When the present economic crisis first began to bite, the bourgeois press – and the left – used up a lot of ink discussing how deep it would turn out to be. Would it be as bad as the 1997 Asian financial collapse, the 1987 crash on Wall Street, the stagflation of the 1970s …?

Now, the list of options has been whittled down to one – the one the bourgeoisie did not even allow itself to think about two years ago. Every financial column in the western world is haunted, daily, by the spectre of the great depression of 1929-33. No other period bears witness to such precipitous collapses of hundred-billion-dollar financial institutions. Most worrying of all is the international dimension – the national and regional limitations of more recent bubbles, wobbles and recessions have been comprehensively broken by a crisis that has come close to sending entire countries to the wall.

Brown: G20 gamble

In Britain, recent financial headlines have been dominated by Bank of England boss Mervyn King’s announcement of a £75 billion ‘quantitative easing’ package. This involves the bank buying certain assets – usually government bonds – from private financial institutions as a backhanded way of injecting cash into the banking sector. It has a useful side effect, in that buying up large numbers of government bonds in this way tends to increase their value. Because bank lending rates are partially linked to government bond yields, buying them up should help spur lending – as, of course, should handing over £75 billion. Encouragingly for the government and Bank of England, the Financial Times reports that government bond prices have indeed increased sharply, though it is early days yet for the quantitative easing programme (March 10).

This cash is, in this case, “central bank money” – a very bland way of saying that King and his subordinates have effectively willed it into existence (printing money, as it would be called in the days before electronic transfers). Unsurprisingly, this has been controversial – lurid tales abound of hyperinflation, of Britain reduced to the state of Germany in 1923. This is most likely misplaced – in the first instance, it is by no means certain that this money will do much of anything. It is certainly not the first multi-billion-pound package to be thrown at the banks, and it would not be the first to fail to stimulate lending.

Secondly, the story of the crisis so far has been a collapse in the market value of financial products. Over the last decade and before, the amount of ostensible monetary wealth in the economy has increased to an incredible degree – at its peak, the international derivatives trade was valued in the hundreds of trillions of US dollars. This capital is, in Marxist terms, fictitious – and it is the first, if certainly not the only, victim of the crisis. In the context of generalised collapse of asset values, a short, sharp increase is not likely to lead to a spike in inflation, let alone a catastrophic spiral motion in the manner of today’s Zimbabwe – not on its own, at any rate.

In any case, Gordon Brown and Mervyn King are running out of options. The government had already been forced into taking a majority stake in Royal Bank of Scotland in January, and finally did the same to Lloyds on Friday (though it faced more resistance from the latter’s board, according to the March 7 Financial Times). We stress the word ‘forced’ – Gordon Brown and his colleagues have been extraordinarily resistant to nationalising the banks outright, or making full use of their new stakeholding muscle to ensure a relaxation in the credit markets.

Partly this is an ideological matter – New Labour orthodoxy is virulently and unabashedly neoliberal, and Brown, along with his predecessor, Tony Blair, frequently boasted of Britain’s economic deregulation. The main factor, however, is an objective one. Nationalising the banks effectively commits Brown to carrying the can – it can only be a first step in a general reorganisation of British economic life most likely in the direction of protectionism. It would be very much a gamble.

A more attractive gamble, from Brown’s point of view, is on international action to combat the crisis. The G20 group of the 19 largest economies (plus the EU) meets in London on April 1. Brown is hopeful that some useful agreement can come out of it – on reining in tax havens, or curbing the much-maligned ‘bonus culture’. He is particularly concerned to argue for ‘free trade’, as Britain is not the only country to come under the temptation to protectionism in lean times. ‘Free trade’, however, most likely refers to the assemblage of mechanisms for enforcing unequal dependency relations between the imperialist powers and the third world, for which that phrase has become a particularly notorious euphemism.

Somehow making countries lower down the food chain pay for the crisis will be a concern of great interest to the G20, and particularly to the most politically powerful in that group. What could have turned out to be a substantial international recession in 1997, for example, was successfully dumped on particular states or regions – in that case, the ‘tiger’ economies of the east Asian Pacific rim.

It is possible, however, that this crisis is too deeply rooted in America and Britain, as well as other metropolitan states, to be offloaded in this way. The case of China is instructive here. How long ago it now seems that commentators – even among our comrades on the Marxist left – believed that China would ride in like a white night to save the world, however temporarily, from recession … yet it has been barely a year.

In that time, the bourgeoisie has gone from eyeing greedily the Stalinist regime’s substantial stocks of foreign currency to looking aghast at the state of the ‘real’ Chinese economy. In Britain the sudden loss of 2,331 jobs would cause shockwaves; but that is the number of shoe factories alone that closed in China in the first half of 2008.¹ While the Chinese state still anticipates a growth rate of 8% this year, that is a fall from 26% last year and a two-decade low. Exports and imports have collapsed, as consumer demand in the west for Chinese products crumbles with the tightening of consumer credit.

Still, it is not the case that China is to be somehow sold up the river by the great powers. The decline in manufacturing in America and Britain particularly has obviously not diminished the latter countries’ need for manufactured goods. The net effect is that economic explosions in the far east are not contained within China, but reverberate back into the metropoles and generally sharpen contradictions throughout the world market.

And it is not only ‘purely’ financial contradictions that China is throwing up. USA Today reports on the mass protests at layoffs and closures rippling through the country. A Beijing academic is quoted assaying that the “recent mass incidents are the biggest political test the ruling party has faced since the 1989 incident” (February 2) – no prizes for guessing what that “1989 incident” was.

A serious political challenge to the ruling bureaucracy would have provoked the western capitalist class to salivation under other circumstances, suspicious as it still is of the pretensions to communism of China’s ruling party, and vexed as it is by China’s cultivation of trade blocs against the hegemony of the USA. A collapse of the Chinese government under current conditions, however, would not bode well for other countries, both in the region and throughout the world.

For these reasons, it is unlikely that the USA, Britain and other closely linked economies will be able to escape a long period of economic pain – it is simply not feasible to dump the ill effects on other economies, and to do so would carry enormous social risks for the ruling class. This is partially a symptom of the US’s accelerating decline as the world hegemon state, but also the epochal decline of capitalism as a functioning system.

By the same token, capitalism’s recovery – which will come, provided we are unable to get rid of the system in the interim – will take an international form, whether through conscious synchronisation of economic policy or through an ‘objective’ and uneven process (as was the case in the 1930s).

Proletarian responses to the crisis will have to be international as well – in this, if nothing else, we should be unabashed in learning lessons from Gordon Brown. The broader the scale of working class unity, the better – serious links between workers’ organisations in Britain and on the continent would be an important first step towards shaping events to our advantage, and pushing our demands.

It is necessary to make the case for a genuinely internationalist programme which combines economic demands with the crucial questions of democracy and state power – in a word, communism.

Note

1. www.einnews.com/pr-news/10317-china-factory-closures-shatter-decoupling-myth