The Age of Crises
Farooque Chowdhury
It is an age of crises. Capitalism in its crisis-ridden history has never faced a similar situation like now. Many crises have “come down” on this earth, have joined together, are acting together and also, are acting against each other, aggravating all, and are threatening not only humanity, with which capitalism’s relation is antagonistic but which is essential for the survival of capitalism, but also the world system capitalism has constructed over centuries.
Now it is not only the proletariat, the grave diggers of capitalism, but also the edifice the world system capital has devised in its process of accumulation and globalization that is threatening the world capitalist system. The relationship, opposites uniting together and opposing each other, built up by capitalism is the show of its crisis generating efficiency. But, alas, none of the market mongers are there to celebrate this efficiency!
Crisis creating capacity of capitalism is being reaffirmed by the present state of the world. The world system is riddled with crises: The Great Financial Crisis, the Great Hunger, the environmental crisis, the energy crisis including the peak oil reality. The crisis in democracy is not limited in the periphery only. Advanced capitalist states are also showing signs of crisis in their body-politic. The issues of equity and equality, in the realms of distribution, access, entitlement, rights and resources, remain a far cry in the entire world system, and thus constitute one of the biggest crises.
The crises, on the one hand, are hindering the progress of humanity, and on the other, have appeared as a threat to world peace, to the peace in the lives of billions, to humanity’s quest for prosperity and happiness, to their efforts for a stable life. Thirst for accumulation, adventures for profit, hunger for expansion, and wars – propaganda, trade, diplomatic, and military – for empire have brought these crises that have been and are being designed and directed by a few. The triumph of capital in its globalization expedition has aggravated the situation.
The adventure began since capital enthroned itself on the barbarous dream of appropriating all the resources and labor centuries ago, since capital crowned itself as the master of the entire world, of all the human beings, and of all life and dead, of history, philosophy, and science. Thus it sowed the seed of crises in all spheres of and related to life – nature and society, economy and politics, ideology and education, institutions and relations.
It has no capacity to resolve the contradictions, antagonistic and irreconcilable, between the few indulging in unimaginable luxury and humanity striving for survival, created with its greed and cruelties, with its power for accumulation and appropriation, extortion and exploitation, with its energy to destroy and deface. The consequences of aggrandizement now are engulfing the entire earth with all the crises humanity is experiencing.
Has ever the earth experienced so many crises simultaneously? Has any of the societies, slave owning or feudal, occidental or oriental, created any parallel to these crises? Had any of the empires, from the east to the west, the power to create any of the crises of this magnitude, global? Have all the civilizations of the past days ravaged resources of the earth to this level and thus created crises that now threaten the entire humanity? Were the crises created in the pre-present world system periods entwined together like the present, one influencing the others, and thus accelerating the speed and velocity towards the earth’s journey to its destruction? Can a single such crisis be identified there in the domains of savages and warlords, in the paths of conquests by conquerors and marauders? Are there crises in all the past phases of the world that joined together, that increased the magnitude of the rest? Not a single instance is there in the annals of human history, and thus the all powerful capital stands unparallel.
But, it has gone to its limit, bankrupting itself of all creativity, but the power of destruction that now even threatens itself, and it still plans to reap profit by capitalizing the crises, the climate change, the environment crisis, the food and energy crises, etc., despite the looming demon of destruction over its fate. It has ignited fires of conflict and strife, and is increasing tension in geopolitics. But, it is failing to escape the fundamental contradictions, the contradictions that are embedded in its accumulation adventure.
Fundamentally, two crises have been generated by the present world order: the crisis of capital and the crisis of environment, and these two are connected to each other. The Great Financial Crisis has been generated by the monopoly-finance capital in its speculation venture, its speculation with finance, with bubbles that it built on the base of profit and manipulated prices, that it built with manipulated financial instruments, even with imagined possibilities of risks, with manipulated and corrupt ratings, and thus with all the financial instruments and transactions the financial commodity was created. The finance-commodity has weakened its relations with other commodities, historically determined socio-production relations, and with the manufacturing sector. A contradiction was generated that has weakened the capital engaged in speculation with financial commodities.
It tried to resolve the contradiction by intensifying class war, a part of which was pressing down real wages, and by intensifying the process of appropriating societies in the periphery. Nevertheless, that attempt has intensified competition and the already existing contradictions, and has generated new contradictions, in the market, the market that depends on consumption for regeneration of capital, in the ranks of the wage earners, and at the global level, in the sectors related to food and fuel production, and with the other centers of monopoly-financial capital. The later one, in the form of competition and politics, made impact in the politics of other countries, and in geopolitics. The higher rate of profit resisted the monopoly-finance capital from getting engaged into research and development also.
A combination of crises in agriculture, class interests, capitals involved, distribution, ecology, energy, speculation has generated the food crisis. The politics related to the food crisis comes out from the involved capitals, and has played its characteristic role, standing by the capitals and against the producers and consumers until the crisis took the form dangerous to the rule of capital. Food, agriculture, and energy are parts of environment.
The crisis in agriculture is a combination of crises in soil and water management, of contradictions in class interests, of manufacturing and trade interests, the interests involved in manufacturing, trading, and transportation of chemical products and implements used in agriculture, and trading of fuel.
The agriculture crisis has increased because of capital’s adventure for appropriation from agriculture, for appropriating soil, and to resolve energy crisis. Thus, capital created a new crisis in agriculture in its effort to fly away from the clutches of energy crisis. But, it failed to forget its driving motive, profit, while it stepped into the world of agriculture to escape energy crisis. This is inherent in capital.
It cannot operate in some other way other than a predestined path determined by its nature. Energy – oil, natural gas, renewables, nuclear, etc. – is part of environment and affects environment. But, involvement, type, sector, sub-sector or level, of capital in energy is determined by rate of profit. Over-exploitation, indiscriminate use and misuse, investment, R&D, etc. are determined by profit, and these have impact, immediate and long-term, on environment. Trading is also involved there. The “way of life”, not only in the metropolis of the world system, but also in the periphery is determined by capital and capital behaves on the basis of profit, relating it to the “way of life” all over the world, and in the speculation bazaar. This in turn makes impact in the environment that is pushed to dangerous level by snapping the relationship between human society and nature and by making nature subservient to profit.
The issue of climate change needs no explanation after looking into these businesses of capital. With the domination of speculation market the entire situation aggravates.
This reality exposes the inefficiency of capital that undermines the survival of human being. It shows capital’s inability to resolve the contradictions generated by itself.
The trajectory of the crises goes through politics, mainly harming and/or threatening or posing to harm and/or threat the ruling machine, the world system, the dominant classes and their ideology. Geopolitics for domination of the world by sections of the world system and security of dominant powers are also influenced by these crises. This in turn sharpens contradictions in the dominant camp and creates possibilities for weakening of the machines for dominance.
Profiteering from the crises and putting the burden of crises on the dominated is the way capital seeks to get out of the crises, an inherent capacity and incapacity of capital that increases the magnitude of the crises, and creates new crises including eroding credibility and acceptability of dominance with the possibilities of emergence of newer factors in politics, sometimes at a slower pace, but at times, faster than imagination, as steps by history are dependent upon and relative to contradictions within economy.
Society, politics, ideology, philosophy, and culture including education and science get impregnated with these contradictions that in turn make capital’s capacity to resolve the contradictions difficult and thus worsen the situation. Capital cannot resolve the contradiction between limited resources and equitable distribution as profit stands in between these. The entire process threatens the existence of humanity as humanity with its common interest stands at the opposite pole of capital that owns only its own narrow interests. Other than opposing capital there remains no alternative available to humanity for its existence. This age of crises brings forth this reality, where compromises embolden capital in its last ditch attempt.
Extent and power of crisis grows with the expansion of capital’s power to subdue all in this planet, and thus capital’s triumphant globalization finds crises spread across the globe. Each of the crises has overwhelming power over the other. The globalization by capital thus turns globalization of crises.
The analyses, explanations, and ideas, the structures and approaches capital tried to sell over the decades were and are being refuted and rejected broadly with the same force and speed by the reality emerging out of contradictions; a number of allies it tried to nourish and bring into own fold started competing against it; regions it tried to control and appropriate were torn into pieces with strife and bloodbath. A few of the examples are: smallest possible government, least possible state intervention, crowning the economy with privatization, structural adjustment programs; Saddam, China, Russia, religious extremists; Iraq, the Balkans.
The funniest example of the dominating capital’s failure in the realm of knowledge is the “brightest” idea on the termination of “history”. No other idea, most probably, has been mocked and refuted so repeatedly and within so short time by reality and by people concerned with the humanity’s journey like the famous idea of “end of history”. The money invested to sell the idea and the power of corporate media and corporate academia upholding it tell the power of rejection, and the power of satire the idea faced.
On the other hand, there is also capital’s rejection of ideas/analyses that were not fanning the financialization process. Internationally respected economists John Eatwell and Lance Taylor in their book Global Finance at Risk, written 10 years ago, mentioned the risks and failures created by financial liberalization. But those analyses were ignored by the mainstream. The reason: those were not serving the interests of the dominant factions. George Soros informed in an interview on Bloomberg TV that Edward Gramlich, one Fed governor, warned of a coming crisis in subprime mortgages in a speech published in 2004 and a book published in 2007. But, Soros said: “the authorities didn’t want to see it coming. Analyses by Paul Baran, Harry Magoff, Paul Sweezy, decades ago, and by John Bellamy Foster, and Fred Magdoff, years ago, gathered bitter experience: unheard, unconsidered by the mainstream.
This is the fate the power of dominance creates for itself. It creates a complete blindness; class interests throw away knowledge when knowledge does not serve the interests, and thus the class prepares its downward path. Decline of dominance starts in the realm of theory, and the “end”-theory unhesitatingly, probably without any sense of shame, stands down there on the slope of history.
The militarism Toynbee mentioned in his A Study of History as “the commonest cause of the breakdowns of civilizations during the last four or five millennia” is not the militarism the world is now experiencing and apprehending to experience more. “Militarism,” to him, “breaks a civilization down by the local states into which the society is articulated to collide with one another in destructive fratricidal conflicts.” The militarism of today comes from different sources than the sources of “the last four or five millennia” ago. But, it acts in the way that hurts civilization today. Its acts of barbarity today are transmitted from generation to generation; its signatures of destruction are difficult to wipe out from the face of the earth; its marches to invasions and occupations damage environment irreparably. Thus it stands against humanity creating a crisis that most of the time spreads out crossing frontiers. The economy, broadly, of the world system, and specifically, of the centre of the centre compels it to enter into the theatres of wars. The economy cannot survive and flourish without militarism, with or without war, with hot or with cold war.
No ancien regime or modern day colonial power, no empire prior to the emergence of military-Keynesianism in the centre of the centre of the present world system had that military power that now threatens the entire planet, even its outer space. (See, Foster, et al, “The U. S. Imperial Triangle and Military Spending”, Analytical Monthly Review, October 2008.) And, contradictions among its subordinate allies are no less insignificant. The contradictions and competitions related to this regime of weapons are connected to profit thirsty arms manufacturers and traders. An equation with this military “game” and poverty, disease, ignorance, etc. makes the face of crisis crueler.
The dominating classes in the world stage are generating this crisis simply for their aggrandizement, for their indulgence with accumulation that sometimes appears mindless, indifferent; and the humanity has to deal with these crises. “[M]ilitarism … bears within itself,” as Engels wrote in Anti-Duhring, “the seed of its own destruction.” Militarism ultimately creates burden on respective societies. The initial benefits spread over broader parts of society get lost under the pressure of ultimate stagnation. The limits for expansion cannot be crossed by militarism but it has to face foes from within and outside. It faces its own crisis while it creates wider crisis for others. And, “militarism collapses by the dialectic of its own development” (ibid.). It leaves behind trails of destruction before its collapse and thus it takes toll from humanity. So, the growth of military-Keynesianism and all in its bandwagon is a crisis itself in a period the world system promises to give dividends of peace after the fall of its arch enemy.
The face of hungry is a familiar face in today’s world. Hungry faces, a symbol of a crisis created by the world system, even appear in the land known for prosperity, and overwhelm the map of plenty. It is now the world over in billions that boldly announce the failure of the world system in providing food after propagating the beauty and effectiveness of withdrawal of state from food “business”, a strategic sector. The historic level of hunger is without precedent. Hafez Ghanem, FAO Assistant Director-General, stressed while presenting the new edition of FAO's hunger report, The State of Food Insecurity in the World 2008: "For millions of people in developing countries, eating the minimum amount of food every day to live an active and healthy life is a distant dream. The structural problems of hunger, like the lack of access to land, credit and employment, combined with high food prices remain a dire reality."
The developed countries are not free from hunger. “Take the United States. It is a rich country, but for the majority of the population, a substantial majority, the last thirty years have probably been among the worst in American economic history” (Noam Chomsky, interviewed by Simone Bruno, Znet, October 13, 2008).
Conflict is a “contribution” of capital. Reasons behind conflicts in African and the Balkan countries are the evidence. Either there are attempts to grab the natural resources in these countries or interests related to geostrategy of the world powers, and geostrategy is connected to accumulation by capital.
The key drivers of food prices and their complex interactions remain the same, according to a Farm Foundation report, What’s Driving Food Prices? (March 2009 Update). Since 2006, energy and agricultural markets have become closely linked as biofuels production surged. A confidential World Bank report said: biofuels caused world food prices up by 70 percent (Aditya Chakraborty, The Guardian, July 4, 2008).
Poverty is the dominant reality in the present world. The situation has worsened in the periphery, in poor countries, for the people living on the margin. “If you happen to be born in the wrong place,” writes David Rothkopf in his book Superclass, “like sub-Saharan Africa, … that is bad luck,” Rothkopf tells that the top 10% of the adults worldwide own 84% of the wealth and the bottom half owns barely 1%. Included in the top 10% of wealth holders are the one thousand global billionaires. On the opposite, around 25,000 people die from hunger each day whilst a new billionaire is created every second day. With this reality, a very relevant question was asked by Parenti: “The number of people living in poverty is growing at a faster rate than the world’s population. What do we make of this?” (“Mystery: How Wealth Creates Poverty in the World?”, STWR, February 27, 2007).
The answer is known to many, but ignored, and acted in a different direction by capital and the institutions it has established. This creates a crisis, stark and acute; and also another job for capital: attempts to bury the crisis under heaps of lies and irrational statements appearing rational, coming out of powerful propaganda machine and corporate academia corrupting the uninformed and creating another crisis in the realm of knowledge and information. But the facts decline to get buried: In Haiti … workers are paid 11 cents an hour by corporate giants such as Disney, Wal-Mart, and J.C. Penny. In 1990, shoes made by Indonesian children working twelve-hour days for 13 cents an hour, cost only $2.60 but still sold for $100 or more in the United States (ibid.).
Banks and financialization
Banks, in the words of G M Bell, a Scottish bank director, are the “moral and religious institutions” (The Philosophy of Joint Stock Banking, 1840, quoted in Marx, Capital, vol. III), and in the words of Marx, are “esteemed bandits” (ibid.), “brutalise their own people” (Global Witness, March 12, 2009). “The … lax regulation … has let some of the world's biggest banks facilitate the looting of natural resource wealth from poor countries,” said Gavin Hayman, Global Witness Campaigns Director. “If resources like oil, gas and minerals are to truly help lift Africa and other poor regions out of poverty, then, governments must take responsibility to stop banks doing business with corrupt dictators and their families.” But the ruling machines in the world system refuse to take the responsibility. And, seeds of crisis are sown in the lives of the people in countries.
Undue-Diligence – ‘How banks do business with corrupt regimes’, report by anti-corruption NGO Global Witness, exposes banks’ (un)holy alliance with corruption, arms trading, dictators, plunderers, etc.
The brutal face of banks, micro or macro, is well known to many. Readers of The Grapes of Wrath can easily identify the following lines: “…the banks were machines and masters all at the same time. Some … were a little proud to be slaves to such cold and powerful masters…. The bank – the monster has to have profits all the time. It can’t wait. It’ll die. … When the monster stops growing, it dies. It can’t stay one size…. A bank isn’t like a man. … Men made it, but they can’t control it” (John Steinbeck).
Banks in company with other financial institutions are providing the evidence since long. Like monsters they have swallowed billions in monetary terms, and have trampled lives of millions in many countries, and have created a crisis. The crisis has compelled the US government to pledge $12.7 trillion, almost equivalent to the US GDP, in support of the financial system while governments of different countries have committed $18 trillion in public funds, equivalent to almost 30 percent of world GDP, to recapitalize the banks. This signifies the weakness of the system. The subsequent actions taken by the states show the undercurrents of competition and conflict among different sections of the capital involved in creating the crisis. The conflicting interests have strengthened.
Engaging the states by the capital shows the depth of the crisis and the increasing conflict that underlies. “The Germans and French are hostile to the American government’s bailouts because they fear, rightly, that these will enable US banks to retain their dominant global position. The American government, for its part, opposes calls for greater regulation, because they are directed at US finance. The British government, meanwhile, does not want to introduce tougher regulations fearing that they would endanger London’s position, described by Financial Times commentator John Plender as ‘the adventure playground of the global financial system.’ This brings opposition from the German government, which harbored hopes that the crisis would offer more opportunities for Frankfurt. The various industry interventions, likewise, have sharpened national rivalries. The German government’s bailout of Opel, for example, endangers operations in Belgium, even raising questions as to whether rules governing the operation of the single European market might have been breached” (Nick Beams, “Newsweek International editor’s ‘Capitalist Manifesto’, a desperate attempt at reassurance”, World Socialist Website, July 4, 2009). The seeds of more crises lie here, in competition, also.
The financial crisis that has struck is not an overnight work of banks. Rather it started spreading its roots decades ago. It was the growth of financialization, of the monopoly-finance capital.
The growth of financial sector is evident from the following facts: “In 1980, financial firms accounted for about 5 percent of total corporate profits. By 2006, this had risen to around 40 percent. On a global scale, financial assets in 1980 were roughly equal in value to world gross domestic product. Twenty-five years later they constituted 350 percent of global GDP. At the heart of this transformation has been the accumulation of finance sector debt in the US economy. It rose from 63.8 percent of GDP in 1997 to 113.8 percent in 2007—a result of the banks and financial corporations plunging ever deeper into debt in order to fund their debt-based financial operations” (ibid.).
In the late summer of 2007, the failure of two Bear Stearns hedge funds was the beginning of The Great Financial Crisis. It was then not alarming to many in the mainstream. In 2008, the crisis compelled all concerned to give up complacency with mainstream analyses and assurances. The world of capital could not ignore the crisis created with financialization, with roots in the stagnation, in investment and in manufacturing. Paul Sweezy and Harry Magdoff identified in the 1970s and ‘80s that the general economic tendency of mature capitalism is toward stagnation. The stagnation worsened, and the underlying disease spread and deepened. Capital found new ways for reproduction. It prospered through the explosive growth of finance. A new hybrid phase – monopoly-finance capital came in. In 1987 and 2000, stock market bubbles burst. There were savings and loan crisis in the late 1980s and early ‘90s, the Japanese financial crisis and Great Stagnation of the 1990s, the Asian financial crisis of 1997-’98, and the dot com crash of 2000. Magdoff and Sweezy described the incredible pace of development in the financial sector through the twentieth century up until the period of the1980s as financial explosion. Stock markets and currency trading turned no less than giant casinos; every 24 days the dollar volume of currency trading equaled the world annual GDP while the current average was $1.8 trillion a day (John Bellamy Foster and Fred Magdoff, The Great Financial Crisis, 2009). These are only a few facts related to the financialization and the rise of monopoly-finance capital that have created the present financial crisis. The crisis is much deeper.
At the same time, there is the aspect of government debts that signify another aspect of the crisis. By 2005 the total US debt was almost three and half times the nation’s GDP and not far from the $44 trillion GDP for the entire world (ibid.). The government debt in the US is already a much discussed issue. In the UK it is also going to reach 100 percent while in Japan it is climbing to 200 percent by 2011 and by 2014 the public debt to GDP ratios in the G-20 economies, comprising some 85 percent of the global economy, will have increased by 36 percentage points of GDP compared to the levels at the end of 2007 (Beams, op.cit.). The present situation shows “a deep-seated contradiction intrinsic to the development of capitalism itself” (Foster and Magdoff, op. cit.).
The withering unipole in geopolitics
The present geopolitical reality is now charged with the factor of instability: competition among major players. The West is facing challenges from China and Russia. South Ossetia and Abkhazia were challenges to the West. The militarily over-stretched US is conducting two wars simultaneously while the tools in the hands of the US are not many. The world financial and economic condition is not yet hopeful and the West’s dependency on expensive energy is heavy.
Problems, global in size and nature, are there, and new actors are entering the stage of geopolitics. South Asia and the area around Korea are sources of tension. The US is losing its position of leadership, and the US establishment is well aware of its declining economy. Its promotion of democracy accompanied by armed interventions is not well reputed around the world. The EU plans to be equal partners with the US.
Increasing competition is compelling a section of the dominating ideologues to question globalization. The French foreign minister said in a meeting of the EU foreign ministers in September 2008: “The world is dangerous.” He warned of emergence of nationalism and micro-nationalism.
To the EU the Russian-Georgian war, failures in the WTO talks, the rise of China, Russia, and India are the signs that the Western domination of the international agenda can no longer be assured.
The involvement of a section of NGOs in poor countries shows the weakening of the West’s world governing regime and its foreign policy arms, its erosion in credibility, and its limited access.
At the same time, these NGOs, from the North and their local partners, developing NGOization in peripheral societies are the indicator of vacuums in the social, cultural, economic, and political lives in these societies that the dominant mechanism, local partners in the globalization process, in the societies has created, and this in turn is the evidence of eroding ruling mechanism in the societies.
The dominant mechanism in these societies is the part of the world system, and thus they, the weaker connections, are the stark examples of crisis in rule by the present dominating sections of the society. This reality has its part in geopolitics.
The NGOization in some countries has already stood as examples in failure in its attempt to resolve contradictions in those countries.
But, at times, dialectically, the NGOization is creating a space, by centralization and socialization of different aspects in the lives of the poor, especially their economic activities, and by trying to create responsiveness, in relative terms, in the ruling system. Matured people’s initiatives can utilize the space, and the NGOization will make a volte-face if that space is used and politicized, if politicization and active calls for democratization in all spheres in life are effectively made by the initiatives. At the same time, increasing crises will sharpen contradictions in these societies that will ultimately make the NGOization process a silent and ineffective onlooker, which will be a further weakening in the global dominant regime having geopolitical implication.
There are changes and upheavals, significant and with far reaching implications in nature, in the world. “One of the greatest changes in world order … right now is in Latin America. The South is becoming more independent.… [T]he neoliberal order is eroding both within the U.S. and Europe and internationally, as there is more and more opposition to it. So there are opportunities for real change, but how far they will go depends on people, what we are willing to undertake” (Chomsky, op. cit.). With increasing loss of credibility of the Bretton Woods institutions contradictions in peripheral societies will create new challenges to the world system.
The situation with uncertainties will much better be perceived if viewed in the perspective of the downward trend of the centre of the centre, its drive for tighter and wider hold over the world’s resources, especially the oil. This gives rise to tension, threats to peace, and new crisis in geopolitics. Ultimately, this will harm people’s effort to organize a peaceful and prosperous life. A crisis will be born. New contradictions get generated and sharpen while MNCs’ wealth power stands against smaller countries, while capital leaves labor process in search of casino, and simultaneously wages class war, while capital fails to resolve contradictions between the dominated and the dominating.
Factors in reality do not act in a linear way. Reality, a complex amalgamation of many factors that are always non-constant, changes with minute change in any of the factors and in turn influences other factors to change position. Capital is incapable to adjust with this non-linear system as its determining constant factor is profit that compels it to act in linear style and the constant factor declines to change position. This pushes it to conflicts with environment, with people’s aspirations, with reality and thereby is creating crisis as capital never gives up its domain because of inherent reason – growth at the expense of everything, even at the cost of its own soul. So, bigger the capital’s control, spanning the world, bigger the crises, encompassing the globe. So, the near-complete globalization by capital has entered into the age of crises. And, crisis carries seeds of possibilities.
[This is a shortened and slightly modified version of the introduction chapter of the book The Age of Crisis, 2009]
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