The Crisis

A crisis is caused by capitalists choosing not to buy, that is, not to invest profits because they judge they won't make any profits or not enough. Workers cannot be indifferent to a crisis, no matter how much we are disgusted by the predictable pendulum swing between “boom” and “bust”, because our lives can be directly influenced by today’s financial turbulence. But at the same time, we have no interest whatsoever in thinking up ways to put capitalism “back on track” or make it “healthy” again. Even when the system is in tip-top shape it works directly counter to the interests of workers. The crisis will not miraculously or mechanically turn every worker into a socialist, as some hope, but it does at least create a situation where socialists may find workers more willing to consider an alternative to capitalism. It is up to us, as socialists, to present that alternative in a convincing way based on our understanding of the essential nature and limitations of the capitalist system.

 Could the present slump really last for a decade or more? The truth is we don’t know and can’t know. The future course of capitalism is largely unpredictable. Economic forecasting is no more reliable than an astrological horoscope. All we can say with certainty is that it is an irrational system.

A number of quite distinct and separate things need to happen before a slump can run its course. Firstly, capital has to be wiped out if excess productive capacity is to be tackled with devalued capital being bought cheaply by those enterprises in the best position to survive the slump. Secondly, de-stocking needs to take place, with overproduced commodities bought up cheaply or written off entirely. Investment will not resume if overproduction still exists. Thirdly, after this has occurred there needs to be an increase in the rate of industrial profit helped both by real wage cuts and falling interest rates (which tail off naturally as the demand for more money capital eases off in the slump). This will help renew investment and increase accumulation. Also, if recovery is to be sustained, a large proportion of the debt built up during the boom years will need to be liquidated, if it is not to act as a drag on future accumulation. Through these mechanisms a slump helps build the conditions for future growth, ridding capitalism of inefficient units of production. When these processes have run their course, accumulation and growth can begin once more with capitalism again creating a boom situation, which will be inevitably followed by a crisis and slump. This has been the history of capitalism ever since it first developed. Far from being an aberration, this cycle of misery is the natural cycle of capitalism.

A crisis of capitalism

The problem of the crisis is gaining the attention of people worldwide. This is because the present crisis is of unprecedented scale, and unparalleled seriousness and tenacity, have struck throughout the world. Representatives of the two classes in society are seriously engaged in the study of this problem with a rare level of seriousness; economists for the sake of somehow forging a path to stable capitalist production, and Marxists to provide a scientific basis for their tactics in this momentous period. As long as bourgeois economists maintain their capitalist perspective, they are incapable of understanding the problem of crisis. We socialists pointed out that it was not the bankers and financiers but the capitalist, system which was at fault.
To-day, the recession is still as intense than ever, at least, in regards for the working class. Workers in countries all over the world are faced with a world crisis of capitalism. Now genuine questions of survival, issues of actual life and death, are in the forefront of peoples minds. The crisis is not a crisis of natural scarcity or shortage. Millions of workers are willing and able to work; but existing society has no use for their labour. The crisis is a crisis of capitalism alone.
Everywhere there is a call for change and for government interventions that lead to a way out. All the leaders of capitalism, economists, financiers, politicians, are at sixes and sevens. All the capitalist spokesmen, Tory, Lib-Dems and Labour speak of “re-organisation,” and “re-regulation", of new policies of this, that and the other, to “save the British economy.” They appeal to the workers to make “sacrifices” to help and impose austerity cuts to ensure that sarifice. They mistakenly imagine that if only British capitalism could be modernised and improved and rationalisation all will be well. But no policy of patching up capitalism can avail. These so-called remedies not only fail to touch the root of the problem, they can only aggravate the disease.
What solutions do the capitalist leaders propose? They propose to throw the cost of the crisis off the backs of the rich onto those of the poor. The working class has met with the smashing of the unions, the driving down of the standard of living simultaneously with the drastic increase in the cost of living. The capitalists have no solution to the crisis. Its measures aggravate the crisis and pave the way for still more deep-seated and profound crisis in the future. The working class must not harbour any illusions about “recovery”. The motive of capitalist production is profit and the only issue of “recovery” for the bourgeoisie is recovery of profits. Such “recovery” will not alter at all the condition of the working class as wage slaves, or change the conditions of the exploited in relation to the exploiters. In fact, the recovery of the profits of the bourgeoisie can only take place on the basis of the further intensification of exploitation, the further impoverishment and ruin of the masses of the people, with a higher level of the permanent army of the unemployed, an increase in the impoverishment and immiseration of the working class. In order to force through its programme for shifting the burden of the crisis onto the backs of the working people, the bwealthy is launching a savage offensive against the rights of the workers.
In the crisis, the banks could not lend money to business which was not producing profits or dividends and banks could not collect on their loans to business. The government kindly issued loans, took up part of the credit of the banks and in return gave interest bearing bonds (quantitive easing) thus providing a juicy investment field for the bankers. Money went to the banks, the insurance companies, the credit companies to help them overcome the crisis.
With a decrease in revenue and an increase in expenses the government had to increase its taxes. It refused to tax the higher brackets of incomes . Instead, it began a series of wage cuts for government employees in the public sector. It cut welfare benefits. It raised VAT on goods needed by the masses.

Is it any wonder that many capitalists showed a larger profit in some of the years of recession than in other more prosperous years?

The capitalists can only look for the solution in fiercer competition and in cheapening their own costs of production, by cutting wages against their competitors, in increasing their own workers’ productivity , in fighting to enlarge their own share of the market. But these measures are pursued by the capitalists in every country. Although one capitalist or another may gain a temporary advantage for a short time, the net effect can only be to deepen the crisis. The net effect of every advance of technique, of every wage-cut, of every cheapening of costs and intensification of production, is to intensify the world crisis for the worker. Increased output is demanded from every worker for less reward. Speeding up and rationalisation are the order of the day, leading directly to worsening work conditions, mounting health problems, and rising numbers of industrial accidents, along with increasing rate of unemployment or underemployment.

Many would-be reformers of capitalism urge that if only the employers would pay higher wages to the workers, enabling them to buy more of what they produce, there would be no crisis. This ignores the inevitable laws of capitalism — the drive for profits, and the drive of competition. The drive of capitalism is always to increase its profits by every possible means, to increase its surplus, not to decrease it. Some economists may preach the gospel of high wages in the hope of securing a larger market for certain capitalist’s goods. But the actual drive of capitalism as a whole is the opposite. The force of competition compels every capitalist to cheapen costs of production, to extract more output per worker for less return, and for wholesale wage-cuts in every industry. All have the same task; to cut down rigidly the standards of the workers at home, to carry through a trade offensive for the capture of markets abroad.

Capitalism has no solution. The most the capitalists can do is to wait amidst the general misery until the universal stagnation of production has run its course and for “demand” to once again return (...to begin a new trade cycle, and lead to a new future crisis.) Capitalism will survive if we let it. Crises can resolve the contradictions temporarily and allow a new period of expansion until the next crisis.

The motive of capitalist production is the securing of maximum profits. Production of goods is in fact an incidental aim of capitalism, as is employment. The bourgeoisie organises production for the purposes of increasing profits. When conditions are such that profits can be increased by increasing production, the bourgeoisie does so, and when conditions are such that profits can only be increased by cutting back production to keep up the price, then that is what the bourgeoisie does. Thus if it serves to increase profits to increase the numbers of workers in production, then this is done; but if profits can only be increased by intensifying exploitation, getting more or the same amount of work out of fewer workers, then this is done instead. These fundamental features of the capitalist system cannot be eliminated without removing the capitalist system itself.

This crisis calls aloud for the workers’ socialist revolution. Only the working-class can solve the causes of the crisis by wresting production from the fetters of private/state ownership and profit-making and organise production for social use. The power of producing wealth is greater than ever. It has grown far more rapidly than population, thus disproving all the lies of those who talk of “over-population” as the cause of the crisis. Although capitalism does not use more than a portion of modern productive power, although it wastes most and deliberately cuts down and restricts production in order to increase profits, actual production has grown much faster than population.

Only under capitalism can there be a curse of plenty. Only socialism can bring the solution. Only socialism can cut through the bonds of capitalist property rights and organise production to meet human needs. Once capitalism is overthrown, then and only then can production be organised in common for all, and every increase in production bring increasing abundance and leisure for all. This is the aim of the Socialist Party, the only party that pointed out during the present period that there is no alternative for the working class other than socialism.

Bank Nationalisation

It is no co-incidence that the cries for banking reform invariably comes during economic depressions. The lubrication that keeps the capitalist machine running – the money markets – are dysfunctional.

As Marx identified “So long as things go well, competition effects an operating fraternity of the capitalist class…so that each shares in the common loot in proportion to the size of his respective investment. But as soon as it is no longer a question of sharing profits, but of sharing losses, everyone tries to reduce his own share to a minimum and to shove it off upon another. The class, as such, must inevitably lose. How much the individual capitalist must bear of the loss, ie, to what extent he must share in it at all, is decided by strength and cunning, and competition then becomes a fight among hostile brothers. The antagonism between each individual capitalist’s interests and those of the capitalist class as a whole, then comes to the surface…”

 Marx also pointed out that “the moneyed interest enriches itself at the cost of the industrial interest in the course of a crisis” Bankers are enriching themselves at the expense of industry and workers, in other words. So whats new?

The economist David Harvey has explained that the losses of the crisis are finally distributed between factions of the capitalist class, and between the working and capitalist classes, and whatever the power struggle that ensues, the necessary result will be the destruction of value (closure of workplaces, the laying off of workers, destruction of surpluses, defaulting on debt, cutting of state services, and so on) so that a new round of capitalist accumulation can begin. The sad but inevitable reality of capitalism.

Some in America seek a solution in the likes of the State Bank of North Dakota. That the bank owned by state authorities weathered the recession was perhaps more a reflection that the state’s economy is primarily based on agriculture and oil, both involved in current boom times. Nor was the state particularly exposed to the sub-prime disaster “North Dakota really didn’t participate in subprime to a significant degree. I mean, that was–you know, it was sort of a flyover state. All of the aggressive subprime lenders apparently didn’t think there were enough folks in farms that they could get to lever up to take on these dodgy loans.” explained  Yves Smith. author of the book ECONned and creator of the website NakedCapitalism.com

In Scotland, we have the almost unique bank success story of the Airdrie Savings Bank, the UK's last remaining independent savings bank  The bank was founded in 1835 and was born out of the general "thrift" movement prevalent at the time.

 Bucking the trend of the credit crunch, Airdrie Savings Bank has increased its lending for the third year in a row, according to its latest annual results, it lent a record £48.5m - a 35% increase on 2010.  It lent 24% more in 2010 than it did in 2009. Yet we still witness that “North Lanarkshire has been particularly rocked by the recession, including above-average redundancies, because the economy is not as diverse as some and there remains a heavy reliance on sectors that seem more susceptible to economic shocks” as one report describes. Not much of a success story.

What socialists say about the banks is not regulate them, nor nationalise them, but make them redundant. Abolish them, along with all the rest of the complicated, financial superstructure of the capitalist production-for-profit economy. The mythology surrounding the power of banking helps those who take the view that this vast institution is so necessary that the prospect of a world without money would be unthinkable. Let’s abolish capitalism and live in a moneyless, propertyless world without banks. That means moving from a demand for ‘regulation change’ to one for ‘system change’. Perceived wisdom is that it should be easier to make socialists in a recession when the shortcomings of capitalism are more evident. This capitalist recession will eventually end and the economy at some time in the future will inevitably return to growth. If there are more socialists at that future time, then at least one positive outcome will have resulted from this sorry and preventable mess.

“…no kind of bank legislation can eliminate a crisis” – Marx

We always said bankers were *ankers

When giving evidence to the Treasury Committee on 10 February, the former chief executive of Royal Bank of Scotland, Sir Fred Goodwin said: "My pension is the same as everyone else in the bank who is in a defined benefit pension scheme. It is determined in the same way as anyone else."

It emerged that Sir Fred is drawing a pension of £650,000 a year. Although he is only 50, he is entitled to the payment for life, with a pension pot worth £16 million.

Royal Bank of Scotland (RBS) has announced the largest annual loss in UK corporate history. RBS, which had to be bailed out by the government last year, said that its 2008 loss totalled £24.1bn ($34.2bn). Reports had suggested job losses could total 20,000.

Sir Fred's strategy and decision to buy ABN Amro is widely seen as making the bank more vulnerable to the credit crunch and having to be bailed out. The bulk of the losses came as RBS made a £16.2bn write-down on poorly performing assets, mainly resulting from its 2007 takeover of ABN Amro.

Yes , indeed , a well-deserved pension and well-earned luxury for life while all those sacked will struggle on the dole to pay the bills and pay the mortgage but unlike the belated grumblings of Chancellor Darling , Socialist Courier was reporting and condemning Goodwin's feather -bedding way back in August 2007 and October 2007 and March 2008 .

capitalist crisis kills

With South Korea about to enter its first recession in a decade and exports suffering their biggest ever drop, the country's health ministry has launched a suicide prevention program. South Korea's suicide rate nearly doubled during the Asian financial crisis 10 years ago with experts blaming it on stress caused by job and income losses.
"There is a fundamental connection between economic hardships and our high suicide rate," said a ministry official
In South Korea, a commuter train operator is even installing doors blocking access to railway tracks due to a sharp increase in people committing suicide by jumping in front of trains.

Millions of people in Asia have lost their jobs and retirees and other small investors have lost their life savings due to plunging stock markets and the collapse of investment funds. Asian governments are setting up hotlines and counseling centers to help those hit hardest by the financial crisis and the subsequent economic downturn.
Paul Yip, a mental health and suicide prevention specialist in Hong Kong, has seen a jump in the number of patients coming to his clinic for help to cope with the downturn.
"Work is very important to the Asian because we don't have very good social security and losing one's job is associated with the loss of 'face'. So the trauma can be great,"
Hong Kong started special hotlines in October for people suffering from the financial crisis and it opened "depression clinics" in some public hospitals this month.
"The clinics were opened in expectation of more people suffering depression because of the crisis. The government has also ordered more anti-depression drugs," said William Chui, education director at the Society of Hospital Pharmacists.

In Japan, some half a million contract workers are expected to be laid off in the six months until April. The industrial center of Aichi in central Japan, home to Toyota car factories and other manufacturers, has been particularly hard hit.An official in Aichi said the number of people bringing their problems to mental health centers rose by nearly 15 percent in December, compared with the same period in 2007. Japan's suicide rate rose sharply during a severe recession in the late 1990s when guarantees of lifetime employment collapsed, there were mass retrenchments and university graduates struggled to find jobs.

Who Pays for the Crisis ?

A 100,000 people have taken part in protests in Dublin to vent their anger at the Irish government's handling of the country's recession. They oppose plans to impose a pension levy on 350,000 public sector workers. Reports say the plan could cost the 350,000 public sector workers between 1,500 euros and 2,800 euros (£2,500) a year.
Ireland, which was once one of Europe's fastest-growing economies, has fallen into recession faster than many other members of the European Union. The country officially fell into recession in September 2008, and unemployment has risen sharply in the following months. The numbers of people claiming unemployment benefit in the Irish Republic rose to 326,000 in January, the highest monthly level since records began in 1967.
Trade union organisers of the march said workers did not cause the economic crisis but were having to pay for it.

"I've a mortgage to pay, I've children to put through school, and now I'm being told I have to take cutback, after cutback, after cutback." said one protester

"Our priority is about ensuring that people are looked after, the interests of people are looked after, not the interests of big business or the wealthy," Sally-Anne Kinahan, Irish Congress of Trade Unions secretary general

Grand sentiments from a trade unionist but always there must be added a caveat and it was from Karl Marx - that trade unions can only offer defensive strategies against the encroachments of capital and it is only when the working class recognise that it the abolition of wage labour and the whole stinking system of the capitalism that their real interest will be served .

Smoke and Mirrors

One of the striking fetures of this crisis is the seeking out of scapegoats . And for the government the culprits are those bonus-greedy bankers . Simplistic explanations of the inherent instability of capitalism . A simple search of this blog will reveal that Socialist Courier has been exposing those overpaid bankers long before this crisis appeared , something Brown and Darling were at the time turning a convenient blind eye to. ( note though , Socialist Courier doesn't take credit for predicting the crash ) . So bonuses are to end but what else - very little .

As always the people who will be paying the real price of this slump , is not the rich but it will be the working class - once more .

The Scotsman reports
HOMES were repossessed at the rate of 110 a day last year – but experts warn the figure could double this year as the recession puts hundreds of thousands of homeowners at risk of defaulting on their mortgages.Figures released yesterday by the Council of Mortgage Lenders (CML) revealed that 40,000 homes across the UK were seized in 2008, a 12-year high, and up 54 per cent on the previous year's 25,900.The CML does not provide separate repossession figures for Scotland, but housing charity Shelter Scotland estimated they could reach 7,000 by the end of 2009. By the end of 2008, 182,600 of the UK's 11.7 million mortgages were in arrears of more than three months.
One expert accused the group of being "too conservative" and said repossessions were likely to peak at 82,000 homes, or 225 a day.
Brown vowed to "do everything we can to stop repossessions" but the government was accused of "giving false hope" to people at risk after it emerged that a rescue scheme announced in December will not come into effect until April.

SC await a news item of just one bank executive losing his/her house in Barnton or whatever rich peoples enclave they and seeking the help of Shelter or the council housing department .

Also data from the Ministry of Justice showed that nearly 56,000 people applied to become bankrupt through the courts last year, up from about 53,000 in 2007 and the highest number since comparable records began in 1995.