The world economy is trapped in a new capitalist crisis occurring within the framework of the general crisis affecting the existing system. This crisis is more acute than that of 2008-2009, which was, in turn, more serious than the 1970s’ crisis. It is a constant in the development of capitalism to go from one failure to another, stuck in moments of crisis in which those mainly affected are the workers and peoples, because the wealth they produce is always used by one sector of the owners of capital or another.
In these crises all the contradictions of the bourgeois economy are intensely and violently exposed, the basis for their cyclical appearance is in the social character of production and the private, capitalist form of appropriation of the products of the labour of the working class. In the present conditions of monopolistic capitalism, because of the accelerated development of productive forces due to the intensified exploitation of surplus value to extract highest profit and the competition ongoing alongside the monopoly, capitalist production has a tendency to develop rapidly and infinitely. However, the markets do not present a development which accords with this; it is limited and the rate at which the markets grow do not reach a level to address the needs of the infinitely developing production. The finitude of the markets, as well as being related to productive consumption of the capitalists which are each other’s markets, since the luxury consumption of capitalists can be regarded as negligible in terms of magnitude, is mainly determined by the level of the consumption ability of the working class (and other labourers) –a significant section of whose labour power is seized without recompense– which stems from its position as the final and actual consumers of the produced products that can only be actualised by being consumed. When this discord between capitalist production and markets, the impasses caused by any reason in processes of change necessary for production to take place through consumption go over a level where they cannot be “resolved” through averages of market fluctuations or when they can no longer be deferred by being spread over time, the crisis erupts. For this reason, we can assert with confidence that, the crisis of capitalism, in the final analysis, is caused by the following conflict: the insatiable thirst for wealth of the owners of capital leads to increased production and, with it, to the search for a greater mass of surplus value, which comes into conflict with the limited power of consumption of the workers, whereby the social production’s tendency for unlimited development comes into conflict with the limit of the consumption capacity of society. “The true limit of capitalist production is capital itself, it is the fact that, in it, capital and its own valorisation are what constitutes the starting point and the goal, the motive and the end of production; the fact that here production is only production for capital and not the other way around, the means of production are simple means to expand more and more the structure of the life process of the society of producers”i, says Karl Marx.
Due to the emergence of the Covid 19 pandemic, which acted as an external factor of global prevalence, the crisis occurred simultaneously in all countries and practically in all areas of the economy. The losses caused reach millions of dollars, there is an enormous destruction of productive forces as millions of jobs have been lost. The efforts undertaken by the international bourgeoisie to avoid a more serious fall in the economy and to take the road for recovery are leading to the further impoverishment of the working masses, of millions of men and women who are facing unemployment and declining wages. They are also planting the roots for a future fall in the world economy.
Capitalist crisis and the pandemic
The magnitude and extent of the crisis has been intensified with the occurrence of the Covid-19 pandemic, which forced the adoption of blockade measures, that is, the closure of companies, the paralysis of international trade and social confinement.
Covid 19 was not the cause of the crisis, it acted as an aggravating factor for an incubating phenomenon. The world was already in a process of decreasing economic growth, some countries even stagnated, mainly in Europe. According to the World Bank, in its World Economic Outlook report, in 2018 the world economy had a growth of 3.0% in GDP, in 2019 it decreased to 2.4% and it projects a growth of 2.5% for 2020. The biggest problems were in the main imperialist countries (except China), which were expected to have an average growth of just 1.4%, while the so-called emerging economies, East Asia and the Pacific and South Asia, would have growth rates above the world average, 4.1%, 5.7 % and 5.5%, respectively. The International Monetary Fund was more optimistic, as it forecast world growth of 3.3% for this year. However, this forecast was questioned by a range of evidence such as the negative effect of the US-China trade war and the worsening of inter-imperialist contradictions, the worsening of relations between the US and its partners, the deepening of discontent and the struggle of workers and peoples in various regions of the planet.
The official results of the behaviour of the economy during the first quarter of this year confirmed the seriousness of the problems: In the US it fell by 4.8%, in Germany 2.2%, France 5.8%, Italy 4.7%, Spain 5.2%, China 6.8% (the first contraction in the last 40 years); Latin America reported a red balance, except for Colombia and Chile. Despite the great fall, China had a quick recovery in the second quarter, 3.2% year-on-year, according to official data, above the forecasts that placed it between 1.5% and 3%, while the whole of the European Union had a collapse 11.7%.
Analysis of the indices of world industrial production and world merchandise trade allows us to confirm that the current crisis was on its way.
The growth rate of total world industrial production, which was 3.6% in 2017, decreased to 3.1% in 2018 and 0.8% in 2019. In the last two quarters of 2019 the growth rates, compared to previous quarters, were -0.2%, 0.3%. With the impact of the pandemic, especially in China, in the first quarter of this year there was a sharp fall, -4.2%, and in April and May, compared to previous months, the growth was -8.5% and 0.8% respectively.
The volume of world trade began its contraction in 2019, when the pandemic was not yet present, and this contraction became greater with its emergence. Its growth rate, which was 4.9% in 2017, decreased to 3.4% in 2018 and -0.4% in 2019 (negative growth, absolute contraction). The biggest problems began in the final two quarters of 2019, in the first quarter of this year the growth was -2.7%, and in April and May, compared to previous months, these rates were -12.2% and -1.1 % respectively.
China does not escape this phenomenon, but its behaviour is different. It records a small fall between 2017 and 2019, going from 6.6% to 5.7%, but it suffers a sharp fall in the first quarter of this year, -12%, and in March a month-to-month growth of 16% is observed, in April 3.9 % and in May 0.6%. The highest levels of decline are found in Latin America: -0.7%, -2.2%, -5.0% in the aforementioned years, and in April and May of this year -18.0% and 2.2% (in relation to the previous months) respectively.
Since last year there were warnings that a debt crisis may be looming. The ratio of world debt to GDP set a historical record of 322%, equivalent to $253 trillion dollars, a phenomenon that encompasses both the private and state sectors. Since the 2008-2009 crisis, the greatest growth in debt was recorded in the non-bank business sector, which, due to the slowdown in economic growth, found it more difficult to repay loans. According to an OECD report, at the end of December of 2019, the global amount of outstanding debt of non-financial companies reached a record high of $ 13.5 trillion, which was double in real terms that of December 2008.ii
Compared with 2008, the corporate bond stock had doubled in 2019. The ranking of the ten countries with the highest nominal corporate debt is led by the U.S. and China, far above the rest. In the U.S., the debt has reached 75% of the total GDP. In China, it has reached 155%, in Japan it represents 101.6%, in France 154.1%, in Germany it is 58.9%, in the United Kingdom it has reached 79.1% of GDP. In general, the countries with the highest corporate debt are the largest economies on the planet.iii Concerning this matter, the “bad quality of the debt” should also be noted. For example, in the U.S., 75% of the debt is considered to be of this category, and the percentage could be higher because the companies producing these ratings have interests in and agreements with those rated.
With the bailout measures and loans implemented in the recent months to respond to the crisis, as well as the investments made to respond to health problems and social policies, the issue of public debt has taken on greater dimensions, reaching its highest level since the Second War World, to over 100% of GDPiv. Therefore, the phenomenon of indebtedness –corporate and public – threatens to burst this bubble in the short term, with worldwide implications, given that the international monopolies are immersed in this situation.
The fear of the approaching pandemic was expressed in different sectors: in the markets, the share prices fell abruptly from over-elevated levels; in credit markets, the differentials shot up in risky sectors such as the high-yield bonds, the leveraged loans, and the private debt. Then came the fall in oil prices on the international market due to the weakening of world demand and the rivalry of interests among the main oil producers, such as the OPEC member countries, Saudi Arabia, Russia, and the United States. It later began to rise again due to the increasing energy need of the capitalist wheel that began to turn once again as the measures for the pandemic were lifted and the US’ shale gas stocks were exhausted. At the base of this phenomenon is the overproduction of oil, which, for the first time, led to the establishment of negative prices for a barrel of oil. Prices in unit values of raw materials also fell, in April by 5.8% in monthly contrast to March, which already had a fall of 2.0%.
The so-called emerging economies suffered a reversal of portfolio investment flows never seen before, both in dollars and as a percentage of GDP, which led to descriptions of this situation as the perfect storm. Countries with weaker economies strongly felt the problems of the international market, the drastic fall in remittances and, in general, their condition of dependence on international financial capital.
The paralysis of production and trade on a global scale caused panic in the stock markets, and the economic growth forecasts went down. In April, there were concerns about the possibility of a large economic contraction of -3% in 2020, worse than that registered during the 2008 crisis, with constant warning that the scenarios could be worse if the pandemic and its effects were to prolong. In June, the World Bank stated that there would be a 5.2% contraction in world GDP in 2020, making it the deepest global recession in eight decades, despite unprecedented economic and social policies and measures.
The IMF projections published on June 24 are somewhat “better” than those of the World Bank, speaking of a decrease of -4.9% for 2020 and of a growth of 5.4% for 2021, of course if there are no aggravating circumstances in the course of the pandemic. The U.S. and the Euro Zone have the highest rates of decrease (-8.0% and -10% respectively), as well as Latin America and the Caribbean, -9.4%. China went through an important decrease in growth; it dropped from 6.1% in 2019 to the 1.0% expected for this year. It is the only imperialist country to show a positive rate.
The 5.4% growth forecast for 2021 means that, globally, the GDP in the coming year would be about 6½ percentage points lower than the projections published in January 2020, but that the process of total economic recovery will be slow, taking maybe two or three years. The cumulative loss of the world economy is expected to be $12 trillion dollars in the years 2020 and 2021; 10% of that loss will be in Latin America and the Caribbean.
The possibility of the escalation of the problems in the coming months and deepening of the crisis must not be ruled out.
Contradictions and inter-imperialist struggles
Within this context of the economic crisis and the global pandemic, inter-monopoly and inter-imperialist contradictions have been present. The spiral of threats, sanctions and accusations of espionage between the United States and China have continued, at times on a high tone and, at others, with an apparent relaxation. It is not a confrontation between democracy and authoritarianism, or between capitalism and socialism as presented by some sectors, they are contradictions between the two main imperialist powers vying to the expand and assert their control of the markets and regions of the planet.
The adoption of security measures by the main economic powers to control the contagion, have not been dissociated from political considerations, and in the investigations on the treatment and vaccines to counter the Covid 19, the game of interests of the pharmaceutical monopolies and of the imperialist states to which they belong was evidenced.
Inter-imperialist disputes have nothing to do with the interests of workers and peoples, they cannot fall into line behind either of these powers, under the mistaken assumption that one or the other “more or less favours” humanity; furthermore, the sharpening of the contradictions between these powers also engenders the danger of war.
Response of the international bourgeoisie
The international bourgeoisie has learnt from past experiences and, on this occasion, it has adopted a series of measures to avoid a greater economic collapse and the rapid transformation of the discontent of the workers and peoples into major protests.
Central banks injected massive amounts of liquidity, and governments established bailout policies, through subsidies, credits, and fiscal policies for the benefit of the monopolies and large companies, and to prevent mass bankruptcies. The amount of resources allocated for these purposes is enormous, and unprecedented with respect to “the rescue and fiscal stimulus programs, including salary supplements, licenses, loans and subsidies to companies, with an average additional expenditure equivalent to 5-6% of GDP, with a similar amount in addition to loan guarantees and other credit support for banks and companies”.v
The dramatic situation imposed by the crisis and by the Covid 19 pandemic forced the World Bank and the International Monetary Fund to change their discourse regarding the economic management of governments and the adoption of emergency measures. They spoke of the need to suspend the payment of the external debt by countries with weak economies and greater difficulties, and proposed the renegotiation of the processes with them, and a few countries “forgave” parts of the debt of the dependent countries. The IMF launched an urgent plan freely granting credit availability of $20 trillion dollars to 96 countries with greater difficulties accessing these.
They also raised the question of the “need” to implement reforms “that allow capital and labour to adjust relatively quickly, speeding up the resolution of disputes, lowering regulatory barriers, and reforming the costly subsidies, the protected monopolies and state-owned enterprises that have slowed the development”.viIn some countries, special laws were passed for “flexibilization” of labour relations, to legalize company bankruptcies and mass layoffs, to force the use of vacations, to reduce working hours and wages below the established basic wages, while at the same time establishing social programs such as the creation of economic bonds and food kits for the poorest sectors.
Despite the calls for prevention issued by organizations such as the World Health Organization (WHO) to protect life with isolation measures, the bourgeoisie forced the rapid incorporation of workers into companies in sectors considered non-essential, without providing, in most of these places, adequate biosecurity measures, causing an increase of the contagion, but also of the resistance and the protest of the workers.
The workers and peoples are bearing the brunt of the crisis
The main victims of the capitalist crisis and the Covid 19 pandemic have been, from the beginning, the working classes, the most impoverished sectors of society, and mainly, the youth. The actions taken by the bourgeoisie and its governments, despite some social policies (such as bonuses), are placing the burden of the capitalist crisis on the working class, the unemployed and the homeless. This is not a new phenomenon; it is a constant, part of the nature and the reproduction cycle of capitalism.
Millions of men and women have lost their jobs, have suffered a reduction in their wages, have had to increase their number of work hours; millions of others, particularly young people, saw their entry into the labour market stopped.
In the private and public sectors, the use of teleworking has expanded, causing flexible hours, intensification of work, in short, intensification of exploitation. Companies reduce their investments, workers cover production expenses that correspond to or are the responsibility of the companies, such as electricity consumption, internet, computers, telephones; the hourly workday is disappearing, and its measurement is by objectives. For working women, it has been presented as a way to “reconcile work and family life”, hiding the double working day and justifying the adoption of policies to cut social services, such as nurseries, etc.
Thousands of companies have gone bankrupt and closed their doors; to avoid massive bankruptcies, the bourgeoisie adopted a reduction of working hours. According to the International Labour Organization (ILO), the global decrease in hours worked in the first quarter of 2020, compared to the last quarter of 2019, was equivalent to the loss of 130 million full-time jobs. For the second quarter, it calculated that the loss would be equivalent to 305 million full-time jobs.vii At the end of the first semester, the ILO itself recognized that this figure amounted to 400 million, and that the most serious losses are occurring in Latin America (18.3%). For the last quarter of this year, under the most favourable scenario, it is estimated that, around the world, about 4.9% of working hours will continue to be lost (140 million full-time jobs). In the most unfavourable case (a possible second wave of the pandemic), there could be a loss of up to 11.9% of the working hours (equivalent to 340 million full-time jobs).viii
Women workers constitute the most affected sector due, in particular, to the effects of the crisis in the service sector and because they constitute a large part of those who work in the front line of the battle against the pandemic (especially health and social assistance sectors). Working women are suffering the lengthening of their working hours and the decrease in their income. Globally, almost 510 million women workers, namely 40%, carry out their work in the sectors most affected by the crisis.
In general, those who are linked to the sector of so-called “informal workers” have been those most affected. There are more than 2,000 million people in the world (62% of the total employed), who work in practically all sectors of the economy, from hotels, street trade, agriculture, etc. 1.6 billion of these were affected by the restrictions imposed to confront the pandemic.
One in six young people in the world have lost their jobs since the start of the pandemic, and those who are still employed have seen their hours of work reduced by 23%. Young people have seen the destruction of their jobs. Three out of four young people active in the labour market work in the “informal sector, thus lacking social protection. This period has been very hard for young people: their jobs have been destroyed, they have faced obstacles to continue their education and their access to the labour market has been hindered.
The current crisis is widening and deepening social inequities. The year 2020 will end with 71 million more people in conditions of extreme poverty, if the forecasts for economic growth are to remain with favourable factors; otherwise this would reach 100 million people, with which the world rate would rise to 9.18%, signifying the first increase recorded since 1998. The number of people living in poverty would increase by 353 million by the end of the year.
It is mainly the poorest dependent countries that will suffer the increase in extreme poverty and general poverty; almost half of the new poor will be in South Asia, and more than a third in Sub-Saharan Africa.ix Latin America and the Caribbean is the region most affected in terms of negative social effects; extreme poverty will grow from 67 to 83 million people this year, and its growth will be greater in urban rather than rural areas, also due to difficulties in production, decreases in the price of materials, problems in their economy; there is a risk of a food crisis.
The impacts of the economic crisis on the workers and peoples are profound and lasting; they will be present long after the economic recovery begins.
There is no doubt that the destruction of the productive forces that has occurred and continues to occur and the adoption of policies to get out of the hole in which the world economy finds itself, signifies an increase in the level of exploitation of the working class, of the oppression of the peoples. Once again, the bourgeoisie has placed the burden of the crisis on the shoulders of the oppressed.
The rapacious character of capitalism has been laid bare
The development of this new economic crisis of capitalism, as well as of the Covid 19 pandemic and the measures that the bourgeoisie is carrying out to alleviate them, are provoking a multilateral questioning of the system of exploitation in which the workers and peoples live.
Years of carrying out neoliberal policies that, among other aspects, led to the strengthening of the private health and social security systems – to the detriment of those of the public sector – to the carrying out of policies of labour flexibility, to the cutting of budgets for social programs, etc. have placed the burden on the poorest people in the course of the Covid-19 pandemic. They have been the main victims of infection and death, as well as of social confinement, the closure of companies and the measures adopted by governments to save the great business owners.
The workers have seen millions of dollars go to support big business, while the support bonuses or other measures to mitigate the problems of millions of people without jobs and without food, compared to those, barely amount to crumbs. The workers are receiving lower wages so that the big bourgeoisie can maintain its fortunes, in a world in which 1% of the richest people have accumulated 82% of the wealth.
Above all, there is a fundamental element that the entire world has seen: without the labour force in motion, without the workers in the factories and the peasants in the fields there is no production; without that work, society does not generate wealth!
Among the bourgeoisie there is concern about what is happening, about the weaknesses that their system presents and the risk that situations such as those that are taking place today are causing to its stability and permanence. In their think tanks they create proposals that, in general, appear as innovations or reforms to make capitalism less savage, “more friendly” for the workers, peoples and nature; some speak of the need to adopt social policies for the future – similar to those applied by the Welfare State; others, on the other hand, appeal to the need to apply policies of force to contain the discontent and struggle of the masses.
For millions of men and women, it is clearer that the bourgeoisie has in the State the instrument to protect its class interests, in those sectors they are developing the consciousness of the need to transform society. However, these steps taken in the development of the consciousness of the working class do not mean that the perspective of revolution and socialism has opened for all of them as an effective alternative to overcome the current state of affairs. The ideological influence of the bourgeoisie and opportunism is still strong within the workers’ and popular movement, and the capitalist crisis finds it affected by a great ideological and political confusion.
In the same scenario of the crisis, facing the attacks of the pandemic and the devastating impacts of unemployment and poverty on the workers and peoples, the youth have expressed their opposition and rejection of the policies of states and the employers; they have come out into the street demanding their rights, in varying degrees, almost in all countries. Those expressions of struggle of the working class and peoples will grow and we, the proletarian revolutionaries must strive to be present, to point out the most right and correct paths, to play the role of organizers and leaders of the popular struggle. These battles are, by their content and objectives, expressions against capitalism, in opposition to its predatory and oppressive nature; they can and must advance to see the objectives of the revolution and socialism.
Transform the discontent of the masses into organization and struggle
The scenario opened up by the current crisis is creating better conditions to advance the consciousness, politicization, and organization of the working class, youth and peoples. We, the Marxist-Leninist parties and organizations, have a great opportunity to develop our work in this regard, to increase our forces in each of our countries, to expand the influence and organization of the International Conference of Marxist-Leninist Parties and Organizations among the workers and the peoples of the world. This opportunity represents a great challenge for the proletarian revolutionaries to take up with conviction and courage to demonstrate the need for the revolution, to increase and develop our parties, to advance in the process of accumulating revolutionary forces.
These purposes will be feasible if we deepen our ideological, political and organizational relationship with the working class, the youth and the peoples, transforming their discontent into organization and struggle, raising the fight against the measures and policies implemented by the bourgeoisie to shift the burden of the crisis to the workers and peoples. In each country, we have the responsibility to present proposals and programs to respond to the crisis –which accord with the interests of the workers and the peoples-, that become the flags of the masses for struggle and serve us to demonstrate that the interests of the workers and the bourgeoisie are opposed and irreconcilable.
The events that are taking place on a global scale confirm the Marxist-Leninist principles on the nature of the crises of capitalism, but also to confirm that their existence does not in itself determine the outbreak of the social revolution of the proletariat. It is essential to have a strong mass revolutionary movement, a great workers’ and popular movement that will fight against all forms of the exploitation and oppression of capitalism and will lead their struggles towards the establishment of the power of the working class and people. At the same time, the existence and action of the revolutionary political vanguard, sufficiently developed and rooted among the masses, is essential for it to completely fulfil the leading role in the revolutionary process. We must recognize that many steps need to be taken in this regard to achieve the victory of the proletariat over the owners of capital. The International Communist Movement has organizational expression in few countries and with limited influence. This situation must be overcome, and urgently.
The fight for the seizure of power necessitates for us to publicise, as widely as possible, our points of view, the new evaluations of what is happening in the world and what its causes and beneficiaries are. We must be active participants – with our Marxist-Leninist conception – in the political and ideological debate that has opened up regarding the permanence of current capitalism and the “changes” that sectors of the bourgeoisie offer as needing to be made. Along with the perspective of the revolution and socialism, we need to present proposals for the material demands of the masses – immediate and medium term – that can become banners of mobilization and struggle, as is already happening in various regions.
There is much talk of the advent of a “new normal“, as if this would mean overcoming the problems that the world faces today and before the pandemic. However, they assume it based on the criteria built on the same pillars of the outdated capitalist regime: on the exploitation of workers and peoples, the oppression of women, the depredation of nature, racial segregation, and solely with certain modifications in the social behaviour. In reality, the international bourgeoisie seeks to take advantage of the current circumstances to find new accumulation mechanisms, that is, to take the exploitation of wage labour, the extraction of surplus value, to higher levels.
We, the Marxist-Leninists seek a new order that means the revolutionary transformation of society, a “new normal” that arises from the negation of the past, with the birth of a new society, the society of the workers. Only socialism can build that new world.
Coordination Committee of International Conference of Marxist Leninist Parties and Organizations (CIPOML)
i Karl Marx. Capital, Volume III, chapter XV.
ii See: The seeds of the next debt crisis, John Plender, March 16, 2020 https://www.expansion.com/mercados/2020/03/09/5e6578f4468aebff048b45b2.html
iii See: The 10 countries with the greatest corporate debt, Miguel Boggiano, December 16, 2019. https://www.ambito.com/opiniones/bonos/los-10-paises-mayor-deuda-corporativa-n5071402
iv See: Fiscal Policies for a Transformed World, IMF Blog, June 10, 2020 https://blogs.imf.org/2020/07/10/fiscal-policies-for-a-transformed-world/?utm_medium=email&utm_source=govdelivery
v See: UK: wishing for a V-shape, Michael Roberts. July 10, 2020 https://thenextrecession.wordpress.com/2020/07/10/uk-wishing-for-a-v-shape/
vi World Bank.
vii International Labor Organization https://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/documents/briefingnote/wcms_743146.pdf