Bourgeois governments have no solution, except to shift the
burden on people

Anxiety is mounting in governing circles around the world about how bad is the banking crisis, the looming recession in the US economy and the extent of negative impact it could have on other economies. Consumer spending in the United States has stopped growing, following the crash in the housing market and tightening of bank credit. Large numbers of working families have been hit by the housing loans crisis, and this has made all working families cut down their monthly spending plans. Economists and business analysts are now speculating if consumer demand in the US will resume growing or decline further.

Exporting to the US market is an important engine of growth for a large number of economies around the world. The slump in consumer demand in the US, on top of the declining value of the US dollar, has had a negative impact on exports and economic growth in many countries. Economic growth in the European Union is forecast to decline below 2% in 2008.

Capitalist corporations are adjusting in various ways to falling sales, including cutting back on the number of workers employed. Job cuts have begun in several industries, including in Silicon Valley, the IT hub in the US west coast. Several export oriented companies in India and China have also thrown workers out of jobs.

In 1997, what began as an East Asian financial crisis unfolded as a worldwide crisis of the capitalist mode of production. Similarly, what began in 2007 as a financial system crisis in the US is taking on global dimensions and affecting the working people and their security of livelihood in 2008.

The finance ministers and central bank governors of the Group of 7, or G7 – consisting of the United States, Britain, Germany, France, Italy, Japan and Canada – met in Tokyo on 9th February to take stock of the crisis that has hit the financial institutions. The German finance minister estimated the total losses suffered by banks to be as large as 400 billion dollars, nearly four times the amount disclosed by leading US and European banks to date. While the representative of Canada proposed an interest rate cut, the US talked of tax cuts to stimulate consumer demand and consumer credit. The representatives of Germany and Japan refused to agree with the US proposal. In the end, G7 could not come up with any unified approach.

What the G7 meeting in Tokyo was trying to address is not the problem of rising insecurity facing the working people, but the problem of losses due to bad loans, facing the leading institutions of finance capital on the world scale. The inability of the G7 to agree on any common approach reflects the acute rivalry among the different imperialist powers, and different big blocs of financial giants.

In Britain, the banking crisis has prompted the Brown Government to take over a big bank that went bankrupt, called Northern Rock. This is the first case of nationalization since 1970. The people as a whole are being made to pay for bailing out big banks. The burden of the capitalist crisis is being shifted on to their backs.

In India, relatively high rates of capitalist growth in recent years have been driven not only by exports of consumer goods, but also by investment demand created by huge infrastructure construction projects. It is possible that capitalist growth may continue to be faster in India than the global average for this reason. However, it cannot be denied that export oriented production has already been affected, and the overall growth rate of GDP has started to decline, even though only slightly.

The government and various big business spokesmen would like to belittle the potential negative impact of the worldwide crisis on India. They want to paint as rosy a picture as possible. The working class and all working people must be vigilant and not be taken in by the exaggerated propaganda about the strengths of the Indian economy. They must not believe everything that is said in the media.

The capitalist system lurches from crisis to crisis. Every boom is followed by a bust, as the economy goes up and down, repeatedly caught in the grip of one crisis after another. And every crisis sees further concentration of capital in fewer hands, as some companies buy up others. Every crisis also leads to sharp drop in living standards and higher insecurity for working people.

The working class must organize to resist the attempts of the bourgeoisie to shift the burden of the crisis on the people. Simultaneously, the working class must prepare its own class offensive to put an end to the capitalist system and usher in socialism, a system without crises, oriented towards fulfilling the ever rising needs of human society.