The infernal logic of the debt crisis THE GROWING indebtedness of the so-called Third World countries and the chain reactions it is unleashing are only one aspect of a much broader phenomenon. The fundamental problem is the overheating of credit, the locomotive of the late capitalist economy. This must be stressed so that it will be clear that the present financial crisis is the organic result of the worldwide expansion that ensued from the postwar boom, which extended from 1940-48 to 1968-73. (1)
Far from being the result of the fecklessness of the underdeveloped countries, of their propertied ruling classes or their governments, this growing indebtedness is only a specific manifestation of the key role that the inflation of credit - and thus the swelling of all forms of debts - played in stimulating growth (or, more properly, in delaying the crisis) after World War II in all countries and in all capitalist industries.
In reality, since 1940 we have been living in an age of constant inflation, and inflation and indebtedness are to a large extent synonyms. Inflation is, in fact, essentially an inflation of deposits (2), an inflation of credit, and therefore a swelling of debts. ERNEST MANDEL
ECONOMY th United States. Nonetheless, they have a real operational usefulness inasmuch as they reveal the vulnerability of the US banking system and of the international monetary system based on a special role for the dollar.
Let me recall briefly by what mechanisms the inflation of credit and the swelling of debt in the short run cushion the main contradictions of contemporary capitalism.
Household debt makes it possible to reduce temporarily the gap between the growing production capacity of enterprises making consumer goods and the much more modest growth of the buying power of the masses. A part of consumer durables (above all housing and automobiles) are bought on credit.
Corporate debt makes it possible temporarily to reduce the gap between the rate of capital accumulation and the rate of increase in profits. It thereby makes it possible to attenuate for a time the tendency for the average rate of profit to drop. The tempo of accumulation is maintained, inasmuch as a part of new investment (purchases of new machines, additional quantities of raw materials, etc.) is financed on credit and not by profits taken.
The swelling of the public debt makes it possible to mitigate momentarily the fiscal crisis of the state, that is, to reduce the gap between the rate of increase of public spending and the much slower increase in state incomes, especially in taxes. (3)
Of course, debt can only play this role of cushioning some of the contradictions inherent in the capitalist mode of production for a certain time and within certain limits. The sharpness of these contradictions means that more and more credit, and therefore more and more
1. The beginning of the "boom" came after 1948 in Europe and after 1940 in the Anglo-Saxon countries and in Latin America, insofar as the latter were dragged along. In fact only some of them were, the outstanding example being Argentina. The end of the long "boom" for some came in 1968 and for others in 1973-74.
2. Deposits are the sum of bank deposits that can serve as means of payment. When the banks grant loans to their clients, these loans are generally registered in the form of bank deposits, and they therefore swell the volume of deposits. If the rate of increase of these deposits is greater than the rate of increase in material production, we can talk about an inflation of deposits, since the rate of circulation of this money has to be examined as a partially independent variable.
The fiscal crisis of the state has class roots (structural roots) in bourgeois society. The bourgeoisie prefers to lend money to the state rather than to pay taxes to it. Taxes give back nothing. Public loans pay back interest. Moreover, by keeping the state budget constantly in the red, the bourgeoisie keeps it perpetually dependent on short-term bank loans, well as state bonds bought by capitalists. The bourgeoisie guarantees that this state remains "its" property, bound to it by the golden chains of public debt.
17
We have already pointed out on many occasions that after World War II, capitalism floated to "prosperity" on an ocean of debt. To grasp the importance of this phenomenon, you have first to look at its extent. Today just the debt denominated in dollars in the United States, plus the foreign debt in dollars and other currencies of the rest of the world, exceeds the astronomical sum of 8,000,000 million dollars. This broke down roughly at the end of 1985 as is shown in Table 1.
It is evident that the Third World debt that has provoked such ungenerous commentary from banking circles is only a modest part of the
TABLE 1
Countries and regions
US public debt
US corporate debt
US household debt
Third World debt
Public debt of other countries, both capitalist and workers' states
International Viewpoint 5 May 1986 total world debt in dollars and foreign currencies, scarcely more than 10 per cent. Since the "Third World" debt also includes that of China, it is spread over two-thirds of the population of the planet. A tenth of the debt for two-thirds of the people is hardly excessive.
The recriminations by banking circles reflect the bourgeois adage that only the rich get credit" You here in cruder terms, that ought to have given credit only to the rich."
These debt figures have only an indicative value. They do not include the debt in "national" currencies by all the capitalist countries other than Debts in thousand millions of dollars
2,000 2,800 1,900 950 700
inflation, is needed to achieve this effect.
This leads inevitably to an overheating of inflation. But once inflation overheats and goes beyond a certain threshold, it can no longer fuel expansion. It even begins to choke off growth. It then becomes one of the factors reversing the long wave of expansion of 1940-48 to 1968-1973, turning it into the long wave of depression that is now underway. (4)
This process is what has led to the shift from the capitalist economic policy of Keynesianism (stimulating demand and therefore moderate inflation) to monetarism (reestablishing monetary stability at any cost, even that of stagnation and economic depression).
It is not the shift in economic policy that led to the turn in the economic situation. It is the reshuffling of priorities in the bourgeoisie's objectives that led to the alteration in economic policy, at a time when the change in the economic situation was already a fact.
After 1945, the number-one objective of the major capitalist countries (North America, Western Europe, Japan) was social and political stabilization. That led to an orientation toward full employment and a preference for Keynesian techniques. After 1968 and especially after 1973, the absolute priority shifted back to boosting the rate of profit, if necessary at the cost of massive unemploy. ment and sharpening social tensions. Bourgeois interests defended by individual agents
What characterizes bourgeois society is, notably, the fact that the general interests of the bourgeoisie (expressed most often by the bourgeois state) are defended by individual agents (politicians, top civil servants, businesspeople) who in 99 percent of the cases cannot keep out their own private interests.
The general expansion of credit after 1940 (1948) undoubtedly suited the general interests of the bourgeoisie. It was undoubtedly stimulated by the banks, which do not in the first instance pursue the goal of serving the general interest of big capital. They seek above all to increase their own profits, banking profits.
When the economic situation is good, when the barometer is high, the general interests of the bourgeoisie and the quest for private profit by the banks coincide to a very large extent. The banks then function as centers for the "objective socialization" of capital. They collect capital from firms and households that 18 have a surplus and direct it toward those firms (and since World War Il to a growing extent toward the households of the big and middle bourgeoisie and the upper strata of the petty bourgeoisie) that need it to expand their investments and buying.
However, when the system is in crisis, this tendency for the general interests of the bourgeoisie to coincide with the profit-making interest of the banks is thrown out of kilter. The special interest of the banks — to defend above all else their incomes and their own profitability - can come into contradiction with the general interest of capital, which is to restore the profitability of the system as a whole, especially of the main trusts, monopolies and financial groups.
In seeking supplementary profits, the banks engage in practices that upset the stability of the system as a whole, at least in the longer run. State overseeing of the banks, which was extended after the traumatic experience of the 1931-33 banking crisis, is powerless against this problem, which is inherent in private ownership, (5) in competition and in the profit motive as the main driving force of the capitalist economy.
Banking profits come essentially from the difference between the interest rate for deposits and the interest brought by loans. The more bank deposits swell, the greater the interest the banks have in extending loans at higher than average interest rates.
After the shock of rising oil prices in 1973, the incomes of a number of oil-exporting countries went to swell deposits in a series of American and British banks (and, to a lesser extent, German, Swiss and Japanese ones, as well as those in some other countries). These were the famous petrodollars. The banks faced the problem of finding someone to whom to loan this new money capital.
However, the long depression that had just begun in the imperialist countries at the same time reduced the demand for supplementary credit by firms and households, which were
On my theory of "long waves" baitate economi nee of capitalist economic see Waves of Capitalist Development' (Cambridge University Press, 1979).
5. The only banking system that has functioned more or less without hitches during the present crisis is the French one, precisely because the French banks are almost 100 per cent nationalized.
6. It might be objected that the Third World countries were "willing victims" because they had a pressing and constant need for an inflow of foreign capital. But precisely because this need is constant, it cannot explain by itself the abrupt flareup of foreign debt over the 1970s.
7. See on this subject the excellent already exessively in debt. To find new debts, the banks therefore turned elsewhere, essentially to the Third World countries, and, to a lesser extent, to the bureaucratized workers' states. It was the banks that offered these loans to the Third World; it was not the Third World that came to the banks begging for them. (6)
The operation was stimulated by three special conditions that came together in the mid-1970s.
First of all, there was a desynchronization between the depression in the imperialist countries on the one hand and in Latin America and Southeast and East Asia on the other. (7) Thus, the illusion was produced that the solvency of the dependent semiindustrialized countries, at least in these regions, was growing.
Second, these countries were subject to the imposition of higher interest rates, which they were obliged to pay because of the chronic capital shortage from which they suffer, when real interest rates - allowing for inflation - were very low and sometimes even negative in the imperialist countries. (8)
Moreover, the private banks filled a gap left open by the abdication of the international capitalist bodies, or more precisely by the reluctance of the imperialist governments, and first of all Washington, to function in the general interest of the capitalist system in a time of crisis.
The skyrocketing oil price had redistributed surplus value (and its capitalization in the form of money capital on the international scale). The main losers from this redistribution were the so-called Third World countries that were not oil exporters. The chief gainers were the possessing classes of the oilcountries. Balance-ofpayments deficits threatened to choke off the capacity of these non-oilexporting countries to import not only producers goods but even vital raw materials for their growing industries and even food.
A problem, then, of recycling the petrodollars was objectively posed. It was necessary to lend the excess from the OPEC countries to those article by Jeffrey Bortz, "La Dueda Latinoamericano y los Cidos de la Economia Mundial, " in 'La Batalla' [journal of the Mexican section of the Fourth International], No. 13, November-December 1985. -
8. The real interest rate is the dif ference between the nominal interest rate and the rate of inflation. In the United States for example, an inflation rate of 8% and a nominal interest rate of 7% meant in 1977 a real interest rate of - 1%. In Third World countries this negative interest was still more pronounced, encouraging capital flight. For example, in Mexico on average for the period 1976-1982, the real interest rate for the peso was -0.8%, in Argentina it was -6.6%, in Brazil it was -14.7%. After the sharp rise in the interest rates, this situation was obviously reversed.
International Viewpoint 5 May 1986
countries with greater deficits. This, in general, is what the private banks did. However, they did it in a precipitous and imprudent way and for the sake of big private advantages. And here another phenomenon comes into play - the progressive decline in standards of the leading personnel of the international banking system.
During the whole period opened up by World War II, there was a considerable widening of credit operations and a no less spectacular extension of purely speculative operations in the framework of the world banking system.
This expansion can be seen in particular from the time that the dollar became unconvertible, that is toward the end of the 1960s. Speculation turned toward raw materials, gold, currency-exchange rates, land, works of art. It extended during the uptur in 1983-85 to gigantic public sales (fusions of firms manipulated by outside intermediaries) involving thousands of millions of dollars. (9)
As the oil crisis hits the Mexican economy, it's the poor that suffer (DR)
In these conditions, less and less traditional directors (some would say flatly, on the shady side of the law) have turned up at the head of major branches of the big banks, or even at the head of these banks themselves. (10) They operate with a view to maximizing their profits in the short term, without taking account of the risks. The result is a succession of unexpected gains and losses, seriously undermining the solidarity of the banking system as a whole.
Speculation, personal corruption, crises of national solvency and crises of solvency of the banking system intertwine more and more. An impressive series of loans to Third World countries have been diverted, at the source, so to speak, to serve the private ends of bourgeois layers in those countries who are seeking to cover themselves against galloping inflation and the threat of revolutionary crises.
Capital flight has been fostered by foreign loans, and it in turn increases balance-of-payments deficits, which leads to a new round of in-
MART RO creasing debt. The debt spiral widens, for the benefit of the possessing classes and at the expense of the popular masses.
The scope of this capital flight on the part of the bourgeoisies of the main Third World debtor countries was recently assessed by the magazine Intereconomics on the basis of statistics from the Organization for Economic Cooperation and Development (OECD), the International Monetary Fund (IMF) and the World Bank. This study gave the results shown in Table 2.
This list is far from complete, since it does not include the flight of capital from countries such as Brazil, the Philippines, South Korea or Thailand. This capital flight is deemed not to exist, when everyone knows of glaring examples of such practices by the "great families" of these bourgeoisies. (13) This statistical oversight arises from the fact that the figures cited are aggregates and do not cover, in the cases cited, either short-term debt or fluctuations in exchange reserves.
Once again, the ungracious commentary by imperialist financial circles about this capital flight in the so-called Third World countries is tainted by a large dose of hypocrisy. It is an unchallengeable fact that the possessing classes of the Third World countries are rotten to the core. But it is also true that in order for there to be corruption, there have to be both the corrupted and the corrupters. The corrupters and their accomplices in this case are the imperialist banks.
Moreover, most of all there needs to be a general context favorable to an unbridled quest for private enrichment. This general context is called the market economy, the money economy and above all the generalized market economy, that is, bourgeois society, the capitalist mode of production.
Indebtedness went out of control in the Third World at the time I mentioned, at the beginning of the 1970s. At that time, the overall debt of the semicolonial and dependent countries amounted to 150,000 million dollars. Today, it exceeds 900.000 million dollars. This sky. 900,000 million dollars. This skyrocketing of the debt is not essentially a product of political developments, although these have played a not
See many examples in the last chapter of my book 'La Crise' (Flammarion, Third Edition, 1985), in which the data go up to April 1985.
10. See Anthony Sampson, 'The Money Lenders', Coronet Books, 1981.
11. Mexican sources give the figure of 37,000 million dollars.
12. Susanne Erbe, "L'Evasion des capitaux dans les Intereconomics Pays en developpement," pays developpement,
November-December, 1985.
13. The Marcos family and its allies alone are supposed to have deposited 5,000 million dollars abroad.
19
TABLE 2 Country Clandestine capital exports In % of national
1976-1982 (in millions debt to foreign of dollars) banks Argentina 17,150 80.5% Mexico 13,488 (11) 54.0%(*) Venezuela 8,454 65.4%(*) Indonesia 5,164 34.2% (*) Egypt 3,944 44.3%(*) Nigeria 2,748 43.3%(*) India 2,132 33.3% (*) Syria 1,889 96.0%(*) * In the short-term debt. (12)
International Viewpoint 5 May 1986
inconsiderable role, nor of plots and counterplots. It is the result precisely of the inner dialectic of the capitalist mode of production as a whole, both on the international scale and on the scale of the main countries concerned.
Once set off by the recycling of petrodollars, the overheating of debt in the Third World has been kept going by a series of mechanisms that operate more or less spontaneously, or at least are not under anybody's control, not the Third World governments or the possessing classes of these countries; not the imperialist banks, the imperialist governments, or the bourgeoisies of the imperialist centers taken as a whole.
The inflow of fresh capital into the underdeveloped countries is only invested in part and therefore can only in part provide new resources. And, thus, it can only have a partial effectiveness in generating new income to pay the interest on the debt and to reimburse the capital borrowed. This is an initial source of imbalance, and no doubt the main one. The law of value operates implacably
A part of this capital serves to cover the operating costs of the economy and the state, or to maintain it at a given level of activity - to finance the payment of higher oil prices or importing raw materials not covered by exports. Another part is diverted to parasitic speculation. Finally, a part is directly appropri ated by the possessing classes and held outside the country.
The Third World countries' exports, which are supposed to increase in the long term to the point of being able to pay the service on the debt and reimburse the principal, are not growing everywhere or always to the desired extent. The law of value is operating implacably. It is redistributing on a world scale demand as well ås supply, the allotment of the means of production and labor power.
However, this is precisely a spontaneous readjustment, that is, one that is chaotic, unpredictable, and above all, one that is desynchronized from country to country, to say nothing of continent to continent.
This gives rise to enormous imbalances, which it is no use trying to dismiss as "temporary." Everything is temporary by definition in the capitalist economy, except private property in general and the unbridled chase after it. But its precise distribution among the various capitalists, sectors and factions of the capitalist class is always temporary. This is always being upset by new facts, that is, by the law of combined and uneven development.
Thus, the temporary rise in the oil price gave a boost to possessing classes such as those in Saudi Arabia, Kuwait and Mexico, while the economies of Argentina, Brazil and India were violently shaken up. The tables were turned on the other hand with a spectacular improvement in the balance of payments of South Korea and Brazil, while Mexico and the OPEC countries were thrown into a tailspin by the drop in the price of oil.
The overall expansion in the world market, then, has been less than what would be needed for all of the debt-ridden countries to expand their exports to the extent necessary for regular repayment of the debt.
This is all the more true because throughout the 1970s and the 1980s, the economies of the imperialist countries have been marked by longterm depression. This has held back any expansion of exports from the
Third World countries to the imperialist centers. Indeed, at times this has been accomplished outright by protectionist measures.
The example of the multifibers agreement concerning exports of textile products (including clothing) from Asia and Latin America is the clearest expression of such protectionism. There have been similar restrictions on certain food products (sugar, coffee and others).
Of course, the share of exports of Third World manufacturers in world trade has increased spectacularly over the last decade. The US trade balance in such products has gone into the red (which is not true either for capitalist Europe or for Japan). Today, the United States is importing more manufactured products from the dependent semi-industrialized countries than it is exporting.
However, it is a small number of countries that have profited from this rise and a small number of products - Brazilian footwear and steel, South Korean electronics, goods assembled in Hong Kong and other examples. This is too little to get the Third World out of trouble. It is not enough to defuse the debt time bomb.
Given the fact that current production is not providing the resources necessary to cover the deficit in the balance of payments (their foreign currencies deficits), these countries have to borrow again in order to meet a part of the service on the debt and to meet part of the payments on the principal falling due.
According to the UN statistics published in 1985, interest payments on debt for 88 so-called Third World countries amounted respectively to 35,000 million dollars, 48,000 million dollars, and 44,000 million dollars in 1981, 1982 and 1983. They exceeded private credits received over these three years, and in 1983 they even exceeded by 5,000 million dollars all of the private and public credits received.
To this draining off of resources from the Third World, you have to add profits, dividends and so forth repatriated from the Third World to the imperialist centers. These hover around 12,000 million dollars a year. For all three years considered, this figure exceeded the net inflow of investment capital.
According to the Economic Conference for Latin America and the Caribbean (ECLAC), there was a net transfer of resources from Latin America to the rest of the world of 30,000 million dollars in 1985, if you add the current operations accounts and movement of capital The president of this institution Ortiz Mena, estimates that for the
International Viewpoint 5 May 1986
Possible Third World debt defaulting gives the imperialists nightmares (DR)
seminaire de retlexion mandale
20
four years 1982-85, this drain amounted to a total of 100,000 million dollars.
The inevitable result of this is overheating of the debt. More and more is being borrowed, not in order to increase production but to repay old loans and the interest on them. Overall, between 1973 and 1982, debt grew almost twice as fast as the national produets of Third World countries that are not members of OPEC.
This circle is all the more vicious because the terms of trade - the relationship between the export price and import prices — normally operate to the disadvantage of the Third World countries. Except for the brief spectacular flare-up of speculation between 1971 and 1973 and for oil at the time of the two explosions in price, the prices of raw materials and semi-manufactures rise more slowly, when they are not falling, than the prices of manufactured products.
The deteriorating terms of trade, from which only a few semi-industrialized countries, such as South Korea, have escaped and then only for a certain time, are a heavy burden on the poorer countries. Even though it is less in absolute figures than those of the semi-industrialized countries, this debt is an unbearable burden.
The overall price of raw materials dropped from an index of 100 in 1979-1981 to 72 in 1985, the price of food products (cereals, sugar, bananas, soybean cakes) to 56, and that of oil-bearing seeds to 65. The loss of resources (income from exports) suffered in this way by the Third World mounts up to a sum higher than the service on the debt!
Finally, for reasons inherent in the economy of the imperialist contries, a good part of the period consi dered is marked by precipitously rising interest rates, especially in the United States. But, while for the capitalist countries this rise was not catastrophic given the level of inflation, the same was not true for the Third World countries. Since their debts are denominated in dollars, every increase of one point in interest rates in the United States increased the annual service on the debt by 1000, 5000, or 6,000 million dollars at the end of the 1970s and the beginning of the 1980s.
Once again, it is necessary to borrow more to cover these supplementary costs. And since the currencies of Third World countries have been hit by inflation rates higher than those of the imperialist countries, the rising interest rates accentuate the tendency toward a "dollarization" of the economy of these countries. Thus, a whole sector of econo-
International Viewpoint 5 May 1986
IM F pressure produces abysmal poverty and hunger (DR)
mic activity and a growing part of savings are thereby removed from the control of the national governments and from national capital accumulation. (14)
Thus, an ever widening spiral of debt has led to 900,000 million dollars in Third World debts today and to a situation of de facto insolvency in most of the debtor countries. Of these 900,000 million dollars, far less than half have been genuinely invested. Between a third and a quarter have been diverted abroad by the possessors. Another quarter have been held or received by the lenders themselves.
The overheating of the Third World debt has unleashed a four-fold destructive process affecting the world capitalist economy as a whole:
The de facto insolvency of the Third World countries threatens to bring down some of the main banks in the imperialist countries and, as a result, the credit system as a whole and the capitalist world's monetary system. Today, more than half of the Third World debt, about 48,000 million dollars, is held by private banks.
- The Third World countries cannot meet the service charges on the debt - to say nothing of the principal (15) - without producing huge surpluses from their balances of payments. This means net outflow of currency, money capital, and thus of capital in general on a grand scale. But these countries are the poorest in capital and need more capital in order to be able to industrialize and modernize. A net outflow of capital can only result in a progressive slowing of the rates of growth and development. As Raul Prebisch has said, the IMF's remedy comes down to bleeding a patient suffering from anemia!
- The massive outflow from the so-called Third World through interest payments on the debt would require a drastic restriction of imports and a no less drastic expansion of exports. Leaving aside the inability of a great many semi-industralized dependent countries to achieve such an expansion - for example, Mexico, which is at the mercy of fluctuations in the oil price - this would mean a no less drastic narrowing of the world market open to the imperialist countries, especially the less competitive, in particular the United States. These imperialist countries would thus lose
14. See the excellent article by Pierre Salama "Dettes de dollarisation," 'Problemes d'Amerique latine', No. 77, 1985.
15. To repay nearly 1,000,000 million dollars in capital borrowed, the Third World would have to come up with a balance-of-payments surplus of the same value. Even scheduled over 15 or 20 years, this would represent an additional annual outflow for interest payments on the order of 50,000 to 60,000 million dollars, which is totally unachievable. The entire world tacitly accepts the assumption that the bulk of this debt is never going to be paid off.
21
In India, as elsewhere, imperialism remains the last line of defence of the native ruling classes (DR)
on two fronts. They would export less to the Third World, and they would import more manufactured goods.
- However, it would not be the same sections of the bourgeoisie that would gain and lose from such an infernal evolution of the world capitalist economy. The repayment mechanisms established by the IMF in general favor the banking sectors and recipients of dividends in the imperialist countries and go against the interests of the industrial and exporting sectors. Thus, the parasitic, usurious character of the imperialist system taken as a whole, above all in the United States and Great Britain, stands to become more pronounced. (16)
The imperialist bourgeoisies more oriented toward exporting commodities and therefore more dependent on an expansion of the world market - such as West Germany and Japan -are therefore in favor of a more flexible policy toward interest on the Third World debt. This is the meaning of the doctrine proposed by the West German Social Democratic leader Willy Brandt.
Paradoxically, Brandt and FranzJosef Strauss, the Christian Democra tie leader, are working in tandem today as the real spokesmen of the European imperialists against Ameri can imperialism.
The threats that the overheating of 22 the Third World debt pose for the world capitalist economy are thus real. But this does not mean that a full-fledged generalized bank crash is inevitable. (17)
Already at the time of the big banking crisis of 1931-33, a saying was going around international financial circles that "if the debt is 100,000 dollars, the debtor can't sleep, but if the debt is 10 million dollars, it's the creditor who can't sleep." If you multiply these figures by 10 or 100 to adjust for the inflation that has occurred over the half century that has gone by since then, this saying is more pertinent than ever.
The American imperialists cannot allow Chase Manhattan, Citicorp, or Morgan Guarantee Trust to go under, any more than British imperialism could accept the collapse of Lloyds, Barclay's and National Westminster. The most likely eventuality, therefore, is a massive bailout of the big debtors (in reality of the private creditors of these big debtors) by the international banking system and by the imperialist governments.
This amounts to a double nationalization of the losses, partly at the expense of the toiling masses of the imperialist countries, partly at the expense of the popular masses in the so-called Third World countries themselves. The dealing going on now is essentially over the division of the sacrifices. The Third World bourgeoisies are interested above all in the d technical aspects of the question - the timing and costs of debt rescheduling.
Avoiding sacrifices for their own peoples is not exactly their main e concern.
b
However, the success of such bailing-out operations, of which the b
Baker plan is only one partial example
(18), is not at all assured, precisely
50 because no one controls the capitalist economy. It is marked by abrupt, spontaneous, largely unforeseen changes under the pressure of compe-
SC tition, and regulated only in the long
0 term, and therefore blindly, by the law of value.
Thus, the plan for straightening out Mexico's finances, which was so laboriously set in motion by interna-
16. At present in the United States, a nominal interest rate of 10% and an inflation rate of 5% mean that the real interest rate is 5%. In France, an inflation rate of 4% to 5% and a nominal interest m rate of 10% to 12% mean that the real th interest rate is 6% to 7%, an actually usurith ous rate. In the United States at certain times in the 1980s, we saw nominal interest th rates of 20%, when inflation was under 10%.
go
17. Nonetheless, partial banking crashes are multiplying, not just in Kuwait,
Singapore, Malaysia, Argentina, Indonesia na and the Philippines, but also in the United bo
States, in West Germany, in Italy, in Great
Britain and in Japan.
in
18. The Baker plan put forward by US
Secretary of the Treasury James A. Baker, pr aims at getting the private banks to increase tri their credits to Third World countries by it
20,000 million dollars, with something close to public guarantees and a sharp increase in capital and commitments from the World eig
Bank.
International Viewpoint 5 May 1986
tional bankers in 1982 and whose success they prematurely proclaimed, has just had the props knocked from under it by the plunge of the oil price.
Moreover, if every economist who understood the way the capitalist market economy functions could easily prediet that the oil price would fall, no one could predict how sharp this fall would be, and exactly when it would come about, that is in February 1986.
All of this was provoked in part by British Prime Minister Margaret Thatcher's determination to assure the currency necessary to defend the pound sterling by all-out pumping of oil from the North Sea and by the heightening of overproduction that this policy brought out, with the resulting drop in the oil price. Another factor was the refusal of Saudi Arabia to sit by and watch its share of the oil market shrink. This led to the coming apart of OPEC, and hence to the breakdown of prices, and hence to more overproduction, and so on.
Now, the Mexican debt has to be renegotiated a second time, as it was in 1982, and under worse conditions from the standpoint of the world market for oil and the social situation inside Mexico itself.
The evident fact of the interdependence of the economy of the imperialist countries and that of the Third World countries in the framework of the international capitalist economy gives some Third World bourgeoisies a not inconsiderable power for blackmailing the imperialist banks. These bourgeoisies tell the banks in such cases in effect, "If you squeeze the lemon too much, we'd rather go under and drag you down with us."
For this reason, Fidel Castro's scheme for a collective disavowal of the debt by all the Third World countries is not a purely propagandistic proposal. It can be a positive contribution to the anti-imperialist struggle on a world scale. It deserves the support of all anti-imperialist activists, of all revolutionists and of the entire international workers' movement.
This plan should be a signal for mobilizing the popular masses of the Third World, and the support of the world proletariat for them, behind the demand that their respective governments disavow the debt.
Far from favoring any subordination of the workers to the national bourgeoisie, such a mobilization would increase the class independence of the proletariat in the Third World countries, inasmuch as it would show that it is the working class and the workers' movement that defend national sovereignty against imperialism with
International Viewpoint 5 May 1986 consistency that the bourgeoisie has shown itself incapable of. It would thus promote an alliance of the workers, peasants, urban poor and the urban petty bourgeoisie independent of the bourgeoisie.
Moreover, such a - mobilization would promote the direct class struggle of the proletariat and its allies both against the Third World bourgeoisies and against imperialism. Not only do these bourgeoisies continue to pay a usurious tribute to international capital but they strive above all to shift the bulk of the burden onto the backs of the popular masses, whose living standards are dropping disastrously. For workers' control of the banks
The IMF is bringing constant pressure to bear for balancing budgets and reducing public spending, which means above all reducing social spending, cutting subsidies for necessities, as well as paring down the volume of wages and employment in the public sector.
The reactionary character of this pressure - we might even say its inhuman character, since it produces abysmal poverty and hunger in the literal sense of the term - is obvious.
However, it is not enough to denounce this pressure by the IMF. It is necessary to excoriate all those who yield to it, who give in to its diktats, not only out of cowardliness and political fear but also out of class interest.
This is why the workers movement should combine the demand for disavowal of the debt in particular with one for workers' control over banking operations, preferably by the bank workers themselves. This would offer a means for exposing and then for taking concrete steps against diversion, hoarding, private appropriation and clandestine export of currencies by the bourgeoisies, operations that contribute considerably to increasing the debt burden.
Will the Latin American bourgeoisies, to say nothing of all the Third World bourgeoisies, in fact form the united front for disavowing the debt that Fidel Castro has called for? That is not very likely.
As the example of OPEC shows, crisis conditions heighten competition equally among capitalists, among the capitalist powers and the dependent countries, as well as within the Third World itself.
Like the Indian bourgeoisie, the Latin American bourgeoisies will try to use the mounting pressure of the masses, as well as Fidel Castro's proposal, to blackmail imperialism. "Reschedule the debt, give us new credits, or else we will follow the Cuban proposals!" This is all part of a gigantic tug of war that is going on now and whose exact result no one can predict.
A growing number of commitments will not be kept. An increasing number of debts will be purely and simply carried forward when they fall due. Continual extensions are not very different than default. This is why, it should be noted again, the real battle is being fought over interest, over service on the debt, rather than over the principal.
The interdependence between the bourgeoisies of the semicolonial and dependent countries and the imperialist bourgeoisies is not purely an economic and financial one. It is also political and military. With revolution rising in many countries in the so-called Third World, imperialism remains the great protector and the last line of defence of the native possessing classes. This is true not only in Central America, in the Arab countries, in South Africa, in the Indian peninsula, in the Philippines and in South Korea. It is true in all such countries.
On the other hand, imperialism no longer has sufficient resources to rule the Third World directly. It relies on a relative consolidation of regional and local bourgeois relays. If the international banking system collapses, this would not only be a fatal blow to the imperialist centers but one just as fatal to the possessing classes of the Third World. If the revolution spreads in Central America and reaches into Mexico, it would knock directly at the door of the United States.
This explains the desperate attempts of both imperialists and Third World bourgeoisies to grope their way along, from compromise to compromise, from renegotiation and rescheduling, from the bailing out of one threatened bank to another. The fate of the international bourgeoisie as a whole is at stake.
However, the bourgeoisie does indeed have to grope its way, because it does not control all the parts in the mechanism. The interdependence I described remains an interdependence subject to the iron law of the bourgeois world. That is, a crisis weakens the feeble more than the strong, it increases the differences of wealth (and poverty) and power, it tends to magnify relations of dominance and dependence rather than to eliminate them. And, above all, the bourgeoisie is less and less able to control the actions and reactions of the popular masses.
- SWEDEN