By Prof. Jose Maria Sison
Chairperson, International League of Peoples’ Struggle
July 7, 2010
Since 2008 the major capitalist powers have wantonly used public money to bail out the big banks and corporations, thus allowing these to show profits on their balance sheets and to conjure the false illusion of recovery in financial markets but in fact aggravating the economic crisis through the contraction of production and the loss of jobs and homes among the working people. The use of public money to provide relief to the so-called troubled assets of the big banks and corporations has resulted in huge fiscal deficits, a public debt bubble that has begun to burst and an undeniable depression that can no longer be euphemistically termed as a mere recession.
The recent Group of Twenty (G-20) summit in Toronto, Canada sought to find common ground in securing global capitalism from the worsening economic and financial crisis. Led by the United States, the European Union and Japan, the big powers misrepresented the rapidly growing fiscal deficits and public debt as the result of excessive stimulus to production and social spending that need to to be restrained through austerity measures. In fact, the steep rise of fiscal deficits and public debt in the imperialist countries has been accompanied by decline of production, unemployment and erosion of social benefits.
The austerity measures are meant to counter the inflationary effect of public spending for corporate welfare in order to further shift the burden of crisis to the people. They include further reduction of wages and social benefits and increases of taxes on consumption of the working class and the rest of the people. Such measures are bound to aggravate the economic crisis by causing further decline in production, more layoffs, loss of welfare benefits and accelerated deterioration of social services. The Toronto summit showed signs of divisions among the major capitalist powers on how to protect themselves from the crisis, on the kind and extent of stimulus programs and austerity measures to undertake and on what financial regulation and reforms to carry out.
At the previous G-20 summit in Pittsburgh, USA in September 2009, a year after the eruption of the crisis in the US, the big powers congratulated themselves for having supposedly fended off a depression and putting global capitalism on the path of recovery. Developments since then have clearly shown the optimistic forecasts to be wrong and more than ever confirm the fact that neither have the root causes of the crisis been addressed nor have effective counter-crisis measures been adopted from the lore of the New Deal or Keynesianism to stimulate consumer demand and production.
The imperialist powers have clung to their neoliberal dogma and to further financialization of their economies by providing huge amounts of public money to the big banks and corporations for profit-making on their books of accounts while cutting labor costs and evading the need to expand production and employment. Consequently, a protracted kind of depression has further taken hold of the imperialist countries and the rest of the world.
The capitalist global economy, measured in world real gross domestic product (GDP), contracted by more than 2% last year despite claims of a return to positive growth since the last months of 2009. Such spurious claims have been conjured through some US$11.0 trillion of public money doled out by states as bailouts to their giant monopoly banks, investment firms and manufacturing firms in quick reaction to the financial collapse in late 2008.
The supposed recovery has only been in terms of momentary statistical growth and corporate profits on books of accounts and in the stock market rather than in terms of production, employment and improvement of the people’s living conditions. According to ILO figures in 2009, global unemployment increased from 178 million in 2007 to 239 million in 2009, which is the highest level ever recorded. Of course, these official figures grossly underestimate the true extent of the jobs crisis by excluding the unemployed workers who have stopped to apply for jobs or who are on so-called retraining programs and by not taking into account the fall in the quality of jobs and the decreases in working hours and pay (casualization and part-timing).
The US illustrates well how corporate profits and upper class wealth, not jobs, are at the center of government claims to economic recovery. US real GDP began to contract from the start of 2008 to the first quarter of 2009 by as much as 6.5%. The government began a massive rescue effort to try to stem this decline and to date has spent, loaned or at least committed to spend or lend if necessary over US$13 trillion, an amount almost equivalent to the value of US GDP for an entire year. US GDP growth turned positive in the third quarter of 2009, peaked at 5.6% in the fourth quarter, but quickly started slowing down again to 2.7% in the first quarter of 2010.