Wildcat 90, summer 2011, [e_w90_krisenthesen_anfang.html]

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Theses on the crisis

On the road to nowhere

1) Polarisation and divisions

In all the crises of capitalism the balance of power initially shifted against the working class. During this crisis, too worse conditions have been enforced: work has been intensified, real wages have declined, and social welfare has been cut. We are witnessing the biggest redistribution of wealth from the bottom to the top in human history. This redistribution does not only result in a harsh polarisation between the 'super rich' and the 'poor', the policy of crisis also deepens the differences within the class and intensifies individualisation.

2) Upheaval

But – in such historical moments societies also redefine themselves. The global crisis has taught a lot of people about the essence of capitalism, the states, the banks etc.; it delegitimises capitalism. New protagonists have taken the initiative – aware of the fact that they have become subjects of their history and history in general. The uprisings in North-Africa are the forefront of a wave of global struggles. They have already inspired movements in Europe and the USA – and in the medium-term they have toppled two main pillars of global capitalism: cheap oil and the re-cycling of 'Petro-Dollars' on the global financial markets.

3) Crash or stagnation?

Regarding its progression, scope and historical significance, the current crisis compares to the long depression of 1873 to 1896. This quarter of century was not characterised by a constant down-turn, it contained periods of economic growth – but these periods were never sufficient to compensate for the initial slump and were themselves constantly interrupted by setbacks. Since the crisis and slump of 1973 ('oil crisis') the rate of accumulation has fallen and unemployment has increased; the global crash after the financial crisis of 2007 was the transition into stagnation. All elements of capitalism are being put into question: banks, technology, welfare systems, political representation, currency system, energy production; 'Fukushima' demonstrated to everybody that the capitalist form of energy production threatens the planet itself. In 1972, at the beginning of the crisis the Club of Rome¹ countered the demands of the working class by referring to ecological limits. Previously, capitalism was able to avoid struggles over social distribution by economic growth. Today, the 'limits of growth' have become limits of capitalism itself.

4) The assembly line has changed the planet

Capitalism as we know it today developed during the long depression: industrial production of durable products of mass consumption (sewing machines, vacuum cleaners, cars, fridges). The chemical and electrical industries came into existence, and corporations became the typical organisational form of capital during that phase. Oil / electricity replaced coal / steam as the main energy resource. In this period we also witnessed the formation of social democracy and industrial trade unions. The colonial powers destroyed the economy of the former periphery (first of all in China and India) to such an extent that millions died of starvation – a process which is seen as the 'birth of the Third World'.

The assembly line was the essential innovation. The engineers called it the 'peasant harness', because the assembly line made it possible to replace qualified artisan-workers with migrants and peasants 'who had been made redundant'. An tremendously productive combination between the expenditure of labour power and the accumulation of dead labour in form of machinery developed, which has transformed the whole planet. It was possible to produce food and basic necessities for the working class as cheaply as never before and this characterised the 'consumer society' of the second half of the 20th century (food stuff, textiles, later on household appliances and finally the car – nearly all commodities, which we buy today, are manufactured industrially).

5) The stages of Fordism

This – the workers' cheap consumption – was not inscribed within 'Fordism', but the result of hard struggles. Ford did not accept any union organisations on the shop-floor; he made use of spies and thugs and even forbade his workers to talk at work. They described the biggest Ford plant River Rouge at the time as a »huge concentration camp based on fear and physical violence«. In the 1930s the workers' revolts and factory occupations put an end to the authoritarian system of mass production at the assembly line. The recognition and integration of the trade unions, real wage increases according to productivity development, job guarantees, sick-pay, (company) pension etc., formed the foundation of the short phase of 'Keynesian Fordism' after the Second World War – during which productivity increases were more than ever achieved by the 'scientific' division of the labour process, the imposition of work rhythms embodied in the machinery and a general intensification of labour.

Within two decades this model undermined its international foundations. Japan and Germany became serious competitors of the USA, which also dissolved the monetary basis. The currency system resting on the gold standard of the US Dollar and fixed exchange rates started to shake and finally collapsed in 1971. Above all, in exactly those years workers' struggles intensified enormously and they not only demanded higher wages and less work, but essentially targeted the 'factory discipline' itself. For the first time in human history a global subject emerged, which had a deeply egalitarian character and outlook. It emerged out of the mass workers' struggles of a multi-faceted class of 'semi-skilled peasant workers' and their interaction with the anti-colonial struggles of the global south and the youth movement, which strengthened themselves through their interaction. These broad-based struggles in factory and society, which had the multi-national assembly-line workers at their core, burst open the constellation of the assembly-line and (the reproduction of) the working class, which was connected to it.

6) Over-accumulation crisis

Capital has tried to overcome this crisis by a radical restructuring of labour markets and of the labour process itself, in an attempt to dissolve any collective subject. Casualisation and outsourcing segregated the work-force, large factories were dismantled, temporary work and 'atypical employment' became more widespread, social security systems were privatised etc. During the 1970s the 'humanisation of work' and automisation were attempts to encircle the big factories, and subsidies and tax reliefs were supposed to move employers to invest again. The budgets for welfare expenditures were initially even extended. All this raised state debts, but did not deliver any results: wages and social demands further increased and investments did not materialise.

The 'big deceleration' only began by the time of the 'second oil crisis' at the end of the 1970s: a massive hike in interest rates, cuts to welfare services; end of the projects of 'humanisation'. Paradoxically it was the 'monetarist turn' in the economic policies – symbolised by the accession to government power by Reagan and Thatcher – which lead to an explosion in the volume of money and state debts.

Despite all these measures the rates of accumulation declined further from the beginning of the 1970s and the capitalists kept on searching for other 'investment opportunities': they partly invested in the relocation of production to 'low wage countries', and an increasing share was invested in financial business. We understand this interrelation between the crisis of valorisation and growing financial flows and credit as a 'crisis of over-accumulation'; the developmental stages since then have only been a transformation of this crisis.

7) The 1980s – the decade which changed it all

In the end the capitalist counter-attack only progressed because it was able to relate to 'behaviour patterns' from below: trying to escape from work, becoming self-employed/independent, alternative economy, buying shares etc. During the end of the 1970s and the early 1980s capitalism was threatened with the 'big crisis' – but the 1980s became a turning-point: defeat of the Iranian revolution, military coup in Turkey, defeat of the miners' strike in England... At the end of the 1980s 'everything was different' from what it was like at the beginning of the decade; the formerly radical left, as well, had discarded their egalitarian and collective perspective and jumped on the train of postmodern individualism or anti-German zeal for 'big politics' in its worst form, war.² Right from the start these people interpreted the collapse of the Eastern Bloc as yet another defeat of an egalitarian outlook, not as a decampment.

Only shortly before, a new monetary policy had become prevalent; Greenspan, the new chairman of the American Federal Reserve System, had countered the banking crash in the US in 1987 by low interest rate policies, which guaranteed that share prices and prices of other financial assets would not drop below a certain bottom. This so-called 'Greenspan put' was the counter-piece to Keynesian wages, which did not drop below a certain level either. This new monetary policy allowed 'profits without investments'.

8) Credit expansion and asset inflation

Since the mid-1990s the so-called 'real economy' only grew because of the credit expansion. Credit firstly expanded within the IT (dot com) bubble. When this bubble burst Greenspan transformed it into a real estate bubble (it was called the Great Bubble Transfer). The implosion of the latter kicked off the current global crisis – and up to now they have not been able to resolve this combination of real estate and banking crisis, neither in Ireland, nor Spain, the UK, nor least of all in the US.

This time again, the end of recession was accomplished by the conscious creation of an asset bubble. Contrary to what is publically claimed, the goal of Quantitative Easing, a combination of zero-interest rate policy and buying up by the state of their own government bonds, was not to motivate the banks to issue more credits by providing them with cheap money – Quantitative Easing is meant to raise the prices of the assets and thereby to stabilise the bond markets. This made possible the survival of the banks and gave them the means to obtain massive profits soon after; also certain industrial branches prospered again.

9) The banks are in the centre of the state debt crisis

Due to the flight of capital into finance, the finance sector has grown over-proportionally since the 1970s. In 1947 in the US the finance sector (banks and insurances) accounted for 2.5 per cent of GDP, at the beginning of the 1980s it had grown to 5 per cent, since 2000 it accounts for around 8 per cent – the share of industrial production shrunk from 25 per cent in 1947, to 20 per cent in 1980 to about 11 to 12 per cent since 2007. The share of the finance sector of all corporate profits was about 10 per cent at the end of the Second World War, in 2002 it was 40 per cent and even in the first half of 2009 it was still 28 per cent. (In comparison, according to the Federal Office for Statistics, in Germany banks made 18.5 per cent of total capital gains in 2008.) The finance sector is the most heavily over-accumulated sector in contemporary capitalism.

In 2007 and 2008 this global banking system was close to collapse. In 2008 and 2009 the state governments spent at least 18 per cent of global GDP for its rescue. They were able to avoid the crash – but have launched themselves into historically unprecedented debts. Despite all of this, a lot of banks are still insolvent, so-called zombie banks, and are only kept alive by repeatedly huge infusions of capital. An important measure of resuscitation lies in the fact that the banks earn nicely from the debts which the states got into in order to save the banking sector. If such a state would declare bankruptcy, some banks would go bust. This is why the IMF, the EU, the US and China and their federal banks try anything possible in order to avoid a state from defaulting. There are two main dangers for banks which have been protected in this way: a bank run, people lose confidence and take money out of their accounts, or the freezing up of the inter-banking market, banks lose confidence in each other and stop borrowing each other money. Both events have structured the development of crisis in 2007/08 and the current wrangling of the so-called 'Euro crisis'.

10) The crisis of the EU

The state debt crisis became visible in the Dubai crisis in November 2009, but it has unfolded since 2010 in the European periphery. The huge imbalances within the Euro zone, which have been working well for the German export economy, are pushing the states of the periphery into bankruptcy. The 'Euro crisis', which returns in short intervals, is not a currency crisis – in comparison, the Euro is to date more stable than the Deutsche Mark used to be, in relation to the US Dollar the Euro is overrated, and it becomes increasingly important as a global reserve currency. The 'Euro crisis' is a crisis of the European banks, of political governance and of the EU itself. In particular, it is the structure of the EU itself which aggravates the crisis. It is not designed for a common European welfare and fiscal policy; the ECB independently decides about monetary policy, and is focused exclusively upon the stability of the Euro. Therefore the crisis has so far been managed by 'shadow governments in Brussels' and a 'state of permanent emergency to rescue the Euro'³ . The main burden is on the ECB, which rescued the banks by buying their junk assets. It bought the state bonds of the over-indebted states (for what it's worth breaking a cherished taboo by this), and at the same time putting pressure on these states to cut their public expenditure. But first of all, by its interest rate policies, the ECB tries to prevent workers from struggling and obtaining higher wages.

11) USA – the hegemon decomposes

The European periphery was only the weak link in the chain, the Euro crisis only the prelude to the next round, in the meantime the crisis of the US has come to the fore. On 16th of May 2011 the US state debts have grown beyond the legally defined upper-limit of 14.3 billion US Dollars; the government might be able to muddle through to the 2nd of August 2011, but by then the congress will have to have raised this upper limit, otherwise the state is threatened with default. At the end of June the second and last phase of quantitative easing (QE2) runs out, and after that the interest rates will most probably rise and the real estate crisis is likely to get worse again – people already talk about a 'double dip' of the US real estate market. So far the US was able to benefit from the crisis, because massive financial streams entered the 'safe haven' of the USA, which meant that the US state was able to sell its state bonds at very low interest rates. Once interest rates hike, the US state bond bubble might burst and the US-Dollar might crash – which would be the first crash of a truly global key currency. Keynes once issued the warning that there is no better way to topple a socio-economic system than to ruin its currency.

12) Global tectonic shifts

For the first time in the history of capitalism a hegemon decomposes without a follower being there to replace it. [...]

[german version]

Fußnoten:

[1] a capitalist think-tank

[2] The 'anti-Germans' are a specific political tendency within the German 'left'. They supported, amongst others, the US attack on Iraq and Afghanistan 'in defence of Israel'.

[3] [as even the Main articles in the Financial Times Germany from 12th and 20th of April 2011 describend the situation.

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