Capitalist Crises: Boom for Bosses, Bust for Workers

The bosses’ media has pointed fingers at various causes of the current economic crisis: seedy mortgage brokers, “deadbeat” homebuyers, “stupid” investment bankers, greedy and arrogant CEOs, Ponzi schemers like Madoff, and now AIG executive bonuses. They claim the root cause is the “subprime mortgage” fiasco, the housing market collapse, the financial industry crisis and the freezing of credit. Except for workers trying to keep and/or buy homes, all the above characters are part of the problem. And all of the above crises have contributed to what increasingly looks like a Depression,

But all these explanations don’t really explain what’s at the heart of this worldwide debacle for capitalism: fundamental laws governing the inner workings of the system itself. Over 140 years ago after decades of struggle by workers against capitalist exploitation, Karl Marx, in his work “Capital,” revealed important laws of capitalist development. In that and other important works, Marx described two: the tendency of the overall rate of profit to fall, and the occurrence of periodic crises of overproduction as the necessary result of a competitive and unplanned system of production. Communists say that only revolution to overthrow capitalism can end this system’s “boom-and-bust” nature.

Real Wages Falling Since ‘73

The rate of return on capitalist investment (rate of profit) in the “developed” economies (U.S., France, Britain, Germany, etc.) has been falling since the end of the 1960s (see interview with Robert Brenner in “Asia-Pacific Journal,” 2/7/09). This happened despite the fall in real wages since 1973, which should have caused the rate of profit to increase. The profit rate fell because emerging capitalist economies in Europe and Asia began producing “the same goods that were already being produced by the earlier developers, only cheaper.”

Bosses in the more developed economies tried to hold on to their dominant positions by pouring money into new technology. However, this only made the problem worse, for two reasons. Firstly, more high-tech upgrades led to even greater overcapacity in industry, with goods flooding the world market. Secondly, the higher the percentage of total capital invested in plant and machinery, the further the rate of return on capital investment tends to fall. Profit can only be made off of human labor power, not from machinery (see box).

As their economic position worsened, U.S. and Western European bosses cut real wages, increasing racist exploitation to attack ALL workers. They used their control of the government to cut back “social wages”, i.e. social service benefits for workers paid for from taxes. But these attacks on their income meant workers were less able afford the products that the bosses had to sell in order to realize their profits.

Fed’s Policy Led to Toxic Assets

The solution? The U.S. bosses’ state, particularly the Federal Reserve, encouraged the massive use of public and private credit. Government budget deficits increased dramatically in the 1970s and 1980s. In the 1990s, the Fed deliberately kept interest rates very low. This induced a huge increase in private borrowing and encouraged investment in financial assets like stocks, bonds and more exotic instruments like bundles of mortgages (see CHALLENGE, 12/08). Prices of these assets soared. In addition, workers bought more and different products using borrowed money, credit cards and refinanced mortgages.

A succession of asset “bubbles” — first the dot com/technology stock market “bubble” of the late 1990s, then the housing and credit “bubbles” of the 2000s —  were basically speculation sanctioned by the government and Fed. But these bubbles only temporarily postponed the day of reckoning. Again, only labor creates actual value under capitalism, not writings on pieces of paper, or computer entries. The huge increase in speculative investment pulled U.S. and other “developed” capitalisms further away from the labor-created method of wealth accumulation.

Thus, the two laws of capitalism revealed by Marx interact with each other. Both contribute to the inevitability of crises as long as capitalism exists. It’s the anarchy of capitalist production and the system’s competitive nature that generate these built-in problems, which are always taken out on the backs of the working class. Communism, a planned, cooperative system of production based on our class’s needs, not bosses’ profits, would abolish these capitalist relations.

The above Brenner interview estimates that capitalism can solve the global economic crisis without major imperialist wars, including World War III. He argues that “[t]he world’s elites want more than anything to sustain the current globalizing order, and the U.S. is key to that.” The Russian revolutionary Lenin wrote that inevitably rival imperialist powers settle their economic competition by war. This is proven by the history of capitalism — one war after another, and now world wars.

Bosses’ Solution for Disputes: War

Thus, thinking the bosses can peacefully solve their disputes produces deadly consequences. Rising rivals of U.S. imperialism like Russia, China and their allies will not, and cannot, stop short of trying to take down the top dog. The fight to control oil and to use that control to keep or gain number-one status continues. Wider war plans are being prepared right now.

Meanwhile, the bosses are casting the weight of the economic crisis onto us. As we unite unemployed and employed to fight these attacks, remember: the bosses need our labor, but we don’t need the bosses or their crisis-ridden, exploitative system. The working class under the leadership of a mass PLP will put an end to this sordid chapter in the history of humanity.

2007: Rival Imperiaists Challenged U.S. –Workers Fought Back Worldwide

World domination by U.S. rulers is being challenged by the bosses of Russia, Iran and China. This sharpening rivalry is displayed in many ways. Pick up a mainstream U.S. newspaper any time and the message you most likely receive is that China is evil. News sources reported all year about the dangerous or poisonous products of China: from pet chow to toothpaste, from toys to sea food. The mouthpieces of the ruling class were determined to paint China as the devil, even though U.S.-owned companies produced the goods in question.

A communist analysis tells us that the bosses’ reason for this is not concern for our safety. They fear China’s growing ability to compete with the U.S. as an imperialist power, and they need to build up anti-China sentiment in workers in anticipation of future armed conflict.

The U.S. rivalry with China and other growing powers drove many of the events of the year, either directly or indirectly. The Save Darfur movement is being built among students and workers in order to oppose China’s interests in Africa. Hugo Chavez of Venezuela is able to call George Bush names without much fear, partly because of his ties to imperialists in China, Russia and elsewhere. Over a million people have been killed in the wars in Iraq and Afghanistan waged by U.S. bosses to prevent rivals from gaining access to Mid-East oil.

The year 2007 saw the outbreak of rebellions by Arab and Muslim youth in France and mass strikes in France, South Africa, Peru, Italy and the Dominican Republic and a general strike in Greece. Workers in the United States have fought back with strikes in war plants at Northrop-Grumman in Pascagoula, Mississippi and at Navistar. Although those workers struck for economic reasons, striking war plants shows that they did not fall for the boss’s patriotism. PLP supported these strikers and helped expose the pro-boss union hacks still holding back our class. PLP’ers have also been organizing in the military and in subcontracting plants serving the war industry.

The lead-up to the next presidential election was big news as Barack Obama and Hillary Clinton jockeyed for the Democratic Party nomination, each hoping to convince workers of their anti-war stance while assuring Big Oil that they would do a better job than Bush at securing control of the Middle East. Both Obama and Clinton have openly supported pre-emptive strikes against al Qaeda in Pakistan and the Iranian rulers respectively.

In mass events, PLP’ers — through chants, speeches and sales of CHALLENGE — have consistently exposed the liberal politicians as more dangerous as they try to win worker support with their lies while deepening the wars their “conservative” counterparts started.

Meanwhile, the current government used the “war on terror” to excuse increasingly fascist tactics in oppressing the workers. We saw a rise in the use of video cameras everywhere, from schools to buses. Police murdered black and Latin young people in every major city like Kiel Coppin in NYC, Francisco Mondragon in LA and Aaron Harrison in Chicago. Brutal crackdowns on immigrants, like the raid at a plant in New Bedford, Mass., separated families through deportation at the same time that immigration “reforms” like the DREAM Act promise citizenship to those who would join the military to fight in the Middle East. The bosses have worked hard this year to build fear and passivity in the workers, but they face a major contradiction: they are attacking the same people they need to be patriotic and fight their imperialist wars.

PL was there to lead militant, multi-racial protests against gutter racists like the Minutemen. We stood up against racist right-wingers like David Horowitz with his Islamo-Fascism week and against military and CIA recruiters on our campuses.

The local courts in Jena, LA, viciously punished young black students who fought back against racists who hung nooses at their school. Since then the media has reported that racist attacks are on the rise. As the NY Times reported (11/25), “…this country has seen a rash of as many as 50 to 60 noose incidents. The level of hate crimes in the U.S. is astoundingly high — more than 190,000 incidents per year.” Masses of black workers and students converged on Jena, LA, to protest the racist events there. PL members brought communist politics to these anti-racist events.

The rulers left workers to suffer in many ways while they struggled to keep control over their imperialist interests. The sub-prime mortgage crisis meant many workers, disproportionately black and Latino ones, lost homes and financial security. Bridges collapsed, miners died in cave-ins, homes and lives were lost to fires and floods, earthquakes from San Diego to Tabasco, Mexico, to Peru, the Caribbean and Bangladesh. The wreckage left in the wake of hurricane Katrina is in even worse shape after two years of the bosses’ “recovery effort.” The bosses have decided to demolish the public housing which were totally livable.

No matter how much the bosses abandon all responsibility for our safety, workers take care of each other. Students, teachers and workers are still traveling to the New Orleans area to lend support to their class brothers and sisters there. PLP contingents made the trip several times during the year, organizing our friends to help in schools, churches, community groups and workplaces.

High school students spoke to the Delegate Assembly of the New York teachers’ union for the first time, demanding that their voices be heard against imperialist war. On the West Coast, high school and college students spent their summer building unity with industrial workers.

Even as the bosses try to beat us down and win us to their nationalist ideas, the workers’ anger is still there. It’s the job of communists to give this anger at the system a revolutionary direction. We don’t want to rebel fruitlessly, but to build a movement that will be able to challenge and destroy capitalism. Then workers will be able to run the world according to our class interests. PLP is leading the way towards that communist future.

Revolutionary Struggle, Not Chavez’s ‘Business Socialism,’ Will Win Workers’ Power

“Without a revolutionary Party, there can be no revolution.” – V.I. Lenin

The narrow December 2 loss for the Constitutional Reform referendum in Venezuela is a clear example of the above idea. The Chávez government’s plan to impose its “21st Century Bolivarian Socialism” in a bureaucratic top-to-bottom manner suffered a major political setback even though it lost by only 50.3% to 49.7%. The right-wing anti-Chávez forces only gained some 200,000 votes over the 2006 presidential election total. In 2006, 7.3 million voted to re-elect Chávez; this time approximately 4.3 million voted for his constitutional reform.

The Empire Strikes Back

There are many reasons for this decreased support for Chávez’s program. The right-wing waged a very aggressive campaign, financed by big money from both local anti-Chávez bosses as well as from the U.S. The Washington Post (12/3) reported that the anti-Reform movement was funded in no small part by the U.S. government. The Post cited U.S. documents obtained by National Security Archive researcher Jeremy Bigwood that revealed at least $216,000 was funneled through the Office of Transition Initiatives, a secret branch of the U.S. Agency for International Development, erected in Caracas in the wake of the failed April 2002 anti-Chávez coup.

As CHALLENGE has stated many times, Chávez represents a nationalist populist trend in Latin America which, under the guise of anti-imperialism, seeks a better deal from U.S. imperialism’s rivals, like China, Russia and even India. The U.S. bosses and their local allies have been fighting for their interests, using blatant anti-communism (they claim the constitutional reform would turn Chávez into a “red dictator” who would take babies away from their parents, and other lies). Coincidentally, Chávez proved to be a better “bourgeois democrat” than the right-wing opposition in accepting the December 2 loss. If the right-wing had lost, they would have raised hell. Of course, U.S. apologists never mention the many

U.S.-backed overthrows of elected leaders in Chile, Guatemala and elsewhere.

But the biggest cause of the loss was the Chavista movement’s internal weaknesses. Firstly, it isn’t really a revolutionary movement. The Chávez government attacked workers who actually fought their bosses like at Maracay (bathroom appliances) who tried to stop the closing of their plant. Chávez’s “land reform” has been limited to some unused land, without really touching big landowners. In the last few years, some 200 farmworkers have been killed fighting these landlords.

Chávez’s “anti-imperialism” has exploited Venezuela’s new oil supplies via “mixed enterprises” incorporating big foreign oil companies. While talking about “revolution” and “socialism,” his government limited itself to a few small reforms for poor workers, including medical services using some 20,000 Cuban doctors. But meanwhile poverty overall has risen. Chavista bureaucrats and bosses have enriched themselves and big companies have increased prices, squeezing any wage hikes for workers. The government did little to counter the lack of milk and other basic staples caused by hoarding bosses.

Former guerrilla leader Douglas Bravo, a left-wing critic of Chávez, exclaimed: “How can you pretend to build a 21st century socialism enriching a bourgeoisie that came about with this government through oil income…or not taking into consideration workers, poor people in the countryside, indigenous people and giving power to agro-business and rich Chavistas?” (El Mundo, Caracas, 12/3)

That’s why so many workers and their allies abstained from voting December 2. Meanwhile, the pro-U.S. right-wing forces will try to take advantage of their victory in continuing to try to topple the Chávez government through a military coup. (General Baduel, who until recently was Chávez’s Minister of Defense, and who joined the anti-Chávez forces just before the referendum, is their man for this.)

But the right-wing is not united. It represents many different bourgeois forces, included disenchanted former Chavistas. The Chávez camp will also try to regroup, building its bureaucratic Unified Socialist Party to push for its “businessmen’s socialism,” using workers and their allies as cannon fodder.

The real missing ingredient here is a revolutionary communist (not “businessmen’s socialist”) leadership to fight for the real liberation of workers from capitalism and imperialism. This liberation won’t come through electoral referendum, but through revolutionary class struggle. This is a crucial task since the dogfight between the pro-Chávez and pro-U.S. forces will sharpen and workers will wind up losing unless they break with all forms of capitalism, whether the Chavista type or the pro-U.S. type.

Chávez Reform Won’t Bring Workers’ Power

CARACAS, VENEZUELA, Nov. 23 — Chanting “Educación Primero para el hijo del obrero; Educación después para el hijo del burgues” (First educate the workers’ children, and only then those of the bourgeoisie), and “Obreros y Estudiantes, Unidos en Combate” (Workers and Students, United in Struggle), tens of thousands of college, high school students and teacher from all 24 states marched to Miraflores, the presidential palace, on Nov. 21 to support President Chávez’s Constitutional Reform referendum scheduled for Dec. 2. It was the biggest youth march in recent history, countering those by right-wing students opposing Chávez’s plans.

The reform has sharpened all the contradictions here. The right-wing opposition says it will establish Chávez as a “communist dictator.” They have used the right-wing students to lead the anti-Chávez attack and are trying to provoke a military coup against him. It’s also sharpened the in-fighting among Chávez’s supporters. General Baudel, his former Defense Minister, has now joined the opposition.

But Chávez’s reform won’t bring in “communism.” It will continue Chávez’s Bolivarian Socialism — state capitalism with lots of privatization.

The U.S. and the local opposition say the reform will enable Chávez to be re-elected forever. Of course, they don’t level this criticism against Egypt’s Mubarak, Pakistan’s Musharraf, Saudi rulers or any other U.S. ally actually in power with no real mass support.

The reform, while making some nationalist changes in the army, won’t change its class nature, and it will still serve the executive power. The National Guard will become a Territorial Guard and will include “Bolivarian people’s militias,” but will still be subordinate to the Army. And the latter’s main pillars will be discipline, obedience and subordination. So basically, soldiers will be ordered to serve the ruling faction.

The reform will facilitate state expropriation of private companies for the “social interest.” But this maintains “just payments” to private owners for their holdings. Recently the government bought Verizon, paying it more than its value on the stock exchange, a good deal for the phone company. This is just a “change” from one form of capitalist property to another. It will guarantee “mixed-capital” ventures like those PDVSA (the state-owned oil company) now has with big international oil corporations — again another form of capitalism.

The reform will institute a 6-hour work-day and “popular councils,” supposedly organs of “people’s power.” But these councils will be limited to the municipal level. They’re similar to Brazilian President Lula’s ruling Labor Party (PT) “reforms.” Its “participatory budget” (as labeled in Brazil) has even been attacked by PT rank-and-filers as government control of the mass movements.

In Venezuela, these “popular councils” will have no power over national policies, the state budget, the PDVSA, the armed forces or the judicial system.

This constitutional reform fight is one about which kind of capitalism will rule Venezuela, not one about destroying capitalism and putting workers in power under a system based on workers’ needs not on profits. It also involves a section of the Venezuelan bourgeoisie wanting a bigger piece of the pie, and not giving the best part to the U.S. imperialists (as the old ruling class did).

Chávez now is making deals with international imperialist companies in China, Russia and even India instead of just with U.S.- or Spanish-owned corporations. (That’s why Spain’s King shut down Chávez during the recent Ibero-American Presidential Summit meeting in Chile). Brazil’s Senate has just approved Venezuela’s full membership in Mercosur (the Brazilian/Argentinean-controlled South American Common Market).

In 1989, Venezuela’s workers and students rebelled with a mass popular uprising (“el Caracazo”) against International Monetary Fund-imposed austerity measures. It was crushed brutally by the then social-democratic President Carlos Pérez, who sent the army to smash it with tanks, killing over 1,000 workers and youth. Afterwards, Chávez and a few other officers, fearing the masses would continue to rebel and eventually topple the whole capitalist system, led a military revolt against the old corrupt ruling class. He was jailed and then released and ran for President in 1999, winning with the support of angry workers and youth.

But revolutionary workers’ power — communism — won’t come from above, from any “savior” trying to reform capitalism, but only through organizing a mass communist-led movement. That movement must be built among the workers and students who have supported Chávez, struggling with them to shatter their illusions in “Bolivarian socialism.”

Profit System Drowns Workers . . . . Again

VILLAHERMOSA, TABASCO, MEXICO, Nov. 12 — A half million are homeless and there are uncounted deaths from the torrential rains that hit the state of Tabasco for several days — all because of capitalism’s utter disregard for Mexico’s workers. Eighty percent of Tabasco, a state larger than Massachusetts, was under water. Many spent days on the roofs of their houses. Roads, bridges and more than 100,000 homes have been destroyed. Potable water, food, medicine and clothes are in very short supply for tens of thousands of workers and their families who have still not found refuge.

Even worse than the horrific effects of Katrina in New Orleans, such natural phenomena are turned into racist, anti-working class tragedies by the profit system. Most of Tabasco’s victims were extremely poverty-stricken workers and indigenous people — in a country where 40% are jobless and half the population tries to survive on less than $2 a day.

Tabasco’s local bosses and Mexico’s federal rulers are responsible for these deaths, injuries and destruction. “The tragedy of Tabasco could have been avoided with relatively simple and inexpensive measures,” said Salvador Briceño, director of the UN’s International Strategy for the Reduction of Disasters (El Universal, 11/3).

Opposition mis-leader López Obrador, who ran against the current president, Felipe Calderon, cynically used the disaster to build his own base of support. He accused the Federal Commission of Electricity of being responsible for the dams overflowing. Normally the dams should be kept 40% to 50% full so there is enough room for more water in case of serious storms (La Jornada, 11/7). But because the state-owned electric company buys 31% of its electricity from private utilities it doesn’t need the water power of the main dam. Out of disregard for the lives and safety of the working class, it allows it to be underutilized and therefore remain filled to 94% of capacity. Obrador spreads the lie that nationalist state capitalism, unlike private enterprise, is committed to serving the people.

Although Obrador mobilized millions for his election campaigns, neither he nor the union leaders have organized solidarity among the same masses to demand aid for Tabasco’s victims. Nor did they expose the real cause of the tragedy, capitalism. While planning for racist exploitation and wars for profits, and aided by its politician and union leader lackeys, the capitalists are incapable of central planning for — nor do they care about — the needs of the working class.

In 1999, floods in Tabasco were an omen of more extreme disasters like the current one. But government officials, bosses and their capitalist politicians ignored these warnings. Negligence, corruption, militarization and bosses’ obscene profits have been their guiding principles, not workers’ needs. Mexican capitalist Carlos Slim, the world’s second richest man, increased his vast stolen wealth from $5 billion to $49 billion in just a few years.

President Calderon has made deals for billions of U.S. blood money. Calderon sent more than 8,000 soldiers to Tabasco, not to help the workers and their families, but to “prevent looting” of his buddies’ businesses. Calderon wants to protect the state-owned oil company, PEMEX to bring it more under U.S. control. Laura Gurza, coordinator of Civil Protection, rushed to reassure the bosses that, “National security and governability were not at risk due to the catastrophe.” Concern for protecting the bosses’ property came first, workers’ well-being last.

On the other hand, thousands of impoverished Mexican workers responded immediately, bringing food, water and clothing to the victims. International solidarity saw U.S. workers and many countries bring goods to collection centers. We should organize help for our sisters and brothers in Tabasco, in our shops and unions, our churches and community organizations, our schools and on our campuses.

However, unfortunately all this aid cannot solve the problem, which continues to be capitalism and its drive for maximum profits. Other tragedies will occur because of deforestation, the construction of dams and the poverty forcing workers into neighborhoods endangered by dikes, channels or useless walls.

The best help for victimized workers in Tabasco, the Dominican Republic, Honduras, New Orleans and worldwide is to build the fight to destroy the real root of these disasters, the system of capitalism and imperialism, a system which sacrifices workers’ lives for profits. We should dedicate our lives to building a communist world where the life and security of workers is primary, the central goal of society. That means spreading CHALLENGE and PLP’s ideas which will make bosses, profits and corrupt politicians a sad chapter in humanity’s history.