[Documents menu]History of the world economy

Financial crisis: a symptom of the global crisis of capitalism

By Victor Perlo, in People's Weekly World
20 December 1997

The deepening world financial crisis and crisis of overproduction is currently centered in Asia, but it is already spreading to Africa, Latin America, Europe and yes, even the United States.

The long boom in Thailand, the first of the "Asian Tigers" to collapse, brought wealth and extravagant living to the capitalists who exploited Thai workers and to the compradores who acted as go-betweens and enforcers for the Japanese, American and other foreign investors who reaped the largest part of the plunder from the poverty-level wages and inhuman working conditions of Thai laborers.

Now, as overproduction forces the closing of scores of Thai factories, the first wave of laid-off workers has no place to go: 449 of them from the bankrupt PAR Garment factory are sleeping on straw mats outside the plant gate, with no hope for the future. Thai economists fear an additional two million impoverished workers will lose their jobs by the end of 1998. In relation to population, that's equivalent to eight million U.S. workers. Throughout Southeast Asia, governments are being forced by the U.S.-controlled International Monetary Fund (IMF) to slash social and public benefits of all kinds, including education and health services.

Asian countries were prevailed upon to get large loans at very high interest rates from U.S., Japanese and European banks. The scale of this international borrowing went far beyond their base in real production. As a consequence, there was a drastic drop in the exchange rate of their currencies. Combined with widespread bankruptcy of Asian companies, U.S. transnationals are quick to buy up properties at bargain prices. With real wages of Asian workers cut in half, the profits of the transnationals are soaring as the movement of U.S. production to Asia accelerates - and will continue to accelerate.

U.S. workers are, of course, losing as a result of these and other measures, with more yet to come. The vicious welfare/workfare law, immigration laws, attacks on affirmative action and persecution of militant trade union leaders are just the start, even as official reports show employment and wage levels are rising. As a London Financial Times headline put it, "Asian woes cool U.S. pay pressure," reflecting the upper hand given employers to renew the downturn in real wages that prevailed through most of the past 25 years.

U.S. imperialism is using the financial crisis to further its long-sought goal of world domination, a fact underscored by a New York Times headline, "Asia's surrender: reeling from blows to their economies, countries agree to financial concessions."

But the concessions were not solely by Asian countries: 102 countries have agreed to remove most controls and restrictions on the intrusion of foreign capital, while there were absolutely no U.S. concessions in return. Although it is true that while Wall Street will be free to invest in Myanmar (Burma) without restrictions, Myanmar is free also to invest in the United States. But with what capital? With what ability to compete with U.S. power?

The world crisis is, in part, a manifestation of capitalist contradictions. But it is mainly part of the process of struggles which, in some respects, precipitated the crisis and which have sharpened in the course of the crisis.

One struggle is that between capital and labor, particularly in Asia where the crisis so far is deepest and where the capitalists use the situation to increase the exploitation of labor. But the workers are resisting this and, especially, the IMF dictates directed against workers.

A second struggle is between capitalist countries. Imperialism, be it U.S. or Japanese, uses the crisis to reinstate full neo-colonial subjection on its debtors, cutting short their attempts to develop economic independence and jacking up the scale of plunder available to transnational corporations. It is the workers who most strongly uphold the national integrity of the victim countries, who strike and demonstrate to prevent or delay implementation of IMF prescriptions.

This fightback has been especially noteworthy in South Korea, where the working class has a tradition of Communist-influenced trade unionism that has won significant gains in recent years including a level of real wages equaling that of some western European countries.

The third struggle is between capitalist powers for redivision of the world - most apparent between the U.S. and Japan. Japan's aim was to achieve parity with - and supremacy over - U.S. capitalism in overall economic strength and control of Asia. These pretensions were partly smashed by the prolonged Japanese crisis and depression starting in 1990. The severity of the present financial crisis has further weakened Japan's influence. The losses involved in the actual and threatened bankruptcies have brought bailout costs to half a trillion dollars - and still rising.

It is far from certain whether Japan's treasury has the reserves to handle that amount, or whether Japan can avoid surrender to the IMF and acceptance of its humiliating terms.

U.S. and European capitalists are using the crisis to increase their global domination. At the same time, they hope to contain the crisis before economic life in the smitten countries collapses absolutely. And, above all, before political opposition becomes sufficiently organized and unified to threaten anti-imperialist revolutions.

There is an historical parallel: the strategy used by President Herbert Hoover and the Wall Street manipulators to deal with the crisis of overproduction in 1929-32. They continued the tactics they had used during the previous inflationary period in the new deflationary period, which made everything worse and brought the country to the brink of a complete economic standstill.

-The second installment will appear in our issue of Jan. 10, 1998. Vic Perlo has asked that we extend holiday greetings from him and his wife Ellen.

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