A MAJOR report by the McKinsey Global Institute exposes the historic depth of the crisis gripping the world capitalist system, a debt crisis of such epic proportions that it cannot be resolved through any of the usual economic strategies adopted by governments and central banks.
Entitled ‘Debt and (not much) deleveraging’, the report reveals that seven years after the world banking collapse of 2008 – caused by the bankruptcy of Lehman Brothers – instead of global debt reduction (deleverage) the mountain of debt has grown dramatically.
The report opens: ‘Seven years after the bursting of a global bubble resulted in the worst financial crisis since the Great Depression, debt continues to grow. In fact rather than reducing indebtedness or deleveraging, all major economies today have higher levels of borrowing relative to GDP than they did in 2007.’
The amount of debt is staggering. Since 2007, global debt has grown by $57 trillion to its current level of $199 trillion – the equivalent of 286% of worldwide income (GDP).
With masterly understatement, the report says this ever increasing debt ‘poses new risks to financial stability and may undermine global economic growth’.
It does more than pose a risk or undermine economic growth – it poses the very immediate issue of the collapse of the entire banking and financial system of capitalism on a world scale, along with entire nation states going bankrupt.
The simple reason for this is that this debt is so huge that it has become unrepayable.
The report focuses on ‘the debt of the “real economy”: governments, nonfinancial corporations and households’ and found that, in the 22 advanced economies studied, every one had seen their debt-to-GDP ratio shoot up, in many cases by more than 50%.
The single biggest driving factor behind this increase is government debt which in seven years has gone up by $25 trillion.
What has driven up government debt in Britain and every other advanced capitalist country is not, as Osborne and Cameron claim, due to extravagant expenditure on the welfare state but on governments taking over the bank debts – in order to stop them from going bust – and then bailing them out by printing trillions of dollars worth of worthless bits of paper (Quantitative Easing) which it then handed over to the same banks in order to keep them going.
The authors of the report say:
‘Some of this debt, incurred with the encouragement of world leaders to finance bailouts and stimulus programmes, stems from the crisis. Debt also rose as a result of the recession and the weak recovery.’
None of this debt was caused by the working class, but capitalism demands that workers pick up the bill through austerity cuts. But the report makes clear all the cuts imposed so far are nowhere near enough to make the slightest dent in the debt. That would require ‘implausibly large increases in real-GDP growth or extremely deep fiscal adjustments’, that is, ‘more extensive asset sales’ (privatisation).
What is being alluded to by the authors is that this historic crisis can only be resolved by the bankrupt capitalist class waging an all-out war against the working class in every country to smash completely every single gain that has been made in the past.
While Osborne promised to slash state expenditure to 1930s levels, this report makes clear this is not enough – everything must be sold off or closed down.
The entire welfare state, from the NHS and education right through to the most basic social provisions, must go.
In its final imperialist stage, capitalism can no longer provide any future for the working class or peoples of the world except civil war at home and wars of conquest abroad.
The only way forward for the whole of humanity is in putting an end to capitalism once and for all through the victory of the world socialist revolution.
Absolutely necessary to the victory of the socialist revolution is the building of sections of the Fourth International in every country.
