Slowly Deepening Crisis

The so called “Great Recession” is now in its sixth year and is acknowledged, even by the capitalist class, as the most serious economic crisis since World War Two. Although the crisis now appears to have stabilised it is in fact slowly deepening. The violent gyrations in global stock markets of recent months indicate a nervousness and uncertainty, not a return to confidence. The fact that markets can collapse when the chairman of the Federal Reserve Bank announces that money printing will be scaled back because the US economy is improving indicates the upside down world which global finances now inhabit.

The strategies of the capitalist class for overcoming the “Great Recession” whether they base themselves on reflating demand, or austerity and balanced budgets, both rely on achieving economic growth as the only escape route. Growth is, however, proving elusive. The World Bank expects the global economy to grow by only 2.2% this year but this is almost entirely due to higher growth rates in China and India. For the UK, the economy has actually shrunk by 3.9% from its level of 2007 and for the EU as a whole growth has been negative with European Commission predicting only 0.5% growth in 2013.

Attempts at balancing budgets have also been unimpressive. The EU has a budget deficit target of 3% of GDP for all EU members. The UK deficit is now 8.2%, which is the highest since 2008, and the target date for achieving a balanced budget has been pushed back from 2015 to 2018. The EU bailout countries have all been given extended periods to cut their deficits. Portugal and Ireland have each been given another 7 years beyond the original bailout terms. The US budget deficit, though falling, is still expected to be 6.5%.

The strategy of “Austerity and Balanced Budgets” is itself now being questioned by one of it architects, the IMF, which now admits mistakes have been made in earlier bailouts particularly Greece and the medicine dished out with the loans has made the situation worse.

A completely opposite strategy is being attempted in Japan. After two decades of deflation a massive programme of Quantitative Easing has been initiated. Money is being pumped into the economy at a rate of 1% of the GDP per month which is double the maximum ever undertaken by the US. The government aims to increase the rate of growth at the price of allowing inflation to rise to 2%. At present Japanese taxes cover a mere 46% of government expenditure and these measures will increase Japanese debt; a debt which stands at 245% of the GDP and is the highest of any country in the world. These measures reflect a sense of desperation.

The issue of debt in general is, of course, not limited to Japan. The UK government debt, which was £700bn in 2010, has doubled to £1400bn and is expected to rise to 85% of the GDP by 2015. This is just the government debt, once the corporate debt and personal debt are added the total figure is £7500bn or approximately 500% of the GDP.

While this indicates little success in finding a route out of the “Great Recession” it does suggest things could get dramatically worse. A significant rise in global interest rates would be a catastrophe. The figures for rescuing the financial system in the present conditions would be measured in trillions not billions as in 2008. These amounts would be beyond the capacity of the nation state. What the capitalist class would do then is a matter of speculation but, writing down debts, confiscation of deposits, as occurred in Cyprus recently, nationalisation of pension funds, as occurred in Argentina 1990, or devaluing debts by inflation of currencies could occur. All these things would produce a massive financial crisis and loss of “confidence” which in its turn would produce a social crisis.

Accompanying these manoeuvrings in the financial sphere the ruling class has followed a strategy of trying to shift the burden of the crisis onto the working class. There are indications that this strategy on its own is proving insufficient. A hint of this was the so-called “bail-in” of large depositors, namely sections of the bourgeoisie themselves, in the case of the Cyprus rescue. The decisions of the European Union at the end of June established the “bail in” of bank shareholders and creditors as a policy to be followed in future rescues. The signs are that this strategy isn’t working, even though the working class has not yet been able to successfully oppose it.

Far from indicating that a route out of the crisis has been found, these developments only indicate that the underlying problems of capitalism continue and that the ruling class is unable to either understand them or address them.

Attacks on the Working Class

The attempts of the ruling class to impose austerity on the working class have generally been successful. Before considering why this is the case we wish to briefly outline the extent of burdens which have been heaped on workers’ shoulders.

Since 2008 the attacks have been on two fronts, a direct attack on wages and an indirect attack via social benefits. The severity of these attacks can be illustrated by many statistics, but probably the most dramatic are those from Greece. Here we find that;

• Average family income has fallen by 38% from its level in 2007
• Wages and pensions have fallen by 35 – 50%
• Unemployment is 28.6% and 40% of youth are seeking employment abroad.
• Collective labour agreements have been revoked
• Pension age has been raised to 67
• Vat has been increased to 27%
• One of the results of all this is that 37% of all children are now living in poverty.[1]
• Infant mortality has increased by 40%.

In the other EU bailout countries there have been similar, but smaller, attacks on direct wages with reductions of 5-10%. Minimum wages have similarly been reduced. For the UK, the Institute of Fiscal Studies reports that there have been falls of 4.8% and 9.9% in wages in the private and public sectors respectively since 2008.

At the same more flexible conditions have been enforced with workers having to give up previous entitlements such as holidays, bonuses as well as having to sign individual contracts with employers or accept zero hours contracts.

Reduction in the social wage have been imposed through reduction of benefits and services. For example in the UK, disability benefit has been cut, the bedroom tax introduced, workfare, which means working for free, has been imposed together with increases in the pension age and reductions in pension payments etc.

This has been coupled with restructuring of the economies and speed-ups which, of course, has led to massive unemployment. In the EU as a whole the rate is 12% but in certain countries it is much worse. 12% unemployment represents 18.8 million workers!

For the capitalist class this has resulted in a net reduction in labour costs. For Greece this amounts to some 14%. Why has the working class proved unable to resist all this?

Working Class Resistance in Metropolitan Countries

The working class in the so-called “developed”, or metropolitan, capitalist countries, particularly Europe, the US and Japan, has proved unable to resist these attacks. In general the capitalist class has succeeded in enforcing most of the attacks on wages and conditions of workers it wanted. We consider two factors need to be considered in explaining this, firstly the reorganisation of global capital which has been carried out under the banner of “globalisation” and secondly the confinement of workers’ struggles in the prison of the trade unions.

During the last 25 years globalisation has changed the material situation in which the metropolitan working class is forced to struggle. It has given the capitalist class a flexibility they did not previously have, and an ability to outmanoeuvre working class resistance. Richard Freeman, a Harvard economics professor, estimates that the entry of China, India and the former Soviet bloc into the world economy resulted in 1.47 billion additional workers becoming available to global capital. This resulted in a doubling of the size of the size of the workforce to approximately 3 billion. These additional workers brought very little additional capital with them, and as a result cut the global ratio of capital to labour which decreased to between 55% and 60% of what it would otherwise have been_[2]_.

Richard Freeman himself makes the obvious point that:

“The capital/labor ratio is a critical determinant of the wages paid to workers and of the rewards to capital. The more capital each worker has, the higher will be their productivity and pay. A decline in the global capital/labor ratio shifts the balance of power in markets toward capital, as more workers compete for working with that capital.”[3]

The additional workers who have become available have been made use of by the metropolitan capitalist class by exporting production and service industries to the areas where they are available. This has resulted in massively cheaper labour power becoming available to capital. Technical developments in communications and the internet have, obviously, greatly assisted the exploitation of this new labour force. Much of the surplus value generated by these global operations has, of course, been returned to the metropolitan countries and in part been used to fund those service industries which cannot be exported.

For the metropolitan workers, globalisation has as its corollary a tendency to fragmentation of the entire working class. Large factories are split into smaller units forming a small section of a global production process, or simply closed down and production moved to peripheral countries. In the wake of the defeats of the bastions of working class resistance in the 80s the metropolitan capitalists have succeeded in reforming much of the organisation of labour under the banner of “flexibility”. This has resulted in workers working in smaller units. For example, construction workers working for “labour only” subcontractors, or being “self-employed”, or being on flexible contracts such as the infamous “zero hours” contracts[4]. The workforce is thus split into smaller units with apparently differing interests.

The sector of the economy which illustrates the decline of large scale production and large concentrations of workers most brutally is manufacturing. This accounted for 40% of the UK economy in 1955 employing 8 million workers and today accounts for just under 10% and employs only 2.5 million.[5] UK coal mining which employed 470,000 workers at the time of nationalisation in 1947, had contracted to approximately half, 200,000, by the time of the miners’ strike in 1984, and today employs a mere 6000. The same type of reduction of employed workers applies to the steel industry. In 1951 it had 450,000 workers and today the figure is 18,500[6]. Similar figures could be produced for other industries, but these industries are instructive as their decimation followed bitter strikes, strikes which failed to prevent either the plant closures or lost production being replaced by imports. They indicate how the previous methods and particularly the extent of struggle, which had won battles in the 60s and 70s, were no longer effective. Today steel making, vehicle production and whole swathes of manufacturing industry are owned by international capitalist corporations. They are thus able to transfer production elsewhere in the world in response to local profitability, or in response to strikes. Globalisation of production has given the capitalist class the ability to outflank previous methods of struggle.

As the surplus value producing industries, in particular manufacturing, have been cut back industries which generally appropriate surplus value produced elsewhere in the economy, have increased. This in turn has been made possible by globalisation. The service industries, now employ 81%[7] of the workforce in the UK, according to the 2011 census. The sectors included in “service industries” are government employees, health and education workers, transport, tourism and, of course, the famous financial sector, which, employs 17% of the workforce and which, until 2008 was supposed to be the saviour of UK capitalism[8]. Despite the obvious parasitism of the financial sector, not all of these sectors are totally unproductive in value terms and increasing numbers of ‘service sector’ workers are finding their service work is being turned into commodity production. It is no accident that these sectors have borne the brunt of the latest round of attacks on wages and conditions. However, in these sectors strike action is more difficult than in manufacturing, mining or steel-making and is less effective as so many key commodities are imported from abroad.

The second obstacle preventing any effective fight-back in the metropolitan countries is that struggles generally remain controlled by the trade unions. The conditions in which the trade unions operate have also been changed by globalisation, as described above, and the more general change in capitalism’s profitability which has occurred as the system moved from a phase of reconstruction, following World War Two, to one of crisis which started from the early 70s. Whereas the trade unions were able to negotiate some improvements in conditions and pay in the post-war period this was possible because capitalism was in a period of growth, caused by increased profitability brought about by the destruction of capital during the Second World War. As soon as the crisis set in the capitalist class tried to restore profits by reducing workers’ wages and benefits. In the changed circumstances trade unions’ principal activity became about negotiating redundancies, speedups and worse conditions.

This should not surprise us since trade unions do not in any way oppose the wages system which is the basis of capitalism. They locate themselves within the capitalist system and are therefore a part of it. Their principal task is to negotiate the rate capital pays for labour power and to assure its availability. This is a negotiation within the system, and it accepts the conditions and premises of capitalism. Trade unions therefore accept the need for a profitable economy and logic which goes with this. They consequently accept such things as the need for flexibility, speedups, redundancies and the rest. They stand for a healthy national economy and their vision of socialism is an entirely statified economy, that is to say, a system of fully integral state capitalism. Trade unions are consequently agents of capitalism and, as such, they will sabotage any effective fight against the system itself.

For workers in the metropolitan countries, the situation is thus one in which they are under a general attack because of structural changes in the global economy, changes which are bringing about a slow equalisation of global wage rates, and a specific attack resulting from the financial collapse of 2008. We expect these attacks to intensify as the economic crisis deepens. At the same time resistance remains generally organised by trade unions who advise workers to knuckle down and submit to these attacks otherwise their situation will get worse and could reduce their conditions to those of workers in the peripheral countries. This is the background to the current failure to halt the wave of attacks which the capitalist class is launching on workers in the metropolitan countries.

Resistance in the Peripheral Countries

The situation in the peripheral countries is more or less the inverse of that in the metropolitan countries. Here we find huge concentrations of workers in large factories, reminiscent of the situation in Manchester in the Nineteenth century, but many times larger. Perhaps the most dramatic example of this is Foxconn, the Taiwanese electronics company producing such things as smartphones, tablets, computer servers etc. which employs 1 million workers worldwide. Its 3 production facilities in China employ approximately 700,000 workers[9]. The biggest factory in Shenzhen employs 390 000. Similar massive concentrations of workers in production plants are found in India, Bangladesh, Brazil, South Africa and other peripheral countries. The conditions which many of these workers suffer are similar to those described by Engels in his study The Condition of the Working Class in England. In China some 250 million workers earn less than $1 per day and 700 million live on less than $2 a day. Workers often have to work 60 to 70 hours per week.[10] In Bangladesh clothing workers are locked in the factories, have pay deducted for toilet breaks and work in notoriously unsafe conditions for a pittance. In November 2012 a fire in a factory burned 117 workers to death, and this year the collapse of a single factory crushed 1100 workers to death. These few examples give an indication of pay and conditions in the “Brave New World” which capitalism has constructed in the peripheral countries, conditions which revolutionaries can only brand as an outrage.[11]

In most peripheral countries the role of the trade unions is not so entrenched in the capitalist apparatus as in the metropolitan countries. China, of course, is the exception where the unions are visibly integrated into the state. This means that much of the class struggle takes place outside union control. Strikes are wildcats and often do achieve some concessions but a price is paid, frequently in blood.

A majority of the workers in the peripheral countries are first generation workers without a previous tradition of class struggle. When class struggle breaks out it is with elemental violence on a local level often leading to violent clashes with the police. In China, for example, while there are no statistics, it is estimated that there are thousands, if not tens of thousands, of strikes every year. All of them are wildcats.[12] These have recently led to clashes with the police and army leading to deaths of workers. One of the most brutal examples of violent suppression of workers’ struggles in a peripheral country is that of the strike at the Marikana platinum mine in South Africa in 2012. Here the police simply gunned down 34 striking miners.[13]

In the periphery, therefore, it is generally the case that workers are struggling against the savage exploitation and achieving minor concessions in wages and conditions. These struggles remain local and are generally contained by the repressive forces of the state. There is, however, no perspective that this struggle is part of a general struggle against capitalism itself.

Globalised Resistance

While globalisation has provided the capitalist class with the means to undermine local and even national workers’ struggles it has also, as predicted by Marx in the Communist _Manifesto_, created a global working class and a global system of production, which lays the basis for the international unity of the working class. While the capitalists are able to outflank strikes in a single industry or in a single country, strikes which generalised to many industries or became international could not be defeated. It is clear that workers need to unite worldwide exactly in the way the Manifesto states. This has become necessary to achieve even immediate economic demands. The capitalist crisis, however, makes economic gains short lived since the capitalist class will always find ways of taking such gains back or introducing other changes which compensate for these concessions. The real problem is the capitalist system itself which, because of its exploitative nature, is leading the world to catastrophe. The real issue is the replacement of the capitalist system with a communist[14] one, and future struggles need to be given an orientation towards this goal. The question is how can this be done?

The working class owns nothing but its ability to labour. It is a property-less class in capitalism and is thus forced to sell its labour power to survive, and this sale of labour power is the basis of the entire capitalist system. To free itself from this condition it has to break the wage labour-capital relationship and, of course, doing this means exploding the whole capitalist system. It is for this reason that Marx described the working class as a class held in “radical chains” since it cannot break the chains without breaking the entire system apart and reorganizing production and society globally. In these circumstances the working class has only two weapons on which it can rely, its consciousness and its organisation.

Workers’ Consciousness

At present the working class accepts the ideas of the capitalist class since, as Marx noted in The German Ideology

The ideas of the ruling class are in every epoch the ruling ideas*[15]*.

In general workers accept that the present crisis is a temporary interruption in the operation of a system to which there is no alternative. For the present, for most workers, it seems best to hold onto what you have, keep your head below the parapet and wait for the better future, which our rulers are always promising. However, as Marx also notes in the Preface to a Critique of Political Economy:

The mode of production of material life conditions the social, political, and intellectual life process in general. It is not the consciousness of men that determines their being, but, on the contrary, their social being what determines their consciousness. At a certain stage of their development, the material productive forces of society come in conflict with the existing relations of production or – what is but a legal expression for the same thing – with the property relations within which they have been at work hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an epoch of social revolution.[16]

As workers’ lives become ever more difficult and the promised glorious future never comes, it is this which will determine their consciousness. This is, of course, in direct contradiction with the ideas propagated by the capitalist class through their media, their education system and their ideological apparatus. It is in this situation that ideas of wider class struggle and international struggle can take root.

The “social being” of the working class, which Marx talks of, is, of course, enmeshed in the social being of capitalist society at large. The present phase of the crisis has produced a general dissatisfaction with capitalist society which has expressed itself in social movements in which workers have participated as individuals. We have witnessed mass struggles in peripheral and central countries; social uprisings in Tunisia and Egypt; occupations of central squares in major cities in Greece, Spain, US, UK and elsewhere; followed by social movement in Turkey, Brazil and once again in Egypt[17]. While movements are interclass movements without any clear objectives they undoubtedly do express a dissatisfaction with capitalism at a fundamental level and also a dissatisfaction with the formal structures of capitalism such as bourgeois democracy, political parties and trade unions. The crisis has, therefore, brought about an incipient challenge to bourgeois ideas in which workers have participated as individuals.

The CWO argues that capitalist relations of production are a “fetter” on the forces of production in the sense used by Marx in the passage quoted above. Although it is undeniable that the forces of production have grown enormously since the Second World War we argue that this growth depended on the massive devaluation and destruction of constant capital which the war brought about. This destruction of previously produced wealth has become an essential and integral part of capitalism’s survival because of the systemic problems of accumulation which cause a tendency for profit rates to fall. When it is understood that the historical cycle of modern capitalism entails general destruction of wealth through global war it is clear that capitalist social relations are indeed a “fetter” to the forces of production. At present we are at the stage in the present cycle of reproduction where general destruction of constant capital through war is appearing again as the only solution to capitalism’s impasse. However, since the conditions for general war are not yet developed, the present impasse is characterised by ever increasing attacks on the working class.

This is the material background to the working class’ situation. However, the “social being” of workers within capitalism does not directly raise questions such as these. What workers experience are increasingly difficult conditions until it becomes impossible to continue living in the old way. The issue will them be confronting immediate problems, but problems, which when they try to solve them, will necessarily lead to the confrontation of the more fundamental historical questions. Both the Paris Commune of 1871 and the Russian Revolutions of 1905 and 1917 moved from initially trying to confront essentially bourgeois nationalist issues to world historical tasks, and there is no reason why this should not recur.

Organisation

The material conditions exist for the working class to become conscious that its immediate struggles need to be generalised and made international if they are to succeed. There is however no automatic trigger that will make that happen. At the moment the most widespread hope amongst many workers is that capitalism can be made “fairer” despite all the evidence that the wealth gap around the world continues to increase notwithstanding the crisis. This is a necessary stage we have to go through. In the course of their continuing exploitation the wider working class will be faced with the impasse that capitalism has created. It will be faced with the recognition that the system is no longer compatible with the future of humanity (and we have not even raised here the environmental destruction it is creating[18]). Its struggles will become wider and more collective. Street movements may bring impressive anti-capitalist masses out but it will be the mass strikes of the future which will really threaten the system. Only by paralysing the old system of production can we pave the way for a new one. It is worth noting in this respect that, where the struggles have had any success in the “Arab Spring”, strikes by the local working class have provided the force required to achieve the capitulation of the authorities, notably in Tunisia and Egypt. This indicates that the only real power able to confront the capitalist authorities is the working class.

At present workers’ struggles everywhere are largely in the hands of the trade unions which, as has been argued above, form part of the capitalist system of control of labour. For future struggles to have any chance of success it is therefore necessary to take their organisation out of the hands of the unions.

Struggles need to be organised democratically through workers’ assemblies which delegate members to strike committees who would give themselves the task of extending strikes or struggles to other industries and, where possible, internationally. These delegates are answerable only to the assemblies and are recallable.

But this alone will not be enough to defeat the system. In this process a historical consciousness will have to arise which will take many forms but will find its political voice in an international party. This will be a necessary instrument for the working class to be able to build a new world. We are not talking here about a party of government but a party of the working class, in the working class, whose task is to fight for the spread of international communism.

Such an organisation needs to be embedded in the struggles of the working class as this is the only way it can influence them. Without a clear political aim even the most determined workers’ struggles will ultimately end in confusion and failure. To fight for the construction of such an organisation is the key task of the present period for revolutionaries who understand the historical lessons of the class struggle and the stakes of the present situation. How to engage in workers’ struggles and propagate the revolutionary way forward is the key challenge to everyone who sees that only the working class can forge an historic alternative to capitalism.

CP

Footnotes

[1] See solidarity4all.gr

[2]“Labour Market imbalances” Richard Freeman, Harvard University paper. Richard Freeman

[3] See Richard Freeman theglobalist.com

[4] These contracts allow employers to retain workers but only pay them for hours they work. Often they are informed when they are required to work by text to a mobile phone. In the UK in 2012 there were 200,000 workers on these contracts with 100,000 of them in the National Health Service. This system has been extended to professionals such as doctors, engineers, lecturers, journalists and others and the numbers increased by 25% in the last year. It represents a way of cheapening the costs of labour and making employment more precarious. Figures from Financial Times 8/4/13.

[5] See Guardian guardian.co.uk

[6] See Financial Times 14/05/13

[7] See ons.gov.uk

[8] The City of London produces 9% of GDP but generates 27% of government taxes.

[9] See Financial Times 4/01/13. For an article on Foxconn see leftcom.org

[10] Reported in Financial _Times_ 9/12/05

[11] See leftcom.org

[12] See jacobinmag.com

[13] See leftcom.org

[14] When we speak of Communism we mean production for human needs, where the means of production are socialised and society will be organised so that each person will contribute according to their ability and each will receive according to their needs. This has nothing whatsoever to do with the state capitalist societies which existed in Russia, China etc.

[15] Karl Marx The German Ideology

[16] Karl Marx Preface to _A Critique of Political Economy_

[17] See articles which follow this one.

[18] See our pamphlet Capitalism and the Environment by Mauro Stefanini or leftcom.org