the Voice of
The Communist League of Revolutionary Workers–Internationalist
“The emancipation of the working class will only be achieved by the working class itself.”
— Karl Marx
the Voice of
The Communist League of Revolutionary Workers–Internationalist
“The emancipation of the working class will only be achieved by the working class itself.”
— Karl Marx
Jun 24, 2010
The following article is a translation that originally appeared in the July 2010 issue of "Lutte de Classe" [Class Struggle],by comrades of the French Trotskyist organization, Lutte Ouvrière [Workers’ Struggle].
During the first days of May, the Greek state was singled out as the pariah of the European Union. When the European Commission and the IMF (International Monetary Fund) imposed austerity measures on Greece, they said it was only fair since Greece was "living beyond its means." And some officials alluded to the risk of a "Greek contagion," which was supposed to spread to Portugal, and to a lesser extent to Spain. All of this was misleading and false, since Greece had little responsibility for the sickness of capitalism in crisis.
Within six weeks, the so-called Greek contagion spread widely. It not only hit the European countries whose economies are the most fragile, and not only those states whose budgeting is the most slipshod, but the major ones.
The cost of French debt became more expensive than German debt while, before the financial crisis, the costs were practically even. "France is falling behind. Its risk premium almost doubled in six sessions compared to Germany," commented a specialist from the Natixis bank.
This was the warning that financial groups were beginning to suspect that the French government might have problems repaying its debts. If speculation continued to drive up interest rates on French state debt, it would only make it more expensive and difficult for the French state to borrow money to continue to pay its bills.
The Sarkozy government responded with a big show, promising to add a balanced budget amendment to the constitution. But financiers want concrete measures. They want to verify that the government can take what they consider to be the necessary drastic actions against the laboring classes to assure that the interest on the debt will be repaid. So, the Sarkozy government adopted a panoply of measures aimed at pleasing the big financial groups. It promised a large, rapid cut in the budget deficit, bringing it down from 8% to 3% over the next four years, mainly by cutting expenses. It promised to cut the number of State workers, while freezing the salaries of those who remain. There were also measures against retired people. Many of these measures covertly make life more difficult for the laboring classes. An article in Le Monde (May 30-31) spells out a few of these cuts: "Healthcare: the government wants to save 600 millions Euros by freezing the funding for hospitals and nursing homes.... Altogether 1.84 billion Euros for the next year will be saved by increasing co-pays on certain drugs and increasing fees for hospitalization."
The same thing is happening throughout Europe. "Today it is not good to be a public sector worker in Europe," wrote Le Figaro, a right-wing daily newspaper. In Ireland, public sector salaries were cut between 5% and 15%. The Greek government imposed a 15% pay cut on public sector workers, and a 7% cut in their pensions. The Portuguese government imposed a salary freeze and reductions in the workforce through attrition. In Italy and Spain, the governments imposed a wage freeze. The British government imposed a hiring freeze and a general cut in its operating budget.
On June 7, Germany, the richest country of Europe, whose government budget is considered to be a model of discipline, announced a first series of austerity measures aimed at saving 80 billion Euros over four years. These included a new tax on fuel, a reduction in social welfare programs and a cut of 15,000 public sector jobs.
It is obviously much worse in Eastern Europe, the much poorer part of Europe. In June, for example, the Romanian government is planning to cut State workers’ salaries by 25%, as well as pensions and unemployment benefits by 15%.
In England, as Le Figaro says, "There has not been such a drastic austerity plan since World War II." Given the already decrepit state of some public services in England, the results in four years may be devastating. The new Conservative government claims political responsibility for the austerity plan. But it was the former Labor government that had originally worked out the plan.
Austerity measures may vary in form from one country to another, but not a lot. They all have a common goal: to make the laboring classes pay to replace the enormous sums that these governments spent to get out of the financial crisis of 2008 to 2009, as well as to try to prevent a new episode of this crisis in 2010.
Once more, what the different State apparatuses did during the preceding stage in the crisis has boomeranged back on them. They overcame the most acute stage of the 2008-2009 crisis—the liquidity crisis and financial panic that followed the September 15, 2008 bankruptcy of Lehman Brothers—only by extending massive support to the bankers and the banking system. But this massive intervention tore enormous holes in the State budgets. Without exception, the debts of all the States grew to colossal proportions. As the American economist, Nouriel Roubini, described it:"We socialized private debts and we are now in a very dangerous zone. Europe, like the United States, the United Kingdom or Japan, is confronted by gigantic public deficits." Concerning the U.S., he said: "For the moment the country is protected because investors have a big appetite for American debt. But one day, those who hold this debt can wake up and say, "even the U.S. is in a critical situation.""
These "gigantic public deficits’ represent a bonanza for the financial groups. To finance the deficit, the States borrow more and pay more interest to their creditors, feeding the growth of an ever higher mountain of debt. This debt, which is a consequence of the financialization of the economy, in turn aggravates that financialization. While production and investment suffer because of a lack of profitable markets, capital is attracted toward the financial sphere. In the current situation, it is drawn especially toward government bonds. And based on this movement, speculation is growing on government bonds themselves.
States compete with each other to sell their bonds. A country which is suspected of not being able to pay back its debts has to pay a higher interest rate. This then increases its debt and further weakens its situation.
Under the leadership of France and Germany, the two main imperialist powers on the European continent, the European governments, along with the IMF, tried to stop the speculation by creating a fund containing 750 billion Euros, that would loan money to States that might have trouble financing their debt. This enormous fund was supposed to reassure the financial markets that even if a State went bankrupt and could not cover its debts, the financiers would still get their money.
It was another splendid gift to the banks. But it did not stop the speculation. And for good reason! Enormous amounts of capital circulate on financial markets, and it is inconceivable for their owners not to have it making money, that is, they have to place it somewhere profitable. More and more, that means speculation.
The circle is thus closed: financial operations feed on each other, enriching the bankers and their investors and ruining the real economy.
A new phase in the financial crisis seems to have been developing for a while. Lack of confidence in States considered to be credit risks has been spreading, along with a lack of confidence in the banks that own a lot of those States’ bonds.
This new crisis of confidence among the banks is similar to what happened after Lehman Brothers went bankrupt. The loans to the weaker states are more and more considered like the toxic securities of the subprime crisis of 2008. An article in Le Monde (May 30-31) described it this way: "The crash of 2008 showed that a liquidity crisis—the inability to borrow money from other banks or from the markets—can be lethal for a bank even if it is well capitalized.... There are many indications that banks are having difficulty gaining access to liquidity they need in order to provide credit to households and businesses. They show that banks are less and less willing to lend to each other, and have often stopped lending altogether."
The business journal Les Echos (May 27, 2010) evoked the same threat: "American banks are no longer lending dollars to European banks which practically stopped lending cash.... To overcome the difficulties of high costs in interbank loans, central banks must flood markets with liquidity. The principal risk is that banks with great problems refinancing are more reluctant to lend to companies. This further reduces economic growth."
The financial sector is not a completely separate world, disconnected from the productive economy. It is the same economy, above all, because the financial sector, just like productive enterprises, derives its profits in the last resort from surplus value, that is, exploitation. Financial profit is, in reality, the same profit, more exactly, a growing part of the total profit.
At the same time, industrial companies need the financial sector. Daily economic life is conditioned by a myriad of operations, of borrowing, of credits. When the financial pool dries up, the whole economy dies.
And this is what appears to be happening for the second time in two years. The amount of liquidity has been reduced dangerously, due to reasons internal to the financial sphere and its functioning. The large quantity of "bad debts’—this time, State debt—has caused another crisis of confidence among the banks, which limits their ability to play their necessary role in the functioning of the capitalist economy. Despite the colossal amount of liquidity held by the banks, the banks are lending very little to each other.
"The proof of this," according to Les Echos (June 8), "is the amount of liquidity that the banks are depositing each day in the European Central Bank that is exploding.... The banks deposited about 350 billion Euros (compared to one billion before the crisis), which are not being used to provide liquidity for credit markets. In other words, financial establishments prefer to hoard mountains of money at a low interest rate rather than lend them."
Since the long period of stagnation in the capitalist economy first began 20 or 30 years ago, finance has become an even bigger parasite on the productive sector. But sometimes parasites kill their hosts. A new liquidity crisis among the banks could perhaps trigger the beginning of a long depression.
To end the crisis of confidence among the banks, the European Central Bank (ECB) increased its intervention. It began to accept the debt of the Greek State as collateral for making loans. It began to do the same thing for the State debt of other countries in the Eurozone that were considered poor credit risks. In so doing, the ECB had to throw out its own criteria for what kinds of debt it would accept. But for the ECB, the main goal was to reassure the bankers, to convince them to lend to each other again. It was a clear statement from the ECB to the bankers: "Don’t worry about risky bonds held by your partners in banking operations. The Central Bank is ready to buy all those bonds which you don’t trust." This kind of announcement runs the risk of weakening confidence in the ECB, that is to say, in the Euro. Of course, the Euro was already declining in relation to the dollar.
As the economic crisis has developed, the Euro has progressively weakened, falling to 1.20 dollars to the Euro, compared to 1.50 six months ago. And the Euro’s own survival is even threatened. No one can predict when and how this might happen.
The end of the Eurozone can take place in many different ways. The countries with the weakest economies could be excluded from the Eurozone, or they could depart voluntarily. This has already been raised for Greece. On the other hand, Germany could leave the Eurozone. Or the Eurozone could be much smaller, limited to the imperialist countries around Germany and France.
The Euro has certainly not saved the different European countries from the crisis. But if it were to disappear, either totally or partially, this would be an important factor aggravating the crisis. It could mark a return to protectionism and the multiplication of monetary devaluations by countries in competition with each other. And it could be the opening of a new period of permanent European monetary instability. The capitalists themselves are conscious of this fact.
On the European continent, where the economies of the different countries are tightly connected, the disappearance of a common currency would be a catastrophic retreat. The German and French bourgeoisies are perfectly conscious of this. Right now, they have a major interest in maintaining the Euro, the most striking expression of a European market which was so painfully constructed. But as determined as the bourgeoisies of the two countries may be to maintain the Eurozone, they have not created a "common governance."
The absence of such a "common governance" is the Euro’s principal handicap in relation to the dollar. This absence is also the principal factor behind the speculation on state bonds which are denominated in the same common currency. It is just like a check—what counts is not the amount written, but who signed it. The signatures of Portugal, Greece or even Spain are worth much less than Germany"s.
Even the choice of words is significant. Government officials speak of "common governance," but not of a common State. A real "common governance" presupposes a common State apparatus. But no significant political force, placing itself on the terrain of the bourgeoisie, is considering this.
It would be useless to try to predict how the world economy will evolve in the coming period. The only prediction that we can make is that when it comes to imposing austerity, we have not seen anything yet.
The bourgeoisie is fighting with all its might to maintain the profits of the capitalist enterprises by increasing exploitation. The States fight to re-balance their budgets in the only way the bourgeoisie will allow, by increasing the burden on the laboring classes, reducing social protections and public services, at least those that concern the laboring classes.
Hospitals, schools, public transportation have never been equal for everybody, contrary to what the big reformist parties claim. How could there be equality in a world dominated by money? But all the defects of the capitalist economy, all the inequality it produces and maintains will inevitably be multiplied by the crisis.
The working class will be forced to fight if it wants to prevent the bourgeoisie from stripping it of everything. Social explosions can prevent some anti-worker measures from being applied, but even big ones cannot alter the evolution of this struggle fundamentally. To confront the bourgeoisie’s policy of making the laboring classes bear the brunt of the crisis, it’s necessary to oppose another policy, one which offers a way forward for the entire society.
It is commonly recognized that the current crisis is the worst since the outbreak of the 1929 crisis. But when you compare both, what is striking is how much better off the big bourgeoisie is this time. The 1929 image of capitalists jumping out of their office windows after learning they were ruined may be mostly a myth. But today, only a very small part of the bourgeoisie, mainly the medium and the small bourgeoisie, have been hit by the crisis.
An article in Les Echos (June 11-12), announced with great joy that "the number of millionaires increased by 14% in 2009.... The crisis slid over the most fortunate. According to the last annual report of Global Wealth, the total level of private wealth made a remarkable comeback in 2009, with the rebound of 11.5% following a fall of 10% in 2008."
The bourgeoisie, at least the big bourgeoisie, has come through the crisis of its own economy very well. It had a few frightening moments confronting what it calls the threat of a "systemic crisis," in order just to start everything all over again. The behavior of the financial groups is enlightening: hardly out of the mess created by all their speculation before 2008, they immediately started to speculate again.
This rebound was paid for by a huge setback not only for the exploited masses but for the entire society. The main issue is not what the bourgeoisie took from society, as extravagant as it is, but the price that it imposed on society in order to do it. The years of the crisis have pushed society backward in a material way. A large fraction of the laboring population has been pushed into long term unemployment and misery. Funding for education and new housing for the broad population has been cut. Many neighborhoods of the laboring masses have been turned into ghettos. These attacks have also impacted social life. The entire society is disintegrating. It is decomposing and becoming more dehumanized. Along with the decline of material conditions of life, there is a decline in ideas, in social behavior, in solidarity.
Never before in history has humanity had at its disposal such a vast arsenal of knowledge. Never has humanity had the material means to act on nature, the potential capacity to overcome once and for all material, cultural and moral poverty.
But never has the responsibility of capitalist organization been so clear in stopping society from going forward. And never has the gap between humanity’s possibilities at the scientific and technological level and the backwardness of its social relations been so great.
It has been a long time since the evolution of the capitalist economy has removed all possibility for reformist policies, that is, the hope of a gradual but irreversible movement to improve society. Reformist policy today simply consists in pretending that damage for the exploited masses can be limited. But even that doesn’t succeed.
Capitalism takes society right up against the wall. The working class—the only social force able to oppose the bourgeoisie with the perspective of a revolutionary change of the economic and social order—finds itself without its own policy and without a political party to impose it. It always comes down to this: the capitalist class will not stop pushing society backwards, attacking the only productive class—the working class—until the working class regains its combativity. And, above all, until it organizes its fights around a policy entirely directed toward the overthrow of the domination of the bourgeoisie and the transformation of the economy by ending private ownership of the means of production.
This is not just a question of calling for "the great revolt." The working class must have another policy to counterpose to all the problems created and aggravated by the bourgeoisie’s management of the society.
"The debt must be repaid," demand the political leaders and commentators servile to the capitalist class. But those who ran up the debts should pay them!
Wage earners, unemployed, retirees never saw the trillions of dollars that the States poured into the economy. The exploited classes do not have to acknowledge a public debt which is, in reality, only the debt of the bourgeois class.
After enormously increasing the public debt, the States demonstratively took aim at all public measures benefitting the laboring classes. Public services are the easiest victims. Their budgets are just cut.
Yet those public services were created and developed in the interests of the bourgeoisie itself. When the State took over education or health care, it was a way to relieve the bourgeoisie of the necessity to pay its workforce enough for each person to pay for their own health care and to educate their own children.
But with the crisis, the bourgeoisie and its political representatives reason in the short term: they must find the money, that’s it.
The coming months will be marked by more and more violent attacks, the only limits of which will be set by the relationship of forces. These attacks flow from the capitalist economic crisis and the means by which the bourgeoisie hopes to get out of it. It does not come out of particular policy options, or even less from which political team happens to be in power. They flow from powerful class interests. The role of the political leaders is to apply them and, if necessary, justify them as they can. The range of different political parties in government in Europe, which have all carried out an anti-worker policy, is enlightening. None of these governments has hesitated to justify these attacks, even if they now say the opposite of what they said to get elected.
To present electoral changes as decisive events is always a lie. And it is even a bigger lie during times of crisis. Political people and parties who promise to overcome the crisis or even to protect the laboring classes from it without clearly calling into question the capitalist economy are, at best, charlatans. But, in reality, they directly serve the bourgeoisie or they aspire to, and they are paid to fool the laboring classes.
The only program that opens a perspective is one that responds to the crucial problems of the day from the viewpoint of the laboring classes but, at the same time, ends up calling in question the domination of the bourgeoisie over the society. This program will not become a force until the masses take it up. How and when will this happen? No one can say. But it is not a philosophical question. It is a program for struggle.
The exploited have fallen far behind the exploiters. There is nothing surprising about that. There is the weight of the crisis itself, the pressure of the unemployment. On the political level, there were all the betrayals by the reformist parties when they headed the government. Even when they were in the opposition, these parties long ago abandoned the idea that the working class can’t move forward if it lines up behind the bourgeoisie, that it must oppose the bourgeoisie. That is, these parties abandoned all language of class.
In this crisis, the bourgeoisie has all the cards, allowing it to impose its policy. But, at the same time, they demonstrate that there is no solution to the crisis with their all-powerful financial groups and on the basis of the private property of companies and banks. And the prudence of the political leaders of the bourgeoisie in imposing their anti-worker measures, in spreading the attacks out over the longest possible time behind a smoke screen of pseudo-negotiations with union leaders show that they fear the masses will launch a movement. And that can happen quickly.
During such moments a program for revolutionary struggle becomes indispensable and vital. Just as indispensable and vital is the party capable of carrying out this program, capable of not deviating from this road, even under the pressure of the electoral siren songs and the reformist apparatus. That is, a party that is really communist.
Faced with the growing unemployment—this social leprosy and the principal cause of social decomposition—there is the need to share out the work among everyone, without a loss of pay, and with a ban on all layoffs.
Faced with the destruction of working people’s buying power, which is made even worse by the decay of public services, there must be a sliding scale of wages, as well as pensions.
Faced with the financial crisis, the banks must be expropriated and unified into a single banking institution controlled by the population.
And, above all, faced with the irresponsibility of the capitalist class, it is necessary to impose the control of the workers and the population over the big companies and the economy.