The global economy is on the verge of collapse
with all the symptoms of an imminent crisis:
oil prices fallen, enterprises gone bankrupt,
mass layoffs, rising prices and lowering wages,
all ushered forward by a world-wide pandemic.
Despite how bourgeois analytics may see the
causes of economic problems, they all agree
on one thing: the new world economic crisis
will be more destructive than any before.
One after another, the largest banks compete
to release ever-more frightening forecasts.
Goldman Sachs predicts the downturn of the
American economy by 25%. Morgan Stanley forecast
goes further, and predicts a fall of 30%.
According to experts, United States GDP may
fall by 50%, and unemployment will rise to
30%. There was no such number even during
the Great Depression.
Due to enflamed competition between Saudi
Arabia and Russia, the oil market is collapsing,
and the International Monetary Fund recognizes
a negative outlook for the entire global economy
in 2020.
To understand why the world is again shaken
by market collapse, what economic crises are,
and how to eliminate of them, it is necessary
to reveal the essential nature of the capitalist
system.
The fundamental question; just what is capitalism?
Capitalism is a socio-economic formation based
on the private form of ownership of the means
of production. All land, resources, mines,
minerals, factories and machines – all of
this belongs to private persons – the capitalists.
The capitalists utilize waged labor for their
production of goods or services. Through the
exploitation of wage labor, they make a profit
for himself, which they use to further expand
their own productive enterprise.
The most devastating historical moments of
capitalism have always been crises of overproduction.
In the pursuit of profit, capitalists seek
to sell as many goods as possible. But, when
this accumulated hoard of goods cannot be
sold on the market, the crisis of their overproduction
is felt. Capitalists lose profit, fall short
on debt payments and ultimately go bankrupt.
In order to reduce costs and maintain maximum
profits, capitalist shutter their unprofitable
enterprises and liquidate their workforce
on a mass scale. Trade and financial ties
are broken, stocks and bonds markets collapse.
This is the nature of an economic collapse.
Closure of businesses, mass layoffs, salary
shortfalls - all this leads to a rapid deterioration
in the standard of human living and a decrease
in their demand for goods.
The smaller workers' income becomes, the fewer
mass of goods can be sold to them by the capitalists.
This is the fundamental contradiction between
the desire of capital to expand production
and the ability of workers to buy goods.
This contradiction between production and
consumption, as well as the anarchy of capitalist
profiteering, is generated by this main contradiction
within capitalism.
The root cause of economic crises is based
in the very nature of the economic system
itself; in the contradiction between the social
nature of production and the private nature
of appropriation.
Under capitalism, production develops cyclically.
Inevitably, the process of production is interrupted
by crisis. The period which develops between
one crisis and another is called the economic
cycle, which consists of four phases: crisis,
stagnation (or depression), recovery and growth.
Crisis is the primary phase of this cycle.
At this stage, disturbed proportions of production
are manifested and restored.
The signs of crisis are first found in the
field of exchange, when it becomes difficult
to sell goods on the market. The problems
of selling goods in one link of the producion
chain gradually disrupt the entire course
of material society.
The capitalist who has not sold his goods
cannot afford the means of production, and
thus cannot hire workers. He must go pleading
to the bank for a loan. As demand for liquid
capital inflates, the banks that do not have
enough funds themselves go bankrupt. The exchange
panic begins, closing enterprise after enterprise.
Workers are fired on mass in a desperate attempt
by their former employers to save the investments,
causing unemployment to skyrocket. This further
reduces the demand for commodities, further
worsening the crisis of commodity exchange.
Production in some industries is completely
stopped and seriously decreases for others.
The economic decline continues until the proportionality
between production and solvent demand is restored.
After the crisis, a period of stagnation or
depression sets in. The decline in production
has stopped, but there is no growth. The number
of bank failures and bankruptcies is decreasing.
The amount of goods is gradually declining.
To keep prices low, the capitalists destroy
stockpiles of their own goods, while other
stockpiles are bought up by the larger enterprises
only because the consumption process cannot
be completely stopped.
After making sure that the crisis has ended,
the capitalists begin to seek applications
for their capital. Money supply increases.
In order to reach an average profit and reduced
prices, capitalists intensify the exploitation
of their workers, begin to introduce technical
improvements and upgrade equipment.
Depression thus develops into a phase of recovery.
As a result of the ongoing technical re-equipment,
the demand for machinery and other equipment
rises, which allows those capitalists to expand
production and to hire additional workers.
Unemployment decreases, and demand for goods
is growing. The economy reaches a pre-crisis
level, and recovery moves towards growth.
Production is growing rapidly during this
phase. New plants and factories are being
built, the flow of goods to the market is
increasing. In pursuit of profit, capitalists
seek to produce and sell as many goods as
possible.
Overproduction begins anew, but still in its
discrete form. Credit, trade orders, and booming
finance speculation disguise any impending
catastrophe for the time being, until the
quantity of production exceeds demand. The
new crisis begins.
Particularly hard crises affect the living
standards of the working people.
Workers are again thrown out of production,
mass unemployment returns. Even healthy, skilled
people cannot find application for their abilities.
During a period of forced inactivity, the
body of workers lose their productive skills
and qualifications. During crisis, the standard
of living sharply decreases, the number of
diseases increases, as well as child mortality.
Social insurance and unemployment claims do
not exist everywhere. Therefore, life for
the majority of the world's unemployed becomes
unbearable.
Capitalists shuffle costs onto the working
class by cutting wages and raising prices.
Raising taxes and inflation, increasing tariffs
and supply deficiency further reduce the real
incomes of workers.
Crises also have a severe effect on the petty
and middle bourgeoisie, who come to the brink
of bankruptcy.
Regular crises shaking the world economy show
that the capitalist class is not capable of
ensuring the normal processes of life and
the regular development of productive forces.
These hard times reveal the fundamental limitations
of capitalism and necessity of socialism.
However, economic crises alone will not lead
to the collapse of the capitalist system.
Even with significant losses, crises restore
the proportions between capitalist production
and demand, leading to the needed renewal
of fixed capital and the opening up of opportunities
for new growth.
At the same time, depressions exacerbate the
contradictions of the capitalist system. With
such serious consequences for the life of
averge people, they undermine the foundations
of capitalist power and contribute to the
revolutionary motivation within the working
class.
It is impossible to abolish crises by any
reforms, and “crisis-free” capitalism
simply cannot exist. This is a systemic element
of capitalism, without which its existence
is impossible. Since the main reason for economic
crises lies in the existence of capitalism,
crises can only be done away with only by
replacing capitalist organisation with communism.
The working class must realize its own interest,
to come together to wage class struggle against
the capitalist powers and build a new communist
society. The future of mankind in the new
world will only become possible through full
communism: a world without crises, inequality,
wars and oppression.
Stay tuned.
