Industrial production has started to decline in the United States, the leading capitalist economy of the world. Manufacturing output has declined for the third quarter in a row.  New house construction is 33% below May 2007 levels. The housing slump has led to the loss of thousands of construction jobs.  Immigrant workers are especially hard hit as a result. The recession in the United States is having a negative impact on Europe and many countries around the globe. In Germany, factory orders have contracted for four months in a row. 

What is the root cause of this global economic crisis?  Bourgeois economists are spreading false theories on this question, motivated by their desire to preserve the capitalist imperialist system of plunder at any cost.

One of the so-called theories being spread by bourgeois spokesmen is that the root cause lies in uncontrolled risky lending by banks and other financial institutions. On the basis of this assertion, they advocate stronger banking regulations as the solution.  This is a superficial view, as it does not address the question as to what made capitalist banks resort to risky lending. 

The reason that financial institutions and big capitalist corporations are resorting to high risk lending, and relying more and more on speculation to keep their profit rates high, is that they are unable to reap maximum profits from production.  Production and sales are not expanding because the working class and people have become poorer.   They are unable to keep spending on consumer goods, or keep borrowing to finance purchases of houses and other assets. Thus the root cause is to be found not in the sphere of circulation or finance, but in the sphere of production and consumption. 

Data show that the working class in the US has been growing poorer for many years now. Median household earning in the US fell in real terms between 2003 and 2007.  Median is that level of income above which half the population lives and below which the other half lives.  If the median fell, it means more than 50% of the population in the US became poorer between 2003 and 2007. This has happened for the first time since the Second World War.  They are growing even further poorer in 2008 as a result of rapid rise in food and fuel prices. 

What these facts show is that capitalism is unable to overcome its inherent contradictions. The fundamental contradiction of capitalism is between social production and private ownership of the means of production.  It is a contradiction between the ever expanding productive capacity and the limited capacity of people to purchase what has been produced.  As a result of this contradiction, the system repeatedly falls into one crisis after another. 

The fundamental contradiction of capitalism has been raised to a very high level at the present stage of monopoly capitalism. Private ownership has become highly concentrated and larger sections of the population are becoming poorer, even as the productive power of combined social labour has reached new heights. 

The bourgeois economists and so-called theoreticians want to hide the fact that the root cause of the crisis lies in the very nature of the capitalist system. They want to hide the fact that this is a crisis-ridden system, which has to be overthrown in order to open the path to balanced development without crises and without the ever-widening gap between rich and poor.