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Some Thoughts on Global Economic Crisis, Jeremy Cronin

Some Thoughts on Global Economic Crisis, Jeremy Cronin

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Published by andrew taylor
A Apeech given at Rhodes University by Jeremy Cronin, deputy general secretary South African Communist Party (SACP)
A Apeech given at Rhodes University by Jeremy Cronin, deputy general secretary South African Communist Party (SACP)

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Published by: andrew taylor on May 31, 2010
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1Some thoughts on the global economic crisis:Speech by Deputy Minister Jeremy Cronin, delivered at Rhodes University 17 September 2009This week a year ago, Lehman Brothers a hallowed, century-old financial institution,collapsed. It was one of the top four investment banks in the US and it wassupposedly “too big to fail”. But it failed. Its collapse was a dramatic indication thatsomething truly major, something relatively unprecedented, at least over the last half century, was under-way. Now, a year later, amidst the rubble of the most serious global capitalist crisis sincethe Great Depression of the 1930s, apologists for capitalism are doing their best tofind evidence of “green shoots” – signs of the beginnings of a recovery and a return toglobal growth. Given the unprecedented nature of this crisis, no-one is really surewhat the future holds. However, for reasons that I will elaborate upon in this paper, Ithink that while there may be a short-term if sluggish global recovery, it will merelymark a respite before the onset of further crises – or, rather, the continuation of thesame fundamental crisis.I will argue that the present crisis represents the confluence and interaction of at leastthree critical dimensions:• the
crisis – related to the embedded general features of capitalistaccumulation that continuously drive it from booms into busts. These generalfeatures of capitalism, which some were beginning to believe had disappearedforever, have been manifesting themselves with a particular ferocity over the past year;• the present
crisis of the post-World War 2 global capitalist system presided over by a dominant but now waning hegemonic power – the UnitedStates; and• the
crisis of our entire global growth path.
Capitalist crises – not an abnormality, but the norm
Capitalism is never crisis free. The present crisis is one of the more serious episodes, but an episode nonetheless, in a five centuries-long history of booms and busts.Political economists had long noted this boom-bust nature of capitalism. But it wasMarx in the second half of the 19th century who, I believe, provided the first sustainedscientific explanation.Capitalism, he demonstrated, is a unique mode of production directed towardsaccumulation for its own sake, regardless of social needs. The pursuit of profitmaximisation through ever expanding accumulation drives capitalism’s constant andinnovative tendency to revolutionise the forces of production. But this very processconstantly leads capitalism to “over-produce”, to “over-accumulate” – that is, to produce more goods, or to produce the capacity in machinery and factories, for instance, to produce more goods than can be profitably sold (which is very different2from saying more goods than are needed by humanity). At the heart of all capitalist busts lies this kind of crisis of over-accumulation.What Marx also demonstrated clearly is that the only fundamental “solution” that
capitalism has for these periodic crises is the crisis itself! Only the wholesaledestruction of value (through retrenchments, factory closures, wiping out of inventories, loss of savings, bankruptcies, even the butchery of war) can clear theground for the next bout of accelerated capitalist growth and profit-taking – whichinevitably lays the basis for the following crisis of over-accumulation.
There are nosolutions WITHIN capitalism for these crises OF capitalism. The crises are notthe result of the failure of the system, but of its very successes! The crises are not“abnormal”, they are systemic and inevitable…as long as we remain imprisonedwithin a capitalist system.Even in “good” times – the tendency to growing inequality andimmiseration
Capitalist crises, like the present one, tend generally to impact most severely on theworking class and poor, particularly those living in the periphery and semi-peripheryof the global system. But it is also important for us to remember that even in the“good” times of capitalist boom, life is crisis-ridden for hundreds of millions of theworld’s workers and poor.
the current crash, an unprecedented one billion people globally were living inslums as third world rural economies collapsed. In 2005, at the height of the lastcommodity boom, half the world’s population was living on less than $2 a day. In themidst of its own galloping economy, between 1990 and 2002 (with an average growthrate of 9,3%) China’s growth was actually close to jobless (0,8%)’ and in the boomingmanufacturing sector it was actually negative! In India, supposedly on the high-roadto becoming the next Asian Tiger, between 1997 and the present, while GDP wasdoubling, no less than 180,000 small farmers committed suicide as livelihoods were bled dry by global agricultural liberalisation, under the tutelage of the multi-nationalagribusiness.Here in South Africa, the much vaunted “unprecedented and sustained growth” between 1994 and 2007, only managed (eventually) to bring unemployment back down to the crisis levels at which we had begun in 1994 (that is to say, over 20%). Inthe same period, even in the midst of our democratic breakthrough, there was a hugeshift of surplus from the South African working class majority to the tiny minority of capitalist exploiters and speculators – compensation to employees was 51% of GDP back in 1994, while net operating surplus (profits for bosses) was 25% of GDP. By2008 worker share of South Africa’s GDP had dropped to 42%, while the bosses’share had risen to 33%. This was due to many factors, not least mass retrenchmentsand large-scale casualisation of the work force.These inherent tendencies towards growing inequality and growing popular immiseration within capitalism,
even in the “good” times,
then further exacerbate thetendency towards crises of over-accumulation. Mass poverty narrows the effectivemarket demand (as opposed to human need) for commodities - thus compounding thecrisis of over-accumulated commodities queuing up for non-existent buyers.3These, then, are the
general systemic
features of capitalism leading to inevitablecrises. Many things impact upon the actual unfolding of these inherent systemictendencies, not least the relative capacity and strength of key antagonistic classeswithin capitalism. For this reason, while all capitalist crises have the same general
features, they also have their own historical features. So let’s turn to some of the main
systemic and structural
features of the current downturn.
A major recessionary downturn
In the first place, what has been happening in the present crisis is a typical, cyclical
recessionary downturn
rooted in the systemic tendency to over-accumulation – although in this case it is a particularly serious downturn. Its seriousness relates in part to the fact that its epicentre has been in the US itself, and, initially, in the highlyglobalised financial sector. (Over the past decades, using its global dominance, the UShas been able to displace the epicentres of crisis into other localities – like the socalled“Asian contagion” for instance.) However, this time around, this displacementwas no longer possible, and the fact that the epicentre was in the heartland of theaccumulation process has meant that its knock-on effects have been widespread andrapid
However, while noting the severity of the present crisis, it is also useful to bear inmind that these general global
cyclical downturns
tend to occur every decade or so.In the recent period the global economy has gone into a slump in 1974/5, 1980/2,1991/3 and 2001/2.There is a considerable speculative industry that seeks to predict these cyclicalrealities and also seeks to resolve, or, at best, smooth out the bumps with a variety of contra-cyclical interventions. Until quite recently, indeed, there were somemainstream international economists who had begun to argue that global capitalism, precisely because it was more globalised than ever before and had thereforetranscended all barriers, had now entered a gravity-defying epoch in which theguarantee of uninterrupted growth on auto-pilot was assured. Ricardo Hausman(leader of the “Harvard Group” that produced a recent set of analyses and proposalsfor SA on behalf of our Treasury) wrote a celebrated paper in 2005 along with afellow Harvard luminary. In it, they claimed that macro-economic managementtechniques and financial “dark matter” would prevent a big bang in the worldeconomy. The failure to believe in this “dark matter”, the authors boasted, made“analysts predict crises that, for good reason, remain elusive.”That is a boast that now rings hollow. But the majority of mainstream economists arestill wanting to believe that what we are dealing with currently is a momentaryaberration, and that sooner or later things will get back to “normal”. In other words,the
(i.e capitalist) features of the crisis are not seriously considered. Debatesin these quarters tend to revolve around how best to “stimulate” the economy; how best to get back to where we were before the crisis started. Discussions centre aroundmatters like how to restore liquidity and confidence into the system, and at what pointcentral banks, national governments and multi-lateral institutions should pull-back from these stimulus packages and allow the market to get on with it. While there have been “nationalisations” of major financial institutions in the UK and US, governments4there are quick to indicate that these are temporary measures, and these institutionswill be returned to private ownership once the economy has recovered. In other words, these “nationalisations” are not transformative interventions, they are not thesocialisation of key economic entities, but the nationalisation of debt…future profittakingwill be handed back to the capitalist class.

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