I’m
going to start with what might seem like an overly cute
formulation. I’ll try to justify it, and if I don’t,
then you can throw various objects at me. But the
formulation is: The crisis is over, the crisis continues. I
say that because most the commentary we get about the
crisis—which began in the summer of 2007 and then really
erupted big time in the fall of 2008—focuses on a
particular phase of the crisis and says, “Oh, that’s
over, therefore the crisis is over.”
My
argument to you, hence the title here, is that this is a
mutating crisis. This is a crisis whose weak link keeps
shifting, and as a result, we need to see it in all its
dynamism—the way in which it keeps mutating and generating
new kinds of illnesses within the system, so while it looks
like the last one has been cured, in fact, all they’ve
done is move the damage somewhere else.
That’s
really the essence of what I’m going to be developing for
you—and hence the term for the book I’ve got forthcoming
on this topic:
Global
Slump.
I deliberately didn’t say a single crisis, because
in fact we’re talking about a long–term slump within the
system, which is a series of crises taking different forms.
I
say the crisis is over and the crisis continues because for
the moment, the banking and financial crisis of 2008–09
has been averted. The freefall was stopped, and the collapse
of investment banks and meltdown of financial institutions
around the world has been halted for now. I say for now,
because there are a lot of unknowns down the road, starting
with Europe’s banks, and maybe I’ll get a chance to say
a bit more about that. But I want to remind you for a moment
about the severity of that crisis and then talk about how it
has shifted in form.
The
severity of the financial crisis
You
know that you’ve been living through a very profound
crisis in the system when a whole series of different
cultural markers emerge that indicate this. Some of you may
know that about a quarter million jobs were lost in the
financial services industry, predominantly on Wall Street,
in the course of 2008 as banks collapsed. A number of
gallows–humor jokes started to make the rounds in the
investment community in New York City, and I’ll share with
you my favorite, from fall 2008: How do you start a small
business? Buy a big one and wait.
When
that kind of joke is making the rounds through the
investment banking community, you know things are bad.
Another example of the gallows humor: How do you define an
optimist? An investment banker who irons three shirts on
Sunday night.
Those
are some of the markers. The more serious ones: In March
2009, the Financial Times, arguably the most
important English language financial newspaper in the world,
started a series called “The Future of Capitalism”—as
if this was now an issue. Let me just quote you a couple
passages from the editors of the Financial Times as
they launched this series: “The credit crunch has
destroyed faith in the free market ideology that has
dominated Western economic thinking for a decade, but what
can and should replace it?” The next day, they wrote,
“The world of the past three decades is gone.” (By the
way, I think they’re right about that, and I’m going to
speak to that as I proceed.) And then they proceeded to
quote a Merrill Lynch banker, who said, “Our world is
broken, and I honestly don’t know what is going to replace
it.”
That
gives you a sense of how within the mainstream, the most
serious financial analysts understood the gravity and the
profundity of what was happening, and that there was a
seismic shift—as if the tectonic plates of global
capitalism were shifting, and they didn’t know where we
were going to be when that shifting stops.
But
perhaps the one thing that sums up the ruling–class panic
best was the spoof front page of the Economist from
September 2008, after the Lehman Brothers bank collapse. The
Economist had a two–word front page: “Oh Fuck!”
This was the largest corporate bankruptcy in world history.
You
thought Enron was big when it went under, owing about $60
billion. Lehman Brothers went under owing about $635 billion
to its creditors around the world.
So
that’s the context, and what it generated was the most
massive coordinated central bank intervention into the so–called
free market system in the history of global capitalism. We
don’t know the exact amounts, but the conservative
estimate for the size of the bailout packages that comes
from the Bank of England is around $14 trillion. That’s
around the annual output of the American economy.
Once
you then factor in the additional $1 trillion they decided
to throw in for good measure a number of weeks ago in Europe,
and you start factoring in the stimulus packages and so on,
we’re probably in the area of a $20 trillion intervention
to bail out and stabilize the system.
This
was the scale of the ruling–class panic and, as I say, it
produced something unprecedented in the history of the
system. Never before had world central banks coordinated an
intervention like this and on this scale.
But
what they did in the course of this was simply push the
problem out of the private banks and into the public sector.
They socialized the debt—they made taxpayers take on the
burden of all the toxic waste that the banks had been
selling and holding onto. But in doing that, they raised
huge questions about the long–term viability of government
debt. So we’re now getting these socalled “sovereign
debt crises,” which has been particularly profound in
Europe, with Greece at the forefront.
In
other words, it isn’t the case that the crisis disappeared—
it simply transmuted. It changed forms, and we’re looking
at a different front. Every now and again, you get a serious
mainstream description of what has happened that’s worth
holding onto. I say description, because the theory is
rubbish. All the mainstream theory is totally useless at
making sense of anything that’s happening. But probably
the best description in the mainstream comes from a book
called This Time Is Different: Eight Centuries of
Financial Folly, which makes fun of the idea that this
crisis is different from the others. The coauthors Carmen
Reinhart and Kenneth Rogoff write the following:
“The
global financial crisis of the late 2000s, whether measured
by the depth, breadth, and (potential) duration of the
accompanying recession or by its profound effect on asset
markets, stands as the most serious global financial crisis
since the Great Depression. The crisis has been a
transformative moment in global economic history whose
ultimate resolution will likely reshape politics and
economics for at least a generation.”
I
think that’s exactly right. We are talking about an
epochal shift, an absolute redefinition of a whole political
period. I want to give you a few markers for the analysis I’m
going to develop in the rest of my time, just so you’ve
got some sense of where I’m coming from.
Systemic
crisis
My
view is that this is the first global and systemic crisis of
the neoliberal phase of capitalism. When I say it’s
systemic, I mean that it’s not just a crisis in one
sector. It’s not just a real estate or housing crisis. It’s
not just a banking crisis. It is a systemic crisis.
Capitalism is struggling to reproduce itself on an expanding
scale, which is the essence of the system —it must do that
or perish, and it’s struggling to do that as a system.
The
second underlying premise is that such crises are the result
of prolonged periods of growth within the system.
I
want to emphasize that because there has been a tendency for
many commentators on the left to say that this is just the
latest phase in a forty–year crisis. I don’t believe
this. I think all the evidence shows that the two big
recessions—1974–75 and 1980–82, though in some
countries, there was actually a third along the way—and
the ruling–class offensive that they triggered did, in
fact, shift the balance of class forces massively in favor
of capital, so they were able to increase the rate of
exploitation and launch a new wave of global accumulation,
which ultimately became centered in East Asia, with China
being the most important evidence of this.
This
shouldn’t be surprising. For those of us who take Marx
seriously, the dynamism of capitalism—its very
growth—produces profound crises. I don’t accept the idea
that for forty or fifty years, the system had just been
stagnating. Growth drove us into this crisis.
The
first sign of this crisis emerged in 1997, not surprisingly
in east Asia, precisely where growth had been highest. You
got the so–called Asian crisis, which was very profound
and very deep. After that, there were a series of other
crises: Russia, Argentina, Brazil, the collapse of one of
the largest hedge funds in the United States, and so on,
after which central banks led by the Federal Reserve in the
United States massively stimulated the system, driving down
interest rates. That produced a great asset bubble,
concentrated first in the dot–com sector, and later in
housing, and so on. And the bursting of one of these bubbles
would be the trigger for the crisis that emerged in 2007.
But
triggers aren’t the same thing as the whole story. They
influence the timing and the sector where a crisis emerges.
It didn’t have to be real estate. It could have ultimately
happened somewhere else. But that’s where the big bubble
burst, and that’s where the underlying weaknesses within
the system got exposed. As a result, we are—I agree with
the commentators on this—in the second great contraction
of modern capitalism.
The
crisis behind the headlines
Overall,
these premises go against the grain of so many of the
pundits on the business news channels and in mainstream
newspapers, who are telling us that the crisis is over. So I
just want to move through a few headlines from this moment
and—if you’ll pardon me using the slightly
post–modernist term—deconstruct them for you.
I
do that because I think we need to map where we are with
this crisis, and then I want to talk about how the system is
supposed to be able to get back on its feet right now. In
other words if it’s true that the crisis is over, where is
this resolution coming from?
Let
me give you a few headlines. This one appeared a few weeks
ago, from Thomson–Reuters: “U.S. corporate profits up
206 percent in the fourth quarter of 2009.”
True.
This is a factually correct statement. But what doesn’t it
tell us? It doesn’t tell us that if we remove financial
enterprises—banks, hedge funds, and so on—profits are
only up 18 percent, not 206 percent. And by the way, when
you’re a bank hovering on the verge of bankruptcy last
year, being up 206 percent is not so astronomical.
The
reality is that profits today are still below the peak of
the last expansion, by a very considerable margin. There has
not been, despite the attacks on the working class—the
concessions that the United Auto Workers gave up, the big
wage cuts that have come in one sector after another, the
leaning of production throughout the course of this crisis,
and so on—a recovery of profits to their post–crisis
level.
Here
is a headline that I love, only because I reside in Canada:
“U.S. auto sales outpace Canada’s.” Now this was
considered big news because Canadian capitalism was not hit
as hard by this crisis as capitalism has been in other parts
of the world. But now, U.S. auto sales were going more
quickly than Canada’s. This really was boomtime stuff.
Okay,
let’s deconstruct. It was a true statement about April
this year. But what they didn’t tell us is that this great
burst in U.S. auto sales took them to an annual level of
about 11.5 million. Pre–crisis? 16–17 million was the
annual average. In other words, automobile sales in the U.S.
economy are about 5 million below their pre–crisis level.
It’s true that the corporations have wrung out sufficient
concessions from the unions that they’re profitable again,
but there’s not auto–induced boom coming in the U.S. or
anywhere else.
Here’s
another one of my favorites: “U.S. new home sales make
huge jump.” True, by the way. They did in April. But they
were still 70 percent lower than July 2005. Seven million
households in the United States are behind on their mortgage
payments. Freddie Mac had to ask for an additional $10.5
billion in March to cover further real estate losses.
The
number of people behind on their payments is rising at the
moment—it’s around 10 percent. And by the way, nearly 40
percent of the people who are delinquent are so–called
prime borrowers, not subprime. These are people who
qualified for high–end mortgages. That’s what massive
job loss does. Mortgage applications for new homes plunged
40 percent this spring in the United States, and new home
and apartment construction fell by 10 percent in May. In
other words, the housing and real estate sector has not
touched bottom yet.
And
then, of course, the one that I think you’ll know and
appreciate the irony of: “U.S. economy adds 290,000 jobs
in April.” Again true. Of course, the unemployment rate
rose with that announcement because 800,000 people who
hadn’t looked for jobs the previous month said,
“There’s jobs out there,” and reentered the job
market. And then new job losses claims jumped again.
To
give you some perspective of what this means for the U.S.
economy: Simply to restore the jobs lost in this recession
would require 8.5 million or more, and those that would be
required by ordinary population growth is another 2.5
million. To get those 11 million or so jobs would require
job creation of 400,000 new jobs per month for three years
in the U.S.—just to get back to where they were. Never
mind all the people underemployed and so on. Don’t hold
your breath on those 400,000 a month for three years.
Here
are a couple of facts that aren’t being widely reported.
The
U.S. money supply is contracting at the moment. This is
terribly bad news for capitalism because what it tells you
is that the amount of business borrowing is falling, which
means that investment is falling. It tells you the amount of
consumer borrowing is going down.
The
money supply ultimately reflects the growth, or lack
thereof, of overall transactions happening in the economy—
business spending, consumer spending, and so on.
When
the money supply is going down, that’s a recessionary
indicator—even possibly a deflationary one, and I might
get a chance to say a few words about that in a moment.
Another
fact, this one about world shipping. Some of you will have
heard about an obscure thing called the Baltic Dry Index.
What it does is track the amount of stuff being shipped
around the world—shipping on huge vessels is still the
principle means of moving commodities around the world,
whether it’s steel or coffee. The Baltic Dry Index has
fallen every day for the last three weeks— not good for
the system. But this isn’t making front–page headlines.
Finally,
a report came out from the Organization for Economic
Cooperation and Development (OECD)—essentially the thirty
largest Western economies. The OECD released a report last
month warning of a “lost generation,” with youth
unemployment in those thirty countries officially at 19
percent. That’s the official rate, and of course, as we
know, it’s much, much higher in many countries. For
example, the official unemployment rate in Spain is 20
percent right now, with youth unemployment in the high
thirties.
No
engine of recovery
The
other thing we need to ask is: If the world economy is in
even the early stages of a sustained recovery, where is the
engine? Where is the economy being driven forward?
You
can look historically and see that certain geographic areas
drove the world economy during certain phases. So let’s
look for the engine.
Europe?
Ha! Good luck. Greece
will contract about by 4 percent this year, Spain is
contracting, and so is Ireland and Portugal. Even with
Germany exporting like crazy, there will be Europe–wide
growth of maybe 1.2 percent, and much of Europe will remain
in recession.
Japan?
There’s even a bigger laugh. Japan hasn’t been able to
get out of the grip of deflation, and deflation is a huge
problem, because once prices start to fall regularly,
that’s disastrous news for manufacturers, but it also
means postponed buying. If I’m going to buy a car, and I
know that if I wait five months, it’s going to be 8
percent cheaper, I keep postponing the purchase. That’s
what deflation does. It drives down the overall economy, and
Japan is still there.
China,
of course, has been the chief scenario for economists,
because its growth rates are very, very high. In some
regards, these growth rates will stay high, although I
believe they’ve peaked for the time being. But there are
huge structural problems. About 30 percent of China’s
industrial capacity is unused right now. That’s another
way of saying that capitalism confronts an overaccumulation
crisis. China has built so much productive capacity it
can’t profitably use that the incentive to keep investing
in the means of production drops, and drops dramatically.
Now
it is true that China had a huge stimulus program—
relative to the size of its economy, it was much, much
bigger than the size of the Obama stimulus program for the
United States. It was used to build a huge amount of new
capacity.
Let
me give you some examples. Fixed investment in factories and
railways accounted for 95 percent of China’s growth last
year. This is unprecedented—nothing like this ever
happened in the history of capitalism, where the building of
new factories and railway lines is driving everything.
And
by the way, these are classic signs of an overaccumulation
mania. You build housing developments that sit empty, you
build rail lines where one train runs every day.
But
if you want a really good picture of it, look at the steel
industry. Going into this crisis, China had, according to
all the commentators, an excess capacity in the industry to
produce between 100 and 150 million tons of steel per year.
Last year, China built capacity to produce 58 million tons
of steel more each year. That means it now has an excess
capacity of around 200 million tons.
Put
differently, China has surplus capacity to produce steel
greater than all the steel–producing capacity of all the
countries of Europe combined.
That
can’t continue. You can’t keep doing that. And the
Chinese ruling class knows it. They are trying to squeeze
off the bubble that started to explode in housing.
They’re
trying to reign in credit markets right now, but they’re
trying to do it without producing a crash.
Moreover,
consider the pattern of China’s growth —it’s
export–driven. If you’re driving into other people’s
markets, you’re not creating any basis for anybody else to
boom. So structurally, China’s growth is based on
overaccumulation that’s not sustainable, and the
export–driven pattern means it can’t bring the world
economy forward.
Age
of austerity
Finally,
the United States. The best description I have heard comes
from an economist who I won’t name for the moment because
he’s a real shithead. But he did nail this one when he
said, “What the United States is experiencing is a
statistical recovery and a human recession.” [Fue Larry
Summers, en Davos, el 30/01/10] That’s precisely what’s
happened. A few statistical indicators have moved up, but
for the vast majority of working class people, the recession
continues.
If
you add in the nearly 10 million who are involuntarily
underemployed—they’re taking part–time work because
they can’t find full–time work—you’ve got about 27
million people unemployed or underemployed in the U.S.
economy right now. That translates into an unemployment rate
of over 17 percent, and for Black and Latino workers, it’s
an unemployment rate of around 25 percent.
According
to the Economist, one out of every six U.S. workers
has taken a wage cut in this recession, and amazingly, four
out of every ten African Americans has experienced
unemployment during this crisis. Looking at food stamps, an
additional 37 million people went onto food stamps in the
U.S. in 2009, and 40 percent of those recipients are working
for a wage. They’re not unemployed— they’re simply the
working poor who can’t make ends meet.
As
for the next statistic I’m going to give you, this one was
so overwhelming that I had to double check check it to be
sure. Half of all U.S. children will now depend on food
stamps at some point during their childhood, and the figure
runs at 90 percent for African American kids.
Imagine
that—in the heartland of global capitalism.
This
human recession shows no signs of abating, and it can’t
possibly be the basis for any expansion. What we’re
dealing with, in other words, is, as I said, a protracted
global slump that is changing forms—the front of the
crisis shifts—but in which all the classic neoliberal
tactics of attacking the working class are being
intensified.
But
they have much greater difficulty selling this in terms of a
free–market ideology when they’re going through such
massive state interventions. We’ve got a kind of hybrid
neoliberalism, with elements of Keynesian stimulus when they
think things are really falling apart, and with massive
attacks on the working class and all of the class and racial
dynamics of neoliberalism coming to the fore once again.
You’ve
got huge waves of accumulation by dispossession happening in
the Global South—just massive land grabs, whether it’s
for the land itself for agribusiness, or for water
resources, or for the mineral and fossil fuel deposits below
these lands, and so on. If you look across Africa, China,
India, Mexico, Central America and the whole of South
America, there’s just a wave of primitive accumulation by
dispossession happening. I believe we’ll see this
accelerate over the crisis.
So
there’s that big wave in the Global South, and we’ve got
structural adjustment big time in the North. Greece is being
structurally adjusted right now. The kinds of things that
happened across the neoliberal period to Mexico, Argentina,
Poland, and weaker countries are now the new normal in the
Global North.
And
the logic becomes: Either get structurally adjusted because
of the level of government debt, or do your own
pre–emptive structural adjustment before the IMF arrives.
That’s
what Germany is doing, and that’s what Britain is trying
to do. They’re trying to jump ahead of the IMF and slash
massively.
Let
me just give you a few examples. Latvia has fired
one–third of all teachers and over 20 percent of all
public employees, slashed wages for the remaining
public–sector workers by 25 percent, and chopped pensions
by 70 percent. That’s their structural adjustment, aided
and abetted by the IMF.
Ireland
has slashed public–sector workers’ wages by 22 percent.
Germany has just drawn up a program of $100 billion dollar
in cuts. Something along the same scale— probably
larger—is being planned for Britain. Russia is planning to
cut 20 percent of all state employees. And in Greece 22
percent cuts in public–sector wages, a 55 percent slash in
pensions, and so on.
This
is what’s meant by the age of austerity. This is the way
in which the working class the world over is going to be
forced to pay for the huge bailout of the global banking
system.
The
Institute for Fiscal Studies in Britain put out a report
saying that by 2017, the average British family will be
$4,500 poorer by way of wage cuts and cuts to the social
services on which they’ve historically depended.
At
the same time that report came out, the Sunday Times did
their list of richest people in Britain, which said: “The
rich have come through the recession with flying colors. The
rest of the country is going to have to face spending cuts.
But it has little effect on the rich, because they don’t
use public services.” The class dynamics could not be
clearer.
I’m
not going to tell you the details about the cuts that are
happening in places like California, Ohio, Minnesota, and
Arizona, because you know these stories much better than me.
But I do want to say that one of the things you see
system–wide in this crisis are attacks on migrant workers
moving to the forefront. The sessions on Arizona at this
conference speak to that, but you’re seeing it around the
world—attempts to criminalize and deport migrant workers,
and moves to so–called guest worker programs.
Can
we strike that term from the list? These workers aren’t
guests when you super–exploit them, house them in
barracks, overwork them, arrest them, and deport them at
will, especially if they’re starting to organize unions.
They’re not guest workers. These are temporary
contracts—basically, a bonded labor system—and they’re
moving toward the most temporary and most precarious forms
of employment for migrant workers across the board.
In
Canada, where I come from, four times as many people came in
last year under the temporary foreign worker program than
came in as permanent residents.
This
is the trend—to push the precariousness and vulnerability
of migrant workers. That’s why I believe the defense of
migrant workers has become the cutting edge of truly
anti–racist working–class politics in this period.
Building
resistance
I’ve
only got a brief time to speak to the questions of
resistance, but I want to really emphasize two things.
First,
the working class has fought back heroically throughout this
crisis, but the scale of its resistance and organization
have nowhere been equal to the scale of the assaults.
That’s our contradiction.
Remember,
in the very early days of the crisis, mass protests in the
street brought down a government in Iceland. There was the
December 2008 uprising in Athens.
Think
about the wave of factory occupations, whether it was here
in Chicago at Republic Windows & Doors, or the auto
plants in southern Ontario where I come from, or the factory
occupations in Ireland and Britain. In France, it was the
boss–nappings—occupations aren’t good enough? Fine, we
seize the bosses!
We’ve
had a wave of resistance that’s inspiring and important,
but it has not generally been equal to the task.
We
need, though, to point to some of the examples that frankly
haven’t received sufficient attention, including even from
the left. I’m thinking particularly of the general strikes
in Guadalupe and Martinique. These were really massive and
hugely important struggles—interconnected with the
resistance in France by the way, feeding the struggles in
the streets. France served as the launching pad for the
struggles in these protectorates—that’s essentially what
they are, neo–colonies of France.
To
give you a sense of it, in Guadalupe, the general strike
went on for forty–four days, and the coalition that lead
it, named Stand Up Against Exploitation, brought together
forty–nine social movement organizations, trade unions,
feminist groups, student activist organizations, and so on
into a mass movement that at one point had 15 percent of the
population in the streets, building barricades and fighting
the police.
The
demands were scaled to the lowest paid. The strike won 40
percent increases for the lowest–paid workers, and the
strikers were happy to settle for 6 percent for the best
paid. To win a 200–euro–a–month increase for those
making minimum wages—that was an absolutely glorious
example of working–class insurgency. In Martinique, the
working class got into the act at the same time, held out
for thirty–eight days and got a fairly similar settlement.
We
also have a really important resistance happening in Greece
at the moment that could serve as a point of departure for
much wider waves of resistance across Europe.
We
don’t know whether or when this will happen, because we
also know that the organized forces of anticapitalist
working–class politics are much feebler and less organized
than we would like.
But
we do see the seeds of resistance. For example, in the
absolutely beautiful movements of migrant workers— think
of the strikes and building occupations in France last
winter, for example, by migrant workers or the May Day
demonstrations that you in the United States have recently
been through.
It’s
not yet a transformative moment for the left.
That’s
the complexity — the seeds of resistance are there, but we
haven’t moved into a sustained rising wave of resistance
and struggle. So we need also to remind ourselves of what I
said at the outset — this is a long–term crisis. As the
two bourgeois commentators I quoted said, it’s going to
shape politics for a generation.
So
we need to be trying to combine both the sense of urgency
and the need to act and build resistance now, but not with a
sense of panic. We have to have that degree of durable
patience to our work—knowing that we’re in a struggle we
have to keep moving forward, but a struggle for a period of
years. We have to be building with that perspective. We need
to be building larger, non–sectarian, anti–capitalist
working–class movements if that’s going to be
sustainable.
I’m
going to finish with two quotes from some of the more
exciting examples of resistance that we’ve seen.
We
shouldn’t underestimate the significance of the wave of
strikes happening in China right now. One of the activists,
a twenty–year–old young woman who came out publicly as a
representative of the workers at one of these Honda plants,
and dared to say in an interview: “Our strike is just one
step. It is all about all of the workers of China standing
up against capital, and moving to build an independent labor
movement.”
That’s
the attitude that is percolating through these strikes in
China right now. One phrase that encapsulated it beautifully
came from the striking workers at KOK International, which
is based in Taiwan. The workers wrote a petition with this
closing sentence: “Power lies in unity, and hope lies in
defiance.” That’s the spirit that we see running across
this resistance.
I’m
going to finish with one of the leaders of the mass strikes
in Guadalupe, who said, “When a people arises, when it
develops awareness, when it is convinced of the rightness of
its actions, there is nothing that can stop it.
The
people sweep aside all obstacles placed in their path like a
whirlwind cleaning out all the dirt in a country.”
Now,
we have a lot of work to do before we can go around making
claims like that. But this idea that we need to be building
resistance on the ground today with the idea of generating a
transformative moment for the anti–capitalist left is, I
think, the only perspective that fits when you understand
that we’re looking at a war against the working class that
is being launched from above, and when you understand the
scale of resistance that is necessary.
People
are resisting, but they’re doing so in a context in which
the socialist and revolutionary left is very weak and needs
to rebuild. But this is the task of a generation, and I
think these kinds of meetings like we’re having right now
are all about the process of trying to rebuild that fighting
anti–capitalist left.