Magazine of Socialist Action in Australia

Economic downturn: Major parties have no answers

Reading Time: 2 minutes

It’s their system so make the bosses pay!

Almost every day we hear more bad news about the state of the economy: market volatility, hedge funds collapsing, rising oil and food prices and investors losing confidence. One thing is for sure and that is that the bosses want working people to bear the brunt of any economic downturn.

In recent years US consumer spending has played a key role in keeping the world economy afloat by buying up consumer products produced around the world – particularly in China.

Australia’s role in the world economy has mainly been that of providing raw materials to China for use in manufactured goods. Any drop in US consumer spending will lead to less demand for Chinese manufactured goods. Less demand for Chinese manufactured goods will lead to less demand for Australian raw materials.

The US led consumer boom has been propped up by massive amounts of cheap credit. Household debt is growing faster than the economy in the US reaching a record 134% of disposable annual income! Due to rising home prices many consumers used their homes like credit cards, taking out mortgages to maintain their living standards.

US workers have now come to the end of spending other people’s money. Either they pay back the money or go bust. The history of capitalism is a history of booms and busts. The reason for this is that, while workers create all the wealth in society through their labour, they only get paid a portion of that wealth in the form of wages. The rest of the wealth goes to the bosses in the form of profits.

This means working people can never afford to buy back the goods that they are producing which leads to excess production piling up without buyers. The boom part of the cycle can be extended artificially by extending purchasing power by allowing workers to borrow money on credit. But in the end this has to be paid back.

Consumer spending will no longer be maintained through debt. On the one hand, this spells trouble for the global economy, especially for countries like China and Australia whose economies rely on exports to the US. On the other hand, this will mean a painful cut in the living standards of tens of millions of workers in the US, China, Australia and elsewhere around the world.

A recession, such as that already evident in the US, will lead to cuts in wages and government spending as well as job losses, as big business and governments attempt to make workers pay for their economic problems. As the impacts of this become more evident to ordinary people this can lead to a loss of faith in capitalism and an increase in struggle.

None of the major parties have any real answers to the economic problems faced by working people. Only by getting rid of capitalism, which puts profits before human need, will we be able to secure a decent future.

We need socialism, a democratic system of planning, to ensure that the working people who make the wealth also own it and control where it goes. The urgent task at hand is for workers to get organised in fighting trade unions and to build their own party that can challenge the crisis ridden capitalist system once and for all.

By Dean Roberts


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