This was the year when the wheels came off the juggernaut of corporate-driven globalisation and revealed to a new generation that the capitalist economic and financial model is fundamentally flawed and unsustainable. An insoluble crisis centred at the heart of the system, in the United States and Britain, is certain to deepen in 2009.
In both countries, long-established financial institutions went to the wall or were put on state life-support. Mass unemployment looms from the subsequent collapse of production and consumption, creating the most significant crisis for capitalism since the Wall Street collapse of 1929 and the Great Depression that followed.
During 2008, famous financial institutions like Lehman Brothers, Fannie Mae, Freddie Mac and Washington Mutual, went to the wall in the United States. Events left the reputations of US banking giants in tatters, as the Financial Times, the bankers’ and employers’ broadsheet remarked under the banner: “The fallen giants of finance”. The US Federal Reserve had to bail out American International Group (AIG), the largest underwriters of commercial and industrial insurance in the United States and Citibank. An emergency rescue package rushed through Congress, with the threat of martial law in the background, made no difference.
Masters of the universe like Dick Fuld of the 158-year old Lehman Brothers bank, boss of some 26,000 employees, lost any connection whatsoever with business reality, according to banking insider Andrew Gowers, former Financial Times editor. Writing after Bear Stearns collapsed into the arms of JP Morgan Chase, he said: “On Wall Street blind panic had ensued and its focus was Lehman Brothers. The market has a phrase for this sort of event: the death spiral. Our freewheeling, globally integrated financial markets turn out to be built on sand.”
The sandcastle extended to Britain, where more than a decade of New Labour rule had encouraged the City of London to create its own fantasy world. Building societies became banks and banks built their profits through exploiting an exotic array of financial instruments. After the Wall Street debacle, the collapse of the British end of the casino could not be far behind. And so it proved in October, when the Royal Bank of Scotland and HBOS were within hours of total disintegration. The state bail-out totalled more than £600 billion. Now the British state’s finances are inextricably bound up with those of the banking sector, which shows absolutely no signs of recovery.
In fact, lending remains restricted and the banks are using government money to rebuild their balance sheets at the expense of borrowers and small businesses. Meanwhile, the UK stock market fell by a third during 2008 – it was down more than 40% in Japan - undermining the value of pensions dependent on the value of shares. The ruling elites have lost their confidence, as Lionel Barber, editor of the Financial Times, said in his end-of-year review:
“The twin shocks [Mumbai terror attack and the global financial crisis] certainly challenge assumptions which had appeared unassailable since the fall of the Berlin Wall: the innate superiority of the western model of market capitalism and the inevitable progress of globalisation, powered by the free movement of goods, labour, capital and services.”
As unemployment grows by leaps and bounds, the weakest firms are going to the wall. Household names like Woolworths – which survived the 1930s – and MFI are in liquidation, along with a host of other companies such as Adams, the children’s retailer. At least 600,000 jobs could go in the UK in 2009, according to a report by a personnel managers' professional body. The Chartered Institute of Personnel and Development says even those who escape redundancy face pay freezes.
In China, the global downturn meant that 10 million migrant workers lost their jobs during November. In addition it is estimated that 1.5 million Chinese graduates cannot find work. In Spain, unemployment stands at 11.3% for locals and around 17% amongst immigrant workers. In Greece, poor prospects and youth unemployment are in the background of ongoing unrest in Athens and elsewhere, which has seen weeks of confrontations between security forces, youth and workers.
Thousands of workers marched against job cuts through the Ukrainian capital Kiev just before Christmas. There were demonstrations throughout Russia as the economic crisis began to affect jobs and services. Migrant workers around the world are being hit first and hardest as the recession devours jobs and reduces pay. Unresolved self-determination struggles, such as in the North Caucasus, Georgia, Palestine, Tamil Nadu and Kashmir, became harsher as evidenced by the barbaric attack on Gaza by Israeli warplanes.
In Britain, we are experiencing an eerie calm before the storm, punctuated at present by outspoken warnings from high places – particularly the pulpits and altars of England’s cathedrals. These are strange times indeed when Roman Catholic Cardinals and Anglican Archbishops feel compelled to warn about the unravelling of the very fabric of capitalist society.
Over Christmas, Cardinal Cormac Murphy O’Connor, the Archbishop of Westminster, spoke of “spectacular cases of bad behaviour” in the financial world and warned of lost trust as ordinary people felt that only bankers and speculators were benefiting from the economy. The bishops of Manchester, Durham, Winchester, Carlisle and Hulme warned that Britain was suffering from an addiction to debt, family breakdown and a widening gap between rich and poor. They accused ministers of pursuing "scandalous" policies and reneging on promises.
Dealing as they do with matters of the spirit, religious leaders are sensitive to the way in which the meltdown of the global economy is causing the dogmas and “self-evident” truths of the past decades to disintegrate. As people lose their jobs, pensions and many rights they took for granted, their confidence in the system and trust in the state that administers and defends it also breaks down, as the bishops and others are only too aware.
For the past year A World to Win’s blogs and web pages provided an account of the crash of 2008. We’ve pointed the finger at the bourgeois politicians and states who are spinning around as they try to stop up the dam of capitalism by offering more and more free money to the banks, as if feeding an ever more voracious monster. A World to Win has shown that if existing states and governments are left in power, the rest of us will be dragged down to economic disaster, living in authoritarian, surveillance states.
In the less precise science of economic analysis we are a bit like the group of German astronomers who this month confirmed that there is a giant black hole at the centre of the Milky Way. They reached their conclusion after 16 years of monitoring the motion of the stars surrounding the hole, which is known as Sagittarius A*.
In a comparable way, our team at A World to Win has been monitoring the warped movement of the global economy around its very own black hole. We dubbed this infinite pit of absolute gravity ”fantasy finance or “fictitious capital” as Karl Marx called it. And, as astro-physicists know, activity around the edge of the black hole is most perilous as those who go there tend to disappear forever.
There is of course, a major difference between events in the interstellar universe and those here on Earth. Here, history – including economic history – is the sum of the myriad activities of conscious human beings, each of whom pursues a life-path according to her or his interests, consciously or unconsciously. Under the present system most human beings have no power to decide which way society will go. But moments come in history, when masses of people do assert their power over their rulers and bring about decisive changes.
As we have outlined in our books, the change from the present order of things to a better one needs to take forward all the best aspects of the current system and use them as the foundation of a not-for-profit production and exchange economy where protection of people and the planet is fundamental to everything. Developing strategies for a not-for-profit economy and a truly democratic form of politics is the most urgent issue of the day. We cannot predict or choose exactly how people will act in defence of their rights and living standards. But they must and will do so. Our job is to be ready for this by building up discussion and support for a revolutionary change.
We can take confidence from the fact that many million people around the world have been inspired by the US election to strengthen the understanding that human beings have the power to better their circumstances collectively thereby making history. Barack Obama’s defeat of the Republican Party showed that far from being all-powerful, the Bush regime had lost credibility. The failed military occupations of Afghanistan and Iraq have brought disenchantment with the notion that the US could “spread democracy” throughout the world. The biggest military power in the world is being seen to fail yet again.
Obama clinched the presidency by involving hundreds of thousands of US citizens in their homes and localities. His slogans Yes we can and Change we can believe in, promised a different future than the one offered by Bush, as well as the Clinton group which had hitherto dominated the Democratic Party. Naturally Obama is riding a dangerous tiger of popular expectation which the economic crisis will make it impossible to fulfil. But he showed that people can and will organise themselves to make change possible.
To be successful in this, means making use of all the expertise that human beings have accumulated through science, art and technology, to end the rule of profit-crazed, war-mongering minorities. To bring about the change, the soft-soaping and back-pedalling of reformist trade union leaders and their ilk is worse than useless. Appealing to New Labour, or any parliamentary coalition that may succeed it in the event of an election, to change its policies is living in dreamland.
Instead we should seize the opportunity presented by the crisis and make A World to Win into a powerful movement, based on the People’s Charter for Democracy. The coming year will bring unprecedented challenges to members and supporters of A World to Win and all those who seek to bring about revolutionary political and social change. It’s a chance that we cannot afford to miss.
A World to Win secretary