(en) anarkismo.net: The deepening capitalist crisis: From
blood and dirt to much worse by Shawn Hattingh - ZACF
It was long ago stated that capitalism came into the world dripping in blood and dirt,
from every pore, from head to toe. While it has demonstrated that it won't simply collapse
under its own weight, the recent goings-on around the current capitalist crisis have shown
that with age it has become even more hideous. Capitalism is now rank with massive state
intervention required to simply keep its rotting body moving: through states propping up
the financial sector and deepening the colossal attack on the working class. ---- Fallout
from Chinese stock markets ---- The goings-on that have once again highlighted
capitalism's depravity, are the turmoil - starting in China - that has occurred over the
last few weeks on stock markets; including the underlying causes that led to it, and the
actions that the ruling classes have taken since then to try and end it, or at least
alleviate it.
The recent volatility in world stock markets erupted in earnest in June 2015. In June, the
Chinese stock markets began a plunge that has frightened the ruling classes (capitalists,
top state officials and politicians) across the globe. This plunge has not yet ended, and
so far the Shanghai Stock Market has lost 40% of its value. In the wake of this, stock
markets from New York to London have reeled; leading to a roller coaster ride of uncertainty.
Speculators have also been withdrawing from stock, currency and bond markets in other
parts of Asia, Africa and Latin America. At the end of August 2015, in a single week, $
2.5 billion moved out of the bond markets of countries such as South Africa, Russia,
Turkey and Brazil. Numerous countries too have seen their currencies routed, as nervous
speculators have shifted money to areas and 'investments' they have deemed as being safer
in uncertain times. This shift of speculative money from these markets is dangerous for
such countries. The South African state in particular relies on inflows of speculative
money into its stock and bond markets to cover its current account deficits. If this
inflow of speculative money dries up, South Africa would be in serious trouble. To try and
prevent this possibility, the South African state and the Reserve Bank have maintained one
of the highest interest rates, in real terms, in the world.
States do the dirty work, again
In reaction to this turmoil, the ruling classes in many countries have used their control
of states to try and stabilise the system: highlighting once again that the notion of a
self- regulating free market is a fallacy, that the elite don't believe or practice, but
which they try and sell to the working class.
The Chinese state alone has spent as much as $ 240 billion since June 2015 to stem the
bloodletting on the Shanghai Stock Market. It has also banned large companies from selling
stocks and it has launched criminal investigations into speculators that have been
short-selling. In an attempt to re-inflate the stock market bubble, though, the Chinese
state has lowered the reserve requirements for banks and slashed interest rates - to make
cheap money available to speculators. This was done in the hope they would use this to buy
shares again and stabilise prices. It was also recently announced that the state was
considering suspending trading on Chinese stock markets at any signs of volatility. All of
this has so far been to little avail as stock prices have continued mostly to decline -
they will eventually reach a bottom, but no one knows for certain when.
It has not just been the Chinese state that has intervened in the wake of recent events,
the US state also rushed to try and ease the concerns of speculators over the last few
weeks. It did this by stating, in late August, that it would probably not raise interest
rates yet. One of the ways that the US state has been assisting speculators since 2007 is
by keeping interest rates at near zero. This has allowed banks, brokers, pension fund
companies, hedge funds etc. (speculators in other words) to borrow money cheaply to
speculate on stock and bond markets in Africa, Asia and Latin America, which have been
offering high returns. In stating that it won't probably raise interest rates yet
(although speculation is once again growing, at the time of writing, that it may), the US
state was signalling it would continue to provide easy money to speculators.
Just symptoms
All of these recent convulsions are, however, just symptoms of much wider problems.
Capitalism has been mired in a global crisis since the 1970s based on over-production and
over-accumulation. Since the 1970s, productive sectors, like manufacturing, have been
stagnating with profit margins becoming slimmer and slimmer due to over-production. As a
result, the portion of investment into manufacturing since then has declined, as capital
has desperately sought out other outlets that offer better returns.
One of the few geographical places that seemed to have been immune to the global problem
of over-production and over-accumulation was China. Due to extremely low wages, violently
and ruthlessly kept in place by the Chinese state, the manufacturing sector in China
experienced a boom beginning in the 1980s. Many corporations from various parts of the
world also set up plants in the country or outsourced production to Chinese corporations.
By 2007, and in the wake of the global financial crisis, it became evident that China was
not immune, and that it too was experiencing a crisis of over-production and
over-accumulation. In 2007, exports from China plunged and it became evident that China
itself had excess manufacturing capacity and a problem of capital over-accumulation - at
the time there was a real threat that massive amounts of products would have no buyers and
thousands of factories would become idle. Two things, however, delayed the full impact of
this at the time: there was a shift by Chinese capitalists towards massive speculation on
the stock markets and in real estate - leading to growth in the GDP - and massive
intervention by the Chinese state to purchase products, commodities, and boost the Chinese
stock markets.
A long history of state intervention
States are central to capitalism, which has been evident in the wake of 2007, and again
around recent events centred on China. The anarchist Peter Kropotkin long ago stated that:
"The state... and capitalism are facts and conceptions which we cannot separate from each
other. In the course of history these institutions have developed, supporting and
reinforcing each other. They are connected with each other - not as mere accidental
coincidences. They are linked together by the links of cause and effect, effect and
cause". Indeed, in the context of modern capitalism this relationship has been laid bare
for all to see. States, since the 1970s, have been intervening in very specific ways to
try and create outlets for capital in order for capitalism to overcome the crisis of
over-production and over-accumulation. In the past states, including in countries such as
the US, intervened through heavily assisting corporations involved in manufacturing,
including through subsidies. In China until the late 1970s a form of state capitalism
existed, with the state playing a direct role as a capitalist through owning the means of
production and directly exploiting workers. By the late 1970s, the intervention changed.
As such, states still have intervened in the market, but only in new ways.
One way states have been 'intervening' in the market, since the 1970s, has been through
embarking on financial liberalisation. They have assisted capitalists by allowing and
enabling them to create new areas of 'investment', including through floating currencies,
promoting the growth of financial markets, and encouraging trade in opaque financial
instruments such as debt derivatives. In countries such as the US and South Africa states
have also made it legal for companies to buy back their own shares to inflate share
prices. Other states, in the 1980s and 1990s, such as the Chinese state established stock
markets for the first time (along with encouraging the emergence of much larger private
sectors and embarking on some privatisation); thereby creating new outlets - even if
unstable - for capitalists globally, who were experiencing over-accumulation and needed to
find some profitable outlets for their capital beyond manufacturing.
It is, therefore, states as instruments of the ruling class that have helped in
engineering the explosion of the financial sector and speculation, including in China.
Globally the financial sector and speculation has become massive - dwarfing productive
sectors. For example, by 2014 the average daily speculation on currencies around the world
had reached $ 5.5 trillion. Even a relatively small country like South Africa - which is
ranked 33rd in the world in terms of the size of its economy - has come to experience
massive trade in its currency. In fact, the average daily trading volumes (mainly
speculation) on the South African Rand has reached $ 60 billion - meaning the size of the
speculation on the Rand on any given day is almost 20% of the country's entire Gross
Domestic Product (GDP).
The amount of speculation on stock markets has also exploded since the 1970s. Many,
including Wall Street, are now far larger than the GDP of the states they are situated in.
In recent years corporations in the US have been on a massive share buy-back spree to
inflate share prices - since 2009 $ 2.3 trillion has been spent by US companies buying
back their own shares and thereby inflating the prices. It was and is states that make
this possible through their policies, laws and even actions such as bailouts.
This explosion of speculation, since the 1970s, has led to massive instability. Since
financial liberalisation began in the 1970s, there have been over 100 financial crises in
different parts of the world. The last major one being in 2007 and centred around US
corporations that had run up massive debt and speculated on debt - only to find the debt
they had speculated on was largely worthless - while the most recent one being the
bursting of the Chinese stock market bubble and the subsequent global fallout.
Of course when speculative bubbles have burst, states have spent billions and trillions
bailing out the rich. Indeed, when in deep trouble the ruling classes have always turned
to their instrument of rule, the state, to bail themselves out. In the wake of the 2007
financial crisis it was estimated that the US state alone spent as much as $ 29 trillion
bailing out speculators. In countries like South Africa, the state has helped finance
capital when they have got into difficulty. In 2014, the South African state and the
Reserve Bank spent $ 1.6 billion bailing out African Bank. African Bank had been involved
in massive unsecured lending, and when large parts of this could not be paid back, the
state stepped in to save the capitalists that owned the company. For the people that had
taken unsecured loans that African Bank fostered on them, however, there was no relief:
the state has enforced the repayment of these loans.
China too also has a history of assisting and bailing out corporations in specific ways.
Its recent spree to prop up the Shanghai Stock Market is nothing new. In 2007, when demand
for goods manufactured in the country declined, and it became clear China was suffering
from a crisis of over-production, the Chinese state spent $ 4 trillion (between 2008 and
2009) to create demand for goods. Many of the projects to create this demand were absurd -
for example building highways and bridges to nowhere and even a theme park in Tibet - and
were undertaken with the sole purpose of assisting capital.
Over and above this, since 2007, cheap loans have been provided by the Chinese state to
corporations to undertake projects in the real estate sector and to speculate on the stock
markets. This contributed to private debt rising by more than 60% in China in the last
five years, with private debt now standing at 280% of the country's GDP. All of this,
however, only bought time. The massive state intervention in 2008 and 2009 to try and curb
the impact of the crisis has now run out of steam - meaning the crisis is returning in
full force. The state may choose again to try and delay the impact with massive spending,
but even its capacity to do this endlessly does not exist and will only make
over-production worse in the short-term. It has, therefore, become clear again that the
problem of over-production and over-accumulation has not disappeared even in China, and it
is this that is at the centre of the current stock market crash.
Over-production and over-accumulation are still with us
Officially, the Chinese state has claimed that GDP in the country is still growing at 7%
annually. However, there is a widespread belief that this may be false, and that at best
China's GDP is in the region of 4%, with manufacturing actually declining. The July 2015
manufacturing purchasing managers' index (PMI) in China showed that manufacturing is
shrinking. Likewise, it was announced that exports and imports had also declined year on
year in August. In fact, it was the 10th consecutive month that imports declined. This
partially also means that the main driving force of growth in China since 2007 has not
really been a vibrant manufacturing sector with ample demand for goods across the globe,
but rather real estate and stock market bubbles (along with massive Chinese state spending
to boost demand for manufactured goods), which are now bursting.
At least 19 sectors in China have been hit by falling prices since 2013 due to
over-production, including the steel, clothing, and ship-building sectors. In these
sectors, prices have been cut to the point of often being below the cost of production -
driving many companies into bankruptcy. In 2013, the Chinese state ordered 1400 factories
in these sectors to slash production to try and address the problem. Along with this, the
state has been 'stock-piling' certain commodities from the worst hit sectors, such as
aluminium, to try and keep prices as high as possible to prevent a collapse of these
industries. Even all these measures have not ended the problem. The problems of
over-production and over-accumulation can be seen most vividly in the hundreds of cement
factories in China that have slashed production or are lying idle.
The fallout goes far beyond stock, currency and bond markets
For countries that rely on exports of raw materials to China, like South Africa, the
problem of over-production and over-accumulation in that country, and likewise globally,
is bad news even beyond their stock, currency and bond markets. Since 2007, China has
accounted for 40% of growth globally - without China the depth of the capitalist crisis
would be even starker. China also accounts for over 10% of the global trade in goods. The
slow-down in manufacturing in China is already beginning to hit other countries hard.
South Korea - which in terms of the 'Asian supply chain' is a major exporter to China -
saw its exports decline year on year by 14.7% in August.
It is, therefore, also not an accident that South Africa's economy shrunk by 1.3% in the
second quarter of 2015. Manufacturing and mining in particular have been adversely
impacted on. It is also not an accident that Chinese companies are dumping steel in
countries such as South Africa - and thereby threatening steel companies based in South
Africa - as due to overproduction Chinese companies are desperately looking to off-load
steel even if that means selling it at below cost elsewhere. Even tougher times,
therefore, look like they are ahead for China, the countries that export to it, and indeed
the world (of course states and capitalists will try and assuage the impacts of this by
creating another bubble somewhere else).
Globally, the crisis of over-production and over-accumulation is still with us - it has
never been overcome. Rather, states have created speculative outlets for capital, and
capital has used this to create bubbles over and over since the 1970s. When these
periodically burst, the full brunt of the crisis of capitalism becomes evident again, as
has happened with the events around the Chinese stock markets.
More lesson's from the past
Like in past 'financial' crises since the 1970s, no doubt the ruling classes are going to
use what has happened around the Chinese stock markets and the fallout to once again
attack the working class. Indeed, every financial/economic crisis since the global crisis
of capitalism first erupted in the 1970s has been used by the ruling classes to attack the
working class.
One way to try and maintain profits under capitalism has always, and will always be,
driving down the cost of labour. Consequently, we are likely again to see attempts to
retrench more workers, drive down wages, drive up productivity, and cut any semblance of
welfare even further (welfare which was won by the working class through past struggles).
Already in South Africa, for example, the ruling class has been threatening to retrench
hundreds of thousands of workers in the steel and mining sectors. The South African
President recently called on workers to 'tighten their belts' in the midst of the turmoil,
and to be willing to accept compromises in terms of their wages.
As with all of the past attacks, the new round of attacks by the ruling class will lead to
greater inequality, if they are not stopped by the working class. Already as a result of
attacks since the 1970s wages in many countries have stagnated or dropped in real terms.
In the US, for instance, wages as a share of GDP are at their lowest levels in history.
Likewise, in China wages as a percentage of GDP have declined from over 56% in 1983 to
36.7% today. According to a study by Arden Finn, of the University of Cape Town, 60% of
African workers and 22% of white workers in South Africa now earn so little that their
wages are not enough to pull them out of abject poverty. Unless combated, the current
events globally and in China will see a worsening of this situation. Indeed, the
underbelly of the rotting, yet living, corpse that is capitalism is the increased
exploitation and oppression that the ruling class has unleashed on the working class.
Unless fought, what we have seen recently will be used as a pretext to make this worse.
The system needs to go
There needs to be a massive defensive struggle against the further attacks that will
follow in the wake of events in China and the fallout around it. A start already has been
made. Massive protests and strike waves in many countries, including China, have been
taking place since 2007, especially against austerity. In the current climate, these have
to be built on - otherwise the ruling classes will cut wages and welfare even further.
Nonetheless, at some point, such defensive struggles are going to have to be built into
conscious revolutionary struggles to rid the world of the rotting system that is
capitalism. Thus, while capitalism is a rank and vile system it will only be ended if the
working class ends it. In doing so, the working class too will have to rid themselves of
the states that so blatantly and ruthlessly prop modern capitalism up. Indeed, only when
the working class has dismantled capitalism and the states that keep it in place - and
replaced these with an economy based on meeting all people's needs and a society run by
all through federated worker and community assemblies and councils - will the torture of
the working class at the hands of the ruling class be ended. Only then, will the wasteful
use of resources to assist the richest people on Earth, while billions of people are mired
and driven further into poverty, be a thing of the past.
Related Link: http://zabalaza.net
http://www.anarkismo.net/article/28502
