Contribution to the International Communist Seminar
‘Economic Crises and Possibility of a Major World Crisis’
Brussels, 2-4 May 2002

www.icsbrussels.org , ics[at]icsbrussels.org

Communist Party of Cuba

The current elements of a world economic crisis

Since more than two decades, the neoliberal model has been imposed on the world by the biggest of the imperialist superpowers. But it was not until the beginning of the 90s that this intensified and reached its highest level, expanding over the entire planet as an inherent part of the process of globalization, and thanks to the world's political unipolarity, resulting from the dramatic events that took place in the Soviet Union and Eastern Europe.

Against this background, the United States, with the help of its enormous political, military and technological power and its almost complete control over the international financial institutions, has obtained the greatest accumulation of wealth and power that the history of mankind has ever known.

This accumulation of wealth was realized at the expense of the large majority of the nations and peoples. Following the commands of the Bretton Woods institutions, and particularly the IMF, their governments created the mechanisms the transnational corporations of the rich and developed North needed to plunder the underdeveloped and dependent economies with impunity.

In the name of free trade and a 'level playing field' for economic competition, the dominance of the rich countries has been strengthened and the inequalities between the former and the so-called Third World have widened, thus compromising even the latter's future potential for development.

Notwithstanding the bad social results of this neoliberal policies, disastrous results that are clearly visible, the most enthusiast economists of globalized and transnational capitalism declared before the world the end of the cyclical crises of the system, thanks to the emergence of the so-called 'New Economy'. In short, this term refers to the emerging economic activity related to the computer and telecommunication sectors. It has been presented as the event that created the necessary conditions for the growth and continuous expansion of the developed capitalist economies.

This theory was underpinned by the fact that the capitalist economy, and particularly the North American economy, had known one of its longest periods of expansion since the middle of the 80s, with the new technologies playing a vanguard role.

To further defend this idea, they also referred to the fact that the current economic growth is to a large extent determined by the advance in scientific-technological development, in innovation and in the competition that is created on this basis.

But to affirm that such developments, and the emergence of new technologies, products and processes, would have fundamentally modified the operational principles of the capitalist mode of production over the past five or ten years - principles that have been formed during centuries - and that they would have created new schemes or laws for the functioning of the economy on the basis of such technological developments, is, to say the least, not knowing the nature of the system itself.

The deep crisis that precisely the sector of the 'New Economy' is experiencing demonstrates that the thesis that this economy is completely different from the old capitalist economy with all its rules is erroneous. All the old phenomena of recession, depression and crisis are far from having disappeared forever.

To the contrary, with today's world economy having become more interdependent and globalized - to which precisely the development of computer technology and telecommunications has contributed - it is much more likely that the effects of the crisis of the system can be felt far more broadly and with more devastation than in the past.

Since two years, the capitalist world lives under the threat of a possible global recession. But in order to maintain the quiet on the speculative markets, the efforts to transmit a positive and optimistic image has reached such a level that words are even changed to show that it doesn't concern a recession or a crisis, but only a conjunctural adjustment. In the same vein, they have fabricated terms as a 'soft landing' for the recessive process of the North American economy. This way the growth of the most powerful economies, particularly of the North American economy, is guaranteed.

Using the same style, when finally the circles of capitalist powers have decided to speak about the possibility of a recession, they only discuss the major economies or centers of power (United States, Japan and Europe), while minimizing the rest of the world, or mentioning cases of regional crises and of the - badly named - emerging economies in an isolated manner. This has been the case with the crises of Mexico, Asia, Russia or, more recently, Argentina. These underline the current situation in vast regions of our planet, where the large majority of humanity lives.

At a time when an enormous technological and scientific development has been reached, which has increased the capacity to generate resources and wealth with which the most pressing social problems, accumulated through centuries of colonial and neocolonial exploitation, could be solved, paradoxically the misery is growing to unbearable limits and the gap between the rich and the poor countries and between the social classes in each country is widening more and more.

In the neoliberal logic, it appears to be a fact that capitalism has reached the conclusion that a marginal world exists in which 85% of humanity lives and which has been left aside in the distribution of wealth. This world is not taken into account when the theoreticians of capitalism speak of a new economy or of the danger of a world recession. But it is in these underdeveloped countries that the international conjuncture turns extremely adverse, in a context of recessive tendencies that tend to decrease the price of their export products and to erode the terms of exchange, which by them are already unjust and unequal.

In a climate of recession, also the credits and foreign investments tend to diminish, as do the remittances and other financial transfers from the industrialized countries.

In contradiction with their own capitalist logic of stimulating consumption as the mechanism to maintain the growth of the demand and consequently the expansion of production, not only has the previous situation not been taken into account, but there is no real will on the part of the rich countries to solve the serious problem of the foreign debt, which limits the underdeveloped countries' access to the market ever more. This debt already surpasses 2500 billion dollar and currently shows a growth, which is more dangerous than the one in the 70s.

The debt by itself is immoral, because of the terms on which it has been contracted and because of the scandalous mechanism of submission and exploitation that it implies. It has already been paid various times over through the arbitrary growth of the interest rates and through the capital flight towards the rich countries.

It is estimated that in the United States some 727 billion dollar have been placed that stem from the reserves of the Central Banks of the world, including of the underdeveloped countries. In the latter, the upper classes get their capital out of the country, in search of a safe haven. This situation leads to the absurd fact that with their reserves, the poor countries offer cheap and long-term financing to the richest and most powerful country in the world, thereby destroying every possibility to count with the necessary resources to resolve their own social and economic problems. It also leaves the Third World nations without protection against the instability that the very system engenders.

What possible limitless expansion of the markets and of the productive activity could exist, if as a result of the application of neoliberal policies in more than 100 countries, the income per capita is lower than what it was 15 years ago, if 1.6 billion people live in worse conditions than in the beginning of the 80s, if 820 million people are malnourished, of whom 790 million live in the Third World, if in these countries life expectancy is limited to 40 years for 507 million people and if entire continents, as Africa, appear to be condemned to a loss of population as a result of wars, hunger and AIDS.

In our modest opinion, the road to neoliberal globalization has intensified the destabilizing elements in the capitalist economy and has created the conditions for ever more dangerous crises and recessions.

With the terrorist attacks of last September 11 in the United States, and with the war of that country's government against Afghanistan, a high degree of uncertainty has been created regarding the economic implications of these facts. But it has to be taken into account that the recent recessive tendencies of the North American and world economies originated and took on force already before these events.

According to IMF projections from before September 2001, the global GDP would grow by 2.6% in that year and by 3.5% in 2002. In the first half of 2001, world industrial production has fallen by 6%. Later IMF projections (mid-November 2001) foresaw that the growth of the world economy would be around 2.4%. This downward revision in the projections of world GDP growth reflects above all the expected economic decline in the three major world economies, which has led to a scenario already qualified by some institutions as a global recession with a strong potential of aggravation. Indeed, numerous economists share the idea that a global growth rate below 2-2.5% could be defined as a global economic recession.

Generally, the current economic cycle is largely synchronous with the previous cycles in the three main centers of world power, the United States, Europe and Japan. According to economic studies and following a supposed scale in which the maximum degree of recessive synchrony would be 100, it is estimated that the recession of 2001 would reach the level of 90, as against 50 for the recession of 1975, 60 for 1082 and 65 for 1991.

It should be pointed out that if the current global economic recession of the world economy were characterized by its high degree of synchrony, the subsequent phase of recuperation would not necessarily maintain this characteristic.

As the major world economy, the United States undoubtedly plays a decisive role in the future of this crisis. In this sense, the Federal Reserve and the North-American government have applied an aggressive policy of measures to avoid the deepening of the recession. We can mention the ten decreases in interest rates implemented until November 2001, the tax cuts and the growth of the fiscal budget and of the military budget. In this sense, the Bush administration has designed a package of fiscal stimuli with the objective to reestablish consumer confidence and to stimulate investment.

These anti-recession measures carry with them the danger to deepen the crisis, or at the least to create new complications for the major world economy, for it should not be forgotten that the basis of the current difficulties is the profound indebtedness that concerns the North American government, corporations as well as families.

On the other hand, the tax cuts and the expansion of government expenditures has in fact meant the return of budget deficits, which in the medium and long term can feed the phenomenon of inflation and can thus make the policy of low interest rates counterproductive.

It is against this scenario of recession that the so-called "war against terrorism" has to be placed. Its first phase was the war against Afghanistan, which has made many analysts think that it was in part also a strategy to augment the military expenditures as an escape valve for the crisis. Although we do not completely discard this thesis, we consider that this war has another objective, namely to impose upon the international community a precedent of total impunity and hegemonism on the part of the United States. The US has fashioned itself as the judge and the policeman of the world. It applies its extreme Rightist and warlike policy without the least respect for the international laws, treaties and institutions and with the silent complicity of its main allies.

In the past months, the media again overflow with market optimism. There is talk of increasing consumer confidence in the United States, the decrease of plant stocks and the stock market exchange again reaching levels as before September 11. But until when this optimism will last? Why ignore that the industry of the developed world at this moment has a large capacity to deceive, and that in a few days' time they would be capable to replenish the stocks? Why do gigantic monopolies continue to go bankrupt in a scandalous way, if they were supposed to be in good economic shape?

We cannot ignore the fact that we continue to live in a virtual economy, that financial speculation has become the most important activity and that the so-called speculative bubble becomes ever more separated from the productive activity.

Today, 3000 billion dollar go around every day in purely speculative operations. This means that in only a couple of days, the amount surpasses the 8 trillion dollar of the world's trade in a whole year. Indeed, the last years this irrational speculative process has been converted into the main source of income and consumption in the United States and has destabilized countries and entire regions in a matter of hours.

To the extent that the majority of humanity is being marginalized from the markets and that money ceases to be a source of productive investment and is converted in a destabilizing factor for the poorest economies, the perspectives of the system to grow become more distant.

How talk about the growth of consumption if entire continents have no access to it? How avoid crises of overproduction with a similar logic?

In Europe and North America they produce subsidized foodstuff, thus ruining the agriculture of the South. While in the Third World, famines and crises occur, the North is destroying food to avoid price falls.

Will our planet be able to resist the logic of a system for which growing irrational consumption is the basis of its very existence? This consumption model, which is limited to only a group of rich countries or to a third of the human beings, is already depleting the world reserves and poisoning the environment.

Will the societies in North and South be able to resist much longer the economic, ethical, political and moral degradation of a system, which is far from solving the problems it creates and aggravates? Will humanity be able to live with growing figures of hunger, disease, illiteracy, unemployment, exploitation of child labor, drug trafficking and consumption, corruption, money laundering and so many other evils that haunt us.

We are convinced that capitalism has no answers to these questions, and solutions, even less. Not even in those rich countries that in particular historical situations have taken on the idea of the so-called "social welfare" capitalism.

The crisis will inevitably continue to succeed one another, the political destabilization is already a fact in a large part of the world, and the system is confronted with a growing situation of ungovernability. The imperium itself has acknowledged this, and we are inclined to think that its current warlike attitude and the renewed arms race is a symptom of this, with which it justifies so huge an investment in new war technologies and a so enormous military budget, while today, more than ever, the world lives under the aegis of its unipolar dominance.

Marxism-Leninism is today more valid than ever. Capitalism, in its most recent version of neoliberal imperialism, continues to dig its own grave. The contradictions of the system, far from getting solved, are deepening, and the crises will be every time more profound and destructive.

The alternative is socialism, a new society in which the human being and his problems will be the main concern. A society in which the logic that the blind market laws define the destiny of civilization, will be overcome, and in which the resources and achievements that humanity has reached over the millennia will be in the service of man, to satisfy his material and spiritual needs. A society in which the moral and ethical values of solidarity and social justice will play a central role.