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  The world is experiencing a succession of convulsive processes of the class struggle, with revolutionary ascents (such as those lived in Chile, Haiti, Hong Kong, Lebanon, Iraq, and others), and also counter-revolutionary coups (as in Bolivia).

             It is important to identify that there is a material basis for that reality, which has to do with the global economic crisis that comes from 2007-2009.

By Eduardo Almeida – Brazil

To respond to this crisis, the bourgeoisie imposes neoliberal plans that cause brutal setbacks in the situation of workers throughout the world. That is a fundamental part of the explanation of the radicality of the struggles. There are clear signs of barbarism in the world and the masses are reacting strongly against capitalism.

There is no mechanical relationship between economic crisis and mass struggle. Many times, the reaction to the economic crisis is a paralysis of the workers, due to the action of the reformist leadership and the fear of unemployment. But this time, what is happening is a furious reaction of the workers and youth against the harsh attacks, which lead to that feeling of “having nothing to lose.”

Those processes could be extended. There are growing signs of worsening economic crisis (the US-China trade war, the sharp expansion of financial bubbles, the decline of entire countries and regions) that point to the possibility of a new global recession in a relatively short time, such as one or two years.

In this scenario, you can imagine the mutually feeding effects of economic crises on economic policies.

This article seeks to explain the current economic situation and prospects

 

The long downward curve of the capitalist economy

The capitalist economy evolves through cycles. There are short cycles, generally from 5 to 7 years, which are determined by laws (essentially the evolution of the rate of profit).

There are also longer periods that incorporate several short cycles. In 1919, Kondratieff pointed out the existence of long waves of the capitalist economy in periods of more or less 50 years, with an ascending and a descending part. He gave them virtually the same character as the short cycles of capitalism. In Trotsky’s evaluation (inwhich he called them “capitalist development curves”), which we share, these long cycles have no predetermined duration nor the economic automatism of the short cycles. They are determined by extra-economic factors related to the class struggle (revolutions, wars), expansion (obtaining new territories), or technological evolution … We understand the current world economic situation as part of a downward phase of a long wave.

The ascending phase coincided with “globalization,” beginning in the 1980s and 1990s with the defeats of the revolutionary rise of the 1960s and 1970s and with the capitalist restoration in China and in Eastern Europe.

The downward phase of that long cycle had as its first political framework the defeat of that Bush military and political offensive, which was strongly expressed in the 2007-2009 crisis. That was the most serious crisis since 1929 and explained the change from the ascending phase to the descending phase.

 

Balances and imbalances…

The rising wave of globalization, in the 1990s was an equilibrium point of capitalism, using Trotsky’s understanding. Now, at the time of the downward wave, the imbalance predominates.

             Capitalist equilibrium is an extremely complex phenomenon.  Capitalism produces this equilibrium, disrupts it,                                        restores it anew in order to disrupt it anew, concurrently extending the limits of its domination. In the economic                                          sphere these constant disruptions and restorations of the equilibrium take the shape of crises and booms. In the                                               sphere of inter-class relations the disruption of equilibrium assumes the form of strikes, lockouts, revolutionary                                      struggle. In the sphere of inter-state relations the disruption of equilibrium means war or – in a weaker form – tariff                           war, economic war, or blockade. Capitalism thus possesses a dynamic equilibrium, one which is always in the                                            process of either disruption or restoration. But at the same time this equilibrium has a great power of resistance,                                   the bestproof of which is the fact that the capitalist world has not toppled to this day[1]

 

The first major element of imbalance in this descending phase is due to the very consequences of globalization.

Capitalism presupposes a clash of the productive forces with national borders, insofar as the tendency of capital is its international expansion, without respecting any borders. At the time of the rise of globalization, in the upward wave, there was a jump in the internationalization of production, with the reduction of customs tariffs and the qualitative expansion in the freedom of movement of international capital with neoliberal plans. That led to the expansion of international treaties and the preparation of even greater progress, with the United States-European Union (US-EU) and Pacific Pact formation pacts.

However, with the crisis of 2007-2009 and the fall in the rate of profit there is a tendency towards the crisis of these blocks and agreements. The EU is in full crisis, whose central focus is Brexit. The US-EU agreement was not finalized, with explicit conflicts between Trump and the German government, which were previously the pillars of that approach. In Asia there are two disputed treaties, with and without China.

The protectionist reactions of governments are expanding in the world, to begin with Trump himself, extending to populist governments of the right, as in Italy and other countries (with right-wing populism “against the EU”), a partial rejection of the process of globalization.

The downward curve causes increasing imbalances in important aspects of what was known as “globalization.” The world division of labor opened in the 1980s is in check. There are entire regions doomed to decay. This is expressed in important divisions of the bourgeoisie and in the sharpening of the class struggle.

We have a long period of this descending phase ahead of us, which will be expressed in short cycles with fragile growths and strong crises.

 

The specific form of the post-crisis recovery of 2007-2009

There are two specific characteristics of the 2007-2009 post-crisis recovery that need to be explained.

The first of these is that the exit found by the great bourgeoisie to curb the great crisis of 2007-2009 to prevent it from moving towards a depression similar to that of 1929 was the injection of large sums of states directly into banks and large Business. That occurred in unprecedented dimensions in history, and meant a gigantic transfer of surplus value to financial capital.

It is a fact that the bankruptcy of the banks was stagnant after the bankruptcy of the Lehman Brothers in 2008. There was no serial bankruptcy of the American banks as it happened in 1929. The General Motors (GM) was on the verge of bankruptcy, but it was saved. There were crises of states, which were lowered in the world division of labor, but in general they were on the periphery of imperialist countries (such as Greece and Portugal).

This mechanism of salvage of big capital, however, also had other consequences. In general, in crises, the bankruptcy of old capital allows the emergence of new capital, and that mechanism helps to recompose the profit rate and the emergence of a new growth cycle.

In this post-crisis period of 2007-2009, this specific feature of the salvage policy of large companies, contradictorily hindered the subsequent more dynamic recovery of the rate of capital gain.

There remained a whole sector of the economy with a low profit rate, and the economy as a whole with an idle capacity. For a more energetic recovery of the capitalist economy, a major capital burn was needed.

The second specificity of the exit from the 2007-2009 crisis was the role of China as a kind of auxiliary engine in the recovery of the economy, which in the imperialist countries had an anemic recovery.

As the second GDP among the countries of the world and a growth rate well above any imperialist country, China fulfilled that role. It was also decisive in that period for the “commodities boom”, which allowed significant growth for Latin America and Asia.

Taking that into account is important, because we can hardly see China fulfilling this role in case there is a new world recession now.

 

The possibility of a new world recession

The so-called short cycles of the capitalist economy are determined by the evolution of the capitalist’s profit rate. When there is a fall in that rate of profit, the tendency is for capitalists to stop investing, precipitating a new crisis.

There is no consensus among Marxists on this approach. There is a whole sector (to begin with Rosa Luxemburg) that understands that what determines the crises is the underconsumption of the masses and not the evolution of the profit rate of the capitalists.

It is important to note that some serious Marxist economists such as Anwar Shahik and Michael Roberts rescue the theoretical relationship of the capitalists’ profit rate with the evolution of the cycles, as evidenced by empirical studies. They do that both for the evolution of the long ascending and descending curves of the economy and for the short cycles.

In our view, we are at the end of a short cycle of the economy, within the downward curve that comes from 2007-2009.

There is currently a stagnation of the German economy, the leading car of the European economy. In the first quarter of this year it grew 0.5%, in the second it had a drop of -0.2%, and in the third, a growth of 0.1%.

The European economy as a whole points towards a slowdown and stagnation, albeit unevenly. The real social war against the workers and the reduction of the countries of the imperialist “periphery”, such as Greece and Portugal, were not enough to overcome the decline of the European economy.

Now it is some of the central countries that are experiencing a serious political and economic crisis, including England and France. And it is the EU’s head car – Germany – that is slowing the whole. Japan is in anemic growth (annualized GDP growth of 0.2% in the third quarter of 2019) with a downward trend.

China continues its deceleration process, with a growth index of 6.0% inthe third quarter of this year, the lowest in almost thirty years.It is important to note that Chinese data is strongly questioned by serious economists, who point to the dictatorship of Xi Jinping making up statistics. In addition, the entire future of the Chinese economy is obviously linked to the ongoing trade war with the United States. The world economy has, as it always had, and even more now, a fundamental reference in the situationto the United States.

Until this moment, the American economy had been growing at a faster rate than the other imperialist countries, taking advantage of its financial and parasitic control.

However, two elements point to a downward inflection of the US economy.

The first is the logic of economic cycles: after ten years of the last crisis, the tendency is for the current boom to point to a turning point towards a fall.

The second has to do with the latest data, which points to a real fall in the rate of profit (formerly masked by Trump’s tax reduction) and, now, a fall in durable goods parcels of 2.1% in April of this year (Michael Roberts, “Global Fall”, May 2019). The deceleration can be explained in the evolution of GDP (3.1% in the first quarter; 2.1% in the second; 1.9% in the third).

In addition, there is a definite decline in the economy of emerging countries such as Brazil (GDP decline of 0.1% in the first quarter), Argentina, Turkey and South Africa.

The only one of the BRICs with significant growth (above 6%) is still India, although it is also slowing since the last months of 2018. This reality is leading to the possibility of a new world recession in one or two years.

 

Big capital struggles to reverse the crisis

That possible recession will not necessarily have the severity of the one that occurred in 2007-2009. There are important againsttrends in reality, which can mitigate the effects, postpone or even prevent a new recession.

In reality, the imperialist bourgeoisie is trying to recompose its profit rate in such a way that it can avoid a new recession, and even enable a new upward curve of capitalism.

For imperialism to resume a new upward cycle, it needs to impose qualitative defeats on the world proletariat to rebuild its profit rate. But it also needs a new world division of labor, as well as new productive sectors that allow the launching ofa new great cycle of investments on a world scale.

Imperialism is looking for the conditions for a new ascending phase, transferring unpublished sums from states to large companies, and imposing very hard austerity plans in a true social war against workers to rebuild their profit rate. It is also necessary to define a new world division of labor, as well as new productive sectors that allow the launching of a new great investment cycle.

It is a fact that the bourgeoisie is trying to implement that recomposition with those mechanisms that we call against tendencies.

The first counter trend is the application of hard plans to increase the rate of surplus value and recompose its profit rate. It is important to note that, in most cases, the bourgeoisie has the open support or not of union bureaucracies and reformist parties, and manages to impose its plans. As we said, the social consequences already include the existence of elements of barbarism in many countries of the world.

The second is access to new technologies that can be incorporated into production. There are signs that this can happen with the incorporation of 5G networks, the internet of things[2], electric cars, and other advances. It may be that the bourgeoisie is touching real possibilities of advancement in production. It is said that with 5G networks it would be possible to reduce labor force in several sectors of the economy.

The third counter-trend implies changes in the world division of labor and in the system of states. The transformation of imperialist countries into semi-colonies, such as Portugal and Greece, and the reduction of countries such as Brazil, Argentina, South Africa, and others in the world division of labor is part of that. That is, we can face qualitative setbacks in the location of countries in the international division of labor and in the face of a heavier capital burn. That is precipitating the economic decline of countries and entire regions.

It is important to keep in mind that the last times that imperialism managed to reverse a downward curve for a new ascending were moments of great changes, with the arrival of imperialism towards the end of the 19th century and the beginning of the 20th century; the period after World War II , with the whole process of rebuilding Europe; and the post-restoration moment of capitalism in Eastern Europe and China.

Until now, in spite of all the efforts of imperialism, the world economy shows no signs of overcoming the crisis started in 2007-2009. There is no recovery in the rate of profit that enables a qualitative expansion of investments. That results in the continuity of the crisis.

 

The degree of financial parasitism can aggravate a new global recession

The dynamics of the economy can also point to a new recession, as or more serious than that of 2007-2009. There are trends in reality that point in this direction.

The first element is hypertrophy and financial parasitism that were already present in 2007-2009, having advanced much more.

Financial capital controls the world at levels higher than the one known by Lenin when he defined that as one of the central characteristics of imperialism.

As we saw, the way found by the bourgeoisie to escape the crisis of 2007-2009 was the injection of capital into banks and large companies to avoid bankruptcy.

The result is that aggregate global debt went from 177 billion dollars (September 2018) to 247 billion dollars.

The degree of parasitism and hypertrophy of financial capital generate mountains of fictional capital that are artificially valued at impressive levels.

The only way to create surplus value is through real production. These masses of fictitious capital are artificially valued, create speculative bubbles and dispute surplus value with other sectors of the economy.

They serve to sustain the growing economy, like a gigantic financial pyramid, but they can, when the cycle turns down, qualitatively expand the worsening of the crisis, as happened with the real estate financial bubble in the United Statesin 2007-2009. Today there are financial bubbles much larger than those of 2007-2009. The consequences of that reality at this time are serious. A new world recession can trigger several of these bubbles, deepening the crisis in the direction of a new depression. And the resource used in these last ten years, to transfer large sums to the banks to stop the crisis, already shows clear signs of exhaustion.

 

The United States-China trade war and its consequences

The second element that can aggravate a possible global recession is the trade war between the US and China, one of the most prominent elements of the global economic scenario.

There is no longer the bourgeois unity that marked the upward curve of capitalism in the rise of globalization in the 1990s.

That is a new factor and indicates a deeper imbalance of theworld division of labor and the system of states, which can have important consequences in the generation and aggravation of a possible new recession.

The explanation of the commercial war is a crisis in the world division of labor. In the period of rising globalization, China became the “factory of the world,” with imperialist investments that took advantage of low wages and bourgeois dictatorship.

However, the growth of the Chinese bourgeoisie, supported by the huge Chinese market, sustained by a rate of accumulation well above the average of the imperialist countries and with a banking system still under state control, led to the country changing its location in the world division of labor. It is almost a symbol that Apple that produces in China has been surpassed in the sale of cell phones worldwide by the Huawei.

The dispute around the control of the 5G network is one of the most important bases of the ongoing commercial war. And a demonstration that this is not just the work of the “crazy” Trump is that Google, Intel and Qualcomm supported Trump, as well as other imperialist countries.

US imperialism wants to prevent China from advancing in the 5G network and wants to impose an opening of the financial market in that country, ending the particular advantage of the Chinese bourgeoisie in this area. Trump has the support of European imperialism and Japan for that.

But nothing ensures that imperialism will be able to impose that setback on China. Xi Jinping has just visited Putin, and as part of that the Huawei closed an agreement with the MTS – Russian communications company – to advance technological development and the implementation of 5G networks. Until now, the Chinese government has not shown signs of acceptance of the opening of the financial market.

As we saw, China has been lowering its growth rates, already reaching 6%. Now it is being more affected by this trade war, with the possibility of lowering further.

This trade war is also not restricted to the dispute between the United States and China. There are important clashes between the United States and the European Union. The clashes between Trump and Merkel on the EU continue, as in the case of Brexit.

Trump’s protectionist stance calls into question important trade flows and the very existence of the WTO [World Trade Organization]. The rupture of the agreement of Iran, on control of nuclear weapons, and that of Paris, increases inter-imperialist divergences.

The reality is that there is no longer the great bourgeois unity that marked the rise of the ascending phase of globalization. Protectionism is growing from the most important imperialist center itself, the United States. But not only from the United States.

Bourgeois inter-imperialist disputes already had consequences in the fall of world trade growth that fell from 5.1% in 2017 to a forecast of 2.1% in 2019.

In addition, this trade war is leading to political wear and tear at its most important points. It can harm Trump in his re-election attempt in 2020, in the event of a recession in the United States. And it can precipitate a crisis in the Chinese dictatorship, if it generates an important ascent of the labor movement in the country.

The trade war can aggravate a possible global recession. In the opinionof Michael Roberts, itcan be the rapier of that recession.

 

The class struggle can directly affect the economic crisis

There is a direct relationship of the class struggle with the evolution of the economy. Economic crises influence class struggle and receive its consequences.

The revolutionary gains that affect countries on several continents, such as Chile, Ecuador, Haiti, Hong Kong, Iraq, Lebanon, Iran, Sudan, Algeria, have heavy consequences in those countries, as well as in the regions involved. It is possible that in the next period that rise will reach countries of greater economic weight on the world stage, such as some of the imperialist countries or even India and China.

It is important to remember the reflections of the class struggle in the last downward curve of the capitalist economy, in the 1960s and 1970s.

There were great convulsions of the class struggle, with revolutionary processes and counterrevolutionary military coups in various regions of the world.

It was the period in which the May of ’68 occurred in France, the Portuguese revolution of 1974-1975,and the victory of the Vietnamese revolution in 1974. There were great ascents in several countries of the world.

Now again there is a tendency towards the polarization of the class struggle, which presupposes a confrontation between revolution and counterrevolution in a harder and sometimes violent way.

The existence of revolutionary processes does not mean that victorious revolutions will occur. The crisis of revolutionary leadership can ultimately decide the resolution of those crises. Revolutions and counter-revolutions, promotions and bonapartist blows may occur.

What is happening today in the world already indicates towards that process. At the time we wrote this text, there is an ongoing revolution in Chile, with more than a month of hard fighting despite the repression of the Piñera government.

In Ecuador there was an insurrection that combined the occupation of Quito by the natives, for twelve days, a general strike of five days, an uprising of the popular neighborhoods of the capital, and the blocking of the main routes of the country by the peasants.

In Haiti there is an uprising of the masses for the overthrow of the Moïse government for more than two months.

In Hong Kong, the mobilizations directly question Carrie Lam’s government, even after he withdrew the decree on extraditions that motivated the beginning of the struggles. The problem is that the fate of the Hong Kong process is directly related to the evolution of the political situation in China, of which the territory is officially part today. The authoritarian regime of Hong Kong is directly supported by the local bourgeoisie and the Chinese dictatorship.

There is an uprising in Lebanon, which directly questions the government and the national unity regime in which Hezbollah participates. There is another uprising in Iraq, against the Shiite regime. In Iran,strong struggles against rising fuelprices are growing.

The counterrevolutionary coup in Bolivia is part of the same convulsive process of confrontations between revolution and counterrevolution.

When this article is being read, new processes will probably have assumed the importance of these described here.

That element of political reality, in our view poorly evaluated by most Marxist economists, is the decisive factor inthe dynamics of the world economy.

The enormous instability caused by political crises and revolutionary ascents directly affects the willingness of large capital to invest. That can precipitate or aggravate the economic crisis. On the other hand, if the bourgeoisie manages to defeat those processes, it will have more conditions to impose its plans and escape the crisis.

These great struggles are symptoms of the crisis started in 2007-2009. And, on the other hand, they are also decisive for the evolution of the economy. As it is a struggle, the result is still open. The evolution of the class struggle will have decisive importance in the development of the economic crisis.

[1]Report on the World Economic Crisis and the New Tasks of the Communist International –  www.marxists.org/archive/trotsky/1924/ffyci-1/ch19.htm

[2] The “internet of things” is a concept that refers to the digital interconnection of objects for daily use and, from there, its automatic and / or semi-automatic operation. Translator’s Note