The global economic collapse is crushing workers even more. The UN’s International Labor Organization (ILO) predicted that the subprime crisis and rising oil prices will increase world unemployment by five million (Agence France Press, 1/23) over and above the already 189.9 million now jobless. That forecast was reached before the current turbulences in the world’s financial markets. “We still don’t know the impact of the stock market crisis on the employment figures,” explained ILO chief José Salazar-Xirinchs.
Trenton, NJ Mayor Douglas Palmer, president of the U.S. Mayor’s Conference, told 250 mayors meeting in Washington that the subprime crisis is “an economic tsunami…hitting our cities.” A recent Conference study said home values would drop by $1.2 trillion this year.
The mayors are asking for immediate federal help, but — even though some cities are suing banks and speculators who caused the subprime mess — their main response has been to cut social services even more nation-wide. Sacramento city officials have responded to a $55 million projected budget shortfall for next year by ordering an immediate hiring freeze and ending some discretionary spending. In Virginia, Fairfax County — facing a $220 million deficit for the coming fiscal year — is considering cuts to school districts. On January 24th, billionaire New York City Mayor Bloomberg announced an across-the-board 5% cut for all city departments, for a total slash of $1.5 billion in two years, including a $505 million dollar reduction in schools.
The effects of the current economic crisis are also hitting countries closely linked to U.S. imperialism. During the current world economic forum in Davos, Switzerland, the governor of Mexico’s Central Bank reported that his country’s economy will be hit badly — 40% of Mexico’s Gross Domestic Product depends on trade with the U.S. Already, Mexico is predicting a slowdown in growth for 2008. On top of that, hundreds of thousands of Mexican immigrant workers in the U.S. are losing their jobs because of the subprime crisis (many work in construction) and general economic collapse, reducing their remittances to relatives back in Mexico.
This racist aspect of the subprime crisis is affecting Britain and Spain. Immigrant workers involved in construction there are losing their jobs.
International financier George Soros is not bullish about this crisis. He told the Davos economic forum that there is a profound difference in the current crisis, marking the end of an era of credit expansion based on the dollar as the international reserve currency. He called it the worst economic crisis since World War II. The hope that the rising economies of China and India will help ease the situation is being dashed since they depend on exporting to the U.S. and European markets, hard-hit by the current crisis. For example, incomes for workers in the U.S. have not risen in real terms for three decades because of downsizing, racist wage-cuts and the lack of mass fight-back by the union movement. The subprime crisis has put working-class homeowners — who borrowed money based on the rising values of their homes — in a hole, decreasing consumer spending. Less consumption and a falling U.S. dollar might spur China and other countries, who have lent the U.S. trillions by buying Treasury bonds, to cash in their investments, sinking the U.S. economy even more.
Soros is worried that resulting political tensions, including U.S. protectionism, may disrupt the global economy and plunge the world into recession or worse.
That “worse” could turn economic conflicts into a shooting war among the world’s imperialists for a bigger share of the capitalist pie. The subprime and credit-crunch crises are just symptoms of a capitalist system based on speculation, endless imperialist wars and racist-fascist attacks against the international working class. None of the tricks the bosses used in recent decades have worked, including Thatcherism, Reagan’s “trickle-down voodoo economy,” Clinton’s “new economy” or Bush’s tax cuts. U.S., British and other capitalists’ turning away from production has created an even more parasitic capitalist class, still more dependent on financial speculation and increasing fraud, without creating real value. Each new scheme — dot.com, subprime mortgages, etc. — created bigger bubbles, dragging the world economy down.
But capitalism won’t fall by itself. Since its birth the profit system has been based on boom-and-bust cycles, accompanied by massive wars, recessions and depressions. The anarchistic capitalist production system will continue as long as we workers let them make us pay with our blood for their profits. Previous wars and crises led to workers’ revolutions: the Paris Commune, the Bolshevik and Chinese revolutions. As the international working class prepares for May Day 2008, we in the Progressive Labor Party must step up our efforts to win workers, youth and soldiers worldwide to see that the only way out of this capitalist hell is building a massive revolutionary communist movement to bury the bosses once and for all.