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Capitalism in crisis!

By Stephen Boyd SOME POLITICAL and social commentators have begun to bemoan the continual stream of bad economic news. However for the working class and the middle class in Ireland and around the world the impact of the bad economic reality is unavoidable.

By Stephen Boyd

SOME POLITICAL and social commentators have begun to bemoan the continual stream of bad economic news. However for the working class and the middle class in Ireland and around the world the impact of the bad economic reality is unavoidable.

Ireland and indeed the world economy look like they are rapidly moving from a recession into an economic depression. There now seems little doubt that such a prospect faces global capitalism.

The most recent IMF World Economic Outlook, predicts “by far the deepest global recession since the Great Depression”.

Financial Times economist Martin Wolf, commenting on the claims by some, including Barack Obama and the European Commission, that there are “green shoots” of recovery, was crushingly dismissive when he wrote: “Is the worst behind us?…In a word, No. In the US, the rate of decline of manufactured output compares with that of the Great Depression. Japan’s output of manufactures has already fallen by almost as much as in the US during the 1930s. The disintegration of the financial system is, arguably, worse than it was then.”

Martin Wolf then warned of far worse to come, “The brutal truth is that the deleveraging of the private sectors of highly indebted countries has not begun, the needed rebalancing of global demand has barely even started and, for all these reasons, a return to sustained, private-sector-led growth probably remains a long way in the future,” Financial Times 21 April 2009.

In Ireland every new economic report predicts that the recession will be worse than previous predictions. The latest report from the European Commission says that the economy will contract this year by 9%. The ESRI has predicted a 14% contraction between 2008 – 2010. This would mean that Ireland’s economic recession would be the worst of any industrialised country in the world since the 1930s! And unfortunately for working class people this may turn out to be an underestimation.

In human terms this will mean a major decline in the living standards of all working class and middle class families. Unemployment now stands at just under 390,000, the ESRI has predicted that by the end of next year it could rise to the truly staggering figure of 575,000 – a figure in percentage terms higher than in the US during the Great Depression.

This year 8.5 million jobs will be lost in the EU and five million have been lost in the US in the last 18 months with 600,000 losing their jobs every month.

In the US in the 1930s during the Depression, unemployment was 25% and wages fell by 42%. Some may think that these predictions are too alarmist, yet in the Irish Times 29 April 2009, the economist Jim O’Leary wrote: “Parallels between the current crisis and the Great Depression of the 1930s, once dismissed as hopelessly far-fetched, are becoming increasingly and disturbingly close. A recent short paper [A Tale of Two Depressions] concludes that the world economy is now tracking or doing worse than during the Great Depression: industrial output has been shrinking at least as fast; world stock markets have been falling more steeply and world trade has been contracting more rapidly”.

Every action taken by the government to deal with the crisis will only make it worse. Combined with the increases in VAT, the pension levy, the health levy, PRSI, new income levies, and the cuts in spending on public services will take €6 billion out of the economy this year. These actions in themselves will cause job losses as working class and middle class people will have significantly less money to spend on everyday items, food, clothing, and electrical and white goods – never mind socialising or holidays.

Even before the most recent budget retail sales fell 27% and 21% respectively in January and February. Food sales are down 5.5% and 25,000 workers in retail are expected to lose their jobs this year.

Personal debts are continuing to rise. In a report to the Dail the Money and Advice Budgeting Service (MABS) stated that the proportion of their clients who had mortgage problems had risen from 18% to 27% this year, while the average client’s credit card debt had gone up from €3,800 in 2006 to €8,000 in 2009! MABS also commented that their clients were coming under severe pressure from the demands of debt collection agencies. Compare this to the bailouts for the banks and the property speculators and it starkly exposes the huge inequality that exists in this society.

The government’s “strategy” for rescuing the banks has been one expensive fiasco after another. The re-capitalisation of the AIB and Bank of Ireland, and the bailout and nationalisation of Anglo Irish, have already cost the taxpayer €8.5 billion. On top of this the establishment of NAMA to bail out out the banking system and rescue the property developers, according to Dr. Alan Barrett of the ESRI, may cost us €40 billion and will immediately add €2 billion a year to state borrowing, which will have to be paid for through further cuts in public spending.

Whatever way you look at it, the impact of this economic catastrophe and the impact of the government’s “remedy” will fall firmly and squarely onto the shoulders of working class people. On top of this, workers are being told by employers in both the private and public sectors that they must accept pay cuts. The bosses are using the recession as a “cover” to drive down wages.

Working class people are being forced to take a major cut in living standards, to suffer the poverty and suffering of years of unemployment and the return of mass emigration – whilst the rich and big business are getting off scot free.

In 2007 the total profits made by all businesses in Ireland amounted to €63 billion. At the last measurement the richest 1% of the population owned 34% of the wealth, totalling €87 billion. These profits and wealth are not being targeted by the government, nor in fact are they in the sights of the main opposition parties, Fine Gael and Labour.

Instead it is the majority and those least able to afford it that are being shouldered with the burden of paying for the breakdown in capitalism.

The trade union leaders have failed to offer a credible resistance to these attacks. Instead they are trying to forge a “social solidarity” pact with the government and the bosses. The union leaders are doing their best to play their part in assisting the capitalist class to “manage” this recession, rather that defending the working class from the jobs slaughter, the pay cuts, tax hikes and cutbacks.

The impact of this recession on the working class has underlined the need for a fighting leadership at the head of the unions. Shop stewards and activists need to come together to build strong left and activist groups to campaign for the transformation of the unions into democratic fighting organisations. The hundreds of thousands who are losing their jobs deserve better leadership than what the ICTU are failing to provide.


You will search in vain throughout the thousands of words that have been written in the mainstream media for a real explanation of why this crisis has taken place. The empirical analysis of the various economists and political and social commentators has exposed with much detail and clarity aspects of what led to the crisis. But they all ignore the fact that this crisis was ultimately unavoidable because it is part of the systemic cyclical crisis of the capitalist system – the unending and unstoppable cycle of boom and bust.

Ultimately it doesn’t matter what capitalist governments or the Federal Reserve, the ECB or the Bank of England do – they can postpone a recession, or shorten it, as in 2001 but ultimately all they can do is put off the day of reckoning (making it worse in the meantime) or alleviate its impact – what they can’t do, despite Gordon Brown’s previous claims, is stop the inevitable recessions.

Because it is a system based on making profit for the super-rich elite at the expense of the needs of the majority, capitalism will never provide a decent life for people. Even during the last boom 80% of the world’s population – 5.4 billion people – lived on less than $10 a day. Now that the world is in the midst of this crisis even the head of the World Bank has said it will result in “a human and developmental calamity… the number of chronically hungry people is expected to climb over 1 billion this year”.

Yet the calamity which has befallen humanity is avoidable. If the working class in Ireland and internationally got politically organised we could struggle to rid the world of this inequitable, inefficient and outdated capitalist system and replace it with socialism. As James Connolly said, “The day has passed for patching up the capitalist system; it must go” – it is to this end that the Socialist Party is working.


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