THE historic crisis of world capitalism has come to a head with a vengeance, with both the once mighty US economy and the European economies teetering on the brink of catastrophic collapse.
In the US, President Obama has stated that, if there is no agreement between the two bourgeois parties on Federal spending cuts and tax rises by July 22nd, then talks between the Republicans and Democrats will have to be abandoned.
These talks are designed to reach agreement that will allow the administration to raise the legal amount the Federal government is allowed to borrow.
At present this limit is set at $14.3 trillion and this limit was reached last May.
Since then the US government has financed itself by stopping payments into Federal pension schemes and selling off some of the assets of these schemes.
Both bourgeois parties are agreed that $1.4 trillion cuts in the Federal budget must be made – cuts that will see hundreds of thousands of public sector workers thrown out of their jobs, and spending on welfare and health slashed to the bone – the main bone of contention is the Republican insistence that there be no tax increases for the wealthy.
Until now it has been assumed that a deal will be cobbled together at the last moment, but the moment has virtually passed, leading the Chairman of the Federal Reserve, Ben Bernanke, to warn that the huge US debt crisis is turning into a ‘catastrophe’ with America about to be forced to default on its loans.
This prospect has sent waves of panic through the capitalist banks and has led to the unprecedented decision by two of the top three international credit agencies, Moody’s and Standard & Poor’s, to issue a warning that the US triple A credit rating will have to be downgraded.
This means that the banks now consider the US to be a huge economic risk and, consequently, they will demand much higher interest rates on any Federal borrowings, pushing the US debt even higher and to unsustainable levels – exactly the same position facing Greece, Portugal, Ireland and now Italy.
This has prompted the Chinese government – the largest US creditor – to issue a public warning to America that it must protect ‘investors’ interests’.
To add to this explosive mix is the ongoing crisis in the European capitalist economies. This is fuelling the US crisis and bringing the contradictions of the world capitalist economy to the point where the future of the productive forces requires the revolutionary overthrow of world capitalism and its transformation via the dictatorship of the proletariat into world socialism.
In the Eurozone, the ‘contagion’ of state bankruptcy has now spread from Greece, Portugal and Ireland to the major economies of Spain and Italy – the fourth and third largest EU economies respectively.
These countries are simply too big to ‘bail-out’ in the same way that the EU banks and the IMF have attempted, with no success, in Greece.
The only solution for the capitalist class is to go down with their system and to fight it out with the working class to the end, by imposing mass unemployment, starvation-level wages and the ending of any state funding for health, education and social welfare.
This is the policy being pursued today throughout the capitalist world.
The only solution for the working class is to defend their living standards – and, indeed, their very lives – in the only way that this can be done, through organising the victory of the world socialist revolution.
The victory of this revolution requires the building of the revolutionary leadership of the International Committee of the Fourth International in every country.