2020 was a terrible year for workers around the world. The combination of the worst pandemic since the Spanish flu of 1918 and the worst world recession since 1929, has caused the death of 2.5 million people (in official figures, it must be many more) and hundreds of millions of unemployed. However, it is not the same for the big bourgeoisie. Most of the big companies are being saved from bankruptcy with the help of government plans of historically unprecedented dimensions. Furthermore, a sector of big capital has been strengthened and made even richer during the crisis. Even worse: there are strong signs that the bourgeoisie is using the crisis to develop tendencies that already existed before the crisis, and that can make possible a new re-emergence of the capitalist economy.

By Eduardo Almeida – March 03, 2021 

Translation by Corriente Obrera Litci U.S.


 The descending wave

According to Trotsky: “Capitalist equilibrium is an extremely complex phenomenon. The capitalist regime builds up this equilibrium, breaks it, restores it only to break it again, thus extending the limits of its domination. In the economic sphere, these constant ruptures and restorations of equilibrium take the form of crises and booms.

In the sphere of relations between classes, the rupture of equilibrium consists of strikes, lockouts, and revolutionary struggle. In the sphere of relations between states, the breakdown of equilibrium translates into war, or, more covertly, tariff war, economic war, or blockade. Capitalism therefore has a dynamic equilibrium, which is always in the process of being broken or restored. At the same time, such an equilibrium possesses great power of resistance; the best proof we have of this is that the capitalist world still exists.” (The World Situation, 1921)

These points of equilibrium defined by Trotsky can be associated with the long upward waves of the capitalist economy and those of disequilibrium with the downward waves.

The more general framework of the current crisis is that of a descending wave of the world economy, which has been going on since the crisis of 2007-09 and extends to the present day.

Previously there was an upward wave with “globalization” in the 1980s and 1990s of the last century, which came along with neoliberal plans around the world, the restoration of capitalism in China and Eastern Europe, and a sharp setback in the living conditions of the proletariat. In that period of the rise of the capitalist economy, China was incorporated into the world division of labor, as the “factory of the world.”

The world recession of 2007-09 marked the beginning of the current downward wave. It almost led to a depression like that of 1929, but the bourgeoisie responded with a brutal injection of public money into big business. There were some bankruptcies, like Lehman Brothers, but most of the big banks were saved, as well as industries (GM, for example) and other sectors.

However, the same government intervention that saved big capital limited its recovery after the crisis. It prevented the bankruptcy of the old capital, of the companies that could not reach the average rate of profits that governs capital, which is the normal dynamic of destruction of productive forces in the capitalist economy. This limited dynamic growth after the crisis.

The downward wave amplified the conflict between states. In the period of the rise of globalization, the relations between the great powers pointed to a period of greater balance, with the creation of international trade agreements and the strengthening of institutions such as the WTO. In the downward wave, inter-imperialist conflicts have escalated, many of these agreements have been questioned (such as Brexit), and the WTO itself is almost paralyzed.

The Trump administration -and the conflicts caused by it- are an expression of this reality. Leaving aside the debate about the current character of China, there is no doubt that the “trade war” between the U.S. and China is the sharpest point of this imbalance between big capital.

China has grown a lot in the last thirty years, it is already the second largest world economy and a major exporter of capital, It no longer fits in the place reserved for it before globalization, and this clashes with the interests of the decaying U.S. imperialism. The conflict between the US and China is a fundamental part of this unbalanced downward wave.

It is also important to emphasize that this imbalance manifests itself in the class struggle, with numerous political crises and the outbreak of revolutionary upsurges (Chile, Hong Kong, and others) as well as military coups (in Bolivia, for example).

This downward wave is therefore the more general framework necessary for understanding the world recession of 2020.

On the one hand, it expresses its severity, as there have been two very severe world recessions in a short period of time (2007-09 and 2020).

On the other hand, one cannot simply point to a catastrophic trend, as if capitalism had no way out. On the contrary, big capital is actively seeking to regain a new equilibrium point, which would allow a new rising wave, like the last one, of globalization. As we will try to demonstrate in this article, it is trying to use the crisis and the pandemic to point in this direction.

The phases of the crisis

The year 2020 had several well-defined phases of the economic crisis.

First, even before the pandemic, there were already clear signs of a new world recession, with falling profit rates in the major capitalist economies. The pandemic accelerated and aggravated all these elements.

In the first quarter, the fall in GDP in the USA was 1.3%, in the Euro Zone 3.7%, in Japan 0.6%. In China it was 6.8%, the first since the restoration of capitalism.

In the second quarter, the crisis worsened dramatically, due to an extra-economic element – the pandemic – which led to the quarantine paralysis of 40 to 50% of the world’s population, something never before seen.

The fall in the US GDP was 9.5% (32.9% in annualized terms, the worst since the depression of ’29). The GDP of the European Union countries fell 11.9% (14.4% in annualized terms), with Germany falling 10.1%, France 13.8%, Italy 12.4%, Portugal 14.1%, and Spain 18.5% (the biggest drop since the civil war). The exception among the major capitalist economies was China, which grew by 3.2% in the second quarter.

From this abrupt fall in the second quarter, two major possibilities for the evolution of the capitalist economy opened up: either a depression like that of 1929 or a recovery.

Taken as a whole, the world recession of 2020 meant a fall of 4.3% in world GDP, much more serious than the 1.7% retreat in the crisis of 2007-09, and therefore the worst recession since 1929. The fall in the USA for the year as a whole was 3.5%, in Germany 5%, Spain 11%, England 9.9%, Italy 8.8%, France 8.3%, Japan 4.8%. Latin America had a drop of 7.7%.

China grew 2.3%. It was the lowest growth in 44 years, but the only one of the big capitalist economies to grow.

What began in the second half of 2020 was a recovery of the economy, which continues to this day. Made possible by the end of quarantines and the giant bailout packages from governments around the world, a fragile and uneven recovery of world capitalism began.

This can be verified by the fourth quarter GDP evolution in the USA (1%), Germany (0.1%), Spain (0.4%), France (-1.3), Italy (-2.3%), Portugal (0.4%), Euro Zone (-0.7%), Japan (3%).

The current reality points to a perspective of slow growth of the capitalist economy that, in 2021, is not expected to reach the levels before the crisis.

V- Evolution?

The governments and ideologues of the world bourgeoisie ran a campaign in the early 2020s pointing to a quick recovery from the pandemic and the world economy.

Now they can no longer talk so much about the immediate end of the pandemic. With more than half a million deaths in the US, the pandemic is still out of control in Europe, and growing in Brazil, India, and various parts of the world, the capital’s propagandists have had to change their discourse.

The WHO now signals that a drop in the number of infected and dead worldwide may have started at the end of January. This new optimistic forecast needs to be verified in the coming months.

The reality is that vaccination is still getting underway, with huge delays and worldwide uncoordination. Even in the most important imperialist countries vaccination is progressing slowly. Many even more affected semi-colonial countries cannot afford the necessary vaccines. A few years may be necessary before a world-wide herd immunity level is reached, and nobody can exclude new waves with new strains of the virus.

Nor do we see a rapid recovery in the world economy. First of all because the persistence of the pandemic affects the economy, as we know.

Moreover, the general pace of the economy is determined by the level of accumulation, of capitalist investments, and this is regulated by the rate of profit of the big companies. If there is a good rate of profit, there are investments and the economy grows, otherwise there is a crisis. There was a drop in the rate of profits in the imperialist countries already at the end of 2019, as we said, which pointed to the beginning of the world recession. Michael Roberts points to a drop in the year 2020 of about 15% in the average rate of profits in imperialist countries.

Evidently there is a huge inequality on this ground, with one sector involving the big technology companies and the big banks, which have made astronomical profits from the crisis. We will talk about this later. But this is not the reality of the big companies as a whole, and it does not change the general fall in the rate of profit.

The gigantic government plans, with an unprecedented injection, in historical terms, of public money in companies, do not solve this problem either. In general, public investments make up 3% of capitalist accumulation, and private corporate investments make up 20%. Biden’s gigantic plan, of 1.9 trillion dollars, can increase the growth of the GDP in the USA by only 1%.

Moreover, governments don’t make direct investments in the economy, but hand this money over to big companies in general and banks in particular. And precisely because of the low rate of profits, these billionaire sums are applied to financial speculation, which, as we shall see, has never been so gigantic.

So, with a low rate of profits, most likely there will be no V-growth at all. The continuity of this low growth must be expected.

Similarly, the old capital-new capital ratio in this recovery is going in the same direction. As happened in the 2007-09 crisis, public money saved large companies that did not reach an average productivity level and should have gone bankrupt, as part of the capitalist cycle. When this doesn’t happen, the average rate of profits that regulates the economy is brought down.

One study indicates that about 20% of the 3,000 largest publicly traded companies in the US are now “zombies”, meaning that their revenues are not enough to pay their debts ($1.36 trillion) and they depend on continued public aid to survive.

Thus, the world recession of 2020, the most severe since 1929, did not evolve into a depression, but into a slow recovery, uneven and with very important contradictions, which we will analyze now.

A gigantic economic and social polarization

It is not true that “everybody lost” in this crisis. On the contrary, the reality is that more than ever those at the top are rising and those at the bottom are falling.

While a trail of death, misery and unemployment has built up among the workers, a portion of the big companies have made gigantic profits in the year 2020. According to the Economist, in the second quarter of 2020 “revenues at Citibank, Goldman Sachs and JP Morgan were higher than at any time since the global financial crisis, nearly doubling in the same period in 2019. Goldman Sachs, one of the two remaining large independent investment banks, saw revenues rise 41%.” The big tech companies, (Apple, Google, Facebook, Microsoft), the e-commerce (Amazon, Alibaba) and the pharmaceutical companies that produced vaccines made astronomical profits.

Billionaires like Jeff Bezos (Amazon), Elon Musk (Tesla), and Mark Zuckerberg (Facebook) take turns being the richest men in the world. Bezos increased his fortune in a single day in 2020 by more than $12 billion.

As part of the same trend, there is an increasing polarization between countries, with big tech companies strengthening in the US, Germany strengthening in Europe, China strengthening in Southeast Asia. Semi-colonial countries are relegated in the world division of labor, with a process of deindustrialization, such as Brazil and Argentina.

And there is a tidal wave of small business bankruptcies, which increases the social crisis and unemployment.

There is a tendency for the U.S.-China polarization to widen

The “trade war” between the US and China is neither restricted to trade, nor has it ended with Trump. As we have seen, it is a conflict between hegemonic but decadent US imperialism and China, a capitalist country with a giant economy, which no longer fits the role previously reserved for it in the world market.

The pandemic, as we have seen, affected the capitalist world unevenly. But China came out of both the pandemic and the world recession earlier and better. Taking advantage of its dictatorial regime, of the weight of capitalist accumulation above the average of the capitalist countries (around 40%, twice as much as the other countries), China was the only one to grow among the big economies. And it sold vaccines, masks, and syringes all over the world. The resumption of its growth can already be felt with an increase in the international commodity prices.

China led in November 2020, the signing of the RCEP (Comprehensive Economic Partnership), a trade bloc that covers 2.2 billion people, a third of the global GDP, with countries like Japan, Australia, New Zealand and most of Asia…without the US.

The Chinese are more advanced in producing and contesting 5G technology markets around the world. They have just launched their cryptocurrency nationwide.

This means that the conflict with the US will continue and widen, even with Biden in office.

A new debt crisis brewing

Governments around the world have set aside neoliberal “minimal state” ideologies to adopt massive spending to get big business out of the crisis. As a consequence, according to Michael Roberts, “public sector debt levels are expected to exceed anything achieved in the last 150 years – including after World War I and World War II.”

The Institute of International Finance (IIF) recently reported that the ratio of global debt to gross domestic product will rise from 320 percent in 2019 to a record 365 percent in 2020. U.S. public sector debt skyrocketed during the pandemic to more than 110 percent of U.S. GDP.

Inevitably, after the pandemic, these deficits and public debts will be charged to the workers, with even more brutal attacks on public education and health, pensions, etc. In other words, the big corporations are saved now, and the workers will pay the bill.

In addition, the high indebtedness also affects companies, large ones and even more so small ones. As we have seen, there is an increase of “zombie” companies, which can go directly bankrupt with the end of the plans. And a good part of the small ones are already going or have gone bankrupt.

A gigantic speculative financial bubble

One of the most aberrant contradictions in the world economy is between the evolution of the real economy and the stock markets around the world. While production, investment and employment had historic falls in 2020, the stock market in the US and most of the imperialist countries had historic highs.

The explanation is simple. As we have seen, a good part of the money from the governments’ plans handed over to the banks and big companies was not invested in production, but went into speculation. With interest rates close to zero or negative, companies apply the money received for free in stocks, bonds and currencies, making high profits. There is a speculative fever the extent of which is almost unimaginable for workers.

Marx called this, speculative capital. The real capital, invested in production, which generates surplus value, is that which is in the automobile factories in the US and China, in the ABC Paulista area, as well as in the textile factories in Haiti, Bangladesh, etc. But companies also raise funds for investment, with the issue of stocks and bonds, which presuppose future profits. There is a market around these shares, which can take off into a speculative process, which is what is happening at this moment. In other words, there is a bet on the future, based on the capitalists’ own calculations that depend on other investors believing in these calculations that are presented to them. This is how waves of outright investment in stocks are created, the so-called ‘herd effect’, which in many cases can result in millionaire losses for small investors and even bankrupt financial groups that are vulnerable to the downfall, as happened in 1929 and in the recent crisis of 2008. The big speculators – such as the giant funds – buy and sell these financial assets, raising and lowering the prices.  As money is abundant, the prices of stocks and bonds soar.

By Bloomberg’s calculations, while the profits of global listed companies fell 15% in 2020, global stocks rose 18%, and the Nasdaq index of technology companies rose 51%.

A company like AMC Theatres, the largest global chain of movie theaters, with empty or closed theaters, earned $600 million on the market. It is worth more in the stock market today than when the theaters were full.  Carnival Cruise, which operates cruise ships, almost completely paralyzed, raised $4.5 billion in new shares.

Tesla is a different example, as it is a factory with a great future for its bet on electric cars, as well as in the production of solar energy panels. It is having great success, producing 367,000 cars in 2019, 500,000 in 2020, and plans to reach 800,000 in 2021.

However, Tesla’s stock has risen brutally, not only because of its position as a company of the future, but because of the ongoing speculative process. Its shares rose 743.4% in 2020. This has led to Tesla having a higher stock market value today than the other automakers all together, such as GM, Ford, Toyota, Fiat Chrysler, Daimler.  Just compare it with actual production, to see that in the United States alone, Ford sold 2.41 million cars, GM, 2.9 million, and Fiat Chrysler 2.89 million in 2020. That is, much more than Tesla worldwide.

There are indices from the bourgeoisie itself that measure the level of disconnect of stocks from actual production and profits. All of them, such as Schiller’s cape ratio, Tobin’s Q, Citibank’s Euphoria-Panic, indicate that the current situation in the stock markets is similar to the one that existed just before the crisis of 1929, and 2007-09.

Another expression of the current speculative binge is speculation in currencies, in particular cryptocurrencies such as bitcoin.

Bitcoin emerged in 2009, created by a group of programmers. It is a digital currency, in the form of an encrypted file, that has no backing in any currency or use value. It is not regulated by any official institution, no central bank like physical currencies. It has a finite number of units (21 million), to mimic the non-reproducible nature of gold, unlike physical currencies that can be printed or minted.

At first, bitcoin was worthless. But it grew at the expense of the discredit on currencies from the 2007-09 crisis. In 2017, bitcoin appreciated by 1880%, as much as $19,000 each. In 2018, it fell 85%, driving to ruin a portion of those who bet on it. In 2020, in the middle of a global recession, a second wave began, as large funds started investing in bitcoins, which appreciated 276%, reaching $27,000. This continued in 2021, with an increase of 80% in two months, reaching at the time of writing a rate close to $50,000.

Often, we workers cannot imagine the real meaning of large sums. In general, we start from references in our reality, such as what we could buy with our salaries. Large amounts are difficult to imagine, as are microscopic objects, invisible to the naked eye. How can you imagine winning 100 million dollars in a single day, which corresponds to roughly five Mega Sena jackpots? That was Elon Musk’s gain speculating with bitcoin. Even less can one really imagine the $12 billion earned in one day by Jeff Bezos from Amazon’s soaring stock prices.

Value is not generated in speculation. The gains, often huge, are actually transfers of the surplus value generated in the factories from the hands of some capitalists to other capitalists. A speculative spiral is generated that resembles a gigantic financial pyramid, which some day has to collapse to fit the real economy. This was the dynamic in 2007, with the subprime crisis in the real estate market. And it can happen again at any moment.

What are the dynamics of the current crisis?

We can summarize what we have said so far by pointing out that the capitalist economy is recovering from the recession of 2020 with a slow and uneven growth, marked by an increase in the polarization between the different sectors of big capital, and between capital as a whole and the workers. A capitalism that carries a heavy burden of public and private debt, and a speculative character of brutal dimensions.

This could precipitate a new and more serious recession in a few years, which would be the third of this long downward wave.

But, as we said before, big capital also seeks to renew itself in order to reach a new ascending wave of capitalism. To resume this new upward phase, capitalism needs a new technological base to be incorporated into production, to advance in a new world division of labor by somehow solving the US-China conflict, to impose new defeats on the living conditions of the proletariat.

This quest of big capital is also a process, with comings and goings, advances and retreats, victories and defeats in all these terrains of technology and economics, the relationship between states and the class struggle.

In our view, part of the current reality is the signs that capitalism is moving in this direction, and that it is using the pandemic and the last recession to do so.

First of all, from the technological point of view, there are already advances that can be incorporated into production to generate a new base, similar to the one that the automobile industries had as their driving force. 5G technology, the Internet of Things, electric and autonomous cars, 4.0 industry, a new energy matrix, are all very important technological advances that, if incorporated into production, can mean quality advances.

Secondly, there are already brutal setbacks in the standard of living of workers, which have become much worse in 2020 with the pandemic and the recession. The very strong advance in the precariousness of labor relations, the creation of a huge reserve army of workers with the unemployed masses, the reduction of wages, indicate a setback of more than a century in the conquests of workers.

It is a fact that in many sectors, this process is advancing. One example is electric cars. Tesla is the best known example, and is opening new large factories in Berlin and Shanghai. All the major automakers are investing heavily in this, with plans for billions of dollars in new, more efficient and cheaper models. Apple is negotiating a partnership with GM and Hyundai to produce an electric car. GM has announced that by 2035 it will produce only electric cars.

This is not simply a technical problem. It involves a struggle between new capital and old capital that is invested in the production of combustion cars, along with oil production, refining and distribution. This messes with investment of billions of dollars in top sectors of the economy, such as the automobile and oil industry. In some sectors, it is the same big companies that are reconverting. In others, there are inter-bourgeois clashes, with distinct portions of the bourgeoisie with long-established political relationships with parties and governments.

For example, Trump has always been linked to the oil companies’ sector that refuses a new energy matrix, and therefore denies the Paris Accords. Biden took over and, in his plan, points to a new energy matrix, even with the support of a sector of the oil companies that accepts and invests in this, but is beginning to have friction with a sector of the oil companies linked to fracking in the USA.

There is no imperialist strategy for real ecological change. On this ground, there are no “ecological interests”, but capitalist interests that arise from investments in different areas, disguised by ideologies. However, there is no reason to ignore the inter-bourgeois crises that arise from the imposition of reality.

There are already signs that the electric car projects are going to extend significantly. Last November in England, Boris Johnson sanctioned a law that will ban the sale of new cars powered by gasoline or diesel from 2030.

5G technology and Industry 4.0 are already part of the plans of governments and sectors of the bourgeoisie for the coming years.

Little by little, new consumer habits become the needs of humanity and become widespread. Today, smartphones are part of people’s daily lives worldwide, determining new patterns not only of communication, but of consumption, even though this doesn’t reach the most impoverished sectors in the same way it does the middle class. Many young people no longer want to buy cars, one of the consumption dreams of past generations. They just take uber or rent cars when they need them. Consumption of food purchased over the internet became widespread because of the pandemic, reduced restaurant attendance, and created a gigantic fleet of food app transporters on motorcycles and bicycles, with workers generally earning very low wages.

The new precarious jobs do not include vacations, 13th salary, retirement. In large factories, there are legions of outsourced workers who fragment the workforce. In the services that are expanding, almost all of them are already like this. It is the so-called uber phenomenon. If you work, you eat; if not, you starve. A huge reserve army of workers waits for new jobs with these same characteristics…or worse.

All these reality data already exist in great extent, even more so after the pandemic and the recession. We can characterize these as signs of capitalist barbarism that are spreading.

Are the foundations then already in place for a new cycle of capitalist expansion? Not yet. The rate of profit and the political instability do not yet allow the bourgeoisie to impose these new technologies and workers’ conditions on a large scale in new productive plants worldwide.

The bourgeoisie does not speculate because it is a “bad, speculative bourgeoisie” as opposed to the “good, productive bourgeoisie.” It is the same sectors of the bourgeoisie that decide to invest productively or speculate, through the big funds that dominate the planet. And, if today they mostly decide to speculate, it is because the rate of profits is still low in production.

The crisis between the different sectors of capital, new and old, has not yet been resolved. The conflict between the US and China tends to increase.

But a possible evolution is that this slow recovery of the economy will follow with the deepening of the attacks on workers and the creation of conditions for sectional investments in the plants based on the elements of barbarism that already exist.

The most important element that will weigh on this economic terrain is the class struggle. Political instability, confrontations between revolution and counterrevolution will increase as a result of these extremely violent attacks on workers’ wages and rights.

It is not by chance that the uprising has reached imperialist countries like the U.S, with the struggles following the assassination of George Floyd, and has reached different countries, from Myanmar to Haiti and Chile. Even with this dynamic, it is clear that workers’ responses worldwide are still well behind the degree of attacks made. The paralyzing elements of the pandemic still weigh on the workers in many countries, due to the fear of contagion, the deaths, and the struggle for survival, as well as the restraint by the reformist leaderships.

The bourgeoisie needs to defeat the workers’ struggles to impose the stability necessary to create conditions for long-term investment in new industrial plants.

The workers need to defeat the bourgeois plans to prevent the extension of barbarism. The disjunctive socialism or barbarism is very strongly placed and should decisively influence the trends of the world economy.