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On a knife edge

Share markets around the world suffered another roller-coaster day yesterday as nervous traders decided it was a good time to sell. Everything points to the most dangerous moment for global capitalism since the autumn 2008 meltdown.

Many and varied reasons are being cited by the traders who sold (and later bought) shares during the day, moving huge sums to (relatively) safer places, including US Treasuries and German government bonds.

The Financial Times’ Chris Giles blamed Europe’s sovereign debt crisis, which, he said, “sent shock waves across the world as it proved that the recovery from the great recession was neither steady nor guaranteed.” It sounds authoritative and convincing.

"The main reason for the fall in South Korea, is the risk of war with North Korea," said Kim Joong-hyun, a strategist at Shinhan Investment in Seoul. The warship was sunk two months ago, on March 26, and North Korea’s leader Kim Jong Il has now severed all communications with the South.

The US Dow Jones sank below 10,000 due it was said, to disappointing news of falling house prices. New regulations on US financial institutions are adding to the problems, threatening banking profits. Credit in the US has been shrinking for two years – overall bank lending is down more than 20% from where it began in 2009 – and Obama’s legislation has been under way for months.

In London, the FTSE 100 index of Britain's biggest companies dropped 2.5%, falling below the 5,000 mark to 4938. It was shadowed downward by markets in Germany, France and Spain. Here the reason given for the collapse was an instruction from the International Monetary Fund to Spain’s government to sort out its bankrupt banking sector. At the weekend, the Bank of Spain seized Cajasur, a small but troubled savings bank and trade unions have started preparations for a general strike.

Each of these and many other different localised “explanations” for market movements reveal aspects of the crisis in each region of the global economy. Others are searching for a connecting thread. Washington Post staff writers Howard Schneider and Neil Irwin believe they have found one in the realm of politics:

The knife-edge psychology currently governing global markets has put the future of the US economic recovery in the hands of politicians in an assortment of European capitals. If one or more fail to make the expected progress on cutting budgets, restructuring economies or boosting growth, it could drain confidence in a broad and unsettling way. Credit markets worldwide could lock up and throw the global economy back into recession.

They suggest that one false move could lead to a sovereign default in Europe, adding:

Bank holdings of European debt are now being studied with the same focus given to holdings of US mortgage-backed securities as the global financial crisis unfolded in 2008 - and with the same suspicion that problems in one part of the world could wreck others.

What they are describing is a universal crisis of the capitalist system, brought about by decades of attempts to offset falling rates of profit with pumped up balloons of credit- and debt-led growth. Politicians and states are struggling in vain to keep up with the unravelling that began two years ago.

The crisis makes its appearance in the realms of the economy, in international relations, in the crisis of the democracy and the state, in the tipping of the planet’s ecosystems into irreversible changes, and in the degrading commodification of culture.

Many new people joined A World to Win on the revolutionary road at our conference last weekend because not one of these parts of the crisis can be resolved on its own or within the economic and political framework of capitalism. You should make the same choice.

Gerry Gold
Economics editor
26 May 2010

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Your Say

Richard says:

Capitalism has been very good at selling us its product. Firstly it has persuaded us that capitalism is the only way of life, that there is no alternative, despite the fact that it has only been around for less than 300 years. This has enabled it to encourage our fear of the unknown and thus lead us to accept superficial reforms rather than revolutionary change. It has been very good at judging the limits to which it can go and accepting those reforms as preferable to real change.

Thus, in the face of the worst excesses of the Industrial Revolution which led to the widespread poverty and ugly deprivation of the burgeoning cities of the late seventeenth and early to mid eighteenth centuries, it swapped its hitherto ’laissez faire’ demands for an element of regulation. It ceased defending the indefensible and accepted the limitations placed on its exploitative practices by the Factories Acts. Enlightened (forcibly) it stopped sending children down the mines.

Then seeing that its excesses in profiteering by underhand means, making money unfairly out of investors or its customers was no longer generally accepted as a reasonable way to behave it accepted Company Legislation and legislation on terms of trade etc. These did not cure the problems, merely preventing the worst excesses and made the problems acceptable.

With the usual periodic crises in capitalism, people began to accept that the unemployed and sick needed society’s protection. (Trickle down never has worked). In return for society’s agreement to pay for a welfare state, capitalism accepted a less than perfectly free market. However, it persuaded us that in order that it could afford to pay its taxes to part fund the welfare state, government would have to spend billions on indirectly subsidising private enterprise and create the conditions necessary for business to succeed.

With the growth in power of the Trades Unions, it had its most worrying time and gave up much ground in increased workers’ rights, but kept its head down to survive until the storm blew itself out. The pendulum swung. The unions, being the only organised opposition of any strength, turned political, laying themselves open to the attack of being undemocratically trying to overthrow the government – and that’s not British. Having split the workers’ movement, it became no contest. The state education system having become focussed on producing factory fodder or managers, there was no ‘educated’ class to oppose the status quo. The only ‘educated’ people were those whose background entitled them to a private education, whether intelligent or not.

Next with a boom based on an unsustainable financial investment and property model, a sufficient number of people did well enough to feel that capitalism did enable people to ‘make it’ it did provide opportunity, so those who remained poor, well, it must have been their fault.

Capitalism has won so far because:
It is the existing tradition
It tells a good story
It can point to progress (defined in its own terms) It is flexible and good at judging the mood – reforms imposed upon it have led to less degradation It has succeeded in persuading us that success is measured by wealth And thus that Competition is our natural state

Also because the majority have accepted that:
We have to pay for the pool of unemployed which enables business to pay low wages and control its workforce. We subsidise private profit.
We must pay for the roads by which their goods accumulate unsustainable food miles (Historically roads were built by governments to enable the faster deployment of troops) We must pay for all the mechanisms (the state) put in place to control capitalism’s excesses.

Given the recent turmoil in the financial markets and the palpable unfairness of the deficit reduction plans, capitalism is at its weakest for a while, most notably in the West. Now is the opportunity to persuade people that there is an alternative:

We have a big state because of capitalism | Success based upon contribution to society not what one has succeeded in stealing from it | Reduce benefits at a stroke – pay a living wage | Reduce benefits even further – pay everyone a wage in return for whatever they are able to contribute | Association not competition | Change not reform | Real Change not just change in government | Rebuild from the bottom up

Sorry if I got a bit carried away- just some ideas I’ve been developing since reading Carlo Pisacane’s La Rivoluzione

Silver says:

Something needs to be done.The status quo is making the rich richer and the poor poorer. The gap between rich and poor is ever widening. The attack on the Sick,Unemployed,Disabled and Vulnerable by this ConDem Government by use of State Sponsored Propaganda is Immoral if not Illegal.
The right wing press does nothing to stop the Propaganda but wholly supports. And no wonder with the likes of Rupert Murdoch owning much of the media.
Thatcher got rid of a lot of affordable homes in her right to buy scheme. Something that Labour did not reverse. Private Landlords are charging over the odds for rent as housing is scarce. The ConDems say they will reduce the amount of housing benefit to counter this but what is needed is a Cap on Rents and the building of more social housing.
The Mega Rich get away with paying taxes through offshore accounts while this Government wants to spy on the poor's bank accounts in case they seem to be getting to much. Well do the same to the Rich then it will be fair you expense cheating jobsworths.

Jonathan says:

'Conditions for revolutionary change are increasingly favourable.' But this without organisation on a world scale will lead to disparate and individual resistance both in national economies and on International issues such as Banks or Multi-National drug companies. Working class and National Resistance has, through necessity, created organisation. But this can not be, and never could be left to spontaneous resistance and the leadership thrown up through that: however heroic.

The organisations now existing are the unbroken, if sometimes sectarian, legacy left from the birth of the working class and from national struggles for Self Determination. This latter, by its own internal laws, goes over into a permanent revolution. Or decays into a new bourgeoisie exploiting its 'own' working class and, or, peasantry. Without the unity of action in creating – first dual power – then a transfer of power, the ruling class and its state bodies (and on an international scale) will 'pick off' the struggles that take action: and learn lessons more quickly than those which by necessity, whether they now know that this necessity is arising or not, oppose them. In this becoming, the form of organisation and its aims must watch the nature of the world crisis and the National Struggles: must draw in those by necessity opposed. For more and more layers are being awoken to the broken nature of the world system of capitalism, of the permanency of its decline, and most importantly in America, awoken from the fallacy of the American Dream. They can not be allowed to awake in confusion with no alternative: this is the kind of confusion the policies of Stalinism allowed in the 30's.

In the case of the Banks' Private (Private Capital) debt was transformed into public debt: this kind of book-keeping, much referred to in Britain by the New Coalition. All of these word forms (compliantly portrayed by 'their' media; which occasionally go so far as to mention 'the excesses of capitalism') in terms of New Cuts from this and all other aspects of the Public Debt created by a broken system then blamed on the borrowing of the 'consumer'. The totality of the Human Being and 'its' relationships is foreign to this Capitalist system just as much as is a safe planet: either a worker or a consumer. The new form is Resister: but with clear leadership. I support this call: totally necessary world wide.

Josie says:

Thanks you for this wonderful reflects my thoughts and values from the time I was, some 40 yrs later and having been sucked into the imperialist/capitalist economic system, I have been struggling for decades with making this notion a reality and agree it is the solution for global survival and equality of all peoples, the people of the world. I too believe that soon these revolutionary ideas and values will permiate the minds and souls of the invisible and voiceless masses.

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