Indian Scene

On Approaching the Present Imperialist Crisis
P.J. James

The quarter century of irreversible imperialist crisis starting with the stock market crash of 1987, the Mexican Crisis of 1994, the Asian financial crisis of 1997, the collapse of Long Term Capital Management in 1998, described by then US Treasury secretary Robert Rubin as “the worst financial crisis in 50 years”, leading to the  sub-prime crisis that developed in 2007, followed by the collapse of investment bank Bear Stearns and  Lehman Brothers respectively in  March and September 2008, finally culminating in the collapse of the big five Wall Street investment banks by the end of 2008  that wiped out trillions of dollars of “fictitious capital” has assumed a new dimension with the unprecedented economic and social catastrophe now haunting the entire European countries. Though the tendency is to compare the current European situation to the American sub-prime crisis and Lehman Brothers collapse, it will be an understatement of the severity of the former. While the sub-prime property market along with its toxic “derivatives” represented a $2 trillion debt, the combined public and private debt of the most troubled European countries – Greece, Portugal, Spain and so on – alone is estimated to be $9 trillion. Thus, the process of collapse of imperialist world economy that began with the advent of neoliberalism is gathering momentum and is integrally linked up with the process of “financialisation” that began with the demise of international Keynesianism. The imperialist financial system has started melting down.
Figures themselves speak on this. In 1980, if the financial firms accounted for about 5 percent of total corporate profits, by 2006 this had risen to around 40 percent. On a global scale, financial assets in 1980 were roughly equal in value to world gross domestic product. Within a span of thirty years they have grown to five times that of global GDP. This financialisation which has been the  essence of imperialist globalization was a response of imperialism to the crisis in the neocolonial accumulation process that  evolved in the post WW II period and continued till the 1970s. This crisis is to be located in the whole course of transformation of imperialist world economy led by US imperialism during the neocolonial period.
The  so called “Fordist” organization  of  production and business  by which  MNCs accumulated immense wealth became unviable since the 70s following the advent of “stagflation’ and collapse of Keynesianism. Confronted with a downturn in the rate of profit, US led imperialism undertook a major restructuring program since the early 1980s.  In the context of the ideological and political setbacks suffered by the working class at the international level, an important component of this has been  a “deindustrialization” process or  the destruction of  several areas of manufacturing industry and a neoliberal attack on the working class leading to unprecedented unemployment and underemployment which came to be characterized as “jobless growth”. A new international division of labour called “post-Fordism” or “flexible specialization” that made use of the new developments in transportation, communication, information and processing technologies enabled imperialist capital to reap super-profits by involving cheapest sources of labour in neocolonial countries through “outsourcing” that reduced wage rate abysmally in imperialist countries, especially in US, on the one hand, and developing new avenues of speculative finance capital on the other. From 1980s onward, new financial methods and instruments were developed for appropriating wealth. In brief, under neoliberalism, there took place a change in the mode of accumulation. The driving force of accumulation of profit during this period has been financial speculation.
The essence of the present crisis is that it has brought about cracks in the mode of accumulation practiced by finance capital. No doubt, the real causes confronting capitalist crisis lies in the incurable ailments of capitalist production relations that Marxism had already pinpointed. More precisely it relates to the ever-mounting contradiction arising from the social character of capitalist production and private nature of its appropriation. As a greater proportion of surplus value is extracted from the workers and toiling masses through a whole set of complex financial processes such as “futures” and “derivative” trading,  the purchasing power of the broad masses depreciates continuously leading to the accentuation of the ‘realization crisis’ in capitalism that Marx had pointed out. Every effort on the part of capital to overcome this crisis, on account of capitalism’s inherent logic, will take its internal contradictions to an ever higher level, by constantly producing and reproducing them on an ever wider basis. The operation of financial markets itself will make this point amply clear. The financial assets including new financial derivatives, real estate and other forms of property titles accumulated by wealthy classes are all, in one form or another, claims to income. That is, in the final analysis, they are claims to the surplus value which is extracted from the working class. The value of such assets can rise faster than GDP provided that the proportion of national income going to profits is increasing, that is, if there is a greater pool of surplus value to draw from. But the process in which finance capital’s claims on income rise faster than GDP, the speculative process cannot continue indefinitely. Though the appropriation of surplus value by finance capital takes place in financial markets, this appropriation is ultimately related to the extraction of surplus value through production and employment which are relatively lagging behind. Consequently, much of the financial assets have become ‘non-performing’ or what is called “toxic” assets. And that is the essence of the crisis today.
In other words, imperialist globalization led by finance capital has intensified all the contradictions of the imperialist world economy. The developments ranging from the American “sub-prime crisis” to the present European “debt crisis” simply show that the crisis is only just beginning to unfold. The so called bailout and stimulus packages launched by both imperialist and neocolonial governments  around the world have nothing to do with maintaining the jobs and living standards of the working class or toiling masses. Rather, they are aimed at transferring as much as possible of the massive debts amassed through “toxic assets” by the financial corpo-rations and banks to the taxpayers and common people via the state. This “rescue operation” though has temporarily boosted stock and speculative markets for some time, ultimately resulted in an aggravation in inequality and loss of purchasing power for the masses  leading to an intensification of finance capital’s “realization crisis” further. For instance, the total state support to the speculative class in the form of bail out packages already pledged by US government is estimated to be more than $12 trillion , almost equivalent to America’s present GDP. And since the wholesale eruption of the financial crisis in September 2008, governments worldwide have committed $18 trillion in public funds to those who are holding toxic financial assets, equivalent to almost 30 percent of world GDP. To that extent govern-ments’ fiscal position has worsened and broad masses of people are pauperized through neoliberal aust-erity measures imposed at a global level. Government debt in leading imperialist countries such as US and Britain has almost become 100 percent of GDP while Japan’s government debt is headed for 200 percent by 2011. According to IMF  by 2014 public debt to GDP ratios in the G-20 economies, comprising some 85 percent of the global economy, will have increased by 36 percentage points of GDP compared to the levels at the end of 2007. This massive debt has led to a biggest-ever slash in state spending on  social and welfare services and an unprecedented assault on  the living standards of working class. Mass consumption at a global level is expected to reduce by at least 20 percent from its level in 2006-07. On the other hand, the unfolding imperialist crisis unequivocally reveals the most conspicuous consumption and appropriation of social wealth by an unproductive and parasitical financial oligarchy. As a result, in spite of the global capitalist crisis, there has been a more than 50 percent rise in the wealth of world’s billionaires. According to Forbes Magazine, during 2009, the number of global billionaires rose from 793 to 1011 while their total assets increased from $ 2.4 trillion to $ 3.6 trillion. The very same financial oligarchs who created the present crisis are also reaping the biggest gains out of it.
If the 2008 US crisis was a manifestation of the risk from “corporate debt liabilities”, today the European crisis has been the outcome of “bankruptcy crisis” of sovereign governments themselves. It is the policy of coming out of the crisis through an appeasement of  corporate monopolies that strained the fiscal position of European countries.  The dramatic developments  in Greece whose public debt has exceeded the limit set by the Maastricht  Treaty,  followed by  the threat of a renewed global financial melt down have provided another opportunity  to European imperialists  to launch a heinous assault on  European workers in the form of unprecedented austerity measures. Though the declared objective of the recent $ 1 trillion bailout package reached by European Union and IMF is to stave off the bankruptcy of Greece and other European member states such as Spain and Portugal, its ingenious motive is to make a massive transfer of wealth from the toiling masses to imperialist banks and companies. For, following the package, various European governments have resorted to a series of austerity measures that include huge cuts in wages and social and democratic rights. Following the “aid package”, the IMF and EU enforced draconian attacks on common people which have brought hundreds of thousands of Greek workers into the streets in strikes and mass protests. Similar austerity measures are in the offing against Spain and Portugal making them easy targets of financial speculators seeking super profits. At a time when the official unemployment rate in these countries already stands at over 20 percent, the austerity program will mean a further cut in employment, decline in earnings of workers and a further turn by these countries towards recession and stagnation. Now such unprecedented attacks on the people are fast spreading to the entire Euro zone countries.  All these underscore the class character of the economic policies being pursued where the entire burden of the financial crisis is placed on the backs of the working class on  the one hand, and massive amounts of social wealth are transferred to the financial parasites who are responsible for it, on the other.
Another aspect to the ongoing crisis is also there. On account of growing deficits and public debt in Europe as a whole, the value of Euro is depreciating fast and along with rising unemployment inflation has also set in. This has resulted in a further decline in the real wages of the working class throughout Europe. As the crisis is spreading to more and more countries including Germany which has a powerful industrial structure, economists have even started predicting a  possible collapse of even the common currency Euro itself. The disintegration of Euro does not mean simply the end of a currency. It will plunge Europe into an era of competitive devaluations and an acute fight among European imperialists for a re-division of the Euro zone market, trade protection, and for prying open markets in neocolonial countries. At the political level it may lead to the bouncing back of various racist and national chauvinist ideologies along with the resurgence of old enmities and prejudices that were kept in abeyance. The resulting social and political unrest may lead to a breakdown of existing economic and political arrangements in Europe with far reaching repercussions in inter-imperialist contradictions and international relations.
The emerging situation is to be located in the broader context of the transformation of international political and economic relations during the neocolonial global order led by US imperialism.  Under the American sponsored European Recovery Program or the so called Marshall Plan, the European imperialists agreed to have a reconstruction of the war-torn countries of Europe. Among other things, one of the objectives was to build up necessary institutions for achieving political and economic stability in Europe as per Keynesian state programming and welfare prescriptions. Within a span of a decade productivity and economic growth rate in Europe started overtaking that of USA such that European MNCs along with that of Japan could effectively challenge American MNCs in neocolonial markets. US attempts to bring Europe under its neocolonial umbrella through a series of political and military arrangements were also not smooth. It is a fact that one of the major reasons for the breakdown of the Breton Woods monetary system in the early seventies had been the non-cooperation on the part of leading European powers such as Germany and France in sustaining a dollar based neocolonial monetary order. Meanwhile, ignoring their century-old enmity that led to two World Wars, the ruling classes in  both Germany and France took initiative to evolve a complex network of political and economic relationships which culminated in the establishment of European Union and finally the common currency in 1999.
However, by this time the laws of motion of finance capital has transformed to such a stage that the objective conditions that enabled the formation of EU are no longer available. International Keynesianism was replaced by neoliberalism. The unparalleled growth and internationalization of financial speculation has added a new dimension to the general crisis of capitalism under neoliberalism. Anarchy and instability have become the hall-mark of every aspect of imperialist world economy. Alarming growth of parasitic and speculative finance capital relative to production, coupled with the ‘uneven development’ of capitalism as analysed by Lenin has aggravated all the inherent contradictions under imperialism. While the subjugation of neocolonial countries by finance capital intensifies the contradiction between imperialist countries and oppressed nations and peoples on the one hand, the unevenness of capital expansion has sharpened inter-imperialist contradictions.
To have an objective historical understanding of the present developments, a brief analysis of the transformation of finance capital in America, the supreme arbiter of the  post WWII neocolonial world order is indispensable.  Of course, the people of the US and the world are confronting a financial catastrophe and economic devastation on a scale not seen since the Great Depression of the 1930s and the ‘stagflation’ of the 1970s.  As already elucidated, with the inauguration of Reaganite neo-liberal policies by the neo-conservative ruling class since the eighties, American capitalism sought to tide over its inherent crisis by carrying out a deliberate policy of deindustrialization and joblessness, which wiped out millions of jobs from the real, productive economy. Vast industrial resources were destroyed, and the savings of workers were plundered in order to free up capital for the most parasitic forms of financial speculation. Increasingly, wealth was separated from the creation of real value. American imperialism has become the global leader in the creation of personal wealth for the ruling elite entirely separated from the creation of real value in the process of production. The current economic breakdown, which threatens the world’s people with catastrophe, is the inevitable result of this unhindered speculation. During the post-war boom, that is, under Keynesianism, finance capital in the United States accumulated profit through the provision of loans to industry and other forms of commercial banking, as well as providing home loans. That is, there was a fairly direct relationship between the extraction of surplus value and the appropriation of a portion of that surplus value by finance capital. However, with the inauguration of neo-liberal policies, a clear dichotomy between production and speculation took place and the leading American monopolies started solely specializing in the latter. For example, as mentioned earlier, in USA newer methods of value extraction are being developed by the financial aristocracy through the development of new loan   arrange-ments and credit instruments. Thus apart from the markets for commodity futures, bonds, shares and real estates, the housing loan sector has become the most profitable venue of operation by leading US financial speculators.  The profits of finance capital do not so much involve a direct appropriation of surplus value from the sphere of production as they are accumulated through changes in asset values—that is, by operations in financial markets. It became very profitable to make money out of money. The injection of large amounts of credit into the financial system has played a key role in sustaining and building up finance capital within the economy such that the bubble economy of finance surpassed the real economy of production, with major implications for the stability of the system as a whole.
Moreover, over the past decades, in consonance with the logic of finance capital, America, the leading imperialist power was transforming itself from a productive economy to a consump-tion based one and she has become a net importer of cheap goods from the other countries such as China.  As already noted, using new avenues of internationalization of production such as new technologies, post-Fordist business organization and flexible specialization, American MNCs took the lead in the transplantation of several production lines to cheap labour economies, resulting in unemployment and underemployment in USA at high levels resulting in a fast deterioration of the real earnings of American working class. Burgeoning imports into USA naturally led to a paradoxical situation of worsening of the balance of payments of America, which had been world’s banker until the seventies. Alternatively, it was the low-cost pro-duction in China and neocolonial countries like India and their integra-tion with world economy that created the conditions for consumer boom and financial expansion in US until this crisis. In the process leading American MNCs such as Walmart that immensely  benefited from cheap labour abroad  increased  their super profit through cheap selling of consumer goods and galloping of consumer debt, especially in the form of housing loans that   maintained con-sumption spending at a high level in the face of declining real incomes for the vast majority of people under neoliberalism. In course of time, in spite of its intensified neocolonial plunder, the world’s creditor became the biggest debtor along with protracted depreciation in the value of dollar.
In an earlier era, the intensifying crisis of American capitalism would have been encouraging to European imperialists. Today the integration of  world commodity and financial markets through imperialist globa-lization has yielded a quite different situation. All the European govern-ments are faithfully implemen-ting neoliberal policies in the interest of big capitalists. The sub-prime crisis that exploded in 2008 on account of the inherent contradictions of American imperialism had at that time itself its repercussions in Europe in the form of serious stock market crises. Like the American counterpart, EU govern-ments also resorted to a policy of transferring the burden of corporate debt on to public exchequer and from there to the shoulders of broad masses of people through a whole set of austerity measures. The governments have pumped trillions into the coffers of  financial speculators and banks to prevent their collapse, thereby galloping public debt and straining their fiscal position. That is, rather than taxing the rich, the ruling classes have come forward  to place the entire burden on the backs of working people in the interests of the major banks and corporations and in the process setting out to destroy what remains of the welfare measures and democratic rights previously won by workers. In the context of the huge stimulus package offered to speculators, all the governments in Europe are experiencing huge budget deficits. Moreover, in view  of the understanding to meet a 2013 deadline for compliance with EU stability criteria, which permit a maximum deficit of 3 percent of GDP, the eurozone countries and Britain will have to slash their budget deficits by a total of €400 billion. This huge sum will have to  be mobilized  through massive cuts in employment, wages and welfare spending. Thus the entire social security system built up as part of the welfare state in Europe after the second world war is coming to a halt with horrible social and political repercussions in the days ahead. And this European crisis which is part and parcel of the current crisis of world imperialism has imparted a new dimension to the latter.
The inevitable outcome of this turmoil is world wide protests against ruling classes everywhere. The objective conditions created by crisis-ridden imperialism are favourable for an increase in the class consciousness of workers and toiling people. While the ruling classes in imperialist and neocolonial countries will resort to every kind of diversionary tactics to dismember the fighting unity of workers, peasants, women, youth, students and other oppressed sections on the one hand, and  repressive and fascistic measures on the other, what is lacking is an international revolutionary leadership capable resisting decaying imperialism. Though workers in Europe, America, and Afro-Asian Latin American countries are coming out to the streets, their social democratic and even conservative leaderships are incapable to lead them both ideologically and politically. Telling the people that  “there is no alternative”, the social democratic leaderships is manipulating the unions to cope with austerity cuts.  They are also preventing the development of an international solidarity among workers.  While the decaying imperialist system can not be reformed and can only be overthrown, the maximum that the social democratic leadership can do is towards reformism that seeks solutions within the system. More often, in pushing through neoliberal policies, ruling classes everywhere are ensuring the support of social democrats. Along with the struggle for the defence of the hard earned social and democratic rights which is the immediate task, what is required is  the development of revolutionary working class leaderships in each country with their appropriate coordination at the international level capable of fully assimilating the unprecedented revolutionary implications of the present crisis confronting imperialism and overthrowing it. The present imperialist crisis is a clear manifestation of the extreme rottenness affecting ageing imperialist system and its social anachronism as a whole.  Marxist-Leninists and progressive forces the world over should come forward to launch an all-out offensive against world imperialist system taking this as an opportune moment.