The financial crisis will be "more extreme and more serious than that of the 1930s",

The financial crisis will be "more extreme and more serious than that of the 1930s", cabinet minister Ed Balls has predicted.

Mr Balls, a former economic adviser to Gordon Brown, said the global recession would be the most serious for "over 100 years", the Yorkshire Post reported.

He told a Labour conference that these were "seismic events that are going to change the political landscape".

The Conservatives said the remarks were "staggering and very worrying".

Mr Balls, the schools secretary, made the comments at Labour's Yorkshire conference at the weekend, the newspaper reported.

Mr Balls and Downing Street have attempted to play down the significance of his remarks, insisting he had been pointing out the unique nature of the global financial crisis and was not predicting that the impact on ordinary people would be worse than that experienced during the Great Depression of the 1930s.

SOURCE: BBC NEWS

F. William Engdahl Interview - Two Years of Recession or Ten Years of Hell ? Part One and Two and Three and Four

Contribution to the Forum on the Global and Financial Crisis

on 30 January 2009 at De Balie, Amsterdam
By Prof. Jose Maria Sison
Chairperson, ILPS International Coordinating Committee

It is of utmost importance for the working class and the rest of the people exploited by the system of monopoly capitalism to discuss and clarify to themselves what they can and must do about the current grave financial and economic crisis. They are necessarily concerned about being ceaselessly victimized by the monopoly bourgeoisie, extending from the extraction of the surplus value in the process of production to the complexities of capital overaccumulation and abuses of finance capital.

In this connection, I wish to point out certain facts in order to show in a comprehensive and profound way how the current grave crisis has come about and how the working class and the rest of the people have been exploited and oppressed on a global scale, especially in the last three decades under the signboard of “neoliberal globalization”. Consequently, it becomes easier to discuss what the people can and must do about the crisis in terms of raising their consciousness, organizing and mobilizing themselves for making protests and demands in order to bring about the necessary social change for the better.


I. Certain Facts About the Crisis

We must counter the onesided, narrow, fragmentary and shortsighted explanations of the crisis in the US and on a global scale. These have been made by the industrial and financial magnates, their political agents, their academics and publicists in order to obfuscate the origin and development of the crisis, to continue the misrepresentation of monopoly capitalism as “free market” capitalism, to continue making the most out of the mess in the system of greed and to confound and confuse the people.

Whatever is the dominant policy stress of the imperialist state and the monopoly bourgeoisie, whether the policy is called Keynesian or neoliberal, it is in the very nature of monopoly capitalism to exploit and alienate the working class from what it produces, maximize the extraction of surplus value, raise the organic composition of capital and accumulate and overaccumulate both the productive and finance capital in the hands of the monopoly bourgeoisie, especially the financial oligarchy.

Pressing down the wage level cuts down effective demand and results in the crisis of overproduction. Raising the organic composition of capital in order to increase productivity and competitiveness results in the tendency of the profit rate to fall. The recurrent and worsening rounds of boom and bust and recessions have been temporarily overcome by heavy doses of debt financing. The overall decline of US industrial production since the mid-1970s has been accompanied by an unprecedented financialization of he US economy. But ultimately the overaccumulation of capital (especially through the overvaluing of assets, the multiplication and spiralling of derivatives and the generation of fictitious capital through unregulated credit expansion for the purpose of monopoly control and speculation) leads to the super-large financial and economic crisis, like the Great Depression and what now portends to be the Greater Depression.

The so-called neoliberal or “free market” policy stress has been significantly distinct from the previous so-called Keynesian policy stress a) in unbridling and letting loose the naked self-interest or greed of the monopoly bourgeoisie as the driving force of the economy ; b) in blaming as the cause of the problem of stagflation the rising wage level and social spending by the US government in the 1945-75 period, instead of the recurrent crisis of overproduction, the overaccumulation of capital and the demand-pull inflationary effect of military spending (the arms race, overseas deployment of US military forces and the wars in Korea and Indochina);

c) in seeking to make more capital and profit-making opportunities available to the monopoly bourgeoisie through the denationalization of the neocolonial economies, privatization of public assets, trade and investment liberalization and deregulation or removal of restraints on abusing the working people, the environment and the financial system, and d) in accelerating the centralization and concentration of capital (especially in the form of finance capital) in the US and a few other centers of global capitalism.

The monopoly bourgeoisie in the US and other imperialist countries has successfully waged a class struggle against the working class by using the imperialist state to attack the trade union and other democratic rights, to press down wages and erode hard-won social benefits, cut back on social spending and to deliver taxpayer money to the monopoly firms in the form of overpriced contracts in military production and continuous supply of fuel and other raw materials for strategic stockpiles, direct and indirect subsidies and insurance for overseas investments. At the productive base of society, the state guarantees the legal property right of the monopoly bourgeoisie in order to maintain the exploitative relations of production and provides the laws and coercive apparatuses to keep the working class under control. Even as it misrepresents itself as “free market” capitalism, monopoly capitalism has always used the state for purposes of exploitation and oppression. As the partner of private monopoly capitalism, state monopoly capitalism takes more forms than state ownership of enterprises, even as nationalization is a form that may become conspicuous in time of severe crisis.

In accumulating and overaccumulating capital, the US monopoly bourgeoisie has not been satisfied with the extraction of surplus value in the process of production, the privilege of tax cuts and grabbing of taxpayer money, access to the bank deposits and pension funds of the workers, expansion of credit and money supply in relation to deposits, the creation of derivatives that speculate on fluctuations in the stock, bond and currency markets and taking of superprofits on cheap commodities and debt service from the economic hinterland of the world. After inveigling millions of worker and middle class families to buy into the “hightech bubble” in 1995-2000 and making them lose their savings, the US imperialist state and the monopoly bourgeoisie drew the American households to the “housing bubble” from 2002 onwards at teaser interest rates at the beginning.

This would promote an unprecedented level of consumerism based on the artificially rising housing values and further consumer credit (in addition to housing equity loans, auto loans, credit cards and so on). The “housing bubble” complemented the so-called military Keynesianism of Bush, which pumpprimed the US military-industrial complex but not the entire economy in terms of increased demand, employment and production. The new bubble was one more and a bigger device to fleece the American working class and ultimately to securitize debts, especially bad mortgages, and generate the most arcane forms of derivatives, like the collateralized debt obligations, asset-backed securities, credit default swaps and structured investment vehicles.

The imperialist state looks like it is violating its dogma of “free market” or “state non-intervention” in using public funds to bail out the largest private banks, investment houses, mortgage companies, insurance companies and some key productive enterprises like the Big Three of US car production

But in the first place, such a dogma is a slogan of pretence. It is completely untrue that the imperialist state is going “socialist” when it uses taxpayer money for private corporate bailouts. Forms of state monopoly capitalism should not be mistaken for socialism. In times of big crisis like the Great Depression and the current grave crisis, the monopoly bourgeoisie deliberately avails of monopoly state capitalism to bail out the distressed monopoly firms and to assist the stronger firms to absorb the failing firms. Bush, Bernanke of the Federal Reserve Board and Paulson of the US Treasury Department cooked up with their Wall Street confreres the scheme of bailing out the banks with taxpayer money to the flagrant detriment of Main Street.6.

The purpose of the scheme is simply to pump prime the assets of the big banks and other financial corporations , allow them to dump the toxic assets and hope in vain that they thaw out the credit freeze and resume lending operational capital to producer firms. But would such producer firms take further credit for production under the depressed conditions of the crisis of overproduction? The scheme is anti-worker, anti-people and anti-socialist. The imperialist state and the monopoly bourgeoisie are not as interested in bailing out the workers from mass layoffs, home foreclosures, loss of pensions and other social benefits and other disasters as bailing out first the financial and industrial giants. Obama’s so-called stimulus package of USD 850 billion can provide temporary jobs only to a small part of the rising numbers of unemployed. It is a poor afterthought in terms of tardiness and smallness in relation to the trillions of dollars already deployed for the bailout of the financial giants since 2007. It is starkly clear that the bailout funds for the Big Three is anti-worker because it is preconditioned by the reduction of wages and benefits for the workers.

The highest US authorities in the outgoing and incoming administrations admit that the current financial and economic crisis will not blow away in one or two years. It can last for as long as ten years or even more. The gravity of the crisis can be deduced from the enormity and significance of the debts incurred by the US government, the private corporations and the American households. All these debts are beyond the capacity of the debtors to pay back. To collect the debt payments and/or write off the debts would deflate and further depress the economy. The US national debt has soared because of budgetary and trade deficits. The budgetary deficit involves a huge amount of debt service, the tax cuts for the corporations and the wealthy and heavy military spending.

The trade deficit involves the outsourcing of consumer goods and the decline of US manufacturing for export (except big industrial items and agricultural surpluses) since the 1970s. The use of US treasury bonds and taxpayer money to bail out the US financial and nonfinancial giants aggravates the crisis. Not only the financial corporations are in trouble with huge amounts of bad mortgages and other bad debts and worthless paper assets, the nonfinancial corporations are also in a big financial mess as shares of stocks and corporate bonds lose their value and the loss of effective demand and lack of sufficient fiscal stimulus stagnate and depress industrial production, the basic service sector and the real economy as a whole. The American households are losing jobs and homes by the millions and have savings of close to zero.

The current global financial and economic crisis has dramatically spread from the US to the rest of the world for several reasons. The US is the center of the world capitalist system. It has imposed the policy of “neoliberal globalization” on its imperialist allies and the less developed countries. It has subordinated veritably the whole world through bilateral and multilateral economic and trade relations and through its control of the Group of 8, the OECD, IMF, World Bank, WTO and other international agencies. The US is where both productive and finance capital have been most concentrated. It is the principal destination of foreign direct investments. It has been described as the engine of global economic growth and the biggest consumer market. Its currency is practically the world’s reserve currency. It has become the world’s biggest debtor, ceaselessly printing dollars and selling stocks and bonds to foreign entities. It absorbs the biggest bulk of the exports of the other imperialist countries, the so-called emerging markets and the oil-exporting and raw-material producing countries of the world. China, India and other so-called emerging markets are now in a severe crisis due to the international credit crunch and reduced US demand for their exports. The general run of third world countries which export nothing more than raw materials and some semi-manufactures are the most devastated by the drying up of international credit and by the fall in US demand for their exports.

In contrast to its longrunning arrogance and practice of setting the line for its allies, the US was at a loss on how to solve the global financial and economic crisis during the recent G-20 Summit. Bush prated about preserving “free market” capitalism. But the declaration of the summit encouraged all the participants to adopt whatever monetary and fiscal measures they deemed best. Discredited and with extremely limited resources, the IMF could not be referred to as a rallying point. Neither could the World Bank because no country would provide it with capital. And of course, the WTO is still bogged down in failure to resolve outstanding issues in the Doha round of talks. These are now overtaken by the current crisis. Countries that used to be lectured to by the US, like France, Russia, China, India and Brazil took their turns in lecturing to Bush. The financial and economic relations between the US and China, which are supposed to be the biggest global partners, are now increasingly unstable. The sweat shops on the eastern coast of China, owned largely by foreign investors and producing consumer goods for the US market, are closing down or reducing production and throwing out tens of millions of people out of their jobs. The US and foreign exchange holdings of China are vulnerable to capital flight and the value of US treasury bonds and corporate securities in the hands of China can evaporate as fast as the US proceeds to further enlarge its national debt and keep the interest rate at close to zero for the purpose of reviving the US credit system.

The broad masses of the people, especially the workers and peasants, suffer from the global financial and economic crisis in terms of reduced employment and income, the deterioration of their living conditions and intensification of exploitation and oppression. The crisis has resulted in widespread social discontent and unrest. It is generating the people’s resistance in the imperialist countries, in the so-called emerging markets and former revisionist-ruled countries and in all the third world countries. For the people’s resistance in any country to be resolute and effective in confronting imperialism and reaction and in seeking reforms and social revolution, there has to be a revolutionary party of the working class to lead both the organized and spontaneous masses. For several decades, the imperialists and their reactionary allies have launched offensives to destroy or weaken the working class parties and the progressive trade unions and other mass organizations. But now the gravity and long duration of the current financial and economic crisis opens excellent opportunities for the progressive forces and movement of people for national liberation, democracy and socialism to grow in strength and advance.

II. What People Can and Must Do

What the people can and must do about the global financial and economic crisis ranges from seeking relief, recovery and reforms within the imperialist-dominated world capitalist system to the most fundamental criticism of this system and raising the demand and undertaking the actions for revolutionary change towards socialism.

When I speak of reforms within the system, I do not mean harking back to the misappropriation of the term by the dishonest purveyors of “free market” capitalism who used it against the basic rights and interests of the working people in the industrial capitalist countries and in the less developed countries. At the moment, key bourgeois political and economic authorities are swinging back to the Keynesian general theory of equilibrium and the management of effective demand through fiscal measures.

As far as I am concerned, reforms within the framework of Marxist political economy can be undertaken to serve the immediate demands of the working people for employment, decent income, better working and living conditions and the availability of basic social services, even as the long term goal of the people’s revolutionary movement is to replace the system of monopoly capitalism with the socialist system.

To take an important phrase from the Communist Manifesto, the battle for democracy must be won whether the popular movement for socialism be in the imperialist countries or in the far less developed countries dominated by imperialism. The consciousness, organization and mobilization of the broad masses of the people must be raised to a level high enough to effect basic reforms immediately and social revolution in the long run.

In the industrial capitalist countries, the economic basis for socialism exists. But the monopoly bourgeoisie never gives up its political and economic power voluntarily. It uses its state power to impose fascist rule if the persuasive and deceptive role of the bourgeois political parties fails to mislead the people and stabilize the system. Thus, the battle for democracy must be won against the potential or actual rise of fascism and the use of imperialist war by the monopoly bourgeoisie to regiment the people. In this regard, we recall the Great Depression, the rise of fascism and World War II.

In the far less developed countries, where there are still large vestiges of feudalism, winning the battle for democracy involves not only upholding, defending and promoting the collective and individual rights of the people, especially civil and political liberties, but also addressing substantively the demand for national industrial development, the peasant clamor for land reform and engaging the peasant masses in the new democratic revolution led by the working class as the long term agent for socialist revolution and construction.

Information and Education Campaigns Whatever significant degree of social change is called for in the short term or in the long run, the people must comprehend the problematic situation that they are in and the possible and necessary solutions that must be carried out with their conscious, organized and militant participation. In this regard, the working class parties and mass organizations of various exploited classes and sectors must engage in information and educational campaigns.The current global financial and economic crisis cannot be comprehensively and profoundly understood by those who analyze it from the narrow viewpoint of those who wish to preserve the system of monopoly capitalism. They are like frogs in the well.

Those who continue the Marxist and Leninist tradition of critiquing the political economy of capitalism and monopoly capitalism have a clear advantage as they have an overview of the inhuman and anti-labor character of the US and world capitalist system and the need to strive for the socialist system.

Research and analysis of the exploitative roots and development of the current global financial and economic crisis must be undertaken for the purpose of drawing up programs and declarations of political action. These must also take into account the impact and implications of the global financial and economic crisis on the global political crisis as manifested in the intensification of the major contradictions in the world.

The working class parties and mass organizations can add to their accumulated knowledge the analysis and advice of experts of political economy and international politics who truly understand the crisis comprehensively and profoundly. In this connection, there is now a rising demand for the Marxist critique of the capitalist political economy and the Leninist critique of monopoly capitalism and theory of state and revolution.

This is a time of discredit and embarrassment for those bourgeois economists who have followed the path of Milton Friedman and the Chicago School, for those neoconservatives who believed in strengthening US global hegemony by spreading the “free market” and “liberalism” with the leverage of US military superiority and for those neo-Kautskyite globalists who peddle the notion of supra-imperialism as a benign industrializing force.

The crisis has served to negate in the most telling way all the prior propaganda done by the monopoly bourgeoisie to hype the dogma of the “free market” through the dominant mass media, the schools, the think tanks, political parties and the nongovernmental organizations bound by the rule of civility in obeisance to the bourgeois state and big business. The working class party, the mass organizations and the broad masses of the people must carry out information and education campaigns as counter-offensive to the ideological, political, economic and military offensives of imperialism and reaction.

Social investigation must be undertaken among the people in order to learn from them how they are being afflicted by the crisis, what are their most pressing demands and what they are capable of doing to confront the crisis and bring their social movement forward. The social investigation can be of varying scales, from the basic level of local communities and work places to the national level. The purpose of social investigation is for the working class parties and mass organizations to learn from the people what must be done in order to arouse, organize and mobilize them.

There are various forms and ways of carrying out campaigns of information and education. These include the conferences, forums and seminars where the political activists and the experts can learn from each other and the mass meetings and rallies for expressing protest and demands and spreading wide the demand for social change and gauging at every given time how many people are being drawn to the mass movement. The working class parties and mass organizations can avail of the electronic media as a cheap and fast way of generating and accelerating the campaign of information and education.

Organizational Campaigns In the industrial capitalist countries, the monopoly bourgeoisie manages to stay as the ruling class and control the state for its own purposes, whether there is a duopoly of the Republican and Democratic parties as in the presidential form of government of the United States or an oligopoly of parties as in the parliamentary forms of Europe and Japan. There are variations among the the so-called mainstream parties but they are all within the predetermined framework or confines of the monopoly capitalist state system. In the semifeudal neocolonies, the joint ruling classes of the big compradors and landlords likewise maintain a variety of political parties to conjure the illusion of democracy. These parties are required to stay within the bounds of the big comprador-landlord political system.The ruling bourgeois class can tolerate a working class party if it does not challenge the state system of bourgeois rule and seeks reforms exclusively within the framework of bourgeois law and order. It takes every effort to induce and persuade a working class party to stay within the bounds of bourgeois rule. But it does not hesitate to use the coercive apparatuses of the state to malign and suppress the working class party when this is deemed as a threat to the system for seeking to supplant the class rule of the bourgeoisie with that of the working class in order to establish an anti-imperialist or socialist state.

At any rate, there is the need for a working class party to lead the people in seeking basic reforms within the bourgeois political system or in seeking to replace this with the socialist system. Basic social reforms as well as social revolution are not possible without the working class party that is capable of leading the organized and unorganized masses. Without such a working class party, the big bourgeoisie continues to rule society unchallenged and unhampered through the political parties which it uses for preserving the system, for intra-class and intra-systemic competition for political power among the bourgeois factions and for warding off any political party that seeks to overthrow bourgeois rule.

There must be a trustworthy working class party committed to the propagation and realization of the program of social change and capable of leading the broad masses of the people, especially the working people. Such a party is best relied upon for confronting the global financial and economic crisis and solving the problems for the benefit of the people and with their active participation. Without a working class party, the bourgeois parties would prevail over the working people who are unorganized and spontaneous or who are limited to mass organizations.

In carrying out organizational campaigns in the face of the current grave financial and economic crisis, efforts must be resolutely undertaken to build a genuine working class party that surpasses the bourgeois laborite, reformist social democratic or revisionist communist parties. Building such a working class party is quite challenging because of the long running attempts of the monopoly bourgeoisie to stigmatize as “terrorist” revolutionary forces that call for national liberation, democracy and socialism. But the current crisis conditions are favorable for building such a party.

The trade unions and other mass organizations must be built in order to uphold, defend and promote the rights and interests of the exploited classes and sectors of society. In the industrial capitalist countries, the most important of these are the mass organizations of workers, migrant workers, immigrants, the various nationalities, youth, women, the professionals and cultural workers. In the semifeudal neocolonies, the most important mass organizations are those of workers, peasants, youth, women, the intelligentsia and the minorities. These classes or sectors are adversely affected by the crisis in particular ways.

The class and sectoral mass organizations must further form multi-class and multisectoral federations and alliances in order to underscore common interests and build political unity cumulatively and progressively. The genuine working class party offers to them as guide its general line and program of action, encourages their political and organizational initiatives and thereby wins their abiding support . Mass organizations with different ideological, political and religious affinities can form formal and informal alliances to pursue common courses of action on the basis of consensus and coordination.

Within a country, mass formations can be established and developed at various levels, from the basic level through intermediate levels to the national level. These mass formations can in turn become components of similar formations at the international level. The International League of Peoples’ Struggle has been working hard to build its national chapters and its global region committees. It is a form of international alliance but is ever ready and willing to form broader alliances along the anti-imperialist and democratic line of people’s struggle.

Mass mobilizationsIn connection with information and educational campaigns and organizational campaigns, the broad masses of the people in their millions must be mobilized to denounce the exploitative and oppressive character of the system of monopoly capitalism, now sharper and more destructive than ever before, and to demand social, economic and political changes, ranging from basic reforms to the fundamental revolutionary transformation of society.The battle for democracy must be carried out according to the objective and subjective conditions obtaining. The legal forms of struggle must be carried out where these are possible and to whatever extent these are possible. The full spectrum of human rights, civil, political, social, economic and cultural, must be upheld, defended and advanced for the benefit of the exploited and oppressed people. The people must be able to act accordingly as the the socio-economic crisis results in political crisis and the forces and agents of monopoly capitalism malign and try to discredit democratic protest as unlawful rebellion or even as terrorism and thus justify increased political repression.

In countries where the ruling classes engage in state terrorism and/or imperialism engages in wars of aggression and military intervention, the people have the sovereign right to mobilize themselves for all forms of resistance, including revolutionary armed struggle. At the moment, legal mass movements and revolutionary armed struggles are going on and advancing in several countries in Asia, Africa and Latin America, where the people are the most oppressed and exploited. The current severity of the global financial and economic crisis, the exacerbation of exploitation and oppression, the blatant political repression or naked state terrorism and the imperialist wars of aggression impel the people to wage armed revolution.

To become most effective in making protests and demands, the mass movement for social change must be based at the level of the local communities, the factories, farms, schools and churches. It is indestructible when there are dedicated activists of the working class party and the mass organizations who are deeply rooted among the toiling masses and who arouse, organize and mobilize them at the basic level. This fact is well demonstrated in cases where the most vicious campaigns of deception cannot sway the people against the progressive mass movement as well as in cases where the counterrevolutionary state carries out a campaign of military and police suppression but fails to defeat or weaken the revolutionary mass movement of the people.

When the mass movement is well-established at the basic level, especially among the working people, then it can easily build and support the organs of leadership and organizational effectivity at various levels, up to the national level. It can mobilize significantly large and effective numbers of people at the centers of the towns, districts, provinces, regions and the capital of the country. The higher levels of leadership and organization and the lower levels can interact to drive the mass movement forward according to the general political line.

Anti-imperialist and democratic mass movements are well-rooted in many countries. These have become interconnected with their counterparts within global regions. The cohesion and coordination of the mass movements within a global region can be effected through conferences, seminars, forums, a standing regional committee and timely consultations.

The formation of global region committees and organizations does not always have to precede the formation of the international organization. An international organization can be formed by calling for the participation of people’s organizations based in various countries. The International League of Peoples’ Struggle was first established as an international organization and subsequently called on its member-organizations to form national chapters before pushing in earnest the formation of the global region committees and organizations.

At the moment, there are several international formations or combinations of people’s organizations. These can be consensus-based formal and informal alliances. They can make declarations and agreements of anti-imperialist solidarity, mutual support and cooperation. We are witness to the growing unity, cooperation and coordination of these international organizations in carrying out mass mobilizations to oppose the vile policies and acts of imperialism and reaction and call for a new and better world of greater freedom, democracy, development, social justice, healthy environment and peace.

III. Prospects

The current financial and economic crisis is far from over in the US and in the world. The bursting of the bubbles in housing, bank credit, the stock market and derivatives has not yet run its full course and continues to deflate values in trillions of dollars due to debt deleveraging in the trillions. The bubble in derivatives has been the biggest in the entire history of capitalism and is estimated to range from 500 trillion to a quadrillion dollars on a global scale. The corporate bond bubble among the giant industrial firms is expected to burst in a big way this year. So is the bubble in US treasury bonds that has rapidly inflated due to the bank bailouts in the trillions.

The real economy is bound to be further afflicted by bankruptcies, drastic production cutbacks, decline of employment and incomes and the further loss of effective demand. The accumulation of debt financing by governments and private corporations in so many decades is cascading into and collapsing on entire economies. The Keynesian stimulus packages of the US and other governments are puny and restricted by the persistent neoliberal policy bias and the ever insistent demands of the financial and nonfinancial corporations to be the first served with the bailouts.

Let us recall that the pumppriming fiscal measures adopted by Roosevelt under the New Deal did not really solve the Great Depression and stabilize the US economy. These measures would counter now and then the depressed conditions only to be pushed back by “free market” arguments against deficit spending in a period of lower tax collection. It was largescale civil and military production related to World War II that finally stimulated the US economy.

There is good reason to be wary of Obama’s kind of top economic advisers like Volcker, Rubin and Sommers and his top appointees to the US Treasury Department (Geithner), the US Securities and Exchange Commission (Schapiro), the Commodity Futures Trading Commission (Gensler) and so on. These are exponents of unregulated “free market” capitalism, especially Sommers and Geithner who were instrumental in pushing the Financial Services Modernization Act and the Modernization of Commodity Futures Act during the time of Clinton in 1999. Geithner is a dyed-in-the-wool factotum of Wall Street, like his former bosses Bernanke and Paulson. It is highly probable that the glittering Obama promises of stimulating the economy the New Deal/Keynesian way would be squashed under the pressures of unwieldy bipartisanship and the persistence of the neoliberal policy bias.

The US policy makers under the Obama administration have already indicated that they will continue to chant the slogan of “free market” capitalism, retain as much as they can a high level of deregulation favoring the financial and industrial giants and carry out a number of measures to reverse the industrial decline of the US. These measures include Keynesian pumppriming (like public works, expansion of social services and green energy projects), military production and taking back some of the manufacturing of consumergoods conceded previously to US allies.

The current financial and economic crisis is grave enough to threaten and undermine the position of the US as the No. 1 economic and military power. But the decline of the US as the unquestioned No. 1 imperialist power will not occur rapidly on a straight line. The other imperialist powers have also taken a big hit as a result of hewing to the line of “neoliberal globalization”. This is well illustrated in a current cynical joke among Washington insiders, Republican and Democratic, that the financial crisis would have been far worse for the US had it not succeeded in exporting the toxic financial products to Europe, Japan and elsewhere. The US is still in a position to adopt self-serving policies to slow down its decline and further beggar its own imperialist allies and neocolonial underlings.

However, such policies will be very harmful to other countries and the people of the world and will provoke them to react and adopt their own policies. The currents of multipolarization will thus become stronger. In fact, the struggle among the imperialist powers for a redivision of the world in terms of political hegemony and economic territory (sources of cheap of raw materials and cheap labor, markets and fields of investment) will become more intense. The adverse effects of the crisis on the so-called emerging markets and the general run of raw material-exporting countries in the third world are leading to social and political turmoil.

The severity and dire implications of the global economic crisis push the imperialist powers to intensify aggression and military intervention and accelerate their preparations for war. The trend of US-instigated aggressive wars has conspicuously risen since the disintegration of the Soviet Union and global recession that hit Japan the hardest. Since its economic slowdown at the turn of the century, the US has become even more aggressive with the so-called global war on terror as a convenient pretext, to pumpprime the military industrial complex, as well as further expand an consolidate its global hegemony.

The NATO allies of the US, notably Germany and France, have been less enthusiastic in supporting US military campaigns and programs such as in Iraq and elsewhere in the Middle East and in the former Soviet bloc countries. Russia is wary of the US and NATO policies and track record of expansion and aggression and have formed with China and some Central Asian states the military alliances, Collective Security Treaty Organization (CSTO) and Shanghai Cooperation Organization (SCO).

No one can accurately predict how long the global financial and economic crisis will persist and how the imperialist powers can solve or aggravate it. But there is ample ground and ample time for the working class, the mass organizations and the broad masses of the people to further strengthen themselves against the onslaughts of monopoly capitalism and all reaction and carry out mass movements to make demands for basic social reforms in all countries and to wage revolutionary struggles in an ever increasing number of countries.

At any rate, the Greater Depression is still looming ahead. There will be more widespread social and political turmoil in various countries of the world. Wars of aggression and military intervention are in the horizon. The most effective counter to this is in the ceaseless consolidation and expansion of the revolutionary mass movements for national liberation, democracy and socialism.

Thanks to Marxist Leninist for this contribution.

It Won't Save the Economy; It May Make the Crisis Worse

by Michael Hudson

First, here’s the silhouette of the giveaway, as outlined Thursday in the New York Times:

“Treasury Secretary Timothy F. Geithner said Wednesday the administration is working on a comprehensive plan to “repair the financial system.” … bank stocks surged on hopes the government was moving toward creating a “bad bank” to purge toxic assets from balance sheets that are rapidly deteriorating as the economy worsens… administration officials believe that trillions of dollars more may be needed to buy the majority of bad assets from banks. …

“The concept of a bad bank has gained momentum in the financial industry as the economy deteriorates, slashing the value of risky assets on banks’ books and increasing the need for banks to hold capital against those losses. Shares in Citigroup and Bank of America, which both recently received a second taxpayer lifeline, surged 19 percent and 14 percent respectively as the stock market rose on optimism that the administration would relieve banks of money-losing assets.”

“Geithner Says Plan for Banks Is in the Works”, By Stephen Labaton and Edmund L. Andrews, The New York Times, January 29, 2009.

After (1) threatening for eight years that the prospect of a trillion-dollar deficit spread over a generation or so is sufficient reason to stiff Social Security recipients and abolish debts to the nation’s retirees, and (2) after the Bush administration provided $8 trillion over the past three months in cash-for-trash swaps of good Treasury bonds for Wall Street junk derivatives, the Obama Administration is now speaking of (3) some $2 to $4 trillion more to be given in just the next week or so.

Not a single Republican Congressman went along, just as Rep. Boehmer refused to support the Bush bailout on that fatal Friday when Mr. McCain and Mr. Obama debated each other over marginal issues not touching on the giveaway, which both candidates passionately supported. The Party of Wealth sees the political handwriting on the wall, for which the Party of Labor seems happy to take all responsibility. This probably is the only place where I’d like to see “bipartisanship.” Watch the campaign contributions flow for an index of how well this will pay off for the Democrats!

How many families would like a “give-back” on every bad investment they’ve ever made? It’s like a parent coming to a child who has just broken a toy, saying “That’s all right. We’ll just go out and buy you a new one.” This from the apostles of “responsibility” for poverty, for mortgage debtors owing more than they can afford to pay, for people who get sick and can’t afford medical care, and for states and cities now left high and dry by the fiscal wipe-out that the Bush-Obama “cleanup” has foisted onto the economy. No do-over for anyone but the hundred or so billionaires who have just been endowed with enough free money to become America’s ruling elite for the rest of the 21st century.

After spending a lifetime denouncing socialism as inherently unfair, Wall Street is now doing a hideous parody – as if “socialism for the rich” were not an oxymoron in the first place. Certainly the banks are not being “nationalized.” Giving away the largest sum of spendable securities in history without direct managerial power that goes with ownership is not “nationalization.” Ask Lenin.

Now that the details of the new, larger but definitely not improved bank giveaway of between $2 and $4 trillion more have been leaked out in time for Wall Street’s Davos attendees to celebrate, we may ask whether, financially speaking, the Obama Administration should best be thought of as Bush-3 – or indeed, whether it is still on a pro-creditor trend that may better be traced as Clinton-5, or perhaps even Reagan-8. Since 1980 the financial sector has made a sustained money grab at the expense of labor and “taxpayers.” More accurately, it has been a debt grab, on the opposite side of the balance sheet from assets.

Backed by Larry Summers, Boris Yeltsin’s Harvard Boys transferred trillions of dollars of Russian mineral wealth and public enterprises into the hands of kleptocrats. That was an asset transfer, pure and simple. In 1997, to be sure, the IMF gave Russia a loan that immediately disappeared into the kleptocrats’ bank accounts, to be paid out of subsequent oil-export proceeds. But assets were the name of the game. Today’s U.S. giveaway has a new twist. The analogy is the “watered stocks” and bonds of yesteryear that railroad magnates and Wall Street emperors of finance gave themselves and their political mouthpieces, simply adding the interest coupons and dividends onto the prices charged the public as if they were real “costs.” Today’s version – “watered Treasury bonds” – are being created on the public sector’s balance sheet. “Taxpayers” must pay bear the interest charges – leaving less for the infrastructure investment that Mr. Obama suggests we may need.

The Bush-Obama bailout bore “small print” stipulations that have already given Wall Street a decade’s tax-free status by letting it count its financial losses against its tax liability. So not only has there been a great fiscal giveaway, there has been a tax shift off finance onto labor and industry. States and localities already have begun to announce plans to sell off roads and airports, land and other public assets to the financial sector in order to finance their looming budget deficits (which localities are not allowed to run under present legislation) . No federal funding has been granted to finance the cities as their tax receipts plunge. There has been a token amount to relieve some low-income families saddled with junk mortgages. But this does not involve actually giving them a spendable money “bonus.” Their role is simply to be trotted out like widows and orphans used to be, as justification to bail out banks for their bad gambles on currency, interest rates and bond derivative gambles. Insolvent debtors are merely passive vehicles to get a book-credit of mortgage relief that the government will turn over in their name to their bankers to make these institutions whole.

Whole, and then some! Chris Matthews just reported his statistic of the day (January 29): $18.4 billion in Wall Street bonuses, paid for out of the government giveaway.

This is called “saving the economy.” That is as much an oxymoron as “socializing the losses.” Socializing the losses would mean wiping the mortgages and other bank loans of debtors off the books. These giveaways are to keep the debts on the books, but for the government to buy them and make the creditors whole – while a quarter of real estate has fallen into Negative Equity as its debts are not being bailed out but kept on the books. The economy’s “toxic waste” remains. But a matching volume of new waste is being created and given to a few hundred families. No wonder the stock market soared by 200 points on Wednesday, led by bank stocks!

In the seemingly frenetic ten days since Obama took office, it is beginning to look as if his good political decisions regarding Guantanamo, Iraq, employee rights to sue for employer wrongdoing, are sugar coating for the giveaway to Wall Street, a quid pro quo to avert opposition from his Democratic Party constituency. At least this seems to be their effect. To accuse Obama of a giveaway would seem at first glance to contradict the basic thrust of his actions – or would be if one did not take into account his appointments of Larry Summers at the White House and the conspicuous leadership role in the bailout played by Barney Frank in the House and Chuck Schumer in the Senate.

There is a simple way to think about what has happened – and why it won’t help the economy, but will hurt it. Suppose the new $4 trillion “bad bank” works. The government shell will give away Treasury bonds for bad bank loans and derivatives gambles, without the government “marking to market.” (So much for the pretense that giving Wall Street credit is “free market” policy. But the alternative to free markets does not turn out to be “socialism” at all, even if “socialism for the rich.” There are worse words for it, which I won’t use here.)

The real question is what the Wall Street elite will do with the money. From Chuck Schumer and Barney Frank through Larry Summers, the Obama administration hopes that the banks will lend it out to Americans. Borrowers are to take on yet more debt – enough to start re-inflating house prices and making homes yet more unaffordable, requiring buyers to take on yet larger mortgages. Larger mortgages at rising prices are supposed to help the banks rebuild their balance sheets – to earn enough to compensate for their gambling losses.

But this neglects the fact that today’s looming depression is caused by debt deflation. Families, businesses and government having to spend more wage income, profits and tax revenues on debt service instead of buying goods and services. So why is the solution to this debt overhead held to be yet MORE debt? Is there not something crazy here?

The government’s solution, placed in its hands by the financial lobbyists, is to bail out the bankers and Wall Street while leaving the “real” economy even more highly indebted. All this talk about “more credit” being needed, all this begging of banks to lend more money and then extract yet more interest and amortization from the economy, is leading it even deeper into the debt hole. It is not helping families repay their debts. And indeed, homeowners whose mortgages already exceed the market price of their property are not going to be able to borrow more.

It would take only $1 trillion or so – or simply to let “the market” work its magic in the context of renewed debtor-oriented bankruptcy laws – to cure the debt problem. But that obviously is not what the government aims to solve at all. It simply wants to make creditors whole – creditors who are, after all, the largest political campaign contributors and lobbyists these days.

The most important thing to understand about the present economic crisis is that it was not necessary technologically, politically or fiscally. Government at the state, local and federal levels are strapped for funds – but only because the natural source of taxation, land rent and monopoly rent and the user fees from public enterprise have been financialized. That is, whereas property taxes used to finance about three-quarters of state and local budgets back in 1930, today they supply only about a sixth. The shrinkage has not been passed on to homeowners and renters or commercial users. Prices for homes and office buildings are set by the marketplace. The rise in market price has been pledged to bankers as mortgage interest. The financial sector thus has replaced government as recipient of the economic surplus – leaving the public sector starved of cash.

The financial sector also has replaced the government as economic planner. This role has followed from its monopoly in credit creation, which turns out to be the key to resource allocation.

Bank credit is created freely. Governments could do the same. Indeed, this is what the U.S. Treasury did during America’s Civil War, when it issued greenback credit.

If today’s looming economic depression is a manmade (that is, lobbyist-financed) phenomenon, then what policy is needed as a remedy?

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) He can be reached via his website, mh@michael-hudson. com

Crisis 'has hit China's economy'

Chinese Premier Wen Jiabao described how his country was tackling the financial crisis

The global financial crisis has had "a rather big impact" on China's economy, the country's Premier Wen Jiabao said in a major World Economic Forum speech.

Speaking in Davos in Switzerland, he said the crisis had placed the world economy in the most difficult situation since the Great Depression.

In China, he said, there was rising unemployment in rural areas and "downward pressure on economic growth".

But he added that China's economy was in good shape "on the whole".

Mr Wen said that among the reasons behind the current global downturn were "inappropriate macro economic policies in some economies, characterised by [a] low savings rate and high consumption".

He also pointed to a "failure of financial supervision and regulation to keep up with innovation which allowed financial derivatives to spread".

'Downward pressure'

China's economy grew by 9% in 2008, but only by 6.8% in the final quarter of the year, as overseas demand for China's exports shrank.

"The Chinese economy is now under mounting downward pressure," said Premier Wen Jiabao.

We are full of confidence

China's Premier Wen Jiabao

"We are targeting a growth rare of about 8% in 2009. It will be a tall order, but I hold the conviction that through hard work, we can reach the goal."

As the demand for China's exports shrinks, he said that as part of relaunching the economy, the country had to focus now on expanding domestic consumer demand.

There would also be a sustained package of measures aimed at increasing economic growth, as well as a series of policy measures in the financial sector to boost economic growth.

New technology

In addition, there would be industrial restructuring - with the phasing out of backward production practices - and particular attention would be paid to the key industries of cars, iron and steel.

An "extensive use of new technology would increase competitiveness", as would an upgrading of science and technology, he said.

"Will China's economy continue to grow fast and steady? Some people may have doubts about it, yet I can give you a definite answer," he said.

"Yes, it will, we are full of confidence."

He said China would "take prompt, forceful and effective measures" to ensure the health of its economy.

Source BBC News

Crisis of Neo-liberalism- Keynesianism no Answer

The Great Depression of the 1930s was finally pulled out of its crisis after World War II together with Keynesian formulas of state intervention nationalization) and the welfare state. In those days it also had to contend with a powerful socialist camp. But with the temporary collapse of socialism worldwide and the retreat of national liberation movements and a persisting economic crisis since the mid-1970s, the neo-liberal formulas were pushed to the fore.

Reaganism,Thatcherism, et al became the fashion and Keynesianism, nationalization were much ridiculed, not to mention the socialist alternative. The 1990s saw neo-liberal economic polices peak where the market was the new god that determines everything.

Fortunes were made on a scale never seen in the history of capitalism; of course, in the wake of immense impoverisation, with the rich-poor gap also becoming the widest ever.

It was even portrayed as “the end of history”, as though the ‘golden’ capitalist era is here for ever and socialism relegated only to history text books. Even welfare was now privatized with a massive mushrooming of NGOs funded by the moneybags and the state.

Growth rates grew compared to the era of the 1970s and that became the irreversible
alibi for the neo-liberal theoreticians. And with it was accompanied the gigantic leaps in communication technology in the form of the computer, internet, cell phone, TV, etc that gave it the glamour of a scientific inevitability. The high profile media portrayed none of the misery below the surface and only promoted the world of wealth and glamour.

The middle class was brainwashed with this continuous bombardment, and a section even got an opportunity to eat off some crumbs from the imperialist/comprador table. The smallest dissidence was labeled ‘terrorist’ and callously dispensed with. Once so branded, one ceased to be human, it was as though a dangerous insect had been crushed. The poverty stricken masses too were a nonentity in this make-believe world.

But now the fantasy world of the neoliberal bubble has burst; and burst in a way that it is unlikely to re-gain for long. Meanwhile it will pull down with it millions more into the mire and suck away lives in lakhs. With one financial bubble after the other bursting the theoreticians of neoliberalism have no answers and seem totally helpless in the face of the continuing collapse of pillar after illar of the financial establishment. The gods of power and wealth are tumbling down.

All these crisies and bursting of bubbles since the 1970s are, at its roots, crises of over-production. Due to levels of extreme exploitation, markets for commodities have scarcely grown while profits and capital accumulation have skyrocketed.

This is clear even from the Fortune 500 listings each year which show negligible growth in sales. So, the accumulated profits has no outlet in industry and the manufacturing sectors. That is why much of the accumulated surplus has gone into the financial sector -in the form of third world debt, and then into speculation and real estate, creating the bubble economies.

They have just their standard fiscal answers — reduction of interest rates is their main tool: to increase liquidity (i.e. money for capitalists) and make available easy credit for the people to spend and revive the slumping market. But it is not working. On Oct 9th, for the first time ever several Central Banks acted in concert to stem the market panic. The US Fed cut interest rates by 50 basic points to 1.5%; while the European Central Bank cut interest rates from 4.25% to 3.75%. The Bank of England and the Central banks of Canada, Sweden, Switzerland and China also cut interest rates within seconds of each other.

But this was not able to stem the rot. The collapse of the banks, financial institutions and now even the industrial giants continue. Interest rates were reduced further and now in the US the rate stands at 1% and in Japan at 0.2%. On Nov 6th England once again slashed interest rates, this time by as much as 1.5% to bring it to 3% — a 53-year low.

In desperation they have thrown all their neo-liberal theories to the winds and governments have intervened with gigantic bail-our packages to rescue the banks, investment institutions and even companies. This is defacto resorting to the much abused ‘nationalization’. As long as they were making huge profits, privatization was the mantra; now when they are making losses and are in fact collapsing it is back to nationalization.

But this Keynesian alternative is no real solution; it is a mere palliative to give immediate relief. The social democrats and the CPI/CPM type socialists may harp on these alternatives but they will have to explain the earlier failures of the Keynesian model of the 1960s resulting in the crisis which began in the 1970s, and still continues. Also they will have to explain the collapse of the Soviet Union (after capitalist restoration) and those of the then East European countries — all of which were built on a powerful state sector.

The present crisis which is reminiscent of the Great depression is a systemic problem of the capitalist mode of production itself. The roots of the crisis lie in the capitalist system itself for which there is no solution within it. The only real solution to revive the economy is through the very overthrow of the system and its replacement with the socialist alternative.

Extract from Article in Peoples Truth India No 4 - Voice of the Indian Revolution

Crisis - the Over Accumulation of Capital by Brendan M Cooney

We can’t understand anything in isolation. We only understand things by comparing them to something else. If we are to understand why a capitalist economy goes into crisis we need to compare capitalism to something outside itself. Through such a comparison we can begin to see what is distinctive about capitalist crisis.

In order to make the most striking comparison, here we will use the example of a primitive hunter-gatherer society. The economic life of these early societies were extremely simple because there was no differentiation of work activities. Labor was a collective effort in which everyone participated to the best of their ability. The products of that labor were shared amongst the community according to need. The economic structure of these early primitive-gatherer societies was a large undifferentiated whole. There was no possibility of internal economic crisis because there were no internal parts that could be in conflict with each other or get out of synch.

Economic crisis, then, was external. Drought, cold, fire, disease, predators…. The brutal forces of nature had their way with early man. It was this opposition between man and nature that defined life for early man.

Fast forward a few millennium…

Capitalism could be seen as the polar opposite of this. Our vast productive abilities have enabled us, for the most part, to be free of this opposition with the natural world. By producing a social surplus, we can store up goods to feed us in times of drought, to shelter us from the ravages of storm and cold. This tremendous productive ability is accompanied by a tremendous differentiation of economic activity into separate parts- millions of different productive units (workers, companies, banks, governments) all coordinated through capitalist markets. When crisis hits a capitalist society it is not because of some external shock, but because something has gone awry internally. The mechanism by which all these different labors are coordinated has broken down. Crisis in a capitalist society is not a matter of man versus nature but of man versus himself. We might even say that the external conflict has been internalized.

How are all of the different productive activities of a capitalist society coordinated? Rather than sharing in one collective laboring effort like in a hunger-gatherer society, capitalist production is separated into millions of separate labor processes all coordinated through the exchange of commodities. By exchanging commodities in the marketplace the labor of tomato pickers, car makers, hair stylists and coal miners is coordinated. The private labors of these individual labor processes (tomato pickers, car makers, hair stylists and coal miners) each make up just one small part of the total labor process of society. Their labors are represented in the form of commodities. What at first glance appears to be just physical objects exchanging with one another is actually a complicated process whereby the various components of a social labor process are brought together. Karl Marx remarked about this process that, “Material relations between people become social relations between things.” That is, commodities become representations of these tiny parts of the collective labor process.

Value

Commodity exchange implies a notion of value. While in previous eras people labored in order to make things for themselves, capitalist production means working in order to make commodities to sell. Commodities don’t just have a subjective value to the people who use them (a use-value). They also have an objective value, their exchange-value, which expresses their value relative to all other commodities. (We don’t just worry about whether or not we want a commodity; we also worry about how much it is worth relative to other commodities). Value expresses the amount of labor represented by a commodity. It is through this exchange of values in the market that all of the different parts of the social labor process are coordinated. We measure value in money.

So the social relations between people in a capitalist society are regulated by commodity exchanges. And commodity exchange is organized around values. “Value”, in the economic sense, is a very peculiar concept, unique to capitalism. Value is produced by the private concrete labor of an individual worker or group of workers. Yet this labor only has value to the extent that it is part of a larger social labor process happening all over the world. Through exchange the value of my individual labor is measured against the value of everyone’s labor. When we say that crisis in internal to capitalism we mean that something has gone awry with the way value regulates this commodity exchange.

Accumulation and Overaccumulation

[Money is also a very peculiar thing. We use money to measure value. It helps us exchange one commodity for another (C-M-C). In capitalism another use of money also becomes possible- M-C-M: A capitalist begins the day with money (M). (S)he sets this money in motion producing commodities (C) to sell. At the end of the day (s)he has more money (M). Whether a capitalist invests directly in production or loans money out as credit they are engaging in M-C-M. Thus the total amount of value in society is constantly expanding.]

Money is also a very peculiar thing. We use money to measure value. This allows money to act as an intermediate stage in the exchange of commodities: rather than directly bartering I sell a commodity for money and then use that money to buy a different commodity. But the opposite can also happen: I can spend money on the production of commodities and then sell those commodities for money. It only makes sense to do this if I end up with more money. This is exactly what capitalists do all day long. They turn their money into more money by investing in production (or loaning money). When capitalists accumulate more money they are accumulating more value. Thus the total amount of value in society is constantly expanding.

In previous societies the rich were primarily concerned with accumulating specific things (use-values): land, subjects, riches, etc. In a capitalist society it is money itself, as the representation of abstract human labor, that is the goal of accumulation. Instead of pursuing particular qualities of commodities the capitalist is interested in gaining greater quantities of the same thing: money. Because humans can always work more, always produce more value, there is no limit to the amount of value that a capitalist can accumulate.

Eventually Genghis Kahn would have run out of desert to conquer. Pizarro could only steal so many riches from the Incas. The Pharaoh could only build so many pyramids. But the capitalist can grow and grow, seemingly without limit. Hence the amazing, dynamic trajectory of capitals growth- a system that in a few hundred years has conquered the globe, revolutionized the lives of everyone on it, destroying old societies and creating new ones out of their ashes… always getting bigger.

Because there is no limit to the amount of value that can be created the only thing the capitalist worries about is where to invest to make more money. As long as money can be turned into more money the economy is in good shape. But if there is ever a reason why money can’t find profitable investments we are in trouble. When money can’t be turned in to more money the Crisis! sirens go off on Wall Street. Capital freezes in all the stages of it’s circuits and economic activity grinds to a halt. The only solution is to devalue capital: to sell off excess commodities at discounts, to close factories, fire workers, write down assets, foreclose on mortgages, etc. When capitalist accumulation overreaches its own ability to grow it has no choice but a violent purging of value from the system. This is what a crisis is.

Nowadays we talk a lot about the external, ecological limit to capitalist growth. But value theory is interested in a different limit- an internal limit lodged in the very heart of capitalist accumulation. When the accumulation of value hits a limit it appears as a crisis of over-accumulation: an excess of capital that can’t find profitable investments. This manifests itself as idle factories, factories with excess capacity, shelves of unsold commodities or partially finished commodities, unemployed workers, debt which can’t be paid, devalued real estate, etc. Value theory argues that the same process whereby value is accumulated generates its own limits. Let’s take a closer look as to how this happens.

Labor and Capital

In order for a capitalist to turn his money into more money there must be a commodity which is capable of creating more value than it costs. This commodity is, of course, human labor. The amount of money paid to workers in wages has nothing to do with the amount of value they produce. These are two entirely distinct quantities of value. (We often refer to this as the difference between the use-value and exchange-value of labor power. The use-value is the capacity for creating value and the exchange-value is the cost of reproducing the worker.) The more labor a capitalist gets out of his workers relative to their wages, the more surplus value the capitalist makes, the more profit he makes, the more the economy grows.

This means that there is a fundamental antagonism between the interests of capitalists and workers. The more surplus value the capitalist extracts from his workers the better he is at being a capitalist. The better the working class can resist this exploitation the more they defend their own interests. This antagonism lies at the very heart of the way value is created in a capitalist society. Let’s look then at how this antagonism generates limits to accumulation.

Though labor and capital are antagonistic they are also mutually dependent. Without capital workers wouldn’t have jobs. Without labor capital wouldn’t be able to turn itself into more value. When workers become too powerful they can demand higher wages from capital which means less profits. So capital looks for ways to free itself of its dependence on workers. The name for this is “efficiency.”

That sounds like a weird definition of efficiency but this is precisely what lies behind the capitalist obsession with efficiency. When the labor process becomes more efficient it means that the same task can be done with less labor. It also causes much of the labor process to be simplified, meaning that jobs require less skill and lower wages. This all makes workers easily replaceable and makes capital less dependent on labor. Capital can lay off workers or pay them less and workers have less power to resist.

More efficient production also allows capitalists to out compete their rivals. Since prices are set by the average productivity of labor, if a capitalist can cause their workers to be more productive than other firms then they can take advantage of this difference between their firms productivity and average productivity to make extra profit.

But as much as capital may try to free itself from labor it is always ultimately dependent on labor to produce value. So there is a real and dangerous contradiction between the dependency on labor to create value and capital’s drive to rid itself of this dependency. It is this antagonism which creates the crisis of overaccumulation: capital goes looking for profit and can’t find enough places to make profit because it has annihilated its own ability to create value.

Let’s look a little more concretely at how this happens.

Machines

Since it’s emergence on the historical stage capitalism has displayed a remarkable ability to innovate. Vast revolutions in our technological abilities, from transportation to communication to production, have created revolutions in every aspect of our lives, altering even the ways we experience space and time. The primary drive in all of this has been to decrease the amount of time required to produce a commodity. Yet while such technological revolutions have often triggered enormous economic booms they have also eventually destabilized value relations and opened the door for crisis. We have to remember that anytime we increase the efficiency of the labor process this means that the product represents less value.

When workers are replaced by machines this means less labor input per commodity… which means less value per commodity. If just one capitalist does this he can produce commodities more efficiently than the social average thus turning the difference into excess profits. But this encourages other capitalists to follow in search of these same excess profits. Once they all introduce more machines into their labor process a lower average productivity is reached and the prices of commodities fall. But the expense of making a commodity has gone up due to the cost of adding new machines. This can manifest itself as a falling rate of profit. (See video on falling rate of profit.) When profit rates fall this means that capital can’t find profitable places to invest. Money can’t be turned into more money fast enough. The circuit if capital (MCM) grinds to a halt.

Fixed Capital

The worker finds himself surrounded by an increasingly complex array of machinery all designed to purge human labor from the production process. Capital finds itself entangled in larger and larger investments in machines while the value of their commodities keeps falling. But what if the price of machines are falling as well? If new machines are constantly being purchased at cheaper prices this could stabilize profit rates in the long run.

But much of the machinery in a capitalist society is built to stay around for a long time. Auto factories, oil refineries, steel plants, gas pipelines, etc. all entail large start-up costs and years of construction. It takes these investments many years, perhaps even decades to pay off these initial start-up costs. We call these machines that stick around for a long time “fixed capital.” Fixed capital introduces all sorts of complications into value relations. Capitalists are committed to the use of fixed capital, to a certain level of efficiency, for some time even if the value relations around them are changing. For instance, if you build a factory for a million dollars in 2000 that has a maximum capacity of producing a thousand widgets a year… and then your competitors all build factories in 2005 that cost half as much to build but produce more widgets… you are screwed because now you have to sell your widgets at a loss. And you can’t just go buy a new factory because you still haven’t paid off the old one.

The current problem in the US auto-industry is a perfect example of this problem. The US auto-industry dominated world markets after World War II. But as the Japanese and German economies began to revive they built more efficient factories with new, cheaper fixed capital. (The costs of these fixed capital inputs had fallen over the years.) The Germans and Japanese began to produce cars more cheaply and undercut American car production. This sort of competition effectively devalued the existing stock of fixed capital in the US, yet the US couldn’t just abandon its factories and build new cheaper ones because it still hadn’t recouped the costs of its initial fixed capital investments! This led to the economic crisis of the 70’s in which Nixon had to devalue the dollar in order to make US commodities more competitive in global markets. (This is all a huge oversimplification.)

The US auto-industry found itself with an overaccumulation of fixed capital that could no longer produce enough value to stay competitive in the world market. This particular overaccumulation manifested itself as excess capacity, but overaccumulation can take a variety of forms. In our current crisis we can see many different types of overaccumulation. Retail sales are down and commodities are bunching up in warehouses. Industries are struggling to shed themselves of excess capacity by closing factories and firing workers. The ranks of the unemployed grow by the tens of thousands every month. Real estate is over-valued. There is an excess of credit unable to be paid off. In all these cases there is too much capital stuck somewhere in the circuit of capital, unable to move to the next stage.

Devalue

In all these instances the solution to overaccumulation is devaluation. By reducing the prices of commodities, closing factories, firing workers, cutting wages and benefits, writing down debts and slashing real estate values capitalism can devalue capital in all of its stages. This process of devaluation- this violent purging of the system is the necessary antidote to the problem of overaccumulation. This is what a crisis is- a drastic process of devaluation.

Though devaluation will drive many capitalists out of business, some will survive. Those that do survive come out on top. They are able to buy up the assets of their competitors at devalued prices as we have recently seen Bank of America do. Crisis is often a time of massive capital consolidation.

In a crisis the capitalist class battles over who will absorb the brunt of devaluation. Will it be the banks and credit agencies that finance production? Will it be the productive capitalists who drove down profit rates with their fixed capital and excess capacity? Or will devaluation be displaced geographically?

One of the most common strategies for devaluing capital is to devalue the currency. This devalues all capital relative to other countries making a country’s commodities more competitive on foreign markets. Devaluation of the currency effectively socializes the costs of devaluation meaning that all commodities, capital and labor are devalued. When Nixon devalued the dollar in 1971 this made all US commodities cheaper and better able to compete against the Germans and Japanese. But the long term effect of this was to trigger a long process of competitive devaluations as different currencies adjusted relative to other currencies all trying to shift the burden of devaluation onto some other country. The Asian financial crisis of 1997 showed us how reckless and destructive this strategy can become. It will be interesting to see how the process of competitive devaluation plays out in the current economic crisis. Who will be forced to bear the brunt of devaluation? What political alliances and battles will form out of this global conflict over devaluation?

Another strategy is to postpone devaluation in time through the use of credit. This has been a major strategy for displacing crisis since the 70’s. When profitable investments can’t be found in production capitalists can pour their money into loans, mortgages, hedge funds, etc. This creates the illusion that their money is still in motion, that it is still generating more value. But a lot of time this just means that debt is just being passed from capitalist to capitalist… This can create enormous bubbles of credit values not backed by any real value at all. (see my video “What is Credit?”) The insane over-investment in credit markets (accompanied by an insanely low rate of interest) before the recent bubble burst is evidence of the lack of real actual profitable investments in the global economy relative to the amount of capital needing to be invested.

Conclusion

When we say that crisis is internal to capitalism this means several things. It means that the method by which all of the laborers of a capitalist society are coordinated, value, creates antagonisms that destroy that very coordination. Value as a coordinating mechanism spawns class antagonism between a capitalist class that exists to appropriate this value and and a working class that must be exploited if capitalist accumulation is to take place. And this class antagonism is reflected in the antagonism between man and machine- the conflict that drives accumulation forward toward its own destruction.

Capitalism is a system rife with such dynamic, explosive internal antagonisms. What else could explain the cycles of boom and bust that have rocked capitalism since its inception? When we say that crisis is internal to the structure of capitalist social relations we mean that the very way our social relations are structured are dangerously unstable. While the mainstream political discourse debates which capitals to devalue and how to initiate the next boom phase we must remember that a true solution to capitalist crisis is to redraw the basic mechanisms of these social relations. If we can’t understand capitalist crisis without comparing it to something outside of itself we also can’t solve capitalist crisis by confining our logic to the internal logic of the system. We must appeal to a future stage of history: an organization of social relations without accumulation based on exploitation.

Brendan M Cooney

Bibliography:

Das Kapital- Karl Marx
Limits to Capital- David Harvey
“Turbulence in the World Economy” by David McNally in the Monthly Review; June 1999 (http://www.monthlyreview.org/699mcnal.htm)
I also recommend the following series of papers/lectures:
http://akliman.squarespace.com/crisis-intervention

Neo Liberalism's intellectual edifice by Gunnar Tomasson

Picture Paul Samuelson

Dear Mr. Dionne,

Re. the following from your column in today's Washington Post:

In [a certain] respect, at least, Obama is rather like Franklin D. Roosevelt, who dismissed the conservative economic doctrines of the 1920s. “We must lay hold of the fact that economic laws are not made by nature,” Roosevelt said, directly countering the central premise of orthodox economics. “They are made by human beings.”

Comments.

I. In the opening section of a recent paper on Iceland ’s economic collapse I traced the precise source of this "central premise of orthodox economics" to Paul A. Samuelson’s Ph. D. thesis at Harvard in 1942:

Neoliberalism' s ‘intellectual edifice’

The disaster which befell the national economy in early October had long been foreseeable. It reflected the collapse of the business model of the Icelandic commercial banks following their privatization, on the one hand, and the inadequacy of the concurrent economic policies of the government, on the other hand. The business and economic policy practices involved were not specifically Icelandic but mirrored the ideological prescriptions of which former Chairman of the US Federal Reserve Board Alan Greenspan, spoke before a congressional committee two weeks later as follows: "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief.” As for the presupposition of all mainstream economics that automatic corrective forces ensure financial market equilibrium, Greenspan said: “The whole intellectual edifice collapsed in the summer of last year.”

“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Greenspan confessed. “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.” The committee chairman sought clarification of the matter: “In other words, you found that your view of the world, your ideology, was not right, it was not working,” “Absolutely, precisely,” Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

Greenspan’s ideology is labeled The Washington Consensus because it has shaped the views of the principal institutions in the field of monetary and economic issues in Washington D.C. , including the International Monetary Fund (IMF). In the wake of the privatization of the banking system, the Central Bank of Iceland, the Ministry of Finance and the Financial Supervisory Authority were guided by Greenspan’s ideology. And they were not alone in this for as John Maynard Keynes, the foremost economist of the last century, observed, “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men ... are usually the slaves of some defunct economist.”

Keynes wrote this at the end of his best-known work, General Theory (1936), but in a preface to Tract on Monetary Reform (1924, a book dedicated “without permission” to the Bank of England’s Court of Directors ) he had expressed his disagreement with the view that bankers could not understand the business of banking. Instead, the problem was – and, as indicated by Greenspan's ”shocked disbelief”, still remains – that theoretical economists have not had anything sensible to say on the subject matter. Since 1976, as it happens, this writer has repeatedly drawn attention to the flaw which shocked Greenspan 32 years later. At the time I was doing research in connection with a Ph. D. thesis at Harvard University while working as an economist at the IMF. My drawing attention to the flaw was not well received, to put it mildly. My adviser, the Chairman of the Harvard Economics Department, chose to withdraw from that role and colleagues at the IMF were not amused for, as a very senior official put it: “Mr Tómasson thinks he is right and the world is wrong.”

Four weeks before Greenspan’s appearance before the committee, Fréttablaðið published an article by me on the flaw in question (‘Crisis in economics’, Sept. 25). Since it addresses the root cause of ongoing problems in world monetary and economic affairs as well as that of Iceland ’s economic disaster, my article’s key point bears repeating now:

The flaw resides in an innocent-looking hypothesis which Paul A. Samuelson advanced in a 1942 Ph. D. thesis at Harvard expressly for the purpose of paving the way for use of algebra and calculus in the analysis of theoretical economic models. It reads as follows: A market economy is a “system in 'stable’ equilibrium or motion”. Embedded here is the idea that any incipient displacement of the conditions of market equilibrium triggers offsetting corrective reactions by the forces which drive the market system along its path of dynamic equilibrium. This notion is borrowed from Newtonian mechanics in which gravity is held to steer the path of all material particles in the universe.

Samuelson’s hypothesis is no worse than much else which academic scholars can imagine and it was benign while ensconced within academe’s ivory tower. Also, it is fair surmise that the hypothesis would not have passed muster had it occurred to anyone that it would be taken seriously by the world’s monetary authorities after 1970. For it implies that national and world monetary equilibrium is certain to be ensured if the world's governments and central banks step aside to make way for the equilibrium which the hypothesis holds to reside in market forces. Now that many national monetary systems and that of the world as a whole are in turmoil, it can no longer be denied that the hypothesis is counter-factual.

Indeed, it is self-evident that ’laws of nature’ differ from regulations established by national and international authorities in light of their best judgment at any given time. Still, Iceland’s Minister of Finance viewed government intervention in the decision-making of the country’s banks as ill-advised because they were operated by experts. Iceland ’s monetary authorities may not have heard of Samuelson's hypothesis, yet it is reflected in their worldview.

II. I commented on the dire real-world implications of this “central premise of orthodox economics” in a Letter to the Editor of the Washington Post on September 20, 2008 as follows:

Your Sept. 20 editorial ('Day of Reckoning') refers to "greedy Wall Street executives and the inattentive Washington regulators who enabled them to build what we now know was a financial house of cards.”

As a former senior IMF staff member (1966-1989) and critic of mainstream economics and The Washington Consensus, I have long viewed post-Bretton Woods world monetary arrangements as fatally flawed. In this respect, John Maynard Keynes cautioned: “Soon or late, it is ideas, not vested interests, which are dangerous for good or evil."
One such idea is Paul A. Samuelson's “hypothesis that [a real-world market] system is in “stable” equilibrium or motion.” (Foundations of Economics, p. 5) For, when applied to policy-making, it implies that monetary stability is best served by the IMF, governments, and regulatory institutions getting out of the way of self-correcting market forces.
In fact, it is not rocket science to figure out that an ever-increasing ratio of world paper 'wealth' to real output is unsustainable. But, once the inevitable happens, those in authority will feign surprise and assert it could not have been forseen. In late 1996, therefore, I advised Fed Governor Laurence Meyer, inter alia, as follows:
“It is fair surmise that macro-economic forecasting models predicated on mainstream monetary thought, which have detected no signs of a global crisis during the rapid rise in the ratio of paper wealth to real output during the past quarter century, are once again setting policy-makers up for a nasty “surprise”.”
Also, in early 1997 I wrote to Professor Patrick Minford, economic adviser to Margaret Thatcher, concluding with respect to post-Bretton Woods world monetary arrangements that “[This] house of cards is certain to come crashing down."
III. A refresher economics course for President Obama’s brilliant economic team is in order.

Sincerely yours,

Gunnar Tomasson

The Global Capitalist Crisis and India: Time to Start the Discussion

by Analytical Monthly Review

We have not yet seen the start of an adequate discussion of the consequences for India of the global capitalist crisis. We cannot in these few pages correct that inadequacy, but perhaps can suggest some reasons why the discussion has been inadequate, and some lines along which the discussion might usefully develop. The decline of political economy as the central tool of analysis, above all in the mass media but even among the left, is most to blame. The “reform” of the last decades had seen a deformation of economic discourse, with discussion frequently reduced to imbecilities about the rise in aggregate growth rates and a hypnotic stunned fixation on the apparently inexorable rise in Sensex stock exchange index numbers. Those who were paid to beat the ideological drum in the business press have been left stranded and exposed by the events of the last months, their few pet arguments in ruins. Some of that rubble remains to be cleared away, if a useful discussion is to start.

To restore a proper perspective we need to focus on growth rates, since they occupy what space has been given to date to discussion on the consequences of the world capitalist crisis. More than 70% of the total population of India is rural. In 1990-91 GDP composition by sector showed agriculture with around 32%, the industry sector with 27%, and the services sector with 41%. In 2007-08 it is 17.8% from agriculture, 19.4 from industry and 62.9% from service — which include construction, trade, hotels and restaurants, transport, storage and communications, finance, insurance, real estate and business services, community, social and personal services. The growth rate of these sectors from 2001 to 2008 is respectively 2.8 for agriculture, 7.1 for industry, and 9.0 for services, with the highest growth rates in services to be found in finance and finance–related sectors. Thus a primary force of the supposed high growth has come from the opening of the Indian economy to the vast financial bubble generated by the rulers of the United States (see John Bellamy Foster and Fred Magdoff, Financial Implosion and Stagnation: Back to the Real Economy” ( For this article scroll down this page)

These much-publicised high growth rates of the last several years have been largely irrelevant to the majority of the population.

A recent World Bank report finds that 42 percent of the population, or 456 million people, are living below the official — and criminally low — poverty lines. Of course it is not the case that all the growth of the last few years is the result of the financial explosion and the penetration of U.S. global finance capital. There has been increased productivity from technological progress, continuing infrastructure development, and growth in IT to some degree represents activity useful to humans irrespective of what social system predominates. But from what we have seen of the relevant research, the historical growth rates predating the “reforms” approximate what growth has occurred in the real economy, and the recent upward deviation from the mean is largely accounted for by growth in finance and finance-related sectors.

Yet the diseased growth spreading from the financial sector has not been without consequences. A significant sector of comparatively well paid and high-consuming small property owners has been created, linked to global financial circuits but contributing little or nothing to the real economy — beyond the construction of multistoried air-conditioned palatial apartment blocks that overlook hectares of crumbling huts and slums. And as has always marked the progress of global monopoly finance capital, this period has seen the benefits of all growth, both in the real economy and in the finance-related sectors, accrue primarily to the rich, with an enormous increase in the already existing severe inequality. In March, Forbes magazine reported that the number of billionaires had increased to 53 and their combined wealth was equal to 31 percent of the country’s GDP. As these billionaires have multiplied, lakhs of farmers committed suicide in the country, the employment rate declined, the pre-”reform” rate of decrease in the poverty rates — even according to official estimates — declined, children remained malnourished and millions died of curable diseases. Only within this context should we approach the discussion of the effect of the world capitalist crisis on growth rates.

Every day now brings new revisions downward of the expected growth rates for the coming months and years. The repeated announcement by the now departed Finance Minister and the Prime Minister that the impact of the world financial crisis is going to be insignificant is already a curious memory of the past. And given what we know of the finance-related contribution to recent growth rates, a sharp decline is indeed inevitable — and the only reason that it will not be more severe is that Chidambaram’s aggressive privatisation program for the finance sector was effectively resisted. It is evident to all now that the private finance sector is in deep trouble, while the state banking sector stands firm. Growth in the real economy has also ceased. The Index of Industrial Production (IIP) has been slowing for months, and in October recorded its first year-on-year decline since April 1993, dropping 0.4% compared to October 2007. The manufacturing component of the IIP fell yet more sharply, by 1.2%. November shall be worse, as it is already announced that passenger car sales declined 19% in that month. The IIP decline was offset by an increase in the mining sector, an offset that is unlikely to continue given the global collapse in mining. Insofar as finance-sector explosion led to increased real economy activity by bolstering the effective demand of the new high-consuming (and creditworthy) strata via credit expansion, to at least the same degree the contraction of credit contracts their demand and the real economy. In October the decline in manufacturing was led by a three percent drop in consumer durables. It is clear that an industrial pullback is now under way, and certain that growth in the economy as a whole shall sharply decrease.

The 1991 “reforms” led to the “Washington Consensus” expansion of the export sector, with results that exaggerate the effect of the global capitalist crisis. India’s trade to GDP ratio increased from 15 percent to 34.8 percent between 1990 and 2007. Exports have grown at an average annual rate of 23 percent (in dollar terms) since 2002-03. In October, for the first time in five years, exports fell year-on-year. October exports were 12 percent lower than the corresponding month of 2007. Severe job cuts have been reported in the textile sector, which employs 3.5 crore workers. There have been 7 lakh job losses reported by November, with speculation of as many more by January. And of course the young “globalised” IT sector is very exposed.
Girish Mishra reported a finding of the Economic Times:

“In India, around 60 percent of the companies operating in the IT-BPO sector have been working for American financial corporations like Goldman Sachs, Washington Mutual, Citigroup, Bank of America, Morgan Stanley and Lehman Brothers. Tata Consultancy Services and Satyam Computers have been working for Merrill Lynch, and Wipro has a number of American corporations as its clients that are bruised by the present collapse.” Mishra added: “It is anybody’s guess that layoffs are certain to take place in Bangalore, Hyderabad, Chennai, Gurgaon, Noida, etc.”
The Economic Times predicted, according to Mishra, that “around 2.3 million young and energetic people working in India’s information technology and BPO” would be left jobless by the financial crisis.

As for the most immediate effect of the global capitalist crisis, nothing compares to the outflow of foreign institutional investment from the equity market. Over the financial year 2007-08, net FII investment inflows into India amounted to $20.3 billion. Since July, FIIs have pulled out more than $12.5 billion so far and the rupee has fallen by 20 percent. The Sensex index, which in its rise from the 4,000 range in 2002-3 to over 20,000 at the start of 2008 produced both endless ecstatic drivel in the business press and a flood of FII, has tumbled down to the 9,000 range as we write. The WEF-CII report, released ahead of the India Economic Summit that began on 16 November, said that “India’s dependence on capital flows to finance its current account deficit is a macroeconomic risk and the global crisis could generate a sharp increase in capital outflows and a reduction in the availability of finance.” In summary, as the winter of 2008 begins we are faced with a widening current account deficit, depleting foreign exchange reserves, depreciation of the rupee, the emergence of a balance of payment problem, credit crunch, and an accellerating contraction in industrial production.

It is surely appropriate that this moment should see the departure from the Finance Ministry of Chidambaram, as the “Washington Consensus” policies that he attempted to impose on the Indian economy suffer a total squalid collapse. Such protections as India has from the global credit implosion lie precisely in those remaining capital market and currency controls that Chidambaram sought relentlessly to destroy. Dishonest to the end, in his last weeks as Finance Minister Chidambaram tried to deny the evidence of the approaching contraction as shown by the negative trend of the Index of Industrial Production.

As Amiya Kumar Bagchi said in an interview with Radical Notes, “it is disingenuous of the Finance Minister to call the IIP ‘not very reliable’ when his government has done so much to massage the official statistics so as to produce a favourable picture of its performance in the economic field”.

Already Chidambaram’s programme for further financial sector “reform” is but a bad memory. The Government hints at different packages to arrest the slowdown of the economy, including the increase of public expenditure and public debt. The different parties propose strict controls for the financial sector, reversing those financial sector “reforms” put into effect. No one defends the “Washington Consensus” policies that have produced the disaster, but as yet no one is questioning their cornerstone: the focus on exports, foreign capital and technology, and 10-15% of the population as “modern” consumers. The business press has been reduced to babbling, and is taken by surprise and shocked by each new piece of economic news, even when it is no more than a continuation of a marked trend. The old religion, as set out by U.S. Treasury Secretary Paulson in Beijing in March, 2007 (”[a]n open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention”), is dead. But the discussion of the path of planning and democratic socialist management has not yet come to life. We suggest this impasse is in part due to the clear necessity that any such programme must first address the unfinished business of Indian Independence, the failure to carry out the agrarian revolution in the countryside, where to this day most people live.

And when the discussion does begin, it must take as its subject matter more than economics or politics in isolation, but political economy. From the perspective of political economy there has been a single overarching process at work, the subjugation of India by world imperialist capital — a global capital market dominated by the United States — with interrelated consequences in the economy, international relations, domestic politics, and culture, including intellectual discourse. British colonialism successfully relied for generations upon a broad base of (often tacit or even disguised) cooperation and support in the possessing classes, including the Congress leadership.

Only with its global crisis in World War Two could colonial hegemony be shaken and Independence become possible. Today the hegemony of imperial capital in India is at least parallel in power and sources of support, but its global crisis also opens the possibility for carrying forward the aborted promise of Independence: revolutionary change in the countryside and self-determination for the great majority.