World Economic Disorder & G8/G20 Summit

(The following is the text of a presentation by Barry W. to a Socialist Action public forum at the People’s Summit, Ryerson University, on June 20, 2010.)

The G20 Summit is a festival of the oppressors. It’s not just a $1.2 billion photo op for the world’s top capitalist politicians. It is a showcase for repression in support of an ongoing campaign by Capital to destroy a century of working class gains. Stephen Harper is in the forefront of this effort, from the Omnibus Budget Bill C-9 to his role in the wrecking of the Copenhagen Climate Conference; from the creation of a police state in Toronto in preparation for the G20, to the cuts to funding for any pro-Palestinian group, to the attack on NDP MP Libby Davies, to the embrace by Ottawa of some of the worst human rights abusers in the world — all of these are signs of the erosion of our democratic rights.

And while Rome burns, while oil pours into the Gulf of Mexico and ice caps melt, the deepening global economic & ecological contradictions are evident to all. Harper’s Tories, with support from the Liberal Party and Bay Street, have identified 4 areas to advance the corporate agenda:

· Global economy – which means not only deficit reduction, but wholesale social cuts

· Climate change – which means avoidance of action, and trying to profit from selling carbon credits

· Development – which means reducing barriers to Capital penetration in poor countries

· Democratic governance – which means the opposite.

This summit provides us with an opportunity to project a radically different course:

1. We point to the inherent contradictions of capitalism that make sustainable progress in these areas impossible, and

2. We strive to unite labour militants, anti-poverty activists, environmentalists, feminists, community and anti-imperialist activists. Socialists have a global class analysis that enables us to explain what is happening and the way out of this mess.

What are these summits all about? Why was the G7 expanded to the G20?

What they are really trying to do is re-invent their same old system. While the ruling rich squabble over the details, it is time to change the very fundamentals.

The fundamentals concern the massive concentration of business class power. The assets of the world are held in fewer and fewer hands. The political representatives of the ruling classes want to keep it that way – to keep the assets intact and make us pay for the crisis. (a.k.a. ‘covering their assets’)

In 2007, the 400 richest individuals in US had combined wealth approximately equal to the bottom 50% of pop’n – 150 million people. There is a growing polarity of wealth. You are familiar with the gruesome data on global infant mortality rates, life expectancy, and numerous other indices of inequality.

So what happened – why the crisis? As you know we are still in the the worst economic downturn since the 1930’s Great Depression. Despite all the business media hype about recovery – it’s not happening. Despite some modest stock market blips, there’s ongoing joblessness and misery for working families and the poor.

The chief economist for Moody’s, quoted recently in a SA article, said what capitalists need to do is restore their declining rates of profit. He had it right – a very honest economist.

“It’ll take years of savage spending cuts, wage cuts and welfare and pension reform to eventually grow out of the debt situation in Europe”.

Over the past couple years we have been witness to the US sub prime mortgage crisis, the bailout of the big banks, investment firms and auto giants, the attack on workers’ wages, health care, trade union liberties, social services, public education and pensions. We’ve seen rising unemployment, and the bosses’ conscious decisions to move production to low wage countries, to speed-up production here, to use temporary and/or contract workers, migrant workers, to outsource unionized work to non-union cut-throat contactors, to push for mandatory overtime, and more. All of these measures are designed to counter ever-declining profit rates at home.


Pundits say we aren’t ‘productive’ enough, that we are too greedy, living foolishly, beyond our means. The Greek working class is their dart board.

We need to be clear. The problem of capitalism today is not insufficient productive capacity. Rather it is too much productive capacity in relation to effective demand (people willing & able to pay). Markets are saturated with goods and machinery.

No RATIONAL capitalist is going to invest in new plants and equipment if plants and equipment are sitting idle. We’ve seen this movie before. Let’s look back.

Here is an excerpt from Friedrich Engels’ 1880 essay ‘Socialism: Utopian and Scientific’.

“Commerce is at a stand-still, markets are glutted, products accumulate, as multitudinous as they are unsaleable, hard cash disappears, credit vanishes, factories are closed, the mass of the workers are in want of the means of subsistence, because they have produced too much of the means of subsistence; bankruptcy follows upon bankruptcy. The stagnation lasts for years; productive forces and products are wasted and destroyed wholesale, until the accumulated mass of commodities finally filter off, more or less depreciated in value, until production and exchange gradually begin to move again. Little by little, the pace quickens. It becomes a trot. The industrial trot breaks into a canter, the canter itself grows into the headlong gallop of a perfect steeplechase of industry, commercial credit, and speculation, which finally, after breaking leaps, ends where it began – in the ditch of a crisis.”

Engels’ account is a portrayal of overproduction. The situation is worsened by the tremendous concentration of capital today. Both factors loom large behind the current capitalist crisis. This isn’t a lecture on Marxist Economics, so you can relax. But this much should be said: There is an inherent tendency towards a decline in the rate of profit due to the declining value of commodities, which in turn is the result of less labour power being embodied in each product. The exploitation of labour power is the only source of profit.

The capitalist system is constantly coming up again this contradiction. The result is:

· Overproduction

· Overaccumulation

· Over capacity

The chief means by which the system strives to stem this tendency and maintain the rate of profit is the generation of waste in the form of:

· Military spending

· The Sales effort (advertising)

However, these efforts are insufficient to counter the tendencies towards stagnation.

Historically, capitalism has grown at a 2.5 % compound rate since 1750. In good years it grows at 3%. Barack Obama and Jim Flaherty promise we will be back to 3% in a couple years. The former UK P.M. Gordon Brown said the economy would double in the next few years. When capitalism became dominant in Manchester and a few other hot spots in 1750, 3% growth was no problem. We are in a different world today. The total economy in 1750 was about $135 billion. Two hundred years later, in 1950, it was $4 trillion. By 2000 it was $40 trillion. Now it is $56 trillion. If it doubled like the good Mr. Brown promised that’s $100 trillion. By 2030 one would have to find jobs for 3 trillion workers — that is if you want profitable opportunities for capital to operate at that point. However there are limits.. environmentally, socially and politically. (as David Harvey argues in MR)

The capitalist economy over past 20 years shifted from real production to ‘financialization’. Lacking any profitable investment opportunities in manufacturing or high tech, capital flowed into financial markets. The system became dependent on debt. Toxic debt, highly leveraged, was criminally sold and re-sold.

We can see this in the financial crisis itself. The economic-financial crisis can be traced to stagnation. But the bursting of the household bubble was an amplifying factor and soon became the center of a perfect storm of financial crisis and worsening economic conditions. Out of this, financial capital appears to have emerged in many ways stronger, with the remaining big banks more powerful than ever. Twenty years ago the ten largest financial institutions in the United States owned 10 percent of all financial industry assets; now they own 60 percent. They are truly too big to be allowed to fail.

If stagnation is centered in production, the economy is more and more dependent on the financial balloon to lift it off the ground. Yet, the balloon deflates periodically with disastrous results. This is the paradox of monopoly-finance capital.

This situation, plus expanding military spending, made the bubble bigger before it burst. The crisis was inevitable – that’s monopoly capitalism. It’s not the first financial crisis – there have been several over last 3 decades.

– US savings and loan crisis of the 1980s.

– Mexican debt crisis in 1994 and the subsequent bailout to prevent NY banks failing, while making the Mexican working class pay the price.

– The bubble crash in 2001-2002.

Crises are central to the history of capitalism. What someone called the “irrational rationalizers” of the system.

In past crises, such as the 1930s, a moment of “reconfiguration” of the system occurs before recovery. (Sort of a “re-boot”) Keynesianism is an example of system response.

Monopoly-finance capital can’t live without deficits, and it can’t live with them. This is a growing contradiction of the system. Deficits are of course related not just to the size of spending in relation to revenue but also to what the government is spending on. In the United States in 2007, 4 percent of GDP ($553 billion) was spent on the military, according to the usually quoted acknowledged figures. This of course helped prop the economy by soaking up excess capacity, but it also meant expanding budget deficits. Much of this now is spent waging the wars of aggression and occupation in Iraq and Afghanistan. According to these acknowledged figures, the U.S. is spending almost as much on the military as the rest of the world put together. But real U.S. spending, based on government data, including hidden military expenditures, was $1 trillion in 2007, over 7 percent of GDP. Actual military spending as a percentage of federal spending (minus transfer payments) was in excess of 50 percent in 2007. Clearly, then, this is the source of the bulk of the deficit. Of the remainder of the U.S. federal budget, minus transfer payments, a very large portion goes to direct and indirect subsidies to Capital. Only a relatively small portion of U.S. government spending is thus devoted to social support for the population.

Right now, the deficit is expanding enormously as a result of the successive bailouts of financial capital and capital in general. The costs of this of course falls on the general public. As Marx observed in Capital, “The only part of the so-called national wealth that actually enters into the collective possession of a modern nation is — the national debt.”

The G8 and G20 power brokers are only trying to reconstruct the pre-existing power structure or save the existing structure without intervening in any significant manner.

They are waging a one-sided class war against workers – which we know as neo-liberalism. It takes the form of a return to classical liberal notions of competition, survival of the fittest, and self-regulating markets.

Its goals are to:
a.. Weaken and break unions
b.. Remove state supports for the poor
c.. Cut back social services
d.. Push down real wages
e.. Free up the movement of capital

We can expect this class struggle from above to intensify. There is simply no other way for capital at present.

The concept of a ‘rational capitalism’ is pure fantasy. The economic ideology of the system itself is broken.

Today we hear very few references to absurd notions such as the

a.. ‘free market economy’
b.. ‘self regulating market’ or
c.. ‘globalization as a system’

Here’s another change: ‘Anti-globalization’ demonstrators of the past are now calling themselves ‘anti-capitalist’.

Suddenly, demands for nationalizing banks, taxing bankers, redistributing wealth to the population, establishing programs to create jobs and to aid distressed homeowners don’t seem so far fetched.

The private sector economy is no longer sacred, or beyond political reach.

Apologists for the system insist this is only a recession, and everything will soon be back to normal.

The labour leadership, hit by the crisis and double digit unemployment, is concerned about an orderly retreat and are devoid of initiatives. The post-WW2 social contract with capital is still the lens through which they look at the class struggle. The NDP leadership, which overlaps with the labour leadership, offers no fundamental critique of the system or any alternative solution.

While Canadian banks may have fared better than US banks, is it the same for working class Canadians? Not so much.

Not since the Great Depression have Canadians been so exposed in the face of recession. We have the weakest system of protection against unemployment since the 1940s. Personal savings rates are comparable to those of the 1930s. We have record-high levels of household debt. Many were unprepared for massive job loss, and have nowhere to turn.

The drop in GDP was more rapid in the opening months of this recession than the opening months of the 1981-82 and 1990-91 recessions. Job losses in 2008-2009 elipsed the rate of job loss in the early months of the 1980s and 1990s recessions.

In the recession of the 1980s, it took almost four years for the number of full-time jobs to be fully restored. It took seven full years to get back to the pre-recessionary number of full-time jobs in the wake of the 1990-91 recession, though GDP returned to pre-recessionary levels in just four quarters.

If experience is any guide, it could take years to recoup the loss of full-time employment that is underway in record numbers this time around.

About 60% of Canadian households were already in a net debt position before this recession began. With so many families already reliant on credit to make ends meet, the competition for remaining jobs is fierce. Both the 1980s and 1990s recessions led to a major restructuring of Canada’s labour force and began a long-term trend toward lower paying, insecure work. Similar factors are at play today.

It is time to break the logic of the capitalist business cycle, of capitalist waste and oppression. It is time to put an end to profit from war and environmental destruction. It’s time to dump the G20 and its agenda overboard.

Socialist Action advocates a number of concrete measures: Put people, and the preservation of nature, before profits. Nationalize the banks, mining, Big Oil and Big Auto. Create jobs through public investment, public ownership, democratic planning and workers’ control. Convert industry, transportation, and homes to green, energy efficiency. Repair our disintegrating roads, bridges, railways and port facilities. Make E.I. more generous and accessible. Raise the minimum wage to $17/hour. Shorten the work week to 30 hours without loss of pay or benefits. Abolish student debt. Make all education free. Protect pensions. Fund health care and the arts. No corporate bail-out. Open the company books. Steeply tax corporations, speculators, and the rich. Abolish the GST. Uphold aboriginal land claims and local self-governance. Hands off migrant workers. Impose boycott, divestment and sanctions against Israeli apartheid. End the occupation of Afghanistan and Haiti. Reduce the Canadian military to a disaster-relief and rescue force. Get Canada out of NATO now!

The current relations of production are not taking us where we want to go. It is taking us towards:

· Greater inequality, especially for oppressed nations and aboriginal peoples

· Greater social and environmental destruction, towards general ecological collapse.

It is a delusion to think that economic expansion will fix everything, that there is a market solution. There is no market solution. The capitalist market created the problem. Only a social revolution can solve it. Only by taking control of the major means of production, only by effecting a rapid democratic, green conversion to meet human needs, fully in tune with nature, do we have a hope of survival. That means challenging the pro-capitalist direction of the labour and NDP leadership. It means opposing an NDP coalition with the Liberal Party or any capitalist party. It means fighting for a Workers’ Agenda and a Workers’ Government, fighting for freedom for oppressed nations, fighting for Eco-socialism and feminism.

Most importantly, it means building a real revolutionary party to campaign for change, everywhere and everyday. We need to forge a leadership of the working class and oppressed nations that can win. This cannot be done without you. Why wait for the next economic crash, for the coming environmental catastrophe? The situation is dire. Rebellion is in the air, from Venezuela to Palestine. Socialist Action needs you. Please join us today.