Nothing Human Is Alien
21st June 2010, 11:26
An overview of the world financial crisis
Unless you’ve been living on a deserted island for the past few months you know of the world financial crisis that is unfolding.
A number of the world’s biggest banks have crashed, surviving only through massive financial injections from world governments. The stock markets in Asia, Europe and the Americas have lost over $25 trillion dollars since the beginning of 2008. Over one million people in the U.S. alone have lost their jobs in the same period. South Korea’s stock market index has fallen 42.6 percent. Countries from Singapore to the U.S. to Germany are “officially” in recession. News continues to come in at a rate that makes it impossible for us to keep up with, but needless to say things are only continuing to get worse.
And it’s not nearly over. Jacques Attali, economic adviser to French president Nicolas Sarkozy, warns of “A tsunami on the way.” The International Monetary Fund has said 50 countries will be hit by famine. The International Labour Organization predicts that at least 20 million jobs will be lost by the end of 2009, bringing the total number of unemployed people in the world to 200 million, the highest in recorded history. They’re joined by a slue of other economists, spokesmen, and government officials who also warn of things to come.
So, what caused this world financial crisis?
According to many world leaders, business leaders, bankers, and their mouthpieces in the corporate-owned media, the current crisis is a result of “excesses" or “bad management.”
The truth is that recessions are endemic to capitalism, the form of society in which we live. In the last forty-one years alone there have been five recessions (1967, 1974, 1981, 1991, 2001). Before that, there were many, many more, including the Great Depression.
Roughly every ten years, capitalism goes through a cyclical crisis or “business cycle” of “boom and bust.”
While capitalism is in a “boom phase,” or period of expansion, products are regularly bought up because a lot people have money. But because a lot of people have it, the value of money goes down, causing prices to simultaneously rise. This is called inflation.
In the boom phase, labor is needed to meet the increased demands for goods and services. As workers rush to fill the newly opened positions, unemployment falls.
Businesses see profit being made and want to increase their involvement, causing them to seek funding through credit. The bankers want to get in on the action too, so they raise the interest rates on loans they give out.
The rise in interest rates slows down the demand for credit. The debts of those who borrowed to take part in the expansion begin to build up. Production starts to slow down. Unemployment rises. As a combination of job losses and inflation, people can no longer afford to buy things as they did before. The boom phase draws to a close and the crisis begins.
As production and incomes decline, the bankers get nervous and call in their loans, but because of declining sales the business owners cannot afford to pay them. This leads to bankruptcies and loan defaults. Businesses cannot afford to take out new loans at the current interest rates, so the bankers are forced to lower their interest rates. Increased unemployment and desperation among working people leads them to take lower paying jobs.
After a while, lower prices lead overstocked shelves to begin to empty and bad debts are written off. Businesses see the low wages and prices that have come about as new profit-making opportunities, and the whole cycle starts over again.
Of course the scope and impact of each crisis depends on the scope of the credit system. The more credit is extended, the bigger the crisis.
The current crisis is so serious for precisely this reason.
In the 1970’s, another crisis occurred. In the richer countries like the U.S., businesses saw the slow rise of workers’ wages (which themselves came about as a result of struggles, unionization, etc.) as an obstacle to profit making, so they began moving their operations to poor countries in which workers earned substantially lower wages (also known as “outsourcing”), bringing in workers from poor countries to work for lower wages, and replacing manned-positions with computers and/or machines. In one respect, this was a huge success. The businesses were able to produce the same products and services as they had before at a much lower cost, leading to a vast increase in their profits. On the other hand though, their maneuvers caused the workers’ wages to either stagnate or fall, which meant that they could no longer buy products as fast as they were being made.
In order to keep their profits increasing the businesses extended credit to the workers. This was the only way to keep selling their increasing number of products while real wages continued to stand still or fall. But it wasn’t a permanent fix. It simply postponed the crisis.
Throughout the 1980’s, 1990’s and the first few years of the 2000’s, consumer lending (credit to workers) exploded. While allowing millions to continue to buy products and services, it also drove millions into crushing debt. By 2006, those U.S. workers in the worst financial conditions (the “sub-prime” borrowers), couldn’t keep up. This was the first crack in the hollow shell. Capitalism being an interconnected world system, the crack could only spread. Today the shell is shattering completely.
As a result of the Great Depression in the 1930’s (the biggest crisis of capitalism to date), governments came to see the need to interfere with capitalism (that is to adjust interest rates, exchange rates, etc.) in an attempt to prevent future crises. But the more credit, speculation (the buying and selling of stocks, real estate, bonds, etc., to profit from fluctuations in prices) and money with no real basis (money which is just paper and doesn’t represent anything real of value) build up and comes to dominate the world economy (which is happening more and more each day), the more difficult it is to stave off crisis. The current crisis has proved that.
So, who was Marx, and what does he have to do with all of this?
Karl Marx was a political economist and political theorist, but above all, he was a revolutionary. Among his many writings was Capital, an exposé of the workings of the exploitative capitalist system. But Marx didn't just criticize capitalism, he also pointed the way forward for humanity, through the creation of a higher form of social organization. Marx lived from 1818 to 1883, but his theories remain as relevant today as when they were first written.
What Marx Said
“The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit.” - Capital, Volume III, Chapter 30.
"...n the same measure in which the capitalists are compelled.... to exploit the already existing gigantic means of production on an ever-increasing scale, and for this purpose to set in motion all the mainsprings of credit, in the same measure do they increase the industrial earthquakes, in the midst of which the commercial world can preserve itself only by sacrificing a portion of its wealth, its products, and even its forces of production, to the gods of the lower world – in short, the crises increase. They become more frequent and more violent, if for no other reason, than for this alone, that in the same measure in which the mass of products grows, and there the needs for extensive markets, in the same measure does the world market shrink ever more, and ever fewer markets remain to be exploited, since every previous crisis has subjected to the commerce of the world a hitherto unconquered or but superficially exploited market." - [I]Wage-Labor & Capital, Chapter 9.
“Contradiction in the capitalist mode of production: the laborers as buyers of commodities are important for the market. But as sellers of their own commodity — labor-power — capitalist society tends to keep them down to the minimum price.
“Further contradiction: the periods in which capitalist production exerts all its forces regularly turn out to be periods of over-production, because production potentials can never be utilised to such an extent that more value may not only be produced but also realised; but the sale of commodities, the realisation of commodity-capital and thus of surplus-value, is limited, not by the consumer requirements of society in general, but by the consumer requirements of a society in which the vast majority are always poor and must always remain poor.” - Capital, Volume II, Chapter 16.
“The enormous power, inherent in the factory system, of expanding by jumps, and the dependence of that system on the markets of the world, necessarily beget feverish production, followed by over-filling of the markets, whereupon contraction of the markets brings on crippling of production. The life of modern industry becomes a series of periods of moderate activity, prosperity, over-production, crisis and stagnation. The uncertainty and instability to which machinery subjects the employment, and consequently the conditions of existence, of the operatives become normal, owing to these periodic changes of the industrial cycle. Except in the periods of prosperity, there rages between the capitalists the most furious combat for the share of each in the markets. This share is directly proportional to the cheapness of the. product. Besides the rivalry that this struggle begets in the application of improved machinery for replacing labor-power, and of new methods of production, there also comes a time in every industrial cycle, when a forcible reduction of wages beneath the value of labor-power, is attempted for the purpose of cheapening commodities.
“A necessary condition, therefore, to the growth of the number of factory hands, is a proportionally much more rapid growth of the amount of capital invested in mills. This growth, however, is conditioned by the ebb and flow of the industrial cycle. It is, besides, constantly interrupted by the technical progress that at one time virtually supplies the place of new workmen, at another, actually displaces old ones. This qualitative change in mechanical industry continually discharges hands from the factory, or shuts its doors against the fresh stream of recruits, while the purely quantitative extension of the factories absorbs not only the men thrown out of work, but also fresh contingents. The workpeople are thus continually both repelled and attracted, hustled from pillar to post, while, at the same time, constant changes take place in the sex, age, and skill of the levies.” - Capital, Volume I, Chapter 25.
"In every stockjobbing swindle every one knows that some time or other the crash must come, but every one hopes that it may fall on the head of his neighbour, after he himself has caught the shower of gold and placed it in safety. Après moi le déluge! is the watchword of every capitalist and of every capitalist nation. Hence Capital is reckless of the health or length of life of the laborer, unless under compulsion from society." - Capital, Volume I, Chapter 10.
“After every crisis there are enough ex-manufacturers in the English factory districts who will supervise, for low wages, what were formerly their own factories in the capacity of managers of the new owners, who are frequently their creditors.” - Capital, Volume III, Chapter 23.
“In the social production of their existence, men inevitably enter into definite relations, which are independent of their will, namely relations of production appropriate to a given stage in the development of their material forces of production. The totality of these relations of production constitutes the economic structure of society, the real foundation, on which arises a legal and political superstructure and to which correspond definite forms of social consciousness. The mode of production of material life conditions the general process of social, political and intellectual life. It is not the consciousness of men that determines their existence, but their social existence that determines their consciousness. At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or — this merely expresses the same thing in legal terms — with the property relations within the framework of which they have operated hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution. The changes in the economic foundation lead sooner or later to the transformation of the whole immense superstructure.” - Preface to the Contribution to the Critique of Political Economy
The solution
At one time in history capitalism was progressive. That time is long gone.
Today, capitalism is a fetter on human development. It is a system based on the exploitation of the working majority for the benefit of a parasitic minority. It has outlived its historical usefulness and has entered a period of decline, with dire consequences for humanity.
The for-profit system is at the end of its rope. It offers no way out for the suffering masses. Instead it contributes to their suffering! Today, as millions—even in the richest countries—are being forced into homelessness and unemployment, while tens of thousands around the world continue to die every day as a result of starvation and curable disease, human labor and valuable resources are squandered on useless gimmicks and weapons that can destroy the human species and the earth itself. The world provides enough for every human being to have a quality life, yet capitalism restricts those without enough money from even surviving.
It is necessary for humanity to sweep away capitalism and replace it with a higher form of social organization. Because of its position in capitalist society as the producers of all, the sole force capable of carrying out this task is the working class (made up of all those who have no way to survive other than by selling themselves piecemeal, e.g. by the hour for a wage, to a capitalist who profits from their work).
The working class must oust the capitalist parasites and take power and control of production into their own hands, in order to reorganize society to meet human need. Only the rule of the working class can reverse humanity’s slide in barbarism, create a society free of exploitation and oppression, and pave the way for the creation of a world of material abundance in which the needs of all are met.
Marx correctly described the evolution of human society and the workings of the capitalist system as we have shown here. But as Marx said long ago, the point is not simply to understand the world, but to change it!
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