By Larry Holmes
October 17, 2022
The writer is Workers World Party’s First Secretary. This is a slightly edited version of the full article you can read at workers.org.
According to the International Monetary Fund, most of the world, including the U.S., is either in or headed for a recession, or something worse, by sometime in 2023. All economic indicators are pointing to severe economic contraction. Businesses are being forced to rent more and more warehouse space to stockpile all the computers, televisions, furniture and other things that the workers can’t afford to buy.
This is no normal economic downturn. However long and drawn out this economic crisis is and whatever events push it forward, it’s the development that many Marxists (as well as bankers and billionaires who are willing to utter words of truth) consider to be the biggest global capitalist economic crisis in history. The capitalist crisis that is under way is unique in that it is symptomatic of a dying system entering its end-stage.
Federal Reserve declares war on the workers, oppressed of the world
The Federal Reserve is shutting down the economy with rate hikes, not out of confidence or because they have a real plan. It is something that the Fed is doing out of panic. It’s something that they are doing because they have run out of all other alternatives; and so, in a desperate attempt to save U.S. capitalism, they are opening the doors of hell. Wall Street thinks that workers who are living paycheck to paycheck and who cannot afford to pay their bills are inflationary.
The Federal Reserve Bank, the bank that all the other central banks either follow or get whipped back in line by, has declared war on the workers and oppressed peoples of the world. The Fed is raising the interest rates, faster than at any other time, to essentially force the layoffs of as many workers as possible, drive up the unemployment rate, as well as lower workers’ wages, and help companies like Amazon and Starbucks bust unions.
Because of what the bankers are doing, workers stand to lose their homes either through eviction or foreclosure, lose their pensions, have their cars repossessed and be unable to provide food for their families. The Fed’s war is not limited to workers in the U.S.
It’s an attack on workers and oppressed peoples everywhere. U.S. imperialism is once again weaponizing one of the remaining clubs that a crumbling empire holds over the world. The U.S. dollar is still, in effect, the currency of the world by virtue of U.S. imperialism’s economic and military strength. Ninety percent of all trade in the world is done in U.S. dollars.
Raising the interest rates strengthens the dollar against every other currency, making food and essentials far more expensive everywhere in the world. Workers will pay a lot more for a loaf of bread in Italy or for groceries in Spain. But those who will be hurt the most are the poorest people, who live where 85% of the people on the planet live, in the Global South.
What the Federal Reserve is doing could quadruple the cost of food and medicine in most of the countries of Africa or in places like Pakistan or Peru. These are areas of the world where starvation is already a crisis. This will cause the poorest countries to default on their debt payments to the IMF, making life and survival much harder.
This is going to ignite social uprisings, the fall of governments, and revolutions.
Those of us who live at the center of world imperialism, here in the U.S., have a special obligation to foster class-based alliances with the poorest people in our global class. This goal must be very high on the agenda of the working-class movement in the U.S. It is not based on pity or paternalism but on the objective of realizing revolutionary internationalism. If the capitalist crisis enables the working class to make progress along these lines, it brings the whole world closer to socialist revolution.
Crisis in the making for a long, long time
Apart from the reasons that the capitalist class gives for any capitalist economic crisis — reasons that are superficial, confusing and outright false — the fundamental causes are both historic, as well as contemporary. Capitalist economic catastrophes don’t merely repeat each other; they get worse. What used to be considered cyclical crises gives way to a systemic crisis that can be delayed, even hidden for a while, but no longer really stopped.
As the magnitude of capitalist overproduction grows exponentially with the vast changes to the productive forces of the economy, each subsequent capitalist crisis becomes wider, worse, more global and more difficult to control. The new technology of the digital age has made the crisis of capitalist overproduction a permanent feature of capitalism.
The amazing new generations of technology that make the world smaller, more connected, and should make hunger, homelessness, poverty and want a thing of the past, under capitalism tend to make the rich richer and everyone else poorer. The pandemic exposed capitalism as a system that actively harms society, blocks further social progress and development and poses an immediate and existential threat to the life of the planet.
This is the reason that so many young workers are demoralized and filled with hopelessness. Economic insecurity and capitalist climate armageddon have convinced many that they have no future. We must all work hard to turn this hopelessness into revolutionary anti-capitalist rage that fuels the class struggle.
Shouldn’t this crisis be the main issue for the working class?
How to prepare for this capitalist economic crisis should be the primary discussion among those who consider themselves Marxists; to think otherwise would be contrary to revolutionary Marxist theory. To the extent that this crisis has not yet become the main priority of the left is a reflection of the left and the working-class movement’s ideological, political and organizational weaknesses. Setbacks and losses over an extended period of time have tended to weaken the most revolutionary forces and buttress the more numerous reformist and social-democratic forces.
In many left circles, talk of capitalist crisis leading to revolution is considered proven wrong by history, and talk of revolution is considered unrealistic at best. Unfortunately, these notions make it easy for a section of the capitalist ruling class, such as the Democratic Party in the U.S., to control the working class and keep it tied to capitalist-class interests.
The global economic crisis unfolding before us is going to change all of this. Already, we have seen young radical workers breathe new life into the working class with organizing drives that are transforming the old traditional labor movement. Socialism is already more popular than it’s ever been, and this capitalist crisis is going to explode the ranks of anti-capitalist militants.
Why the whole capitalist economy is sitting on the biggest debt bubble . . . ever
The Federal Reserve is shutting down the economy with rate hikes, not out of confidence or because they have a real plan. It is something that the Fed is doing out of panic. It’s something that they are doing because they have run out of all other alternatives; and so, in a desperate attempt to save U.S. capitalism, they are opening the doors of hell. Wall Street thinks that workers who are living paycheck to paycheck and who cannot afford to pay their bills are inflationary.
The Federal Reserve Bank, the bank that all the other central banks either follow or get whipped back in line by, has declared war on the workers and oppressed peoples of the world. The Fed is raising the interest rates, faster than at any other time, to essentially force the layoffs of as many workers as possible, drive up the unemployment rate, as well as lower workers’ wages, and help companies like Amazon and Starbucks bust unions.
Because of what the bankers are doing, workers stand to lose their homes either through eviction or foreclosure, lose their pensions, have their cars repossessed and be unable to provide food for their families. The Fed’s war is not limited to workers in the U.S.
It’s an attack on workers and oppressed peoples everywhere. U.S. imperialism is once again weaponizing one of the remaining clubs that a crumbling empire holds over the world. The U.S. dollar is still, in effect, the currency of the world by virtue of U.S. imperialism’s economic and military strength. Ninety percent of all trade in the world is done in U.S. dollars.
Raising the interest rates strengthens the dollar against every other currency, making food and essentials far more expensive everywhere in the world. Workers will pay a lot more for a loaf of bread in Italy or for groceries in Spain. But those who will be hurt the most are the poorest people, who live where 85% of the people on the planet live, in the Global South.
What the Federal Reserve is doing could quadruple the cost of food and medicine in most of the countries of Africa or in places like Pakistan or Peru. These are areas of the world where starvation is already a crisis. This will cause the poorest countries to default on their debt payments to the IMF, making life and survival much harder.
This is going to ignite social uprisings, the fall of governments, and revolutions.
Those of us who live at the center of world imperialism, here in the U.S., have a special obligation to foster class-based alliances with the poorest people in our global class. This goal must be very high on the agenda of the working-class movement in the U.S. It is not based on pity or paternalism but on the objective of realizing revolutionary internationalism. If the capitalist crisis enables the working class to make progress along these lines, it brings the whole world closer to socialist revolution.
Crisis in the making for a long, long time
Apart from the reasons that the capitalist class gives for any capitalist economic crisis — reasons that are superficial, confusing and outright false — the fundamental causes are both historic, as well as contemporary. Capitalist economic catastrophes don’t merely repeat each other; they get worse. What used to be considered cyclical crises gives way to a systemic crisis that can be delayed, even hidden for a while, but no longer really stopped.
As the magnitude of capitalist overproduction grows exponentially with the vast changes to the productive forces of the economy, each subsequent capitalist crisis becomes wider, worse, more global and more difficult to control. The new technology of the digital age has made the crisis of capitalist overproduction a permanent feature of capitalism.
The amazing new generations of technology that make the world smaller, more connected, and should make hunger, homelessness, poverty and want a thing of the past, under capitalism tend to make the rich richer and everyone else poorer. The pandemic exposed capitalism as a system that actively harms society, blocks further social progress and development and poses an immediate and existential threat to the life of the planet.
This is the reason that so many young workers are demoralized and filled with hopelessness. Economic insecurity and capitalist climate armageddon have convinced many that they have no future. We must all work hard to turn this hopelessness into revolutionary anti-capitalist rage that fuels the class struggle.
Shouldn’t this crisis be the main issue for the working class?
How to prepare for this capitalist economic crisis should be the primary discussion among those who consider themselves Marxists; to think otherwise would be contrary to revolutionary Marxist theory. To the extent that this crisis has not yet become the main priority of the left is a reflection of the left and the working-class movement’s ideological, political and organizational weaknesses. Setbacks and losses over an extended period of time have tended to weaken the most revolutionary forces and buttress the more numerous reformist and social-democratic forces.
In many left circles, talk of capitalist crisis leading to revolution is considered proven wrong by history, and talk of revolution is considered unrealistic at best. Unfortunately, these notions make it easy for a section of the capitalist ruling class, such as the Democratic Party in the U.S., to control the working class and keep it tied to capitalist-class interests.
The global economic crisis unfolding before us is going to change all of this. Already, we have seen young radical workers breathe new life into the working class with organizing drives that are transforming the old traditional labor movement. Socialism is already more popular than it’s ever been, and this capitalist crisis is going to explode the ranks of anti-capitalist militants.
Why the whole capitalist economy is sitting on the biggest debt bubble . . . ever
Today, the whole world’s capitalist economy is sitting on the biggest debt bubble in history. Some believe that the debt bubble could be as big as 10 or even 20 times the size of the capitalist world economy! In many ways, it is the debt crisis that capitalists are the most horrified about. The only thing that scares the capitalist ruling class more is the prospect of the working class rising up and making socialist revolution.
How did this happen? As the crisis of capitalist overproduction has increasingly deprived the rich of their desired profit margins, the capitalist system began moving away from prioritizing manufacturing and selling things as their only source of making profits. Capitalism has become more and more dependent on the manipulation of finance capital to satisfy its greed.
This is why the banks have come to play the dominant role in the global capitalist economy, along with financial markets. Why produce things that people can use when you can get richer by lending or investing and trading and buying stocks, bonds and the innumerable other ways that finance capitalism trades in paper and debts, while the living standard of the working class plummets.
Fidel Castro once said that, instead of meeting the real needs of society, capitalism had turned the world’s economy into a giant Las Vegas casino.
The problem with “casino” capitalism is that, as in any Ponzi scheme, ultimately at the end of the day, there can be only a very few winners, with everyone else left in very, very big debt.
The creation of unimaginable and mostly hidden debt is a fundamental feature of a system that is dominated by finance capital. Fourteen years ago, something happened that made the capitalist debt crisis a million times worse.
The 2008 global financial crash began with the collapse of the mortgage loan business, an integral part of the capitalist financial system. Of course, the millions of workers who lost their homes were not bailed out. However, the financial system, minus a few players like Lehman Brothers and Bear Stearns, was. Before the damage was partially and temporarily contained by some of the most extraordinary measures in the history of the capitalist system, the entire world financial system almost completely collapsed.
It would have collapsed, were it not for frantic meetings across the world and agreements, mostly secret, between panicked central bankers from New York and Washington, Germany, France, England, Japan and all the major banks in the world, to put the financial system on life support.
The whole capitalist system was so shaken by the crash of 2008 that they decided to do something completely unprecedented. The major central banks of the world, led by the Federal Reserve Bank, agreed that in order to prevent such an unimaginable crisis in the future, they would collectively lower interest rates to reboot financial markets.
But they went further. Under the label of “quantitative easing,” the banks printed trillions in currency and funneled it into the financial system. The Federal Reserve pumped at least $20 trillion into the financial system, not into the actual economy but into the big banks to use as they pleased.
In the early days of the pandemic, with the economy closing down and financial markets crashing, central banks led by the Federal Reserve pumped trillions more into the financial system and into the economy to prevent a worldwide depression.
The problem is all this money, that central banks printed to prevent the financial system from collapsing, had no relationship to anything of real value; and therefore, all this currency was virtually worthless. This is one of the main reasons why there is such a gigantic debt crisis.
The size of the debt crises is concealed until there’s an economic crisis that is so big that the real value of things can no longer be hidden, and the extent of debt is exposed. This is the reality that is beginning to unravel. The central banks can’t keep the financial system on life support forever; this reality is central to the crisis the system has entered.
In the capitalist financial system, currency, stocks and other kinds of paper may have a face value attached to it; however, that is misleading. In reality, the paper is either worth much less, or worthless, or actually really reflects hidden debt that will eventually be forced into the light of day.
Back in 2008, the thing that the bankers were worried to death about was contagion. The bankers understood that their banks and their financial system are a house of cards.
The contagion could start with a country defaulting on a loan payment or a bank somewhere, not even a big bank, collapsing. That is because bankers know that no matter how much they lie, it’s likely that one or two events could have a “domino effect.” Last week, Credit Suisse had to reassure its clients that the bank was solvent. Since then, the Bank of England has had to take measures to reassure financial markets that something in London wasn’t about to go bust.
War and fascism: What capitalism resorts to in a crisis like this
The war in the Ukraine, which is really a proxy war against Russia led by U.S. imperialism and its allies, has in a number of critical ways exacerbated the world economic crises. Among other things, this war is about another attempt by the U.S. imperialist empire-in-decline to once again redivide the world in its interest. The main target of U.S. imperialism is China.
Some think that the U.S. has entered a post-nuclear epoch, where the use of nuclear weapons that could destroy the world is unthinkable and therefore off the table. When has U.S. imperialism been rational, especially if it is desperate? It reminds us of an important historical lesson: When a world crisis of the magnitude of the one that is developing is upon us, either the working class uses that crisis to further its own class and revolutionary goals, or the imperialists use the crisis to save themselves through either war or fascism.
We need not look anywhere else around the world to see the dangers of fascism. It is part of the political crisis facing the workers and oppressed peoples right here. The Democratic Party’s abandonment of even the pretense of representing the workers and instead uttering empty rhetoric, about “how our great democracy is in danger,” makes pro-fascist forces feel more emboldened. Recently Italy, which like most of Europe is in a deep recession, elected the leader of a neofascist party to be prime minister.
I’m not saying that now Italy is fascist. Yet this is another reminder of the price the working class pays, when instead of taking advantage of a crisis in its own class interest, it leaves a vacuum for others to fill.
Is it a revolutionary period?
For the better part of several centuries, revolutionaries have debated whether or not either a country, a region of the world or the entire world was in a revolutionary period. It is often not an easy question to answer.
When the working-class movement is weak and the revolutionary forces or vanguard forces and organizations are weak, it seems that these facts alone answer the question. However, revolutionary periods are produced by complex and varied events and crises over a period of time. The capitalist crisis that we are facing is the kind of thing that creates revolutionary periods.
The working class can go through endless years and decades of passivity, politically unconsciousness, unorganized and dormant, and, then all of a sudden over a relatively short amount of time, will wake up, become radicalized, organized and ready to change the world.
We would be mistaken not to see this potential in the period that the world is entering. Revolutionary forces in the working-class movement would be remiss in their duties not to see this and to prepare for it.
The lessons of 2008: The working class must rise up this time!
It’s important to review the lessons of the 2008 capitalist crisis. This is the crisis that gave us the “Great Recession.” This recession made the poor even poorer, labor unions weaker and created more precarious jobs. The ruling class allowed the first Black person to become president, in the wake of the financial crisis, in part to take out insurance against rebellions. One of the main social and political consequences of the 2008 crisis is that it accelerated what is a global social process.
As Karl Marx and Frederick Engels predicted in the Communist Manifesto, the “Great Recession” pushed more college-educated young people, who thought that they would have a comfortable life, out of the middle class and into the working class. During that time, the labor unions held big marches against budget cuts and layoffs, gave platforms to capitalist politicians to sound militant, and then instructed union workers to return home, when many of us were agitating for workers to occupy things.
There were a few exceptions; in December of 2007, several hundred migrant workers in Chicago occupied the window factory that the bosses were closing down. The ruling class was so worried that the idea of occupying things would catch on, that they sent top bankers to negotiate directly with the workers.
In early 2011, thousands of teachers, education workers and public workers occupied the state capitol building in Madison, Wisconsin, to protest the governor’s plan to essentially turn the state into an anti-union, “right-to-work” state. The Madison occupation should have started a wave of worker occupations across the country; the Democrats made sure that this did not happen.
Finally, in the fall of 2011, young people started the Occupy Movement in New York City that spread across the country. Actually, the Occupy Movement spread from Southern Europe to the U.S. The workers were intrigued by the Occupy Movement. But once again, labor leaders and politicians, who praised the occupations, worked overtime to ensure that the workers would not follow its example. And so, an opportunity to open up a massive, militant workers’ struggle on a wide basis was lost.
After the Occupy Wall Street movement, the Black Lives Matter movement came on the scene. This movement was in reality a working-class movement. However, it was not politically ready to declare itself as such. The inability of the working class to assert itself in a major, militant and sustained way in part laid the basis for the ascension of Trump. We must fight like hell to make sure that the working class doesn’t miss the opportunity to do that this time.
How to prepare for the struggle that’s coming: A classwide uprising
How to prepare for the class struggle that the capitalist economic crisis is going to be is the most important thing facing the entire working-class movement. It must be considered the most serious and consequential task. What alliances are possible? What strategies should be considered? This will take time and careful work to determine. Revolutionaries and all forces who want to fight and not be held back should be thinking about this. In lieu of these preparations, the broad political outline of what’s necessary is already clear.
It’s going to take a truly classwide movement, led by the most militant and revolutionary forces. What we mean by “classwide” is that the most oppressed workers must be in this struggle — more than in it, in the leadership of it. Migrant workers must be in it, not alone, like they are so many times, but with the broad support of unions and other progressive forces and movements.
The struggle against racism must be not peripheral to, but at the center of, this struggle. The young workers that are in the vanguard of the organizing drives underway at Amazon and Starbucks and Target, and many, many other places, must be in the leadership of this struggle, because they are brave, radical and hate capitalism.
This must be the kind of movement that stops marshals from evicting people, that coordinates wider and wider workers’ strikes, that occupies in mass, when ready, and shuts things down with the power of millions.
It must be a movement that goes beyond the usual demands and raises the question of workers’ control. It must be a class-based movement that cannot be stopped by the Democrats.
It must be a movement that is anti-capitalist and impossible for those who are really against it to either tame or control it. It must be anti-imperialist, and it must be a movement that sees itself, in words and in bold actions, as part of the reawakening of a worldwide working-class upsurge. A development like this would be decisive, and it would help pave the road that leads to socialist revolution.
