What a relief for the leaders of the world. It is likely that the recession started during the second half of 2000 and worsened by the events of September 11, 2001 will not result in a major economic crisis, such as the one experienced after the financial crash of 1929. A revovery will probably occur. But for how long ?
Because –and this is the object of this text- the elements which can start a generalized stagnation are accumulating. On one hand, the capitalists push for the increase of the production, by continuously creating new capacities. On the other hand, they limit the consumption of the masses. Which worsens the potential situation of overproduction(1). On this basis, the financial sector develops itself beyond measure, which doesn’t correspond anymore to the reality of production. The debt deteriorates for the third world countries and for the imperialist countries as well. The international monetary and financial imbalances are important and show the growing economic fragility of the whole capitalist system. Everywhere the opposition and the resistance of the populations and of the workers is increasing. Besides the economic weaknesses, a political and ideological crisis is also progressing.
The amplitude of these phenomena brings us to the conclusion that there are only two big exits left to capitalism in the current situation : either to launch a new world war, a war caused by the sharpening of all the contradictions of the system, this sharpening being itself pushed by the current economic crisis; or the overthrow of capitalism and its replacement by a superior system, socialism.
Anyway, even the world war, with its procession of abominations and slaughters, will cause a rejection of capitalism by the populations. It will accelerate the revolutionary process and, as the two previous ones (1914-1918 and 1939-1945), it will be the starting point of popular uprisings, leading to the destruction of the capitalist states and to the construction of corresponding socialist states.
If the 20th century has seen the fight between imperialism and socialism and that some have believed that the former had definitely won over the later, the 21st century will be the century of the victory of socialism. It is for this task or in the framework of this task that the communist of all the countries must work.
1. A crisis which continuously deepens
1973
The current economic crisis started in 1973, by an important fall of the production. Since, there was a long period of economic stagnation characterized by the following elements : 1. a strongly attenuated growth compared to the one of the 50s and 60s; 2. a jerked development with periodical falls of the production (which can be called conjunctural crises); 3. a chronic unemployment and underemployment ; 4. constant monetary and financial tensions. One will call this period structural crisis. It goes on, lasts for years. During this time, the bourgeoisie doesn’t succeed in finding relevant solutions to go out of it.
This situation is not unique in history. One finds it first between 1873 and 1895. Fundamentally, the European bourgeoisie solves the problem through colonization, which offers outlets, markets and raw materials to the imperialists. But this generates a race to colonies, which is the origin of World War I. Afterwards, a second structural crisis appears in the 20s and 30s. All the solutions used by the bourgeoisie result only in a sharpening of the contradictions of the world capitalist system. The New Deal doesn’t put the US out of the crisis. Nazism pushes the imperialists against each other. It leads a big offensive against socialism(2). Thus, the crisis of 1929 leads to the Second World War. Today, we faced a structural crisis of the same kind.
1989
In 1989, with the victory of the counter-revolution in USSR, the imperialist bourgeoisie, and first the American one, proposed the idea that all the difficulties were solved, that the world would henceforth live in peace, harmony and in a general atmosphere of prosperity for everyone. Already at the end of 1990, the economy of the US showed some signs of slowdown. The Gross Domestic Product (GDP), which estimates the market wealth created in one year, declined of more than 1% in 1991.(3) This had repercussions in the form of a similar decline in Europe in 1993 and of a complete stop in Japan since. At the end of 1994, it is the turn of Mexico, wonder country of the third world, strongly supported by Washington, to fall and it must devaluate the peso.
1997
But what happens in 1997 is even more dramatic. Less than ten years after the nice promises of a bright capitalism. The recession, which results from the difficulties of Eastern Asia in July 1997 is the most important according to the very executives of the international institutions. In 1998, in Davos, at the world economic forum, which gathers every year the 2,000 "most important" persons of the planet, the particip ants declare that the current shock is the most important since the one of the 30s.(4)
It is the panic in the US. Russia is affected by a massive flight of capital. This extends to Latin America, mainly to Brazil. In September, one billion of dollars comes out every day from the largest country of South America. In the US, a speculative funds(5), the Long Term Capital Management (LTCM), is virtually bankrupt. With its own funds amounting to just 4 billions of dollars, it had been able to levy 100 billions in shares. Essentially by loans. As a result, it threatened the American bank system. Thus, Alan Greenspan, the president of the Federal Reserve(6), gathers the largest banks, which succeed in 48 hours to subsidize the deficient company with 3.75 billions of dollars. When Brazil is again struck at the beginning of 1999, the US force the International Monetary Fund (IMF) to organize a credit line of 41 billions of dollars, even before that the Brazilian government had asked for anything. It is to this price that Washington protects itself from financial contagion. Brazil devaluates the real, leading Argentina to the worst crisis of its history. But not the United States. Not Wall Street(7).
Meanwhile, Japan, second world economy, « capitalist wonder since World War II », gets deeper and deeper into recession. For ten years, its growth is extremely weak. In 2001, it is the third time for a decade that the archipelago experiences a yearly reduction of its actual GDP. More than 1,000 billions of dollars have been injected by the state. Without any recovery !
2001
Things are getting more precise in the US. The other important stock-market, the NASDAQ (National association of securities dealers automated quotations system), the market of the actions of the companies of new technologies, after that its index(8) had increased from 2,700 points in September 1999 to 5,000 in March 2000, tumbles down rapidly during the following year and the index falls again under the 2,000 points in April 2001. This starts a succession of restructurings in the fields of electronics, telecommunications and other sectors, which were supposed to generate jobs. This spreads even to other industries like the car industry where DaimlerChrysler announces at the beginning of 2001 that it lays off 26,000 workers. For the year 2001, 1.2 millions of workers have lost their job in the American manufacturing industry, the sector the most struck by the crises(9). Among them, 188,000 from the industry of the information technology, the one which was supposed to bring prosperity and jobs(10).
It is in this context that the events of September 11 occur, leading the American economy to its worst setback for ten years and taking the official unemployment to its highest level.
Three kind of global explanations have the ambition to understand this phenomenon of structural crisis.
The first claims that this period is just a big mutation, the transition from an epoch to another, and, in this case, the transition towards the era of the society of information, of knowledge. However, any change is critical, with its clashes and problems. But one must continue, go forward towards the new society, the "new economy". This gives the delusion that it is knowledge which will replace the capital as foundation of the society. And labour as source of creation of wealth. Therefore there will be no more class societies, based on the private property of the production means (companies, factories, etc.)
The second argumentation emphasizes the fact that the difficulties met by capitalism are caused by its excesses: excess of liberal ideology, excess of financial domination, excess of the ideology of competitiveness…Consequently, the State must take in charge again its rights of public regulation, to eliminate the perverse effects of capitalism. It is more or less the policy preached by Keynes at the time of the crisis of 1929 and his theories have been put in practice after World War II, almost in all imperialist countries. However, with the globalization, the drifts have expanded to a world scale and there is no international institution able to face them. All the difficulty is to build such an institution, in charge of the world regulation, and in fact to impulse a Keynesian-like strategy at a world scale.
These two bourgeois currents are not able to explain the ground of the structural economic crisis. Because they don’t relate it to the fundamental characteristics of the capitalist system. Because they deny class exploitation. Because of this, the workers would be able to take advantage of capitalism. A harmonious development of it can occur. These theories give the delusion that capitalism is a dynamic system, which will still live for centuries. They give a justification to the reformists and revisionists for trying to "civilize" capitalism, to reform it and thus to preserve it. They hide the contradictions which are sharpening...
Only marxism-leninism can offer a valid explanation to the economic crisis under capitalism and draw the true consequences. At the centre of the recession, one finds the exploitation of the workers, which serves the growing accumulation of wealth in the hands of a bunch of capitalists. This is why the companies develop more and more the production on one hand, create new units to increase their profits and why, on the other hand, the workers, which form the large majority of the population, see their purchasing power continuously limited and constrained. Therefore, the profit rate of the companies tends to fall, because one needs more and more capital for smaller and smaller profits. The competition between companies becomes sharper. Each capitalist wants to get rid of its competitors. It is anarchy. And the result is overproduction, foundation of the capitalist economic crisis.
As Marx writes: "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".(11) It is the hart of the capitalist system, its foundation, its exploitation character, always reproduced and expanded.
With imperialism, era of the monopolies, one finds oneself at a superior stage. The structural crisis is the proof that capitalism get stuck in its antagonisms and that it can not overcome them by the traditional means. It is why the bourgeois take the direction of the world war. Therefore, the structural crisis is an integral part of the general crisis of capitalism, that is to say of the decomposition of the system by its internal contradictions and by the rise of a superior production mode, socialism.
We will show the possible breaking points of the economic system and indicate why they push the capitalists to take the direction of war, to try to solve the inextricable antagonisms that they generate. In other words, the conditions to have a crisis of the kind of the one of 1929 are developing. Neither a new kind of society born of a « great mutation », nor the correction of the excesses by a world public regulation are able to put an end to it. Therefore, the military solutions begin to appear again and one aims towards more and more massive and numerous wars, prelude to new world conflagration.
2. Larger and larger, bigger and bigger !
Lenin defined imperialism in the simplest way like being the era of the monopolies. Today, concentration has reached such a level that in most of the sectors only a very restricted number of world scale companies still subsist.
There are just two companies left, which make big commercial airplanes: Boeing and Airbus. Three oil companies are fighting for world hegemony: Exxon-Mobil, Royal Dutch/Shell and BP. A fourth would like to enter that club : Total which bought successively Petrofina and Elf. And a fifth could be set up if Texaco and Chevron merge. But it is much less that the forty something companies which existed at the beginning of the 80s. Forty is also the number of independent companies existing in 1981 in the production of passenger cars. By mergers and acquisitions, there are only 11 « independent » groups left today : General Motors (which controls Saab, Isuzu, Daewoo Motor and which has a determining or important participation in Subaru, Suzuki and Fiat), Ford (which bought Jaguar and the car department of Volvo and which controls Mazda), Toyota (which took in hands Daihatsu), Volkswagen (which bought Seat, Skoda, Trabant, Bentley), DaimlerChrysler (that is to say Mercedes and Chrysler which merged in 1998 and which took an important participation in Mitsubishi Motors and Hyundai), Renault and Nissan (which are close of a merger), Honda, Peugeot, BMW (which bought Rolls-Royce), Autovaz (which will be soon bought or dismantled) and Rover (close to bankruptcy).
This concentration exists also in the sectors of new technologies. Several firms are in a situation of quasi-monopoly : Microsoft for the basic softwares, Intel for the advanced electronic chips, Cisco for the interrupts and switches for Internet, Sun for the Internet equipments, AOL-Time Warner for Internet cables and access. Without speaking of Dell, number one of the sale of PC via Internet and IBM, the number one of computer industry in general.
This process of concentration took in fact a particularly fast extension between 1995 and 2000. There was, at that time, a wave of mergers unprecedented in history. The amounts at stake went from 975 billions of dollars in 1995 to about 3,500 billions in 2000. They fall to almost one half of this value in 2001 : 1,744 billions. A majority of the capitalist investments during this period concern acquisitions of firms. This shows that capitalism creates less and less real new firms but uses its expenses for a struggle of power, of hegemony, in which the workers are merely soldiers. Forced to work more and more in the companies to make them more and more competitive, those are thrown towards unemployment at the time of restructurings. According to the International Labour Organisation (ILO), there would be one billion of people in a situation of unemployment or underemployment at a world level, that is to say 200 millions more than in 1997, at the time of the Asian crisis(12).
The concentration results in an accelerated creation of production capacities. Given that the purchasing power of the population doesn’t increase at the same speed, this generates in fact overcapacities. In the car industry, companies could produce 75 to 80 millions of motor vehicles a year. But they don’t sell more than 56 millions, that is to say 20 to 25 millions less. In the steel industry, the overcapacities are estimated to about 350 millions of tons of raw steel, on a production of 780 millions a year. To fit these capacities to the demand, one would need for example to eliminate General Motors (8 millions of motor vehicles), Ford (7 millions) and Volkswagen (5 millions), that is to say three of the four biggest firms of the sector(13). Or, in steel industry, close one plant out of three. In the aeronautics, Airbus and Boeing should stop producing for about one year. This makes capitalism particularly unstable and fertile in contradictions ready to burst at any time.
There is overaccumulation of capital. The capitalist system is just a gigantic Monopoly game, where the goal of each employer is to take power, to become more powerful, richer, to get rid of its competitors. By destroying productive forces(14), by letting asides millions of workers, by lettings entire parts of the planet in the most complete misery. Imperialism is the era of the deterioration of capitalism, the era where the progressist character of the system, which allowed the development of the productive forces, of communication means, is supplanted by its negative elements of plunder, of destruction, of overexploitation, of large-scale dictatorship and of repression towards all those who resist. All this in favour of a bunch of capitalists. At the disadvantage of the huge majority of the world population. The situation created by the concentration becomes unbearable.
Because of this, the overproduction worsens and the possibilities of solving it get smaller. Because, in order to solve it, to bring the production at the level of the demand, the bankruptcy would be needed, the disappearance of several giant companies, occupying millions of employees. Moreover, if this would happen, this would cause a rise of the workers struggles, a worsening of the rivalries between imperialists, because every State would struggle in order that the rival would support the biggest weight of the restructurings. The economic crisis appears unsolvable following the traditional methods of the bourgeoisie of increasing exploitation, of elimination of the weakest competitors, of transformation of the social relations in markets for the capitalist products…
3. A handful richer, the majority poorer
The inequalities in incomes are strongly growing in the world. A consequence of the increase in the accumulation of capital. The capitalists become richer. The result is that it is first their consummation which increases, at the prejudice of the huge majority of the population. And this worsens the overproduction and sharpens the social tensions.
United-States
In the US, the richest 1% disposes in average of 30% of the net worth of the nation since the 50s. This is shown by the following table :
Table 1. Evolution of the 1% top share in the US real wealth (in %)
1958
1962
1969
1972
1976
1983
1989
1992
1995
1998
30,4
32,2
31,3
31,6
21,9
33,8
37,4
37,2
38,5
38,1
Source : Edward Wolff (1987 et 2000)
Note : Real wealth is assets minus liabilities.
With the crisis of 1973, it saw this part to reduce to around 20% only. Since, it continues to retake some ground and today goes largely beyond its level of the 50s and 60s. In 1995 and afterwards, it amounts at more than 38%(15).
This net worth, composed in majority of parts of capital, has increased dramatically. In 1976, the richest 1% in the US possessed a real wealth amounting to 1,350 billions of dollars. This corresponded to the market wealth that the third world, 80% of the world population, produced in one year (its GDP). In 1998, last date for which official figures are available, this one per-cent had 15,600 billions of dollars of net worth, that is eleven times more than in 1976. Meanwhile, the GDP of the third world amounted only to 7,000 billions of dollars, the one of the whole world to slightly less than 30,000 billions. The world GDP has only been multiplied by five between these two dates. This means that, from 1976 to 1998, the real wealth of the richest per-cent in the US has grown at least two times faster than the creation of "market wealth" at the world level.
This reflects in an increase of the incomes of these extremely rich capitalists.
Table 2. Evolution of the distribution of US incomes between households by revenues (in %)
1950
1970
1975
1980
1985
1990
1995
1998
0-90%
64,24
67,13
66,21
64,93
61,93
59,82
58,18
54,80
90-99%
22,87
23,78
24,82
24,92
25,23
25,78
26,76
26,29
99-100%
12,89
9,09
8,97
10,15
12,84
14,40
15,06
18,91
Total
100,00
100,00
100,00
100,00
100,00
100,00
100,00
100,00
Source : Thomas Piketty et Emmanuel Saez (2001).
Note : 0-90% are the 90% bottom households ; 90-99% the following 9% ; 99-100% the richest percent.
The part of the richest per-cent, which was at its minimum level in 1975, at less than 9%, doesn’t stop growing since and reaches its after-war record in 1998 at more than 18%. On the other hand, the share of the poorest 90% reached its maximum in 1970 with 67% of the total of the American incomes. Afterwards, it regularly decreases to reach less than 55% in 1998. To find again such a situation, one must go back to 1929, when the poorest 90% had a share of 53% and the richest per-cent 22.5%(16).
The process of capitalist accumulation is based on a shameless exploitation of the working class. The result is that the richest per-cent sees its wealth growing very rapidly and its incomes increasing proportionally. Meanwhile, the poorest 40% saw their incomes decreasing since 1977 (17).
Third world
At the same time, these very rich people win also through the exploitation and the plunder of the third world. Some ideologists, like Rostow, have claimed that the development was a question of passage through a series of steps and that one had just to wait that every country goes through the different stages to reach prosperity. Today one sees that the opposite happens.
A majority of third world countries got poorer since 1980 and most of the African nations since 1960. But even the so-called « emerging » countries (the tigers and dragons of Eastern Asia and the big countries of Latin America) are not able to drag the world economy by an increase of the consumption. The workers of these countries often earn only one tenth of the income of an employee in an imperialist nation. Therefore, the 210 millions of Indonesians consume almost as much as the 5 millions of inhabitants of Arizona. The 62 millions of Thai, a country of the "Asian economic wonder", as much as the 3.5 millions of Oklahoma. And the billion of Indians as much as the 12 millions of inhabitants of Pennsylvania, which are 80 times less numerous.
How can one believe that such a system can continue the growth with such inequalities ? That one can continue to privilege the incomes and the consumption of the 120,000 rich of Pennsylvania (1% !) at the prejudice of the poorest 5 millions in this state (40%) and above all of the billion of Indians ? However, it is the explicit policy of the imperialist countries : make the rich even richer. The programs of reduction of taxes favour the large incomes, while the measures aiming at making work more flexible and at reducing the labour costs limit the purchasing power of the populations.
Increasing the incomes of the capitalists worsens in fact the overproduction. Because these very rich people consume only a part of their earnings. Another part, and often the most important, is invested. This means that this money goes either in the creation of new production capacities, or in the purchase of shares of existing companies, or in the speculation.
Capitalism is unbearable, untenable, inhuman. According to the World Bank, 2.8 billions of people, almost one half of the world, live with less than two dollars a day and, among them, 1.2 billion with less than one dollar(18). The crisis, far from going away, gets deeper. And it does because of the major contradiction which generates overproduction, the growth of accumulation on one hand, at the advantage of a minority, and the limitation of the consumption power of the population on the other hand.
4. The hypertrophied development of the financial sector
To this, one must add a financial domination of the capitalists on the world. But it is logic in the development of the system. Because the financial markets represent the accumulation of capital, from which the bourgeois draw their incomes. And, at the same time, in a period of crisis and decrease of the profitability of the companies, they insure a potential of enrichment for these employers. If they develop themselves, it is not at all by excess but by necessity.
One can give three examples of the phenomenal extension of the financial markets. The global turnover on foreign exchange market has gone from 18 billions of dollars at the beginning of the 70s to 150 billions in 1985 and 1,100 milliards in 2000. On this amount, just 5% represent commercial activities or investment and portfolio activities. The other 95% concern the operations of hedging of the companies in front of the exchange variations and the transactions of speculation. Other illustration : the amounts at stake in the financial derivates market (these are contracts based on the evolution of the course of the stocks, of the commodities and of the exchanges, in its essence a speculative market) reach 95,000 billions of dollars in 2000, three times the world GDP. This sum has doubled since 1995. Finally, the market capitalization of the companies, the value put in the stock exchange by them(19), is gone from 42% of the world GDP in 1990 to 119% in 1999 (before the fall of the NASDAQ). It is what can be read in the following table.
Table 3. Evolution of World GDP and world market capitalization 1990-1999 (in billions dollars)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
World GDP
22.519
23.684
23.615
24.216
26.005
28.790
29.590
29.477
29.272
30.242
Market capitalization
9.400
11.346
10.933
14.017
15.124
17.772
20.230
23.087
26.964
36.031
Ratio (% of GDP)
41,74
47,91
46,30
57,88
58,16
61,73
68,37
78,32
92,12
119,14
Source : IMF for World GDP, Standard & Poor’s for market capitalization.
There is creation of fictitious capital, because the value treated on the financial markets doesn’t correspond anymore to what happens in the production(20). The stockmarket prices have grown beyond the expectations of normal profit, under the impulse of new technologies societies. The NASDAQ was the banner-bearer of it. But this had several particularly important consequences.
First, the domination of finance on the « real » economy becomes almost total. Surely, it is the surplus value created by the workers of the world which feeds the machine to accumulate of capitalism. But it is the financial markets which more and more dictate the amount of surplus value to obtain and the conditions in which this must occur.
Second, as a consequence, this supremacy has for effect the dictate of the financial markets on the profitability objectives of the companies. One must reach a return of 15 to 20%, without what the capitals move and go to more lucrative companies. This amounts to permanent restructurings in the companies and thus to an obligation for the workers to produce more and more with less. For example, Michelin dismissed 7,000 people (on a total of 130,000), just to satisfy the demands of the stockmarket (because the company is making profits) and to support the price of its shares. But for the employees, this means either loose one’s job, or working harder.
This financial domination expresses truly the dictatorship of the capital on the workers, in all its aspects and consequences : more ferocious exploitation and more intense repression, because it can not be allowed to loose the high profits expected.
Third, the speculation bring in more than the « shearing of the shares ». All the more so because the amount of dividends paid tends to fall in comparison to the capital invested in the stock-market(21). This has another consequence : if the prices increase immoderately in comparison with the potential profit of the companies, that means that, if nothing changes, the future profits are already incorporated in the prices of the shares; in other words, the future surplus-values would be already realized; which would leave not much future for the development of the capitalism itself. But this situation is of course untenable. It shows a system extremely unstable and propitious to stock-market crash. Because a day will come when the financial institutions (hedge funds, multinationals, etc.) and the « big speculators » who invest on the stock-market will ask themselves questions about the future of the companies in which they invested so much money, they will want to realize their potential gains in capital and come out. Which will trigger a generalized fall of the prices.
Fourth, the development of the financial market has a capital importance on the economic growth. Because the later is dragged for ten years by the consumption of the US households – and, as we have seen, especially by the richest per-cent. However, these spend their money on the basis of the increase of their wealth that they hold mainly in bonds. In the US one can use its financial assets as a guaranty to get a loan for a consumption good (a house, a car,…), if the amount of the loan doesn’t exceed the half of the assets put as guaranty. In this way, the expenses of the population have increased faster than the disposable personal income, fed by the growth of the financial assets, a part of which is fictitious. The difference, the net saving, is close to zero. But such a situation can not last. And if a crash occurs, the value of the guaranties will deteriorate, while the debts will subsist.
Fifth, the domination of the finance on the real economy has precisely as a consequence to make the whole system much more fragile. Because the decisions of the stock-market investors are much more volatile and they can have immediate effects, much more rapidly than the decisions taken by commercial or industrial companies. There is a systemic risk, that is to say a series of events starting a panic towards fall on the stock-markets. The stakes are so huge that nobody would be able to intervene anymore, if that happened. The central banks have reserves amounting to around 2,000 billions of dollars. However, the world value traded daily during the year 2000 is 191 billions of dollars(22).
Sixth, the risks are unevenly spread. The number of people who buy bonds has strongly increased in the imperialist countries in the 80s and 90s. In the United States, in 1999, 48% of the total active population possess bonds, either directly, or indirectly through funds. They were only 19% in 1983(23). However, if a crash occurs, the most powerful capitalists will be able to get out rapidly of the difficulties. They often bought at the most timely moment, when the prices are at their lowest level. Therefore their possible losses will probably be tiny(24). On the other hand, the employees will have difficulties to cope with the fall of the stockmarket. Like the workers of Enron, who put their savings in the pension fund of their company, this one having massively invested in the company itself. Result : in addition to their job, the employees can forget about their pension with the bankruptcy of the energy company.
The hypertrophied development of the financial markets makes thus the system more fragile, more likely to crash economically. It shows the dictatorship of capital on the whole planet, with extremely damageable consequences for the workers : continuous and massive redundancies, increased exploitation, control of the workers and of the populations, generalized repression… A stock-market crash is threatening. In this case, that would lead to a situation worse than in 1929, because the stakes, the amounts, the companies are more important now than then. And like in the 30s, the capitalists won’t hesitate to present the bill to the employees, as was shown by the Enron ‘s bankruptcy.
5. A mountain of debts
The debt points out the problem of the support that the state can bring to the economy if this one sees its growth slowing down. However, a large debt hinders such a support. Because of this, keynesian policies, which increase the State debt, can not be effective anymore today. Moreover, the importance of the debt of the Third World impoverishes even more this largest part of the world.
Third world
This is an important source of imperialist plunder. This debt amounts in 2000 to around 2,500 billions of dollars. Four times more than in 1980 ! On this amount, since 1970, these countries have paid more than 4,000 billions of dollars (from which 2,700 billions during the last decade) for the debt service(25). It is 55 times the amount of the external debt in 1970(26). The following table shows the most important of these data:
Table 4. Evolution of third world debt, debt service, compared with third world GNP and exports 1970-2000 (in billions dollars and in %)
1970
1980
1990
2000
World debt
72.8
609.4
1,458.4
2,492.0
Debt service
9.2
93.4
163.8
398.9
Debt/GNP
10.9
21.0
34.1
39.1
Debt service/Exports
13.5
18.1
18.1
Source : World Bank, Global Development Finance, different years.
It is these considerable amounts, which literally exhaust the semi-colonized countries and hinder their development. Those ones must dedicate around 20% of their exportation incomes to this debt service. In the case of the nations of Latin America, it is even 50% on average.
When one thinks that the official development assistance, which moreover favours mainly the multinationals (by the commands created by the aid), brought in around 1,100 billions of dollars on the last three decades, that is four times less than the debt service, one can say that it is the South which helps the North and not the opposite. In 2000, it is even more : the debt service is close from 400 billions of dollars, while the aid stagnate to a little bit more than 50 billions.
At the same time, the debt is an important political lever to force the semi-colonized countries to follow the dictates of imperialism. The country which supports the US, the European Union and Japan in their struggle against the revolutionaries, against the countries resisting imperialism, will see its debt being reduced, even partly suppressed. The country which doesn’t collaborate will have the IMF and other western experts at its heels.
But, doing this, the large debt restrains also the possibilities of growth of the market in the third world. The possibilities for the capitalists to find an alternative market there, in case of stagnation in the US or in Europe, become smaller. It will be more difficult for these countries, which have almost all experienced restructurings of the debt at one time or another, to borrow again massively to create outlets for the western multinationals, like in the 70s.
The case of Argentina is striking. This country was insolvent in 1984 when it appeals to the IMF. But, since, its debt didn’t stop increasing. It went from 49 billions of dollars in 1984 to around 148 billions in 1999(27).
And the debt service during these fifteen years amounts to 144 billions of dollars. This means that, since this restructuring in 1984, Argentina reimbursed three times its debt. But, meanwhile, that debt was officially multiplied by three. Today the country is bloodless. All the contradictions have been sharpened, which pushed even the "middle class", the class which had supported all the political regimes for years, to go in the streets and to demand the overthrow of the successive governments. Because it knows that its living standard will decrease. Only the richest fraction, living of incomes from abroad, from international financial places, can keep its living standards. It is an infernal, inhuman, shameful situation. For a country which was at the level of many European nations in the 20s. This shows the degradation that world capitalism can bring to the populations. But this blows back also against the capitalists themselves. For them, this means that they must not expect from this country anymore huge possibilities of growth of the consumption, thus of outlets. The economic crisis gets deeper, the contradictions are sharper. The country is close to an explosion, which could have a contamination effect to the other regions of the continent. Washington is certainly very worried about this evolution.
Imperialist countries
The debt of the imperialist countries also shows the problems related to the economic crisis. It has strongly increased since 1970, as can be seen from the following table.
Tableau 5. Evolution of ratio Public debt/GDP by imperialist countries 1970-2000 (in %)
1970
1980
1990
1995
2000
European Union
24.5
30.0
47.0
56.0
48.3
Japan
6.6
40.9
51.7
59.8
105.8
USA
28.9
26.4
43.5
50.0
36.6
Others
25.4
24.4
27.0
37.7
30.6
Total
25.0
29.7
45.1
53.7
52.5
Source : Before 1990, IMF, International Financial Statistics Yearbook ; after 1990, OECD ; for GDP, IMF.
At that time, the ratio public debt on GDP amounts to 25%. It doubles in 1995 and stays almost to the same level in 2000. The US have reduced their federal debt in the 90s. But they have partly transferred it on the local authorities. Together with the debt of the local powers, the public debt amounts to 47% of the GDP.
All the imperialist countries want to avoid following the same evolution as Japan. In 1970, its debt was the weakest. In 1990, it is still at the level of the other powers. But, since, the government injected more than 1,000 billions of dollars to support the moribund economic activity, without succeeding to boost it. Today, the debt amounts to 106% of the GDP. In this way, this leaves still little margin to increase even more this deficit and this support to the capitalist companies, struck by the economic crisis.
Households and non financial and non farm corporate business
The debt of the households and of the non financial, non farm corporate businesses has also considerably grown. In the US, it experienced an important development. Since 1990, the debt of the households grows to a rhythm of more than 7% a year and the one of the businesses to a little bit less than 6%. A similar situation exists in the other imperialist countries. In this case, the risks of bankruptcy and failure to pay are multiplied and will develop even more with a stock-market crash, because the values of the bonds will fall, while the interests on the debt will stay the same. It is the low and average incomes which are the most threatened, because their debts compared to their incomes are the highest.
Capitalism lives and develops itself with the help of a mountain of debts. But, because of this, it eats its own future and makes the whole system very fragile and unstable. If the debt alone can not start a major crisis, it will be a worsening factor in case of abrupt turning of the economic conjuncture. It will precipitate in bankruptcy and misery thousands of families, especially among those which possess nothing or not much. It will cause hundreds of resounding bankruptcies. It will leave bloodless countries, throwing their populations in famine, in deep poverty, in disarray. Like today in Argentina.
6. The international economic imbalances
The American hegemonic position worsens the anarchic development of capitalism. The structure of the financial and monetary flows is determined by this dominating position. But if this one is put into question, it will cause dramatic economic troubles.
Indeed, till 1990, the US are being caught up by the European Union and Japan. The American bourgeoisie is mainly worried about destroying socialism in USSR. But it succeeds in 1989. It can throw itself again in the economic race, claim its hegemony at the world level, in the economic domain included, and use the military techniques for commercial uses. Starting with Internet. It is the basis of the « new society » of knowledge, of the "new economy".
But this one is first founded on an increase of the output of the third world in the manufacturing production. In 2000, the US supply themselves at more than a third abroad for their manufactured goods, half of it from the third world. It is shown by the following table.
Table 6. Productive manufacturing structure of USA, European Union (EU) and Japan in 1997 (in %)
USA
EU
Japan
Domestic
66.4
74.2
95.7
Imports
33.6
25.8
4.3
Total
100.0
100.0
100.0
billions dollars
2,079
2,111
4,231
Source : Survey of Current Business for USA, Eurostat for European Union, OCDE, for Japan, WTO, annual report 2000, for importats.
Note : Productive manufacturing structure is total of added value of manufacturing and imports.
First, this allows to have these products at a cheap price, because the salaries paid in the third world are low. Second, this limits the increase of the salaries because the prices of the consumption goods are low. Third, the US can orientate themselves towards the sectors of the information technologies and of the related services. Thus they acquire a competitive advantage with respect to the European Union, which has some delay in this process, and mainly to Japan, the manufacturing production of which is still fundamentally based in the archipelago (see table 6).
This has a consequence : the trade balance of the US is strongly in deficit : in 2000, 450 billions of dollars, that is around 130 billions of dollars because of the imports of raw materials, 160 billions due to the imports of manufacturing goods coming from Europe, from Japan and from Canada and 160 billions coming from the third world (the deficit coming almost entirely from Asia). This can only continue if the 450 billions of dollars of capitals flow every year to the US as investment.
But what happens when the growth is slowing down, bringing a fall of the investments ? How can the 450 billions land in the US if the stock-markets fall ? And if the international role of the dollar is questioned ? Thanks to this role, Washington is not forced to pay the money which circulates abroad. But will the dollar keep this function ? Because the contestation exists at this level. The European Union has created the euro, precisely as a reaction to this ability of the US. It also wants its currency used in the international transactions and conserved as such in the reserves of the central banks. But, doing this, it puts in danger the extremely fragile construction of the US.
And the Asian countries are also furious. Every time there is a slowdown in North America, they are the ones who face the consequences, since they export around 20% towards the United States. They want to constitute a zone of free-exchange, helped by a monetary union, in the region, that is to say with China, Korea and Japan. It is a serious threat to the American edifice. Because this would constitute a common market of around 2 billions of inhabitants, the biggest ever constituted. It would be an economic force able to rival with the western multinationals. And probably also a political power, developing its independence with respect to Washington.
If the American economic and monetary construction collapses, the United States will be forced to devaluate, triggering chain reactions, probably protectionist. Because no other region would like to pay for the Americans. Because of this, tensions of all kinds risk again to sharpen.
7. The development of the resistance
Faced to the economic crisis, the imperialist bourgeoisie launched a vast offensive as soon as the end of the 70s. It started in the United States and in England with Reagan and Thatcher. Its goal was to increase the share of the richest households, the ones who possess capital, in the world assets. However, how to increase the profit and the accumulation of the capitalists, if not by forcing the workers to provide more work, to cut down their expenses at the advantage of the wealthier families ?
From 1989, the victory of the counter-revolution in USSR and in Eastern Europe left the imperialist forces almost alone to exert the world leadership. The measures which had been started in a number of countries, included in the third world through the plans of structural adjustment, have been generalized to a large scale. The same policies have been led everywhere : liberalizations, opening of the borders to goods and capitals, privatisations, flexibility, subcontracting, development of precarious jobs,… It is what generates growing inequalities at a world scale and in every country.
In comparison with the previous periods, today’s world capitalism contains more contradictions, but thus more sources of resistances. Because, on one side, the level of technical progress allows to eradicate poverty, to offer a decent life to each inhabitant of the planet, to develop a participative democracy thanks to the sophisticated means of telecommunications. On the other hand, misery has never been so high, it doesn’t stop increasing as a result of the economic crisis and repression falls on all those who revolt or protest against social inequalities and injustices. There has probably never been so many struggles of all kind everywhere in the world (Palestine, Argentina, Colombia, Ecuador, Nepal, movement against the globalization, struggles against the privatizations, etc.).
The rejection of the system grows everywhere, certainly in the third world. But there are two major thorns for imperialism and in particular for the United States. First, there is a growing hatred of the Arab and Muslim populations against Washington, which prevents the US to develop their policy of monopolizing and controlling their natural resources, oil in particular. Then, there is a growing mistrust of the populations and governments of Eastern Asia towards the Bush administration. They also feel themselves as being trapped by the imperialist policy, American especially. They want to unite, which will weaken the influence of the US in the region, where it is already one of the weakest in the world. The presence of China, large country of the third world with a basis which is still socialist, is a factor on which the other Asian countries can lean to lead a really independent policy and thus opposed to the American hegemonic will.
It is not for nothing that the experts of the US Defense Department point to Eastern Asia and the Middle East as the two most crucial regions for the leadership of the United States in the future. And the experts of the CIA present China as the most redoubtable enemy at long term.
8. A military solution to the economic crisis
A major crisis like the one we experienced in 1929(28) is threatening. The margins of movement for the capitalists become smaller. The contradictions are sharpening. The social tensions are rising. The opposition to the world capitalist system is developing. The possibilities to solve the crisis or even to attenuate it by the classical means are narrowing.
Washington can not wait. On one hand, one must insure that the profits of the production support the development of the financial markets which begin to be shaken and thus the consumption of the capitalists. In other words, the production of the third world must be insured and even developed. On the other hand, the White House can not see its hegemony being contested because that would question its financial and monetary balances.
It is what brings the American bourgeoisie to change of orientation and to privilege the development of a strategy centred on an increase of the military expenses and on political and armed pressure on the rest of the world. This allows: 1. to drag along the economy by military commands and possibly to palliate the deficiencies of private consumption ; 2. to insure the domination on the third world which delivers raw materials and manufactured products ; 3. to repress those who resist, in the US included, through the fight against terrorism, thus to maintain and to reinforce its dictatorship at the world scale; 4. to reaffirm and guarantee its hegemony in all the fields. Launching local wars is a mean to realize these aims.
But this incites the other countries to do the same. The European Union builds its own army. It defines its own priority zones : the Balkans, Russia, the Middle East and Africa. Some of these zones infringe upon the American ambitions. Therefore there are possibilities of conflict in the long term. Japan is preparing a military force to insure its supplies in energy raw materials from Indonesia and not to trust anymore the United States on this point. China stays the main source of contestation of the American hegemony for now. It stays socialist in its foundations. It is a large third world country which wants anyway to develop in an independent and autonomous way. It is able to federate the Asian countries, Japan included, disappointed by the perspectives given by the US. It possesses a military power. If there is a conflict with the US, this will be automatically a world war, because of the importance of these countries.
From these tensions, from these countless conflicts, from the rise of the antagonisms, unavoidably pushed by the prolonged economic crisis, must appear an exacerbation of the fundamental contradictions. And a conjunctural crisis like the one of 1929 will sharpen even more this phenomena, by weakening the capitalism and, in particular, the United States. Which will encourage the other States to try to free themselves from their domination. It is from these contradictions that will outcome the next world war. It is still too soon to know which ones of these contradictions will concretely trigger it. But the process is going on and advances inexorably, faster and faster actually. Unless the revolutionary forces succeed in opposing it…
9. Conclusions
Imperialism, by the contradictions it develops, generates war. Because of this, it accelerates the decomposition of the capitalist system. But the economic crisis is a formidable factor of exacerbation of the antagonisms, because it restricts the possibilities of creation of wealth in profit of the bourgeoisie and thus weakens it. It is thus an essential element in the general crisis of capitalism, which pushes the system towards a degradation of all the economic, social, political and ideological conditions.
It is in this framework that the communists must work. Because this means that socialism is at the agenda. It is not a perspective for far away centuries. The economic and political conditions will deteriorate, so that this will generate revolutionary situations in the world. Since 1945, the capitalism has experienced a relatively slow development of the contradictions, a situation favoured by the existence of a socialist camp, which has forced the imperialists to social concessions, but also of revisionism, which has taught a theory of pacification of class struggle. The victory of counter-revolution leaves the road free for the manifestation of all the oppositions, of all the antagonisms. Because of this, the process is accelerating. A world regulation becomes impossible. It is a delusion to believe that the relative stability of the system will maintain itself. Either on the economic, social or political side. Major upheavals are on their way at the world scale.
But to say that capitalism enters a new phase of general crisis, initiating new revolutionary phases, doesn’t mean at all that the socialist revolution will automatically and necessarily comes out from the stagnation and the chaos. Without a communist party to lead the populations in their struggle, to steer them towards the creation of a new socialist society, the revolution will never be victorious. It is therefore urgent to work at this task of construction of the party.
(1) This puts also a problem of repartition between sectors, between the one who makes the production means and the one who makes the consumption goods. But this question, probably essential for the understanding of the economic crisis, will not be treated in this text.
(2) That it looses thanks to the resistance of the soviet people.
(3) On basis of IMF, International Financial Statistics Yearbook. The net GDP evaluates the created value with constant prices, that is to say normally without inflation. Which translates better the evolution of the real economic activity.
(4) The Wall Street Journal, 30-31 January 1998.
(5) It is a financial organism, the capitals of which come from private persons and which manages them through stock-market operations, among other speculative operations of gains in capital.
(6) The central bank of the United States.
(7) The main American stock-market, located in New York.
(8) An index is a weighted price of the most representative shares of the stock-market. It gives the indication of the average evolution of the financial market.
(9) David Langdon, Terence McMenamin & Thomas Krolik, « US labor market in 2001 : economy enters a recession », Monthly Labor Review, February 2002, p.5.
(10) David Langdon, Terence McMenamin & Thomas Krolik, op. cit., p.8.
(11) Karl Marx, Capital, Progress Publishers, Moscow, 1959, p.484.
(12) BIT, « Rapport sur l’emploi dans le monde 2001 : La situation s’améliore, mais la fracture numérique semble inéluctable », 24 January 2001.
(13) The fourth is Toyota : 6 millions of vehicles.
(14) All the elements which allow an increase of the possibilities of production, an improvement of the well-being, that is to say the development of science, of techniques, of knowledge in general, of thought, of organisational abilities, etc.
(15) Calculation done from Edward Wolff (1987 and 2000), who uses the official figures of the Federal Reserve, in Survey of Consumer Finance. But he takes as measure of the net worth only what can be directly converted in cash. He removes the consumer durables (cars, televisions, etc.) which don’t really form an asset and the retirement wealth, which can not be converted in money (except if this is the case).
(16) Calculations done from Thomas Piketty and Emmanuel Saez, « Income Inequality in the United States, 1913-1998 », NBER Working Paper, n°8467, September 2001 : www.nber.org/papers/w8467
(17) Council of Competitiveness, US Competitiveness 2001, p.16.
(18) World Bank, World Development Report 2000-2001, p.23.
(19) It is the multiplication between the number of emitted shares and the price of these shares.
(20) Marx defines this fictitious capital as values which can be negotiated on the financial markets, possibly independently of what happens in the production, and because of this, it is fictitious, its value is imaginary: "Titles of ownership to public works, railways, mines, etc., are indeed (...) titles to real capital. But they do not place this capital at one’s disposal. It is not subject to withdrawal. They merely convey legal claims to a portion of the surplus-value to be produced by it. But these titles likewise become paper duplicates of the real capital; it is as tough a bill of lading were to acquire a value separate from the cargo, both concomitantly and simultaneously with it. They come to nominally represent non-existent capital. For the real capital exists side by side with them and does not change hands as a result of the transfer of these duplicates from one person to another. They assume the form of interest-bearing capital, not only because they guarantee a certain income, but also because, through their sale, their repayment as capital-values can be obtained. To the extent that the accumulation of this paper expresses the accumulation of railways, mines, steamships, etc., to that extent does it express the extension of the actual reproduction process - just as the extension of, for example, a tax list on movable property indicates the expansion of this property. But as duplicates which are themselves objects of transactions as commodities, and thus able to circulate as capital-values, they are illusory, and their value may fall or rise quite independently of the movement of value of the real capital for which they are titles. (...) Gain and loss through fluctuations in the price of these titles of ownership, and their centralisation in the hands of railway kings, etc., become, by their very nature, more and more a matter of gamble, which appears to take the place of labour as the original method of acquiring capital wealth and also replaces naked force. This type of imaginary money wealth not only constitutes a very considerable part of the money wealth of private people, but also of banker’s capital (...)". (Karl Marx, Capital, Progress Publishers, Moscow, 1959, p.477-478).
(21) The dividend-price ratio is relatively stable in the 50s and 60s around 3% (which is a low level of profit). It increases at the end of the 70s to reach its record of 5.81% in 1979. Afterwards, it doesn’t stop falling to reach 1.15% in 2000 and 1.32% in 2001 (Council of Economic Advisers, Economic Report of the President, February 2002, p.430). Thomas Piketty et Emmanuel Saez (« Income Inequality in the United States, 1913-1998 », NBER Working Paper, n°8467, September 2001, p.14 and figure 7) show that the part of the dividends in the incomes of the richest people decreases steadily.
(22) Calculated from the Standard & Poor’s, Emerging Stock Markets Factbook, 2001, p.37. Almost 48,000 billions of dollars treated yearly in the world stock-markets, if one counts 250 working days.
(23) Investment Company Institute & Securities Industry Association, Equity Ownership in America, Fall 1999, p.5.
(24) There are always exceptions.
(25) Payment of the interests and reimbursement of the main debt.
(26) Calculated from the World Bank, Global Development Finance, various years.
(27) It is only the long term debt.
(28) In this case, it is a conjunctural crisis but which can turn into a prolonged and generalized stagnation.
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