Thoughts on the world economic crisis

What began in 2008 with the collapse of Lehman Brothers, the gigantic American financial institution, expressed itself in a matter of days in a meltdown not only of the financial system of USA, but of the whole advanced world.

This characteristic of the contemporary economic interconnection, interrelation of the World Economies, indicates most of all that there is no national economic event or policy, that does not affect all the world economy one way or another. This characteristic dictates that there can be no national economic measures that won?t affect the rest of the economies. From that follows that no solution can be national, that the need for international remedy is on the agenda of the day.

This is exactly direction all the efforts of the capitalists have been oriented since the beginning of 2008. Contrary to the path they followed after the 1929 collapse, with all kinds of measures aiming in reinforcing ones economy at the expense of all others, now America is trying to find a negotiated way out in her problems with China, while European countries put, for the time being, the greatest efforts in keeping Europe united.

But they will realize very soon that there can be no negotiated way out of the World Crisis. The 1929 crisis led to the World War not because they did not have the wisdom to try for a negotiated a way out, but because this was unachievable as long as the capitalist economic framework remained unchanged.

There is no better proof for the above than the fact that despite all coordinated efforts to handle the European crisis since 2008, the crisis continues without signs of an end. On the contrary, average wage cuts approach the figure of 40% and unemployment is soaring in some of its member states to levels similar to the 1930s?. The already unsustainable debt burden increases instead of being reduced.

Their obvious inability of Capitalism to provide solutions starts being the source of increasing rivalries on the political scene. These are the prelude of open antagonism that will in all probability lead to the division of Europe, on a North South basis first and to a division on national lines at the end. If this takes place, all evil of the economic system that is called capitalism will come to the surface. In trying to stave off the heat of the crisis in any national economy, there is no economic measure that won?t have adverse effects to the rest of the countries. In periods of capitalist decline attempts to solve each country?s problems on a national basis can only lead to economic conflicts with its neighbors at best with armed conflicts further down the line.

Greece was among the first countries of Europe to be caught in the whirlwind of the European economic crisis. Since then all memorandums, all austerity measures had no other effect than further deteriorating the economic performance of the country. Greece has suffered a decline of its GDP of more than 20% since 2008, greater decline than the one that the Greek economy suffered after 1929. The average wage is down by more or less 40% of the pre-2008 levels and unemployment is very soon heading to 30% with the figure of the youth unemployment already surpassing 60%.

The European and world capitalist, together with their allies, the press etc. did not spare ink or any kind of efforts in presenting the Greek economic mess as an unavoidable consequence of the fact that Greeks had learned to live beyond their means, to borrow to lead lucrative, corrupted lives at the expense of the nations that lend them. But the heavy Greek borrowing, like the one of Spain, Italy, Portugal etc., was necessary not only for Greece, but also for Germany, France and all other lending countries. Without this borrowing the expansion of the so advertised ?highly efficient? German production machine, would not have taken place. The whole capitalist relative growth of the last period would not have taken place. This truth is behind the massive loans given to Greece from German banks. Today, and as a result of the austerity measures in the European south, France is in recession (two consecutive quarters with a negative growth) and Germany is predicted to grow by no more than 0%.

The political landscape has changed dramatically as well. Pasok, the Greek Socialist Party, has seen its electoral force dwindle from more than 40% to less than 10%, while Syriza, a centrist coalition of the radical left, has seen its share of the vote catapulted from around 5% to almost 30%, only narrowly missing the first place in the latest election which would have given it the opportunity to form a government. At the same time of course a significantly adverse development has expressed itself through the neo-Nazi formation of ChrysiAvgi (Golden Dawn) which has increased its strength to become the third biggest party in the Greek Parliament.

Syriza is an extremely important formation of the working class in the process of the Greek and European revolution. It possesses no solid, revolutionary program but includes all kind of Marxist tendencies, to which, at least until now, has guaranteed freedom of expression. Its leadership policies have closely followed the mood and the degree of mobilization of the masses. When mobilizations are the order of the day, these policies move radically to the left. When this is not the case, like in the period since last elections, its policies shift to the opposite direction.
But the years ahead will be full of mobilizations not only in Greece. Demonstrations and strikes in Italy, Spain, Portugal and elsewhere will increasingly prove that the struggle of the Greek working class is not a national struggle but a European one.

Unable to compete with European capital on any other level, Cyprus depended on tourism for a long period. By the end of 1990s though, this sector of the economy started presenting signs that it could no longer be the pillar of the Cypriot economy. That was the beginning of the rapid expansion of the financial sector which, as it should have been expected, under capitalism, got into all kinds of ?legal and illegal? transactions, not different in moral value than the transactions of Lehman Brothers in USA. This is capitalism, especially in a period of decline. The Cypriot banks expanded their yearly economic activities to a level many times higher than the national product of the country. It was a matter of time before this bubble would burst.

The country found itself at the eve of a catastrophe. And all ?moral? justifications were present for the European Authorities to execute their project: According to them, Cyprus had been a center of money laundering and illegal financial transactions that had enabled its people to lead lucrative lives. They had to pay: crime and punishment, moral settlement of an injustice that took place at the expense of all other European people.

Against this background they moved in and literally robed the deposits of thousands of people and enterprises, more than 5 billion euros in a country whose GDP does not exceed the amount of 18 billion euros. Every amount beyond 100 thousand was cut by an unknown yet proportion which won?t be less than 37%, with the deposits of one of the biggest banks that collapsed being in danger of total liquidation.

The ?communist? government of Demetris Christofias which was in power from 2008 to February 2013 is not responsible for the economic crisis in Cyprus. But it is responsible of not exhibiting the slightest ability in either predicting or preventing any of its dramatic consequences. This gave the chance to the main party of the Cypriot bourgeoisie to take power during the elections of last February.

AKEL, a Stalinist party, is proved unable to provide any convincing way out of the crisis every single day during this last period. But contrary to Greece, there is no mass alternative to the left of AKEL for the time being to benefit from the considerable discontent that prevails within the rank and file of AKEL. In Cyprus there is no Syriza-type formation which had a long standing tradition, rooted in the years of struggle against the military dictatorship of 1967-1974. What started as a majority split from the Communist Party, the KKE Esoterikou(Communist Party of Greece of the Interior) went on to gather around it personalities of the wider left transforming itself to the Synaspismos tis Aristeras (Coalition of the Left) and managed to retain roughly the same electoral support as the mainstream Communist Party (KKE). A few years ago Synaspismos joined with a number of leftist groups to form Syriza (Coalition of the Radical Left), turning the party sharply to the left.

AKEL will continue to dominate left politics. The Social Democratic Movement EDEK has proved itself over a period of decades unable to provide an alternative to the working class of Cyprus. From its radical past it now only retains an ultra-nationalist platform.

As in Greece, the radical left in Cyprus stands against the memorandum. But although its program includes the nationalization of the Banks, increasing corporate tax and taxing immovable property, it is not a worked out program, cannot provide answers to the tasks of the day and, thus, fails to be convincing to the mass of the working class. Moreover it is unclear on its stand towards dangerous positions that were to be adopted by the leadership of the left they would lead to a disaster. Such a position is the proposal to leave the Eurozone.

It is no accident that neither the Greek nor the Cypriot left managed to work out a convincing program with an internationalist scope. Internationalism has for a long time been discredited by the mass parties of the working class through pursuing national politics and all kinds of alliances with right wing formations on the basis of solving social problems and securing indefinite increase in the standard of living in their isolated national horizons. Trotskyist and other revolutionary sects preached internationalism but never really made an impact on society. As a result they came to believe less and less in the potential of internationalist politics and they are reluctant to map an explicitly internationalist revolutionary exit from the crisis.

But there is no national solution to the crisis for either Greece or Cyprus. The suggestion for reverting to national currencies, the main alternative policy some of the left organizations put forward in opposition to the austerity imposed by the European authorities, is a purely capitalist policy which enables one nation to put the burden of the crisis on the shoulders of the others, which would lead to economic collapse and, in all probability, to authoritarian dictatorships. Reverting to national currencies and devaluing them by let?s say 50% against the euro would directly lead, the same moment, to doubling of the debt burden which is already unbearable, doubling of the cost of energy, of technological products which in Greece and Cyprus are imported and even of most of every day consumption products in both countries. But even worse, it will push the rest of the European competitors to retaliate by imposing all kind of trade restrictions in their transactions with Greece and Cyprus.

The political messages of the slogan to abandon Europe and the euro are equally dangerous. The slogan of abandoning Europe sends the message that the problem is Europe in general. It does not make the distinction between the classes of Europe, it does not clarify that although the capitalists of Europe are our enemies, at the same time the working class of Europe is our most reliable ally. It sends the message that the problems produced by the capitalist Europe would stand a chance of being solved in an isolated, national, capitalist environment.

The only road forward for the Greek and Cypriot working class today is the relentless effort of finding allies in all other European countries- in the European left, the European social democracy, the trade unions. This alliance should be built on a minimum pan-European program which must include nationalization of the whole European banking system and big companies under social control, pan-European planning of investment and production, abolition of all public debts which, as it was explained before, were necessary not just for the countries asking for them but for the whole capitalist system. On such a basis the European working class will be able to win and change the world situation in a decisive way.

Soteris Vlachos

P.S. Heavy borrowing, unethical banking practices, as well as fictitious share, bond and real estate prices, was the method that capitalism followed worldwide after the impasse imposed on it by the economic developments of the 1970s. They were imposed on it as the only choice, the only way out for the world system. The dramatic decline of the profit margins of more than 50% in the advanced capitalist countries- compared to the figures of 1967- experienced in the early 1970s did not leave them much choice. In economic terms this was the main function of the neoliberal era. After the vicious attacks on wages and benefits in the late 1970s and 1980s which were necessary steps to assist the recovery of profit margins for each individual company, they faced the problem of reduced demand that led to bankruptcies and high unemployment. Unprecedented borrowing of people, companies and states, as well as fictitious, unreal money arising from fictitious values in the stock market as well as in real estate, supplemented the lost purchasing power and gave a push to the developed capitalist states and, consequently, to the rest of the world. But they did not cure capitalism from the fatal decease of its inability to reproduce itself. The financial collapse of 2008 brought again everything to the surface and marked the beginning of capitalism?s death agony.

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