Whatever else happens, 2008 will go down as the year when capitalists lost confidence in the market. In a dramatic U-turn, the free market credo that has been shoved down our throats for almost three decades, has been replaced by calls for central banks to inject liquidity, for governments to coordinate fiscal stimuli and generally for the state to pick up the pieces and sort out the consequences of the financial “meltdown”. In Britain, it is a standing joke that Gordon Brown, the once self-styled “prudent” Chancellor, is now presenting himself as the saviour of the world as we know it by leading the call for a concerted recourse to the printing press. However, now that the financial crisis extends beyond banking and the stock exchange so that the pundits now admit the term “economic crisis”, now that “downturn” has turned into “recession” and even the almost forgotten word “depression” has come back into the vocabulary, the spectacle of global economic activity grinding to a halt is no laughing matter. Already November’s rate of job losses in the United States is higher than at any time since at least the early 1970s (which is where the roots of the present crisis spring from - see the report of our public meeting in this issue). Some pundits even say this presages a higher unemployment rate than during the Great Depression of the 1930s when more than 20% of the workforce were unemployed for long stretches and when labour in industry was working for only 40% as much time as in 1929.

Outlook for Workers

Certainly, the outlook for the working class everywhere is grim. Lay-offs, short-time working, extended factory shutdowns or outright closures and loss of livelihood are on the cards for workers the world over. In those countries which were at the centre of the property speculation boom, where house prices are still falling, more and more wage workers are falling behind with mortgage payments and finding themselves in negative equity (paying for a higher mortgage than the existing market value of their house). Workers who thought they at least had peace of mind for the future are seeing their pension funds (based on investments in plummeting stock market assets) decline dramatically or even worse, disappear altogether when their company is wiped out by the crisis. Of course millions of workers outside of the capitalist heartlands have never had peace of mind for the future in the first place and their struggle for survival will be even more difficult. Yet this is just the tip of the “credit crunch” iceberg.

The Puny Palliatives of Capital Won’t Work

Between April and the end of October 2008, the world’s central banks and governments had injected about £5000bn, or the equivalent of 15% of world GDP, to try and stimulate the financial markets and revive wider economic life. The effect was minuscule and hardly affected the mountain of credit derivatives that is paralysing commerce and choking off investment. Since then the US alone - with a mountain of private debt equivalent to three times GDP - has injected a further $800bn into the economy in a desperate attempt to revive consumer credit markets and bring down the cost of mortgage borrowing. ($600bn is directed towards buying up mortgage-backed assets and $200bn towards mopping up “asset-backed securities”, the “assets” in question being student loans, auto loans and credit card loans!) The scale of this dwarfs Alistair Darling’s puny tax reductions, the Bank of England’s interest rate cuts or Brown’s promises of release from mortgage interest payments for struggling borrowers in the UK. The aim, however, is the same: to somehow revitalise the economy by means of retail markets in the hope that this unprecedented crisis will be overcome by consumer spending. As if the world economy were one big shopping mall and monetarism had never existed. As if the working class were really only consumers and not wage workers whose “propensity to consume” (Keynes) is limited, not primarily by the drying up of credit, but by the simple fact that their wages, which in any case represent only a fraction of the value (or wealth) that their labour creates, are the first “expense” the capitalist cuts down on in a crisis. And so it is. Even as workers face an uncertain future threatened by unemployment, wage cuts, rising housing costs and little provision for retirement, the main strategy of those states where personal debt is highest (an average of 170% of disposable income in the UK and 140% in the USA) is to find a way of “reviving the credit markets” and keeping up personal consumption! It is a ludicrously impossible aim. As for workers in those parts of the world where capitalism has not yet defined them as consumers, their prospects are horrendous. The crisis, we are told, will be disastrous for the world’s poor, but there is no suggestion that anything must be done about it. On the contrary, the latest United Nations conference which was supposed to confirm levels of international aid to “poor countries” was a complete flop and significant only for the absence of all but one leader from a major power (Sarkozy of France).

Time For a Backlash?

Little wonder that the works of Marx are reappearing on booksellers lists. Small wonder too that a section of the capitalist class is already beginning to fear what will happen. In the words of one obscure Tory writing in The Financial Times “... as recession bites, there is real danger of a backlash against capitalism itself” [5.12.08]. From the viewpoint of the future of humanity, it is no exaggeration to say that a backlash against capitalism is our only hope. That is, if by “backlash” we can interpret the overthrow of a system that has outlived its usefulness and its replacement by a global community producing directly for human need without money or profit and above all without the parasitic capitalist class which hypocritically lives off the value produced by wage labour.