The End of the Corporations
The End of the Corporations (in spanish El Fin de las Multinacionales, FdM)
(2012) New Edition 2021
Chapter I Bailouts
Chapter II Trends
Chapter III 1929 and 2007
Chapter IV Globalization
Chapter V Forms
Chapter VI Accumulation
Chapter VII Additional Notes
National Directorate of Copyright (Argentine) - Made the deposit on 3/28/2011
"The accumulation possibilities of the system have peaked. We can be sure that in 30 years we will no longer live under the capitalist world-system. But what system will we live in then? It could be a much better system or a much worse one. possibilities are open"
Immanuel Wallerstein 1/31/09
The economic crisis that the world economy has been going through since 2007 is the most important in the history of capitalism. Its most spectacular expression is bailouts, a massive fund injection operation that exceeds 60 billion US $, and is still under development. This operation carried out by capitalist governments to save multinational corporations from bankruptcy is of a colossal magnitude, of such a proportion that it would make it possible to rebuild Haiti 40 times, banish hunger in the world, put an end to the destruction of the environment and grant housing to all the inhabitants of the planet.
The crisis is installed in the center, in the economy of the G7 countries. This occurs because the heart attack was suffered by the heart of the world capitalist system, global corporations, large companies and banks in the US, Europe and Japan. For decades the heart of the world capitalist system has been the modern multinationals and large companies, banks and investment funds whose interests are increasingly deeply and intimately intertwined. From the collapse of the current crisis, they could only be revived with the massive intervention of the G7 states and the backward countries.
This crisis is the product of a long process of decline of capitalism, which began at the beginning of the 20th century, which after World War II established the supremacy of the United States in the world economy and the emergence and development of multinationals. From there to today, the world capitalist economy went through two phases or regimes of uneven accumulation and combined development with the aim of counteracting its decline and historical crisis. The first that started in the 40s, continued in the '50s,' 60s and was exhausted in the '70s, was known as the Keynesian model or "welfare state".
The second regime was called "Globalization", or "Neoliberalism" began in the '80s, the' 90s, and begins to run out in this first decade of the XXI century. Both regimes of accumulation contributed to sharpen, in different ways, the historical contradictions of capitalism and were exhausted. The current crisis, which began in 2007, shows the exhaustion of the globalization regime and the Global Corporations which, had it not been for the massive intervention of the central banks and the support of the G7 states, would have disappeared.
Global corporations are the highest expression of capital appreciation and private property that concentrate high percentages of GDP and world trade. Their massive bankruptcy revealed what they apparently hide, that they are an obstacle to the development of the productive forces, a parasitic outgrowth of high destructive power, whose defense of profits and benefits constitute a serious danger to man, nature and drags barbarism to humanity.
The multinationals will continue to exist, despite having collapsed, because they emerged with the support of the most formidable imperialist state in the history of mankind, the US The G7 countries will continue to support them with massive funds, with their overwhelming technological dominance and the military might of their armies. They will only disappear if the states that sustain them disappear. And although the vulnerable nature of transnationals as an economic entity has never been shown as in this crisis, it is a reflection of the increasingly vulnerable political situation in which the governments and states that support them find themselves, fundamentally that of USA.
The current crisis shows that multinationals are unviable and need to be expropriated and nationalized, which would allow a colossal development of the productive forces. The objective situation of the capitalist system requires these measures in such a way that at the peak of the crisis, General Motors, the emblem of the domination of the multinationals and of the hegemony of the United States, had to be rescued with state funds, in order to that can continue to exist.
But expropriating the multinationals is a measure that should be part of a program that can only be carried out by governments with class interests diametrically opposed to the current capitalist governments, both in the G7 and in backward countries that act in defense of the interests. of the great industralists and boards of the multinationals. Never have economics and politics been so closely intertwined. For this reason, precisely, the explanation for the crisis cannot be reduced merely to the economic sphere.
Let us leave these explanations to journalists, economists and vulgar Marxism, who try to explain development and economic crises separately and in isolation from class struggle and political processes, as if economic processes were developed in a laboratory, or as if they were a cold process, isolated from political and social phenomena.
In this book we are going to delve into and analyze the long decline that capitalism has been developing, without which the current crisis cannot be understood. Nor can this be understood without linking it to the revolutionary processes that, since the last century, have questioned capitalism and moved the world. Marx's concept of political economy is precisely that of economics deeply intertwined with political events and the class struggle. If with the birth of Marxism, political, social and cultural facts begin to be explained from the economy, with the decline of capitalism, this relationship is reversed, and politics begins to explain the economy.
This is how Nahuel Moreno raised it with the Causality Reversal Law: "... In relation to the great historical epochs and the normal development of societies, Marxism has argued that the red thread that explains all phenomena is economic processes . But in a revolutionary and crisis time, this general law has a particular refraction that reverses causal relationships, transforming the most subjective of factors, the revolutionary leadership, into the fundamental cause of all other phenomena, even economic ones ... Summing up, The two determining elements of all contemporary phenomena, the ultimate and first causes, which determine all phenomena with their different combinations, are the revolutionary rise of the struggles of the working class and backward peoples on the one hand, and the crisis of revolutionary leadership for the other ". (1)
Precisely, it is about understanding the current crisis in the framework of the time of the economic decline of capitalism that went through different phases, stages, moments and even rebirth such as the postwar "boom". After the first and second world wars, senile capitalism acquired the physiognomy that we know it today. In turn, it is necessary to analyze the concatenation and intimate connection of each of these moments or phases with the respective political events. The fall of the Berlin Wall and the current crisis of capitalism, in which the myocardial infarction occurs at the heart of the world capitalist system, are the most important events of this new world stage. And preparatory, for the advent of the most important political and social events in history.
(1) Nahuel Moreno. Transition Program Update. (1980)
Chapter I BAILOUTS
"A moment ago, the citizen, carried away by his rationalist chimera and his intoxication of prosperity, proclaimed money as an empty illusion. There was no money other than merchandise. The cry that now resounds from one end of the world market to another is There is no other commodity than money! And like the deer for fresh water, his soul now howls for money, the only wealth "
Karl Marx Capital, Vol I
The world crisis of capitalism began in March 2000 when the "dot.com" bubble burst. But the sharp peak of this crisis happened broke out on August 9, 2007 (1) when the French bank BNP Paribas announced that its funds ran out of money. The announcement was preceded by serious events such as the withdrawal of the New Century mortgage from the stock market due to insolvency and alleged accounting crime, the bankruptcy of Bear Stearns hedge funds, the bankruptcy of Blackstone, German bank IKB and National City Home Equity. That day the general bankruptcy shot up throughout the capitalist system and began a chain process of bankruptcies of multinationals and investment banks.
Although many warned about the existing imbalances in the economy, no economist, nor governor, nor official, wrote, nor did they foresee, about the direction and magnitude of the crisis that erupted from that moment on. The crisis was the product of the fall in sub-prime loans, bad debts, which began to mercilessly hit banks and investment funds. But it infected all the papers, debts, assets and derivatives of the world. The entire world financial system, with different rates and inequalities, went bankrupt.
This forced the central banks, the Federal Reserve (Fed), the European Central Bank (ECB), the Bank of Japan and the Bank of England to intervene jointly, which, as if following Walter Baguehot's advice (2), began the bailouts. From the outbreak of the crisis, the intervention of the Central Banks became chronic, and the bailouts a permanent maneuver. Interbank credit, one of the most important institutions of capitalism, immediately broke down.
US President George W. Bush declared: "the foundations of the American economy remain solid", but the banks ignored him, they did not lend more money; or they did it reluctantly, at very high rates, out of mutual mistrust. The Bank of England saved Northern Rock whose clients withdrew 3,000 million euros in a weekend, the Swiss Global Conglomerate UBS announced losses of 3,400 million US $, Merril Lynch 7,900 million US $. The British Global Conglomerate Barclays lost assets of 1,818 million euros, the Citigroup for 3,100 million US $.
The Swiss insurer Swiss Re announced losses of 733 million euros, the British bank Royal Bank of Scotland (RBS) announced bad debts of 1,737 million euros. In Spain its own housing bubble collapsed, the banks of Iceland and Ireland collapsed. The Global Corporation and holder of the second Investment Bank in the US Morgan Stanley, reported losses of 9,000 million US $ and the sale of 10% of its shares to the Chinese government. The interest rate, an expression of the rate of profit, collapsed since the beginning of the crisis and remains almost at zero until today.
The bankruptcy of interbank credit, of credit in general, and the collapse of interest rates affected the process of capital circulation, vital for the functioning of capitalism, similar to the process of blood circulation in the human organism. The central banks tried through bailouts to revive the capital circulation process, but the damages were immense, requiring operations of enormous magnitude to stop them.
The year 2007 closed with a serious disturbance in the process of expanded reproduction and circulation of capital, which prepared the conditions for the heart attacks that occurred in the capitalist system in 2008. That year the heart of capitalism collapsed, because between March and September the Investment Banks began to fail. In March the Bear Stearns Global Corporation collapsed, which had survived the Wall Street "crash" of 1929, was the "most admired" in the Fortune rankings, but had debts in the billions and a leverage ratio of 35.5 to 1. Several managers faced criminal charges and the Fed gave JP Morgan a loan to buy Bear.
The crisis of the sub prime papers did not stop deepening. The Association of Mortgage Banks of the USA revealed that the number of defaults was 6 million contracts for 600,000 million US $. Home prices fell 8.9%, the biggest drop in 20 years. Mortgage Bankers Association raised the social gravity of unprecedented magnitude in US history: the executions and expulsions of families who lost their homes reached the record level in history.
After Bear's bankruptcy there was the largest bailout in US history, with state funds rescued the giant Global Mortgage Corporations Fannie Mae and Freddie Mac. Fannie Mae is the popular name of the National Federal Mortgage Association, created in 1938 under the Roosevelt government. Freddie Mac is the Federal Residential Mortgage Loan Corporation created in 1970. Both handled a volume of US $ 5 billion, equivalent to the GDP of Latin America, with more than 50% of the mortgages in the country.
The bankruptcy of the two mortgage lending giants threatened the Sovereign Bank, Pimco, the world's largest fixed-income fund manager, the State of China, numerous Central Banks and Sovereign Investment Funds linked to the mortgage giants for owning credits in US foreign debt papers, made up of Treasury Bonds, and Fannie and Freddie bonds. Yu Yongding, an advisor to the People's Bank of China, China's central bank, warned: "If the government allows Fannie and Freddie to go bankrupt and international investors are not adequately compensated the consequences would be catastrophic." (The Privateer, 8/08). (3)
The graph shows the short "V" movement that expresses the sharp peak of the world crisis of capitalism between 2007-2008-2009. After the brutal fall to -3%, the world GDP once again suffered from the impact of the bailouts. The caption reads: "Global GDP Growth in Volume". Source: French Office for National Statistics
If Lehman impacted on commerce, Fannie and Freddie on credit and AIG on insurance, Washington Mutual did it on commercial banking. WaMu sold deposits and subsidiaries to JP Morgan Chase, an operation that aroused all kinds of suspicions because for the second time in 6 months, JP Morgan Chase took over the deposits and assets of a financial institution, which made it the largest bank in the United States. by deposits.
The first global bailout of Bush and the G7: The QE1 is born
Until then, the policy of the powers and their Central Banks was to come to the aid of multinationals and corporations to the extent that they required financial assistance and were heading or directly declaring bankruptcy. This policy of "random bailouts", putting out the fires that occurred in Europe, the US and Japan as they were occurring, began to prove insufficient. To face a crisis of this magnitude, larger operations were necessary. Between the months of September and October 2008, the first coordinated and global salvage process took place.
With this policy, the "random" rescue stage ended and this new stage was entered thanks to the Emergency Economic Stabilization Act ("The Emergency Economic Stabilization Act 110- 343") on 10/3/08, promoted by Bush by an approximate amount of 700,000 million U $ S. This first bailout was prepared by Secretary of the Treasury Henry Paulson who was a member of the board of directors of the Goldman Sachs Investment Bank, together with Fed Chairman Ben Bernanke and agreed with the 9 largest banks in the US (5)
The bailout included the Troubled Asset Relief Program, (in English, Trobled Asset Relief Program, TARP), aimed at the purchase of troubled papers with the aim of strengthening banks, recovering credit and reviving the flow of capital. To oversee the bailout, the Office of Financial Stability was created and Paulson appointed another Goldman Sachs man, Neel Kashkari, as interim incumbent of the new Office. With Paulson and Kashkari at the highest level of decision, the investment banks took control of the entire bailout operation. Europe, Japan, China and the BRIC'S followed in the footsteps of the US, the Federal Reserve (FED) and Wall Street set the orientation that all countries adopted.
The EU and the ECB had to put out the fires that threatened all the most important European Investment Banks and multinationals. The 1st EU Summit in September 2008 launched a bailout of almost US $ 4 billion to help and curb the threat of financial bankruptcy in several Eastern European countries such as Poland, Hungary, Ukraine, Latvia and Lithuania. That's how he was born the QE1. The movements of the Central Banks of the United States and Europe are called QE (in English, Quantitative Easing, QE, in Spanish, Quantitative Flexibilization)
These measures were risky, but motivated by even greater risks: if some of these countries declared bankruptcy, they could cause the collapse of creditor banks such as UBS in Switzerland, Austrian bank Raiffeisen, Commerzbank AG, Deutsche Bank in Germany or the BNP Paribas of France. There was also the case of countries that sought to become financial havens and suffered a currency leakage shock like Ireland. Or Iceland whose stock market sank 76% after being closed for a few days.
The blow of the crisis in China forced Premier Wen Jiabao to promote a bailout that reached the figure of 5 billion US $, with the main objective of developing public works and credits to reactivate the economy. The shock suffered by China due to the decline in its exports translated into the closure of factories in the south of the country and the destruction of thousands of jobs. Growth went from 11.4% in 2007 to 9% in 2008. As we will see later, the Chinese bailout was transformed, among other things, into a powerful real estate bubble.
The crisis made it possible to corroborate the central role that the United States maintains as a world protector of capitalism. The dollar and Treasury Bonds became the main havens from the global collapse. Despite the fact that the crisis broke out in the heart of the US economy, paradoxically the reaction of investors and countries was to safeguard their assets and reserves in dollars. The dollar strengthened because it began to be demanded by banks around the world, after the successive paralysis suffered by interbank loans.
The Bank for International Settlements (BIS) central bank of central banks, assessed that the dollar came to represent 55% of assets and liabilities, more than 70% of reserves, 80% of transactions, the 70% of imports and almost all of the oil trade in the world. At the same time that Russia, Brazil, India, South Korea and Taiwan came to lead the global accumulation of reserves in dollars, this currency became, according to the definition of the BIS, the "favorite currency of central banks".
At the most acute and dramatic peak of the crisis, nothing more quickly refuted the groups of intellectuals and analysts who were beginning to propose the "Decoupling Theory" and the "loss of US hegemony." The exclusive fact of reality is that in the midst of the greatest crisis in the history of capitalism and the US economy, the only thing that strengthened was the dollar. All the G7 countries, and most of the backward countries rushed to take refuge and protect their dollar reserves and US Treasury assets. The demand for the dollar in the midst of the crisis is the clearest sign that large companies, countries and capitalist powers consider the United States with its 7 fleets, its military dominance and arms power as the greatest guarantor of last resort of capitalism, against any eventuality that questions it.
On November 14 and 15, the G20 met in Washington, a body that, although it had existed since 1999, became an important instrument for the actions of capitalist governments together with the G7. At the G20 in Washington, the US imposed the world bailout line, of giving money to multinationals and Investment Banks, adding words of commitment in the final document, such as "establishing financial regulation standards", that is, setting controls to unbridled speculation, an issue that ultimately never happened.
The G20 consolidated US dominance. It consolidated bailouts as a policy to save Global Corporations at any cost. The G20 in Washington included the incorporation into decision-making of smaller capitalist countries such as China, Brazil, India, Russia, Australia or South Africa, which is a distorted expression of the blow suffered by the imperialist countries and the historical degree of the magnitude of the crisis of capitalism, which forced the G7 governments to appeal for the support of backward countries to go ahead with their plans.
The Obama administration the second part of QE1 and the global bailout of 2009
Obama continued Bush's economic policy, a course made clear when he appointed Timothy Geithner as the 75th Treasury Secretary to replace Paulson. Geithner, from Kissinger Associates, a consultant for Henry Kissinger and Brent Scowcroft, (6) was serving at the time of his appointment as President of the New York Fed, where he was appointed by Bush. From that position, Geithner actively promoted the bailouts for corporations, which earned him complaints about the diversion of funds to different investment banks.
Obama appointed Lawrence Summers, who was Reagan's adviser, Chief Economist at the World Bank and Clinton's Secretary of the Treasury, as his chief economic adviser. Together with him, he appointed a Board of Advisors made up of the most distinguished members of the financial oligarchy. In the presidency of the Board he summoned Paul Volcker, linked to the Rockefeller Group, an American economist who served as Fed director during the Carter and Reagan presidencies.
He also appointed Robert Rubin from Citigroup, William Daley from JP Morgan Chase, Roger Ferguson from TIAA-CREF, Anne Mulcahy from Xerox, Richard Parsons from Time Warner and Eric Schmidt from Google, among others. Obama decided to replace the head of the bailout oversight office appointed by the Bush administration, Neel Kashkari, with Herbert Allison, a man from Fannie Mae Global Corporations and TIAA-CREF.
The Bush bailout had prevented the bankruptcy of multinational corporations, but the crisis continued to worsen and to gradually affect the entire world economic and political system in its different dimensions, dragging new parts of the capitalist system into crisis. There was a general collapse, the growing loss of asset value, mistrust in indicators and measurement instruments, in rating agencies, in governments, suspicion, disappointment and confusion prevailing in many sectors.
The sharp peak of the world crisis of capitalism expressed in the spectacular fall of the Gross Domestic Product between the years 2007/08/09 reflected in the "V"
The fall in all indicators, the drop in retail sales in the US and the prospect of bankruptcy of large companies forced Obama to launch a new bailout of 8 billion US $ through the US Recovery Act and the Reinvestment Law. In March, Geithner launched a "public-private investment program" to buy assets and loans, "toxic" and uncollectible papers, which caused great euphoria in the stock market.
After the enactment of the law, the US carried out the purchase of shares in the company General Motors (GM), which formalized its bankruptcy filing in June 2009. Fearing the fall of the automotive industry with axle In Detroit, Obama rescued GM, which for 77 years was the world's No. 1 automaker and an emblem of capitalism. The US controlled 60% of the company, Canada and the province of Ontario kept 12% of the shares. The bailout involved a violent attack on workers, reduction of its dealer network, plant closures, and the elimination of thousands of jobs. In Europe, too, governments came to the aid of their automakers.
The credit rating agencies Standard & Poors, Moody's and Fitch began to have a great role as their ratings decide which debts and papers have value and which ones are not, which in a time of large debts like the one that opened with bailouts, it is vital to the destiny of capitalist companies and states. In April, the new G20 summit took place in London, which decided to provide an additional half trillion dollars to the IMF to reinforce its role as an international lender.
Given the contraction in world trade caused by the Lehman Brothers crash, the G-20 decided to inject US $ 250 billion destined to reactivate global trade and US $ 100 billion for international development banks, with the aim of rebuilding it. At the G20 in London he did not reach any agreement on the reform of the financial system, and tax havens.
In the third and fourth quarters of 2009, huge bailouts caused a slight rebound in the global economy, but global imbalances continued. In November, Dubai World, the official company of the Emirate of Dubai, one of the seven emirates that has made up the United Arab Emirates since 1971, caused by a speculative bubble that was saved by the Abu Dhabi bank, went bankrupt.
The world movement of capital movement continued to decline. If by 2007 the flow was estimated at 1.2 trillion US $, it was reduced to in 2008 to 707 billion US $. The projections of the World Bank, in its report "The world economic crisis seriously affects capital flows to developing countries" of June 2009, placed international capital flows in decline to reach 363,000 million US $ in 2009, which brought to the fore the dangers affecting capitalism. To avoid the brutal decline in capital flows, which continued to decline sharply, the most likely prospect was another global bailout, coordinated between the various governments of the capitalist powers and the central banks.
The bailouts carried out between October 2008 and April 2009, were denominated in economic jargon QE1 (in English, Quantitative Easing, QE, in Spanish, Quantitative Flexibilization) that is, monetary issuance without gold backing. That fabulous injection of money weakly reactivated the world economy, and many economists spoke of recovery, relying on the trend that was reflected in the drawings of the famous "V" that indicated that the indices were going up again, after the spectacular decline in the years 2007/08.
Economic growth of capitalism between the years 1790 and 2020. The purple circle shows the fall in world GDP in the year 2000, which marks the beginning of the current world crisis of capitalism. Source: Real Investment Advice
But together with the weak growth indices that developed throughout 2009 and 2010, other indices exploded that pointed to the deepening of the crisis. On the one hand, a global wave of unemployment, inflation in backward countries and rising food prices was triggered, exacerbating the food crisis around the world.
The crisis was descending from Investment Banks, multinationals and Central Banks to companies, real estate, regions, cities and municipalities. In the interior of the United States, the crisis of the states and local municipalities began. US municipal bonds, known as "Munis" that serve to finance municipal transportation, health, education and sanitation infrastructure, began to collapse due to the increasing inability of municipalities and states to pay their debts, which also affected the financial entities that had "Munis" in their coffers.
And all this deterioration of conditions occurred on the basis that QE1 was coming to an end and neither the US economy, nor the world economy had been reactivated. Neither had consumption, production, or trade been reactivated. The weak recovery that QE1 produced was over with the bailout itself. Faced with this critical panorama, the G20 Summit of Finance Ministers and Central Bank Governors that met in Busan (South Korea) in May failed, as did the G20 Summit in Toronto, Canada in June.
The failure of these summits did not have to do with the magnitude of the crisis only, but with the development of the crisis in Europe that posed an unresolved historical problem of European capitalism.
Unlike the US, which is a single state that dominates the world economy and can issue currency with its Central Bank to implement bailouts, Europe is not a single country, but the sum of countries with very unequal economies. Powers such as Germany and France coexist in the EU, powers in decline, such as Italy, Portugal or Spain, or backward countries such as those of the East. And although there is a Central Bank, the ECB, there were no clauses in the Union treaty that allowed their countries to financially rescue another (7)
The magnitude of the crisis forced the dominant imperialist countries Germany and France to confront the historical contradictions and unresolved problems of European capitalism and establish measures to overcome them even in a precarious way. The crisis of the so-called PIGS (Portugal, Italy, Greece and Spain) caused the implementation of bailouts to avoid a collapse of the common currency, the euro.
After a long round of negotiations, back and forth struggles, a bailout of € 1.1 trillion was implemented in May to help Greece and it was agreed to create the European Financial Stability Fund (EFSF) through a combination of contributions from different governments and the IMF composed of a fund of up to US $ 7.5 trillion. The creation of the EFSF was a political change for the European institutional structure, since it meant the constitution of a supranational entity that began to make decisions that involve the more than 500 million inhabitants of the EU.
The EFSF meant an undemocratic leap, to the detriment of the interests of the population and in favor of the interests of the bankers. In the days of the announcement of the creation of the EFSF, the stock markets soared and the Euro achieved its biggest gain in 18 months.
The ECB also changed its credit rating policy and announced that it would accept all outstanding debt as collateral, regardless of credit rating. But even so, the friction between the European countries, Great Britain and the United States, reflected not only the inequality in the course of the crisis, but also the beginning of a global political crisis in the G7 governments. The growing pressure of the discontent of the masses and the questioning of the bailouts of the Global Corporations began to act as a factor.
Beyond occasional and conjunctural frictions, the capitalist governments launched adjustment packages that affected the health, education, retirement and public works budgets, in the common consideration that the crisis should be paid for by the workers and peoples of the world. After the bailouts, as of May 2010 Portugal, Italy, Greece and Spain announced severe cuts in public spending and tax increases. Great Britain, France, and Germany, too, made their own adjustments. The growth of poverty, unemployment and the deterioration of the living conditions of millions, aroused worldwide outrage over the bailouts of corporations.
This wave of disapproval of the policies implemented by the G7 governments was the trigger for the political crises that began to develop in the US and led to the first wear, discontent and disillusionment of the population in the Obama administration. This led to resignations from the cabinet of Herbert Allison, Larry Summers, Christina Romer and Peter Orzsag. Allison was replaced by Tim Massad of the New York firm of Cravath, Swaine & Moore LLP.
The same attrition and political crisis unfolded in the EU, causing a round of downfall of the governments of the UK, Ireland, the Netherlands, in Finland twice, in Denmark, Portugal, Hungary, the Czech Republic, in Slovakia twice, too. in Belgium, Spain, Greece and Italy, since the beginning of the crisis. In Romania, which received bailouts of 25,000 million euros between 2009 and 2012, the prime minister fell at the beginning of 2012.
In November 2010, when all economic indices showed that the world economy was once again approaching a collapse, a new round of bailouts or QE2 began. The Obama administration injected US $ 6 trillion into the economy, the Fed acted by massively buying US Treasury Bonds (T-Bonds). With this maneuver, the Fed's coffers aggravated the character of its balance sheet and added mountains of fictitious capital to the already existing mountain of fictitious capital.
The Bank of England acquired almost 1.5 trillion US $, also the Eurozone began a round of bailouts. Ireland, which had suffered the failure of the six main banks to finance a housing bubble with losses of 1 trillion euros, received a bailout from the IMF, Great Britain, Denmark and Sweden of 67,500 million euros. Portugal in serious situation also received a bailout of 78,000 million euros. The European Council in December agreed to modify article 136 of the Treaty on the Functioning of the EU signed in 1992 in Maastrich to allow bailouts of countries whose currency is the euro.
The year 2011 was the year that Japan, the world's third largest economy, was also severely hit by an earthquake and tsunami on March 11 that left 12,157 dead, 15,496 missing and 161,000 refugees. Faced with the tragedy, investment funds and speculators bet on the "reconstruction business" around 15 trillion yen, speculating that Japanese insurers would repatriate funds to pay compensation and carry out public works for which it began to cause the rise of the yen.
The cost of reconstruction impacted on Japan's huge public debt, of more than 200% of GDP, the largest in the world, and triggered the risk of a default by the state. After the tsunami there were two big "bailouts" one of 5 trillion and another of 8.9 trillion yen by the Bank of Japan, to avoid the bankruptcy of insurers and banks. The Japanese disaster affected the US and China because Japan is the buyer of 10% of the exports of both countries.
The road to QE4 "whatever it takes"
Summarizing, the first salvage tranche was called QE1, and began in September 2008, until 3/31/10. When the world economy showed recession symptoms again, the second round of bailouts began on 3/11/10 called QE2 until 6/30/11. But it did not manage to ward off the danger of crisis which led to a third round of bailouts called QE3, which began on 9/13/12 until 10/29/14, when it stopped in the US In Europe the QE was developed during 2015.
Balance Sheet of the US Federal Reserve between the years 2003 - 2017. Note the development of the bailouts, QE1, QE2, and QE3. Source: Federal Reserve & J. P. Morgan Chase
As the QE had avoided bankruptcy, revived circulation and avoided recession, by 2015 all the economic authorities, analysts and officials of capitalism assured that the crisis had been overcome. Janet Yellen, the president of the Fed, went so far as to say that there would be no more crisis "for many years, and perhaps never again." A whole chorus of charlatans argued that we were facing the "longest economic growth since the postwar period," that the "worst was over," and that the time had come to "normalize" the economy.
However, the reality was the opposite. What produced 10 years of injection of trillions of dollars was a veritable disaster that pushed capitalism into greater and more serious dangers. If what had caused the outbreak was a crisis in US mortgages, now that mortgage crisis had multiplied by 12 and spread to 11 countries.
On the other hand, one of the reasons for the crisis was the size of the companies that dominate the world economy. It is these companies that over-accumulate capital and push capitalism into crisis. But after years of injections of monstrous masses of capital, the "Too Big to Fall" are now bigger and more dangerous. Having injected these huge financial parasites with bailouts, I exploit the development of old speculative maneuvers such as share buybacks, and all kinds of fraudulent activities. Criminal financial activities multiplied, which according to capitalist analysts themselves are "weapons of mass destruction."
Risky speculative plays develop so-called speculative "bubbles". The over-accumulation in a few hands of the 1% of aristocrats caused that a bubble has been mounted on a global scale that bourgeois analysts call the "Bubble of the whole". Financier Jared Dillian explains it like this: "... In 2000, we had the dot-com bubble. In 2007 we had the housing bubble ... In 2017, we had the everything bubble ..." (Capital Bolsa 6/29/17 ). And in China a gigantic bubble was formed which is called "the mother of all bubbles."
But the bosses of capitalism faithful to their belief that "the worst of the crisis is over" in November 2017 began an economic operation called Quantitative Tightening (QT, Quantitative Tightening). In a reverse process to QE, instead of printing money to circulate the QT, it is withdrawing money from circulation. The Fed assured that the transition from QE to QT would be so gradual that it would not cause any problems. Philadelphia Fed Chairman Patrick Harker announced that the process would be as boring as watching the paint dry. Along with the QT, the Fed carried out five interest rate hikes.
The title of the chart reads: "China has the mother of all bubbles" The imposing Chinese real estate bubble of 15 trillion dollars is appreciated, with a growth of 685%
Contrary to everything the officials raised, with the QT capitalism exploded. To the extent that the Fed restricted the flow of money, and raised interest rates, it became a vacuum cleaner that absorbed all the dollars that circulated in the world. By attracting dollars from around the world, it caused a crisis in the currencies of developing countries because dollars began to flee from the economies of poor countries.
Turkey and Argentina collapsed. Indonesian, Indian, and Egyptian currencies began to shake, and conditions in hundreds of countries worsened. Developing country bonds sank. On February 5, 2018, Wall Street's biggest crash since 2000 took place, and the VIX index, which measures the uncertainty of the world economy, soared. Three months after the beginning of the QT, the whole mirage of the "end of the crisis" collapsed.
When in July 2012 the then president of the European Central Bank (ECB), Mario Draghi, was asked how far he will go in his maneuver to print money to support the Global Conglomerates, the former Goldman Sachs official said: "The ECB will do everything necessary". Mario Draghi's words were prophetic. The authorities of world capitalism to stop the debacle caused by the QT, were forced to carry out "Whatever it takes" and desperately inject billions. This is how the QE4 was born
Increasing and accelerating bailouts
The bailouts are the greatest expression of the collapse of capitalism. It is a phenomenon completely unknown by the overwhelming majority of the population: 99% of the world population knows about the Coronavirus, but does not know about the bailouts. And the bailouts are a thousand times more dangerous than the Coronavirus, they kill more people than the pandemic. This is hidden from the peoples by the capitalist governments, their political parties, the social and union leaders who support capitalism.
The reason why the bailouts are hidden is because the people should not know that while they are demanding adjustments, plans for hunger and misery, the capitalist governments give millions of dollars to the aristocracy of the 1% that dominates the world. In addition, they are hidden because the peoples should not know the real dimension of the depth of the crisis that capitalism is going through.
It is hidden from the peoples of the world that the Corporations went bankrupt en masse between the years 2007/2008. And that from then until the beginning of the pandemic in 2019 they received a total of 30 billion dollars, during 14 years. The majority of the world's population does not know this. And he does not know that capitalism lives with an artificial respirator because capitalism could not survive for a minute if the bailouts were suspended.
But the delivery of "cheap" and "easy" money to the global aristocracy is not only a tremendous injustice that aggravates social inequalities minute by minute, but has also become a permanent, accelerated, vertiginous maneuver that shows that capitalism is in the midst of a serious collapse In 14 months more bailouts than in 14 years Between the first months of 2020 and April 2021, the capitalist governments of the world have injected more bailouts than in the last 14 years.
This speaks to the clear of the vertiginous convulsive, and accelerated dimension that the world crisis of capitalism is reaching. The Central Bank of the United States, called the Federal Reserve (Fed) injected for 14 years between 2007 and 2019, a total of 4.5 trillion dollars. But since the pandemic broke out in December 2019 until today, the Fed injected three bailouts: One in March 2020 under Donald Trump of 2.1 trillion, another of 0.9 trillion when Joe Biden won the elections in December 2020, and a third of 1.9 billion in March 2021, already with Biden assumed president of the United States
The argument of the capitalist governments was that the injection of money was to solve the COVUD-19 pandemic. This is false, the pandemic continued in the world with new strains of coronavirus such as the Delta variant, the British strain, the South African strain, the Mu variant, and others, the money was essentially destined to save the Corporations that dominate the world economy from bankruptcy.
For the purposes of a better political understanding of the phenomenon, we call this entire set of bailouts operations produced between 2019 to today, QE4, which adds up to the amount of 4.9 billion dollars, which is a figure higher than what was injected in the previous 14 years. If we add the 4.9 trillion of QE4, to the 4.5 trillion injected since the years 2007/2008, it all adds up to the immense sum of 9 trillion dollars, only in US.
The title of the painting says: "The greatest bailouts in history." You can see the magnitude of the salvages in the last 50 years. You can see the Savings and Loan between 1980 and 1990 and the "effects" or LTCM, in the 90's. The Salvages that begin in 2008 (QE1, QE2 and QE3) were so far the largest in history. 2020 QE4 is equal to all previous salvages put together. Source: Deutsche Bank, and IMF
And if we add to all this what was injected by the central banks of England, Japan, Canada, the European Central Bank, China, Switzerland, etc., which follow in the footsteps of the Fed, the joint action of the main central banks of the world It is bringing the total money injected since the acute peak of the crisis in 2007/2008 to around $ 60 trillion.
Some economists, political and social leaders claim that capitalism had a crisis in 2007/2008 when Lehman Brothers went bankrupt. Then he recovered and 14 years later he "relapsed" again due to the outbreak of the Coronavirus pandemic. This is false. The crisis of 2007/2008 and the current one are the same crisis. Capitalism never emerged from this crisis. The best expression that the crisis of the years 200/2008 and that of today are the same, is the fact that the bailouts have not stopped developing in these 14 years.
The capitalist governments of the world unite to sustain capitalism
All capitalist governments contribute to the bailouts to the Corporations and to the support of capitalism. No government is outside of these plans, even if they want us to believe otherwise. Along with the governments of the United States, France, Germany, Japan, and Canada, there are also the governments of China or Russia, which carry out bailouts, participating in the daily rescue of capitalism.
For those who believe that the US is facing China or Russia, or the latter against world imperialism, the reality of the Salvages, and the daily rescue of capitalism, shows that this is false. In fact Xi-Jinping, China's top leader, who is supposedly at "War" with the United States, was part of the launch of the "Great Reset" in Davos.
Putin's governments in Russia, or Iran also contribute to the maintenance of capitalism when they favor the investments of the Corporations in their countries or
they keep agreements with the IMF, like all capitalist governments in the world. Even those capitalist governments that present themselves as "left" or "progressive" such as those of López Obrador and Morena in Mexico, Fernández in Argentina, Maduro in Venezuela, or Díaz Canel in Cuba, contribute to the rescue of the Corporations.
They do so by promoting the investments of multinationals in their countries, or by contributing dollars when they pay external debts to the IMF. This agreement of all the capitalist governments of the world to support capitalism is what explains the silence about the bailouts and the hiding of them from the masses, from all the governments and leaders of the political and social leaders of the world.
The QE4 is assured of its failure
But it would be a mistake to believe that the 2020 collapse is the fault of the QT. The crisis exploded because QE1, QE2 and QE3 had made a mess. The QT was a kind of financial coronavirus that revealed the magnitude of the disaster. In just 3 months the objectives that the QE1, QE2, and QE3 had costly achieved in 10 years were erased at a stroke of the pen. The assertions of the bosses of capitalism that the crisis "is over" were buried by reality.
But if QE1, QE2 and QE3 made a mess, what effects will QE4 have? With QE4, the equivalent of half of the bailouts that were implemented in the previous 10 years were injected in two years. At an even faster and more breakneck speed. In the midst of a pandemic and a colossal level of destruction of the productive forces. That is, if QE1, QE2 and QE3 made a disaster, and led capitalism towards collapse, QE4 is going to cause an even greater disaster, and its failure is already assured.
If the circulation was revived with the QE1, QE2 and QE3 now it depends on the artificial respirator of the QE4 to continue day to day. If the bankruptcy of the Global Conglomerates was avoided with the QE1, QE2 and QE3, with the exception of Lehman Brothers and Bearn Sterns, now all the Conglomerates depend on the day-to-day life of the artificial respirator of QE4 to avoid bankruptcy. And if before the beginning of QE4 the outlook for the world economy was recession, now it is depression.
This is the grim expression of the collapse of the capitalist mode of production. But meanwhile the crisis continued its development, and nothing, not even the serious deepening of it, prevented the big capitalists who control the world economy from losing their juicy bonuses and benefits. As bankers practice the frenzied dance of awarding millionaire prizes, a worldwide debate has raged about the nature and prospect of the crisis.
The questions follow one another in search of answers: Where is this crisis going? Why did it happen? Can capitalism overcome it?
We will answer these questions successively. The future panorama of the crisis of capitalism, beyond its conjunctural movements, the deep processes that unfold and its fundamental tendencies are reasons for analysis in the next chapter.
(1) As George Soros points out: "The outbreak of the 2008 economic crisis can be officially set in August 2007 when central banks had to intervene to provide liquidity to the banking system." George Soros. "The new paradigm of financial markets" Taurus 2008
(2) Walter Bagehot, 1826-1877 English economic journalist, was one of the first editors of "The Economist". In his book Lombart Street, Bagehot argued that the fundamental mission of the Bank of England was to use all its gold reserves to, in times of liquidity crisis, acquire all the assets it could from commercial banks and thus restore credibility to the banking system . Source: https://www.juandemariana.org/estudio/
(3) There are different versions of why the government did not rescue Lehman and if it did it with Merryl Lynch, Bear Stearns, Fannie and Freddie. The behavior of the Fed and JP Morgan after the bankruptcy of Lehman raised suspicions among analysts. Whatever the reason, it was JP Morgan who benefited from the operation, which had an exposure of almost 90 billion US $ of derivatives, was technically bankrupt and in fact underwent a process of disguised recapitalization.
(4) The Wall Street Journal also indicated that the real beneficiaries of the successive bailouts of AIG were two dozen large financial institutions, which received payments worth US $ 50,000 million since the bailouts of the insurer began in September. . The list is headed by Deutsche Bank and Goldman Sachs, but there are also Merrill Lynch, SG, Royal Bank of Scotland, Morgan Stanley or HSBC, etc. Congressman Christopher Dodd, D-Connecticut, protested: "It is not clear who we are rescuing." Source: https://edicion4.com.ar
(5) The Investment Banks JP Morgan Chase, Bank of New York / Mellon, Merrill Lynch, State Street, Morgan Stanley, Goldman Sachs, Bank of America, Citigroup and Wells Fargo, were part of the agreement.
(6) Henry Kissinger was Secretary of State in the administrations of Presidents Richard Nixon and Gerald Ford. He played a dominant role in US foreign policy in the Vietnam War, the bombing of Cambodia, and relations with China. Brent Scowcroft was a National Security Advisor under Presidents Gerald Ford and George Bush. He also served as a military assistant to President Richard Nixon and as Deputy to the President for National Security Affairs in the Nixon and Ford administrations and assisted President Barak Obama in the election of his national security team.
(7) The ECB was established on 1 June 1998 by Belgium, Germany, France, Ireland, Italy, Spain, Luxembourg, the Netherlands, Austria, Portugal and Finland. As of January 1, 1999, the economies of the Member States adopted the single currency, the euro.
Chapter II TRENDS
"The actual internal connections of the capitalist process of production is an extremely intricate question ... it goes without saying that ideas must be formed in the minds of the capitalist agents of production and circulation about the laws of production that diverge entirely. of those laws ... The ideas of a merchant, a stock market speculator, a banker are, necessarily, completely wrong"
Charles Marx: Capital, Third Book, ch. XVI, Book III
After the bailouts, the world literally changed. It changed not only in the economic field, the bailouts had an impact on social relations, production relations, political and economic trends, the location and agreements of social classes and class sectors, countries and their relationships throughout the world. Everything has definitely changed.
But while in essence everything has changed, in appearance everything remains the same. Capitalism continues to function, multinationals move, the population consumes, commerce continues its march, apparently, everything continues, except for some announcements of bankruptcies and disappeared companies. Even at certain times there is economic growth. This appearance of the crisis is one of the elements that causes the greatest confusion among analysts and economists around the world.
Most of them are disoriented. They are permanently perplexed by a reality that they do not know, without a doubt they are moving in unknown territory. They look for parameters to find answers, they compare the crisis with others, "it is the same as the Nasdaq of 2000" some say. "It is the same as that of the oil crisis in the '70s" affirm others. All the time the statistics confuse them, "We are coming out of the crisis" they affirm, but then the data refutes them. "It is part of the end of a long cycle of growth" say some. .
Others refute them: "It is part of a long cycle of stagnation". Statistics give data to assert both one thing and the other. It is the same statistics that lead analysts and economists, even some so-called "Marxists", to such a state of confusion. It is important to compare this crisis with others that have occurred in capitalism, but the answers cannot be sought only in comparisons, because the current crisis has elements of all the previous ones. Statistical data cannot explain the deep laws of economics, they are very important, but they only serve as a support.
The outlook is bleak in the lands of Marxism, where most economists refer to describing the crisis as one of overproduction. Although it is true that there are millions of goods on the market that are not consumed, that does not explain the crisis, because overproduction is the external expression of the profound phenomena of capitalism. Those who describe the crisis of overproduction confuse appearance with essence.
In truth, the crisis is very complex, the interaction of conjunctural, structural, and historical elements of capitalism have found an intersection, not coincidentally, in the first decade of the 21st century. It is the only mitigating factor that we can give our analysts that justifies their confusion. And in the case of those who defend capitalism, they also make the recurring mistake of confusing reality, with their wishes and interests.
But before them, the changes that are taking place firm, unshakable, are here to stay, and have drastically modified the reality and the economic prospects of capitalism. From the bailouts, from the injection of fabulous masses of capital into the economy as a whole, nothing will be the same again. Even data on the crisis in the first years of its development have been recorded of such severity that we have to go back many years to find antecedents of a similar magnitude in capitalism, which were not recorded in decades or even centuries.
The main ECRI indicator produced by the Economic Cycle Research Institute, has come to show falls in the US economy that are around -6.9, pointing to a contraction and a speed of fall that the most important capitalist economy has not known since the postwar period.
In 2009, all the G-7 economies registered negative growth in unison, something that had not happened in 100 years. Also in 2009, more than 100 nations registered zero or negative growth, for the first time in the history of capitalism!
The Baltic Dry Index indicator, which reflects the evolution of world trade, was close to 12,000 points in May 2008, but at the end of that year it suffered a historic drop and collapsed, collapsing to 660 points, progressively reaching 4,500 points at the end. 2009. Since then, the decline has been continued, and at the beginning of October it reached 2,478 points, in a clear sign that the world economy is still moving away from the pre-crisis indexes, since in relation to the period 2006-2007 the volume of global trade fell 25%. This fall is the worst since ... 1945!
The fall in the prices of oil and other commodities was the fastest and deepest since the record began in 1956. If in the Great Depression of 1929, in the United States the percentage of debt over GDP was 186%, in the current crisis, the debt / GDP ratio is calculated ... 379% !, More than double that of the Great Depression! And if future retirement debts are added, the percentage rises to 800%! Japan's GDP in 2009 registers indices ranging from -6% to -10%. These data are the worst since 1945.
Interest rates are practically zero in the US and almost all the major economies, since the outbreak of the crisis, are at their lowest level in ... 100 years! The ones that broke all the historical records are the British interest rates that have reached their lowest point since ... more than three centuries! Exactly since when the Bank of England was founded, in 1693! In 2008 the Caisse des Dépôts, the financial arm of the French State since 1816 and under all regimes (monarchy, empire, republic, ...), experienced its first annual loss ... in 193 years!
The Baltic Dry Index shows the spectacular decline in trade after the bankruptcy of Lehamn Brothers Source: Baltic Dry Index
We can synthesize the fundamental tendencies that have taken place in the capitalist system from the salvages, grouping them into 4 items that incorporate a series of issues in turn, linked:
1) Jump in poverty and inequality indices in the G7 and the world
2) Devaluation and decomposition of the world economy
3) Crisis of credit, money, and general bankruptcies of companies and states
4) Permanence and institutionalization of bailouts
1) Jump in poverty and inequality indices in the G7 and the world
World poverty and inequality indices, which were already serious, after the bailouts are skyrocketing with indices that are also historic. As of 2012, out of a total of 6.7 billion inhabitants in the world population, 1 billion "survive" on an average of $ 2 per day, of which 70% are women. Three billion are not enough to cover basic needs in food, housing and health. More than 24,000 people die of hunger every day, 840 million people are malnourished, of which 200 million are children under five years of age. More than 1.8 billion human beings do not have access to safe water.
More than 1 billion lack a worthy home, 2 billion people suffer from iron deficiency anemia, 880 million people do not have access to basic health services, and 2 billion people lack access to essential medicines. At the other extreme, those who pocketed the bailout money, the top twenty super millionaires on the Forbes list, collect together a figure estimated at US $ 109.5 trillion (1), which is equivalent to more than is necessary for the end. of hunger and poverty in the world.
The select club of super millionaires of the Forbes ranking went from 1,125 members in 2008 to 793 in 2009. Those 109.5 billion US $ of accumulated wealth in the hands of the "millionaires" exceeds the world GDP, that is, the annual wealth produced for all countries, which is around US $ 100 billion. These data show that the bailouts exacerbated social inequalities, the data of which are worsening day by day.
After the "bailouts" the indices of social inequality, human and nature destruction, skyrocketed, which heralds the danger to which this phase of the capitalist system is leading us. The devastating data on the world economy are so serious that we can affirm without a doubt that no phase, stage, or period of capitalism has existed until now that signifies such a serious drop in the living conditions of billions of inhabitants of the world. planet simultaneously, as we currently live with the situation open after the bailouts.
With the chilling indices in hand and comparing them to 25 years ago, we could easily declare Ronald Reagan and Margaret Thatcher "benefactors of humanity." This is recognized by officials defending capitalism such as the then managing director of the IMF in 2009, Dominique Strauss-Kahn: "Since the crisis in the US began in 2007, 30 million jobs have been lost in the world ... really we face the risk of losing a generation. "
With the bailouts, economic, political and social forces were unleashed, which are modifying social relations between classes and sectors of them, but also impacting and modifying relations between countries, nations and states. Before the salvages, the existence of a "First World" made up of an elite of 7 countries, the United States, England, France, Canada, Germany, Italy and Japan, and a "Third World" made up of 192 countries, was always considered. The remaining ones that, apart from inequalities, always had the most important poverty rates on a world scale.
Poverty and unemployment rates, although not yet the same as in Third World countries, tend to equalize and approach rapidly. For this reason, and taking as a definition of a country the social formation made up of social classes and class sectors at a time in the historical process, we can affirm that after the "bailouts", in the countries or social formations of the United States, France, England, Canada, Japan and Italy tend to increase the rates of poverty and unemployment typical of the social formations of the countries of the "Third World".
Relationship between states and multinationals
Different is the situation in relation to the states. After the bailouts, the existence of a few states, qualitatively richer and more powerful militarily and economically, than the remaining 192 states is strengthened and deepened. These imperialist states are the richest in the world, not only because of the accumulation of wealth that they have historically carried out, as a result of the plundering of the most backward countries, colonies, and possessions, but also because of the control of trade, industry, distribution, finance, communications, combined with its military and technological might.
The immense bureaucratic and military machinery of these states is now experiencing a greater overlap with the multinationals. The bailouts have involved the injection of giant masses of capital into them, which has united more deeply and intimately the constituent elements of the states and multinationals. From the bailouts, the situation of the imperialist states and the multinationals became even more deeply interrelated, the future of the states depends on the future of the multinationals and vice versa.
It is a permanent tendency of senile capitalism to unite the states with their multinationals, as expressed by the fascist states of Hitler and Mussolini, in which large companies and national monopolies reached a deep unity with the states. While multinationals were not predominant at the time, the trend is the same and the analogy can be perfectly established, albeit in completely different social and political contexts. For Trotsky: "The corporate state ... is nothing more than the agent of monopoly capital ... Mussolini makes the state run with all the risks of the companies and leaves the capitalists all the benefits of exploitation" (2)
What we analyze is a trend of which "bailouts" are its expression. It follows from this relationship that just as the generalized collapse of multinational corporations affects the imperialist states. The deep interweaving of these with the corporations supposes that the destiny of the states is also the destiny of the corporations. This unity between imperialist states and multinational corporations gives rise to changes in the relations between states, economies and nations.
A study by Sarah Anderson and John Cavanagh of the Institute for Policy Studies finds that of the 100 largest economies in the world, 51 are corporations and 49 are countries. A comparison of corporate sales and countries' GDP reveals that General Motors is bigger than, for example, Denmark or that Wal-Mart is bigger than countries like Norway and General Electric, also associated with JP Morgan is, for example, greater than Portugal.
This tendency of the G7 states, their role as imperialist states, their deep entanglement with multinational corporations, their entanglement with the armies that depend on them, their renewed arms development, and the existence of a bourgeois class sector with a bureaucratic component of officials of the imperialist state machinery, develops another trend. These states will tend to dissociate themselves from the social formation that they dominate, and will seek to modify the relations of production and the structure of said social formation in order to stabilize themselves, to impose new relations of force between the classes.
For this reason, the development of the rich imperialist states is necessarily accompanied by social formations of increasing poverty. The contrasts that previously characterized the "First World", the "Third World", are now the contrasts between the countries and states of the G7 with the social structure that they dominate. The population of the G7 countries, and fundamentally the working class and popular sectors, after the "bailouts" began to experience phenomena and situations unknown to the inhabitants of northern Europe, North America and Japan, although quite common for any citizen from the third world.
At the same time, and as we saw in Chapter 1, with the bailouts, relations between the imperialist states are drastically changing, developing an accelerated process of colonization of the EU, China and Japan by the US The colossal infusions of capital of the Fed, act to reinforce the hegemony of the United States, which imposes its policy on the EU, China, Japan and the BRIC'S.
Growth of poverty and changes in social structures in the G7
In the United States, the trend is toward an increase in the number of poor people as well as the number of Americans without health insurance. Among minorities such as Hispanics, African Americans, immigrants, women, youth, Hispanic children, poor immigrants, the elderly and poverty in the US is on track to mark a record increase with numbers of people without resources of working age, rates rise to levels. from the time of the Great Depression.
Poverty rates are the most important since the government began accounting for poverty in 1959, surpassing the previous highest statistics recorded in 1965 and 1980. More than 2.8 million people lost their homes in 2009 through foreclosure or foreclosure. banking. The same trend is unfolding in Britain, with millions of people currently unemployed and millions more working part-time.
A study published by the British newspaper The Independent proposes that the level of poverty in England would be at levels similar to those of the Victorian era of the years 1837 to 1901. One of the most serious problems of the workers and the people in Great Britain is housing, which has worsened as a result of government measures that led houses to go from more than a third in the hands of the State in 1982, to only 14%, 20 years later.
In Germany unemployment is rising, and as reported by the Federal Employment Office in Nuremberg, 1 in 4 immigrants living in Germany lives threatened by poverty, with young people and children among the most affected. The German Institute for Economic Research (DWI) estimated that 1 in 7 Germans lives in conditions bordering on poverty, 1 in 4 Germans between the ages of 19 and 25 are threatened by poverty, and 40% of the single mothers or fathers live in poverty.
In Japan, the end of lifetime employment and the deterioration of the social security system are the main factors that are impoverishing important social sectors of a country that was considered immune to poverty. After years of economic stagnation and growing income disparities, according to data from the Ministry of Labor, there are 20 million poor people, considering the authorities the poverty limit at about US $ 22,000 per year for a family of four, which represents half the income of an average household in Japan.
More than 80% of those living in poverty in Japan are poor and temporary workers, with no security and few benefits. There is also a marked advance in job insecurity, which has opened a huge rift through which millions of Japanese have fallen and place, according to official data, Japan in the fourth highest poverty rate among developed countries.
In France, poverty advances hand in hand with unemployment, the fragility of work and precariousness that afflict more than 4 million people, in 2010, there are already 8 million French, almost 13.4% of the population, living below the poverty line, and once they paid for rent, gas, electricity, transportation and insurance, they only have $ 2.70 per day per person left to eat and clothe themselves. Out of a population of 65 million inhabitants, unemployment in France affects 2.7 million people, equivalent to 10% of the active workforce. The percentage of poverty is particularly high in immigrant households, reaching 36%.
In Canada, inequality and poverty are also growing, especially among the thousands of immigrants estimated at more than 10,000 Hispanics who immigrate to Canada annually and the demand for residency visas continues to grow. A person in Toronto or Vancouver who lives alone and earns only about $ 30,000 a year can live only modestly. In Vancouver, Toronto, Montreal and Ottawa, the sector of the so-called "working poor" advances, people who work but do not generate enough income to be above the poverty level.
Pyramid of world wealth according to Credit Suisse data in 2020. The 1% of the population concentrates almost 45.8% of the world's wealth. The next 11% segment holds 39% of the world's wealth. 12% of the global population holds 85% of the world's wealth. Source: Credit Suisse
According to United Way studies, 30% of the families in the municipality of Toronto are poor, taking as a parameter those households whose income is 50% below the average income in their community, and using the so-called LIM - Low Income Measure. Given the high cost of living prices in Canada, income is considered precarious.
In Italy, millions of people live in absolute poverty, 4.9% of the population according to reports from the Italian Institute of Statistics (ISTAT). Poverty in the south is almost five times that of the rest of the country. These changes are taking place rapidly in the social formations of the imperialist countries, with elements that are constant in almost all of them: Poverty advances, health, education and housing indexes fall, they hit the weakest, most vulnerable, and defenseless sectors. of the population.
2) Devaluation and decomposition of the world economy: The salvages cause the birth of the so-called "zombies" or "living dead." What are they? This is how the Global Europe Anticipation Bulletin defines them: "In the streets of large North American and European cities ... a significant number of brands are found that continue to shine to attract the buyer, but which in fact are nothing more than deceptive appearances of bankrupt companies, artificially kept alive by dint of public money or restructuring of an uncertain future, such as CIT, GM, Chrysler, Saab, Opel, Karstad, Quelle, Iberia, Alitalia, etc ... On the surface, it works as if everything was normal, but in fact ... real zombies, all "economic living dead" (Global Europe Anticipation Bulletin 39).
After the bailouts, the "zombies" are generalized. Several economists have dubbed these companies, which, still bankrupt, continue to exist as "zombies" or "living dead". Given the size of the bailouts as a result of which the multinational corporations that dominate the world economy are being saved, the magnitude of these dead bodies dragged by capitalism is also enormous and of great weight and importance in relation to GDP and the whole of the world economy.
This is how David Troman, head of financial services at PA Consulting, an IT industry consultancy, analyzes the situation of zombie Investment Banks:"The simultaneous existence of zombies is something that has not happened before in the working life of any of the financial services ... banks, despite appearances, only limp in a semi-alive state .... We are all going to learn to live with zombie banks " (3)
Bailouts open an unprecedented situation in many ways, with the existence of entities, companies, states, banks, etc. that of content are in bankruptcy, but formally they do not declare it. A new situation arises in which these entities whose economic operations have failed and are destroyed, do not disappear and in a certain way continue to participate in the profit sharing process to claim part of the capital and the existing surplus value.
The effect that the existence of these dead bodies dragged down by capitalism is that they keep the organic composition of capital high, because an enormous mass of fixed capital, machinery, workshops, infrastructure and capital continues to subsist that do not obtain a rate of profit and therefore therefore, they act as an obstacle to the production of new value.
The rise in the organic composition of capital caused by the bailouts acts as an obstacle to capitalism's exit from the crisis.
Historically, every crisis of capitalism is solved with a process of bankruptcies, auctions and foreclosures that means that the strongest capitalists survive and the companies and banks that have operated without success disappear and the erroneous investments are liquidated.
This is how Karl Marx posed the phenomenon: "... the conflict between the antagonistic driving forces is periodically released by crisis. How, then, would this conflict be resolved and the conditions for the" healthy "movement of capitalist production reestablished? It includes putting fallow and even annihilating a part of capital ... But under any circumstance the equilibrium would be established by inactivation and even by annihilation of capital to a greater or lesser extent " (4)
Evolution of the debts of zombie companies. Source: Bloomberg
Marx argues that the way out that the capitalist system finds to resolve the crisis and find a new equilibrium that allows the development of the economy is the outright destruction of a sector of capital. But from the Salvages this is the historical mechanism that capitalism used to overcome the crises, it could not develop, therefore, the crisis is prolonged and worsened, extending the agony of the capitalist mode of production.
"Too big to fail"
Without a doubt, had it not been for the "bailouts", the capital annihilation that took place would have been of a qualitatively higher magnitude and would have reached global corporations and a banking sector. This massive intervention by the G7 states, mainly the US, acted by disturbing and altering the process of annihilation and destruction of capital that would have allowed capitalism to regain part of the lost balance.
In the absence of a process of "natural selection" of capitalists and capitals, bailouts prevent the destruction of surplus capital. And by hindering the burning of capital, it hinders the way out of the crisis. In this way, the bailouts become another structural factor of the same that hinders the entry of investments to relaunch the world economy.
From the point of view of the process of burning and annihilation of capital, which Marx analyzed, we can answer the question: Why did the bailouts take place? And the answer would be: They are explained because the magnitude of the crisis that broke out is such that it could have triggered a process of destruction and annihilation of capital that endangered the existence of the capitalist system itself.
For example, General Motors (GM) had to go bankrupt, but if GM had disappeared, it would have impacted on a production of millions of cars and trucks in 34 different countries, 463 subsidiaries and 234,500 workers, 91,000 in the US that provides health coverage. and retirements to almost half a million retired workers. And together with GM they had to go bankrupt multinational corporations whose size in relation to GDP and portions in branches and sectors of the world economy is of such importance that their disappearance affected the very foundations of the world economy.
From there came the expression "Too big to fail" of economists defenders of capitalism. The problem is that many of the "Too big to fail" after the bailouts are now "dead-alive", and their need for survival requires huge and growing masses of capital. And as if this were not enough, since there was no burning of capital, the exit of the same becomes more difficult, and the dead bodies that the salvages produced, act as an obstacle to the solution to it.
The definition of zombies in turn extends corporations to countries, some of which are "unviable" for international credit agencies. Even some once powerful like Spain, Italy, Portugal today are considered zombie nations. The bailouts exacerbate the devaluation of the world economy With the "bailouts", the capitals contained in the Global Corporations are devalued. That is, if the banks calculated future earnings that did not occur, this acts by devaluing their assets immediately.
This is how Marx explains it: "The part of the capital value that is only found in the form of allocations on future shares in the surplus value, in the profit in fact as mere debt securities on production under various forms, is devalued from immediately with the decrease of the entries on which it is calculated " (5)