It's a crisis of the system, stupid!

The great financial crisis has exposed the shallowness of the system and its general stagnation. This crisis is not a unique or one-off event: it is another bubble burst (many others having burst before this one), leaving exposed a very weakly based economic system that has little room for growth and little investment opportunity and therefore little avenue for capital to re-create itself and so prevent stagnation.

The system itself is in continual crisis, and all the wars, privatisation, deregulation, financial products and credit cards can only temporarily hide that crisis.

It is not merely a crisis of neo-liberalism, as neo-liberalism itself is only a way to try to hide the general crisis in monopoly capitalism. The system has no long-term answers and can only go further down the road of war and privatisation to provide temporary relief.

Those who believe that the system can be managed in a way that will prevent crisis are deluding themselves as well as deluding many working people. They misunderstand the crisis. They see it only as a crisis of neo-liberalism, and they see neo-liberalism purely as a consequence of political decisions rather than as a consequence of both the political and the economic system. Neo-liberalism developed as monopoly capitalism’s response to the stagnation of the system and as a means of providing new avenues for growth and profits.

As this article is being written, the crisis is continuing to deepen and is moving into a more critical economic and also political phase.

In Europe the euro is now seriously damaged; in the United States the sheer scale of their debt has resulted in their downgrading and a scathing attack from their biggest creditors, the Chinese.

Only days after the European Union announced its response to the crisis and renegotiated rescue packages, the situation has greatly worsened, leading the president of the EU Commission to seek another meeting of the European Council to discuss another attempted rescue.

Nothing they are doing is working, and the capsule some of them appear to be in with regard to the seriousness of the systemic crisis was best exemplified by none other than Silvio Berlusconi when, on 20 July, he began to realise that “the world has entered a global financial crisis that concerns all countries.”

In recent days the establishment’s growth estimates have been lowered in Ireland, Britain, Italy, and Spain, with central banks and governments only now beginning to acknowledge that we are in for many years of little or no growth—something readers of Socialist Voice knew a long time ago.

Meanwhile some people on the left—the same people who misunderstand the crisis as merely a crisis of neo-liberalism—will cry that this is evidence that austerity is not working, because it’s sucking growth and investment out of economies. They also misunderstand austerity, for austerity is not designed to create growth: it is designed to free capital to pay the debts of private banks to private banks.

The downgrading of US long-term federal debt to AA+, one notch below the top grade of AAA, by Standard and Poor’s (a credit rating agency with very poor standards, given its previous AAA rating for sub-prime securities) merely reflects the very obvious fact that the American state is bankrupt, heavily dependent on Chinese loans, and cannot afford the massive tax credits and freedoms it provides to capital.

The debt of15 trillion, with the debt ceiling now raised by a further couple of trillion, is evidence of the complete bankruptcy of the state and the fundamental weaknesses of the American economy.

For the left to make gains out of this crisis and begin to tip power back in the direction of labour and shift the cost of the crisis back onto those responsible, the mass confusion that exists needs to be cleared up.

The crisis is a crisis of the system, not a crisis of the management of the system. The response—austerity—is not to help the Irish economy but to save the euro. The answer is not more power to Europe but less. The answer will not come from politicians but from people.