The New Debt Crisis: Capitalism is out of control

‘It is no longer  a question of contagion; contagion has already happened. This is like Ebola: when you realize that you have it, it is almost too late! You have to cut your leg off to survive’.

This is how Angel Gurria, the head of the Organisation of Economic Development, compared the growing debt crisis in the Eurozone.

The Irish media have reported on the crisis as if it were a capitalist morality tale. The Greeks are bad boys and girls who have caused us all a lot of trouble. The Irish are well behaved pupils who have just been caught up with the wrong sort of people.

The Irish Independent business journalist, Brendan Keenan, came on RTE radio to warn the unions that they better accept the public sector deal – or they will go the way of the Greeks.

The real story is very different. Chris Giles of the Financial Times – the global mouthpiece for the business elites-  summarised the roots of the new crisis as follows:

‘Huge budget deficits resulting from the financial crisis have put public debt on an unsustainable trajectory, and doubts are growing that the political will exists to swallow the medicine needed’.

This compressed sentence needs a little translation - so let’s decode its three main elements.

• 1.       Capitalism came close to a systemic break-down in the Wall Street crash of 2008. It was only rescued by huge injection of state funds. Globally, the estimate is $14 trillion dollars. This involved a huge shift from private corporate debt – to public debt.

• 2.       The level of public debt that resulted is seen as ‘unsustainable’ by rich speculators. Government debt is funded by selling bonds to rich people who sit back and collect interest each year. They are now worried that countries such as Portugal, Ireland, Greece and Spain,

 will not pay them back fully. So they are pushing for even higher interest payments to cover their risk – which, of course, only pushes up the debt even further. Instead of attacking corporations like Lehman’s, they are now attacking countries.

• 3.       The only way to re-assure the speculators  is if the workers make a collective contribution to their wallets by accepting pay cuts, redundancies and lower public services. But the wealthy are worried that these same workers will not play ball.

Given this scenario, the speculators apply constant  pressure to gain an even greater pound of flesh.  When you hear the ‘markets are nervous’, it just means that they need even more money to smooth their anxieties.

Looked at from this perspective, there are no rewards available for the Irish –only further kicks in the teeth for Irish workers.

For the past year, the FF – Green government told the population  that we must pull together to bring down the government deficit and impress the speculators by our ability to take pain.

At the same time, €22 billion was  poured into the banks to support ‘our international  reputation’.

The contradiction between these two imperatives – cutting the deficit while pouring billions into banks – was supposed to be overcome by a statistical trick. (The official line was that the billions for banks were an ‘investment’ not a ‘bail-out’ and should not appear in the figures for government debt.)

But this little trick has fallen apart and at  least some of the bank bail outs are being counted by Eurostat as government debt. Ireland is therefore heading for a government deficit of between 18% and 25% of GDP in 2011 and 2012.

This is going to make the speculators very nervous – and they will need even more cash from the Irish population to overcome these nerves.

So the lesson is absolutely clear:  All the sacrifice we have put up with for the past year will do no good. They are just going to come after us for more.

Which begs the question: Is there not a better way?

An alternative approach means grasping that capitalism is now a dying system that is out of control and will wreck even more havoc if it is let loose. Instead of feeding the great Beast, we need to start planning an escape.

That starts with some basic resistance.

• ·         Public sector workers should vote No to a deal that will destroy their conditions. This deal contains a clause about ‘unforeseen budgetary circumstances’ and it is now pretty clear that this will be used to push through even more attacks – once we have given up the battle to resist pay cuts.

• ·          We should come out in our thousands on the ‘Stop the Bank Bail Out’ march to the Dail on May 11th, assembling at 7.30 from the Garden of Remembrance.

But behind the resistance, we need to share a different political vision – that it is perfectly possible to organise our economy on a non-capitalist basis where production is geared to the needs of people rather than profit.

Once we understand this, we will find that we have far more in common with the Greek workers and no longer need to behave as model stooge for the speculators.

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