What the People Can and Must Do About the Financial and Economic Crisis

5. The imperialist state looks like it is violating its dogma of “free market” or “state non-intervention” in using public funds to bail out the largest private banks, investment houses, mortgage companies, insurance companies and some key productive enterprises like the Big Three of US car production. But in the first place, such a dogma is a slogan of pretence. It is completely untrue that the imperialist state is going “socialist” when it uses taxpayer money for private corporate bailouts. Forms of state monopoly capitalism should not be mistaken for socialism. In times of big crisis like the Great Depression and the current grave crisis, the monopoly bourgeoisie deliberately avails of monopoly state capitalism to bail out the distressed monopoly firms and to assist the stronger firms to absorb the failing firms. Bush, Bernanke of the Federal Reserve Board and Paulson of the US Treasury Department cooked up with their Wall Street confreres the scheme of bailing out the banks with taxpayer money to the flagrant detriment of Main Street.

6. The purpose of the scheme is simply to pump prime the assets of the big banks and other financial corporations , allow them to dump the toxic assets and hope in vain that they thaw out the credit freeze and resume lending operational capital to producer firms. But would such producer firms take further credit for production under the depressed conditions of the crisis of overproduction? The scheme is anti-worker, anti-people and anti-socialist. The imperialist state and the monopoly bourgeoisie are not as interested in bailing out the workers from mass layoffs, home foreclosures, loss of pensions and other social benefits and other disasters as bailing out first the financial and industrial giants. Obama’s so-called stimulus package of USD 850 billion can provide temporary jobs only to a small part of the rising numbers of unemployed. It is a poor afterthought in terms of tardiness and smallness in relation to the trillions of dollars already deployed for the bailout of the financial giants since 2007. It is starkly clear that the bailout funds for the Big Three is anti-worker because it is preconditioned by the reduction of wages and benefits for the workers.

7. The highest US authorities in the outgoing and incoming administrations admit that the current financial and economic crisis will not blow away in one or two years. It can last for as long as ten years or even more. The gravity of the crisis can be deduced from the enormity and significance of the debts incurred by the US government, the private corporations and the American households. All these debts are beyond the capacity of the debtors to pay back. To collect the debt payments and/or write off the debts would deflate and further depress the economy. The US national debt has soared because of budgetary and trade deficits. The budgetary deficit involves a huge amount of debt service, the tax cuts for the corporations and the wealthy and heavy military spending. The trade deficit involves the outsourcing of consumer goods and the decline of US manufacturing for export (except big industrial items and agricultural surpluses) since the 1970s. The use of US treasury bonds and taxpayer money to bail out the US financial and non-financial giants aggravates the crisis. Not only the financial corporations are in trouble with huge amounts of bad mortgages and other bad debts and worthless paper assets, the non-financial corporations are also in a big financial mess as shares of stocks and corporate bonds lose their value and the loss of effective demand and lack of sufficient fiscal stimulus stagnate and depress industrial production, the basic service sector and the real economy as a whole. The American households are losing jobs and homes by the millions and have savings of close to zero.

8. The current global financial and economic crisis has dramatically spread from the US to the rest of the world for several reasons. The US is the center of the world capitalist system. It has imposed the policy of “neoliberal globalization” on its imperialist allies and the less developed countries. It has subordinated veritably the whole world through bilateral and multilateral economic and trade relations and through its control of the Group of 8, the OECD, IMF, World Bank, WTO and other international agencies. The US is where both productive and finance capital have been most concentrated. It is the principal destination of foreign direct investments. It has been described as the engine of global economic growth and the biggest consumer market. Its currency is practically the world’s reserve currency. It has become the world’s biggest debtor, ceaselessly printing dollars and selling stocks and bonds to foreign entities. It absorbs the biggest bulk of the exports of the other imperialist countries, the so-called emerging markets and the oil-exporting and raw-material producing countries of the world. China, India and other so-called emerging markets are now in a severe crisis due to the international credit crunch and reduced US demand for their exports. The general run of Third World countries which export nothing more than raw materials and some semi-manufactures are the most devastated by the drying up of international credit and by the fall in US demand for their exports.

9. In contrast to its long-running arrogance and practice of setting the line for its allies, the US was at a loss on how to solve the global financial and economic crisis during the recent G-20 Summit. Bush prated about preserving “free market” capitalism. But the declaration of the summit encouraged all the participants to adopt whatever monetary and fiscal measures they deemed best. Discredited and with extremely limited resources, the IMF could not be referred to as a rallying point. Neither could the World Bank because no country would provide it with capital. And of course, the WTO is still bogged down in failure to resolve outstanding issues in the Doha round of talks. These are now overtaken by the current crisis. Countries that used to be lectured to by the US, like France, Russia, China, India and Brazil took their turns in lecturing to Bush. The financial and economic relations between the US and China, which are supposed to be the biggest global partners, are now increasingly unstable. The sweat shops on the eastern coast of China, owned largely by foreign investors and producing consumer goods for the US market, are closing down or reducing production and throwing out tens of millions of people out of their jobs. The US and foreign exchange holdings of China are vulnerable to capital flight and the value of US treasury bonds and corporate securities in the hands of China can evaporate as fast as the US proceeds to further enlarge its national debt and keep the interest rate at close to zero for the purpose of reviving the US credit system.

10. The broad masses of the people, especially the workers and peasants, suffer from the global financial and economic crisis in terms of reduced employment and income, the deterioration of their living conditions and intensification of exploitation and oppression. The crisis has resulted in widespread social discontent and unrest. It is generating the people’s resistance in the imperialist countries, in the so-called emerging markets and former revisionist-ruled countries and in all the third world countries. For the people’s resistance in any country to be resolute and effective in confronting imperialism and reaction and in seeking reforms and social revolution, there has to be a revolutionary party of the working class to lead both the organized and spontaneous masses. For several decades, the imperialists and their reactionary allies have launched offensives to destroy or weaken the working class parties and the progressive trade unions and other mass organizations. But now the gravity and long duration of the current financial and economic crisis opens excellent opportunities for the progressive forces and movement of people for national liberation, democracy and socialism to grow in strength and advance.

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