Capitalism in crisis: world economy heading for turbulent times 

Matt Dobson

This article was written before the invasion of Ukraine by Putin’s regime, which will add further economic turmoil for global capitalism.

After the economic of collapse of 2020 there was a bounce back in growth in 2021. Yet with the institutions of world capitalism forecasting slower growth this year, there are major problems ahead for the ruling class.

Rising inflation, sluggish growth, supply chain crises, clashes between the US and China and demands from workers for wage increases to at least keep pace with inflation, all point to 2022 being a year of turmoil for world capitalism.

Only 16% of those attending the elite Davos World Economic Forum view the global economic outlook as positive, reflecting a mood of gloom among the capitalist class.

World Bank projections for growth have now been downgraded to 4.1%. This follows on from the inevitable rebound of 5.5% in 2021, which came in the wake of the colossal economic slump of 2020.

Shallow, limited growth has been confined to advanced capitalist states and China. Across Asia, Africa and Latin America a depressionary slump causes social horrors which will have major revolutionary consequences affecting the whole world.

The World Bank highlight a “reversal in development” with indebted neocolonial countries owing 12% more in 2020, a colossal $860 billion, to the advanced capitalist countries and China.

The UK has been among the most sluggish of major capitalist states. The 0.9% growth in November 2020 – which saw the UK economy nudge past pre-pandemic levels – may bring relief to commentators but this was before the Omicron variant hit which, along with the highest inflation rate since 1982 and a multi-fronted cost of living crisis and mounting debt, blackens the horizon for British capitalism.

Thirteen year crisis

Globally, capitalism has been in crisis for thirteen years, with only minor upswings since the 2007/08 financial crash. The debt crisis of states, banks and corporations has only escalated.

Added to this are new structural problems often created or exacerbated by the emergency action – often through state intervention – taken by the ruling class to save their rotten system.

These include supply chain disruption, stagflation and inflation, trade wars and protectionism and a constant danger of a lack of demand once production recovers as the living standards of the working class are under constant attack.

One of the most important developments of the past period has been growing class polarisation, reflected in revolutionary and counter revolutionary features.

Oligarchic capitalism that leads to unprecedented inequality, economic dislocation and climate destruction is driving mass movements around the world.

The wealth of billionaires globally increased to $13 trillion during the pandemic. US bosses saw their widest profit margins in 70 years last autumn, while the average American worker saw their wages decline by 0.5%.

That period also saw an explosion of strikes from coast to coast with hundreds of thousands of US workers taking strike action.

These structural problems of debt and inequality and a tendency towards crisis are also preventing a “rebooting” of the system through sustained and coordinated planned investment based on new green technology and automation desired by many pro-capitalist commentators.

Socialist Party Scotland and the Committee for a Workers’ International says no policy of the capitalist class, either the emergency state intervention packages seen in response to the pandemic in the US and Britain, or a return to neoliberal austerity, or a combination of both (the most likely course for many major capitalist powers), can prevent the onset, at a certain stage, of a new economic recession.

However, the best conditions for the rebuilding of a combative workers’ movement that would lift the confidence of the working class through victories and the consciousness of its power would be if such a slump was delayed.

Workers have to prepare to struggle in all eventualities. Since the election of Sharon Graham last summer as the leader of Unite, £25 million has also been won by workers taking industrial action and/or the threat of action.

The experience of squeezed incomes over the last decade and the pandemic, where workers have felt they are a key part of the economy, is leading to industrial militancy directed at achieving wage increases, particularly with the onset of inflation.

The bosses and their politicians will no doubt now begin to blame workers’ wage rises for inflation when in fact their bankrupt policies are responsible. From 1980, £250 billion a year has been transferred from the pockets of the working class to the capitalists through the neoliberal offensive.

Key socialist demands such as wages to be increased in line with prices, for the opening of the books of firms to trade union scrutiny and for popular committees made up of the trade unions and consumer groups to monitor prices and measure the real cost of living will gain mass appeal.

Inflation internationally has the capitalists in a quandary as tackling it by hiking interest rates or cutting spending could trigger a new recession. The real causes are multiple; the surge in demand for energy as economies reopened was a trigger but really the profiteering of financial speculators is central.

Policies like quantitative easing and state intervention during the pandemic alongside decades of under investment play a key role. The anarchic nature of the capitalist market and the inability of capitalism to deal with the virus variants has also contributed to a supply chain crisis internationally, worsened by the US/China trade war.

In Britain the economic dislocation of Brexit, geopolitical conflicts and labour shortages in some sectors have also contributed.

The shortage of key commodities in the production process like semiconductors has caused chaos. Often multinationals have taken advantage of shortages by hiking up prices even further.

Supply chain problems contributes further to inflation and low growth.

Zombies

Economist Nouriel Roubini is correct to raise the prospect of 1970s-style stagflation combined with a debt crisis. The £400 billion state intervention package from Rishi Sunak and the Tories along with quantitive easing and low interest rates adds to its indebtedness.

20% of UK businesses are “zombies”, only able to meet debt interest payments from profits. A slowdown or interest rate rises could see them collapse.

Interest rate rises are also a danger regarding government debt, the financing of which is undermined by the sheer level of quantitative easing – ie debt – run-up by the ruling class.

This is the root of Sunak’s reluctance to take any measures to alleviate the cost of living crisis. On the other hand, mass pressure from the working class also makes it difficult to inflict austerity through tax rises and spending cuts.

Higher interest rates also threaten the incomes and mortgages of large sections of the working and middle class. The ruling class fears the economic and political consequences of more large scale state intervention both in exacerbating the splits in the ruling Tories but also increasing the confidence of workers and youth to refuse to accept the logic of capitalism, as Engels described the “invading socialistic society”, as the capitalists can only turn to the state to prop up a failed system.

It is ironic that just thirty years ago the capitalist class were jubilant following the collapse of Stalinism and the ending of that alternative non-capitalist economic model, proving the “superiority of the neoliberal market”.

Stalinism

Stalinism was not genuine socialism. Despite huge economic, technological and societal advances in a state planned economy the working class was elbowed out of political power by a bureaucracy that proved a eventual fetter leading to the USSR’s demise.

But everything that capitalism benefited from in the immediate years following the 1990s such as new areas of the globe in eastern Europe and China to exploit through globalisation and neoliberalism has now turned into its opposite.

The International Labour Organisation estimates during the pandemic that the equivalent of 255 million full time jobs were lost in reductions in working hours, $4 trillion in lost wages.

The capitalists, with their outmoded tools, have no way out. Taking over the major corporations, banks and biggest industries under the democratic management and control of the working class, and planning production and the allocation of resources, a socialist society would unleash human potential that would end poverty and inequality for good.