European bailouts confirm
Capitalist crisis is spreading
Workers must unite to fight bankers’ attacks
By
Fred Goldstein
Published May 12, 2010 4:17 PM
The big message that the working class should take away from the latest
European bailout and the stock markets’ ups and downs is that capitalism
is failing as an economic system and the time for workers to open a struggle is
now.
European capitalist governments and the International Monetary Fund just had to
pledge to put up $980 billion to keep the governments of Greece, Portugal and
Spain financially afloat. Fears of imminent government default in Greece and
threats of future default by Portugal and Spain prompted the emergency meeting
of European finance ministers and strong intervention by Washington.
Sixteen countries use the euro, which is controlled by the European Central
Bank, as a common currency. That bank agreed to make or guarantee $575 billion
in loans. The larger 27-nation European Union pledged an additional $80
billion, and the IMF agreed to put up $325 billion. This is supposed to cover
government deficits of the three southern European countries and other
endangered government debt for the next three years.
Gov’t bailout is a bank bailout
The real aim is to make sure that these governments can pay their debts to the
banks. So the government bailouts are also bank bailouts, aimed at preventing a
global financial collapse of the type that almost took place when Lehman
Brothers failed in the U.S. in September 2008.
European banks and insurers are holding $193 billion in debt due from the Greek
government. But they also have $240 billion in government debt from Portugal
and $832 billion from Spain. Big European banks also have investments in Greek
banks that are in danger.
Much of this debt was incurred during periods of economic expansion. Though the
capitalist economic crisis has reduced the tax base of the governments, the
banks still want their pound of flesh, even if it takes cutbacks in services,
wages of government workers, pensions and benefits. Southern Europe is
experiencing budget crises and cutbacks similar to those taking place in
California, Michigan, Rhode Island, Illinois and many other states in the
U.S.
The credit agencies have downgraded Greek government bonds to “junk
bond” status, and the credit ratings of Portugal and Spain are falling.
That means the bankers and other financial loan sharks of the capitalist world
either will no longer lend money to these governments or will charge such high
interest rates that the governments can no longer afford to borrow.
But the governments have to borrow in order to pay off debts to the banks that
were incurred from previous borrowing. So they are caught in a debt trap that
could lead to defaulting on their loans. That is why what is happening in
Europe is, at bottom, a bank bailout.
High stakes for Wall St. and Washington
Wall Street and Washington also have a big stake in this affair. The
administration put on a full-court press to put together the trillion-dollar
bailout. President Barack Obama was on the phone with German Prime Minister
Angela Merkel, pressuring her to give up opposition to the bailout. German
capital will have to be a major lender under the plan.
Obama was also on the phone with French President Nicolas Sarkozy. Vice
President Joseph Biden met with Spanish Prime Minister José Zapatero.
Treasury Secretary Timothy Geithner lobbied the finance ministers, while the
Federal Reserve Board promised to supply dollars to various European central
banks in currency swaps so they could make payments in dollars, if needed.
The urgency behind Washington’s intervention flowed from the fact that
U.S. banks have $3.6 trillion in exposure to European banks, including $1
trillion to France and Germany and $200 billion to Spain, according to the Bank
for International Settlements. A string of defaults set off by the default of
Greece and other governments would jeopardize U.S. banks and bring a renewed
financial crisis on Wall Street.
Furthermore, an economic collapse in Europe could hit U.S. corporations that
export to those countries. More than a quarter of the profits of the Standard
& Poor’s 500 top corporations come from exports — much of them
to Europe. So the Obama administration’s pressure for this bailout was
not to save Europe but to save Wall Street and the big U.S. industrialists.
At the end of this financial chain are the workers. The banks have been
bleeding the governments of southern Europe. This means bleeding the workers
who create the wealth and value that goes into government treasuries and ends
up being paid out in interest. The capitalist governments are conduits to
transfer wealth from the workers to the bankers.
Now that the governments are in a position of unsustainable debt, the bankers
want the governments of Greece, Portugal and Spain to cut back even further on
the working class as a price for the bailout.
While the banks in Europe and the U.S. rake in hundreds of billions in profit,
in Greece unemployment is officially around 10 percent. It is the same in
Portugal and around 20 percent in Spain. This is official unemployment, meaning
that, as in the U.S., the figure is far below real unemployment. This is a
crisis for the working class — and the bosses want to make it worse.
That is what is driving the heroic and intransigent resistance of the Greek
working class, which has taken to the streets to stop the attacks on their
pensions, retirement age, wages and general living conditions.
In fact, the Greek bailout was meant to stop the “contagion” of
financial default and economic meltdown. But it was also meant to guard against
the contagion of class struggle, which could easily grow among the militant
working classes of southern Europe.
The Greek working class fought against Nazi occupation and British-backed
counterrevolution after World War II. When Portugal’s African and Asian
colonies were fighting for and winning their freedom, the working class in
Portugal itself had a revolutionary uprising that came to the edge of a
proletarian revolution in 1974. Workers in the Spanish state fought the fascist
Franco regime and carried out heroic underground organizing for decades.
These three countries constitute the poorest, most class-conscious, militant
parts of Europe. A spreading struggle in the south could easily expand to the
north, where the workers have been under constant pressure from the German,
French and British ruling classes.
Capitalism depends on life support from state
What this latest crisis shows is the complete dependence of the capitalist
class in Europe, the U.S. and Japan upon the state as the fundamental prop to
keep the system going. The capitalist states have to go to their mints and
print money to loan banks and weakened governments just to temporarily stave
off catastrophic crises that bring devastation to the workers and the
oppressed.
But going to the printing press does not create any value. Only workers create
value. The European Union, the European Central Bank, the U.S. Federal Reserve
System and the Treasury Department can print money to loan out to save the
banks on a temporary basis. But capitalist overproduction, slow growth and
economic stagnation are choking the system and creating long-term mass
unemployment. Furthermore, the system is always standing on the brink of
collapse, as the recent crisis in Europe shows.
Debunking the ‘jobs recovery’
The government and the big business media in the U.S. were hyping the great
“jobs growth” numbers just as the European crisis came to a head.
That sobered everyone up about the “recovery” of the system.
There were great cheers for the supposed creation of 290,000 U.S. jobs in the
month of April. A more sober assessment of these numbers brings little solace
to the workers. Of the 290,000 jobs, 62,000 were short-term census work.
According to the government, 150,000 new workers enter the workforce every
month. So of the 290,000 new jobs created, that leaves just 80,000 jobs for the
unemployed.
This doesn’t even put a dent in the number of workers who are unemployed,
underemployed or have become discouraged from looking for work and dropped out
of the workforce. This figure, called total unemployment or U6 by the Bureau of
Labor Statistics, stands at 30 million. In fact, the regular unemployment rate
went up from 9.7 percent to 9.9 percent last month, and, more importantly,
total unemployment went up from 16.9 percent to 17.1 percent.
There may be a recovery of capitalist profits and business, but it is not
bringing the millions of workers back to work. Furthermore, the prospect of a
massive rebound of capitalist production and employment is off the historic
agenda.
Instead the system is lurching from crisis to crisis. The only way out for the
workers is to follow the lead of the Greek working class and refuse to allow
the bosses and the bankers to put their crisis on our backs.
The workers should refuse to be enslaved to the capitalist “jobs
market,” where they have to sell their labor to some boss every day or
face rejection and unemployment. A job should be a right, a political right. If
the capitalists cannot give the workers jobs, then the government should
guarantee a job or income to everyone who needs it — a job with dignity
and living wages.
If capitalism cannot do that, then it is time to get rid of the system.
Goldstein is author of the book “Low-Wage Capitalism,” a
Marxist analysis of globalization and its effects on the U.S. working class. He
has also written numerous articles and spoken on the present economic crisis.
For further information visit www.lowwagecapitalism.com.
Articles copyright 1995-2012 Workers World.
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