(Excerpt from the Report to the 5th National Congress of the Communist Party of Labor of the Dominican Republic)
During our previous congress we discussed the manifestations of the crisis of
the capitalist system, which were then concentrated in Southeast Asia and were
also shown in Argentina, Russia and some other countries. In the report to that
congress these events were analyzed and explained in the light of the Marxist
theory of the significance of the stock market and the rate of profit in the
capitalist system but very particularly from the point of view of the
fundamental contradictions of that system.
At that time, the economies of the Southeast Asian countries were strongly shaken by the crises that were expressed in the precipitous fall of the stock market, the bankruptcies of large enterprises, the increase in unemployment, etc. But the U.S. economy was developing more or less well and since it is the locomotive of the world economy it could influence and avoid through globalization what was taking place in those countries being transferred to other places with the same harshness.
Nevertheless, and just as was stated in the same report to the 4th Congress, the fact that many important U.S. enterprises were then reducing their profit expectations and in some cases the general consumption expressed a tendency to reduction, let many analysts realize that the period of economic prosperity that that great power had experienced during the Clinton presidency was coming to an end. What was then an opinion of a future perspective is today a reality, since not only specific areas of the capitalist economy are in crisis, but also the whole world economy is affected and even more is in recession.
At the beginning of this, our 5th Congress, we stated that every day there is news about the fall, slight recovery and new and more drastic decline in stocks on Wall Street, which will transmit the same situation to other countries, by virtue of globalization and the fact that these countries practically quote the same stocks and bonds.
In the United States, Japan and the countries of the European Union, which are the three big axes of imperialist economic power, their difficulties are on the order of the day. In the U.S., the main enterprises connected to technology and information are enmeshed in financial scandals and have declared bankruptcy, as we will see further on. In Japan, whose problems have been aggravated since the crisis of the late 1990s, it has been impossible to pay off credits of $360 thousand million with the expectation that that situation will last until the year 2004. In addition to this, in the first seven months of the current year, there have been a total of 11,686 business bankruptcies with the possibility that by the end of this year this number will reach 20 thousand.
In Germany there have been losses in the millions in important enterprises and unemployment is growing. Siemmens, in the electronic and telecommunications sector, has already announced losses from the beginning of this year alone of slightly more than $359 million, to which it has responded by reducing its payroll by layoffs which, since the year 2000, have affected 42 thousand workers. Some four million workers have lost their jobs in the crisis-recession of recent years.
France, the other most important economy in the European Union, ended in the first half of this year with a budget in the red, with a deficit of $26,100 million, almost $10 thousand million more than in the same period of 2001. The same thing is happening with the big modern technology enterprises, such as Vivendi Universal, a producer of means of communication, which ended the first half of this year with losses of $12 thousand million.
A preliminary report dated this same year by the World Trade Organization, WTO, recognizes the existence "of a trend toward strong deceleration of economic growth and world trade. Last year the Gross Internal Product and world trade registered their lowest level in a decade" (...) The institution attributes this fact "to the decline in investments in information technology and in goods; besides that, consumption has declined." It emphasized that this decline is much greater than what had been expected. The estimated growth for the United States is 1% for this year; for Japan it is -2.5% and for the European Union it is also 1%.
Manifestations of such crises and/or recessions in the capitalist system have been registered practically since capitalism's appearance, the most prominent one being that of 1929; in 1973, 1974, 1979, 1987, 1990, 1998-1999, and already again in 2002. This confirms the Marxist prediction of the inevitability of cyclic crises under capitalism, and also shows that the periods between the moments of recovery/boom and the appearance of new difficulties, are becoming increasingly short.
It is important to emphasize the similarities between the crisis of 1929 and the present one, as well as what is different about this one, in order to get an overview of their general orientation.
Like all the classic crises, which include a decline in production, a fall in trade, financial and business bankruptcies, an increase in unemployment, etc. that of 1929 followed a long period of growth and economic prosperity, and the same thing is happening now.
Just as now, in 1929 there was also talk of a new economy resistant to crisis. In the period before 1929 there was a process of continual changes in technology that began in the great industrial revolution in the second half of the 19th century and reached its greatest level in industrial production in the mass production technique called Fordism. Now, under the influence of the scientific-technical revolution, it has been claimed as in the 1920s that there is a "new economy," which eliminates the possibility of crises.
As in 1929, the present crisis follows the application of liberal policies. Before that crisis, in the academic world and in economic production the ideas of Adam Smith and David Ricardo, among others, predominated. The present crisis is occurring after the most determined and brutal implementation of the (neo) liberal formulas that have done everything possible to impose themselves through suppression and destruction. In both periods it was necessary to resort to the State to dynamize the economy; and in both periods it was also necessary to resort to war as one of the factors of a solution. The ideas of Keynes appeared as saviors for the problems generated by the crisis of 1929. After that came the Second World War, which was also one of its immediate results. Today, implicitly there is another attempt to resort to Keynes and to make the State a vital element in the recovery. At the same time, war, whether it be a regional war, or at least the creation of a general psychosis of war to justify a substantial increase in military expenditures, appears as a policy both to reactivate the economy as well as to reaffirm the domination of markets and the conquest of other areas for investment and trade.
The events of September 11 and the war against Afghanistan, the threats against Iraq, the redesign of Plan Colombia into a Plan for the Andes; the project Puebla-Panama that seeks to exploit a wide zone in which there are still untapped and abundant natural resources; the great and unusual enthusiasm in recent months by the Bush administration for the Free Trade Agreement of the Americas, FTAA, are part of the efforts of U.S. imperialism to maintain a war environment to justify the dynamization of its military-industrial complex, to recolonize Latin America and find new areas for investment of capital.
A Fraudulent System
Based on Exploitation
The so-called "new economy" has demonstrated the inevitability of crises in the capitalist system, and at the same time it makes evident the fraudulent character of that system. It also makes clear the falsehood of the thesis that in the "post capitalist" era, the workers are also investors, so that, as some bourgeois theorists claim, the class differences between exploited and exploiters have disappeared.
Facts show in a most forceful manner the falsehood of this view, and they confirm those characteristics of the capitalist system. On July 22 of this year, the World BBC revealed broadly that the U.S. company WorldCom, one of the most important in the field of telecommunications, had declared bankruptcy. This was a case considered to be "the most important in the history of financial insolvencies," according to the broadcast of July 22 by that news agency. A business with declared assets of some $107 thousand million could not pay debts and interests amounting to just over $30 thousand million.
Last year, the energy company Enron created a scandal with worldwide repercussions when it had to admit that it had declared profits of $600 million more than it really had. After this, other business scandals came to light: Adelphi, the sixth largest Yankee cable television enterprise, declared bankruptcy in the middle of this year, due to proven fraudulent maneuvers similar to those of WorldCom and Enron; at the same time, AOL, another large media and entertainment enterprise, had to admit that it exaggerated profits from the installation of internet services, by some $49 million; Xerox, which produces and sells office equipment worldwide, admitted to boosting profits by $1,900 million over those really obtained, although in its edition of June 27, the Wall Street Journal suggested that that figure could reach $6 thousand million. In this carnival of frauds, even General Motors, symbol of U.S. industrial power, had to suspend trading on Wall Street because of suspicions by investors that it, like others, had also inflated their profits to scam possible buyers of its shares.
The publicity about all these deceitful practices has affected the current chief representatives of the U.S. political power, exposing the dishonesty of the likes of President Bush and Vice-President Cheney. Bush was questioned about the sale of more than 212 thousand shares at a value of $848,560 while he served as Director of the Harken Energy Corp., and less than two months later that enterprise declared losses of $23 million and the value of its shares fell by half. This led to suspicion that in order to make the sale, Bush altered the reality of the company's profits to make the sale of its shares more attractive. Meanwhile, it was proven that between 1995 and 2000, when Vice-President Cheney headed the Halliburton company, an engineering and petroleum services industry, the financial situation of the company was hidden from its investors by altering its books.
The obligatory question is: "why are the profits in so many enterprises exaggerated?" It is a practice with two interrelated motivations. First, to hide the tendency of the average rate of profit to fall which, according to the investigations of Karl Marx in Capital, is a major reference point for the decision of investors as to whether or not to invest during a specific cycle. Second, to make the purchase of its shares in the stock market more attractive. This mechanism is the explanation for the so-called "bubble in the values of technology shares", which is nothing more than an over-valuation in the stock market of shares of businesses tied to communications and high technology.
During the 1990s the revolution in technology and the marvels created by this became the flagship of capitalism. Even ordinary citizens in a country such as ours were dazzled by computers and could not resist the temptation of showing off an ever-smaller beeper or cell phone. Modern technology had a boom in the stock exchanges of New York, Frankfurt, London, Tokyo, Paris and other important cities. It was good business to buy shares in corporations in that sector.
From 1995 to 2000 investments in information technology businesses grew at a rate of 20%. A study by the Organization for Economic Cooperation and Development, OECD, showed that in 1995 50% of gross investment by businesses for the formation of fixed capital took place in the information technology sector. At the same time, during the period of prosperity in this sector, its shares rose 100%, 200% or even 1000% on the stock market.
The deregulation of the movement of capital, the modernization and expansion of capital markets and the new products created by them, led to the development of pensions funds as sources of capital for enterprises, just as large numbers of workers and small savers were seduced by the possibility of making extraordinary profits by buying shares on the stock market. These events led theorists such as Peter Drucker to claim that class differences were disappearing between businessmen, who made use of the savings of their workers as sources of capital for which they paid some dividends, and those workers who benefited by receiving an extraordinary income from these dividends, which at the same time resulted from the compensation of capital in the production process. They try to hide the exploitation by claiming that in this dynamic, businessmen and workers are partners, when in reality what takes place is a crude super-exploitation. Because the businessmen convert the savings of their workers into their own capital, they acquire modern technology with which they reduce the labor time that is socially necessary to produce a commodity and in fact they increase the surplus value, which they deposit into their bank accounts. Thus the savings that are converted into capital are returned as dividends; these will be always an insignificant trifle in relation to the part that the businessmen keep for themselves. That is, if they do not declare bankruptcy. According to that logic the workers are made fools of, because they contribute their savings which the businessmen turn into capital to further exploit them.
Capitalism thus exhibits the worst cynicism, but in any case, it is clear that a point has been reached at which it can and must be superceded; never before has it been so clear that production is social and that the superfluous element in the production process is the ownership by a few of the means of production.
But since last year the demand for enterprises that use that technology was reduced by a half, practically at one blow and they continued to fall, generating the crisis at its present level and breadth.
The declaration of bankruptcy by many enterprises, made the savings over years of hundreds of thousands of people go up in smoke, people who were deceived by the propaganda of the "new economy" which led them to believe that they were investors in the stock market. Now all that remains is to scratch their own. The integrated society of capitalists and workers postulated by the Peter Druckers as an expression of "post-capitalism" has suddenly disappeared. Even if the capitalist has declared bankruptcy, he continues to be a capitalist, because his system counts on laws and a State that will quickly run to his aid. But the worker will continue in the same conditions as ever. Things are more or less as Joan Manuel Serrat sings: "it is over, the night says that the end has arrived, for a moment one forgot what each one is..."
For Latin America, the expressions of the crisis are well known and cause much suffering. Argentina began to have problems since the end of the 1990s. In that country there was a brutal process of privatizations, foreign debt and dollarization of the economy and in general of determined application of liberal policies and of the demands of the World Bank and the IMF. In the last three years, it has experienced an economic recession with consequent negative effects on employment; in this period more than half the population has lived in poverty. Since last December social tensions have grown, impacting on politics. Within months, four governments were toppled by movements of the masses who took to the streets to protest against the economic policies and to demand a change.
Brazil had been accumulating problems and at this time is threatened by a recession. Uruguay too. In Ecuador the same reality prevails, the same state of mobilization and will of the masses who have toppled two governments. In general, all of South America is shaken by economic crisis, the constant growth of the popular struggles and of political choices in response to the neo-liberal orientations in the economy.
A Context
of National and Social Imbalance Favorable to the Patriotic and Popular Struggle
In spite of the tendency to the integration of a world market, of globalizations, the demand by the rich countries to liberalize markets and the capacity never before seen in the history of humanity to produce wealth and guarantee the general welfare of the population, there prevail situations of inequality among nations and within them that demand an urgent solution.
In the majority of the countries agriculture continues to be their main source of export. The report of the year 2000 by the WTO states that "almost 50 economies in development receive more than a third of their income from exports from agriculture"; and another 40 countries are considered to be in a similar situation, 50% of their incomes also come from activities related to agriculture. And despite the fact that the rich countries demand total liberalization of the flow of commodities and capital, these countries subsidize their own agricultural products by a total of more than one thousand million dollars a day, that is, almost $400 thousand million a year; at the same time as they maintain duties on imports that are on the average four times greater than duties on industrial products.
Realities such as these accentuate disadvantages in the foreign trade of these countries, in that they sell little and cheap and buy much and at least more expensive than they sell. The IMF itself had to recognize, in its report of the year 2000, that from 1982 to 1998, the balance of trade of these countries was mainly negative.
The foreign debt, inseparable from those imbalances, has grown in the countries considered to be in development, becoming one of the principal mechanisms for looting by the World Bank and the rich countries of the poor countries. The report of the World Bank of last year provides some statistics that explain by themselves how our countries have been converted, by payment of the foreign debt, into exporters of capital with no benefit in return. The report says that in 1970, the total service on foreign debt of the countries considered to be in development, reached a total of $8,867 million dollars; ten years later, in 1980, it reached $75,254 million and in 2001 it had already reached $381,900 million.
During this period these countries always transferred out more than they received. In 1984, they transferred out in debt payment $7,332 million more than what they received in the form of direct or indirect investment; in 1987, they transferred out $25,071 million more; in 1998, $43,753 million more and in 2001, the deficit reached $137,900 million.
For countries such as ours, these realities are part of the social and national models of exploitation implemented for decades and they are causes of what Commandant Fidel Castro denounced at the Conference of the United Nations Organization held in Monterrey, Mexico this year, that 4,550 million people live under conditions of underdevelopment; 1,200 million live in poverty; 826 million suffer physical hunger; 854 million are illiterate; 325 million children do not attend school.
These are conditions that present the challenge of a great and renewed effort to unite the majority of those affected in the nation into a great torrent of struggle. It continues to be a task of the highest order to win the masses and to mobilize them toward the objective of changing the wrong course along which the governments have led the country and people. There are plenty of objective interests that support this. All that is lacking is a greater creativity in the propaganda, will and disposition of each of us to go to the masses, to organize them, to educate them politically and to accompany them in their struggle.
In the midst of the crisis of the system, the taking of the streets by the workers and other popular sectors is an encouraging sign of world reality. This is happening more and more often and in more places every day. The Dominican communists and revolutionaries are compelled to act in such a manner so that this takes place in the Dominican Republic.
In the capitalist crisis of 1929, there was one element that is different from the present time. At that time there existed in almost all countries a movement of the workers and of communist and revolutionary parties with sufficient strength to push forward the struggle of the masses with the perspective of conquering political power. We are compelled to fill this vacuum in the shortest time possible, or else capitalism will pass from crisis to crisis, but it will still dominate. The PCT and the fraternal communist parties and organizations are called upon to fulfill this perspective.
Manuel Salazar