Should We Pay for the Crisis?

As I write these lines the destinies of Greece are being decided in a titanic struggle in which the Greek working class is confronting the big banks and capitalists of all Europe. The EU is subjecting Greece to the most shameless blackmail. They say: either accept draconian cuts in your living standards, or else we will refuse to hand over the next tranche of 12 billion euros.

Latuff - Euro timebombLatuff – Euro timebomb

That would mean that the Greek government would soon run out of money. It would not be able to pay the wages of nurses, doctors, teachers or policemen. Greece would be bankrupt.

On all sides the cry is heard: The Greeks must pay! But on the streets of Athens we have been hearing another voice: the voice of the ordinary man and woman, the voice of working people who work hard all their lives, who struggle and make sacrifices, the voice of people who are not responsible for the crisis, yet who are being asked to foot the bill.

One working class woman asked a Channel Four journalist in Syntagma Square: Why should the poor people pay? That is an excellent question and deserves an answer.

On Tuesday night [June 28] on British Channel Four News a Greek doctor answered the monstrous lie about overpaid Greeks. “I am a doctor and have worked in the hospital for 27 years,” he said. “My monthly wage is just 1,500 euros, which is about 70 percent less than what my colleagues in other European countries earn.”

The Greek workers are among the lowest paid in the EU, and have already seen their wages cut by one third in the last year. Now they are being asked to accept further enormous cuts of 30 percent. When asked whether Greece should accept the latest austerity plan or not, the doctor answered with another question: “Can the EU give me a guarantee that if we accept these cuts Greece will not be forced to default?” No answer was forthcoming.

The answer has already been given by the events of the last twelve months. Austerity and falling living standards have already plunged Greece into a deep recession. Further cuts will lead to a further twist in the downward spiral, with more unemployment, falling demand, falling tax revenues and an inevitable default in the end. Stavros Lygeros in the Greek newspaper Kathimerini lays out the stark, cold maths facing Greece:

“Even on the off chance that Greece’s primary debt is completely wiped out, in 2012 it will have to pay some 52 billion euros (35 billion in mature bonds and 17 billion in interest), while it is expected to receive 12 billion euros from the troika. In 2013, Greece is not expecting to receive anything from the troika, but it will still need to pay approximately 44 billion euros (27 billion in mature bonds and 17 billion in interest). Basically, it needs to have more than 84 billion euros for the 2012-13 period alone, so even if it receives a loan of 60-65 billion euros, it will still have a shortfall of 20-25 billion. Ostensibly, this amount is supposed to be covered by privatizations and the sell-off of state assets.

“Life, however, does not end in 2013. Where will Greece find the tens of billions of euros it needs annually to service its massive debt? And what will happen after 2014, when the amount to cover interest rises?”

In other words, whatever sacrifices the Greek people make, it will make no difference to the outcome. In the end, Greece will default, and the consequences will be severe – not just for Greece but for the whole of the EU, for the USA and for the prospects of the world economy as a whole.

Today’s news confirms this. The credit agency Standard & Poor’s has stated quite clearly that the present package agreed to for the restructuring of Greece’s debt effectively represents a default. The plans for the private financial sector to “roll over” some of Greece’s debts could trigger a de facto default according to Standard & Poor’s ratings criteria. Herein lies the answer to the question posed by the Greek doctor quoted above

The total Greek debt in 2010 was €328.6 billion, which equals 142.8% of GDP. This year it will be 157.7% of GDP, an increase of over 10% in one year. Everybody is pointing an accusing finger at Greece. But it is only an extreme case of a phenomenon that affects every other country in Europe.

The medicine prescribed by the EU bureaucracy will not work and will kill the patient. But what is the alternative? All the bourgeois say that there is none. But that is a blatant lie. It is the same lie that is being told to the people of Ireland, Portugal, Spain, Britain and the United States. “What can we do? There is no money,” the politicians say, with tears in their eyes.

But in fact there is plenty of money. According to the Greek Tax Office SDOE, more than 10,000 “offshore” companies are owned by Greek capitalists with a total annual turnover of around 500 billion! (Source: Ta Nea, 05.11.2009). As we can see, there is plenty of money in Greece, but it is not in the hands of the elected government but in the hands of private citizens, rich men and women, bankers and capitalists who do not pay taxes and send billions of euros abroad to foreign banks or offshore businesses. When they talk of the Greeks “making necessary sacrifices, it is not these Greeks they are talking about.

A mountain of debt

The total world external debt was estimated at $60.28 trillion on 31 December. This figure is the sum total of all countries’ external debt, both public and private. From these figures, the whole world is drowning in a sea of debt. This is a colossal burden that is weighing on the shoulders of humanity and dragging it down. It acts as a constant drag on demand, reducing consumption. There can be no question of getting out of the crisis until at least part of the debt is reduced and consumption restored.

The problem of unsustainable debt is not confined to Europe. Nobody likes to talk about the unsustainable debts of the USA. It is like discussing an anti-social disease in polite society. But serious economists and foreign investors are well aware of the real situation, which is alarming by any standards.

The USA’s public debt as of May 6, 2011 was $14.32 trillion and was approximately 98% of the 2010 annual GDP of $14.66 trillion. Using 2010 figures, US total debt (96.3% of GDP) ranked 12th highest against other nations. The combined public debt of the EU [€9.8 trillion or $14 trillion] and the USA [$14.32 trillion] adds up to roughly $28 trillion.

The long boom in the USA and other countries was based on a mountain of debt. But it is well known that sooner or later such mountains experience avalanches. A serious avalanche will sweep all before it, causing enormous material damage that will take a long time to repair.

The reason why Obama has pressed the Europeans to solve the problems of Greece is that a collapse in Greece will lead to a crisis in the euro zone and possibly the collapse of the euro itself. But given the level of indebtedness of the USA, this would immediately put pressure on the dollar, and might even conceivably cause a serious financial crash in the USA, which would send shock waves all over the world.

No money?

Inequality is growing rapidly, and has actually increased during the economic crisis. Let us take for example world household income or consumption by percentage share of national income. The lowest 10% consumes only 2.6% of national income, whereas the highest 10% consumes 28% (2005 figures).

It is the same in all countries. Britain has just experienced the biggest strikes of public sector workers for decades. We are fed the same story they tell the Greeks: there is a crisis, and so there is no money to pay for pensions. We must all make sacrifices to save the Nation.

All? No, not all. Not the bankers who award themselves huge bonuses in the middle of a crisis, even those banks who have received billions in state aid. They are not required to make any sacrifices at all. Despite all the talk of austerity, the super-rich in Britain have increased their wealth by 18% in the last twelve months.

What is true for the bankers is true for the capitalist class as a whole. The top 1,000 richest Britons have £60.2 billion more in their bank accounts than they had 12 months ago. The average earnings of the top 100 chief executives rose by 32% last year to £3.5 million. Even Vince Cable, the business secretary of the LibDem-Tory government had to admit that “top pay has escalated to ridiculous levels, particularly in the banking system but also more generally.” (FT, 7/6/2011) At the same time Mr. Cable and his friends inform workers that there is no money for pensions, schools and hospitals.

The Economist of 25 June carried a short item with the interesting title It’s a rich man’s world. It reads as follows: “An annual survey estimated that the combined wealth of the world’s 10.9m rich people (27% of whom are women) stood at $42.7 trillion in 2010, more than in 2007, the year the financial crisis was brewing. More than half of the monied classes live in the United States, Japan and Germany, though Asia has more in total than Europe for the first time.”

The biggest increases in inequality can be seen in China where the dash to capitalism has created a yawning gap between rich and poor. In 2007, according to the Financial Times, there were no fewer than 364,000 dollar millionaires in China, while Chinese workers are made to work for a pittance in the factories of the new rich.

According to The Economist world GDP over the past 12 months [May 2010 to May 2011] was about $65 trillion. This means that approximately 11 million people (roughly the population of the metropolitan area of London) have combined wealth equal to about two-thirds of the entire production of the planet. Eleven million people is a tiny fraction of the total world population. The total world labour force: was estimated at 3.191 billion in 2010. Eleven million people represent only 0.0034% of the total world labour force.

“But if we share out all the wealth equally, it will solve nothing and will undermine productive investment, which is the life blood of the economy.”

This is very true, but it misses the point. In the first place, we point out that we do not propose to share out all the wealth equally, but to use it for productive purposes, for the benefit of the whole of society, not the profits of a handful of super-rich individuals and families.

In the second place, the reason for the present crisis is precisely that the capitalists are not investing in production in Greece or anywhere else. They are hoarding their money, or spending it on gold, works of art or any parasitic speculative activity that can give them a high return on their loot.

Part of this speculative activity is devoted to massive gambling on the world’s money markets. Like hungry wolves the speculators descend on any country that is in difficulties and drag it down. The words national sovereignty and democracy become meaningless in this capitalist jungle, as the Greeks, Irish and Portuguese know only too well.

Let us accept that a large part of the total wealth in the hands of this tiny minority consists of land, factories, buildings, machines and the like. Even if we assume that only half of it consists of disposable wealth (money in Swiss bank accounts, stocks and shares, “offshore investments”, jewels, works of art, etc.) This means that just over half the private fortunes of the world’s rich would be enough to pay off all the combined public debts of Europe and the USA (about $28 trillion).

That is a really astonishing expression of what Marx called the concentration of capital. Greater and greater wealth is being concentrated into fewer and fewer hands. And with great wealth comes great power. The destinies of whole nations are being decided by a handful of unelected and anonymous individuals, which hide behind the mask of “the Market”.

The scourge of unemployment

“Socialism cannot work”, they say. But they conveniently overlook the fact that it is the capitalist system that is not working. How does it come about that all the big banks and a large number of big private companies (see the automobile industry in the USA) can only exist thanks to the injection of trillions of dollars of public money?

Where is the so-called superiority of the market now? Where is the risk, when all the risk is taken by the public and the taxpayer who is expected to generously reward the bankers for their failures, while ordinary workers are sacked without mercy?

How does it happen that the bill for the crisis of the banks – a crisis associated with an orgy of speculation, swindling and downright robbery perpetrated by the bankers – is supposed to be paid by the poorest sections of society, while the very same bankers pay themselves obscenely extravagant bonuses out of public funds?

The failure of market economics is shown by the figures for world unemployment. World unemployment was estimated at 8.8% in 2010 (up from 8.3% in 2009). However, this figure drastically underestimates the true figure for unemployment since it excludes a huge number of people who are underemployed or engaged in street selling etc.

In 2007 if one combines unemployment and underemployment, the total was 30%, and that was before the economic crisis. The situation will be far worse now. In Spain alone, unemployment is officially 21.3%, and youth unemployment is close to 50% – figures that are approaching the levels of Tunisia and Egypt.

Taking the 2007 figure as a base, 8.8% of 3.19 billion adds up to 281.6 million. So that even in a boom capitalism condemns over 281 million people to enforced inactivity. It cannot use their creative potential for productive purposes. This means that every year we are losing the equivalent of over 281 million man-years in lost production. That is a staggering level of waste. And there is no solution in sight.

What is the nature of the problem? It is overproduction: the inherent tendency of the capitalist system to produce more than what society can absorb. As Marx explains in the Communist Manifesto:

“Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells. For many a decade past the history of industry and commerce is but the history of the revolt of modern productive forces against modern conditions of production, against the property relations that are the conditions for the existence of the bourgeois and of its rule.

“It is enough to mention the commercial crises that by their periodical return put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of over-production.

“Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce. The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of bourgeois society, endanger the existence of bourgeois property.

“The conditions of bourgeois society are too narrow to comprise the wealth created by them. And how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented.” (Chapter I, Bourgeois and Proletarians)

How relevant these words sound today! Last week the Financial Times (June 28) stated: “Nearly three years after the start of the economic crisis, a new spectre is haunting the world’s most advanced economies: the prospect that the majority of their citizens will face years of stagnant wages.”

In fact, this is already the case for many workers worldwide. In all countries the share of the workers in the national income has been falling (even before the crisis), while the share of the capitalists has been increasing. The OECD has found increasing income inequality between the mid-1980s and the late 2000s in 17 out of 22 advanced countries, including Sweden and Denmark.

The most extreme case is the USA. The FT writes: “Growth in per capita national income must go somewhere. In the US, the money flowed almost exclusively to the very richest. The earnings of US individuals with pre-tax income in the top 1 per cent accounted for 8 per cent of total in 1975, but rocketed to 18 per cent by 2008 (…). Even larger proportionate rises in the share of income went to the top 1 per cent of those with incomes within the top 1 per cent.”

By contrast, median male real US earnings have not risen since 1975, while those in Germany have been falling for the past ten years. This is the secret of Germany’s “success story” – bought at the expense of the living standards of the German workers. The bankers and capitalists would like every country to experience similar “success”.

No alternative?

Is it really acceptable that in the second decade of the 21st century the destinies of millions of men and women, of whole countries and states, should be determined in the same way as a gambling den? Is it really true that humankind cannot think of any better system than this? “There is no alternative” is in fact a vicious libel on the human race. And an alternative certainly does exist, but not on the basis of capitalism.

Rising unemployment and constant attacks on living standards mean falling demand and a deepening crisis. The Financial Times quoted an American economist, Dick Longworth of the Chicago Council on Global Affairs, as follows: “This is a consumer society and they’re the consumers; if they don’t buy, we don’t survive.”

That is why the “solutions” that the EU wishes to foist onto Greece, far from solving the problem, will make matters much worse. The Greek workers are quite right to resist them with every means at their disposal, and their example must be followed by the workers of every other country in Europe.

There is no rational reason why millions of people should be condemned to unemployment while millions of others are forced to work long hours of overtime in the factories. In a rational economic system the hours of work would be shared out and unemployment abolished, while the working day is drastically reduced.

The abolition of unemployment would lead to a colossal leap in production, generating a huge amount of wealth, which can be used to solve all the problems of society. There would be plenty of money for houses, hospitals and schools, and the budget deficits would vanish overnight.

These things are entirely possible on the basis of the existing productive power of society. If they are not done, it is not because there is no alternative, as they claim, but because two major obstacles prevent them from happening. Those obstacles are private ownership of the means of production and the nation state.

The example set by the Greek workers should be followed by the workers in the rest of Europe. The ruling class must get the message loud and clear: We will not pay for your crisis! But strikes and demonstrations, while absolutely necessary, cannot solve the crisis. The only way to solve the present crisis and prevent new crises in the future is the abolition of these monstrous obstacles that stand in the way of human progress, causing endless suffering and misery not just in Greece, but everywhere.

What is the answer? In the first place, the cancellation of all debts and the expropriation of all banks and finance houses without compensation. The parasites have already squeezed quite enough from the people. It is time to call a halt! If there are any cases of genuine proven need, the people concerned can receive compensation. But not a penny must be paid to the fat cats and parasites.

Once we have the banks and big monopolies in our hands, it will be possible to begin to plan the economy in a rational way. It is not necessary to nationalize small farms and businesses. We must reassure the middle class that socialism is not opposed to their interests. On the contrary, by nationalizing the banks it will be possible to offer small businesses access to credit at favourable rates.

A nationalised planned economy, run on democratic lines with the full participation and control of the workers, would enable us to mobilize the full productive potential of society to its fullest extent. The talents of young people now being wasted by unemployment would be put to use for the satisfaction of human needs: a crash building programme for new houses, hospitals and schools would immediately be set in motion.

Instead of the present economic stagnation and miserable rates of growth, we can confidently predict a rate of growth of at least 10 per cent a year. This would mean doubling the wealth of society in the space of two five-year plans. Instead of cutting pensions, wages and public services, they would be massively expanded in all departments.

The resources are there, the money is there, and the needs are there. What prevents these factors from coming together to create a new and better life for all? Only an outdated and degenerate socio-economic system that has long outlived its usefulness. It must be swept away and it will be swept away. The Greek workers have begun the process. It must be carried out to the end.

London, July 4, 2011


Are you a communist?
Then apply to join your party!