From “The End of the Corporations”, Chapter II “Trends”. Amazon 2014
Bailouts are credits. The G7 administrations make use of injections of credit into economy and this is a latent and constant tendency inasmuch as world economy cannot overcome the crisis. And they constitute the fundamental strategy of the USA and the states that dominate in capitalist world economy to palliate the crisis. At the round table of the magazine Barron’s of 2010, the CEO Felix Zulauf of Zulauf Asset Management expressed it as follows: “Governments and Central Banks are injecting money into the global economy. We do not know what the real situation of economy would be without this help.” What we understand by bailouts is all kinds of credit and creation of fictitious capital meant to uphold bankrupt companies, states and banks that dominate world economy, especially multinational corporations. This means that bailout have various mechanisms.
The following can be grouped as bailouts:
1) The QE, or the gigantic emissions of money by Federal Reserve of the USA or other Central Banks or international organisms of credit as well as bailout packets promulgated by law or by decree of any of the governments;
2) Such variants as swaps of bonds via primary dealers of the Federal Reserve (8) or other variants of obtaining money from different informal windows making economic packets voted by the Parliaments unnecessary;
3) The massive injections of money destined for credit, known as “stimulus”: these are operations with low rates of interest for the loans of Fed to The European Central Bank or other Central Banks, the swapping of bonds and different kinds of credit such as the injection of billions to stimulate economy, as in the case of “operation Twist” in the USA or the loans for housing or the lowering of legal banking reserve as in the case of China.
4) Purchase of shareholder packets of multinational corporations and great enterprises or national monopolies by capitalist governments in the First World as well as in the Third World. These are the so-called “nationalizations” or expropriations by economic agents and governments, but actually are nothing but coordinated action of states and banks to defend private property and multinationals.
In Latin America as well as in the Asiatic southeast and all the remaining underdeveloped countries, technically speaking there are no bailouts, because they are not head offices of the multinationals. Consequently the states of these countries do not rush out to help the multinationals directly the way the G7 states do. However they do act indirectly, for the purchase of shareholder packets of companies means state contribution of the governments of capitalist underdeveloped countries to facilitate the arrival of the investments of the multinationals.
Deceitful effect of bailouts
At first, bailouts were unanimously supported by the population that, in view of the gravity of the crisis, actively supported fast and blunt actions of governments willing to halt it. But after the initial enthusiasm, the population of all the countries began to feel disappointed and regarded the bailout packets granted to the corporations while their own problems kept on getting worse and worse and bankers´ and great entrepreneurs´ fortunes accrued.
Since those days, the bailouts policy became more consolidated and diversified. Since the beginning of the sub-prime crisis in the mid-2007, the aggregate balance sheet of the top 8 Central Banks shifted from slightly over $ 5 trillion onto over $16 trillion. Four years ago, the balance sheet of the top 8 Central Banks represented 10% of world’s markets but after the bailouts it now stands for about 1/3 of the assets of Worlds’ Exchanges. Different theories surfaced and have been hatched since then in relation to the role of states in economy.
After decades when analysts and governments of the world alike repulsed state intervention in economy, massive intervention by means of bailouts gave the impression that the G7 administrations have turned “state-lovers” and so forsaken the ”privates” values pertaining to globalization. Different trends of opinion are talking about “back to Keynesianism” or state interventionism aimed against globalization. In the G7 countries, governments buy packets of shares of the great banks and enterprises in the name of “defence of jobs”, such as the case of General Motors and call this nationalization and stratification.
The governments of underdeveloped countries also carry out purchases of packets of shares of strategic importance: food or energy and these measures are also dubbed “nationalizations” This purchase of packets of shares of enterprises is regarded by many analysts as the verification of the “Theory of Uncoupling”. According to this theory, the world is shifting towards a kind of “uncoupling” of countries from American domination because the “hegemony of the USA” is said to be recoiling and the BRICS (Brazil, Russia, China, India and South Africa) – or some of these countries are said to occupy their place.
According to this theory underdeveloped countries are splitting away from the domination of the USA and the G7. Partial “nationalizations” are regarded as a confirmation of this tendency. The Uncoupling Theory poses the end of dollar as currency and the beginning of a basket of currencies to replace it. Some variants of this theory even insist that China is to become the new “empire” to rule over the world. All those premises and theories are based on real facts of life for all the capitalist countries in their effort to halt the crisis have been practicing state interventions at a rate rarely seen before.
On January 27th, James Bianco, of the investment analyst firm, Bianco Research LLC, wrote as follows: “The degree up to which Central Banks of the entire world are printing money has no precedents… Central Banks are governing markets to an extent never seen by this generation. Collectively, money is printed up to a degree never seen by human race.” However, nothing is farther from truth than saying that bailouts stand for uncoupling or that they mean the emergence of new states that will dominate world economy instead of the USA, or that they anticipate tendencies where governments will take measures against the multinationals or a new wave of “nationalizations” that will foretell the return to a Keynesian regime. There is no fact of real life that will indicate this.
Far from the deceitful effect, bailouts appear as a mirage that the facts of life soon belie. All the data of economy indicate that the policy of bailouts has reasserted the hegemony of the USA has aligned all the capitalist governments with a common policy under their supremacy and has caused a world-wide wave of privatizations of a magnitude superior to that of the 90’s. The difference between that privatizing wave and the present-day one is that the epicenter of privatizations today is not in the underdeveloped countries but, for the first time in history, the crest of this wave is sweeping the G7 countries, essentially the USA, who is now the world leader in privatizations.
In 2009, the total amount spawned by the sale of public companies broke another record with $256 billion, which made the USA the most privatizing country for the first time in history. The key is TARP because the mass of capital offered to the investing banks valued the purchase of assets of public companies. Second on the list of privatizations is the EU for there is a rarely seen before privatizing wave sweeping across Spain, Portugal, Ireland, Greece, etc. We shall mention just a few Third World examples so as not to overwhelm the reader with data. In underdeveloped countries the tendency is to use part of the state-owned funds - which ought to be used for health, education or old-age pensions – to buy shares of companies.
The conclusion is that the purchase of shares by the governments of Third World countries, far from being nationalizations, is merely a set of measures that are complementary to the bailouts of capitalist governments of the G7 countries. And the data related to the outcome of the bailouts bluntly belie that the measures of the capitalist governments in the developed countries as well as in the Third World, may mean anything different to the privatizing wave of the 90’s. They also belie the assertion that these measures stand for anything like uncoupling from American hegemony or that the purchase of shares may deeply affect the interests of the multinationals. The contrary is true. Bailouts make the deepest tendencies towards privatization and concentration of branches of production and trade in the hands of the same economic groups that spawned the crisis.
Bailouts do not only continue but they also tend to become institutionalized as the creation of FEEF o MEDE seems to indicate, of the supervision offices TARP in the USA. The surfacing of supranational entities that decide about the fate of the billionaire funds, which in turn decide about the lives of millions of people in Europe, the USA, Japan or developing countries, they are the institutional expression of the so-far privileged political strategy used by the G7 administrations and states.
Bailouts produce an impact on the awareness of millions
Due to its magnitude of historic character, bailouts have caused an enormous impact on the awareness of millions just as important as all the transcendental events, such as the Great Depression, world wars, the Russian Revolution, the fall of the Berlin Wall or the fall of the Twin Towers. Bailouts expose what for decades has been concealed to the eyes of millions: the contribution and support of imperialist states have been the base for the development of capitalism ever since II World War. Bailouts expose the lies about the existence of “democracy” in the USA.
The same financial oligarchy that dominates over world economy is perfectly represented in both parties: Democrat and Republican, both of them consist of patrician families, veritable dynasties of multimillionaires who interpret the needs of the world dominating class perfectly. As a rule, the careers the professional politicians are financed by the multinationals so as to control the oligarchic two-party political system of the USA. Now millions of Americans, Europeans and inhabitants of the Third World can now clearly perceive the governments of the richest countries rushing to the aid of the capitalist system.
That is why the bailouts are the end of the “American Dream”, the end of the dream of social ascent, while poverty and destitution spread relentlessly. Capitalist state so far favoured the rich and the powerful in a veiled and discreet way but now, with the bailouts these contributions have become shamelessly public. They stand for the end of the propaganda for “triumph of capitalism” and “failure of socialism”.
Today, 43% under 30-years old have poor opinion of capitalism and such minorities as Negroes and Latinos react positively to socialism at an even wider scope within the entire American territory. Bailouts make the younger generations associate the word capitalism with injustice, unemployment, poverty, loss of right and future. This represents the end of the propaganda of the “triumph of capitalism” and “failure of socialism”.
Bailouts are an irrational immorality that can only be explained by the decadence of the dominating oligarchy of the world capitalist economy. Considering that world famine will earmark barely 1% of what has been contributed by the governments to bail the multinationals out. Bailouts cause outrage among millions because they take place while governments apply cuts to wages and jobs. Bailouts impose capital’s harsh conditions on millions of humble people around the world and at the same time they affect their awareness showing them the crudest spectacle possible: that of politicians, even those considered to be “progressive” and “liberal”, working brazen-facedly for the corporations, desperately trying to maintain capitalist order shaken by contradictions.
We, the Marxists, know that the definite solution will not come from bailouts; these constitute the policy that the great states that prevail over capitalist economy put into practice as a result of the little room that world political situation leaves free for them. We shall see if the imperialist states manage to achieve other room to provide a solution to the crisis. As long as they have not yet achieved this goal, their central strategy will continue being that of the bailouts.
But as soon as they find that different relationship of forces may be feasible all over the world, capitalist governments will appeal to other solutions to the crisis. Are there other ways for capitalism to get out of the crisis? Actually there are. In order to become acquainted with them we must begin to sink our analyses in previous significant crises suffered by capitalism throughout history. Our analysis will begin by studying the ’29 crisis and we shall analyse its nature and development in the next chapter.