Reflections on Coronavirus and the Economic Crisis

A much expanded version of this article is available here:

Leaving aside for a moment the issue of “fake news” conspiracy theories circulating in the ether about the origins of the virus, that whether by accident or deliberately American laboratories engineered it themselves (with all the implications this would have on international imperialist scenarios), let us confront the problem in simple terms, based on what the theorists are saying about the possibility of coming out of this latest financial-economic crisis.

The “gurus” of the international economy address the problem of the coronavirus crisis from a financial perspective, from that of the “central banks” – as they are bound to do – and commit a series of errors in evaluating the global economic system as a whole, which they are trying to dominate, without realising that they are dominated by it.

  1. For them, the crisis, like every other crisis that has occurred in recent decades, is due to a lack of demand. This was already discussed in the 19th century classical economic schemas of Ricardo and Smith. As good Marxists, we respond that the theory that the crises (inherent and inevitable to capitalism, based on the unequal relationship between capital and labour) are due to a lack of sufficient demand is false. It is false because in the capitalist system, there is always “too much” being produced in the form of goods and services in relation to a progressive decline in the costs of labour (wages and salaries) which thus cannot provide this demand. The development of the productive forces aims to produce more at a lower cost, while these lower costs are precisely the wages and salaries of which demand consists. Consequently, less demand equals less profit for the productive apparatus, and capital is no longer primarily directed towards productive investments but instead towards speculation, which, in the short term, can create advantages for capital, but in the end creates speculative bubbles growing constantly until they burst, further blocking both the financial system and the underlying system of production.
    Moreover, the current structural crisis is the result of a chronic lack of valorisation of productive capital due to the law of the falling rate of profit. In simple terms, the development of productive forces, i.e. the most important investments in constant capital (machines, primary materials, etc.) in relation to investments in the workforce, cuts jobs while simultaneously restraining the field of extraction of surplus value. Consequently, the creation of profit ends up curtailing demand, reducing the number of people receiving income. Hence speculation is directly proportional to the fall in the rate of profit, to the point of creating an enormous mass of speculative capital equivalent to thirteen times global GDP.
  2. Nevertheless, for the “gurus”, the solution to this crisis is simple: new public money (quantitative easing) given freely to the banks, which in turn invest it in businesses, in order to resume the “normal” cycle of financing – production – distribution (all just as unequal as the aforementioned relation of capital to labour). Except that due to coronavirus, enterprises are forced to close or work at 50% capacity. Trade suffers in the same way, as well as logistics and the whole production-distribution chain, including some services. This inevitably leads to a rise in unemployment, yet another sacrificial policy already invoked by Confindustria (the Italian bosses’ organisation, the General Confederation of Industry) with the blessing of the unions. And the type of insurance, which the banks equip themselves in order to avoid the risk of bankruptcy like in 2008, are certainly not enough. The credit system, as it has already been doing for the past ten years without much success, thus obtains state money at zero cost, or indeed below cost. It only partly invests this productively in the form of debt obligations taken on by “guaranteed” companies, the rest going to speculation on shares on the stock market or on the currency market (primarily the dollar, but also the renminbi, the yen and the rouble, according to the imperialist trends in global currencies), but also on the bond market, if it can guarantee them interest rates proportional to the mass of speculative investments and the reliability of the entity, i.e. the state, that issues them. The conclusion of such financial policies is a rise in state debt, a decline in global GDP of 10 points for 2020, closures of factories that will not survive the difficulties of an increasingly restricted market, and frightening speculation in danger of repeating a financial crisis bigger than the one we still have yet to come out of, despite the newly issued finance capital.

The burden will fall on the working class in the name of an emergency which demands sacrifices from us all, because we are all supposedly in the same boat, and that boat needs saving. As usual they forget to say that on this boat there are those who row and those who crack the whip. Moreover, the coronavirus crisis sheds light on just how “fruitful” the capitalist system has been for years. The dismantling of the welfare state, in particular in the health sector, reveals the whole desperate tragedy. Spain and the UK have already declared that they do not have the necessary health resources to adequately confront the emergency. In Italy, funding for the health sector has been reduced by 37 billion euros in the last ten years. Thousands of jobs (doctors, nurses, research posts) have been cut. The fateful arrival of the “coronavirus crisis” coincides with the closure of secondary care units with a loss of 70,000 beds, thus magnifying the danger to health. This is in the tragic scenario of the corona crisis lasting only six to eight months; if it goes on longer, things will be even worse. The rebound effect, which the usual “gurus” predict for the beginning of the fourth quarter of 2020, are a pious illusion. Statistics on this matter are a projection based, like the analyses of the positive tendency in the global economy before the 2008 crisis, on nothing that any analyst, save for a few exceptions, has predicted. The economic recovery, if indeed there is to be one, will need a lot of time before it can assert itself, and will only be temporary and unresolved in this decadent phase of the capitalist system. Only hypothetically, and with a great deal of luck, could everything return to normal a week after the spectre of coronavirus has passed. China is economically on its knees. The latest data have estimated the growth of GDP at merely 2.8%. The USA is overwhelmed with debt and immense deficits and can only rely on the supremacy of the dollar and the world’s most powerful army to survive. Half of Europe is in a technical recession, including Germany, and the future looks increasingly bleak.

The fresh money that the European Central Bank (750 billion euros) and the Federal Reserve (a trillion dollars) are supposed to be forking out will inflate the coffers of the banks and the speculative bubbles because of the weakness of the profits of enterprises that cannot allow new investments, except in the case of bigger enterprises, which will benefit from intervention by the state when financing from the banks does not suffice. But the rate of profit, aside from inevitable fluctuations, will not increase except at the enormous price of super-exploitation of the international proletariat. This super-exploitation will mean lengthening the working day, raising productivity, limiting wages and reducing pensions. This is already on its way, but not yet at sufficient levels.

However, for those still working in key productive structures (those that cannot be suspended or slowed down), the situation has already become untenable. The absence of adequate conditions of hygiene and sanitation, the forced proximity between workers, and the scarcity of masks and overalls, not to mention the necessity of building showers and other decontamination systems anew, may well foster the virus in workplaces. And as well as the sacrifices already made and those to come, there is now an added fear of infection, with a further risk for some of losing not just their jobs but their lives. The bourgeoisie will probably be confronted with a determined class response – consisting of strikes over economic and safety demands – which it will find difficult to manage. In this case, the “militarisation” that is now slowly appearing as a necessary aid to the management of the behaviour of the population in a regime of social emergency will immediately transform into a real militarisation against the workers’ revolts in the name of maintaining social peace. Otherwise, the solution will be a “just” war which would destroy everything in order to reconstruct it, giving the capitalist system economic room for a new cycle of accumulation. If these are the real perspectives presented to us by the capitalist crisis, in the face of the financial “solutions” of the “gurus”, only a revival in class struggle on an international scale, guided by a revolutionary party, can save us from the umpteenth onslaught of butchery being criminally prepared by imperialism.


23 March 2020

Friday, April 10, 2020