At the beginning of the century scientists, propagandists and politicians declared triumphantly that this was the end of the capitalist cycle of crisis and boom. The line of growth in the 90ies would go on unbroken, high-tech, new economy, world-wide production and financial markets would guarantee a continual and fast growth. Then came the crash at the stock-markets, new and old economy drifted towards crisis, warnings of negative figures, counterfeit balance-sheets and bankruptcies were daily on the agenda. already in 2001 the main economic forces of the triade – the USA, Germany and Japan – stuck deeply in a recession and with them the whole globalised world-economy. The hopes of a fast recovery did scatter, everybody knows that there is a long-run stagnation coming, if not even deflation and depression. The global capitalism did not only enforce a „cultural shock“ by its now obvious criminal qualities, as the Süddeutsche Zeitung and the New York Times did put it, it proves to be economically weak for a longer period, a system in serious crisis. This is due to its basic structure, whose characteristic crises were intensified by the neo-liberal globalisation.
The capitalist cycle of boom and bust has not been abolished by „high tech“ and the „New Economy“-on the contrary, they have made it even more pronounced and dangerous.
The capitalist competition and its imminent principle of maximal profit – because only with maximum profits it is possible to win against the competitors – the capitalists always are driven to over-accumulation, to build up over- capacities in relation to the purchasing power. While the capitalist entrepreneurs want to maximize their production at the same time they try to minimize the costs, but these costs represent at the market the basis for the purchasing demand. The realization crisis because of sinking profits (over-accumulation of capital) and the realization crisis because of lack of purchasing demand (under-consumption) are two sides of the same medal, just as Karl Marx has described it in „The Capital“: „The basic reason of all real crises always has been poverty and reduction of consumption by the masses while on the other hand the capitalist production is driven striving to develop the productive forces as if only the absolute ability of consumption were its limit.“ With the creation of over-capacities the economic cycle develops with the phases upward circle, boom, downward circle and recession and possibly depression.
With the growing importance of high-tech and new economy the cycle is even intensified. The information technology results in a so flexible fabrication that the production can follow the purchasing demand without great storage capacities or reserve of employees, every change in the market shows its effects on the production nearly immediately. The fast increasing work-productivity is accompanied by a growing productivity of the capital, that means that with every newly employed unit of investment capital a larger amount of goods can be produced. The consequence is a relatively low demand for workers as well as for investment goods, that means a relative decrease of the entire public demand. With high-tech and new economy the antagonism between the potential of accumulation and public demand grew up to the point where even in times of economic growth the employment rates can be sinking, what led to the phenomenon of „jobless growth“.
The contradiction between production capacities and demand with enough purchasing power has sharpened with the growing importance of the world market and the evolution of transnational corporations (TNC). Through the „competition of the best“ for world market shares, individual societies are being optimised as „national locations“ in theinterests of the TNCs; in other words, the incomes of the masses are lowered, and public spending on health, social security, and welfare services is reduced. But since the world market consists of the individual national markets, global demand is decreasing relative to production capacity.
Since the remain in the „frog-perspective“ of the single economies the neo-liberal economic theorists propagate an improvement of the supply-circumstances as a key for a dynamic economic growth. Not the total economic demand or even the purchasing power of the masses, but the improvement of the circumstances for supply by reduction of costs, lowering of taxes and deregulation in this logic are the central categories. Thereby it is tried to enhance the international competitiveness, the position at the world market. As a consequence higher profits are expected that would lead to higher investments, increased growth and more employment.
The „world-market“ is something like the promised land for the neo-liberalists, the land of seemingly unlimited (sales-)opportunities, to which all the spare production can be exported. but since all industrial countries are looking for salvation at the world market, that is, on the combined national markets of the other countries, this world-market is getting tighter, therefore competition and the fight to supersede the others are getting tougher, especially, since in this „competition of the best“ for portions of the world-market in all industrial countries wages, social contributions and expenses for public insurance were cut back. The threatening with or the realisation of movement to other countries make the fight of the unions for better wages difficult. In difference to the 70ies in the following decades in the most industrial countries the improvement of the productivity were no longer passed on to employees. In the USA and in Germany for example the real wages remain on the level reached in 1980. Consequently the purchasing power and therefore the potential of the world-market increased only slightly. Instead of the propagated revitalisation of the capitalist economy and a new economic dynamic the growth rates decreased during the 90ies and stagnative tendencies grew stronger.
This discrepancy between demand and supply is advanced especially by the TNC. These did increase – not at last by mergers & acquisitions – their productive capacities far above the average in relation to the world-wide growth. They were the first to utilize investments in the IT- and electronic part to increase their productivity. On the other hand they were able to utilize in global scale cost advantages and to reduce the amount of the costs for wages in their sales radically by building up global production chains (choice of the cheapest location, global cost-dumping), by „global sourcing“ (in connection with massive pressure on the suppliers) and new forms of organisation (lean-production, Toyota-system, breathing factory). Altogether that led to an increasing gap between the production facilities and the purchasing power. On the other hand the TNC reached a elasticity of production that made it possible to lower the break-even-point even further, they reached the verge of making profit already with a usage of capacities of 70 and less per cent. In turn they are able to react to growing demand without employing a relevant number of new workers. This led to the phenomenon of jobless growth and is the reason for the high basic rate of unemployment. There were counter-tendencies to this development in the last decade as well:
- With the implosion of the eastern European Socialism there were opened new fields for expansion of the western capital. In the same direction worked the „policy of opening“ of the VR China and Vietnam as well as the penetration of formerly closed markets by the trans-national capital as e.g. in India. That opened additional markets especially for the TNC for their goods and in the form of direct investments new possibilities to place their spare funds. Rosa Luxemburg already had pointed out this imperialist urge of the capital: „For the productive utilisation of the realised surplus it is necessary that the capital more and more the whole globe to its usage to have the quantitative and qualitative unlimited choice of their means of production“.
- With the forced privatisation of public enterprises and branches in all industrial and developing industrial countries in the 90ies there were created additional areas for the realisation of capital, as well as an expansion in „heterogeneous milieu“.
- In the USA the boom in the last decade was based on a since undiminished purchasing power and urge to consume of the US-citizens, that was still growing on a high level. Although the real wages were reduced by cutbacks of the tariffs and a growing number of precarious jobs; the employees nevertheless compensated the loss of purchasing power by working longer or even taking second or third jobs.
The real fuel for the consumptive power was the enormous readiness of the US-households to indebt themselves that resulted in historical peaks in the debt-per-person and negative records for the savings rates.The thereby initiated and fuelled boom made it possible that the USA with its enormous economic potential – more than 30 per cent of the world-wide economic product – worked as a locomotive for the world-economy in other regions of the earth by importing goods and capital, though this resulted in exorbitant US-deficits in the output-balance. The US-boom therefore in two ways was a boom by debt: Through the consumer-credits and mortgages of the US- consumers and by credits from other countries.
The hausse of the stock-markets since the mid-90ies ignited a second stage of the US- boom-rocket. The excellent prospects of profits of the US-multis encouraged US- and foreign investors to invest progressively more in stock. In addition there was a an increasing amount of money provided by the private pension-insurances that led to an expansion of the pension-funds that invested the money in stock as well. The stock-markets were furthermore heated as a consequence of the financial crises in the developing industrial countries – South-East-Asia, Russia, Brazil – that made the institutional investors withdraw their money from this countries and to transfer it to the stock-markets of the industrial countries, as there the boom still was at its peak.
In the private households the stock-frenzy had the consequence that their savings were invested more and more in stock and investment-certificates or even bought stock on credit and thought themselves rich with the stock going up. That induced the so-called fortune-effect: analyses and calculations have shown that private investors spent 4 or 5 cents on consumption when the stock went up one dollar. Especially in the USA where every second household owns stock this increased the consumption-frenzy. This way the hausse gave the real economy an extra kick.
The privatisation of public industries and of the social security systems has created new fields of exploitation for transnational capital. But it has also led to over-accumulation and to the current crisis in the IT industry.
The privatisation initiated by the neo-liberal governments in the 80ies reached its peak in the passed decade. The privatisation or part-privatisation of public telecommunication companies, public transport (trains, regional and local transport, airlines), public supply companies (electricity, gas, water, sewage), post and other infrastructure- and logistic-institutions, banks and insurances brought new areas of realisation for the TNC and new possibilities for investment and speculation for the finance investors. The UNCTAD named in their World Investment Report 2000 the privatisation-tendencies in all industrial and developing industrial countries as the main reason for the growth of direct investments especially in the form of inter-national mergers & acquisitions.
Especially in the IT-sector privatisation and deregulation had an important part in the over-accumulation and the increase of over-capacities. One just has to be reminded of the investment- and merger-frenzy in the telecommunication-sector, the crazy auction of UMTS-licenses, the new-economy-fever that originated in the seemingly endless possibilities in combining telecommunication and internet. Driven by competition and the prospect of fantastic yield for the leaders in technology and on the market the companies invested nearly limitless in telecommunication, mobile phones and internet, what again increased the circle of innovation. Ignited by the IT-euphoria and great mergers the stock went straight up. The stream of money that was driven by greed into these branches at the stock-market seemed to be never ending. The market potential seemed limitless, the consumers seductable by every innovation and ready to buy. In the past years the IT-branch averagely grew four times faster than the complete economy.
The IT- and new-economy-fever lasted about three years, than the founder-party was over. the old capitalist crisis cycle took over again. A serious over-accumulation-crisis was due. First it hit the start-ups of the new economy that collapsed in rows. But the great companies of the telecommunication branch were not spared. In the competition for dominance in the sector and over the market they had invested too much capital and produced over-capacities in great scale, that were moreover financed by credit in the final phase of the telecom- and internet-fever and the accompanying merger-orgies. The visions about UMTS soon proved to be science fiction, new services and applications could not be developed fast enough. The consumers could not be manipulated to accept every new idea and at least partly did refuse to buy. Others were lacking purchasing power. The consequence were wrong allocations en masse. The drop of the stock-market deteriorated the finance possibilities. The net providers suddenly found themselves sitting on a mountain of debt. The destitution hit the whole sector. The providers cut short their investments, thereby causing a crisis of the equippers as Ericsson, Siemens, Alcatel, Lucent, Nokia and others. With breathtaking speed the whole branch slid directly from boom to crisis. The Financial Times published a „telecom’s job cuts watch“ listing eradicated jobs in the companies since the beginning of 2001. The status at the 14th of May 2002: 539.429 annihilated jobs in the telcommunication branch. Since then further ten thousands followed.
Deregulation and privatisation did not only in the telecom-sector lead to an unimpeded investment-fever and the accompanying over-accumulation. A similar situation is foreshadowed in the sector of energy and supplies, as it is signalled by the mega- bankrupts of Enron and Vivendi. The energy- (electricity, gas, public energy supplement) and water supplement (drinking water and sewer) were deregulated and privatised in nearly all industrial countries.
Because it was integrated in the capitalist profit-economy now the stabilising factor of a public infra-structural sector that could be the starting point of public investment- and employment-programs is lacking.
The collapse of the Bretton Woods system in the Seventies brought an end to the system of fixed rates of exchange and resulted in extremely volatile currencies. In combination with the deregulation and liberalisation of the financial markets, this created new dimensions of financial speculation. The globalisation of the financial markets and of speculation became a reality. The result has been that the real rates of interests have exceeded the rates of growth of the gross national product of the industrialised and newly industrialising countries. One effect is the financial crises in the newly industrialising countries. Since the debtors are not able to pay the interest from real growth but have to draw on their principal, the share of income and assets that would have been available as effective demand for capital and consumer goods dwindles.
Financial speculation is not new, new is only its dimension and its global acting. Necessary conditions were the change to variable exchange rates, liberalisation and deregulation of the financial markets and the creation of innovative financial instruments, e.g. derivates. But where do these immense – and growing – amounts of money come from? They are the result of enormous redistribution of income in favour of the profit- and fortune-incomes due to neo-liberal supply-policy. The growing profits find less and lesser investment-possibilities in the real sphere of the economy because of the structural weakness of the demand (permanent cutbacks on the purchasing power). Over-accumulation of the financial capital leads to a relative disengagement of the financial sphere from the real economic development. The surplus financial capital is the basis of the fast growing financial speculation that manifests most obviously in currency- and stock-speculation. Thereby the values at the stock-markets are blown up to mainly substance-less bubbles and whole currencies can be pushed over the brink.
„When the real interest in the average lies above the rate of growth of the gross national product and above the rate of profit on capital in vested in the industrial or the service sector, that means that increasingly less debtors are able to pay their debts from the surplus, because the interest rates are higher than the growth of the gross national product and averagely higher than the rate of profit. When the interest cannot be paid out of the real surplus, they can only be paid out of the substance. Somewhen the bottom is reached and the finance crisis begins. If the money flow always leads from debtors to debitors, that is, to the owners of fortunes, the disparities in the world are growing. If one group always pays their debts to the other group, that means that the first ones always become poorer and the others always become richer“ (Elmar Altvater, isw-report 52, S. 6).
The result is that no new values are created but by the means of interest rates and profits of stock- and currency- speculation still a redistribution of money in the favour of the wealthy financial investors and owners of monetary fortunes takes place. The main actor on the financial markets and the field of speculation is the international financial capital in form of international investment banks and other institutional investors: investment- and pension funds and insurances. By the over-dimensioned international speculation in combination with the entanglement of the finance markets the risk- potential of the finance markets, their inner instability is growing. If the bubbles of speculation burst, the chains of credit are breaking and for the real economy the consequence are risks and shock as well. This proved true in Japan when 1989/90 the stock- and real estate-bubble burst and the banks since then are burdened with a mountain of foul credits.
The interest rates and the speculative capital can disengage relatively, but not completely from the real economic sphere. It dominates and dictates this sphere at the same time. This becomes obvious in the power of the institutional investors over the companies in the real economy and in the dictate of the share-holder-value- orientation. It becomes visible when the international financial capital dictates the policy of developing industrial countries, but in the household-policy of industrial countries as well, that are more and more bound by the „law of the markets“. Mobility and time of reaction of the international investors grew immensely because of the deregulation of the finance markets in connection with new communication technologies. International credit institutes and institutional investors can speculate all over the world and around the clock. Therefore if the economic situation in a country is getting worse that can lead to a rapid withdrawal of capital in great scale. That makes the finance and investment planning of companies and countries difficult and includes the risk of shortages of money and liquidity. Through finance- and currency-speculation the international financial capital induced the crises in the south-east-Asian „tiger“-economies and in the Latin-American developing industrial countries. The reasons for finance- and currency-crises still are the „fundamentals“, the so-called fundamental economic figures of companies and national economies. The movements on the finance markets, and even more the financial speculation, take these disparities as a starting point and add to their instability. The consequence are high volatility (rate of fluctuation of the currencies in the run of time), „overshootings“ (speculative exaggerations) caused by the money concentrated in the funds and in the hands of major speculators („trendsetter“). Financial speculation and global indebtedness under these circumstances are additional global factors that can induce crises.
A growing part of the whole economy, and of the economic behaviour of private households as well, now depends on the fluctuations of the stock markets. This amplifies the business cycles, both in booms and in depressions.
Transnational companies today are mostly financed over the capital markets, especially by the emission of stocks. During the merger-fever in the past years stock became a „currency of acquisition“, mergers and take- overs were largely financed by swapping of stock. That made the stock go up and heated the stock-fever. With the drop of the stock-market this financial sources mostly dried out. The TNC had to use company loans to get money, thereby increasing their debts rapidly. Alone the European telecommunication providers were indebted with 400 billion Euro in the middle of 2002 and now are forced to reduce their investment plans massively. They reduce costs mainly by substantial annihilation of jobs.
Because of the cutbacks in the public pension insurances the private households additionally had to invest in capital-based pension-insurances: in the form of life-insurances, company- and other pension funds (especially in the anglo-saxonian countries).During the boom the life-insurances, funds and company pension insurances invested their surplus mainly at the stock-market. The legislator had raised the limit for the coverage with stock a few times. Now, in the baisse, the life-insurances are in mortal danger themselves: Quite a few of the private insurances and company pension insurances have billion-gaps in their coverage. Some insurances can not pay the guaranteed interest of 3,25 per cent on life-insurances at the end of the year. With bankruptcies in the USA like Enron and Worldcom company pension insurances completely vanished. Now insurances and institutional investors flee the stock-market in great haste and thereby bring down the stockrates further. With the baisse of the stock-markets the monetary situation of many private households deteriorated as well. During the boom the number of private shareholders increased rapidly. Especially people who got on the train lately or bought stock on credit lost a serious part of their fortunes or are indebted. Altogether the enormous annihilation of stock-fortunes now resulted in a negative „fortune-effect“ in the opposite direction. Economists predict for the months coming a serious reduction of the consumption of the private households. An analysis ordered by the OECD shows that the demand shrinks about 0,45 to 0,75 per cent (about 0,5 per cent in Great Britain and 0,2 per cent in Germany) with a sinking of the stock-rates about ten per cent. In Germany the so called „cash-burning-rate“ is lower than in the anglo-saxonian countries, because here only every fourth household owns stock, while in the USA more than half of them.
Due to the dominance of institutional investors and investment banks, corporations are becoming more vulnerable in crises. Transnational companies today are mainly dominated by national and international institutional shareholders. For them the benefit of the owners has absolute priority, it is enforced without care for the interests of the employees or social or ecologic consequences. The only goal is the maximization of the shareholder-value in form of a rising of the stock-rates and dividends. By benchmarking (the comparison with the best of the branch on the world- market) the institutional investors are enforcing yield expectations in the companies that are orientated at the highest global results. Boards of directors and managements, stimulated in the same direction by stock-options, hand the pressure on to the staff. By concentrating on the so called essential business it is tried to reach a pole position in the world-ranking of the branch. Less profitable parts of the company are sold, an internal subvention is no longer allowed. By take-overs, mergers and acquisitions they try to reach a dominant position at the market and the monopolist ability to dictate prices.
All that makes the companies vulnerable for crises. Monocultures make the balance of risks in case of a structural crisis of the branch impossible. The unconditional merger-fever to reach the position of a monopolist includes the danger of getting too deeply involved in debt, as it happened to the telecommunication-companies, but as well to some companies in the automobile industry. These companies completely became the prey of the financial capital. The increasing financing of the TNC on the capital markets makes the companies more dependant of the fluctuation of these markets. This results in the current baissesituation in the depreciation of the acquisition-currency „stock“.
In the course of globalisation, the intermeshing of trade and capital between economic regions has increased greatly. In this economically integrated world, the business cycles in individual national economies are moving more and more in step. The weight of the US economy is crucial here: if a real recession occurs in the USA, then a world-wide depression results, a crisis of global capitalism.
The global stock-markets are all swinging in tact with Wall Street. Every noise there induces an earthquake at the European and Asian stock-markets. A study of the IMF shows the high correlation of the US- and the European stock-markets: The correlation-factor has risen in the 90ies from 0,4 to 0,8. The high dependency of the rest of the stock-markets can be deduced from the weight of Wall Street, where all the leading TNC are notated. The stock capital of NYSE and Nasdaq together is bigger than the added stock-capital at the rest of the world stock- markets.
The entanglement of the finance markets has its equivalent in the goods economy. The world trade rises and falls mainly with the US-imports, about a quarter of the world-wide imports. Especially the exports of the regions Latin- America, the rest of the NAFTA-countries and South-East-Asia heavily depend on the consuming capacities of the US-market. But the overseas trade of the EU with the USA (and the whole dollar-zone) grows much faster than the internal trade in the EU. Altogether the USA had the function of a locomotive for the world economy in the 90ies. A sinking super-tanker USA on the other hand would draw the world economy into the abyss. More important than the entanglement of the world trade in general and especially between the USA and the EU is the exchange of capital between the triade-regions. While the world gross product grew from 1990 to 2000 about25 per cent and the exports all over the world increased in the same time about 85 per cent, the direct investments multiplied six times from 1990 to 2000.
In the triade the economic regions Northern America and EU are dominant. They produced in 2000 nearly two thirds of the world economic output and 87 per cent of the exported direct investments. The entanglement of capital between this two regions did increase immensely in the 90ies and has nearly the character of a trans- Atlantic trade region. The USA as the world greatest single investor have spend in the past decade nearly a billion dollars (997) in form of direct investments in other countries; more than half of it (55 per cent) in the EU. The direct investments of the EU were about fifty-fifty between in-block-investments and exterior investments. About 55 per cent of the exterior investments were spent in the USA.
The growing entanglement between the two north-Atlantic economic regions leads to greater consequences on the course of the economic cycle with this giants than it is mirrored by the mingled trade flows. The sales of the US-subsidiary companies in Germany did already five years ago exceed the US-exports to Germany about four times. On the other hand the sales of subsidiary companies of German TNC in the USA were four times higher than the German exports there, with English subsidiary companies it was even five and a half times the export of Britain into the USA. If these sales and profits are dropping because of a economic weakness in the USA that has consequences for the profits and investments of the main company. And the other way round. Economic fluctuations in the different countries therefore have direct effect on the associated TNC.
In contrast to the Great Depression of 1929, in the current crises no relapse of the main economic powers into protectionism is to be expected. The level of internationalisation and global interlinking of capital would presumably doom any attempt to isolate a single economy. In every crisis the weaker capitals are the first victims of the struggle to supersede and to destroy. This became obvious in the economic crises in the developing industrial countries – South-East-Asia 1997, Brazil 1998, Argentine 2000/1, Turkey 2000/1, Brazil 2002 – whose rise to the world-league of the capital was mostly financed with credits and who had no chance against the competition of the multies when the markets became tighter.
As a result of the crisis and with the instruments IMF and World bank the – partly still sealed off – economies were opened and prepared for the expansion of the transnational capital. The IMF dictated with its programmes the privatisation of public companies and infrastructure that then could be taken over by the TNC. The saturation of the world by the trans-national capital became a new push after these crises.
Even the „fortress Japan“ could no longer seclude itself during the enduring crisis in the 90ies, it was largely razed. The Japanese automobile industry e.g. today is nearly completely in the hands of foreign multies. Even with the word-wide recession that is a fact since one and a half year with its current „double-dip“ there are no steps of the main countries in the direction of a serious protectionism to be noticed. This cannot be refuted by the occasional trade conflicts as e.g. the steel-quarrel and the agricultural or farmer-„wars“. Moreover, because of far reaching exemptions for the EU and Japan the „steel-war“ was merely a shooting with blank cartridges.
In difference to the mainly trade-based internationalisation at the eve of the world-wide economic crisis 1929 till 1932 the globalisation today is mainly based on a merge of the capital. The invention of protective duties and trade barriers as it was done then would be without consequences because of the network of main and subsidiary companies all over the world. The network of trade-, capital- and financial connections is so complete today that no industrial country can step out without risking existential economic danger. The multies have reached a magnitude that makes it necessary for them to utilise the whole globe as a market. Even the USA, the country with biggest interior market, would have problems today to draw back to the position of „splendid isolation“, to autarky and protectionism. The world-economy would fall into chaos if the USA would for example cut the flow of trade and money to and from their country or the transactions between the US-multies and their 8.000 subsidiary companies all over the world. Therefore the USA as well will go on to integrate the national markets in one unified and uniform world-market.
The function of a depression is the massive annihilation of capital and thus of the overcapacities, and the re-establishment of the balance of production potential and purchasing power on a lower level. The most obvious annihilation of capital took place in the beginning world recession in 2001 in the new economy. Over-capacities are eradicated, profitable enterprises or enterprises with the prospect of being profitable are being taken over by the great companies. Of the 9.000 counters of the Nemax today only 300 are left, now the „new market“ is buried completely. The capital intensity of these dotcom-, e and @-firms is rather small, the annihilation of the capital therefore not very relevant for the economy. In great measure the shut-down of the capital in high-tech-sector begins, especially in the telecommunication branch, where it is still in full progress. A covered annihilation of capital currently takes place in many sectors by not using or reduction of capacities, that means by not-production.
In all capitalist industrial countries there still is to be noticed an increasing number of bankruptcies, that now – especially in the USA – reaches the bigger companies. In Germany this year the biggest wave of bankruptcies of all times takes place. Insolvencies like Holzmann, KirchMedia, Babcock and Fairchild Dornier show that middle and big companies are not spared. And with every bankruptcy hundreds and thousands of jobs are annihilated. With the tide of bankruptcies a continuance of the merger process is programmed. The survivors will take over the insolvent companies and cut them up. The circle of companies is getting smaller, the giants will come out even bigger and mightier. In the telecom-sector e.g. the public monopoly providers will be replaced by private telecom-companies.
The anticyclical capabilities of government economic policies have been amputated as a result of neo- liberalism. For the neo-liberal politicians with their supply-side strategies and their clientele, the wealthy, monetary stability is more important than employment stability. Even facing a second drop into recession („double dip“) the EU governments are sticking to their „stability pact“. The few instruments of anti-cyclical policy soon reached their limit in the USA during the crisis 2000/2001: nearly monthly the interests were reduced by the US-Federal Reserve Bank – with 13 a new record – and considerable tax-reductions made by the Bush-administration. They did further stimulate the consumption of the US-citizens and possibly prevented the breaking of the credit-chains. But they ignited only a short-living effect. For a lasting upward circle, especially concerning the investments, the impulses proved to be to weak. The low-interest-policy could even have been a factor in the establishment of a new speculation bubble on the real estate market.
Possibly now the Bush-administration now looks for a reactionary way out of the crisisdilemma by utilizing an armament-Keynesianism through the continuing of the „war against terror“ and a offensive warfare against Iraq.
The governments in the Euro-zone have bound their hands even more effective by the stability pact. An European employment program for example by „deficit spending“, an anti-cyclical economic policy, is prevented by the dogma of the consolidation of the household. This is the course of the newly elected German government as well. Instead of taxing the rich with an effective inheritance-tax and the re-invention of the tax on fortunes, the government tries to cut the expenses on the cost of the unemployed and the social welfare and through a further cutback of public investments and service. This is the policy of the German Reichskanzler Brüning (1930-1932) who had heated the economic crisis by a brutal program of emergency decrees and a pro-cyclical deflation policy.
Due to globalisation, we now face the threat of a return of that much-feared type of crisis, deflation, the vicious circle of wage cuts, price cuts, and a sharp increase of mass unemployment that finally ends in a full-fledged depression.
Deflation and in its wake depression had been the classical case of an economic crisis that regularly harassed the capitalist economy. The last – then already global – depression was the worldwide crisis 1929. The first phase of a more or less „normal“ over-capacity-crisis was followed by the real drama of the crisis with a crash of the stock-market and the following downward spiral: deflationary fortunes, breakdown of the national demand, sinking prices everywhere, sinking wages and dismissals, shrinking profits and investments. Consumers and companies are caught in debt, bankruptcies of companies and as a consequence the breakdown of banks, a rapid increasing of the unemployment rate, at that time from three to six millions in Germany. The government reacted on the sinking revenues with a radical policy of saving – the austerity-policy of Brüning – and thereby fastened the downward circle.
Since then we had no deflation. The crises of the after-war-period were marked by other factors: Although the sales shrank and in spite of over-production the prices still increased. In the crisis 1974/5 e,g, the automobile companies even raised the prices more than once – although thousands of vehicles were in their storage. The companies could prevent the sinking profit usually connected sinking sales on the more or less closed markets, a phenomenon that earned the name „stagflation“ (stagnation plus inflation). While the profits of the small and middle firms were sinking, 15 of the 20 biggest industrial companies registered considerable growth of their profits. The monopolist capital was able to hand on the costs of the annihilation of capital in a way that made the crisis only for the not-monopolistic parts of the capital a crisis of sinking profit.
The dangers of a new arising of deflation come with the globalisation and the connected international competition of the TNC. In difference to the national monopolies the TNC have – with few exemptions – a relatively small power to dictate prices. To improve their „ability to compete globally“ there is exercised a permanent pressure on the wages and in a competition of locations all standards are dumped. With stagnating sales there is a grave danger of wage-lowering races. The increasing globalisation of the national economies and in connection with that a entanglement, opening and deregulation of goods- and capital-markets can have the result that because of the intensified international competition these races to reduce costs end in price-wars. The trigger for deflation could be the over-capacities that the companies build up in the past years and that are now bear down on the prices. Growing deflationary tendencies showed during the past years in the lasting Japanese crisis. They occurred as well in the developing industrial countries, e.g. in the South-East-Asian tiger-crisis with a race of devaluations and a following race of price-reductions for export-goods. As an argument against this it is said that the capital- and production-structure is different today. In spite of the globalisation and the accompanying increase of the competition the TNC show a new quality of concentratio of economic power. This makes it possible for them to intensify the pressure on the suppliers and the sales organisation and by this secure their own profits. Furthermore the elasticity of the production has grown so far that they reach the zone of profit without utilising as much of their capacities as earlier was necessary.
The recessions are rapidly increasing the social inequalities in the world: they are deepening the gap between the leading capitalist countries and the periphery, and intensifying the polarisation within industrialised countries. The social and economic costs are greater and greater from one business cycle to the next. This form of economy costs nature and humankind too dearly. With the busting of the bubble of speculation at the stock-markets no capital is annihilated, there only nominal worth is burned. There merely the inflated notations are adjusted to the real worth of the companies. The losers are the late-coming small investors who, attracted by the seemingly everlasting boom, wanted to make a fast Euro as well. They bought when the stock-rates were at their peak and now realise that stock-rates can be rapidly sinking. They are the real losers of the stock-speculation. Since the number of shareholders doubled in the past three years in Germany alone these are not few. Their money is not gone or eradicated – it is only in the pockets of others. Usually it is in the account of some bank, a fund or other speculators. A crash of the stock- market always has the result of a re-distribution of monetary fortunes. By shortselling the hedge-funds- speculators and their clientele, the monetary multi-billionaires, even or especially during the baisse. The parasitical character of the system shows most extremely here. But not only the small investors have to pay in times of crash or crisis. The bill is paid as well by
- the tax-payers who have to pay the billions the IMF needs for its saving actions when it is rescuing the banks and funds that have invested in the developing industrial countries
- the taxpayers who have to pay for the sinking revenues when the banks are writing off their foul credits and saving actions for hedge-funds (LTCM) and other institutional investors
- the people in the „third world“ who have to bleed for the debts of their countries and the payments to the international financial capital, with the consequence of cutbacks in the expenses for social welfare and health systems and intensified exploitation
- the employees who e.g. in the cases of the Enron-, worldcom-, Siemens- and Daimler-pensions-funds have to fear for their pensions
- the owners of pension-funds-shares and life-insurances, whose old-age-insurance is endangered
The crises in South-east-Asia, Latin-America and other developing industrial countries furthermore make obvious: A development making up with the disparities is impossible under the circumstances of the capitalist globalisation. All those countries were pushed away from the doorstep of the club of the industrial countries. The hegemony of the TNC is global and total. Only „isles of productivity“ in the countries of .the periphery have the chance to rise above the ocean of poverty and misery and can become part of the international resources network of the TNC. Otherwise the global „Apartheid“ will be intensified.
But in the industrial countries the polarisation between rich and poor increases faster with every crash of the stock-market and every recession as well. More and more private and public households, but increasingly productive companies as well, have to get deeply involved in debt and become prey for the monetary capitalists. With the sinking into recession, but already with the downward circle with a slowdown of the growth the number of unemployed is rising. This can not be camouflaged by increasing the number of part-time-jobs and cosmetic corrections of the unemployment statistics. Because of the progress of productivity and the one-sided appropriation by the owners of the TNC (institutional investors) a decreasing number of people is needed to produce the economic values. The people are being robbed in a global dimension of their dignity, their creativity and the possibility of self-realization
What opportunities are there to protect the vital interests of the people against the TNCs and global capitalism, to pursue economic policies in the interests of the people, and to act against the imperialist war machine?
- It is an illusion to believe in a national strategy against the globally operating capital if one counts on the „national“ great capital to fight against the global capital dominated by the USA. The 100 biggest TNC from the USA, the EU and Japan realised more than half of their sales abroad, the USA are the largest single market and New York is the main financial market for most of them. The great capital – TNC and financial capital – are no longer structured national, but global. Therefore it is wrong to speak of an European structure of the EU-capital and to think it would develop a particular European strategy. The main part of the exports of goods and capital from the EU-countries goes to the dollar-area, as it is increasingly the fact for the USA vice versa. We view an increasing integration of the global capital, especially of the trans-Atlantic complex USA/EU, with a „natural“ centre of gravity in the USA, where one third of the world social product is produced. Therefore it is only possible to fight the inhumane logic of the neo-liberal global capitalism by fighting each national compartment of capital.
- This fight has to lean on the workers and employees who are at each national place of competition the victims of the neo-liberal policy, and on the growing number of people who are not willed to bear their own precarious situation as well as the worldwide „costs“ of neo-liberalism – hunger, poverty, racism, war. An ally in this fight could be the „middle-classes“, these small entrepreneurs who are dependant on national and regional markets. The fight of these classes and groups has to accept to premises:
- The margin for reforms in the neo-liberal system is extraordinarily limited. In midst of the neo-liberal globalisation the political struggle at once gets a principal dimension, as every question touches the focal point: Should the economy and the society be treated as an element in the competition on the world market or should it be used in the interest of the people who live and work here. Every relevant demand against the neo-liberal system will meet the unwavering resistance of the neo-liberal great capital, that dominates the economy, most of the political parties and the media. Through the established parties, universities, media etc. the fight is therefore only partly possible, the movement against neo-liberalism has to develop independent forms of organisation and mobilisation and reform-movements as e.g. the unions have to review their position in the public encounter. This of course is no academic debate, but the in itself a product of the imminent conflicts.
- The global entanglement of capital is the main reason that every resistance in one country at once meets the full force of repression of the global capital. An isolated lasting „national success“ is therefore impossible. Nevertheless we have to use and enlarge in global partnership with the meanwhile international resistance every national and regional room to fight. As the British organisation „global resistance“ puts it: „Global resistance – regime change begins at home“. Every national progress improves the circumstances for all and is on the other hand dependent on the progress in other countries. In Brazil the activities of the opponents of neo-liberalism were the reason that Lula won the elections, and this will strengthen the resistance of the whole continent against the US-plans to create one single, US-dominated American market. On the other hand Lula will only be able to enact a real anti-neo-liberal policy as far as the resistance of Brazil gets international assistance. This dependence of national and international progress is even bigger the more the national societies are supra-nationally united like e.g. the EU.
- The necessarily basic and global character of the resistance against neo-liberalism shows most evidently in the question of war: The global expropriation by the TNC and the financial capital today needs always the military threat, because and as far as the collaboration with the local elites in the poor parts of the world no longer works. The political partners of the global capital have lost their credit with their people or are facing this political bankruptcy. Therefore the grip on the dwindling resources more and more gets a military character – in the form of wars, implementations of protectorates etc. The military is transformed according to this logic into global mobile task forces with matching weaponry. Especially in the question of war the national and regional possibilities for the peace movement are considerable and diversified. Large they are because in the question of war or peace the antagonism between the vital interests of „normal“ people and the abominable strategy of the global capital and its governments become most obvious even for the people in the industrial countries. Diversified these possibilities are because the interest of the national compartment of the global capital in a war can be different, the risks for one nation are smaller or bigger and the historical attitude towards war in general and a concrete war as well can be different. These various possibilities must be used by the national resistance movements, without forgetting the most important point, the international coordination and the common aims in the fight for peace. The critics of the neo-liberal globalisation have to realize that militarisation and war are the current form of the global capital, the fight for peace therefore is literally a fight on terms of life or death with this global capital.