- Albert Einstein
On April 2nd, 2009, the leaders of the so-called G20 ended their summit in London, UK, with the commitment to inject another $1.1 trillion to the veins of the ailing world economy.
About 2/3 of this amount, more than $750 billion goes to the International Monetary Fund (IMF). This amount will be added to its previous $250 billion resources.
Notorious IMF along with its twin usurer the World Bank (WB) are the main tools of exporting finance-capital (industrial capital + monetary industrial capital) globally.
Stringent conditions attached to the IMF and the WB loans are the leading cause of the current economic meltdown. These loans have stripped even apparently the most powerful countries of their political independence. Borrowing countries were exposed to the greedy eyes of the giant international monetary associations.
The IMF and WB’s insistence on deregulations, free trade agreements and privatization of a country’s assets and resources made that country defenseless against the neo-liberal policies of the World Trade Organization (WTO).
Domestic privatization of a country’s assets and resources made that country an easy prey for the take-over of the big money, the finance-capital. Thus selling of domestic private businesses to the giant internationals became much easier, due to the clauses of free trade agreements. These trades did not need any governmental intervention. Powerlessness of the domestic legislative bodies due to the deregulations made these deals feasible.
Everything from factories, communication services, housing projects, hospitals, schools, and media, to the lands, waters, and mines were put on auction and sold to the international private sector. The result was the disappearance of the native industries, agricultures, social services, and even the burgeoning democracies were sacrificed.
To render a free hand to the greedy private sector and under the pretext of fighting budget deficits and saving money, most of the competitive public institutions, hospitals, nursing-homes, schools … were closed by the puppet governments.
Workers and working peoples were laid-off and their workload burdens were put on the shoulders of those who kept their low-paid jobs.
To summarize, the over-all result of the IMF, WB and WTO’s Neo-liberal policies bankrupted countries, caused rampant unemployment, impoverished peoples and mush- roomed shanty towns.
The exportation of jobs to low-wage countries, the merger of companies and the automation of industries resulted in massive unemployment in the metropoles. Bankrupted countries cannot pay back their loans, so are jobless people who cannot spend, as they cannot buy and most importantly they cannot pay off their loans and mortgages.
Meanwhile, the greedy finance-capital resorted mostly on the more profitable and convenient business of usury. Money as a commodity reproduced itself by different exotic names like derivatives, hedge funds, mutual funds and so on.
Central banks printed money to cope with the increasing demand of the money market industry. Printed money as factitious capital surpassed the amount of real capital. It is estimated that the amount of these speculative and factitious capital reached to more than $500 trillion globally.
Here the question is that if you own this amount of capital, are you able to buy the same amount of goods and services, considering the current real prices? The answer is no, because the entire world’s output is only about $66 trillion (WB, revised 24 April, 2009), thus the remainder or the $434 trillion is nothing more than paper printed and electronic created money. You can burn them up or delete them by a touch of a button, and nothing will happen in the real economy.
Nevertheless this huge amount of capital was not idle and forced its way to the global market by every possible mean: from overt forces, to covert intrigues, through installing puppet regimes or through bribery.
According to the World Bank Institute (WBI) (April 08, 2004), “each year more than $1 trillion is paid in bribes… these bribes are made worldwide in both rich and developing countries”. Bribes are paid to the rulers, influence peddlers and their cronies, for the purpose of creating factitious markets. And of course by inciting conflicts, tensions and wars to satisfy the ferocious appetite of the Finance-Military Complex. Bribes have fertilized parasitic security and vigilant paramilitary forces as tools of oppression and subjugation against the pillaged nations.
To stabilize itself as real capital, factitious money found its way through the $1 trillion business of producing and trafficking of drugs. To secure its sphere of influence, this dirty capital laundered itself forcibly and corrupted the systems from the top to the bottom. As economist William K. Black said, the financial downfall of the US in the wake of Bush years is due to “the most elite institutions in America engaging in or facilitating fraud” (April 3, 2009, PBS’ Bill Moyers Journal).
Here is the time to mention that financial downfall is engendered in the flaws of capitalism itself. For instance, we have witnessed different durations of economic recessions since the Great Depression of 1930s, but many economists comparing the Great Depression of 1930s and this Great Recession believe that, “this is a depression –sized event.” (Voxeu.org. April 6, 2009).
The current recession officially started since the fall of 2007 with the sliding of the US stock market, and the main culprits were the big monetary associations and first of all the IMF, as explained above.
Yet the IMF is assigned to turn the world economy around and prevent swift fall of this intractable recession into a great depression as the world faced, back then in 1930s.
The Great Depression of 1930s also started with the crash of Wall Street in the fall of 1929. The injection of money into the system by the US government temporarily helped the market recover into the April of 1930. Then the economy continued it’s down falling in spite of many positive factors which we lack now in the current situation.
In the 1930s, there was nearly an absence of derivatives and powerful hedge funds, the main tools of making money by money and creating a bubble economy.
The existence of bank regulations, depositors’ protection and governments’ will to spend in the infrastructure, which took place in response to the Great Depression, as part of President F.D. Roosevelt’s (1933-45) the New Deal.
The existence of powerful workers unions, which not only pressured the US government to empower the public sector, but also organized the jobless and demanded the government to employ these people in the public sector.
The existence of fewer giant banks, with smaller shares of total market. Then the famous slogan was: “What is good for General Motors is good for America.”
A relatively tame global scene, for the plunderers and exploiters. Latin America, Africa and most parts of Asia were considered colonies, neo-colonies or backyards of the imperialist and colonialist powers. Vast countries like India and Indonesia were colonies of the UK and the Netherlands respectively. Manchuria (1931) and eastern China (1937) were occupied by the militarist Japan, and the rest of that country was entangled in a nationalist war, civil war and Revolution. The Soviet Union was still struggling to cope with the impacts of WWI, the imperialists’ interventions after the October Revolution, civil wars and post Revolution conflicts. In the east, both China and Soviet Union were not considered as economic competitors at all.
In the west, in the most Depression stricken continent, many European nations misguided by the capitalists’ propaganda embraced fascist and authoritarian nationalist regimes. Miserable European nations blamed each other for their misfortune and as John Reed once wrote about WWI (1914-1918), “Nations are ready to fly at each other’s throat like dogs.” They gave the imperialists a blank check to fight for redistributing the world’s lands and resources at their expenses.
Consequently WWII started in 1937, and the whole Europe was nearly destroyed, more than 70 million people were killed and millions were disabled during the eight years of war globally. Parts of Asia and Africa were ruined too. Untouched directly by the war, U.S. president F.D. Roosevelt’s New Deal, eased the economic hardship in America, but failed to recover it completely. Some of the job seekers were sent to the battlefields; thousands of them were killed or maimed. The US government commandeered automakers and other industries to make tanks, jeeps, guns and war-planes. As a result, the unemployed found jobs in the profitable war industry.
With the end of WWII in 1945, rebuilding of Western Europe started under the Marshall Plan (1948). Cheap European labor, nearly free raw materials extracted from Latin America, Africa and Asia made that rebuilding possible. Economic recovery heralded the rise of the U.S. as the spearheading imperialist power on the global scene.
Now in 2009:
Banks alone control $200.4 trillion of derivatives, (Martin D. Weiss, Ph.D., March 30, 2009). According to the 2008, fourth quarter report by the Comptroller of the Currency (OCC), “America’s top five commercial banks control 96% of the industry’s total derivatives, while the top 25 control 99.78%. In other words, for every $100 of derivatives, the mega banks have $99.78… while the rest of the nation’s 7000-plus banking institutions control a meager 22 cents.”
Thanks to the Neo-liberal deregulation policies of the last 25 years, there are no bank regulations. Unlike F.D. Roosevelt’s New Deal which preferred and empowered industries over banks, now the reverse is happening. Central banks and treasuries continue their policy of creating money to bailout (subsidize) the failing banks in expense of future generations of tax-payers hard work. This policy inflates the bubble economy even more forcefully. That is what was endorsed by the “G20” leaders. Printing new money to pay the old debts is a Ponzi scheme much bigger than Bernard Madoff’s swindle.
The absence of influential workers unions. Unions are now quantitatively and qualitatively weak and submissive. They become weaker and weaker by the anti-union trends and anti-union regulations both by the public and private sector.
The leading industry in the US is the financial industry, at about 24% of GDP, or $3.36 trillion real capital. While manufacturing industry is 12% or $ 1.18 trillion. Now the slogan has changed to, “what is good for Wall Street is good for America.”
On the global scene, more than 2/3 of Latin Americans have chosen an independent and a socialist way of growth. They are no longer an easy prey for the imperialist and colonialist pillagers. China has become a world economic power and has signed bilateral economic agreements with the majority of the Latin American, African and Asian countries. Unlike unilateral, greedy and exploitative pacts of the imperialist powers, China has agreed to import oil and raw materials from these countries and provide them with factories, roads, schools, hospitals, etc, etc. Russia is a main energy exporter, rich and a competitor against imperialism in the global scene. Russia like China has signed relatively fair economic pacts with many countries around the world. These agreements mean that when a niche is filled for good in the global theatre, the unfit will die out.
However we are not living in isolated economic islands. “Because the world is now so much interconnected and because the banking system is now so big, we face a synchronized downturn in almost all countries… What we face now could, in fact, be worse than the Great Depression.” (Quote from Simon Johnson, ex-chief economist of the IMF, April 04, 2009, The Atlantic).
Twelve days later, our notorious IMF with so much money in its hands warned that, “The current global recession is likely to be unusually long and severe, and the recovery sluggish.” (BBC News, April 16, 2009). Hence the IMF is asking again for more money to deal with this unusually long and severe recession. As AFP reported on April 26, 2009, “ The IMF and WB, have warned that the global economic crisis is turning into a ‘human calamity’ and called on members to speed up the pledged aid and give even more to help the most vulnerable.”
In an unusually Long and Severe Recession, say Depression, the system will not recover with creating factitious money again and again, to be lent to the failing countries, banks, companies and individuals to pay their old debts. The IMF assignment only postpones the demise of the system. As we saw, the remaining option to salvage the crumbling capitalism is war. And, because the economy is so much bigger than what it was in the pre-WWII era, this war must be much bigger. Except that now the world is saturated with atomic bombs.
Being scientific and believing in the power and ability of the people, another world is possible; Socialism is already in progress in parts of Latin America.