Point of no return in Europe

Impasse. Tipping point. Crisis. Boiling point. Point of no return. Explosion. What words can convey the profundity of the present moment of transition?

The people of southern Europe in Portugal, Spain and Greece have reached the limits of their preparedness to tolerate more brutal assaults in the name of austerity.

But the leaders of the public and private sector unions who have called today’s general strike in Greece do not intend their collective action to bring down the three month-old coalition, let alone challenge the economic and social system. Quite the opposite. 

"We call on everyone to take part in the strike and resist the austerity measures that hurt Greek people and the economy," said Despoina Spanou of the ADEDY labour group.

With unemployment at a record high in Greece – hitting almost 24% at a national level and 55% among young people, the highest in Europe – the leaders want the action to emphasise how deficit-cutting measures at the expense of growth and development are creating an economic death spiral. As Stathis Anestis of the GSEE union group put it: “These policies have led Greece to an impasse and are totally counter-productive.”

The anger is intensified by the European Union, European Central Bank and the IMF who are pushing for further cuts in wages and pensions which have been drastically reduced in the five years since the crash. As well as proposing the introduction of a six-day working week, the Troika aim to cut the minimum wage by 22% and abolish collective labour agreements.

Union leaders, not just in Greece but throughout Europe, have no intention of going beyond resistance and protest actions. Their “alternatives” are based on the notion that present policies are “wrong” and that growth would be better.

But we are patently in a crisis of the capitalist system of global proportions, where contraction is driven by an inner momentum which governments of all persuasions are barely able to influence let alone halt. And the political crisis is growing too, especially in Spain where riot police fired rubber bullets to prevent crowds storming the parliament building yesterday.

In Catalonia, nationalists are turning the anger onto the federal government. Catalan President Artur Mas has called an early election for 25 November, a move towards secession that has stirred dark warnings from the military with echoes of the Spanish civil war.

The people of Portugal have also had enough of austerity, with one draconian package after another imposing longer working hours, 7% pay cuts, tax rises, and an erosion of pensions. Unemployment has reached 15.7% - with one in three young people jobless..

A week ago, more than half a million people marched in cities across the country in the biggest protests against the government since the end of the dictatorship in 1974. The peaceful marches were a milestone in a country where people are not known for a protest culture.

From left to right, from moderates to radicals, from young to old, from professional protesters to first-timers, it was an unmistakable warning shot for the government. Protests were scheduled even in wealthy Cascais, a coastal city near Lisbon famous for its upper-class demography.

In the shadows of the darkening clouds of the planetary emergency brought on by decades of debt-fuelled growth, the crisis engulfs, overwhelms and overpowers the increasingly desperate attempts by agencies and governments to build new defences as the old ones fail to deliver.

You can see that in Britain, where the deficit is rising and only the printing of vast amounts of money by the Bank of England is holding back economic collapse. Yet the TUC is restricting itself to a weekend demonstration and the threat of some scattered, one-off strikes over pay sometime next spring. It just won’t do.

Humanity stands at the threshold of an evolutionary leap in social organisation. Either we cross it, building a not-for profit economy and society based upon co-operation and collective stewardship of the world’s resources, or we will become capitalism's victims.

Gerry Gold

Economics editor

It's the system, stupid

A sketchy deal on spending cuts which allow the US debt ceiling to be raised is no more than an acknowledgement that law-makers in even the world’s largest national economy can make little if any impact on the deepening crisis.

The credit ratings agencies whose pronouncements are treated as holy gospel say that the America’s AAA rating won’t last. And it’s easy to see why. US debt, already at a staggering $13 trillion, is forecast to rise without pause through to 2016.

As it does so, the cost of financing the debt will have to come out of current budgets, leading to further cuts in health and welfare benefits. Political turmoil in Washington, with Barack Obama looking increasingly like a lame duck, one-term president, only adds to the sense of crisis.

Stock markets nose-dived on news of the vague compromise which, like the UK Coalition’s savage austerity programme, is founded on false expectations of growth. Market speculators immediately turned their attention back to Europe, driving up borrowing rates once again for Italy, where Berlusconi has called an emergency meeting, and Spain, where prime minister Zapatero yesterday postponed his holiday to deal with the crisis.

Throughout the post-war period, the world economy grew as it had to if profits were to be maintained, but the global trend in the rate of that growth has been relentlessly downward. Throughout the period of globalisation a series of ever sharper, deeper and more extensive crises saw the rate plummet and then recover, but the recovery was always weaker than the crash.

During 2007/8, when a series of individual mortgage defaults undermined the extreme fragility of the global house of cards built from credit and debt, the growth rate threatened to turn negative for the first time. This prompted the panic which saw governments and central banks flood the world with more credit, which as debt has now rebounded with such devastating effect.

Sovereign debt quickly overtook private and corporate debt, and now all are in the same boat – with the rudder entangled in a net of credit default swaps, holed below the water line and sinking fast towards a collective default. The long-hoped for “return to growth” is just that – a hope.

Reports on manufacturing this week reveal that output is not just slowing badly in the US the world’s largest producer, but actually shrinking in China, the world’s second largest, and in the UK – the seventh largest.

The universal consequences of the crisis and attempts to fix it include inflation boosted by fantasy finance and unemployment as public bodies cut spending. Corporations respond in their usual ruthless way in a desperate bid to maintain profits.

Foxconn, the world's largest maker of computer components which assembles products for Apple, Sony and Nokia, is in the spotlight after a string of suicides of workers at its massive Chinese plants, blamed on harsh working conditions. The Taiwan-based company currently employs 1.2 million people, with

most of them working on the Chinese mainland.

The corporation’s classic response is contained in its plans to introduce a million robots to its production lines over the next three years to cut rising labour costs and improve efficiency. If it is successful, the products it turns out will be highly competitive, but will flood onto a declining market as the global economy slows further. And because labour is the source of all value, the rate of profit on the whole operation will shrink dramatically.

It’s just another example of the inescapable, contradictory logic that ensures that in the midst of a crisis – and this is unarguably the worst in the short history of capitalist society - any attempt to fix things has exactly the opposite effect. In the 1992 US presidential election campaign, Bill Clinton taunted his opponent with the phrase “it’s the economy, stupid”. Actually, it’s the system, stupid.

Gerry Gold

Economics editor

Crisis over? Who are they kidding!

Finance ministers in Italy for this weekend’s annual meeting of the G8 capitalist countries aren’t short of sources to help them interpret economic statistics, and they’re getting plenty of advice about what needs to be done. The trouble is that not only are the statistics contradictory, but so is the advice.

The International Monetary Fund has revised its previous 2010 global growth forecast of 1.9 per cent sharply upwards to 2.4 per cent, because it thinks the wave of government intervention – which it encouraged – is going to bear fruit. The Chinese government, for example, has implemented a $585 billion stimulus package in fixed assets like apartment buildings and roads. One result is that China’s oil refineries have returned to production on a grand scale.

In the real world, however, things are sharply different. China’s exports - a key measure of the health of the global economy – fell by a worse-than-expected 26.4 percent from May 2008, while imports plunged by a quarter. This is the seventh month in a row that they have both fallen, and the pace accelerated from April.

Nevertheless, in a new round of hyped confidence in the prospects for profit, stock markets around the world are roaring ahead. The price of oil is soaring and there is even talk that the “recession is over”. Nothing could be further from the truth. What is happening is that the meltdown of the global economy is taking place at a slower pace – but it’s still melting.

The World Bank’s International Development Association (IDA) provides grants and loans to the world’s 78 poorest countries, and already this year the IDA has received a record number of requests for help. It now says that the world economy will shrink by 3% this year - much more than its previous forecast of 1.75%. "Most developing country economies will contract this year and face increasingly bleak prospects," World Bank president Robert Zoellick said.

Despite its optimistic forecast, the IMF has warned that there could still be another $3 trillion in losses for the financial sector as a whole before the crisis is over. Interest rates are beginning to move upwards on both sides of the Atlantic as buyers of government debt take fright at the prospects for inflation contained within the phenomenal printing of money that has kept the financial system on life support.

Some analysts are now weighing the prospects of a new, more catastrophic financial collapse starting in Eastern Europe. Latvia is truly facing economic catastrophe – output is shrinking at a rate of 20% a year – and, with massive credit provided by Swedish banks, some say threatening to take the rest of Europe down with it.

Latvia’s parliament is today considering emergency measures to its 2009 budget to attract funds from the IMF and European Union. The measures include a 10 percent lower old age pension, a savage 70 percent cut in the pensions of pensioners who still work and a 20 percent cut in state sector salaries, with allowances for parents reduced by 10 percent. "Yes, with yesterday's decisions the state has really been saved from bankruptcy," Prime Minister Valdis Dombrovskis claimed.

Meanwhile, all the major parties in Britain are considering where the axe will fall in order to stave off state bankruptcy in the coming period. And the crisis is over? Who are they kidding! The costs of saving the Latvian state or any of the capitalist states and the global capitalist system are unsustainable for the majority of the world’s population. For us, the future lies in replacing production for profit with production for need.

Gerry Gold
Economics editor

Being anti-capitalist is only a start

As the leaders of the world’s richest countries start gathering in London for Thursday’s G20 summit, a picture can convey more than words about what confront Obama, Brown et al. The latest cover of Time magazine just about sums up the desperate nature of the global economic crisis. It depicts a small boat with six people desperately rowing to prevent it falling off the edge of a massive waterfall. The headline is: “All together now (please?)”

Whatever efforts are made at the G20, it’s apparent that even if the participants agree on stricter regulation of the global financial system, the proverbial cat is out of the bag. In fact, those taking part have already said as much. The German chancellor Angela Merkel spoiled the party on Saturday when she said that no deal would reached and that the summit “will naturally not solve the economic crisis either”.

Gordon Brown hopes that “this crisis can be dealt with by us acting internationally” and by the assertion of “sounder principles”. Only in his dreams. The notion that those overseeing the global economy can and will redress “global imbalances” is clearly cloud-cuckoo land. In reality, the world economy is on a knife-edge. Financier George Soros, the sage and self-appointed Cassandra of financial capital has warned that if the G20 does not insulate developing countries “against a calamity that is not of their making” the world will slide into slump. Soros does not appear over-confident about the outcome.

The most significant question is not “imbalances” between the richer and the developing countries, but the nature of capitalist production and ownership itself. The relentless drive for profit through unsustainable growth is at the root of the current crisis. Obviously, the G20 capitalist club is not in a position to address this issue! As A World to Win said in the flyer we distributed at Saturday’s “Put People First” march in London:

“Those who created the crisis are part of the problem, not the solution. The global crisis is a great opportunity to make a dramatic change and create for the first time a society where the majority actually come first over the narrow interests of profit. Ordinary people should plan for a future based on co-operation not competition, co-ownership and not private ownership, and for meeting social need not the demands of bankers and shareholders.”

The mass support for the protest march, organised by the Trades Union Congress and supported by a host of other organisations, which was joined by workers from across Europe, was significant despite the futile appeals to the G20 leaders put forward by march organisers. The response – estimated at around 35,000 even by the police which means it was far higher – shows that people are willing to take to the streets to defend their living standards

In Germany tens of thousands marched in Frankfurt and Berlin. It was, as comedian Mark Thomas also noted, the first time that people have had a chance to come out on the streets in a big way. Thomas called for it to be “the start of a grassroots movement”.

The key issue is where that movement should go? This is the question that must be raised at the camps and actions organised by ecological and direct action groups in the City and at alternative summits organised by students this week. Brown is right about one thing – the crisis is forcing change. That change has to be on terms that benefit society and the planet as a whole, however. Our Charter for Democratic Rights suggests how we can achieve the revolutionary transformation required. Sign it, spread the word, and join A World to Win in its aim of going beyond anti-capitalist propaganda to creating a practical alternative.

Corinna Lotz
AWTW secretary

Globalisation 'virus' hits Davos

Spare a thought for the great and the not-so-good who have gathered for the annual party of the rich and the powerful at the luxury resort of Davos in the Swiss mountains for the World Economic Forum (WEF). The 2,500 or so attendees, including 41 heads of state, have been obliged to scale down from the most expensive champagnes like Dom Perignon to “normal champagne”, according to reports. Some benighted delegates are even downgrading from champagne to white wine, according to a local hotelier. 

But the real difficulty they face is that the “Davos consensus”, which has hitherto prevailed at these and similar gatherings – that free-market, globalised capitalism would create a better world – is in now tatters. WEF founder, economist Klaus Schwab, even believes that the present downturn has led to an outbreak of schizophrenia at Davos. 

In his view, the present economic downturn is in reality an accumulation of “an imbalance in the global system, a credit crisis: above all a confidence crisis and a systems crisis”.  In addition, he points to other emergencies – global warming and water shortage, which have to be addressed as well. Schwab’s remedy is a new approach to global confidence and the creation of “an ethical value base and a better, more enhanced, co-ordinated and regulated global system”. 

But the dream of a new consensus is just that. The agreement made at the first G20 summit of developing nations, held last year in Washington, broke down in just a few days, after Russia and India imposed tariffs. Many in Davos will now be watching Wen Jiabao and Vladimir Putin, the Chinese and Russian prime ministers, as well as the leading Indian and US representatives, for further signs of economic nationalism. 

These multiple and interconnected economic, political and ecological crises demonstrate the dialectic at work. The very dynamics of globalised capital that powered decades of growth and expansion over the last four decades have turned into their own opposite. Instead of growth, there is contraction – an unprecedented fall in wealth. As one commentator points out, “the globalisation of the economy appears to have done the opposite [of leading to steadily rising prosperity] – spreading a dangerous economic virus around the world and creating the threat of another global depression”. 

The latest US National Intelligence Council report says that “the international system – as constructed following the Second World War - will be unrecognisable” while former US deputy treasury secretary Roger C Altman notes that “the financial and economic crash of 2008, the worst in over 75 years, is a major geopolitical setback for the US and Europe”. These are serious observations, to put it mildly. 

The severity and depth of the global crisis is forcing a new sobriety and concentrating minds at Davos. The triumphalism of the 1990s has disappeared, almost in an instant. The chastened advocates of capital will muse and drink and ski in their mountain retreat. They will fawn over brutal dictators like Putin and Jiabao. They will ponder “solutions” to force those who create value into unemployment, homelessness and poverty. 

But for ordinary people who are the victims of their system, the threatening catastrophe presents a great challenge. It’s clear that any “new systems of governance” will focus on an attempt to survive the crisis by preserving the rule of rich political and economic elites at the expense of the many – those who in fact create the values and wealth we all depend on for our survival. In the People’s Charter for Democracy, A World to Win outlines concrete solutions to the crisis which preserve and maintain the positive sides of globalisation while replacing the destructive, profit-motivated system of private ownership. The disarray at Davos should spur our efforts to build an irresistible momentum for revolutionary change along these lines. 

Corinna Lotz
AWTW secretary

Seize the time in 2009

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.

Corinna Lotz

A World to Win secretary