From The End of Corporations Chapter IV                        

 

 

At last years of XX century and 90’s decade, global capitalist economy raises enormous contradictions. The Profit rate had a partial recovery, but there was an over accumulation of capital and development of destructive financial bubbles. The combination with political issues opened the current crisis between July and August 2007.

 

In 1999, the severity and continuity of the bubbles increasingly large and destructive led the powers to organise the Financial Stability Forum (FSF) consisting of Ministries of Finances, Central Banks and international financial organisms in order to promote international financial stability. The target of the FSF was to supervise and vigilance of economic institutions and economic transactions.

 

But this attempt was an absolute failure and the crisis spread from the peripheries to the centre and the following crises no longer developed in the underdeveloped countries but in the economy of American economy. In the late 90s and early XXI century three serious crises burst out and became combined: 1) that of the hedge fund Long-Term Capital Management (LTCM) under the influence of the vodka effect that made Wall Street shake; 2) the bankruptcy of the Enron Corporation or one of the most important energy companies in the world, and the 7th in the USA and 3) the crisis on the dot.com.

 

The outburst of the dot-com, initiated the crisis of the basic industrial branch in globalization: informatics. The rapid consumption of these products by millions of people produced a bubble surrounding their companies that led the NASDAQ index to 5000 in the year 2000. When the bubble burst, the NASDAQ fell to 3500, at 1300 in 2002. So 4854 companies disappeared in midst of scandals about fraud as was the case of World.com. The three crises combined started the world recession of 2000 – 2003.

 

This recession already expressed the process of depletion of multinational corporations and of globalisation as a form of accumulation. The enormous masses of fictitious capital had caused not only the fall of the rate of profit but also an accelerated process of devaluation of economy. Capitalist powers had to counter these trends and to overcome the crisis, but achieving this would have meant a new round of destruction of productive forces and burning of capitals much greater than what was done during and immediately after the II World war.

 

Between 1980 and 2000 with globalization, the degree of destruction of productive forces was important. The Iraqi War had already taken place and the wars of Yugoslavia. Chechnya. Afghanistan, Rwanda, the two wars in Congo and Bosnia and this taken into account together with the growth of poverty and extreme destitution, the increasing process of destruction of Nature and the development of arms industry had developed a process of great destruction of productive forces.

 

But this process of destruction of productive forces was not enough for capitalism to achieve a superior form of accumulation capable of overcoming multinational corporations. Let us remember that after the depletion of the cartels and the trusts, capitalism developed a process of destruction of productive forces that opened the path for a superior form of accumulation: the multinationals.

 

During the post-war, the brutal destruction of productive forces in the underdeveloped countries allowed for a new and superior form of accumulation, multinational corporations, to emerge.  But by year 2000, facing the depletion of the multinational corporations, capitalist powers had to develop a process of destruction of productive forces that would allow the passage to a superior Form of Accumulation.

The crisis was already there in the heart of world economy, American economy and the bursting of the “dotcom” bubble had started a serious recession. There was only one way of countering these tendencies: overwhelming the multinational corporations by means of a process of centralisation of capitals, with an enormous development of destructive forces.

 

The strategy of the Project for a New American Century (PNAC)

 

President George Bush launched the strategy known as Project for a New American Century (PNAC) after the attacks on the Twin Towers. 11th September 2001. This strategy consisted of a worldwide political, economic and military counteroffensive hinging round the slogan "war on terror" and defeat the "axis of evil". The PNAC strategy sought to overcome the serious crisis that opened in capitalism and draw economy out of the recession and for this purpose he established the development of a war of vast scope and long-winded in order to halt the revolutionary processes in the Middle East while disciplining the workers and the peoples of the world.

 

The PNAC also sought to maintain keep the military complex expenditures high while carrying out an important process of destruction of productive forces. It was impossible for the American State to carry out this strategy against the opposition of American people. That is why Bush took advantage of the impact of the terrorist attack on 11S to set up a deeply antidemocratic regime in the USA supported by the Patriot Act that sought to limit democratic liberties and the freedom of expression of the workers and the people of the USA and so to silence the voices of those who might choose to oppose this strategy.

 

The regime of the Patriot Act was a de facto reform of the Constitution, which placed the Executive Power, the army and security services in the centre of the political regime in the USA and so trying to wipe out historic democratic conquests of the American People. At the same time, a number of laws and decrees produced important cuts in the democratic liberties: attack on liberties, especially those of Muslim origin and the criminalisation of oppositionists.

 

The PNAC was a strategy meant to deliver a hard blow to the peoples of the world that might challenge the strength of capitalist powers and simultaneously sought to resume the offensive against the masses of the developed countries. The campaign “Global War Over Terrorism” (GWOT), was boosted from the USA, but was adopted by all the capitalist governments and states in the world. The Political-military front that was articled round PNAC, expressed in the military coalition that carried out the invasion on Iraq in 2003, was one of the greatest in the history of capitalism within the economic scope. Bush sought to re-launch economy by copying Reagan with a bubble based on credits for mass consumption, this time hinging round housing.

 

Millions, lured by the ease with which these loans could be obtained, signed up and that was how the bubble of subprime mortgages soared. It began in 2002 and it burst 2007. All the financial structure signed up sub-prime papers that promised fabulous business and grew and grew for ever providing fabulous profits. The swelling of the wave of house purchasing pushed the industry of construction leaped and together with it, inflation began.

 

The prices of all the building materials soared and dragged all the prices behind it. To stop the rampant inflation wave, the Fed raised the rates of interest that rose from 1% to 5.75% in 3 years, but this rate hike made the credit granted to badly-off families too expensive for them to pay and aggravated the debts unpaid.

 

Investment banks began to issue the MBS (Mortgage Backed Securities and the CDO (Collateralized Debt Obligation) papers that were to serve as insurance to cover any possible defaults. These documents were negotiated all round the world and became part of the coffers of the world financial system. Due to the gigantic magnitude of the credit bubble underway, the G7 states summoned the Basil II agreement in 2004, seeking to overcome the limitations of Basil I that ignored the essential aspect of credits: their quality and probability of loan default.

 

In 2004, in order to overcome these limitations, Basil II proposed a new set of recommendations that prove useless, because the Bush administration had already boosted an enormous bubble and pushed capitalism towards. The whole financial system was flooded with MBS and CDO, the value of which fell abruptly. By the year 2006, the USA Army and the Coalition for Freedom got militarily mired because of the heroic Iraqi resistance against the invasion. Simultaneously, the resistance of American people against the repression of the regime of the Patriot Act and the increasing unpopularity of the Iraq war plunged Bush into disrepute.

 

In this way, the two fundamental pillars of political, economic and military strategy of PNAC was suffering from increasing depletion and deterioration. The military defeat in Iraq meant the final blow for the PNAC strategy and opened a political crisis for the Bush administration. This political crisis combined within the economic scope with the disaster caused by the subprime bubble. The increase of the rates of interest that the Fed had boosted to stop the inflation made debtors unable to pay for the loans and so the bubble was pricked and banks were flooded with bad loans.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By 2006 about fifty financier businesses went bankrupt, there were millions of embargoes and investment banks together with the world financial system, faced the menace of bankruptcy. The Bush administration had managed to have a million, two hundred thousand Americans were cheated and far from fulfilling their dream of a house of their own, they were now being evicted from their homes. By 2007, the sub-prime burst and was global. If Reagan’s bubble was the beginning of the globalization, “bush bubble” was its end.

 

When the subprime bubble burst it revealed the depletion of the globalization as a regime of accumulation and that of the multinational corporations as a form of accumulation. The military defeat of the USA impeded the burning of capitals and the process of destruction necessary to allow reaching a higher level of centralization of capitals that manages to respond to the process of depletion of multinational corporations.

 

We are not saying that there was no destruction of productive forces; there was and the invasion turned Iraq, which used to be one of the most beautiful countries on earth, heritage of the emergence of humanity, into absolute rubble? If we add what happened in Afghanistan to this conflagration, the destruction is terrible but absolutely below the round of destruction carried out in the post-war.

 

A simple comparison will allow us appreciate the magnitude of this phenomenon: The Vietnam War, for example, in the post-war, lasted 11 years and was, as we have already seen, part of the greatest process of destruction of productive forces that stretched for decades in vast regions of the planet. The Iraq war was solved in barely 3 years, to the detriment of the USA. The defeat of the PNAC had immediate effects on economy. Not only the crisis broke out in 2007, but because of this, also the process of centralization of capitals fell. This can be verified in the data of the M&A process that suffered a hard blow with the crisis and fell 50% with respect to the levels previous to 2007.

 

The data of the M&A process prove that with the defeat of the PNAC the process of centralization of capitals failed to make headway and suffered a severe setback. About 2010 when M&A reached $2.4 billion and thanks to the bailouts there was an increase of 23% with respect to 2009 and the strongest of all the period from 2008, for Thomson Reuters. But all the data show that capitalism did not manage to return to the level of centralization of capitals that was necessary to overcome the depletion of multinational corporations, which as from 2007 – as we have seen in chapter 1 – began to queue to file bankruptcy.

 

The crisis made the M&A recede in relation to the levels from before 2007. Why – in the entire period that goes from the eighties up to now – has capitalism not managed to produce a process of destruction of productive forces similar to the levels attained in the post-war?  Why have the powers failed to overcome the crisis caused by the depletion of the corporations? Why have they not achieved a superior form of accumulation of capital? We can find the explanation if we analyse some of the most outstanding political events in the XX century.

 

The fall of the Berlin Wall: A blow to globalization   

 

The fall of the Berlin Wall was a hard blow at capitalism and its globalization. When the wall fell, the governments of the capitalist powers and the Stalinist regimes were working in partnership advancing with a brutal exploiting offensive and renewing together the Yalta and Postdam agreements.

 

But having toppled the pro-capitalist dictatorships in those countries, the popular mobilization proceeded to hamper the joint plans of the powers. Without their Stalinist partners found it difficult to carry on with their plans against the masses of the most important economies. At the same time, the chain of popular uprisings grew and after the collapse of Stalinism in the countries of Eastern Europe, the collapse of the dictatorships in the USSR and in the republics in their orbit. The consequences for capitalism were important, because after the fall of the Berlin wall the circumstance that allowed the super-exploitation of European and German working class.

 

A fundamental condition that facilitated the exploitation of European and German workers during the post-war was to maintain the division by means of the Wall. Its collapse allowed a process of unification of the powerful European and German working class, one of the most highly qualified, concentrated, enjoying the greatest social achievements and the highest level of culture in the world.

 

At the same time, the oppressed nationalities that during the post-war had been violently shoved under imperialist domination began a process of liberation and this swept away the frontiers imposed by Yalta and Postdam. Because of Stalinist leaders who fell after 1989, imperialism had managed to survive the defeats in Vietnam, in China, in Korea and could continue with their systematic destruction of productive forces.

 

They had transformed these political defeats into even greater hardships for the masses which afforded great profits for the multinationals. But after the fall of the wall, these leaders of the “world official left”, who had rendered great services to capitalism but now no longer had all this power.

 

The “world order” of the post-war fell and the “new world order” proved to be a terrible disorder for the capitalist powers. This is the way the IWL explains it, “the bankruptcy of Stalinism in the 90s weakened the world order in two respects: the counterrevolutionary apparatuses that used to hold back and negotiate in the name of socialism… could no longer fulfil this task… there is a new world order established unilaterally on the institutions of imperialism and of the USA… It seems to be stronger than the previous one, but actually it is weaker…” (1)

 

This explains why with globalization, capitalism did not manage to match the economic successes of the Keynesian regime. The collapse of the Berlin Wall prevented a global GPA from cropping up like in Yalta and Postdam. These agreements that allowed for the post-war boom had been destroyed by the collapse of the Berlin Wall; together with them the economic and political order that had prevailed for the previous forty years collapsed.

 

The governments of the G7, analysts, and journalists of all kinds proclaimed that the fall of the wall was the triumph of capitalism and “the end of socialism”. Many believed this story and most of the left succumbed to terrible confusion. We shall not go into debates that these events produced. We shall limit ourselves to verifying the impact that they had on economy. China is the best proof of the hard blow that the fall of Berlin Wall meant for capitalism and the course of globalisation.

 

The opposite event took place in China: the wall did not fall there. The Tienanmen demonstrations were ruthlessly repressed and defeated. As from that moment on China established itself as the "paradise" of the multinationals. Having repressed the demonstrations, China made headway in obtaining better rates of exploitation and all kinds of facilities for the multinationals take root.

 

If the fall of the CP dictatorships had complicated the plans of the capitalist powers in Europe, the triumph of the Chinese CP transformed that country to a bastion and a life buoy for capitalism. With the triumph of Chinese CP, capitalist powers obtained an immense market of millions of workers that Chinese dictatorship had disciplines to offer low wages, labour conditions of super-exploitation and that allowed – as we have seen – the growth of their economy in the 90s.  

 

Salaries and labor conditions were very much deteriorated in the remaining countries of the former Stalinist orbit. Imperialism took advantage of these “comparative advantages” and this helped towards the growth of economy and granted the recovery of the rate of profit in the 90s that remained unshaken for most of the decade. Capitalism achieved a victory in China and had an economic mouthful of fresh air.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

           

 

 

 

This chart shows the most important multinational corporations and their importance in the world economy. The lines show the deep interrelation of the Banks of investment and the nodes stand for the concentration of capital. Research offered by the scientific magazine Nature in June 2012. Source: Nature.com

 

But with the fall of the Berlin Wall, their strategic plans suffered a tremendous blow, because it was the parties and their leaders, the ones who had rendered great service to capitalism by negotiating an agreement on the capitalist reconstruction of Europe who had fallen, those who had allowed the development of modern multinationals and halted revolutionary processes.

 

The collapse of the Yalta and Postdam that had made the boom possible was a strategic blow for capitalism. This is the central explanation of the reasons of which capitalist powers could not - in globalization – develop a round of destruction of productive forces superior to that of the II World War or the post-war, which would have allowed them to overcome the depletion of the multinational corporations. In this way, the fall of the Berlin Wall is the necessary prologue to the fall of Wall Street 20 years later, and the first political explanation about why begin the global capitalist crisis.  

 

Notes

 

(1) IWL-FI “La situation in the world”. Texts part of the “Theses on the world situation” VIII World Congress IWL-FI July 2006 Marxism Alive12 2005 (our highlighting)

 

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