{"id":1165,"date":"2020-03-25T14:09:12","date_gmt":"2020-03-25T12:09:12","guid":{"rendered":"http:\/\/marxistworkersparty.org.za\/?p=1165"},"modified":"2020-04-23T11:18:26","modified_gmt":"2020-04-23T09:18:26","slug":"coronavirus-plunges-capitalism-into-global-turmoil","status":"publish","type":"post","link":"https:\/\/marxistworkersparty.net\/?p=1165","title":{"rendered":"Coronavirus Plunges Capitalism into Global Turmoil"},"content":{"rendered":"\n

The Need for a Socialist Alternative <\/h2>\n\n\n\n

Statement from International Secretariat of the CWI<\/a> <\/strong><\/p>\n\n\n\n

23 March\n2020<\/strong><\/p>\n\n\n\n

1. The outbreak of the coronavirus pandemic has\nplunged world capitalism and society into an entirely new era of turmoil and\nupheaval. In country after country, as the pandemic has taken hold, it has\nrapidly exposed everything that is rotten about capitalist society. From the\ninitial cover up of the virus in Wuhan in China by the dictatorial regime to\nthe desperate plight of the old and sick in particular in Italy, Spain, France,\nBritain and other countries who are suffering because of inadequate medical\nfacilities, the decadent nature of capitalism and its rulers has been exposed.\nThis has provoked widespread fears and also a questioning of how society is\nrun.<\/p>\n\n\n\n

2. The consequences of the austerity packages\nwhich have been applied in countries like Britain, France, Spain, Italy and\nmany others have been shockingly revealed as the pandemic has hit these and\nother countries. <\/p>\n\n\n\n

3. Apart from the devastating effects on the\nhealth of millions, this pandemic has also been a trigger for the onset of a\nnew global economic recession. In China, where the crisis began dragging down\nthe world economy, GDP has contracted by an estimated 13% in the first two\nmonths of 2020! With China accounting for approximately 14% of world trade,\nthis alone would have a devastating effect on the global economy. (In 2007\/8 it\naccounted only for approximately 4% of global trade).<\/p>\n\n\n\n

4. However, the \u201clock-downs\u201d being imposed in\nmost major capitalist countries, combined with the effects of large sections of\nthe workforce being off sick for a period, is also ensuring that recession is\nalready underway in the capitalist economies of Germany, France, Italy, Britain\nand the EU as well as in the US and Japan.<\/p>\n\n\n\n

5. The economic and social crisis currently\nunfolding is likely to be at least deeper than the 2007\/8 crisis. Some estimate\nthat the British economy could contract by 15% in the second quarter of 2020.\nLarry Elliot writing in the London Guardian, spoke of \u201cwhat is shaping up to be\nthe recession of all recessions\u201d. Even deeper than 2007\/8! A crash into a\nglobal depression cannot be excluded such is the devastating crisis that is\nunfolding. Big lay-offs are already taking place in many countries and the\nthreat of a massive growth of unemployment is now present in all countries.<\/p>\n\n\n\n

6. This is taking place against the background of\na perilous economic situation before the coronavirus crisis hit. The\ncapitalists fear this will not be a short ‘V’-shaped recession but far more\nprolonged and deep.  Before the onset of\nthe pandemic the global economy was in an extremely precarious situation.\nSlowdowns had already set in in Germany, China and other countries. In Japan\nhousehold spending fell by 7% in the autumn of 2019. In spite of an extremely\nanaemic \u201crecovery\u201d, despite all the stimulus packages and QE introduced\nfollowing the 2007\/8 crash, the global economy had not fully returned to its\npre-2007 growth position. The crash of 2007\/8, while not resulting in a\n1930s-type Great Depression, was one of the longest recessions in capitalism\u2019s\nhistory \u2013 comparable with the ‘Long Depression’ of 1873-96 and the ‘Great\nDepression’ of 1929-39. The 1974 crisis ended the post second world war boom\nperiod and ushered in a new period of instability and upheaval. Today the\nruling classes now face the possibility of having to confront a prolonged\nperiod of recession or even a depression. They enter the new crisis not from a\nposition of economic or political strength and stability.<\/p>\n\n\n\n

7. Global debt has soared to a staggering US$250\ntrillion in the first half of 2019. In fact, global debt levels by 2019 had\nnever been higher with total debt \u2013 government, companies and households \u2013 over\nthree times greater than the global economy.<\/p>\n\n\n\n

8. This meant that in crucial ways the global\ncapitalist economy before this crisis was more deeply in debt than it was in\n2007\/8. However, as the investor and New York Times writer Ruchir Sharma\npointed out, the more risky pools of debt have shifted from households and\nbanks to corporation all over the world. There has been a dramatic rise of\nso-called ‘zombie’ companies which earn too little to even pay interest\npayments on their loans and only survive by issuing new debt. ‘Zombie’ \u2013\ncompanies now account for 16% of publicly traded companies in the US and 10% in\nEurope. <\/p>\n\n\n\n

9. Another area of \u201cdebt stress\u201d includes a swath\nof companies which, to avoid regulations imposed on companies since 2008, have\nmade private deals that have saddled them with huge debts. The average US\ncompany owned by a private equity firm has debts equivalent to six times its\nannual earnings \u2013 twice the rating that agencies consider \u201cjunk\u201d.<\/p>\n\n\n\n

10. These factors were all clearly leading\ntowards a new economic crisis prior to the eruption of the coronavirus\npandemic. <\/p>\n\n\n\n

11. Capitalism was on the brink of a new economic\ncrisis and slow down or recession.  The\narrival of the pandemic pushed it over and has plunged the world economy into a\nserious recession or possibly a depression. The nature of the pandemic means\nthat for the first time the recession will have a dual character – of both\ndemand and supply. It is not just a crisis of consumption but also of supply,\nthe supply chains, production and distribution. This would have devastating\neconomic, social and political consequences on a global scale and would be a\nmulti-crisis of all sectors of the capitalist economy. The dramatic rise in\nunemployment already unfolding and the effects this will have is one aspect of\nit.<\/p>\n\n\n\n

12. Currently this crisis after China and South\nKorea is having its greatest impact in Europe and the US but is rapidly spreading\nto other areas. Fear of the consequences of this rapidly unfolding crisis has\ncompelled the ruling class in most countries to switch take and adopt massive\nKeynesian measures and abandon neo-liberal policies.<\/p>\n\n\n\n

13. One after another, within a few days, massive\ninjections of public sector funding have been pumped into the economy to prop\nup businesses. The ECB has now announced a QE injection of 750 billion euro.\nMacron announced a total of 345 billion euro to be injected into the French\neconomy. Johnson, a week after the budget announcements, has injected another\n\u00a3330 billion into the British economy. Even Trump is considering using\n\u201chelicopter\u201d monetary methods and will simply give money to consumers to try\nand keep purchasing power up. Trump is apparently considering putting US$2,000\ninto the bank account of every American! A step that the Hong Kong government\nhas already taken.<\/p>\n\n\n\n

14. Low interest rates have been slashed in a\ndesperate attempt to try and maintain some economic activity \u2013 in Britain to\n0.1% – the lowest level in history! Already, prior to this crisis, some\ninterest rates were effectively negative.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Neo-liberalism Abandoned<\/strong><\/p>\n\n\n\n

15. Within days, in the face of this\nunprecedented peacetime crisis, neo-liberal policies were rejected in favour of\nstate intervention and Keynesian methods. Elements of what was done during the\nfirst and second world wars have been repeated by numerous governments in a\ndesperate effort to avoid a complete collapse and the social revolt which would\nfollow.<\/p>\n\n\n\n

16. The Italian government nationalised the\ncountry’s main airline and the Spanish government nationalised private health\ncare. Macron has been compelled to say he is ready to nationalise stricken\nFrench companies. In Germany, the Christian Democrat economic minister has\nspoken of the possibility of nationalisation, while warning that “the\nprinciples of free market economy should not be forgotten”. Even Johnson\nin Britain was compelled to approach manufacturers and \u201cappeal\u201d to them to\nchange production to produce ventilators for hospitals. <\/p>\n\n\n\n

17. They have all abandoned their non-state\nintervention and neo-liberal policies at the blink of an eye-lid when\nconfronted with a crisis of this magnitude. As in war-time – especially the\n1914-18 and 1939-45 world wars – they are prepared to mobilise everything in\norder to try desperately to prop up their system.<\/p>\n\n\n\n

18. How successful they will be in avoiding a\ndepression or deep recession remains unclear at this stage. In the last week\nthey have shown they are prepared to mortgage the future to try and avoid a\ndepression and collapse if possible for fear of the economic, social and\npolitical consequences which would follow. As the crisis unfolds globally it is\ncertain to have an even more devastating effect in Asia, Africa and Latin\nAmerica. <\/p>\n\n\n\n

19. In a previous historical period an economic\ncrisis of this magnitude of a massive debt mountain, absence of sustainable new\nmarkets and crisis of overproduction, rearmament drives and increasing tensions\nwith rival capitalisms was driven to barbaric methods to \u201creboot\u201d the entire\nsystem through the destruction of productive forces. This led each national\ncapitalist state to take measures to protect its own interests and even led to\nwar and world war. Today this option is not open to the ruling class because of\nthe mutual destruction it would entail in the era of nuclear weapons. However,\nregional wars between rival powers, or proxy wars, are an inevitable\nconsequence of this crisis. Capitalism may as a result be confronted with a\nprolonged period of economic recession or even depression in which some of the\nproductive forces are destroyed. This could mean an intense period of social,\npolitical and economic upheaval on a global scale un-paralleled in the recent\nhistory of capitalism.  <\/p>\n\n\n\n

20. The lurch to Keynesian programmes to try and\navert such a cataclysmic collapse has not however been on the basis of an\nagreed co-ordinated international strategy of the capitalist classes. Nor has\nit been done from a strong economic position. In 2007\/8, after an initial\npanic, the ruling classes co-ordinated policies to intervene and prop up the\nglobal banking and finance system.<\/p>\n\n\n\n

21. The present crisis is taking place under\nentirely different international political conditions. The decline in the power\nof US imperialism, although still the largest global power, and the emergence\nof China and other regional powers, means that neither the US nor any power can\nimpose unchecked a single policy over other powers.  The weakened position of US imperialism and\nrise of China and other regional powers like Russia has resulted in a process\nof de-globalisation and reversion to protectionist nationalist policies. This\nhas been clearly demonstrated during this crisis as each capitalist power has\nadopted measures to defend its own interests.<\/p>\n\n\n\n

22. Global capitalism has had to confront this\ncrisis against the back ground of developing trade wars. It entered the crisis\nwith a row between the two largest oil producers \u2013 Russia and Saudi Arabia \u2013\nwhich has driven down the cost of crude oil with disastrous consequences for\ncountries such as Nigeria and Venezuela which depend on the export of their\noil.<\/p>\n\n\n\n

23. Added to this is the ineptness of the\nright-wing populist capitalist politicians like Trump, Johnson and Bolsonaro\nwho have compounded the crisis with their handling of the situation. Ratcheting\nup tensions still further, as part of his re-election campaign, Trump dubs the\nepidemic the \u201cChinese virus\u201d, Johnson refuses generalised testing even to NHS\nstaff and Bolsonaro continues to deny there is a serious problem, walking around\ngreeting people whilst waiting for his own test results. Modi in India has\ntaken a similar approach.<\/p>\n\n\n\n

24. There is a stark contrast in the handling of\nthe virus pandemic between the major western capitalist powers and China – a\nunique state capitalist economy with the remnants of the bureaucratic Stalinist\nregime which existed in the past is illuminating, despite the initial cover-up\nof the virus which did the regime enormous damage. The Chinese state was able\nto build emergency hospitals within two weeks (although the workers involved\nendured slave-like conditions) and dispatch doctors from around the country to\nthe worst-affected areas. It also ensured that a food distribution network was\nput in place. Also Cuba, despite bureaucratic planning and partial inroads made\nby capitalist restoration, used one of the currently most effective drugs in\ntreating those worst afflicted with the virus \u2013 Interferon Alpha 2B \u2013 which\nhelped to substantially reduce the number of deaths. Its government then\ndispatched 2,000 doctors to Europe to assist in treating the sick in Italy. Russia, for its own reasons, has also found the capacity to\ndespatch aid to Italy.<\/p>\n\n\n\n

25. The present crisis represents a decisive\nturning point for global capitalism both economically, socially and in terms of\ngeo-political relations. Exactly how it will emerge from this crisis is wholly\nuncertain at this stage. However, a major re-configuration of world and\ngeo-political relations is certain as well as big battles between the classes\ninvolving more powerful elements of revolution and counter-revolution.<\/p>\n\n\n\n

26. Just as the First World War opened the era of\nthe increased power of US imperialism, this crisis will now further undermine\nits position globally. How far that develops is not clear at this stage. China\nis also being ravaged economically as a result of the crisis and it is still\nunclear how it will emerge from the crisis. International tensions and\nconflicts are set to intensify. The break-down and even collapse of regional\nco-operation and integration can result. In Europe the ruling class is\nterrified at the spectre of this crisis ripping apart the EU as it is presently\nconstituted. One of the issues discussed by the ECB in deciding to inject a\nmassive release of funds was fear of the disintegration of the Eurozone.<\/p>\n\n\n\n

27. Inevitably this crisis has seen\nall of the limitations imposed by the European Union on Eurozone members in\nterms of levels of state budget deficits and\ngovernment intervention to support failing industries thrown out of the window.\nAt the same time the national tensions within the EU have been reinforced and\nstrengthened. This was reflected when Italy appealed for urgent medical aid\nfrom EU countries and got a zero response. It was left to Cuba, China and\nRussia to send medical supplies, doctors and aid.<\/p>\n\n\n\n

28. In the short term the understandable fear of\nthe consequences of the virus and effects of the economic crisis it has\ntriggered in most countries has led to an initial feeling of the need for\n\u2018national unity\u2019 to stand together in face of such a devastating crisis. This\nhas resulted in the mass movements in France, Chile and other countries being\ncut across for a period.<\/p>\n\n\n\n

29. The governments in all countries have or are\nin the process of assuming widespread emergency powers. Johnson in Britain and\nAbe in Japan have been emergency powers for two years! In Italy the partial\ndeployment of the army has been accompanied by fines of 5000 euros being\nimposed on anyone on the streets without a permit. In some countries a certain\nmilitarisation of society has taken place with the deployment or partial\ndeployment of the army and other state forces.<\/p>\n\n\n\n

30. Such measures have largely been accepted\ninitially as being necessary to deal with the crisis and protect the lives of\nas many workers and their families as possible. It is similar to the attitude\nthat developed at the early stages of world wars one and two in many countries.\nThe CWI supports all steps taken that are necessary to protect the lives and\ninterests of workers and their families. However, there can be no confidence\nthat capitalist governments will use pandemic measures only democratically and\nin the interests of the mass of the population. Their main concern is defending\nthe interests of capitalism. Furthermore, at a certain stage they will attempt\nto make the working class and middle classes pay for this crisis, either\ndirectly or indirectly. This will inevitably provoke further big social\nupheavals.<\/p>\n\n\n\n

31. Emergency authoritarian measures can be\nturned against the working class and its organisations by the capitalist\ngovernments. The yearlong postponement of local elections in England, including\nthe London Mayoral elections is an indication of how the crisis can be used to\nundermine democratic rights. It could not be excluded that Trump would even\nattempt to use the crisis to postpone the November Presidential and general\nelections \u2013 although a constitutional amendment is necessary to do this, which\nwould not be easy.  This would an\nextremely dangerous step for the US capitalist class but, depending how events\nunfold in the US, such a drastic step by Trump cannot be excluded.<\/p>\n\n\n\n

32. The CWI demands democratic checking and\ncontrol by the trade unions and working people of any emergency measures that\nare taken during this crisis. It is essential that we struggle for an\nindependent class position to be taken by the trade unions and the working\nclass. There is pressure for \u201cnational unity\u201d and even for participation in\ncoalition governments together with the capitalist parties. Whilst being\nsensitive to this mood, the CWI opposes any steps towards class collaboration\nby \u201cleft\u201d parties and trade unions. Steps in this direction by trade union\nleaders are certain at some stage to open up struggles and conflicts within the\ntrade unions.  We oppose participating in\ncapitalist coalition governments of \u201cnational unity\u201d which will defend the\ninterests of the ruling class and not working people. Instead the workers’\nmovement needs its own “Action Programme” to deal with the crisis. <\/p>\n\n\n\n

<\/div>\n\n\n\n

Class Divisions\nExposed and the Need for a Socialist Alternative<\/strong><\/p>\n\n\n\n

33. These developments do not mean that the class\nstruggle has ended. On the contrary the class divisions in society have been\neven more greatly exposed. Further and deeper class polarisation is certain to\ndevelop. Despite initial feelings of fear and trepidation, underlying class\nantagonisms have been exposed to an even greater extent by the crisis as being\npresent and they will increasingly come to the fore as the crisis progresses.<\/p>\n\n\n\n

34. The strikes which broke out in Italy and in\nFrance are a reflection of this, as were the strikes by Mercedes Benz workers\nin Spain and the hospital cleaners in London and other workers elsewhere,\nincluding the US. An instinctive solidarity with the health workers and others,\nalong with a common sense of the need to come together to assist each other has\ndeveloped in most countries, especially those affected by the \u201clockdown\u201d. The\npot banging and chanting in Barcelona against the Spanish King, following\nrevelations about his secret pay-off, illustrates how, during this crisis, the\nclass issues will come forward with greater intensity as it progresses. Even in\nBrazil, Bolsonaro\u2019s inept handling of the pandemic provoked some of the largest\nprotests against his government since he came to power. <\/p>\n\n\n\n

35. The political consequences of this crisis\nwill, at a certain stage, lead to a major shaking up of political consciousness\nand will put the question of the capitalist system in the dock! This is already\nbeginning to take place with a questioning amongst a layer of workers of\n\u201ccapitalism\u201d and the type of society that has been built. Big sections of the\nworking class, youth and the middle class can draw revolutionary conclusions\nwhen confronted with the consequences of a lengthy economic recession or\ndepression. The Keynesian measures, while having an effect will not ultimately\nsatisfy the demands of the working class and the masses. In many countries a\ndeep mistrust of the government and the rich is already being reflected in the\noutlook of some layers of the population.<\/p>\n\n\n\n

36. Even the Financial Times, in its recent\nBrexit briefing, concluded: \u201cIt is in the nature of cataclysmic events, such as\nthe pandemic, to accelerate and refashion historical developments that would\nhave happened anyway. The First World War intensified turmoil in Russia leading\nto the revolutions of 1917, and drove forward the emergence of the US as the\n20th century\u2019s leading global power. The Second World War marked the definitive\nend of European supremacy in international affairs and the planet\u2019s\ntransformation into an arena of US-Soviet rivalry. The pandemic and its\neconomic fallout, unless brought under a measure of control, is sure to have\nsimilar large-scale consequences.\u201d (FT 17\/3\/20).<\/p>\n\n\n\n

37. The dramatic radicalisation and upheavals\nwhich took place following the 1930s depression and the Second World War, which\nresulted in mass support for nationalisation and socialist change, provide\nimportant lessons. Having resorted to major Keynesian methods and state\nintervention during this crisis, the ruling class will find it extremely\ndifficult to simply abandon them as they emerge from the immediate effects of\nthe pandemic.<\/p>\n\n\n\n

38. At the same time, the consequences of the\ncrisis have given rise to a growth of racism amongst a certain layer and also\nafforded the nationalist far right the opportunity to gain some support. This\ncan emerge as a major threat in some countries for example in Poland, Hungary\nand other countries where extreme Bonapartist repressive measures can be taken\nby the right.<\/p>\n\n\n\n

39. These events will pose new challenges and\ntasks for the working class and its organisations internationally. The need to\nbuild combative trade unions to fight to defend the interests of all workers\nand those exploited by capitalism is now more urgent than ever. Above all the\nstruggle to build mass parties of the working class and poor to fight for a new\nsociety and socialism as an alternative to capitalism is more urgent than ever.\nThe fight for decent health provision, sanitation, drinkable water supplies and\nother related health issues have played a crucial role in many countries in\nbuilding mass parties of the working class. In Sri Lanka, the former mass\nTrotskyist party, the Lanka Sama Samaja Party, built its mass base initially in\nthe struggle against malaria. It demonstrated that there was an alternative to\nthe inaction of the state and what a socialist alternative could mean. Today’s\ncoronavirus crisis can also eventually provide the opportunity for the working\nclass to build parties and organisations that can challenge capitalism\nworldwide with a socialist alternative.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Need for a Socialist Alternative.<\/p>\n

Statement from International Secretariat of the Committee for a Workers International – 23 March 2020<\/p>\n<\/div>","protected":false},"author":1,"featured_media":1166,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[24,27],"tags":[],"class_list":["post-1165","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-coronavirus","category-cwi-statements"],"aioseo_notices":[],"acf":[],"brizy_media":[],"_links":{"self":[{"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/posts\/1165","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1165"}],"version-history":[{"count":2,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/posts\/1165\/revisions"}],"predecessor-version":[{"id":1168,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/posts\/1165\/revisions\/1168"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/media\/1166"}],"wp:attachment":[{"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1165"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1165"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1165"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}