (US$9.2 trillion) and state debt (US$2.2 trillion) while private debt is composed of financial sector debt (US$15.8 trillion), business sector debt (US$10.1 trillion) and household sector debt (US$13.8 trillion).
The depth of the problem has already invited comparisons with the US recession in 1927 that eventually led to the stock market crash in 1929 which marked the start of the Great Depression. On the ground, tens of millions of Americans are facing crushing personal debts and uncertain futures. The number of Americans who are jobless or otherwise seeking more work has been rising particularly since the start of the year and now number some 15 million. There is also a resurgence in military production and rising militarism, conspicuously accompanying the rising competition between the imperialist powers.
In the 1990s, the bulk of adverse effects occurred when financial crisis erupted that dragged down real economies. Today, however, the financial excesses have even greatly expanded into speculation in commodities which has resulted in ever more direct effects on the people through grossly higher oil and food prices. Among others this has driven oil industry profits to record highs with US$155 billion in profits in 2002, three-fourths of which are of the top five oil firms. The speculation in food markets has also greatly aggravated the destruction of neocolonial food systems.
Continuing challenges
The people face great challenges in the struggle against the oppression and exploitation intrinsic to capitalism and that are deepening further. Imperialism’s international mechanisms for the domination of world trade, investment and economic life continue to set global rules and distort national economies. They establish exploitative economic relations between advanced capitalist powers and neocolonies. The international finance institutions of the World Bank (WB), International Monetary Fund (IMF) and other regional banks are thoroughly discredited but remain influential. Even if the talks at the World Trade Organization (WTO) remain stalled, it remains imperialism’s most potentially expansive mechanism for pushing its plundering agenda. And particularly important in the last few years are the bilateral and regional free trade agreements (FTAs) that the US, European Union (EU) and Japan are using to tighten their domination of individual countries and regions. From just a few dozen FTAs in the early 1990s there are now some 340 in various stages of talks as of mid-2007. And as it is the US has for instance already seized and opened up economies through sheer military coercion and aggression.
In the neocolonies these burdensome socioeconomic policies are done with the compliance of increasingly subservient governments. They craft the domestic economic regimes most favorable for imperialism and its need for profitable opportunities and outlets for its capital. They maneuver to deliver labor and natural resources to imperialism at the cheapest possible price. And they wield state force to stifle peoples’ resistance and to try and make the masses docile and submissive.
In the end the world remains divided into rich and poor, and into exploiter and exploited. On the one hand are the strengthening of global monopolies and their increasing economic domination and ruthlessness. Forty-six of the world’s 50 biggest transnational corporations are from the US, EU and Japan. Similarly, nine-tenths of global foreign direct investment outflows totaling US$1.2 trillion in 2006 were from the advanced capitalist countries. Investment payments and the servicing of neocolonial external debt – which reached US$3.4 trillion in 2007 – resulted in a massive net financial transfer from the neocolonies of US$670 billion just in 2006.
The greatest share of the world’s income remains concentrated in the imperialist countries that, as of 2006, have only 16 percent of the world’s population but account for three-fourths of global GDP. Starkly, the world’s 500 richest individuals had a net worth of US$2.6 trillion in 2005 which is equivalent to the annual national income of the world’s 48 poorest countries or the world’s poorest 416 million people.
Meanwhile the majority of humanity is chronically deprived with generation upon generation going through lifetimes of hunger and destitution. The world’s working people have less and less options for decent living, they are losing jobs and livelihoods, and their incomes are collapsing on a massive scale. Some 1.5 billion people do not have or are otherwise lacking jobs in 2007 – the 190 million unemployed and 1.3 billion so-called “working poor”. Farmers, workers, indigenous communities, especially women and children, are driven into deeper misery. It is urgent for the people to achieve socio-economic development, social equity and justice.
The people’s struggle
Hundreds of millions of the people across the imperialist countries and in the neocolonies have risen up to expose and resist imperialism’s economic aggression. The ranks of the oppressed working people that are mobilizing have broadened and prevented imperialism and neocolonial governments from easily pushing through with their plundering agenda. This strengthens the ability of the people to face the great challenges in the struggle against the oppression and exploitation intrinsic to capitalism.
The peoples’ struggle for socio-economic development is integral to the overall struggle for national liberation, democracy and social liberation. This includes the commitment of the people of the exploited countries and nations to confront imperialist systems of plunder, exploitation and oppression, and to assert sovereignty and independence. All grossly unequal imperialist trade and investment deals and policies must be outright rejected. Alternative international relations of cooperation and solidarity between peoples will instead begin to be built. The efforts to build more progressive and democratic economies will be all the more effective the more peoples there are working together on a regional and global scale.
Neocolonial domestic economies must be built where our countries’ natural resources and our peoples’ labors serve the needs of the masses most of all. This means a socio-economic program serving, and thus, wholeheartedly supported by the people. This shall redistribute wealth to peasants and workers and other basic sectors, beginning with true agrarian reform development that breaks feudal backwardness in the world’s vast countryside. There must also be genuine national industrialization. The people’s basic and vital needs for education, health and housing must be assured.
A humane, equitable and just path that does not exploit other peoples and economies and that is ecologically sound is being charted. The people will be decisively in control of their lives, as well as at the center of building just and peaceful societies. The need to continue building and strengthening democratic mass movements is as urgent and vital as ever as well as underpins our movements for national liberation.
