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Worldwide Economic Crisis: Two Opposite Models as Answers

by Winfried Wolf Friday, Aug. 06, 2010 at 12:58 AM
mbatko@yahoo.com

In a large part of the population, there is a consensus that capitalism has no answers to the great social challenges of social security, hunger and climate change. An alternative investment program (emphasizing children, culture and climate change) gives a long-term answer.

WORLDWIDE ECONOMIC CRISIS

TWO OPPOSITE MODELS AS ANSWERS

By Winfried Wolf

[This article published in: Marxistische Blatter 2/2010 is translated from the German on the Internet, http://www.schattenblick.de/infopool/medien/altern/marx-440.html.]



The present crisis is by no means ended. One reason for the continuance of the crisis is that there are different interlocked crisis planes intensifying each other. [1]

The ruling circles expect to emerge from the crisis and renew themselves. The dominant capitalist classes try to find immanent ways out of the structural crisis. This extended crisis with diverse ridges of high pressure can be described as follows: “The depression will have a chronic character in those countries hit hardest by the general crisis of capitalism. […] In other countries, the depression will pass into a recovery and a good economy. A general recovery covering all countries and all production branches will in no way occur after the passing of the acute crisis phase. The next new crisis phase will be deeper and more grievous than the present phase.” This assessment of the worldwide crisis was written in May 1931by Eugen Varga, the most prominent economist of the Comintern at that time.

From my perspective, there are currently two antagonistic and conflicting options – a middle class and a socialist alternative. The capitalist option is presently pursued: Keynes a gogo, competition and war and armaments.

KEYNES A GOGO OR RUTHLESS PROMOTION OF GROWTH

One (vulgar) form of Keynesian policy is oriented only for growth. As a rule, existing (dinosaur) structures of the capitalist economy will be strengthened: bonus premiums, subsidies of auto- and airplane manufacturers, road building programs, extending running times for nuclear power plants, building new power plants with fossil fuels and so forth.

However one factor that contributed to the worldwide crisis, the climate- and environmental crisis, is strengthened. At the same time this kind of Keynesianism leads to a discrediting of Keynesianism because no real perspectives are offered and many hundreds of billions of US dollars or euro are cast to the wind. If a new intensification of the crisis occurs, there will be a concrete possibility for an alternative Keynesianism. However the social power relations may oppose such an option. The austerity dictatorship could move into the center.

COMPETITION OR NEW HEGEMON

A second way out of the crisis immanent from the capitalist perspective is an intensified inner-imperialist competition and replacement of the US hegemonial power. In the current crisis, the economic, monetary, political and cultural decline of the US will accelerate… The crucial problem in this possible immanent solution of the crisis is that there are no convincing candidates for the position of the new hegemon.

China will hardly become the new hegemon in the next ten years. The material distance to the US and the EU is too great. Thanks to the greatest worldwide economic program, China could largely uncouple itself from the crisis events. Still the fact remains that the main sales territory of Chinese exports, the US, is at the center of the crisis. Therefore the government in Peking could be intensely affected in the next months by the considerable economic and political contradictions.

The European Union is also not a serious candidate for the position of new hegemon. The EU represents a common economic area. A large part of the EU – the euro-zone – is a common currency area… At the same time there are 27 different national policies regarding the economy and tax legislation.

The crisis has revealed the extreme weakness of the EU and the instability of the euro. Several EU-member countries in Central and Eastern Europe are in a deep crisis. This is particularly true for the Baltic states where the gross domestic product fell more than 20 percent in the two years 2009 and 2010. This has been true for Greece since the beginning of 2010. Greece sees itself confronted with the danger of state bankruptcy. At the end of March 2010, stabilization of the Greek crisis by a compromise on the EU plane mirrored the deep EU crisis. There are obviously enormous internal conflicts in the EU with the German government’s adherence to the model of export promotion and its balance of trade surplus – at the expense of the rest of the EU countries. The involvement of the IMF as part of the “crisis solution” in Greece is a manifestation of a massive weakness of the EU. There are many indications that Greece is only a trial run for new speculative processes. Comparable conditions may follow in the Euro-countries Portugal, Spain, Ireland and Italy. A concerted speculative action against the British pound is also possible.

The intensified competition in the course of the crisis develops into a crisis of the euro-zone and the EU. The unity currency of the euro experiences an existential crisis a decade after its introduction.

WARS OR THE COMBINATION OF MILITARY KEYNESIANISM AND ARMAMENTS AS A SUCCESSFUL MODEL

The third immanent way out of the crisis is closely connected with the second, the intensification of inner-imperialist competition. The two crucial weaknesses of the EU as a challenger to the US are its non-existing political unity and its trifling military significance. In the case of China, there is the relatively great economic disparity regarding per-capita income, a hardly developed domestic market and its military weakness.

Both potential challengers to the US are trying to catch up to the US – in China through increased military spending and development of new weapon systems (U-boats and aircraft carriers) and in the EU through qualitative advances in military technology, building a standardized EU army and gathering experiences from foreign deployments of European armies. The US government has already reacted to the increased Chinese military spending… The Pentagon claims Chinese military expenditures will be “between 5 and 0 billion.” In 2010/2011, US military spending will exceed the 0 billion mark.

Military spending and military exports are clearly increasing. They grow in an anti-cyclical way in the crisis. Military expenditures are not touched by great national crises. The current austerity measures in Greece (wage cuts, reduction of employees in the public sector and raising the pension age) are combined with military spending which is twice as high as a percentage as German spending and with purchase of new weaponry like U-boats, Leopard tanks and Euro-fighters. [5] … More profit comes through Middle East wars, according to the headline of the Neue Zuricher Zeitung. [6]

The US has had experience with civilian and military Keynesianism – from the past worldwide economic crisis. Paul Krugman summarized this experience as follows: “Whoever wants to free the economy from the debt trap should consider the massive public jobs programs that ended the Great Depression better known under the term Second World War. This war brought full employment and also led to fast rising income. […] Up to 1945 the public debts of the US rose but the relation of private debts to gross domestic product in 1945 was only half of the pre-war level of 1940. This low debt level was the foundation for the great postwar boom. [7]

WE WILL NOT PAY FOR YOUR CRISIS

When the crisis deepened at the end of 2008, the motto was largely accepted: “We will not pay for your crisis.” Global justice groups and unions called to massive protests. The movement in France was the largest as was already true in actions against plant closures. On January 29, 2009, there were around 200 demonstrations in which more than two million people participated as a result of the call of eight unions. As a consequence, there were ever-larger activities throughout Europe.

However the mood “It doesn’t seem so bad” has gained acceptance since the middle of 2009. The unemployment statistics “only” increasing slowly, the cushioning of the threatening social misery through massive expansion of short-term work and the news “we have passed through the bottom of the crisis” contributed to this attitude. The great – unfulfilled – expectations set in Barack Obama as the new US president at the same critical moment – at the end of 2008 and early 2009 – were demobilizing in the US and worldwide. The arguments for a comprehensive “Green New Deal” were fascinating.

In the meantime a more realistic view of economic events and of responses of middle class governments is vital. The hangover brought by the further rise of mass unemployment in the course of 2010 and the expected intensified attack of businesses and government on jobs, working conditions and social security contributed to the disillusionment.

Even if the mass base for adopting an alternative anti-capitalist program does not presently exist, developing such a program is important. With a large part of the population, there is a basic consensus that capitalism has no answers to the great social challenges of social security, hunger and climate change.

A program joined to the actual manifestations of the crisis and to human consciousness and at the same time oriented to another social and economic order is necessary. This could have the following three components along with an alternative investment program.

FIRST PLANK: THE BANKING SECTOR MUST BE PUT UNDER SOCIAL CONTROL, DECENTRALIZED AND RETURNED TO ITS REAL DIMENSIONS

From the fall of 2007 to the middle of 2009, most independent economic experts agreed that the banking sector was oversized and posed a constant danger for economic stability in its current private capitalist form. In the meantime, ten large industrial states have provided around 5 trillion euro or 20 percent of their gross domestic product to bailout the banks. Approximately half of this inconceivably mammoth amount has been spent. The result of all these programs is that the banking sector was strengthened again and that speculation – on account of the poor mass purchasing power demand – is nearly at the same level as before the outbreak of the crisis.

According to purely capitalist criteria – “Whoever pays sets the music” – the worldwide financial sector must be under public control. From a formal legal perspective, a considerable part of US, British and German financial capital is already in public ownership. The governments in Washington, London and Berlin sell shares of state banking capital to private actors and do not want to intervene in operative businesses.

The new revival of the speculative crisis – see the crisis around Greek debts – underscores the correctness of the demand: the whole financial system must be put under public control.

SECOND PLANK: REDISTRIBUTION FROM TOP TO BOTTOM

The starting point for the crisis was the extremely unequal distribution process – the rich became richer and a large part of the population were impoverished. In this way more than three trillion euro were redistributed from bottom to top on the international plane sinCe the beginning of the last cycle around ten years ago. In Germany, this was more than a half trillion… There is no problem of a new indebtedness. A considerable margin exists for financing a general reduction of working hours and an alternative Keynesian policy. Therefore a palette of demands must be put together to strengthen public finances by taxing high income, mammoth assets and the profits of banks and large corporations.

THIRD PLANK: A EUROPE-WIDE CAMPAIGN FOR REDUCING WEEKLY WORKING HOURS TO 30 HOURS WITH FULL WAGE COMPENSATION IS NECESSARY

The demand for a general reduction of working hours is an answer to the enormous increase of productivity reached in the scope of globalization. To give one example, the worldwide production of cars increased two- and a half times since the beginning of the 1970s up to 2007 while the number of workers in the worldwide auto industry remained essentially the same. The 200-year experience teaches: the sharing of producers in the fruits of increased productivity was only gained by fight ing. In the Manchester capitalism of the first third of the 19th century, the 12-hour day and the 6- or even 7-day work week prevailed. 80 to 90 weekly working hours were the rule. At that time the 10-hour day was gained by struggle in England. Weekly working hours fell to around 60 hours. After the First World War, the length of the workday could be reduced to 8 hours and weekly working hou9rs to 48 hours in several countries of Europe and after the worldwide economic crisis in the US. Fascism and the Second World War delivered a setback and a new expansion of working hours. In the 1955-1970 period, the five-day week was gained by fighting in many capitalist countries; weekly working hours fell to under 45 hours. Finally, unions and the working class movement in several countries achieved a reduction in weekly working hours to 35 hours in the 1980s and 1990s. Core Europe – Germany and France – were the social avantgarde. This success was destroyed in large part by the neoliberal counter-offensive. In Germany, the average working hours of those still employed rose to around 40 hours.

In the past 150 years, the bourgeois counter-reactions to reduced working hours and demands for extending working hours were always the forerunners of social disasters. Now there are again middle class voices that urge increasing working hours in the crisis. In July 2009, the German Central Bank pleaded for a new increase of the initial pension age to 69 years – with explicit reference to the “undermined financial basis of state finances” as a result of anti-crisis measures. This is also reflected in part of the austerity program of the German government announced before the 2010 summer pause. If implemented, such demands will contribute to as further increase of mass unemployment.

In this situation, the unions and the social left are urged to carry out a common extensive campaign for the qualitative reduction of working hours. The argument of threatening location competition drops out since this campaign would be waged from the start as a Europe-wide campaign. 80 percent of Europe’s gross domestic product stays within the continent. A further reduction of world market dependence and strengthening regional, national and Europe-wide economic cycles would mitigate current and possible future consequences of the crisis and help reduce unnecessary transportation with considerable CO2 emissions.

To have a mass effect, the demand for reduced working hours must be joined with the demand for a general income equalization and a personnel equalization to counteract work intensification.

ALTERNATIVE INVESTMENT PROGRAM

The left must move the material side of production into the center of its policy and reflections in view of this crisis which has an environmental- and climate crisis at its center. Under present conditions, this could be concretized as an “Alternative 3-C Program” – an investment program for children, culture and climate…

Investments corresponding to the “Alternative 3 C Program” could be completely counter-financed within a few years. Within five to ten years, the cost savings bound with these investments will be greater than the costs of the investments themselves. In addition, such an alternative investment program gives a long-term answer to the current unavoidable challenges facing humanity.

After emphasizing growth fetishism for a long time, the Marxist-socialist left has discovered the ecology theme rather late. However a convincing socialist criticism of the capitalist growth pressure existed early on…

NOTES

[1] In my new book on the worldwide crisis, I analyze seven crisis planes. The crisis of the real economy (1), concretized in the crises of two key industries auto-manufacturing and the IT-branch (2), the classical distribution crisis (3), concretized as an over-accumulation crisis; the widely debated and described financial crisis (4) in which it is gladly overlooked that productive – and “good” – capital was and is the driving force for speculation (see Porsche-VW 2008); the North-South crisis – often wrongly interpreted as a regional theme, which is also a hunger crisis and a structural part of the worldwide crisis (for example, as a consequence of the higher price of oil and massive cultivation of plants for production of bio-fuel, higher food prices and worldwide hunger (5), the climate- and environmental crisis (6), which may soon intensify on account of the disastrous ending of the Copenhagen conference and a new steeply rising price of oil in the case of a new upswing; and finally the hegemony or dollar-crisis (7), which contributed to the character of the current crisis and raised the question whether the center of capitalism will shift to China (see Winfried Wolf, Sieben Krisen – ein Crash, November 2009, Promedia (Vienna), 250 p.

[2] Eugen Varga, Wirtschaft und Wirtschaftspolitik, 1. Vierteljahr 1931, Internationale Pressekorrespondenz, 11. Jg. 1931, Nr. 43, 9. Mai 1931; Reprint Westberlin 1977.

[3] Bill Gross, der Chef der größten US-Fondsgesellschaft, schrieb jüngst in der Financial Times: Die britischen Staatsanleihen beruhen auf einem Fundament aus Nitroglycerin. Siehe ausführlich: Lars Petersen, Ring of fire. Neue Immobilienkrise. Neue Finanzkrise. Neue Wirtschaftskrise, in: Lunapark 21 - Zeitschrift zur Kritik der globalen Ökonomie, Heft 8, Frühjahr 2010, S. 10 f.

[4] Angaben nach: Financial Times Deutschland vom 27.3.2009 und Wall Street Journal vom 2.2.2010.

[5] Siehe Zeitung gegen den Krieg - ZgK, Ostern 2010 und Winfried Wolf, Griechische Krise und griechische Rüstungsausgaben in: junge Welt, 14. April 2010.

[6] Neue Züricher Zeitung vom 20.2.2009; zuvor Zitat zu Jenoptik nach: Financial Times Deutschland vom 14.8. 2009.

[7] In. New York Times vom 16.2.2009.

[8] In Deutschland gibt es rund 1,2 Millionen Vollarbeitsstellen in den Bereichen Kindergärten, Schulen und Hochschulen (darunter allein 680.000 Lehrerinnen und Lehrer). Wenn wir hier als Referenzwerte die skandinavischen nennen, so soll nicht verschwiegen werden, dass in Kuba die Klassenstärken mit 11 und 12 Kindern je Lehrkraft im Primar- bzw. Sekundarbereich des Schulwesens ähnlich niedrig und günstig liegen wie in den skandinavischen Ländern.

[9] Siehe Europäische Verkehrswende - JETZT! - Der Krise begegnen. Programm SchieneEuropa2025; Lunapark21, Extra01, August 2009, gemeinsam herausgegeben von Bahn für Alle, Grüne NRW, Betriebsrat Bombardier Transportation und der National Union of Rail, Maritime & Transport Workers (RMT) (London).

[10] Friedrich Engels, MEW 20, S. 455 und 453.

RELATED LINKS:

“Life after the Peak: Everything will Change” by Elmar Altvater

http://portland.indymedia.org/en/2010/08/401508.shtml

Video: Immanuel Wallerstein and Grace Lee Boggs in Conversation at the 2010 US Social Forum in Detroit

68 minutes www.commondreams.org

http://www.commondreams.org/video/2010/07/31

Video: Michael Hudson and Richard Wolff - Europe Under the Crunch

www.grittv.org July 31, 2010

We've heard plenty about the recession in the U.S., but what about the rest of the world? Countries across Europe have faced budget crunches and conservative governments are using the crisis as an excuse to roll back the social safety net that most have enjoyed for decades.

Many of the problems--and the solutions--sound sadly familiar. Lowered taxes on the rich and corporations, falling wages, and deregulation led to the crisis, which is being shifted onto the backs of the working class--as Michael Hudson notes, putting the class war back in business. Hudson joins us in studio, along with Richard Wolff, to discuss the economic crisis in Europe, what we can learn about the response to it and apply back at home. Here's a hint: it involves organized labor.

To watch the interview broadcast on GritTv July 31, 2010, click on

http://www.grittv.org/2010/07/31/michael-hudson-richard-wolff-europe-under-the-crunch/

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