One of the problems in writing about this particular crisis is that it is moving so fast that before you get to the final page new events have happened which need to be taken into account. In the space of a few days the government took a majority shareholding in the Lloyds HBOS Group and unemployment figures for the USA show that 650,000 American workers were thrown out of work in the month of February. In Britain the banking crisis is getting worse and the CBI predicts that one in ten workers in the UK will lose their jobs during 2009.
My purpose is not to attempt to list every event but to look a bit deeper into a number of aspects of the crisis: its general character; the governmental responses; the turn to interventionism; the role of Obama in the USA; the role of Brown in Britain; nationalisation and what it represents, and the response of the working class in Britain to the crisis. It ends with a discussion as to how the left should respond to the crisis, its attitude to government policy, and the kind of demands it should put forward.
1) The origins and severity of the crisis
The origins of the crisis are arguably the most straightforward aspect of it. Two and a half decades of casino capitalism: speculation, deregulation and privatisation, under Regan and Thatcher — backed up by Blair and Brown and the rest of them — created a speculative bubble which turned into a credit and banking crisis when the US sub-prime mortgage market, where the most reckless lending regimes were located, collapsed. This brought the global financial structure to the verge of meltdown.
There has also been an ongoing debate as to the severity of the crisis — though most, on all sides, now accept that it is the biggest crisis since the 1930s (though it is not yet on the scale of those in terms of its social effects), which is rapidly moving towards a deep global recession and probably depression. Dramatically escalating bankruptcies, redundancies, unemployment, and house repossessions, across the globe, make the point clearly enough. We are still at the early stages of the crisis, however, and it is far from clear how far it will go. What is clear is that we stand right on the verge of a major escalation of the effects of the crisis in terms of job loss and redundancy.
The context of the crisis is the unstable economic conditions brought about by the end of the post-war boom in the mid-1970s. These conditions produced a number of severe regional crises over the last 15 years, including the Mexican crisis of 1994, the Asian crisis of 1997, the Russian crisis of 1998 and the Argentine crisis of 2002. The current crisis, however, is qualitatively different and far more globally significant than any of these. This time it started in the capitalist heartlands of the USA and in Europe.
Although it started in the capitalist heartlands its impact on developing countries has been enormous. In China manufacturing for export has been hit hard both by the fall-off of demand from the west. In Latin America the crisis is expected to increase unemployment by 3 million during 2009.
2) The character of the crisis
It is not just one crisis, of course. The banking crisis coincides with other major global developments which increase its severity and make it far more difficult to resolve or even mitigate. These can be identified as follows:
First there is the impact of emerging countries such as China and India — particularly China since the full restoration of capitalism. The explosive growth of commodity production in China, with its vast labour force under repressive conditions, has been sucking in raw materials, in recent years, from across the globe, particularly oil and steel. This has contributed to a generalised rise in commodity prices across the globe which has hit the living standards of the poor. (In fact China is a crucial player in the situation since it has funded the credit bubble in the USA for nearly two decades by purchasing huge amounts of US treasury bonds. If China sold these bonds the dollar would collapse).
Secondly, the approach of peak oil — or, to be more precise, the beginning of the end of oil reserves which are easy to extract — is another major development and alters the basic arithmetic for oil-based economies. It was the major factor behind the invasion of Iraq, of course, and is the reason US bases are likely to remain after ‘withdraw’.
Whilst the crisis has brought the price of oil and gas down the upward pressure exerted by peak oil will remain long term. The conditions of the 1990s where the price of oil fluctuated between $10 and $20 a barrel will not return. The policy of OPEC is to cut production in order to push the price back to around $70 a barrel even during the crisis. Peak oil, therefore, represents a sea change in energy costs for the future.
Thirdly, and most significant, is the ecological crisis and global warming. This is linked directly to the economic crisis of and contributes to making it a systemic crisis. This is ultimately a crisis of much greater significance than that of the economy. Global warming is expanding the deserts, melting the icecaps, drying up rivers, and destroying water reserves. It is disrupting agriculture and reducing agricultural productivity and crop yields. The impact on food prices is obvious. Bio-fuel production compounds the problem by turning food into petrol (ethanol based on sugar and diesel based on vegetable oil etc) and tying up large tracts of land in the process. All this produced food riots in 37 countries during 2008.
Another effect global warming has on the economic crisis is through the impact of extreme weather events on the insurance industry and through it into the banking crisis. Hurricane Katrina is a prime example. It is not difficult to see what the effects of a Katrina type event would have if it happened now with the banking system in a state of collapse. Big resources are also increasingly required in order to adapt to climate change — even with the most optimistic emission reductions.
The fourth factor is the unprecedented level of globalisation of the world economy. It is not just that the world economy is more integrated than ever before but with the collapse of the Stalinist regimes of the Soviet Union and Eastern Europe at the end of the 1980s and the full integration of China into the world economy since then capitalism now covers the whole globe. Cuba is politically significant but economically irrelevant to the global economy. This makes it a very different crisis to that of the 1930s, which was at a more primitive stage of globalisation and which had the Soviet Union outside of the system.
For all these reasons this is not a ‘normal’ cyclical crisis, of the capitalist system — although all the contradictions of the system, traditionally identified by Marxists, which drive such crises exist with full force within it. This is clear in that none of the post-war economic models — Keynesianism, monetarism, or its later neoliberal form, were able to avoid periodic crisis of ‘over-production’.
The dual character of the crisis also has implications for the long-term solution we propose as socialists; in other words an ecosocialist solution. We have to argue that capitalism in crisis points towards the need for an alternative society, built by and in the interests of the working class, which is at the same time ecologically sustainable.