Trillions of dollars were lost from stock markets last month as the world economic situation took a turn for the worse. It has become increasingly clear that far from ensuring a recovery, the measures put in place by capitalist leaders have only deepened the crisis. A global double dip recession is now very much on the cards.
The stock market losses were the worst since the collapse of the American bank Lehman Brothers in 2008. This collapse was the trigger for the financial crisis which spread across the world leading to bank bailouts and the need for huge stimulus packages. This comparison shows how serious and precarious the current situation is, as the world economy stands poised to slip into a prolonged slump.
Revised figures released in August by the US Bureau of Economic Analysis show that the 2007-2009 recession was even deeper than first thought and that the feeble recovery from mid 2009 was even weaker. This comes on top of the downgrading of the US credit rating for the first time in history.
The harsh austerity measures being meted out to workers in the US will only further undermine the economy as workers ability to buy goods is reduced. This same contradiction is stoking the crisis on the other side of the Atlantic in Europe.
In recent weeks Eurozone leaders have stumbled from one crisis meeting to the next attempting to devise ways out of the growing and multiple crises in their own backyard. While the Greek sovereign debt crisis continues to fester, there are fears about the inability of Spain and Italy to repay their own high levels of debt.
The latest, and most worrying of all for the ruling class, are fears that even France may be heading towards a situation where it to could default on it’s debt as growth slows. France is one of the two major pillars of the Eurozone alongside Germany and any problems there would be even bigger than anything that has been seen to date.
China, the auxiliary motor of world capitalism, is also racked with problems including high inflation, a massive housing bubble and the potential for wide spread defaults on loans made as part of the stimulus spending of recent years. The Chinese economy has major problems with overcapacity and will not be able to maintain it’s high levels of growth. China’s main exports markets of the EU and US are in decline and demand will not be replaced by an expanding domestic market under these conditions.
Since the first phases of the crisis millions of people across the world have been thrown onto the scrap heap of unemployment. Governments have slashed support schemes for the unemployed and vital public services. At the same time profit levels have been maintained and bonuses for bosses continue to increase.
While it was not ordinary people who created this crisis they are certainly being asked to pay for it. Capitalist politicians are not prepared to let big business pay for the problems that were caused by their own system.
It is becoming clearer that nothing can be done to ‘fix’ the broken system of capitalism. The problems flow from the contradictions of a system that is based on private ownership and production for profit. Only by replacing capitalism with democratic socialism based on public ownership and production for need will we be able to use society’s wealth to create jobs, provide homes and fund services.
Capitalism has failed. We need system change to avert an even deeper crisis in the years to come.
By SP reporters