The working class movement is faced with an array of bewildering political and economic events which apparently are unrelated to the emerging capitalist crisis.
The present crisis differs in some respects from all previous crises in this century. For one thing, it envelops parts of what were formerly regarded as socialist countries, most particularly in Eastern Europe but also in the USSR, where growing economic and political chaos grows out of a deliberate attempt to scuttle a socialized economy and restore capitalism.
This crisis also differs from others in this century in that it really does cover almost every nook and corner of the planet. It has become a platitude to say that the world economy is now integrated. It has been so for many decades. What is new is that the means of communication have become so rapid that an abundance of information can now flow almost at a moment's notice from one part of the world to another.
None of this, however, including the almost dizzying expansion of technology, has in any way negated the basic causes of the capitalist crisis. On the contrary, it has affirmed and aggravated them.
At the moment, several huge entities of the capitalist economy are on the verge of collapse. Most prominent among them, of course, are the savings and loan banks of the United States, which have been in crisis for a considerable period, with no end in sight.
More recent is the collapse of a mammoth worldwide bank, the Bank of Credit and Commerce International, announced in Britain on July 5. While the press in this country has generally played it in low key, with just a few articles in the New York Times, the Financial Times of London has given the collapse of the BCCI ongoing and massive coverage.
Despite the subdued coverage in the U.S., it is a very important development and a dangerous symptom of capitalist crisis.
The bank is reported to have assets of over $20 billion. This sum does not put it in the same league as giants like Citicorp, Chase Manhattan or any of the big British, French, German or Swiss banks. Its importance lies elsewhere.
The BCCI has operated, according to the Financial Times, in 69 (one account says 73) countries, and was chartered in Luxembourg. It was so structured as to present the image of being a bank organized, run and owned by Third World countries, most particularly Abu Dhabi and Pakistan. It was specially regarded for its Third World operations and leadership.
In the eyes of many Third World people, that would give it much more credibility than the outright imperialist banks, which of course are also operating in many parts of the Third World and may become the target of the masses when widespread suffering turns to militancy.
BCCI's principal stockholders are Sheik Zayed bin Sultan al-Nahayan, the ruler of Abu Dhabi, and other Abu Dhabi officials. Together they own 77% of the stock. Nevertheless, the bank's operations were shut down not by leading Third World countries but by the imperialist banking regulators of England, the U.S., France, Switzerland, Luxembourg and the Cayman Islands.
In the eyes of many in the Third World, these events may appear to be a political plot by the imperialists to shut down a thriving, worldwide financial institution. However that may be, it is still the inevitable result of a crisis in the world banking system. But, as in the case of the savings and loan institutions in the U.S., the crisis is presented as resulting from fraud, deception and corruption.
On July 6, the Financial Times reported that the BCCI had been convicted last year in the U.S. for laundering money, which these days is understood to be linked to drug trafficking. However, this seemed to have made no dent in its capacity to continue its operations.
We should state inter alia that it is often said that illegal drug trafficking upsets the capitalist market and is one of the causes of economic crises. That's altogether false.
Illegal sales of commodities do not influence the nature of the capitalist crisis. Cocaine or any other illegal drug is merely another commodity. The many illegal transactions on the so-called shadow or black market which exists side-by-side with the legal market have no significant effect on the inner workings of the capitalist system, although they may be a symptom of crisis.
Early in 1986, it was reported that Bank of America, First Boston Corporation, Chase Manhattan, Manufacturers Hanover Trust, Chemical, Crocker National and Irving Trust Company all had been fined by the government for violations of the rules requiring reporting of large cash deposits. (New York Times, Jan. 22, 1986. Also see Sam Marcy's book, High Tech, Low Pay, for a discussion of drug money laundering and the banks.)
The very existence of this bank, operating in so many Third World countries, even including the Shenzhen ``special economic zone'' in China, demonstrates a relatively new tendency in international finance capital which may be called the supranational bank.
The traditional imperialist banks, as we know, are situated in Wall Street, Lombard Street of London, the Bourse of Paris, the Kabutocho of Tokyo, and their equivalents in Germany and Switzerland. The point about the supranational bank tendency is that its orientation is to be free, to a limited degree, of state and governmental supervision. It tries to put itself beyond the reach of the governments where it operates and to incur the least amount of obligations to depositors and lenders.
For instance, in the United States, deposits in banks which carry the insurance of the FDIC are guaranteed up to $100,000. (Of course, big depositors who have millions may make deposits in a multitude of banks, thereby qualifying for the insurance which was intended to cover small depositors.) For the most part, deposits in banks in the Third World, particularly in the poorest countries, are not protected.
As for its broader significance, such a bank becomes a medium for draining the financial assets of the less developed countries. This in part explains how imperialist finance capital retards industrial and economic development in the less developed countries. The wealth is ultimately poured into the coffers of the big imperialist banks, without which the BCCI could not exist. It is a means to plunder any depositors, even those with small accounts, but largely the national bourgeois elements who have the wherewithal to make deposits.
The tipoff as to who actually has the decisive say in this big bank is that the Bank of England took the initiative in closing down the BCCI. The governor of Britain's central bank, Robin Leigh-Pemberton, seized control of most of the bank's global operations. He acted in concert with regulators in the U.S., France, Switzerland, Luxembourg and the Cayman Islands. The latter is really the creation of the big imperialists. The operation was closed down without even informing the principal stockholders in Abu Dhabi.
It was only after the order to close the bank was issued that the banking authorities of Abu Dhabi protested. But to no avail.
Often just before a general collapse, a welter of rumors appears attributing the causes of the collapse of this or that bank or corporation to fraud and deceit. The same is true in the collapse of this mammoth international bank.
Reports call it the worst banking scandal ever. The failure of the S&Ls was also said to be a scandal involving some of the principal banking officials, and some of the officers have been indicted and convicted. It is so much like what has happened in previous capitalist crises, when the symptoms were confused with the fundamental causes.
The symptoms as reported in the capitalist press almost always are criminal conduct by the corporate officers as well as the government officials entrusted with overseeing their functions, such as the banking regulatory agencies.
This has been the case in almost every crisis, and most particularly since the collapse that began with the 1929 stock market crash. When the Bank of the United States, chartered in New York, collapsed, the cause was attributed to the officials of the bank, who were charged, tried and convicted.
It happened again more recently when in the late seventies and early eighties such pillars of capitalist finance as the Franklin National Bank (now renamed European American), Penn Square Bank, Drysdale Securities and Continental Illinois Bank all capsized.
The objective significance of the charges of fraud, deceit, mismanagement, inefficiency, corruption, etc., etc., is to divert attention from the fundamental causes of the crisis. The claims of moral turpitude blur any attempt to get at what is at the bottom of it all.
To say that is the fundamental cause of the capitalist crisis is to substitute moral criteria for economic analysis.
Bourgeois politicians and economists often seek a cure for the malady of the economic system in sterner punishment, greater government supervision, greater awareness by high government officials.
On the other hand, another wing of the ruling class attributes the crisis to intervention by the government, saying that business has been hamstrung and rendered unable to solve its own problems precisely because of government interference.
None of this goes to the root of the problem.
Some bourgeois economists do go further than merely dealing with the superficial aspects of the crisis and attempt a serious analysis of the causes. They borrow some from Marxism and say that capitalism is capable of producing an abundance of goods and services but the working class is unable to buy it all back because the lion's share of its labor is appropriated by the bosses and constitutes their profit.
Underconsumption is the fundamental cause of the crisis, in their view. They are for state intervention to increase the purchasing power of the masses — through unemployment insurance, government-funded job creation, etc.
It is of course all too true that there is a super-abundance of consumer goods, and that the workers are unable to buy them all precisely because of the extortionate profit the bosses make from the unpaid labor of the workers. But these economists think that it's merely a question of adjusting the imbalance between production and consumption. Then everything will move smoothly once again.
This is a fallacy. If a mere adjustment of production to consumption would fix things, then surely there are enough economists, technicians and engineers of all kinds to make that necessary adjustment and wipe out the imbalance. After all, if they can adjust the functioning of a satellite after propelling it into space, they surely ought to be able to find a formula to fine-tune the system. But in the end, the solution of these most advanced bourgeois economists proves to be a total failure.
Underconsumption has characterized all previous societies based upon scarcity and the insufficient growth of the productive forces. The peasants had to give the landlords the cream of the crop. Slave society coincided with poverty of the masses. But in capitalist society, there is poverty amidst super-abundance.
It would be easy enough to adjust the balance between production and consumption were production destined solely for the purpose of meeting the demands of the consumers. But that is not the case. Our bourgeois economists know, or should know, that this meets with an insurmountable obstacle. The capitalists do not produce goods in such abundance for purposes of consumption, to respond to human needs. That is not the objective orientation of capitalist production.
Capitalist production is oriented solely and exclusively to the capitalist market, where it must turn a profit, and not for purposes of consumption as such.
It is true that ultimately whatever is produced must meet the needs of the consumer. But it must first pass the test of the capitalist market. This barrier cannot be breached by moral suasion, governmental edicts or even religious incantations.
If capitalist production does not pass the test of profitability, then vast quantities of commodities will remain in storage or, as happened frequently in the past, will be deliberately destroyed or dumped in the ocean. The capitalists will not produce just for the sake of meeting the consumers' needs, no matter how dire they may be.
The market is not just a place where seller meets buyer. Bourgeois economists point out that there's no longer any need to have a physical or geographical place for the market. The market operates by telephone or even telecommunications, as witness the world stock and commodities markets.
The absolutely indispensable characteristic in the purchase and sale of commodities or real estate is the private ownership of the means of production. It is a transaction based primarily and fundamentally on private property.
Were this not so, then the imbalance between production and consumption would reduce itself to a matter of efficiency in distribution and nothing more. Of course, there may be periods of scarcity, such as those caused by natural disasters, but they don't cause capitalist crisis. They are readily overcome by rebuilding technology or increasing efficiency.
Since the great crisis when the capitalist system actually broke down for a period of time after 1929, there have been a number of cyclical crises followed by upturns. These ups and downs have been interruptions in the emergence of a second breakdown of the capitalist system.
Most capitalist economists, when they write about the great depression, don't say how long it lasted. One exception is Charles P. Kindleberger, in his book The World Depression: 1929 to 1939 (University of California Press, 1973). This well-documented bourgeois account of the decade-long crisis demonstrates that it was a breakdown of the capitalist system. That's why it was so prolonged and was only overcome by the Second World War. Now we're facing a similar situation, where the U.S. ruling class is again trying to divert the economic crisis by such imperialist adventures as the war against Iraq. But this time militarism has not got them out of the crisis.
Militarism as an artificial stimulant is not an eternal category. It has been seen over the past decade that eventually it turns into a depressant. The tendency toward a general breakdown of capitalism, while it may have been interrupted, has not been reversed. On the contrary, the diversion of resources into militarism can make the crisis more severe.
All these efforts to hold back the crisis don't solve the overall contradiction that lies at the bottom of it all. On the one hand, production in the modern era is socialized; even the tiniest microchip has embodied in it the labor of millions of workers. Capitalist production has become thoroughly collectivized. On the other hand, however, this collective labor is appropriated by a small group of super-wealthy imperialists who maintain a monopoly of ownership over the means of production.
Last updated: 19 February 2018