Financial Crisis Signals Grim Times for Working People

By Robert Johnson and Roger Annis. The collapse of the capitalist financial system, now sweeping the planet, is the worst economic crisis since the Great Depression. The deep-rooted financial crisis heralds harder times and greater suffering for working people the world over.

Working class and popular movements in Canada and around the world will be challenged as never before to defend living conditions and democratic rights that will now come under harsher attack. Our defense must also include struggle to put an end to a political and economic system that will destroy the planet if left unchecked.

Grim times ahead

Trillions of dollars in financial assets have evaporated in recent weeks. Some of the largest financial institutions in the world have gone bankrupt, been placed under government control, or sold for pennies on the dollar. Stock markets have declined by one quarter or more.

Credit markets have seized up and growing numbers of firms find it impossible to borrow the funds they need for routine operations. The very existence of some companies, including the big three U.S. automakers, is in peril because their profits were already in sharp decline before the crisis exploded.

Capitalist governments in Canada, the United States and Europe have adopted a policy of “socialism for the rich,” bailing out many failed institutions and the ruling families who own them. They are shovelling stupendous amounts of money — several trillion dollars to date — from public treasuries into the coffers of the very corporations responsible for the chaos and misery. Little or nothing is being offered to the real victims of the crisis — working people facing the loss of their jobs, homes, life savings or pensions.

Economists admit that even the extreme measures adopted to date will not avert a generalized recession in the wealthy countries. Some admit that even a longer-lasting depression is possible.

Already in “prosperous” Canada, capitalism’s inhumanity has produced countless personal tragedies: factories are closing, careers are destroyed, livelihoods and homes are lost, and hunger and homelessness are on the rise. These evils are spreading like an epidemic and worse is to come.

The economic decline already underway in the U.S. is accelerating and reaching every corner of the globe. Retirement savings have been lost. Home foreclosures are increasing — there were 300,000 in the U.S. in August alone. Higher taxes and fewer essential services will plague working people for years to come as capitalists attempt to recover trillions of dollars at our expense.

Working people will suffer from the waves of inflation unleashed by the governments’ massive expansion of the money supply.

The situation in Iceland shows how disastrous the economic situation can become for people in smaller countries. Its currency has become effectively worthless for international transactions by ordinary citizens. Savings and pension funds are in limbo following the collapse of the country’s largest banks. The government is restricting the use of foreign currency by Icelandic firms to essential purchases such as food, fuel and medicine.

The financial and economic collapse will also lead to increased demands by the capitalists to abandon any pretence of concern for the natural environment. The relentless build-up of greenhouse gases in the atmosphere will continue as corporations place their profits before the needs of humanity.

Most vulnerable of all are the billions of people who live in third world countries dominated by imperialism, people who already live in harsh economic and environmental conditions. The crisis threatens to push them deeper into the abyss as exports dry up and jobs disappear. The head of the International Monetary Fund has warned that the crisis could trigger famines in Africa and Latin America.

Capitalism, a failed system

The financial crisis was triggered by the collapse of the real estate bubble in the United States, which had an immediate world-wide impact, bringing the world capitalist financial system to the brink of collapse.

The severity of the crisis, its international scope, and the speed with which it developed demonstrates that much more is involved than speculative excess, bad policy decisions, or irresponsible political leaders. What has collapsed is the entire overblown structure of credit on which the expansion of profits during the last two decades has been based. Every capitalist country and government in the world is implicated.

Capitalism as a system has proven to be bankrupt, not just its mortgage lenders, its banks, or its political leaders. The financial crisis results from the operation of the blind economic laws of capitalism, rooted in private ownership of the means of producing social wealth.

The crisis signifies that the capitalist world order of recent decades is broken and something much worse is taking shape.

Socialism, the only solution

A radically different political realignment will begin to take shape in the world in the wake of the crisis. On the one hand, the capitalists will intensify their greed and violence in order to salvage their failed system.

On the other hand, tens and hundreds of millions of people will be compelled to struggle in ways they never imagined to defend their jobs, homes, health care and education, communities and the environment. They will resist the national and racial oppression that will deepen with the crisis.

Their practical experience in these struggles will have profound effects on social and political consciousness, laying the basis for challenges to the entire profit system — responsible not only for the present economic crisis but for endemic imperialist war, economic catastrophe and ecological suicide.

Although the future course of the financial collapse and its fallout cannot be predicted, it can be said with certainty that new conditions are being created to struggle for the only solution available to humanity — socialism.

There are positive, living examples today of countries that have successfully raised the banner of revolt against imperialist domination and charted a course toward societies founded on principles of social justice. There will be no foreclosures or starving pensioners in Cuba. The government of that country represents the interests of working people. Its socialized, planned economy is organized to meet human needs, not profits. These were the key elements that enabled Cuba to survive the economic collapse brought on by the sudden rupture of trading ties with the Soviet Union in the 1990’s.

Working people in Venezuela and Bolivia have also established governments that prioritize the needs of ordinary people over those of the wealthy bankers and industrialists. They are inspiring others in Latin America to follow suit.

Imperialism has been weakened by its financial catastrophe. This creates new opportunities and responsibilities for socialists and the broader labour movement in Canada and around the world. We must join in the growing struggles of working people, and in the process show that there is an alternative to the chaos and anarchy of capitalism.