Responding to the Capitalist Crisis: Key Challenges facing the Working Class Movement and our Government

The capitalist world economy is in the midst of a very serious crisis.  It is certainly the most serious crisis since that of the late 1960’s and early 1970’s, and threatens to become the most serious since the Great Depression of the late 1920’s and 1930s.  The current crisis is clearly now much more than the “credit crunch”, or “financial crisis” it began to manifest itself as.  Its impact is being seen in a recession (contracting production) in the advanced industrialized countries and sharply reduced growth rates in developing countries.  Global trade has contracted sharply. Commodity prices have tumbled. Stock piles of unsold and unsaleable commodities are being observed across the world, and important industrial sectors are in deep trouble.  All of this is being accompanied by lay offs of workers. In the case of South Africa job lay offs have thus far been most notable in the mining sector and in the motor industry, where 36 500 jobs were wiped out between July 2008 and February this year.

The Central Committee has already examined the causes and dimensions of the current crisis of capital.  On the basis of this, a document adopted at the Central Committee meeting held late last year cautioned against any notions that this will be a mere short term hiccup that will allow an early return to business as usual for global capitalism. 

A question that is fast becoming central and urgent in such a context is how should the working class movement and our government  respond - both to the immediate prospects of declining production and job losses and to longer term challenges posed by this crisis ?

An appropriate response requires, in the first instance, understanding critical elements of the phase that we are now in.  The current crisis of global capitalism has features both specific to the particular stage of capitalist development we are now in, and also generic characteristics common to all periods of capitalist crisis. The specific features arise, inter alia from:

1.  the globalised character of contemporary capitalism, where trans-national economic activity driven by trans-national corporations, has emerged as the dominant and dynamic  activity;
2. the “financialisation” of investment that has seen the rise of massive “securities” and “derivitative” trading that created a huge bubble that partly masked the onset of the current crisis and
3. the increasing ecological unsustainability of the current trajectory of capital accumulation (the looming climate change crisis).

The generic features common to all periods of capitalist crisis were analysed by Marx in volume III of Capital. Marx explained that because of its anarchic nature, capitalism is inherently unable to develop along a path of uninterrupted growth and development. The system periodically confronts crises arising fundamentally from over-production of capital.  This does not mean over-production of commodities compared to human need. In this sense there is always under-production. Rather capitalist crises of over-production need to be recognized as over-production of capital compared to the possibilities of realizing profit on that capital. In a system where it is profit rather than social need that drives economic activity, this is fundamental.

Capital needs also to be recognized as existing in various forms, corresponding to what Marx called the circuit of capital.  These include

1. money or financial capital seeking investment opportunities;
2. capital invested in means of production and employing labour power;
3. commodities produced as a result of the application of labour power and the means of production that are awaiting sale, and finally;
4. money capital realized from the sale of commodities which is available to seek new investment opportunities in the next circuit. 

A period of capitalist crisis is a period which necessarily sees a destruction of capital existing in some or all of those forms.  The current global economic crisis first became manifest as a crisis affecting financial capital and financial sectors. This was because the “financialisation” of investment that emerged as a key feature of contemporary globalization had spawned a massive bubble of trading in financial assets more and more removed from the performance of the “real economy”. This bubble partly masked the underlying over-production of capital in the real economy of production, and arguably  partly delayed the onset of the crisis. With that bubble now having  burst it is clear that the current crisis is global affecting all parts of the capitalist world and is very significant in extent in the sense that the bottom of the cycle is still nowhere in sight. It has already seen a very significant destruction of assets in the hands of banks and financial institutions, particularly in the advanced industrialised centres of capitalist power, but it has now clearly moved way beyond that to include destruction of capital existing in the real economy of factories, machinery, employed labour power as well as stock piles of unsold finished commodities which can no longer be profitably realized.

A time of capitalist crisis inevitably brings about a fierce competitive struggle to determine which capitals are going to bear the brunt of the destruction of capital necessary to create the conditions for the system once again to grow and develop.  Marx described this as follows: “…as soon as it is no longer a question of sharing profits, but of sharing losses, everyone tries to reduce his own share to a minimum and to shove it off on another.  The class, as such, must inevitably lose.  How much the individual capitalist must bear of the loss i.e. to what extent he must share in it at all is decided by strength and cunning, and competition then it becomes a fight among hostile brothers.” (Capital Vol III Chapter XV).

Positioning ourselves to respond to the current global crisis means, among other things, recognizing that we are in the midst of “a fight among hostile brothers”.  In the current phase of capitalist globalization this fight of “hostile brothers” takes place not just between capitals in different firms located in specific countries, but between trans-national capitals spanning several countries and even between branches of the same trans-national corporation located in different countries. Put concretely it is not just a question of whether General Motors bears more of the losses arising from the necessary destruction of capital in the motor industry than Toyota, but whether it is the Toyota or General Motors plants in the capitalist centres or those in the periphery that will bear the brunt.   

In recent months we have witnessed governments of the advanced capitalist countries deploying massive sums of money, in what have been called variously “bail outs” or “stimulus packages”.  These have been widely described as a return to Keynesian deficit financing and a retreat from the neo-liberal macro economic orthodoxy which prevailed until recently.  There is no doubt an element of truth in this. Clearly had neo-liberal hardliners won the debates in the US and elsewhere and there had been no “stimulus packages” the likelihood is that, as in the 1920s and 1930s, the current recession would have been tilted much further towards a full on depression.  However, there is also another element that we need to understand. The “bail outs” and “stimulus packages” emerging now have not just involved, as was the case with classical Keynesian measures, deficit funding of infrastructure programmes or government public works, they have also included very significant funding of “rescue packages” directed at strategically important capitalist enterprises, sometimes even involving taking some degree of state ownership in them. Initially these “bail outs” were directed at failing banks and financial institutions but are now also involving significant subsides to the motor industry with other distressed industrial sectors likely to follow  as the crisis deepens.

What we are now seeing could even be described as some form of defensive industrial policy.  Governments of the advanced capitalist countries are pumping large sums of money, precisely to ensure that in the battle of “hostile brothers” it is not flagship companies from their own countries that go to the wall. Moreover, in cases where it is clear that particular transnational corporations will have to contract their operations, subsides and incentives are being deployed to try to ensure that it is not plants and jobs located in their own countries that bear the brunt. Sometimes too, these efforts are being complemented by “buy local” campaigns involving even precise instructions to institutions receiving government support to procure locally.  This is all happening despite lofty pronouncements in summits and multi-lateral institutions by these same governments that they are committed to working against any “resurgent protectionism”. 

Unless we recognize that we are in the midst of a fierce competitive struggle between hostile capitalist brothers to determine which capital, where, will be destroyed, we will not be able to respond adequately to the threat this poses to jobs and incomes of working people and the poor in South Africa. 

What then would constitute the elements of such a response?  The Nedlac task force that produced the recently adopted “Framework for a South African Response to the International Economic Crisis” has, in my view, begun to sketch out some of the key elements of an appropriate work programme.  First, we need to accelerate industrial policy work across our industrial sectors with a particular focus on those most vulnerable to job losses. This must identify new challenges such sectors are facing as a result of the global economic crisis.  From this, we need to identify particular responses.  Some of these clearly will have to involve the deployment of government financial resources to support and sustain jobs.  However, where we provide such support, it must be conditional on specific defined undertakings by capital, particularly and immediately in respect of undertakings on refraining from, or at least moderating, job layoffs.  But we need also to recognize that the sums deployed in the United States alone are several time the Gross Domestic Product of South Africa, and that we will never be able to match those levels of support. There is, thus, a premium on us also identifying non financial support measures.  These must include “trade remedies” such as anti-dumping and countervailing duties, the judicious application of new tariffs where we have space under WTO’s rules to do this, and the more vigorous policing of our borders to deal with cases of illegal imports.  At the same time we need to push forward much more earnestly and vigorously the Proudly South African campaign – particularly taking this into the area of procurement commitments.

A feature of many of the financial support packages that have been deployed in the advanced capitalist countries, is that they are not strictly speaking WTO incompatible in that they do not involve the deployment of subsides directly on trade.  They do, however, tilt the balance much more strongly in favour of the survival of the hostile brothers located in their own countries.  In such circumstances, we need to ensure that we do not disadvantage ourselves by mindlessly buying into calls to preserve “free trade” and renounce “protectionism”.  Such calls I have suggested already, are being belied by the practice of intervening on behalf of particular capitals in the form of financial bailouts. Moreover, in circumstances where developing countries cannot deploy these levels of financial resources, we need to make sure that we do not disarm ourselves by unthinkingly giving up the non-financial defensive measures available to us as these are likely to become even more important as the crisis deepens.

A further element of the response must be, as the Nedlac task team concluded to defend the infrastructure investment programme, which we have already embarked on.  This will require considerable effort and creativity in a context where market financial mechanisms are unlikely to provide financial resources as least on the same terms as originally anticipated when a number of these projects were launched.  Maintaining the infrastructure investment programme and indeed complementing this with an enhanced public works programme is fundamental to defending work opportunities in this time of capitalist crisis. Finally the response requires a series of specific “employment” and “social security” measures, some of which were outlined in the “Framework” document.

In the medium term we need a much deeper reflection on how we move to a more labour absorbing growth path. The growth path that we have been on since 1994, has not been able to deliver a sufficient reduction in poverty, inequality and unemployment even at a time when growth rates where high.  It will certainly not be able to do so with growth rates much lower. One element of this must be to re-orientate our focus much more towards the domestic, regional and south-south markets.  With a global economy in decline, and with the advanced industrialized countries in recession, the domestic, regional and south-south markets are the only real prospects for us to experience any growth.  This does not mean of course that we should not try to take advantage of a more competitive exchange rate to expand exports throughout the world, but we need to recognize that there is a sharply reduced demand in the advanced industrialized countries to which much of our trade has thus far been directed. 

In the longer term the challenge facing the working class and the poor in our own country and across the world, is how we move ourselves beyond the system of capitalism, which is incapable of guaranteeing even basic conditions of economic security to working people and the poor across the world. 

The current crisis is, as indicated earlier, already the most serious since the 1970’s and could well become the most severe since the Great Depression of the 1920’s and 1930’s.  The crisis of the 1970’s saw a massive leap forward in working class organization in South Africa.  Under the pressure of the then crisis, workers took part in the famous Durban strikes and from this began to reorganize a democratic trade union movement after the repression of the 1950’s.  This period of our history is now recognizable as the moment in which the balance of forces between the apartheid oppressors and oppressed, began to change in favour of the oppressed. The 1920’s and 30’s also saw a significant advance in the working class organization at both trade union and political level in many countries of the world.  However, faced with the threat of a significant advance of labour and communist parties in countries like Italy and Germany, capital chose to unleash the forces of the most reactionary elements of fascism and naziism.  In those days the countries of Europe faced a stark choice between socialism and barbarism, with capitalism opting for barbarism. 

In many respects, the challenge facing the working class in South Africa today can be summed up as: can it make a great leap forward in terms of the advancing working class influence in all sites of power, similar in dimension to the great leap forward in working class organization what occurred during the last big capitalist global crisis of the 1970’s? Or if not we may yet find, especially if the crisis deepens, that we face on a global scale a stark choice between socialism and barbarism. 

Of course the issues and challenges facing the working class in today’s crisis are very different from those in the past. The immediate challenge today is can working class power and influence be built in such a way that it leads and hegemonises a recovery programme? Can conditionalities imposed on support programmes to distressed capitalist concerns be structured in such a way that they lead incrementally to enhancing working class influence over the economic growth path of our country? Can the crisis lead also to building working class power and influence at the point of production? If we can devise strategies to answer those questions in the affirmative, we may yet find that the current crisis of capitalism becomes a period of opportunity for the working class and the socialist project.