Phil Hearse argues that the crash could be bigger than 2008 and make fascism a clear and present danger.
28 February 2020.
Stock markets worldwide have crashed in a financial firestorm that looks every bit as bad as 2008. But this is likely to be worse than 2008 – when some UK, American, and European banks failed, the world’s largest insurer went bankrupt, several UK building societies went under, and two leading US merchant banks (Lehman Brothers and Bear Stearns) also folded.
Then the situation was stabilised by massive bank bailouts followed by ‘quantitative easy’ – essentially, pouring trillions of dollars of public money into private banks to prop them up, especially in the US and the UK. Despite this, the world’s rulers, having first saved the speculators, and then allowed them to resume hoovering wealth to the top, imposed more than a decade of austerity on everyone else.
Things may be a lot worse this time. The world’s political and corporate elites have carried on as if nothing ever happened. Global debt stood at around $175 trillion dollars in 2008, around 280% of total global GDP. Today, after 12 years of neoliberal ‘business as usual’ for the rich, it stands at $250 trillion, around 320% of total global GDP.
They have created another bubble of speculation and debt even bigger than the last one. And with nation-states still carrying the financial burden of the last round of mega bailouts, it is hard to imagine them conjuring up trillions more in fictitious capital.
If the stock market collapse triggers half a dozen big bankruptcies, we could be looking at a chain reaction of collapse into a black hole of bad debt. The scale of the potential outcome is mind-boggling.
Notable, too, is the immediate impact on the ‘real economy’ – unlike in 2008, when the whole crash was driven by a wave of collapses in the financial sector. This time, we have travel restrictions, lockdowns, factory closures, supply-chain breakdowns, and other kinds of disruption likely to set up other kinds of economic shock-wave through the system.
The real danger here is of a ‘global Argentina’ – referring to the Argentinian economic collapse of 2001/2 which threw virtually the whole of the working class into penury and wrecked the savings of large sections of the middle class as well. The foundations of Argentinian capitalism failed then. Now it could be the foundations of global capitalism as a whole.
Politically, the danger is that a collapse into economic and social chaos will strengthen the upsurge of fascism, economic nationalism, anti-migrant racism, and climate nihilism. The Far Right will offer solutions – fortified borders, police repression, persecution of minorities, militarism, ecocide. The Left must organise, mobilise, and roll out an alternative vision.
What do socialists say?
Coronavirus has been the trigger for this crisis, but the underlying cause is the unsustainable debt mountain that world capitalism has needed to sustain growth. This is the Achilles heel of neoliberalism. Constant deflation to drive down wages and increase profits has meant bigger and bigger debt mountains to sustain demand and growth.
After 2008, world capitalism failed to find a new framework that could – like the old ‘Keynesian’ demand management model after the Second World War – simultaneously ensure prosperity and guard against crisis and slump.
Globalisation will make the crisis worse because of the interlocking dependence of international production networks. The shortage of Apple products because of disruption in China is a foretaste of this.
All the world’s key capitalist politicians bear responsibility for this new tragedy. EU leaders, in the thrall of German bankers, wrecked the living standards of many millions, especially in Greece, Spain, and Portugal. They are every bit as guilty as American and British bankers.
There is no way out without under the continued rule of finance-capital. The world’s private banks are gambling casinos for the super-rich, and they are on brink of blowing up the global economy for the second time this century. Money creation should be under popular democratic control.
Politics will now become even more wildly unpredictable, with the threat of fascism just over the horizon. Thousands of Donald Trump tweets cannot save the US economy from being impacted, and the consequences for Michael Bloomberg in the Democratic candidate race are fatal. Who will now vote for a New York billionaire banker? The Sanders’ candidature is surely set to surge.
What will the Labour leadership candidates now say? They must put forward demands for unleashing a tidal wave of NHS and social care spending to overcome the immediate health care crisis. In the medium term, the banks must be brought under social control. And the wealthy must be made to pay the cost of the crisis, not the working class.
In Britain, ambitious Johnson-Cummings spending plans must now be on hold. The NHS on a knife edge will not cope, especially if the schools close, pulling tens of thousands back into the home on childcare duties.
In the face of this crisis, the Johnson government is likely to be paralysed. After the 2019 election defeat, the British Left must pick itself up and hammer out an anti-capitalist alternative.
In 2020, the world is zooming towards a dystopian tipping-point – in which economic and climate catastrophe march in lockstep. None of the old politics will suffice to ensure the survival of the planet or the rescue of hundreds of millions from economic and social disaster. Or defend us from creeping fascism.
In 2008, at the height of the crisis, then-US president George W Bush famously declared, ‘This sucker could go down.’
We have to ensure, this time round, that what goes down is global capitalism, not the working class and the planet.
Phil Hearse is a veteran revolutionary socialist active in Mutiny and Socialist Resistance. He is joint author, with Samir Dathi, Neil Faulkner, and Seema Syeda, of Creeping Fascism: what it is and how to fight it.