NEXT week Washington will host the spring meetings of the International Monetary Fund (IMF) and World Bank.
At this gathering, the world’s economic policymakers will once more be facing the herculean task of trying to work out exactly what is going on as capitalism internationally is battered by a never-ending and ever-deepening crisis and at the same time try and work out what they can do to avert a catastrophic crash.
Both these institutions were set up under the Bretton Woods agreement of 1944 and charged with ensuring that the economic crash of the 1920s and 30s would never again be repeated and that world capitalism would forever be stabilised – their aim in short was to prevent any future revolutionary situations arising.
At this latest meeting these policymakers hoped to be guided by a research paper produced by a team of experts from the IMF – a paper that would tell them exactly what is going on, what is causing the crisis and having identified causes give them a positive direction overcome it.
In this hope, the delegates to the meeting will be sorely disappointed for it offers nothing but a general description of international economic collapse with no sign of recovery anywhere in the world.
The paper (‘Where are we headed, perspectives on potential output’), published in parts in advance of the meeting, stands as a complete refutation of all the phoney talk by bourgeois politicians like Cameron, Osborne and Obama about capitalism recovering from the banking crash of 2007/8 and all the usual guff about ‘green shoots’ of recovery or Cameron’s ludicrous claim that the bankrupt British economy is now ‘walking tall’ after years of savage austerity cuts.
This report blows such optimistic propaganda out of the water, replacing it with a picture of ‘doom and gloom’ where any light at the end of the tunnel is the headlights of an oncoming train.
All this pessimism is of course couched in the dry language of bourgeois economists, so you get passages dealing with the collapse of world economies that read:
‘Potential growth is likely to remain below pre-crisis levels, while it is expected to decrease further in emerging market economies in the medium term. These findings imply that living standards may expand more slowly in the future.’
What this means is that growth in the advanced capitalist economies would be below that before the bank crash and will result in the standard of living of workers across the globe being cut to the bone for the foreseeable future.
All the research done by the IMF shows that there has been a ‘persistent reduction’ in economic growth and that there is no sign that this reduction will stop and some kind of stability will return.
As to the causes of this collapse of industries and ‘economic growth’ in both the advanced and developing countries, the IMF places the blame squarely at the door of ‘under-consumption’.
This theory – mainly associated with the British economist John Maynard Keynes – in its most simple form holds that capitalist crises are caused by workers not consuming enough commodities basically because of low wages, leading to a collapse in industry.
The answer to the crisis therefore is to increase the wages of workers thus increasing their spending power and driving forwards a recovery in production.
This theory of under-consumption as the root cause of crisis and the way out of it has historically been adopted faithfully by the reformists of the TUC and Labour Party as the panacea to all capitalism’s ills.
For the TUC, their argument is not that workers demand pay rises to protect their standard of living but to beg the Tories and bosses for wage rises for the greater good of capitalism.
The IMF don’t actually go so far as to recommend immediate pay rises across the world. Instead, they blame an ageing global population and a decline in investment by businesses.
Their argument is that the elderly tend not to spend but to save for their old age – the answer being presumably to cull everyone over the age of 50.
Karl Marx dealt with under-consumption as a theory of capitalist crisis in volume 3 of his work ‘Capital’.
As a theory of crisis, Marx points out, it falls down simply because under-consumption is a permanent feature of capitalism – the workers never receive the full value of their labour power, the greater proportion of the value created by labour power is expropriated by the capitalist as surplus value which provides the capitalist with his profits.
Therefore, workers have never been able to consume the full product of their labour.
Given that this is a permanent feature, it cannot explain the periodic crisis of capitalism.
Marx actually notes that capitalist crisis is usually preceded by wage growth, not decline.
As for magically increasing investment, this ignores the fact that capitalism only produces in order to make profit, not for social need.
Marx summed this up pointing out that: ‘Production comes to a standstill not at a point where needs are satisfied, but rather where the production and realisation of profits impose this.’ (Capital Vol.3 Chapter 15)
At the same time that the IMF report paints a picture of permanent collapse of manufacturing industries across the world, it also is forced to note that this has been accompanied by a huge inflation in asset prices and international stock markets.
The report states: ‘In some countries, weak business investment has contrasted with the ebullience of stock markets, suggesting a possible disconnect between financial and economic risk taking.’
In the past, the IMF has been an avid supporter of Quantitative Easing (QE) which has seen trillions of dollars of worthless paper money pumped into the banks and financial sector to stop them going bust after the crash of 2007.
All this ‘money’ has gone into the pockets of the bankers and used in an orgy of share and asset speculation that has driven stock markets to historically sky high levels, creating a bubble that even the IMF now recognises will burst at any time, plunging capitalism into an even bigger cataclysmic crisis than the one it was supposed to rescue it from.
None of it was invested in profit-hit industry but used to enrich the financiers and speculators.
At the same time, cutting off the supply of this money will only result in a banking crash that will bring the entire system to its knees.
In the parts of the report issued so far, the question of the huge and un-repayable mountain of global debt run up by capitalist states in bailing out the banks (estimated to be $199 trillion) the IMF is deliberately vague about what can be done, merely noting that ‘it is unclear’ what governments and central banks could do to avoid a crash given that the debts are at record highs and that nothing they can do will make a dent in them.
At the same time that this IMF report is bemoaning massive state debts and is ‘unclear’ about what can be done to stop them strangling the life out of capitalism, the very same IMF is demanding that bankrupt Greece pays them the 450m euros (£330 million) owed for a bail-out given them in 2010.
This fact alone just about sums up the position of the IMF and the capitalist system it was designed to prop up – it has no answers, no economic fixes like QE or low interest rates that can save capitalism from its historic crisis – everything it tries rebounds and makes the situation worse.
All capitalism can do is demand the working class, not just in Greece but in every country, pay the price for keeping this bankrupt and historically outmoded system staggering on.
For the working class, the most powerful and progressive force in the world, the solution is to advance the whole of humanity by putting an end to capitalism through the victory of the world socialist revolution.