Deepening financial and economic crisis and Superpower America's Drive for Securing Hegemony

The explosion of the financial crisis gave advance information about the deepening economic crisis worldwide. Now this crisis has become quite deep. Reality has forced those who were denying a recession to acknowledge the same. Now the discussion is whether or not this recession will take the form of the "Great Depression". Most economists agree that this recession will continue and that it is not going to go away soon. According to Arthur Laffer, "Age of prosperity is over". Noriel Roubini states, "World economies are at breaking point". According to Peter Morici, "The threat of widespread depression is real and present". The assessments of most other economists are also on similar lines.

Over the last two months, the crisis of world capitalism has further deepened. America's economy has shrunk by 0.4% in the third quarter, and it is being considered in recession since 2007. Japan's economy has also shrunk and Japan and Taiwan have also been declared in recession. Economies of the Eurozone countries are also in the grip of recession with the GDP of France shrinking by 0.8% over the last three months. According to the European Union, the economy of the Eurozone will increase by only 0.1% in 2009, and even this estimated figure is being decreased. Unemployment stands at 8.4% overall in the Eurozone countries and in many of these countries it has crossed the figure of 10%.

Even in India and China the economic growth rate is being repeatedly revised downward. Russian economy is also in the grip of recession and many countries of Eastern Europe have had to seek out the IMF bailouts in order to stave off bankcruptcy. The price of oil has decreased rapidly due to economic recession and it has come down to 40 dollars a barrel from a peak of 147 dollars a barrel. This fall continues despite the announcement of a cut in production by petroleum producing countries. Countries of South America are also in the grip of economic crisis. In the period of rising prices of raw materials some countries of South America had attained some prosperity by exporting raw materials, but their crisis has also deepened with the fall in prices of these raw materials. The economy of the whole world has come into the grip of depression.

The situation of America, the world's largest economy, has worsened. According to Govt. statistics 533,000 jobs were axed in November 2008, and unemployment rate has reached 6.7% from 6.5%. According to an alternate survey, 673,000 jobs were lost in November 2008. Around 2 million jobs disappeared between January 2008 and end November. Manufacture and construction industry have been worst affected among the various sectors of production. According to Michael Darda, the service sector, which is a large sector in America's economy, is 'imploding.'

The American economy was shaken in a big way by the failure of Citi Bank, one of America's three largest banks. Citi Bank was the world's biggest bank for quite sometime and its total assets are 2.2 trillion dollars (1 dollar equal to around Rs. 50/-). The American administration was ready to save Citi Bank pumping over threee hundred billions in the process. Alongwith, three big automobile companies of America are on the verge of bankruptcy. Among these is the  massive General Motors of whom it was said, "what is good for General Motors is good for America". In November 2008, car sales of General Motors decreased by 41%, sales of Chyrslar by 47% and sales of Ford by 30%. This issue of saving these companies is before the American administration and Congress, but the Republican Party is linking this 'bailout' to the agreement of workers of these companies for a wage cut. In totality, industrial depression is increasing in America and public consumption is declining. This year, even in the season of festivals, sales have fallen by 5%.

Amidst all this, there is a flood of 'bailouts' to save the economy. This amount has already crossed 10 trillion dollars worldwide which is about 15% of the gross production (65 trillion dollars) of the world. This amount is almost eleven times the GDP of India. The major part of this (about three fourth) has been spent by America. About 3 trillion dollars of this is being poured into  buying stocks, corporate debt and mortgages and about the same amount (3.1 trillion dollars) is the amount of guarantees on offer to corporate bonds, money market funds and money in specified deposit accounts. (Arun Kumar in Tribune) China has also announced a programme for expenditure of 800 billion dollars for stimulating demand. According to some commentators, this amount is that of previously decided programmes. The Govt. of India has also announced concessions of around 100 million dollars (5 lakh crore rupees). Most of the money of bailouts in America and Europe have been given to banks and financial institutions. But, even with this the crisis does not appear to be resolving. Banks are using these amounts to correct their balance sheets whereas the crisis of loans continues.

 The Obama administration which is to come to power in America is preparing to announce big investments. For this they are mainly emphasizing programmes of expenditure on infrastructure. The state administrations in America are also hard hit. California, America's largest state, is on the verge of bankcruptcy and its Republican Governor is also stressing on programmes for expenditure on infrastructure. A plan is being made to stimulate demand in the economy through Govt. investments. How effective will be this Keynesian formula (socialization of investment) for saving capitalism is a matter of debate and discussion. There is a dispute about the success of its first application after the Great Depression of 1929, and the situation today is very different from then. There was no provision for unemployment allowance at the time of Great Depression and no security of money of common depositors if the banks collapsed. Today both these are present. Even if unemployment is brought down to some extent by expenditure on infrastructure it will only increase demand marginally. Secondly, because these new jobs will entail lower wages, this growth will have different form and how far it will solve the present crisis is a matter of debate. Deposits of upto 2.5 lakh dollars (before the bailout it was upto 1 lakh dollars) are secure for depositors in banks. Surely the deposits of most depositors is safe. In these ways the situation of the current crisis is different from that during the great Depression of 1929 and that is why the success of the Kenyesian formula for mitigating this crisis is still more doubtful.

The International Monetary Fund (IMF) has supported imperialist countries in increasing state investments, that too by printing new money. The IMF has been pressurizing third world countries at the time of economic crises to decrease govt. expenditure, to balance govt. budgets and to privatize more and more sectors, and has been imposing conditions on them. The conditions imposed by IMF have deepened the economic crisis in third world countries and this has been used to strengthen the stranglehold of huge companies of imperialist countries in these countries. The same IMF is supporting increasing govt. spending through deficit financing by govts of America and of European countries. Joseph  Stiglitz, a critic of IMF conditions imposed on third world countries, has been holding them responsible for deepening the crisis in third world countries and worsening the situation of the people of these countries. After remaining silent about Stiglitz's criticisms for a long time, Rogoff, the chief economist of IMF, recently accused him of not differentiating between the economies of imperialist countries and of third world countries. According to Rogoff, in many countries of third world the effect of increasing currency is that their currency loses its value where as countries like America can increase their currency without this danger. Thus, it means that in Rogoff's view what is correct for America is incorrect for countries of third world. Rogoff also ignores the falling price of the dollar in international currency market. If the printing of dollars by America has not increased inflation rate there upto now, it is due to dollar being the international currency and due to other countries buying dollars due to this. The internal strength of American economy was not the main reason in this. Rogoff is speaking as an apologist of American imperialist interests.

The epicentre of the current economic earthquake is in America. The hegemonic world strategy of American imperialism has a major role in this. Whereas the current crisis is a violent expression of sharpening of contraditions within world capitalism, it is also a crisis of deepening economic crisis of American imperialism and its attempts to come out of this crisis through a strategy of world hegemony. Where America's part in world production and world trade has been continually declining, its military industrial complex has been steadily increasing. America's military expenditure today is more than the combined military expenditure of all other countries. In addition, there are countries like Israel, a large part of whose military expensditure is borne by America, but this comes in the head of 'aid' and not military expenditure. Last year America sold weapons worth 32 million dollars to other countries which is equal to the total sales of the 15 countries ranked after it on the sellers' list. The continually increasing military industrial complex of America has become a heavy burden on its economy. Some economists has estimated the total cost of American military occupation of Iraq at 3 trillion dollars and counting. This definitely is a big burden. Actually, in the past few years, while economic growth rate has decreased especially in the sector of industrial production, America's military expenditure has increased enormously. In this situation there has been a close interrelation between the military campaigns of the American administration and the bubbles created by the American financial institutions. The baseless unacccounted increase in speculative capital (determination and distribution now itself of future profits) and of value of assests gave the American  administration an opportunity to conduct its military campaign by expanding its currency. When the regulators themselves are against regulation, what kind of regulation could there be ? First part of this article (Pratirodh ka Swar, Ocotber 2008) has already dealt with the creation of bubbles by the financial institutions. Here we are discussing the deepening contradictions within superpower America.

The seeds of crisis within the American economy are very old. According to Richard Wolff, real wages have not kept pace with inflation since 1970s. The historic rise of wages in America, according to Wolff, which began in 1820s more or less stopped by 1970s. Analyzing the current economic crisis economist Kaufman says that there have been dozens of financial crisis since Second World War but their effect lasted for a short while. The current crisis is different from these and its root is in the ballooning debt. Especially since 2000, non financial debt has outpaced GDP growth by 8 trillion dollars. According to Kaufman, between 1960-1990 the rate of growth of nonfinancial debt was 1.5 times that of the GDP while saving amounted to 9%. Between 1991 and 2000 the non financial debt outstripped the rate of increase of GDP by 1.8 times and the rate of saving came down to 4.7%. After 2000 the rate of increase of non financial debts reached double the rate of increase of GDP whereas the rate of savings decreased to 1.4% and recently has come down to zero. Over half this debt is with 15 massive companies of America.

These figures make it clear that growth in American economy in past decades was due to  debt driven consumption whereas the real wages of workers did not increase. Banks and financial institutions had a big role to play in this debt driven consumption. In fact banks had a big role to play in the transformation of capitalism to capitalist imperialism. As Lenin observed, "This transformation of numerous modest middlemen into a handfull of monopolies is one of the fundamental processes in the growth of capitalism into capitalist imperialism." (Imperialism, The Highest stage of Capitalism ). This growth, driven by banks and financial institutions, while it kept people of America uninformed about the deepening crisis, it also provided American imperialism money for its worldwide aggressive acts. The worldwide absorption of American dollars intensified the process of the wealth of other countries coming to America. Actually the countries which were big buyers of dollars and of bonds of American Govt. or those which kept their money in American banks were the ones who provided  the resources for America's acts of aggression.

While American economy's base kept weakening the expenditure on its strategy of securing world hegemony kept mounting. This process hastened after 2001. In the name of 'war against terror' America quickly expanded its aggressive activities. By militarily occupying first Afghanistan and then Iraq, American Imperialism wanted to establish monopoly over energy sources, wanted to control trade routes and wanted to stop the rise of any competitor by establishing military bases in all corners of the world. Recently America has established the 'Africa command' of its military. Despite its declining economic power it wants to secure its would hegemony by military means and through acts of aggression.

However the national wars of the people of Iraq and Afghanistan have decimated the calculations of American imperialism. Not only did the cost of the war rise many times above the estimate, the world image and ability of American military was dented in these wars due to its continually deeper bogging down in these wars. Alongwith, domestic support also fell due to the number of American casualties in the wars. America's total debt increased to about 11 trillion dollars and its budget deficit rose above 500 million dollars. These wars have a big role in this economic situation of America.

Alongwith the intensity of the national war of the Iraqi people, the defeat of the American backed Israeli attack by Hizbollah in Lebanon was a big setback to the new mideast plan of America. After the 2006 Lebanon war, the Hizbollah's influence in Lebanon has increased and the people and the Govt. of Lebanon are once again in favour of strengthening ties with neighbouring Arab countries. Alongwith, Israel's intimidation of Lebanon has decreased. The war of 2006 was remarkable in that an Arab army inflicted comparatively more loss on the Israeli army and thwarted its attack. This definitely generated enthusiasm and self confidence in the people of Arab countries. Taken together, despite such high costs, America is far off from its strategic aim in West Asia. Rather its problems in this area have increased and its hold over Arab rulers allied to it is also weakening. In this area a major opponent of American imperialist aspirations is Iran. America's increasing military difficulties and deepening economic crisis have also blunted its aggressive plans against Iran.

An example of the 'over stretching' of American power could be seen recently in  Georgia in Europe. America provoked Georgia for military action. But it could not intervene in the military retaliation of Russia against Georgia. Rather, even the NATO countries of Europe, who are America's allies, were not ready to adopt an aggressive posture against Russia. With time, American imperialism's need for aggressive activities is increasing but its ability to do so is decreasing. It is natural that the shadow of a deepening economic crisis will fall over America's strategy for world hegemony.

It is natural that the result of the current economic crisis will be a weakening of America's influence. Actually, the roots of this deepening economic crisis is in the capitalist production system but it is natural that its sharpest effects will be on those economies whose military expenditures are relatively the highest. At the time of collapse of Soviet Social Imperialism, our Party Congress had analysed, "The creeping imperialist crisis has hit the superpowers with their monstrous military industrial complexes, the most. Over past decades their share in world production and trade was steadily going down. Their astronomical military expenditure could not be sustained by their crisis ridden economies ..... One with narrower social base and weaker economy has come down and the other is facing increasing difficulties." (Political Resolution, April 1992). In 1992, the then candidate for Presidency, Bill Clinton, had written that America should not forget the lessons of the collapse of the Soviet Union. After becoming President, he himself forgot them.

The deepening economic crisis in America and the lack of challenge at global level to its military drive due to its being the role superpower made American imperialism's hegemonic drive necessary in its own eyes; rather to some extent world situation was favourable to it. In this situation, neocon campaigners came forward with the hopes of making the 21st century as America's century, and they captured high posts in the administration. For their worldwide war drive on the one hand they used  the 9/11 attacks and on the other engaged in collecting economic means for this war drive  through neoliberal economic policies.

In this context the policies of globalization also aided them. The unrestricted spread of capital at global level, to whatever level this could be  implemented, increased the control and influence of American banks and financial institutions. They could conduct their financial operations on a bigger base and could hide their ugly deeds in various corners of the world. In a way the financial institutions of various countries of the world became their hunting  grounds. That is why in the last decade American imperialism's main emphasis was on the globalization of service sector especially financial services. The aim of this was to bring the financial institutions of other countries under the control of American financial institutions. By this the base of their control became wider and alongwith they could use the resources of other countries more and more  for their drive to secure world hegemony.

On the one side a deepening crisis in the real economy - production of goods and services - on the other the bogging down of the drive to secure world hegemony in the morass of national wars and struggles of the world people, led to preparing the ground for the bursting forth of intensifying contradictions in the imperialist superpower. The intensifying contradiction between the relative weakening of the base of the real economy and fast increasing burden of the military industrial complex could not be postponed for long by financial manipulations. The crisis of the imperialist superpower ripened.

Alongside, America's drive for world hegemony intensified its contradictons with other imperialist countries. Their competition for sources of energy and areas of natural resources intensified. The competition between imperialist powers intensified in Africa, Asia and South America. Their fight for drawing and redrawing areas of influence is intensifying. On the base of the grounding of America's war drive by the people of oppressed nations, the contradictions among imperialist powers is becoming sharper.

Where American imperialist superpower has a big role in the explosion of the financial - economic crisis born out of the fundamental contradition of capitalist production system, as a result of this explosion, the fall of American imperialism from the position of sole superpower is natural. Those who dreamt of making 21st century as American Century are not talking about this century but the last decades of the past century.

The advance of the struggles of the world people against imperialism and reaction is on and reactionaries of world including American imperialist rulers cannot stop it. The current explosion of the financial-economic crisis is intensifying all contradictions in the imperialist system. Among these, the contradiction between imperialism and oppressed nations is getting especially intense. Alongwith are intensifying the anti-imperialist struggles of people of oppressed nations in which national wars and peoples' struggles against American imperialism have a prominent place.

(Translated from Pratirodh Ka Swar, December 2008)