DEMOCRATIC SOCIALIST PERSPECTIVE

The new crisis — more precisely, the third stage of the general crisis — erupted because of the exhaustion of the exceptional factors that had produced the long boom:

• The accumulation of profits during the boom had increased the organic composition of capital.
• Capitalist world markets had been saturated.
• The working class in the imperialist countries had been able in the boom period to increase its standard of living and restrain the growth of the rate of exploitation.

Today, the capitalist business cycle continues to alternate between recession and relative prosperity, but the downturns are longer and deeper, the upturns shorter and more feeble. Between corresponding phases of succeeding cycles there is a substantial, and often irreversible, increase in the level of unemployment and poverty. The general trend is one of long-term decline, with real growth rates in the world capitalist economy falling from an average 4.9% per year in the 1960s to 3.8% in the 1970s, to 2.7% in the 1980s, and to just over 1% in the 1990s.

The new depression has continued and deepened because the contradictions underlying it have not been resolved.

On an international scale, the accumulation of capitalist profits greatly exceeds the opportunities for profitable productive investment. These vast sums are therefore employed in unproductive fields such as currency, real-estate and stockmarket speculation, leading to wild fluctuations and permanent instability in exchange rates, and real-estate and share prices.

Throughout the 1970s and '80s, the stagnation of productive investment encouraged the banks to lend billions of dollars to borrowers whose ability to repay was more and more questionable. Already overburdened countries of the Third World multiplied their debts. In imperialist countries awash with surplus capital, the average corporate debt increased steadily. The easy availability of credit allowed actually insolvent firms to avoid confronting reality by taking out new loans. Consumer credit also was steadily inflated in a deliberate policy aimed both at providing employment for excess capital and at expanding stagnant markets.

Rather than solving the problems facing the system, this accumulation of debt has multiplied them:

Firstly, the ability of less efficient companies to survive one cyclical recession weakens the following recovery by reducing demand for capital goods. It also increases the scale of overproduction in the subsequent recession. Consequently, larger and larger doses of credit inflation are required to achieve the same anticyclical effect. To bring the United States out of the 1980-82 international recession, for example, the Reagan administration had to convert that country from the world's largest creditor to the world's biggest debtor. By the time of the 1990-92 international recession the massive growth in public debt and permanent budget deficits had severely restricted the means available to imperialist governments to stimulate an economic upswing. In an attempt to overcome their financial crisis, imperialist governments have sought to find money through the privatisation of public assets. This short-term ``solution'' however only reduces their room for manoeuvre in the long term.

Secondly, expansion of world trade is seriously restricted by the instability of exchange rates created by differing degrees of credit inflation in the major imperialist countries. At a time when capitalist production is more internationalised than ever before, the system demands, but cannot create, a stable international currency.

Thirdly, debt itself has become a growing element of the crisis. As it becomes obvious that increasing numbers of debtors (and not only in the underdeveloped countries) are incapable of repaying loans, the banks with the greatest exposure are themselves threatened. The failure of a major bank could easily set off a chain reaction and destroy the whole international capitalist financial system.

The longer the economic depression lasts, the more it increases inter-imperialist competition and promotes the formation of international trading blocs. Increasing protectionism results from the battle to increase each country's or trading bloc's share of stagnant markets, and this further restricts markets.

Unable to increase their markets, the Third World countries sink ever deeper into debt and come under increased pressure to reduce already miserable living standards in order to protect imperialist banks. At the same time as imperialist domination becomes more unbearable, imperialism's internal contradictions restrict its ability to use military force against anti-imperialist movements. The intensification of austerity and the sharpening of social contradictions prevent the creation of the domestic social peace necessary for a prolonged colonial war. US imperialism in particular still suffers from the political constraints imposed by mass opposition to the direct use of US troops in a prolonged war in the Third World resulting from its defeat by the Vietnamese Revolution (the so-called Vietnam Syndrome). To this is added the contradiction that the militarily strongest imperialist power has lost its economic hegemony within the imperialist camp.

There is no quick and easy capitalist solution to the present long-term economic depression (which is already 20 years old), and for the working class and its allies, any capitalist solution would be catastrophic:

• In an age of nuclear weapons, any attempt to redivide the world market between the various imperialist powers through the traditional mechanism of war could devastate the entire planet. A world war is therefore not an immediate answer even for the most deranged imperialist strategists.
• A qualitative increase of technological innovation in the production of the goods and services that constitute the value of labour-power could massively increase the rate of surplus value while expanding markets (by enabling these goods to be produced and sold more cheaply). However, it would involve an equally massive devaluation of existing capital and an equally massive increase of unemployment, leading to a rapid acceleration of social and political instability throughout the capitalist world.
• A sudden, substantial increase in the rate of surplus value through brutal reductions in the direct and indirect income of working people would require a massive attack on the democratic rights of the working class in the imperialist countries. However, such a policy would, in the context of the existing balance of social forces in the imperialist countries, run the risk of provoking a deep-going social and political crisis that could seriously challenge the survival of capitalist rule.

Failing these ``solutions,'' the only option left to the imperialist rulers is a continuation of the policy they have been pursuing for the last two decades (with some success due to the near-total capitulation of the labour bureaucracy) — slow but remorseless reductions in the direct and indirect income of working people. However, this policy is insufficient by itself to raise the rate of profit. While it boosts the total amount of surplus value being produced, at the same time it decreases the purchasing power of the working people and thus restricts the possibilities for realisation of surplus value through the sale of goods. The extra surplus value gained through austerity measures is therefore not channeled back into the production of surplus value, but rather into an enormous expansion of speculative activities (and their inevitable accompaniment — corporate and political corruption). The result is an increase in the instability of, and a decline of public confidence in, the whole capitalist system.

The inability of the imperialist rulers to find a way out of the crisis and the increasing divisions among them lead to a growing crisis of capitalist political leadership — to a loss of confidence within the ruling class in its ability to rule and to a loss of credibility in capitalist political leadership within the general population.

The prolonged depression of the international capitalist economy precludes social and economic concessions to working people on a scale sufficient to close their minds to radical ideas. To the contrary, imperialist capitalism's real economic prospects — continuing decline, sudden shocks and unexpected breakdowns, growing chaos — make it increasingly difficult for the imperialist rulers even to maintain concessions granted in the past. In these circumstances the implementation of a program that could block the radicalisation of working people — a program of extensive and effective long-term capitalist reform — is excluded. The road ahead is one of increasing class polarisation, sharpening dissatisfaction among the working class and its potential allies, and their growing recognition of the need for radical social change.