The worst economic crisis since the Great Depression
- and worse to come
EXCUSE ME,
WHERE'S THE
UNEMPLOYMENT
QUEUE?
Winfried WOLF In the first half of 1982 and the beginning of 1983, the general crisis of capitalism remained grim. Major firms faced difficulties or bankruptcy. In the United States alone, there were 33 bank failures in 1982, a record since the second world war.
The list of countries on the brink of bankruptey is growing longer and longer, and the sums involved are continually mounting. Who is interested any more in the mere 60 or 70 billion dollars the COMECON countries have borrowed from Western banks? This is now less than the debts of Mexico and Brazil, and both countries have in fact ceased payment.
On January 25, 1983, the scenario took place that the simple minded thought would be the condition for an international upturn, but which sent a chill through the banking and financial world. The OPEC cartel failed to agree on a common price and production strategy, and the market price of crude dropped. At the end of January 1983, it was 20 percent lower than the official price of 34 dollars a barrel. And a further drop to 20 dollars a barrel cannot be excluded.
You might think that all those demagogues who have been blaming the economic crisis of capitalism for a decade on the "oil problem" and the "sheikhs, could now relax and inform public opinion that the days of mass unemployment were over.
But it is the opposite that has been happening. Only a few hours after the failure of the OPEC ministers' conference in Geneva, disarray reigned on Wall 26
Street. In a few minutes, the Dow Jones average showed a considerable drop. It was not just the oil multinationals, moreover, that found the ground slipping out from under their feet. More than 80 percent of the stocks traded on Wall Street also suffered losses.
The banking world fears an international financial crisis. Countries such as Mexico and Venezuela, which borrowed money on the expectation that their incomes would rise steadily as a result of oil exports, are now disappointed, and their major creditors no longer have great hopes of getting their money back in a reasonable time nor even of collecting all the interest owed. These fears are shared even far from the centers of the capitalist crisis, as in Vienna (see Die Presse, Vienna, January 26, 1983).
The economic press of the big bourgeoisie has been talking about these problems in a much franker way. Even before the events mentioned above, the South African gold-mining company, the largest one in the world, published a full-page ad in several big international papers. It was introduced by headlines from 1929, the year of the Wall Street crash. The text began as follows: "The Wall Street crash continued from September 1929 to April 1932. It led to the fall of the Dow Jones index from 381 to 56, that is, a decline of 85 percent. During the same period, 4,000 American banks had to close their doors. At the same time, the price of gold rose."
The ad included a coupon inviting readers to take this new investment opportunity: "I would like to invest in Krugerrands [the South African gold moneyl. Could you send me a copy of
IT'S HERE!
the Krugerrands catalogue?"
In January 1983, Henry Kissinger, a man who could hardly be suspected of tender feelings for the working class of the third world, felt obliged to launch a dramatic appeal, along with a large number of well-known bourgeois economists:
"THE SURVIVAL OF OUR
FREE SOCIETIES IS AT STAKE"
"In the democracies of the industrialized world, millions of wage earners have lost their jobs. The developing countries are collapsing under the weight of indebtedness. In the third world, restrictive economic policy is threatening to bring about political chaos. Helter-skelter changes in the scheduling of debt is only putting off the inevitable crisis. Trying to put economies in order by more and more austerity is becoming increasingly untenable, even for the advanced democracies. What we face now is more than an economic challenge; the survival of our free societies is at stake." (Handelsblatt, January 25, 1983.)
In fact, late capitalism is going through its deepest and most prolonged economic crisis since 1929. The "slipping" of the recession into economic collapse resulting from the bankruptcy of companies, banks, and countries is not at all impossible. To the contrary, this possibility becomes more and more probable as the depression continues.
At the beginning of 1983, the imperialist governments faced a portentous decision. Should they turn once again toward an expansionist policy, risking a new rise of inflation that would lead at a later time to a much more serious crisis,
UNEMPLOYMENT (OFFICIAL FIGURES)
deficits (around 180 billion dollars in
1982). In the US, as well as in Great
Britain, we are seeing absolute impoverishment on a massive level. (1)
COUNTRY END OF 1975 in % in absolute numbers in millions
UNITED STATES 8.4 8.0
CANADA 7.2 0.8
JAPAN 1.9 1.1
EEC in total 5.1
WEST GERMANY 4.9 1.1
FRANCE 4.0 1.0
GREAT BRITAIN 3.6 1.3
ITALY 5.9 1.3
BENELUX 4.6 0.3
SMALL COUNTRIES OF
WESTERN EUROPE 0.8
TOTAL (WITHOUT
AUSTRALIA AND NEW
ZEALAND) 15.8 for the sake of defusing the crisis and threatened collapse of the world banking system? Should they relentlessly pursue austerity policy, "clean house" by an means of a prolonged crisis, and thus take all the political and economic risks such a policy involves?
THE GREATEST NUMBER OF UNEMPLOYED IN HISTORY
The depth of the crisis is shown by the extent of mass unemployment. beginning of 1983, the number of registered unemployed in the industrialized countries was higher than at the height of the 1929-32 world economic crisis. It is worth looking at this figure more closely, since it is very often underestimated so as to put the capitalist system in a better
It is for the developed capitalist countries alone, which are members of the Organization for Economic Cooperation and Development (OECD). Thus, it does not take account of unemployment in Turkey, which amounts officially to 3 million persons and is in reality already 5 million. It entirely leaves out the African and Latin-American continents, regions in which unemployment tends to rise more rapidly than in the imperialist
What is more, this figure is based entirely on the official unemployment statistics, which do not include persons who have become discouraged and are no longer looking for work for this reason (in the US alone, it is estimated that there are 2.5 million unregistered unem-
Despite all these limitations, the figure is still frightening.
Over the past decade, the number of unemployed in the OECD countries has tripled. In comparison with the 1974-75 recession, the number has doubled.
1970-71, there were 10 to 11 million jobless registered in the following countries:
Canada and the US, Japan, Australia,
New Zealand, and the West European states. At the height of the 1975 recession, there were already 16 million.
At the beginning of 1983, there were 33
Furthermore, the present recession has been marked by a still more impressive
SEPT. or OCT. 1982 in % in absolute numbers in millions 10.8 12.0 12.7 1.4 2.5 1.5 10.3 12.0 8.6 2.1 9.6 2.1 12.8 3.5 10.9 2.5 14.5 1.2 4.0 30.5 spiraling of unemployment figures. 1975, there were 17.5 million unemployed. In 1980, it was more than 20 million, in 1981, 25 million, in 1982, more thar 30 million, and in the spring of 198 the number grew to 34 million.
### AMERICAN WORKERS
Reagan waged and won his 1980 campaign, his alleged ability to deal with the economy, left him looking ridiculous at the beginning of 1983. "Are things going better today than four years ago?" The crisis has continually worsened. ployment has climbed over the 12 million mark. This is a mass phenomenon affect1982, some 28 million people were out of work for varying periods. Besides the 12 million who were left without jobs in 1982, we have to count 7 million workers on short hours. Some industrial centers set records, such as the steel city of Youngstown, which had a 90 percent unemployment rate. In Detroit, not long 250.000 jobless were registered, which amounts to 25 percent of the economically active adult population.
44,000, the number of bankruptcies reached its highest level since 1930-31. At the end of 1982, the rate of overall industrial capacity was 65 percent. It was even lower in certain industries, such as steel. In spite of repeated predictions of a new "takeoff," the US GNP dropped by 2 percent in 1982. The drop was even sharper in the last quarter of 1982 (-2.5 percent). the end of 1982, industrial production was 7.5 percent lower than at the beginning of the year. Overall, it was 15 percent below the level that prevailed before the onset of the crisis in 1979.
U.S. NATIONAL DEBT SWELLS WHILE
REAGAN CUTS WELFARE SPENDING
Reagan's economic policy, combining tax cuts with sharp cutbacks in the social services and massive increases in military expenditures, resulted in huge budget
Millions of people are suffering at the same time from the economic crisis and cuts in social assistance. Thus, only 40 percent of the 12 million American unemployed are collecting benefits (the general rule is that you get unemployed benefits only for 26 weeks and after that you can get "special aid" for 13 weeks).
The average period of unemployment rose from at least 100 weeks in 1979 to 161 at the end of 1982. As a result, growing layers of unemployed are more and more quickly reaching the stage where the most they can expect is
However, welfare is only available to those whose incomes are under 2,000 dollars a year, in a country where because of the lack of public transport a private car is a necessity.
The lack of a strong social "safety net" in the US is leading to a process of progressive impoverishment, with people giving up cars, facing more and more difficulties in getting their children to school, and getting evicted from their homes. In the state of Washington, a law was passed in mid-1982 allowing marshalls to evict people on weekends. Despite a rate of 30 evictions per day, a "backlog" of 9,000 homes scheduled for evictions piled up.
An army of people is growing who are obliged to eke out an existence in trailer caravans or tents. According to official figures, in 1982 the camping grounds housed more homeless people than tour-
In these conditions, the religious ideology that has been developing under the Reagan presidency, as an accompanyment of the crisis, is acquiring a material
After massive social cutbacks, the
US president has advised the "new poor" to appeal to the churches.
its imperialist competitors, Japan seemed once again to have escaped the worst of the crisis. In fact, in 1982 Japan experienced a 3 percent growth in its GNP. But the situation in Japan today is the same as in West Germany during the 1974-75 crisis. For historic reasons, it is still enjoying greater relative economic stability than its com-
But this stability visibly weakened in 1980-82. This crisis has put a rein on the basic driving force of Japan-
The crisis has also upset another fac tor that played an important role in Japan's long period of growth.
of 1982, Japanese exports showed a drop of 10 percent by comparison with the level at the start of the year. Japanese automotive exports to Europe were 25 percent less than in 1981. This setback is all the more notable because at the same time the yen was devalued by 17 percent against the American dollar, which had
1. tion of the masses" as a phenomenon of periods Karl Marx described "absolute pauperizaof capitalist crisis. he did not conceive of it as a gen- Despite many assertions to eral feature of capitalist production.
27
the effect once again of giving a boost to Japanese exports.
In 1982, the decline in exports brought on a drop in industrial produc tion (-3 percent in October 1982 by comparison with the start of the year). Automotive production also fell by 4 percent.
JAPANESE FISCAL POLICY RUNS
INTO DANGEROUS WATERS
This drop in exports and industrial production has coincided with the negative results of an expansionist budgetary
In September 1982, the authorities were obliged to declare a "fiscal state of emergency." The Suzuki government
In fact, public indebtedness has sharply increased over the last years.
government counted on strong rates of growth and the corresponding tax income. At the beginning of 1983, the public debt exceeded 400 billion dollars, amounting already to about 50 percent to the Japanese GNP
The new government of Yasuhiro Nakasone seemed at the beginning to be adopting an austerity policy. The defict was to be cut. announced for 500,000 public employees. But very quickly the direction was reversed, and the government returned to the expansionist budgetary policy. special program of more than 85 billion dollars was announced to stimulate the
Nonetheless, Japan remains one of the rare countries where economic factors exist that could produce a new upturn. The internal market is still growing. Even in 1982, real wages increased by 2 percent. At the same time, most of the big Japanese industrial firms were continuing their investment program with the aim of carrying rationalization even further, although investment in the economy as a whole remained stagnant. Finally, Japan has had more success with its energy-saving program than any other country. It has achieved the lowest per capita energy consumption of all the OECD countries. (2)
All these factors represent favorable initial conditons for an upturn, if Japan's competitors do not take still more protectionist measures against its exports.
In 1982 already, 30 percent of all Japanese exports to the United States were subjected to protectionist restrictions. The level of unemployment in Japan seems very low. The percentage of 2.4 (November 1982), which represents 2.5 million unemployed, is the lowest of all the big OECD countries. But this comparison is deceptive.
### JAPANESE UNEMPLOYMENT
On the basis of the official figures, the rate has more than doubled by comparison with the last recession (see Table 1). This amounts then, to exactly the same rate of increase experienced by all the 28
SEE? I TOLD YOU WE'D BRING DOWN INFLATION AND INTEREST RATES! other imperialist countries. In fact, all the experts start from the assumption that the official unemployed figures are not comparable to those of the other OECD members. If you apply the same criteria to Japan as to North America or the EEC, the really comparable percentage would be twice as high, around 4 to 5 percent. (3)
UNEMPLOYMENT GROWING FASTER IN EUROPE THAN IN U.S.
By comparison with the 1974-75
"Old Continent" passed North America, at least as regards mass unemployment. While in 1975, about 9 million unemployed were registered in the US and Canada, there were only 6 million in West Europe. Toward the end of 1982, the number of unemployed in North America reached 13.5 million. In West Europe, there were already about 16 million, while in the EEC countries that had less than 5 million registered unemployed in 1975, the number of jobless was 12.5 million at the beginning of 1983. This is an increase of 145 percent in the course of one industrial
The internal structure of this unemployment is still more worrying. In some countries, almost half of the unemployed are under 25 years of age (50 percent in Italy, 45 percent in France, 43 percent in the Netherlands, 40 percent in Belgium - in every case these figures are for the end of 1982). Even with a modest upturn, the rise of unemployment in Western Europe will by no means stop. This is for two reasons:
1) Up to the end of the 1980s, the number of job seekers in the EEC countries will increase by a million every year
AMERI OF POOR SOLE TO HILDALKE POLINA (even taking account of the number leaving the "labor market" as they reach the age of retirement). Thus, it would be necessary to create a million new jobs every year simply to maintain the number of unemployed at the present 12 million (that is, assuming the length of the workweek is not cut). The "best" variant is a halt in the losses of available jobs. This would mean purely and simply a million more unemployed every year, or 20 million jobless for the EEC in 1990!
2) The crisis and capitalist competition will lead to a sharp growth in unemployment in the southern, eastern, and western peripheries of the EEC. The big imperialist countries in Europe will no longer admit foreign workers. To the contrary, they are going to try to return them more and more to their countries of origin. At the same time, the penetration of capital from the economically stronger EEC states into the weaker European countries will continue. In the course of this process, there will be new waves of rationalization and whole industries will be eliminated. This is the perspective for Ireland, Portugal, Spain, southern Italy, and Greece. It certainly holds true for Turkey, which is expected to have 8 million unemployed by the end of this decade! 2. Per unit of gross national product, Japan consumes only 60 percent as much energy that consumed in the US. With respect to 1973, petroleum imports have dropped by 21 percent, although in the same period the GNP has increased by 34 percent (reference year: 1981). 3. For Japan: Deutsche Industries and Handelskammer, Tokyo. The Kommerzbank summary: Japan: Wirtschaft und Zahlen, 1982 edition. Der Speigel, No 42, 1982; Handelsblatt, December 1, 1982; Frankfurter Allgemeine Zeitung, January 24, 1983; Financial Times, January 26, 1983.
In West Germany, the first signs of the crisis were appearing already in 1979, at the same time as in the US. In the period 1979-81, tendencies toward an upturn were noted several times. the international scope of the crisis, resulting in a decline in West German ports, led to a worsening of the recessive tendencies, and today at the beginning of 1983, no improvement is in sight.
to the government's forecasts, which have been revised downward every month, there will be no growth in GNP in 1983 (based on the situation in
The autumn of 1983 will mark completion of the fourth year of crisis and stagnation. This is the most telling indication of the fact that the special features that gave West Germany relatively stable economic position in the past decade have largely lost their force. This is shown by the evolution of indus-
The results of this policy were nega-
Industrial production continued to At the start of 1983, it was 5 percent below the 1979 level. Investment in particular dropped, no doubt partly for political reasons. The weak position of French industry and the slight initial growth in buying power led to a sharp rise in imports and a trade deficit of 100 billion French francs (with a balance of payments deficit of 70 billion French
At the same time, the number of unemployed began to climb again, although at a slower rate. By the beginning of 1983, it reached 2.1 million. The government's financial resources for generating
A rise of 28 percent in government expenditures led to deficit of 60 billion francs, which will grow, despite a more limited increase in 1983 (about 12 percent) to 100 billion state budget. But in the final reckoning, the internal crisis may deepen. In any case, unemployment will remain high
ITALY ON THE BRINK OF BANKRUPTCY
Superficially, it would seem that the inability of the Italian bourgeoisie to inflict a strategic defeat on the class has had positive effects on the crisis in that country. Since up until 1982 the capitalists had not managed to impose a restrictive policy, the GNP continued to grow up until 1980, and held steady in 1981. Even in 1982, there does not seem to have been a decline. with a decline in industrial production, which was 2 percent in 1981 and 4.5 percent in 1982 (October 1982-spring of
USINE-OCCUPEE trial production.
Taking 1976 as 100, industrial production reached its highest point at the end of 1979 at 112 index points, or 12 percent higher than in 1976. At the end of
1982, it had fallen back to 100(-12 per-
NON-A-LA cent). As a result of the crisis, the level of West German production at the start of 1983 was no higher than it was seven
In 1982, we reached the record figure of 15,000 bankruptcies. At the beginning FERMETURE of 1983, the first steel trust filed for bankruptcy. It was precisely the most productive firm, Korf AG, whose profits seemed so assured since OPEC capital (Kuweit) had bought up 30 percent of
The possibility of other failures in the steel industry in 1983 cannot be excluded, in particular in the case of Kloeckner
The AEG-Telefunken trust is also threatened with definitive ance" after being pronounced clinically 'Occupied factory, no closure' Workers fight for their jobs (DR)
Finally, the takeover of Grundig AG by Thomson-Brandt (which could also lead to an unequal marriage. between Bosch-Siemens and Grundig and alliance reaching out to Philips) reflects nothing more than a dominant position in one EEC industry, recreational electronic equipment, and today no longer offers a guarantee of sur-
BELATED KEYNESIANISM FAILS IN FRANCE
France, the second greatest imperialist power in the EEC, entered the international recession only in the middle of 1980. In 1980 and 1981, there was alan absolute decline in industrial production, while the GNP growing slightly. After the installation of the Mitterrand government in May-June 1981, French economic policy took a Keynesian course. An expansionary budget policy and increasing household consumption was supposed to generate an upturn, while a reduction in the workweek was to reduce the level of unemployment or at least stabilize it.
In October 1982, the minister of foreign trade, Michel Jobert, proclaimed "a state of emergency for foreign trade." At the same time, there was a sharp turn in economic policy toward although a still cautious one. The rate of unemployment benefits was cut from 90 percent to 80 percent of wages and the length of time for which they could be drawn from three to a maximum of two
A minimum fee for hospital care was imposed on contributors to the nainsurance scheme (20 Public employees and self-employed professionals were obliged to contribute 1 percent of their income these measures with satisfaction, declaring that if such an austerity program had been instituted by the government of the right, there would no doubt have been a general strike. With this "new" economic policy, which is simply a resumption of the austerity policy followed by Giscard d'Estaing, it may be possible to reduce the inflation rate and limit the growth of deficits in the balance of trade and the
These diverging trends are explained in particular by the growth of the services sector and by the highest public debt in any of the big imperialist countries. At the end of 1982, the public debt total had reached 270 billion dollars, which represents 66 percent of the Italian GNP. The deficit of public enterprises alone dollars for the year 1982, when service on the public debt absorbed 33 billion dollars in state income. In view of the growth of the public debt, the total financial burdens on the Italian state and public enterprises put the country on the brink of bankruptcy in the spring of 1983.
To this should be added the fact that the 2,000 biggest Italian enterprises went
The buying out of Grundig by the nationalized French company Thomson-Brandt is by no means certain. These negotiations could well be part of an operation by Grundig aimed at stimulating interest in buying among German competitors and raising the price. The buying price arrived at in negotiations with ThomsonBrandt was 400 million Deutschmarks, which from the standpoint of Grundig's position on the market is too high. This could be explained by the "national interest" that the Mitterrand's Socialist Party-dominated government attaches to this affair.
29
into the red in 1981 (that is, they had an National Health Service, which up till overall deficit after balancing the losses off against the profits of the companies that remained in the black). The combined deficit was 2.7 billion dollars.
This situation can only be rectified by a rigorous austerity policy that would mean a sharp drop in the buying power of workers and a rise of unemployment to 3 million persons and more. Such policy cannot be carried out in the present relationship of forces between the classes. But the defeat suffered by the FIAT workers in 1980 unquestionably has made it possible for this trust to restore its profitability. (5)
THE BALANCE SHEET OF THATCHERISM
Along with that of Ronald Reagan, the Thatcher government's policy in Great Britain is the second clear test of "supplynow has been maintained as a public operation.
NO ISLANDS OF PROSPERITY LEFT IN EUROPE
The smaller European countries overall present the same picture as the big imperialist countries. Today there is no longer any capitalist country in Europe where the general phenomena of the crisis
Netherlands and Belgium were vortex in late 1979early 1980. These two countries exhibit unemployment figures in In the fall of 1982, the unemployment rate reached 14.5 percent in Belgium. In the Netherlands, it went over 14 percent in December 1982 and is expected to go over 15 percent in 1983 These countries are also among the world leaders in the rate of indebtedness.
policy. The rate of unemployment went from 6 percent in 1979 to 11 percent in 1982. The second largest item in the budget is interest and repayments on the national debt. (In 1983, the budget deficit amounted to 40 billion Danish crowns).
The balance sheet of six years of the liberal-conservative government in Sweden shows a steep rise in the national debt.
Despite all its promises of spending cuts, the new Social Democratic government will increase this public indebtedness. A third of the new budget is covered by borrowing. In both Sweden and Denmark, wages are going to shrink. In Demark, the system of cost-of-living increases has been suspended to assure a decline in real wages.
Up until 1981, Finland could show a real growth in GNP (+6.1 percent in 1980, +3 percent in 1981). This was thanks to the fact that the USSR, the major outlet
At the beginning of In 1983, they are expected to have a 1983, this government boasted of such "successes" as a drop in the inflation rate from 20 to 7 percent (end of 1982). These claims, however, are totally tallac
You cannot fail to consider the economic and social cost of this "suc-
At the time the Thatcher government came into office four years ago, it envisaged a growth in unemployment of a few hundred thousand, up to a total of 2 mil-
At this point, the austerity policy was supposed to improve profits sufficiently to launch a new upturn. Moreover, the start of petroleum production in the North Sea made it possible to cut the country's energy bill considerably, and at the same time it brought a surplus in the
But the results of Thatcher's economic policy are catastrophic. The number of unemployed has climbed above 3.5 million. At the end of 1982, industrial production was at exactly the same level as in 1975, which in turn was no higher than
Thus, for 12 years the country that pioneered modern capitalism has experienced zero growth rates.
Despite the massive cuts in social services, the Thatcher government has not been able to reduce the public debt. In fact, public indebtedness has increased. The first reduction in new debts (-9 billion pounds sterling) is included in the 1983 budget. Overall, the public debt has increased by 80 percent between 1976 and 1981. Britain is still in first place in the world in relative indebtedness (that is, per capita and with respect to the GNP).
In view of the precarious situation, the Conservative government reprivatized the North Sea oil company at the end of 1982, when the price of petroleum was reaching its lowest point. As a result, only 30 percent, of the shares have been
The "financing" of the coming social burdens will be guaranteed by the Thatcher government's surefire method. There will be new cuts in the social sector, with a major offensive against the zero growth rate at least.
On this basis, the conservative governments in office are projecting new social cutbacks, as well as a restrictive budgetary policy, which will lead to a new spurt in unemployment. It should not be forgotten that each of these small countries has more than half a million unemployed today, a figure that a decade ago would been regarded "socially unacceptable" for the big imperialist states of the
Since 1980, Luxemburg's GNP has been stagnating. The official unemployment rate of 1 percent seems idyllic. But if you count the de facto unemployed who are counted as employees of the state and the Arbed steel trust under the work-assistance scheme, the total comes to 3.5 percent. The steel crisis is continuing, and the bankruptcy of Saarstahl, an
Arbed in West Germany, could lead to a sharpening of it in 1983. (In Luxemburg Arbed employs 12 percent of all industrial workers).
THE CRISIS HITS SCANDINAVIA
All the Scandinavian countries have now been drawn into the crisis. In Denmark, the Social Democratic Joergensen government had already begun to follow an austerity policy. The installation of a bourgeois minority government in September 1982 led to a stepping up of this
The defeat of the FIAT workers in 1980 is a classical example of a "bourgeois solution to the crisis." This is reflected by the following
After the firing of 23,000 workers after the strike, there was an enormous increase
40 percent per hour in 1981 over the In the same period, the real costs by 6 to 7 percent. FIAT's share of the West European market rose percent in 1979 to 13 percent in the first half of 1982. when it brought out its new Model UNO the company was in a position to launch a new ofto capture a still larger share of the market by offering highly competitive prices.
procedures (robots). The number of for Finnish exports, is not totally integrated into the world capitalist market. But in 1982 for the first time industrial production fell (by -1.5 percent). The best that can be hoped for in 1983 is stagnation. In the meantime, the unemployment rate has been steadily rising. It was 4.7 percent in 1980, in 1981 it was 6.3 percent, and the figure for 1983 is expected to be more than 7 percent.
HARD KNOCKS IN THE "SOFT
UNDERBELLY" OF EUROPE
In 1982, Spain still benefitted from a slight increase in its GNP (+1.5 percent). It will not achieve this in 1983. Spanish economy is bending under a combination of the prolonged world economic crisis, stepped up inter-European competition, and a "political strike by the capitalists who are withholding invest-
The same dynamic is at work in Greece, although on a different level. In 1982 already this country experienced an absolute decline in production. ployment was beginning to climb from a rather low level. (According to the official figures, unemployment was 2.9 percent in 1981, 3.5 percent at the end of 1982.) In December 1982, the negative effects of Common Market membership for a country such as Greece were becom-
After an initial reduction of tariffs, the Greek trade balance started duced from 267 parts in the body of Model 127 to 172 parts for the new Model Uno). This is going to lead to new massive layoffs. (Financial Times, January 20, 1983.)
In 1981, the per capita debt in Great Britain was around 5,000 dollars, giving the UK the second highest level of indebtedness among the 15 OECD countries, after Belgium, which holds the record of 6,375 dollars. British indebtedness amounts to 60 percent of the GNP (in Belgium, it is 70 percent; in Ireland, 90 percent; in Sweden 61 percent; in the Netherlands, percent; in Italy percent; in the US 47 percent; in Japan 46 percent; and in West Germany 43 percent). As regards the proportion of debt service in public expenditures, Great Britain shares first place with Ireland at 13.6 percent. In Italy, the figure is 12 percent; in the US, 10.7 percent; and in the Netherlands, 9.8 percent.
the announcement that the government region fell by 4 percent, and accordingly to show such a large deficit (as a result of massive imports and the uncompetiveness of the Greek exporting industries) that the Papandreou government was obliged to erect new tariff barriers and to suspend de facto the first steps toward integration into the EEC.
8 MILLION JOBLESS PROJECTED FOR TURKEY
Turkey is showing all the features of a society that has been put in a military straitjacket so that it can be administered the brutal economic "cure" recommended by Milton Friedmann. While the international business press joined in the chorus of the military rulers hailing the "successes" of the new regime, the reserve army of the unemployed was grow-
In 1980, there were 1.2 million unemployed. In 1982, the figure was 3 million. By 1990 it is expected to be 8 mil-
And real wages have been noseMoreover, as in Argentina and
British public service workers protest against higher rises awarded to police etc (DR) Chile, the successes in increasing exports and reducing inflation will prove illusory, was demanding a 12-month freeze on the inflow of hard currency that makes it leaving a totally wrecked economy at the mercy of international capital. (7)
HARD TIMES FOR "HAPPY AUSTRIA"
Austria is the only middle-sized country in Western Europe that managed to show a continued growth in GNP last year, even though the rate of growth (0.7 percent) came rather close to stagnation. In fact, it is also the last country where the government consciously applied a Keynesian policy. This explains why the growth of the national debt in Austria was exceeded only by that in Denmark. From 1976 to 1981, it grew by 206 percent. This policy was to be continued into 1983, since the approach of the March 1983 general elections made the government unwilling to apply an austerity policy.
Some 20 percent of the 1983 budget will be financed by borrowing. The deep crisis in the major outlets for Austrian exports; the structural crisis of the East European economies, which take 11 percent of Austrian exports; the decline in the tourist business; and the international crisis in steel all combined to bring Austria into the world recession. This is shown by the growth in unemployment, which has doubled in a short time to reach 4 percent today, and it will probably hit 5 percent by the end of 1983.
AUSTRALIA'S LUCK RUNS OUT
In Australia at the start of 1983 the No. 1 question was the demand for a 12month wage freeze. While the preceding Labor governments had wavered between a Keynesian policy and an intermediate road between stimulation of the economy and austerity, the conservative government headed by Fraser opted openly for an austerity policy. Immediately after wages, it became clear that the unions interpreted this as a declaration of war (the voters subsequently returned Labor).
A balance sheet of the recession in the imperialist centers alone indicates clearly the depth and the progressive worsening of the features of the capitalist crisis. In order to understand fully the general nature of the crisis and the potential for economic and social explosions it carries with it, it is necessary to look at the capitalist system as a whole. Such a point of departure involves analyzing the situation of the capitalist countries that have been kept underdeveloped.
the last world recession 1974-75, it was still possible to have the impression that some countries or regions considered to be "developing" or to be part of the third world would manage at least to avoid this crisis. be the case for the majority of semiindustrialized countries.
for the oil exporting countries such as Mexico, Venezuela, and Nigeria, it was said that they would profit indirectly from the crisis of the imperialist countries and that their oil income would enable them to lay the foundations of an industrial structure that would have a certain independence.
One of the salient features of 1980-82 world recession seems indeed to be the fact that the entire third world has been drawn into this crisis. Africa, South Korea, and Taiwan have to be added to this list.
The classical semi-industrialized contries, such as Mexico, Brazil, and Argentina, are found above all in Latin America. Since the end of the second world war, real growth has been registered in Latin America. But in 1982 there was a decline. The Gross Domestic Product of the Latin-American countries as a whole dropped by 2 percent. Exports from this possible to pay the service on the foreign debt and to cover the cost of petroleum imports shrunk.
The inflation rate doubled, rising from an average of 36 percent in 1981 to 80 percent in 1982. Taking account of the steady growth of the population, per capita income fell considerably, more than the decline in the GNP would in-. dicate.
THE CHILEAN EXAMPLE
Because the majority of the economically active population in most Latin American countries works today in industry and the services, unemployment has soared as a result of the crisis and austerity policy. In Santiago de Chile, the official figure for unemployment in 1982 was 28 percent, which approaches that
The industrialization process has come to a halt in some countries. there is even deindustrialization. In Argentina, the GNP was only 2 percent higher in 1981 than it was in 1974. The level in 1982 was even lower. The number of workers in industry is 23 percent lower than in 1974!
In Chile, where the Gross Domestic Product dropped by 14 percent in 1982, industrial production in 1982 was on the same level as in 1974. At the beginning of 1983, Brazil and Mexico were in a situation of national bankruptcy. Each of these countries had a foreign debt of more than 100 billion US dollars, on which the service absorbed all their income from exports. 7. In addition, the billions in aid that the Turkish junta gets from the imperialist coun also have to ening out" the Turkish economy.
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PROSTRATION FOR THE POOREST COUNTRIES
If the crisis in the poorest Latin American countries is attracting less attention in the imperialist centers, it is nonetheless
This is true for countries such as Bolivia, Ecuador, and Peru. Ecuador the service on the debt for 1983 amounted to 122 percent of the foreigncurrency income from exports. foreign debt is also growing by leaps and bounds. In 1980, it was 6 billion US dollars. By the middle of 1982, it was 7.5 billion dollars. By mid-1983, it will be more than 9 billion dollars, and the Central Reserve Bank of Peru has forecast that it will reach 14 billion dollars in SOUTHEAST ASIA FOLLOWS LATIN
AMERICA DOWN THE SLOPE
Confronted with the emerging crisis
Latin America, exporters and capital in the US and Western Europe "discovered"
But they immediately ran up against their Japanese competitor, which had already "taken over" this region at the end of the 1960s as an outlet for its goods and its favored area for investment. (8)
The high growth rates in the region seemed to guarantee a supplementary market for the three imperialist centers. Even at the depth of the 1974-75 world recession, the bourgeois business magazines beat the drums for more "involvement" in this region. But more and more the indications are that Southeast Asia is now at the point that Latin America was in 1978. This region is facing the threat of a crisis comparable to the one in Latin America.
In all the Southeast Asian countries, the growth rates of GNP declined dramatically in 1982. In some, there was even an absolute drop in per capita GNP. This was true notably for Indonesia, the most populous country in the region. In the Philippines, per capita GNP stagnated. Service on the debt alone already absorbs 92 percent of the income from exports.
THE CRISIS OF LATE CAPITALISM - PROSPECTS
The previous recessions left some imperialist countries possibilities for stopping up the cracks partially and temporarily. They could increase their trade with the East European countries. They could export to new markets, for example the OPEC countries and Southeast Asia. They could create artificial demand by expanding credit and increasing the national debt. In 1980-82 these roads were to a large extent blocked. (9)
This recession has demonstrated that all the attempts to attribute the crisis to factors other than those intrinsic to the capitalist system were false. The basis of the problem is not an "oil crisis," nor "the inflation caused by the Vietnam war," nor any "wrong economic policy." 32
These phenomena are in large part the cause and not the cause itself. This is true as well of the insufficient buying power of the masses, which is often advanced by trade-union leaders to explain the crisis and try to win acceptance for a "policy of combating the crisis," that is, a policy of boosting the profits of the bourgeoisie.
THE DECLINING RATE OF PROFIT
The only way to explain the capitalist crisis is to look for the cause in the functioning of this system, in the very nature of the capitalist system of produc-
Since this is a mode of production based on profit, it is the decline in the industrial profit rates that are the cause
As soon as the crisis took a clear form, the bourgeoisie recognized this crucial problem of capitalist production. Despite all the scholarly controversies over the methods of calculating it and despite all the camouflage by bourgeois statistics, the long-term tendency is evident. comparison with the 1950s, industrial profits made per unit of capital were cut
From 15 to 30 percent per unit of capital invested in the 1950s, the profit rates had dropped to 5 to 15 percent by the end of the 1970s (see the graph).
Net rates of return on fixed capital
!non-financial corporations)
Japan United States W Germany* France Britain indusiry and transport oniy Annua: averaçes
Sautes CECD. UK Deplot houstry The Economist 27 November-3December 1982
This movement is the decisive cause of the long-term decline in the rate of investment. It is the explanation for the conception that Southeast Asia is a an this region is primarily a preserve for Japanese imperialism. In 1979, 25 percent of Japanese exports went to Southeast Asia, by percent to the Middle East, and 9.5 percent to
While interregional trade amounts to 40 percent in Latin America (as compared with 50 percent in the EEC and between the US and Canada), it amounts only to 15 percent among
Philippines, Singapore, result of the internal crisis of the bureaucratized transitional societies and the indebtedness to the Western world, trade with the countries can hardly grow. 70 billion dollars (for all the COMECON coun-
Yugoslavia), debt to the West was relatively small in absolute terms.
trade of these countries fact that from business cycle to business cycle, every country has been showing declining rates of growth. The driving force behind this decline in the rates of profit is the very same one that makes possible the advent of a free society, a communist society - the steadily increasing productivity of labor. (10)
Since workers or working hours are combined with ever larger units of capital (machines, computers, robots, etc.), there is certainly an increase in labor productivity. But there is also a decrease in the relative surplus value that the owner of the means of production can wrest from the workers. While productivity is the result of the combination between living labor and the machines used [dead labor], profit can only come from the exploitation of living human labor, trom the difference between the price of labor power and the new value that it creates.
The relative decline (which has become absolute) of the involvement of living labor in the productive process is leading, in the long run, to a reduction in the proportion of surplus value, and to a sharpening of national and international competition over dividing up the plunder.
### FACTORS RESTRAINING
THE FALL OF PROFIT
There are, of course, some trends that run counter to this general tendency and serve to brake the fall in the rate of profit to some extent. The bosses and the governments are using the decline in production costs as an instrument of their policy to restore the level of profits obtained in production. There is no doubt that they are being helped out by falling raw materials prices (improvement in the terms of trade) and lower costs for machinery, by the devaluing of capital resulting from the high number of bankruptcies, and by the reorganization of state budgets (which has involved lower taxes on capital, cuts in social spending, and increased arms profits can be The profit rate has also gotten a certain lift from the lower prices for consumer goods that make up part of the basic necessities for the working class, as with the OECD, the only source of currency that could be used to repay these debts, it reached a new high. In 1981, the six small countries of the COMECON (Czechoslovakia, Poland, Hungary, Rumania, Bulgaria, and East Germany) were to pay 8.2 billion dollars to the Western banks. This amount represents 40 percent of their exports to the OECD. 10. "The limitations of the capitalist mode of production include the fact that...with the declining rate of profit, the development of the productive force of labor generates a law that, at a certain point, comes into absolute contradiction with the development of this productivity itself. As a result, this conflict must be continually overcome by crises... The development of the productive forces of social labor is the historic task and justification of capital. accomplishing creates unconsciously precisely of production, conditions for a higher material mode Marx-Engels Werke, Dietz Verlag, Leipzig, 1964, Vol 25, pp 268269. (Das Kapital, Book 3).
Profits if
The profit cruncher
(2)
(3)
(1)
Profits* as
Profits in
(3) adjusted % change in (7) but with
% of nat'l
1982
(1) restored to eliminate income est to 1960s
(4)
(5)
(6)
(7)
% change
Real
(2) raised/ in wages effective lowered by to produce ratet half the rise/ effects
(3)
% change fall in (5)
of (5)‡
(8)
(9)
(10)
% change wages to profit share in wages produce (7) of 30% to produce level 1960s 1982 ave est United States 24 18 $450 bn 3600 br $565 bn Japan 43 27 Y59 tlin Y95 tlin West Germany 30 24 DM335 bn DM420 bn DM435 bn France 32 22 FFr700 bn FFr1020 bn FFr1030 bn Britain 21 14 £32 bn £48 bn *standard DECO defintion: operating surplus: frelative unit labour costs: equals (3)+ 1(2) (6)) can be empirically verified. (11)
factors, and those that the capitalists and the bourgeois governments can most directly influence are still wage costs and working time, as well as the intensity of labor. This is where we have to look for the central arena of the struggle between wage labor and capital today.
In its way, The Economist already presented a high bill in its November 27, 1982 issue, under the headline "How to Make Companies Make Money."
### HOW CAPITALISTS
CAN MAKE MONEY
In the first place, it notes the decline in business protits by comparison with the national incomes of the big imperialist countries over the period from 1969 to 1982 (Columns 1 and 2 of the table). Then, The Economist indicates the level to which profits have to be raised to come back to where they were in the
On this basis, it makes an initial calculation of how much wages have to be reduced in the various countries to allow a restoration of the "profit rates" (profits as a percentage of national income to the previous level. then goes through a laborious set of calculations (which I will spare the readers of International Viewpoint) that take account of the evolution of exchange and lead to the conclusion that there should be a uniform international rate of profit of 30 percent of national
This forms the basis for "calculating" the size of the wage cut required (Column 5), which goes from 7 percent for Japan to 20 percent for Great Britain. According to the British business weekly, this would make it possible to restore conditions for reasonable profitability and some modest economic growth, at least for a certain time.
UNEMPLOYMENT AS A CLUB
One can (and must) make a number of objections to this sort of "calculations." They do not have a lot in common with a scientific approach. In the last analysis, their pupose is to disguise a bourgeois class policy as science. There is no limit to such fantasies. But the underlying class policy is always the same - real from 1973 - 8 + 15 $485 bn --24 --14 Y99 tlin - 9 - 10 DM320 bn - 16 -2 FFr690 bn - 10 + 47 £40 bn {40 bn wages have to be cut. To this end, the capitalists are deliberately using the reserve army of the unemployed. (The unemployment has drastically changed the climate of wage negotia-
The Financial Times, December 2, 1982.) And everywhere the sections of workers hardest hit by the crisis are being pointed up as "an example" of what has to be imposed on the working class. This is the case in the US for the automotive industry in general and Chrysler in particular, in West Germany for steel and Arbed Saarstahl, which is threaten-
Along with the attacks on real wages, the capitalists are pushing a policy of speedup, again using unemployment as a club, trying to force workers to work even when they are sick. (In a recession, the flue viruses are out of work,"
Frankfurter Allgemeine wrote on November 25, 1982) In fact, in West Germany the number of workers who have taken sick leave has dropped by 20 percent by comparison with the spring of 1982, when the bosses could already boast of a decline in sicknessrelated absenteeism.
ATTACKS ON WOMEN AND MINORITIES
Finally, two classical forms of dividing the working class are playing a central role in the bosses' offensive. They are symbolized by the call for "sending women back to the familv and the home"
"sending the immigrant workers back where they belong." In all the capitalist countries, as happened during the
As the time is reduced that is necessary to produce consumer goods that form part of the subsistance of wage earners, the that represents surplus labor, goes to capital in the form of surplus value, inwhile the standard of living (measured consumer products) and the work time rethe same level. This is what Marx calls relative surplus value, which results from the increase in the productivity of labor. sequently, increasing the productivity of labor has as its principal effect bringing about a deincreasing the relative surplus value. For West Germany, one could mention the folproduction of relative surplus value over the
The work time necessary to quire a high quality radio was 41 hours in 1970 and 14 and a half hours in 1981. men's shoes, it was six hours and 2 minutes in 1970, and five and a half hours in 1981. man's shirt, it was three hours and six minutes
1970, and two and a half hours in 1981. For a kilo of coffee, it was two hours and 41
(9) $715 bn - 15 - 26 Y70 tlin - 7 - 11 DM435 bn - 11 - 16 FFr970 bn - 13 - 5 £61 bn - 19 The Economist 27 November-3 December 1982 1929-1932 crisis, a massive ideological campaign has been started up "supplementary focuses on the idea that the "natural role" of women is (unpaid) domestic work and educating children. Often the first blows have been directed at pushing back (relatively) liberal abortion laws.
women workers are being put in the position of second-class persons, with their foreign male and female coworkers relegated to the category of a "lesser breed."
If everything were up to the bourgeoisie and its ideologues, we would be seeing a new migration away from the imper-
The millions of foreign workers that the capitalists brought in during the period 1955-1975 in order to get more easily exploitable human material would have now to render the capitalists a new service in the context of massive unemployment. They are the basis for a racist campaign to divert the attention of the workers away from the cause of the crisis. of this is "These foreigners are the root of the problem, they are taking away our
PAUPERIZATION Since the second world war, there has been strong opposition to the view that there could be a new grave economic crisis accompanied by massive unemployment and pauperization. Today this is no longer a theoretical question. It is part of the reality of the 1980-83 recession. The London city administration has presented statistics showing that last winter minutes in 1970 and one hour and 34 minutes in 1981. In 1970, for a kilo of cutlets it took one hour and twenty minutes; in 1981 it took 51 minutes. In 1970, for one kilo of butter, it took one hour and 11 minutes; in 1981 it took 42 minutes. For a kilo of sugar, in 1970 it took 11 minutes; in 1981 it took eight. These figures are based on the average wage in German industry. The source is the November 27 issue of Handelsblatt. 12. In its February 9, 1983, issue Was Tun, the paper of the Gruppe Internationale Marxisten (GIM), German section of the Fourth International, published a document from the new Christian Democrat minister of the interior, which had been kept secret up till then. It contained proposals worked out for expelling thousands of foreign workers from West Germany. An analysis shows, nonetheless, that such measures will not free many jobs and will not help to reduce unemployment But they reinforce the ideology that maintains that the 4.5 million foreigners living in West Germany are responsible for the crisis.
33
In the spring of 1983, some signs of a cyclical upturn appeared first of all in the US, where there is an upward trend in the GNP and industrial production, and to a lesser extent in Canada, Japan, West Germany, and Great Britain. The general buoyancy of all the imperialist stock mar kets, which at times has assumed spectac ular proportions, indicates that the speculators are already counting on an upturn. The same tendency is reflected by the accompanying rise in the prices of raw materials, with the exception of some foodstuffs Nonetheless, the following factors should be noted;
- Orders for producers goods are continuing for the moment to stagnate or even decline in most imperialist countries, in particular in the US, Japan, and West Germany.
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- The volume of world trade is continuing to shrink.
There is an uneveness in the timing of the upturn, with some imperialist countries, e.g. France lagging, as well as important semi-industrialized countries,
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We can then expect a hesitant, shallow, and uneven upturn in the capitalist countries as a whole. The cause of the upturn in the US is "technical." The recession began in the key consumer durables industries such as auto and housing construction. But production in these industries fell so low during 1981-1982 that there was a drastic reduction in inventories.
Finally, current demand, even though reduced by the decline in the buying power of the masses resulting from unemployment and the cutting of real wages, began to get ahead of current production. This created the possibility for an upturn in production. And this was further stimulated by a lowering of interest rates, which had a marked effect on the real estate market.
In mid-April 1983, automobile production was 10 percent higher than in the equivalent period in 1982. The number of housing starts was double what it was a year before. But two indexes that re-
British Labour Party and trade unions demonstrate (DR) hundreds of elderly citizens died from the cold because they did not have the money to buy fuel. Over the winter of 1982-83, hunger rebellions were feared in Detroit. President Reagan is calling on the poor to go to the churches for help, and the churches are again serving up free soup on a daily basis. These are still, of course, isolated examples in the imperial-. ist centers. But if the capitalist mode of production survives, they will become general, as is already the case in the Third World countries.
THE SYSTEM OFFERS NO HOPE
The discussion of the nature of the crisis and its real causes is not, therefore, 34 an academic and abstract enterprise. It has practical consequences. This is precisely because the cause of the crisis is neither "the oil crisis" nor "under-consumption" but a declining rate of profit, because it is continually aggravated by the sharpening of interimperialist competition, the long-term depression will not come to an end. In this context, it is extremely important to realize that while there will be a slight economic upturn toward the end of 1983 and modest rates of growth in the immediately following years, there will be a new and still more severe world crisis in 1986 or 1987. Even the most favorable variant, that is a modest upturn in 1983-85, means massive growth of unemployment.
flect well the overall trend in industry as a whole are still slightly lower than they were in April 1982. Moreover, while the orders for producers goods were higher in April 1983 than they were in April 1982, they were lower than they were in March 1983.
Thus, the upturn remains hesitant, even in the United States. It needs additional stimulation, which could come from a (slight) expansion in employment, or an increase in exports (but to achieve this the exchange rate of the dollar would have to drop), or from a more expansionist credit policy. However, an investment boom is unlikely in view of the existing excess capacity and the stagnation of domestic and foreign markets. (April 1983)
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