The financial crisis in the US has not yet developed into a full recession by devaluing constant and variable capital in the imperialist heartlands. It is a partial devaluation of capital in the most speculative and least productive areas (home financing, high-risk loans etc), which has spread into the banking system. The state banks are meeting this crisis by reducing interest rates and increasing subsidies (cheap loans) to finance capital to stave off recession.
On January 22 cut in the Fed borrowing rate of 0.75% to 3.5% means that interest rates may now be less than inflation. The tax cut package of $150 announced by Bush will barely scratch the surface of household debt. If it proves that the
This financial crisis in the US takes place against a fundamental upturn in accumulation of the world economy since the early 1990s resulting from the combined impacts of of 'neo-liberalism' on the 'third world' and capitalist restoration on the 'second world'. This had had the effect of a massive devaluation of former state owned assets and privatisation of these assets in the semi-colonies and the destruction and privatisation of assets of the former degenerate workers states. A massive historic defeat of the working class was necessary to allow imperialism to impose this destruction and re-valuation of assets. It enabled the world economy to emerge out of its stagnation of the 1970s and 1980s.
However, the current financial crisis, along with the cyclic crises of the 1990s, shows that as capital goes into a period of accumulation it faces once again the onset of the TRPF and a rising overproduction of capital in the world economy. That 'fictitious' capital cannot be valorised against existing values so seeks to increase its value by speculating on the changes prices of existing values. Thus accumulation necessarily is accompanied by a succession of financial crises or devaluations as fictitious capital is destroyed. e.g. the sub-prime mortgages are written off,
It is important to acknowledge the law of value to reject the bullshit ideas of the exchange theorists that explain the growth of the world economy as the result of unequal exchange. For example, Henry Lui writing on the world economy and
While unequal exchange is undoubtedly a major counter-tendency to the TRPF, US 'dollar hegemony' cannot account for the dominance of US imperialism. Similarly, Petras' more familiar theory of unequal exchange based on US buying commodities cheap and selling then dear is also fundamentally flawed. Imperialism does benefit from 'primitive accumulation' or 'theft' of raw materials and labor power, but cannot sustain a period of renewed accumulation on this basis.
The onset of this period of accumulation in the 1990s can only be explained by Marxist concepts. As Trotsky himself theoretically envisaged, such a new period could arise out of a historic defeat of the world's working class by imperialist globalisation ie capitalist restoration in
Today, 18 years into this upturn, we are once more facing a massive overproduction of capital that cannot be invested productively without further huge attacks on workers and peasants (by wars, invasions (re-colonization), fascism). The gain for capitalism of this would be to drive down the value of labor and of raw materials –to create a new basis for capital investment and exploitation. As the
The outcome of this crisis will therefore depend on the international resistance of the working class to these attacks. If this resistance is isolated and contained by the World Social Forum(WSF) in alliance with 'progressive' capitalists and 'democratic' imperialists, then imperialism will succeed in making the workers and peasants pay for its crisis. If the revolutionary Trotskyists can win the workers vanguard from the WSF and unite it in a new communist international, then we can make the imperialists pay for their own crisis.