Covid Crisis or Capitalist Crisis

Our last issue (January 2020) included the perspectives agreed by the CWO Annual General Meeting in November. We repeated in them our long-standing position that capitalism has basically been in a crisis of accumulation since the 1970s but that this crisis was now accelerating. Even before Covid-19 hit, the amount of global debt was continually increasing. The fallout from the banking collapse of 2008 had not been contained and at least 10% of the world’s companies were “zombies” (i.e. only able to make enough revenue to pay wages and the interest charges on their loans). In the US the figure is 18% and in the UK over the past 20 years investment had fallen from 5% to 1% of net output. In many sectors from oil and car manufacturing to “the hospitality industry” bankruptcies were already on the agenda. As we said then there was a sense that “history is beginning to accelerate faster than we once thought possible”.

The Covid-19 pandemic has thus contributed to a debt crisis which has remained unresolved from 2008. There is no doubt that it has had a profound impact on the social life of the entire planet. Since it began we have published over 20 articles associated with various aspects of this pandemic.1 These have covered strikes against the refusal of employers to close non-essential businesses (by May, 20% of the deaths from coronavirus in Italy were workers in such workplaces); denunciations of the attempts by various political leaders to play the national card that we are “all in this together”. (When, for example, a fifth of the world live in such overcrowded conditions that they cannot possibly socially distance or where millions of poor Americans have no health insurance. At the same time billions have been given to companies that have spent the last few decades boosting executive pay, based on inflated stock market returns, whilst being unable to find any profitable form of investment in the system.) We have also concentrated on demonstrating how the coronavirus pandemic, far from uniting the world in the face of a common danger has only exacerbated inter-imperialist tensions and nationalist rivalry.

The key question that, as yet, cannot be answered fully, is “how will the capitalist system emerge from this crisis?”. According to the July 2 editorial in the Financial Times:

"Public deficits have exploded across the world. Never before in peacetime have governments spent as much money without taxing as today — the IMF estimates that this year global public deficits will rise by 6.2 percentage points to 9.9 per cent, higher than after the 2008 crisis."

Ever since Reagan there has been a capitalist school of thought that “deficits don’t matter”. It’s an odd contradiction that this so-called neo-liberal idea has provoked the biggest state financial intervention in history over the last 12 years. Not to save the people (who have seen their real wages, welfare and health benefits continually diminish) but to save the system. Mario Draghi’s declaration ahead of the European Central Bank back in 2008 that he “would do what it takes” to save the system has been echoed by Jay Powell at the Fed this year.

When the stock market went down at the beginning of the year everyone knew, Covid or no Covid, it was overvalued, but when the bond market started to go down too the Fed was forced to act since the financial contagion was in danger of spreading over into government bonds, “the last bastion of financial stability” (John Redwood in the Financial Times). Three trillion dollars of printed money later the Fed could feel satisfied with its intervention. Every other central bank of the main OECD states has followed suit. The Bank of England, so far, has got away with a mere £200 billion. The outcome is that the US (and all other states) have preserved the idea that the state is the ultimate stop gap, and thus the most reliable source for long term investment. This has kept interest rates low and thus enabled states to borrow more and more, tax less and support some firms and their employees who have been legally banned from working, as well as those laid off, without having massive repayments on their balance sheets.

It cannot last. Until there is a vaccine, Covid-19 will remain a threat to workers everywhere, yet the system is desperate to drive them back into production whatever the consequences. State support for workers will run out soon (support for the capitalists and their financial system will go on whatever). This crisis has only emphasised the gulf between those who control the vast majority of the wealth of the planet and the rest of us.

And many workers will have no job to go back to, especially if they work in the “hospitality” sectors where many smaller businesses like restaurants will simply not reopen. This only causes the capitalists to worry about the knock-on effect for profits. A greater impoverishment of the population will mean they won’t be able to afford the commodities that are produced. At best we are in for a further period of “secular stagnation” of the world economy with millions facing poverty, unemployment and starvation. Such a situation will exacerbate not only the misery of millions but the imperialist reflexes of a system in crisis.

The alternatives are becoming ever more dire. Aside from the ecological threat to the planet (which has not diminished in this pandemic) there is also the fact that the crisis is exacerbating imperialist rivalries. Since 2009 the protective measures that G20 countries have taken to restrict imports has risen from 1 to 10%. However the trade war of the last few years will be nothing compared to what is in preparation now.

We have already seen this in the US pressurising its allies to refuse the superior technology of Huawei. The increasing belligerence of Xi Jinping’s China towards its neighbours (e.g. India and Taiwan), its massive arms spending since 2012 and its clampdown on Hong Kong have undone most of the damage Trump has inflicted on “the Western alliance”. Now the West has suddenly noticed that the Uighurs are being oppressed. The battle cry of “democracy” has been launched against the authoritarianism of the Chinese Communist Party in the new propaganda war. Even the search for a Covid-19 vaccine has become a race for imperialist kudos. As the capitalist world economy limps into its third decade of the millennium “the new cold war” is creating the conditions for a new and generalised conflict. The only force that can put a stop to that dire prospect is the international working class. It alone can dismantle a system which, for all the bombast of its supporters is both unsustainable and a serious threat to humanity itself. As we wrote in January “Socialism and barbarism are still the historic alternatives which will be decided by the class war against capital”.

In this situation it is up to communists to attempt to get their analyses across to the wider class by whatever means we can. There are already a swathe of strikes across the world against the unacceptable conditions the system is trying to impose. These need to be linked and become a movement not just for the redress of grievances but for a complete historical reboot. This can only be accompanied by the conscious formation of a political international, to present an anti-capitalist critique, and a programme of how we can live in a world without money, but where the needs of everyone are satisfied.

Communist Workers’ Organisation

• 1For all our articles on the coronavirus and capitalist crisis, see: leftcom.org