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.
http://www.workers.org/2010/world/economy_0520/
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