The Global Economic Crisis and the Fourth World War
April 16, 2009By Shawn Hattingh
Shawn Hattingh's ZSpace Page
For the last three decades a vicious war, the Fourth World War, has been waged on the people of the world by the global political and corporate elite[i]. They have unleashed a whole array of economic weapons, from trade liberalisation to privatisation to financial liberalisation, to enrich themselves at the expense of the vast majority of people. As part of this onslaught, welfare systems have been attacked, workers rights have been undermined, and environmental legislation has been savaged. The aim of all of these measures was to spread capitalism into every aspect of people's lives. Everything, including culture, social relations, the environment, water and even air were turned into commodities to be bought and sold. While the richest 400 people on Earth used this system to amass vast amounts of money (more money than the poorest 3 billion people combined), over 18 million people died every year for the last 20 years because of poverty[ii]. When people protested that all of this inequality and deprivation were unfair - and demanded that people should be provided with quality education, quality healthcare, food, and clean water; they were told by the elite not to be ridiculous. In fact, people were simply told that no-one had the money to provide such ‘luxuries' as food, quality healthcare and quality education. Yet, when some of the largest companies got into trouble in the last 20 years, states have rushed to bail them out. For instance, when the savings & loan debacle erupted during the Bush Snr years, the US government spent at least $ 200 billion in public money bailing out some of the corporations involved[iii]. At very the same time, Bush Snr and then Clinton were working hard to attack the poor through cutting welfare. Such is the world we have come to live in. It is a world where profits have been privatised for the rich, while losses and misery have been socialized for the poor - a world of the Fourth World War.
It is the elite that have caused the crisis
Of course, the policies that have been pushed by the global elite also created the space for the current financial crisis to occur. Financial liberalisation was implemented by states across the world to assist corporations to find new ways of making money. By the 1970s, profits in the manufacturing sector were declining, the economy was stagnating, and the elite wanted more profitable ways to make money that didn't require hiring much ‘troublesome' labour[iv]. Corporations of every kind used financial liberalisation to limit their investments in manufacturing and begin speculating on anything and everything[v]. They gambled on the fluctuations in stock, bond and currency values. Many started speculating on exotic investment devices such as futures, forwards, options, and swaps. Banks and corporations also ran up trillions in debt and then resold this debt onto investors, supposedly to reduce risk through a process known as securitisation. By 2007 up to 40% of all loans were being generated through securitization[vi]. Indeed, debt drove the whole system - without it there would not have been the explosion in the financial sector. Manufacturing companies also restructured and, in a sense, became investment and financial institutions in their own right. Blind greed, arrogance and short sightedness drove this system and a handful of people made trillions, until the brittle stack of cards holding it up began to collapse over the last two years[vii].
When things began to unravel, corporations and the media tried to shift the blame for the collapse onto the poor who had been lured into taking sub-prime loans. Over the years, the poor have been forced into becoming more indebted - including through being induced by the rich into sub-prime loans - because, in real terms, wages have not risen since the late 1960s. The result has been that that the poor have become even poorer than 40 years ago. Corporations, however, made massive profits out of these loans, and literally milked the poor for all they were worth. It was, therefore, not the poor that caused the current crisis. It was rather the rich, their money making schemes, the policies they pushed for, and the capitalist system itself - which is based on exploitation and inequality - that were the root causes of the crisis.
It has also been no accident that since the 1960s, and the adoption of neo-liberalism and financialisation, the frequency and depth of crises has intensified[viii]. The political and corporate elite have created a profoundly unstable system, which they have grown rich from; while the poor suffered.
The global financial crisis won't end the Fourth World War
The global financial crisis, however, does not mean that the war against the poor will end. On the contrary, the elites' war against the poor is intensifying. During the last days of the Bush Jr regime, the US state basically handed over hundreds of billions of dollars in public money to bail out the corporations that had burnt their fingers due to speculation. In last year October alone, politicians from the UK and the US made $ 1.7 trillion available to save the wealth of their corporate chums - who happen to be some of the richest and greediest people on Earth. So far, the US government has bought or guaranteed up to $12 billion of the bad loans and junk financial assets of corporations. The US Treasury has even swapped government bonds for the junk that companies were holding[ix]. Added to this, since September last year, the US, the UK, Germany and Japan have been regularly pumping hundreds of billions of dollars into stock and money markets to keep private companies afloat. Trillions of dollars of public money has simply been given over to the rich for them to use as they see fit, with absolutely no public involvement. The giant banks that were the main beneficiaries of these bailouts have used this money to expand their power, partially through buying up smaller banks that were not heavily involved in speculating on toxic ‘assets'[x]. All of these bailouts have increased the public debt of the countries involved. For instance, the US's debt spiralled from $ 9.6 trillion in late 2007 to over $ 10.7 trillion at present[xi].
Almost all of the governments across the world have followed similar policies to the US, in terms of using public money to bailout companies, and trying to take measures to resuscitate the lending system. For example, in Latvia the government has been using public money to try and save the banks[xii]. In Greece, plans were hatched to cut the education budget, while the government gave billions to keep corporations afloat[xiii]. In South Africa, which has the biggest housing price bubble anywhere on Earth[xiv], the ANC government has also indicated that it would be willing to spend public money in order to bailout multinationals operating in the country - who also happened to be the main beneficiaries of apartheid[xv].
This use of public money to bailout the rich shows no sign of abating under the new Obama regime. When Obama recently announced his ‘stabilisation' and ‘stimulus' plans, it was clear from the start that it would be the rich and corporations that would benefit. Obama has proposed to build on the work of Bush Jnr by establishing an institution to buy the toxic assets that major banks are holding - such as bad loans, derivative guarantees and swaps[xvi]. This, in effect amounts to another massive no-strings attached bailout for the banks.
Even the Obama regime's much vaunted $ 50 billion mortgage renegotiation programme will benefit the banks rather than the poor. According to the propaganda that is spewed out by the mainstream media, the programme is supposedly aimed at assisting people, who can't afford their high repayments, to renegotiate mortgages with the banks. However, the real beneficiaries are the banks that made the loans in the first place. The way the programme is actually going to work is that homeowners, who are in deep trouble, will be allowed to renegotiate their repayments down to 38% of their income. The US government would then step in and cover the shortfall - using borrowed public money. The banks would then, in turn, receive full payment on the loans they made, meaning that they are the real winners because they won't have to take any losses whatsoever. The overall result will be that poor families will still be stuck with debt, while the banks will be receiving the bulk of the relief. In effect, $ 50 billion in public money will be given to huge banks, such as Citibank[xvii].
Part of Obama's plans have also involved providing tax breaks to the rich. Coupled to this, he has announced that tax incentives would also be given to people wishing to purchase cars and properties. Of course, the only people buying cars and properties in the current climate are mainly the rich and upper middle class. Another aspect of Obama and Geithner's plans also included using as much as $ 1 trillion to bulk up the Term Asset-backed Securities Loan Facility (TALF). One of the main aims of TALF has been to provide funds to corporations that were involved in the securitisation of credit card loans, student loans and auto loans. In effect, this is keeping these corporations afloat. Naturally, from the perspective of the political and corporate elite, the ultimate goal of this assistance is aimed at reviving the securitisation markets so that the lending and debt creating system can start up again[xviii]. Of course, while all this is going on, the poor are expected to diligently pay their debts, which they have been forced to take out because of years declining wages.
Through these measures, Obama and his team are continuing the process of socialising the losses that the banks and corporations have made; while allowing them to do whatever they wish with public money and the profits they have accumulated in the past. On top of this, Obama's plans to revive the flow of credit, through TALF and tax breaks, are simply callous. The creation of debt, and the loans system, has been one of the mechanisms that have been most effective in transferring wealth from the poor to the rich. This has taken place through, amongst other things, interest payments[xix]. Promoting the revival of the credit markets, and the creation of further indebtedness for the poor, as a solution to the crisis is insidious considering that massive, and forced, indebtedness was one of contributing causes of the crisis in the first place.
The political and corporate elite are hoping that once people start accumulating debt again, a new financial bubble will be created. This, they hope, will pull the banks and corporations out of the current crisis. The problem with these hopes, however, is that most of the major banks, including Citibank, JP Morgan and the Bank of America, are bankrupt[xx]. Coupled to this, stocks, bonds, houses and other financial assets are still over inflated. The poor, the middle class and most corporations are still heavily indebted with no hopes of escaping this situation in the near future. Under these conditions, it is going to be almost impossible to create another bubble to pull corporations out of the present crisis. Considering that manufacturing and the service sectors have been in a severe slump since the 1970s, the crisis that capitalism is experiencing looks unlikely to be resolved through the current economic paradigm[xxi]. In fact, investments in manufacturing and the service sectors have been drying up since the 1970s. The only really profitable section of the economy was the financial sector, and that money making avenue now appears to have imploded.
The elite are using the crisis to further attack the poor
Despite the fact that the political and corporate elite are finding it difficult to escape their present predicament, they are trying to force the poor to bear most of the costs of the crisis. Already, the elite are scrambling to protect their interests and their wealth; while at the same time ensuring that the hierarchies that exist are maintained.
Part of the bid to ensure that the poor pay for the crisis has been a widespread drive from the global political and corporate elite for social services to be slashed. Already, 18 states in the US have cut their social spending and welfare rolls within the last year. This means that within the US, the number of people receiving assistance from the state has plummeted[xxii]. There has also been a major drive underway in Washington to slash peoples' pensions in order to redirect this money towards assisting corporations[xxiii]. Sadly, it appears that unless something drastic takes place, this drive will be successful. The attack on social spending, however, has not only been limited to the US. Countries such as Iceland, Pakistan and Hungary were required to cut social spending as part of the conditions attached to the IMF loans that they took as a result of the crisis. Similarly, in countries in the South - like South Africa - the elite have called on the poor and workers to make sacrifices as a result of the crisis. Like their US counterparts, the elite in countries, such as South Africa, also wish to redirect money from social services to assist corporations.
As part of the attack on the poor, a number of governments have frozen the wages of public sector employees. For example, public sector workers in Ireland have had their salaries effectively frozen[xxiv]. As part of the conditions of the IMF loans, countries such as Iceland and Hungary also froze the wages of public sector workers. These wage freezes were justified on the basis that governments simply did not have any money due to the crisis, and indeed had to reduce their debt levels. Yet, the same governments have gone out of their way to assist corporations in every possible way - including massively increasing their debt levels.
Around the world, the corporate elite have also been trying to make workers pay for the crisis. As part of the bailout for the US automakers, workers at these corporations had their employment conditions savaged. Other corporations in the US have also slashed their workforces, with the result that the unemployment rate in the country has increased to 7.6%[xxv]. Unemployment has also sky-rocketed in places such as China due to the crisis[xxvi]. Similarly, due to the crisis in Europe and the US, export orientated multinationals in South Africa have cut workers jobs in order to maintain profit rates. This has been the case both in South Africa's car and mining industries[xxvii]. Sadly, the retrenched workers from these industries will be joining the other 40% of the population who can't find work[xxviii]. Nonetheless, at the very same time as corporations were firing workers, these companies were receiving massive amounts of money from the state. For instance, the South African state recently gave R 837 million to assist multinational car manufacturers. Likewise, the state placed on moratorium on mining royalties, thereby effectively giving R 1.8 billion to the companies involved in the industry[xxix]. Yet, the state offered absolutely no assistance to the workers that were under attack.
As part of the attack on the poor, the most powerful states in the world have also maintained their massive military budgets despite the crisis. In the US, the Obama administration has vowed to continue its current levels of military spending. This means that the US will continue to throw over $1 trillion a year into its annual military budget. Added to this, the US government has plans to recruit thousands of additional soldiers. Most of these soldiers will be from poor families, and will probably end up being required to oppress and kill the poor in countries such as Iraq and Afghanistan. All the while giant corporations, such as General Dynamics, Lockheed Martin and Boeing will be reaping the rewards[xxx].
The people have not stood idly by
Fortunately, people across the world have not stood idly by. People around the world have already started resisting the latest round of attacks, linked to the crisis, by the elite. Protests against the capitalist system, and the bailouts for corporations and the rich, have already occurred in places such as Spain, China, Mexico, Lithuania, Hungary, Germany, Bulgaria and France. When the Latvian economy melted down, people occupied the banks along with storming the country's Treasury[xxxi]. Likewise, with the collapse of the Icelandic economy - due to the major banks in the country going bankrupt because of speculation - people took to the streets to defend their interests against the attack of the elite[xxxii]. As part of this, the people surrounded the country's parliament and demanded that the government resign and that the rich pay for their actions. In the end the protestors managed to get the neo-liberal government to capitulate and early elections were called[xxxiii].
The largest and most intense protests that have occurred so far have taken place in Greece. The protests began late last year, when the Greek President announced that he was going to use public money to bail out the country's corporate elite, who had found themselves bankrupt because of their own greed and role in the global financial crisis. With the arrogance of an emperor of old, he informed the country that in order to raise this money the government was going to dramatically cut its education budget. Naturally, people took to the streets when they heard this. On the 6th of December 2008, the Greek police killed a young activist that was involved in the protests, Alexandros Grigoropolus, and with this the protests turned into a full-scale rebellion[xxxiv].
People, in frustration and anger, attacked and occupied the properties of major banks and corporations in a bid to stop the government providing these institutions with the planned bailout. Students, teachers and anarchists also occupied over 800 schools, 200 university departments and municipal halls across Greece. Popular assemblies were set up in these institutions to decide on what actions should be taken to defend the interests of workers, immigrants, students and the poor. As such, these institutions were turned into centres of activism and organising[xxxv]. In the northern city of Serres, people even took over the buildings of the Chamber of Commerce. Recently, small-scale farmers joined the action and began blockading roads across the country demanding subsidies from the government. As part of all these actions, people also demanded an end to state repression and an end to the plans to cut educational spending. The more radical activists involved even articulated the need for the state and capitalism to be replaced with community assemblies and workers' self management[xxxvi].
Besides these occupations, there were also protests and clashes with the police on a daily basis throughout December and January. Initially, the Greek trade unions also held strikes in solidarity with the actions of the people and their demands. In the end, however, some trade union officials backtracked and distanced themselves from the uprising. This saw them trying to wield their power to force union members to stop their involvement in the uprising. This caused massive tensions within the unions as many workers demanded that the unions continue to be involved in the protests. As a result of this unhappiness, some union activists and workers invaded and occupied the headquarters of Greece's General Confederation of Labour. They called for the unions to be democratized, for the corrupt leadership to resign and for the unions to return to the streets[xxxvii].
The Greek state, however, reacted harshly and swiftly to the uprising and the true violent nature of the Fourth World War became evident. The police even went as far as to actively collaborate with Greek neo-Nazis to put down the uprising. In late December, members of a neo-Nazi group attacked Kostadinka Kuneva - an immigrant domestic worker who was the secretary of a domestic workers' union and who had been involved in the protests against the government and its plans to bailout the banks. The thugs that attacked Kuneva threw acid on her face, forcefully opened her mouth and poured acid down her throat. Members of the Nazi organisation "Golden Dawn" also blockaded the suburb of Exarchia in Athens, which was seen as an anarchist stronghold. People in the suburb were routinely and brutally attacked by the police and the "Golden Dawn"[xxxviii]. Police were also involved in attacking protests across Greece, even when these were completely peaceful. For example, on the 9th of January, the police attacked a student and teachers march in Athens. As part of this, the police cornered 80 students and began beating them with batons. A group of lawyers tried to intervene and they too were attacked by the police[xxxix]. Indeed, thousands of activists are currently being held by the police under the government's draconian laws.
Although the intensity of the uprising in Greece has tapered off recently, it is very likely that this could change in an instant especially if the government unveils new plans to help the rich. Indeed, the people of Greece have shown that they are not willing to let the political elite bailout the corporate elite with public money. Large sections of the population have also started questioning capitalism and the state system itself. This represents a real danger for the Greek and even global elite. In the coming months and years it is going to be very hard for them to contain this sentiment, if not impossible.
For years, the global political and corporate elite have been attacking the poor. They have created economic policies that have turned the entire globe into a money making haven for themselves. In doing so, they have intensified the exploitation of the poor. The consequences have been that poverty has spread and inequality has grown. The latest crisis, which we have been witnessing, has not changed this. In fact, the elite are trying to make the poor pay for the crisis by intensifying their attack. Part of this has seen workers being fired, public money being given to the rich, social services being slashed, and workers' wages being frozen.
We now appear to be standing at a cross-road. It is clear that the elite will do anything and everything to maintain their wealth and their positions at the top of the global hierarchy. If neo-liberalism can't solve their current predicament, then they will try to implement a new system that can. Should it come to this, this system would probably be far harsher than even neo-liberalism. However, people across the world have also been mobilising to resist the actions of the elite. Uprisings and protests have occurred from China to Iceland and from Mexico to Greece. Some people in these uprising have also come to realise that the current system of capitalism and state authoritarianism is not in their interest. Some people involved in the protests are even beginning to once again articulate a desire for a different world: a world where there are no bosses, where workers' manage themselves and where there are no leaders and the led. Indeed, unlike the elite, they desire a world that is aimed at meeting peoples' needs and not making profits. Clearly, the conflict between the elite and such people and movements is set to intensify. It seems that over the next few years we are going to be heading for another showdown in the Fourth World War. Depending on who wins, we could either have a vastly better world or we could have even worse one.
[iii] Henwood, D. 1997. Wall Street: How It Works and For Whom. Verso Press: The United Kingdom and the United States.
[v] Bellamy Foster, J. 2008. The financialization of capital and the crisis. Monthly Review Vol. 59 No 11
[vii] Mishra, G. Financialization in the globalized world. www.zmag.org 27th August 2008
[viii] Bellamy Foster, J. 2008. The financialization of capital and the crisis. Monthly Review Vol. 59 No 11.
[xiii]Kaimaki, V. Bailouts for the banks, bullets for the people. www.znet.org 2nd January 2009
[xix] Henwood, D. 1997. Wall Street: How It Works and For Whom. Verso Press: The United Kingdom and the United States.
[xxi] Wallerstein, I. Capitalism's demise? www.zcommunications.org/znet/viewArticle/20213
[xxii] Street, P. Wall Street welfare: tough talk and government assistance for the rich. www.znet.org 12 February 2009
[xxiii]Greider, W. Obama will fight with us to quash the campaign to loot social security - right? www.znet.org16th February 2009
[xxiv]Flood, A. Thoughts on the crisis, what is planned for us and the alternatives. www.indymedia.ie 8thFebruary 2009
[xxv]Baker, D. Employment free fall continues, unemployment rate jumps to 7.6 percent. www.znet.org 7thFebruary 2009
[xxx]Street, P. There is no peace dividend. www.zmag.org/zmag/viewArticle/20129 - 99k January 2009
[xxxiv]Kaimaki, V. Bailouts for the banks, bullets for the people. www.znet.org 2nd January 2009
[xxxix] Yorgos, G. The next wave in Greece. www.zmag.org/znet/viewArticle/2030419th January 2009