Despite its crises

Capitalism will only collapse under the blows of the proletarian struggle!

(«Proletarian»; Nr. 4; November 2008)


The financial crisis which really began in the summer 2007 with the first bankruptcies of funds specializing in the famous American subprimes, has inexorably increased its sheer magnitude before entering its acute phase commencing at the end of this summer.

For a year the highest ranking financial and political officials in the world, as faithfully reported by all the international media, constantly minimized its extension, being mightily pleased, after each attack of the speculative fever, with the promptitude of the central banks and governments to administer the adequate remedy for the financial system, and regularly announcing the end of the crisis and the pursuit of economic growth.

But starting from mid-September the soothing discourses gave way to the most alarmist declarations: the reason is that the crisis started to get completely out of control, not only the American but the international financial system, like a patient in the terminal phase, no longer reacting to the drastic remedies, following one another with an accelerating rapidity: “rescues” of banks in difficulties, the decision of the US government to take responsibility for the dubious derivative debts of the banks, gigantic injections of liquidities, the historic drop in interest rates decided on by the international Central banks, etc.

In the last days of September the full force of the financial crisis lashed Europe, whose official discourses praised the solidity of the banks against all available evidence (all of the large European banks, from the Swiss UBS to the French Crédit Agricole, without speaking about British Northern Rock which fell into bankruptcy last November, had for months acknowledged having lost billions of euros!).

On September 26, the German Minister for the economy still declared haughtily that because of their crisis, the United States was going to lose their status of “financial superpower” and that a new multipolar world balance was going to emerge in which the euro and the economies in its zone would create a level playing field with the dollar and the US economy.

A few days were enough to show the brittleness of these desires of German imperialism: the large Belgian-Dutch Fortis bank (n°1 in Belgium where half of the households have accounts, n°2 in Holland) was reinflated in extremis by a united action of the governments of Belgium, Holland and Luxembourg, the Dexia bank (of which the main customers in France are primarily local government agencies) by the French and Belgian governments; while the German government was constrained to organize the rescue of the real estate bank Hypo Real and initial concerns surfaced regarding the leading Italian bank, Unicredit.

The hope that the European countries were going to be able to better resist a specifically American crisis, was however definitively to take flight at the conclusion of the first week of October; not only had  these first bailouts come to grief, not only had the situation worsened brutally in the United Kingdom, but moreover, in spite of the repeated assertions to the opposite, the European countries appeared unable to act in a coordinated way, each country thinking only of saving its own interests, even if this was to the detriment of its partners.

Germany and Great Britain, still convinced of their superiority, were  resolutely opposed to any prospect for the creation of  common European funds for the rescue of the banks proposed by the Dutch, the French and the Italians: the European Union means that each state acts according to its own standards the German Chancellor explained curtly at the time of the “mini-summit” of October 3, which therefore did not arrive at any decision. The Irish State had decided unilaterally on September 30 to guarantee the totality of the deposits in its banks; it was severely criticized at the time of the summit by English and German financiers for whom this meant unfair competition for their own banks; but during the weekend of the 4-5, the German government, confronted with the failure of the rescue of Hypo Real and with the unexpected deterioration of the health of its financial system, decided, also in a completely unilateral way, to take same measures; in the emergency the Austrian and Danish governments were also constrained to decree that very night to guarantee deposits to avoid a flight of capital towards Germany!

The British, furious at the German about-face, had no other choice than to resort to an “extreme” measure to preserve their own financial system: it was to be the proposal for a quasi-nationalization of its principal banks. The government of the United Kingdom proposed that other European countries follow its example, which they refused as one man… for four days.

In the same way the unilateral decision of the Dutch government to nationalize its local Fortis branch to safeguard its national interests, without even informing its “associates” in Belgium and Luxembourg of this, obliged the latter two to do the same: the only truly international reaction to the crisis in the aforementioned “united Europe”, has thus arrived at this miserable finish.

To complete the grim tableau, it is necessary to quote the case of little Iceland (a nonadherent to the European Union) which had undergone a record economic boom for a few years, founded on an exuberant growth of its financial activities. Lashed full force by the economic crisis, finding itself virtually in bankruptcy according to government statements, it decided on nationalization of its banks and concomitant freezing of deposits held there, several tens of thousands of which are British (in particular accounts opened by municipalities), which would be extremely difficult for the Icelandic State to refund. Great Britain reacted by using an anti-terrorist law...  to freeze Icelandic funds located in British banks!

Given its degree of severity, the crisis cannot but revive all national antagonisms which exist including those within this cartel of States that Europe constitutes, making any united action beyond certain dimensions problematic. This incapacity of Europeans to decide on  united action contributed more than a little to the weakening of the single currency, the euro, compared to the dollar and the yen; it shows in a glaring fashion the brittleness of the aforesaid “European construction”, and the insurmountable incapacity of Europe to present itself in the form of a potential rival to the United States on the world scene.

The second week of October saw the financial crisis reaching its paroxysm following the failure of all the increasingly desperate attempts to put an end to it: neither the famous American “Paulson Plan” to inject 700 billion dollars, nor the interventions of the central banks, the British decisions, nor even the appeals of the president of the European Central Bank (ECB)  for everyone “to regain their its spirits” even as the crisis struck the world’s second largest economy, Japan, full force, could prevent the world stock exchanges from undergoing a true Crash.

Except for the Moscow Stock Exchange and certain exchanges in Latin America, up until the present there have been no collapses in one session comparable with “Black Monday” of October 1929; however, the majority of the exchanges experienced in the beginning of October , at the conclusion of continual falls, the worst week since the crash of 1987 (as in Paris), sometimes worse than 1929 (as in New York): in one week at the beginning of October the exchange dropped 19.8% on Wall Street compared with 13.17% in 1987 and 9.12% in 1929; it was down 24% in Tokyo, 22.5% in Brazil, 21.6% in Frankfurt, 21.5% in Paris, 19.8% in Madrid, 19.3% in India… (1)


Crisis of Finance? Crisis of Capitalism!


According to the most current “explanations”, the present crisis would be due to the excess of credit spread by the “greed” of unscrupulous bankers and to the insufficiency of the rules and regulation of financial activities. It’s the same old story resorted to at the outbreak of each crisis! Quite a while ago Marx mocked an English parliamentary commission which attributed the cause of the economic crisis of 1857-58 to “the excess of speculation and the abuse of credit”; and he retorted: “Of what nature therefore are the social relations which almost regularly cause these periods of self-mystification, super-speculation and fictitious credit? Consequent to their discovery, one would arrive at a very simple alternative: either society can control the social conditions of the society, or those conditions are immanent in the present social system. In the first case, society can avoid crises, in the second it must undergo them like the natural change of the seasons, as long as the system remains” (2).

It has been one hundred and fifty years since these lines were written and demonstration has been made and remade that the capitalist company is unable to regulate itself and is incompetent to prevent the periodic return of crises, which surprise it each time. The Marxist writings give the mechanism of these periodic crises of capitalism; for example Engels, in “Anti-Duhring”:

“As a matter of fact, since 1825, when the first general crisis broke out, the whole industrial and commercial world, production and exchange among all civilised peoples and their more or less barbaric hangers-on, are thrown out of joint about once every ten years. Commerce is at a standstill, the markets are glutted, products accumulate, as multitudinous as they are unsaleable, hard cash disappears, credit vanishes, factories are closed, the mass of the workers are in want of the means of subsistence, because they have produced too much of the means of subsistence; bankruptcy follows upon bankruptcy, execution upon execution. The stagnation lasts for years; productive forces and products are wasted and destroyed wholesale, until the accumulated mass of commodities finally filters off, more or less depreciated in value, until production and exchange gradually begin to move again. Little by little the pace quickens. It becomes a trot. The industrial trot breaks into a canter, the canter in turn grows into the headlong gallop of a perfect steeplechase of industry, commercial credit, and speculation, which finally, after break-neck leaps, ends where it began - in the ditch of a crash.”(3).

Compared to the nineteenth century, capitalism has developed enormously, engulfing the whole planet, but its laws of operation have not changed. As always, it is the engorgement of the markets, overproduction, which causes the crisis, even when, like today, this crisis initially manifests itself more glaringly as a financial crisis, caused by “speculation” and the disappearance of credit (particularly interbank credit which is vital for the circulation of capital).

The bourgeoisie, their experts and their politicians whether of the left or right-wing, show that they do not understand anything of the workings of their economy when they propose as a solution to the crisis only reforms to regulate and to reconfigure the banking and financial framework: they either do not wish to or cannot see that it is the fundamental mechanism of  capitalistic production which inevitably causes increasingly violent crises until there is no longer any other prospect but a new world war to destroy the excess productive forces and to recommence a new cycle of accumulation - unless the proletarian revolution overthrows capitalism. It is quite possible that they will manage to juggle the financial crash, to save the banking institutions, to restore credit thanks to the implementation of all the official means, including the nationalization of the banking environment which means that the State becomes the bank (or vice versa!); if all is well, the financial crisis could then be “solved” (at the price of astronomical State debts), but the economic crisis which was the real cause, will always be there!


The Spectre of 1929


The extent of the current financial crisis, its depth and its world extension are such that all the commentators, and the whole media speak about a financial crisis comparable with that of 1929, even if they add at once that it will not have the same consequences, because the people in charge will not make the same errors, the lessons of the crisis of the Thirties having been drawn. One could point out to them that for fifteen years successive US governments, under the pressure of the financiers, busied themselves obliterating all the institutional defenses which were set up way back then, and which everyone now swears to reinstall…

But the most important thing is to know what to think about this comparison. There is hardly doubt that the extent of the financial crisis is sufficient to conclude that the global economic recession will be much more serious than any in the last 25 years; but the reference to 1929 recalls a crisis of historic dimensions which, unlike the more or less accentuated recessions which punctuate the economic movement of capitalism, had brutal and durable consequences not only on economic growth, but also on the political and social equilibrium of the countries affected as well as on the international political equilibrium.

Our current has always affirmed that the unprecedented economic expansion undergone by capitalism since the end of the Second World War would inevitably lead to a great general crisis of overproduction - of the 1929 type to give an idea of the magnitude - and which brings back into focus the alternative war or revolution.

As long as capitalism has growth prospects, it is indeed able to “amortize” social tensions and it is consequently vain to hope for the opening up of a revolutionary period (this is what the immediatist crowd in 1968 could not assimilate, their motto being “take your desires for reality”). But when it is threatened by asphyxiation from overproduction, it is necessary for it to relentlessly attack the proletarians in order to clear profits at any cost, while preparing the war which by massive destruction of goods, commodities, productive forces - including human productive forces, proletarians - will enable it to solve the crisis and to recommence a new cycle of accumulation.

Are we at this point?

To try to answer, let us see what  the characteristics of “1929” are, taken as the classic example of a great crisis of overproduction, such as these are defined in work of the party (4). They go well beyond the traditional plunge in the market of black Monday (October 28) where the Wall Street Stock Exchange lost 13% (a record drop which will be exceeded only by the crash of October 1987); because if the brutal collapse of the markets spectacularly signified the outbreak of the crisis, economic recession had commenced in the previous months; and it is this recession which  in last analysis caused the bursting of the speculative stock exchange “bubble” which, in its turn, had devastating consequences on the economy.

Commencing in 1929, the crisis finished in 1932; 1933 was indeed a year of recovery, though still hesitant. In spite of very important measures of State interventions known as the “New Deal”, a violent relapse took place in 1937-38, which experienced a rapid resolution in… the unleashing of the world war which enabled production to recommence on a gigantic scale.

After 3 years of this crisis, industrial production, which is the most significant index, fell 44%, which corresponds to an average fall of 17.5% per annum. In 1929 unemployment was only 3.2%: it reached the enormous figure of 23.5% in 1932, that is to say an annual average increase of 8%. The figures of the market indexes show an average fall of 37.5%.

In addition to these elements, a very important characteristic of the crisis of 1929 was deflation, this nightmare which the capitalists still fear today: wholesale prices (reflecting cost of production) dropped by 12% on average per annum (retail prices, costs to the consumer, also fell, but as always, to a lesser extent). Finally the fall  in wages is the last important criterion of the crisis, while noting that it is partly compensated by the fall in consumer prices:it is possible that the crisis hurt sectors of the capitalists more than it hurt the sections of the working class who still had jobs (many capitalists are broken by a big crisis, precipitated out of their class and proletarianized)! From 1929 to its low-point in March 1933, average weekly wages in industry dropped by 56%, while consumer prices dropped by 28% (5).

In short, a great catastrophic crisis of overproduction in the Marxist sense of the term, is marked by a general fall in production costs, a severe reduction in production, a very large increase in unemployment, a fall in wages, a collapse of profits - and all this throughout the course of several years - , and not merely by a crash in the stock market.

The evolution of capitalism for eighty years could not but have had consequences on the eruption and the course of a great crisis of overproduction: on one side, the much greater importance of the weight of the State in the economy, even after the cure of “liberalism” pursued throughout the last decades, makes it possible for capitalism to somewhat cushion the shocks and furnishes it with weapons of “anticyclical” policy which cannot be usefully compared with what existed in 1929, as we can see before our eyes; on the other side, the hypertrophy of the financial sector and the generalization of the debt economy on a previously unheard of scale increase, the potential instability of the whole economic system, making enormously more problematic the government interventions (to the point of threatening the bankruptcy of the States themselves!) (6); while “globalization”, i.e. the increased internationalization of the economy and the acceleration of  worldwide financial circulation, parallel the diminishing possibilities of action by national States. The productive forces have become more powerful and more important than the official bourgeois structures which seek to control them!

The current crisis presents itself at first sight above all as a financial crisis, and from this point of view it seems for the moment to be more serious than that of 1929; not only is the annual fall in market indices quite significantly larger than at that time, but  for a year now we have had the collapse of financial institutions and a crisis of the credit which had taken place at the time and manifested itself only lately, and this in spite of the massive and repeated interventions of Central banks and States.

But as regards the other criteria, the difference with the crisis of the Thirties is striking: industrial production  in the large countries still displays only a  much weaker reduction: the last figures available (July or August, according to the countries) indicate a variation compared to the previous year, of -1.5% for the United States, -1.7% for the Euro-states(- 2% for France, -3% for Spain, -3.2% for Italy, but +1,7% for Germany), -2% for Canada, -2.3% for the United Kingdom, the grand prize going to Japan: -6.9% (while China announced +12.8%!); unemployment began increasing only recently to reach 6.1% in the United States, 7.5% in the euro zone and 4.2% in Japan (the statistics on unemployment are not very compatible from one country to another, and in general are among the least reliable) (7); the profits of American companies dropped only by 3.8% (annual rate) in the second quarter, primarily in the financial sector, after a strong growth for 4 years until the middle of 2007; the financial authorities fought not against deflation but against a return of inflation; as for wages, if an American forecast indicates that average wages will experience a fall unprecedented since the Thirties in this country , this announced fall would hardly exceed 10% (8) and so on.

In a word the ultramodern capitalism of the twenty-first century, thanks to the methods of official intervention in the economy inaugurated eighty years ago ago by Fascism and Rooseveltian Imperialism , have up to now succeeded in slowing down the crisis, dampering it, in order to postpone the consequences.

In the final analysis, will it  succeed in preventing it from erupting in its full force?

It is impossible to dismiss this alternative; but such a capitalist victory would only be Pyrrhic: instead of undergoing a violent but relatively short crisis, it would be hobbled with a more creeping but prolonged crisis  which it would be much more difficult for it to overcome, and this at the price of a future crisis made even more serious and insurmountable by the means used to fight the current one…


Capitalism Will Not Self-destruct!


At the end of September the German social democrat Minister for the economy, Peer Steinbrück, affirmed in an interview with “der Spiegel” that “certain parts of the theory of Marx are not so false” and in particular that according to which “capitalism will not self-destruct through greed”; on October 15, the recent presidential candidate of the French SP echoed him while proclaiming in a meeting: “Marx said capitalism will destroy itself and well here we are!”.

Actually Marx said that capitalism above all created its own grave-diggers -  which is completely different. Whatever the evolution of the current crisis, even if it proved to be the beginning of the great catastrophic crisis awaited by Marxists, one a thing is sure: capitalism will not self-destruct, any more than the modes of production which preceded it in the history of humanity “self-destructed” . Only a revolution during which the oppressed classes overthrow the domination of the old ruling class by  civil war, can overthrow the old mode of production of which the ruling class is the agent, and establish a new one which corresponds to the level reached by the productive forces. “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 a period of social revolution” (9).

While discoursing on the “self-destruction” of capitalism, the lackeys of capitalism want to prevent the proletarians from understanding that they are the only ones able to be its grave-diggers; in other words that the destruction of capitalism can only be the result of their revolutionary struggle. As long as the proletariat is not able to find, under the blows of the attacks of the capitalists which will only constantly increase, the force to launch out in this decisive struggle, as long as it does not find the force to organize itself in preparation, both on the political level (revolutionary Communist Party) as on  the economic (classist trade-union association), capitalism will succeed in extricating itself from all its crises and in preparing to impose its solution: a new world butchery, even more destructive than the two preceding ones because of its decades of expansion during which gigantic quantities of excess productive forces were created.

Such is the alternative that the course of capitalism poses historically; such is the alternative that the current crisis poses to the proletarians.

October 18, 2008



(1) It is true that the next Monday, the worldwide exchanges, enticed by the billions of dollars and euros promised by bourgeois governments, underwent historic gains; but the enthusiasm was quickly dissipated  and as of Wednesday they experienced new losses, just as historic! This volatility of stock prices is typical of periods of crash: shortly after the black days of October 29, prices on Wall Street inflamed by 18%. The only difference is that today this volatility is even larger and especially more sustained.

(2) K. Marx, “New York Tribune”, 4/10/1858. cf Marx Engels, “The Crisis”, ED 10/18 1978, p. 201-202.

(3) Engels “Anti-Duhring”, Socialism, ch.2. (MIA)

(4) cf «La récession américaine de 1957 annonce-t-elle un nouveau 1929?», Programme Communiste n°4.

(5) Figures of American statistics quoted by E. Varga in his book of 1935:  “The Economic Crisis, Social, Political”, reprint Ed. Sociales1976.

(6) In addition to little Iceland, the financiers consider the risk of a non-payment - i.e. of a bankruptcy - higher than 80% in Pakistan, in Argentina, in the Ukraine, Hungary and Turkey also being threatened, as are Kazakhstan and Latvia. cf Financial Times, 14/10/08.

(7) The Economist, October11-17 2008

(8) International Herald Tribune, October16, 2008

(9) K. Marx, Introduction to the “Contribution to the Critique of Political Economy”. Ed. Sociales 1977, p.3.



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