The coronavirus has thrown stock markets around the world into free fall and paralysed global commerce, but the economic calamity it has unleashed was a chronicle foretold. The bug is but the spark that ignited the combustible of a global economy that never fully recovered from the 2008 financial collapse and has been teetering on the brink of a renewed crisis ever since.
The pundits of global capitalism had deluded themselves into believing that all was well. But the underlying structural causes of the 2008 debacle, far from resolved, have been steadily aggravated. Frenzied financial speculation, unsustainable debt, the plunder of public finance, an overinflated tech sector, and state-organised militarised accumulation have kept the global economy sputtering along in recent years in the face of chronic stagnation and concealed its instability. The pandemic will pass but the crisis of global capitalism is here to stay.
Global Capitalism’s Structural Crisis
All the telltale signs of an overaccumulation crisis have been present for some time. Capitalist globalisation since the late 1970s has pushed the global working and popular classes onto the defensive and shifted the global balance of class forces in favour of transnational capital following the period of mass struggles in the 1960s and 1970s.
But globalisation also aggravated capitalism’s contradictions. Overaccumulation refers to a situation in which enormous amounts of capital are built up, but without productive outlets for reinvestment. This capital then becomes stagnant. By liberating emergent transnational capital from national constraints, globalisation undermined redistributive programmes that had attenuated capitalism’s inherent tendency towards social polarisation. The result has been an unprecedented sharpening of inequality that fuelled overaccumulation.
The level of global social polarisation and inequality now experienced is unprecedented. In 2018, the richest 1% of humanity controlled more than half of the world’s wealth while the bottom 80% had to make do with just 4.5%.
Such inequalities eventually undermine the stability of the system as the gap grows between what is (or could be) produced and what the market can absorb.
The extreme concentration of the planet’s wealth in the hands of the few and the accelerated impoverishment and dispossession of the majority meant that transnational capital had increasing difficulty finding productive outlets to unload the enormous surplus it accumulated. The more global inequalities expand, the more constricted is the world market and the more the system faces a structural crisis of overaccumulation. Left unchecked, the expanding social polarisation that is endemic to capitalism results in a crisis.
Overaccumulation originates in the circuit of capitalist production, yet it becomes manifest in the sphere of circulation, that is, in the market, as a crisis of overproduction or underconsumption.
Over the past few years there has been a rise in underutilised capacity and a slowdown in industrial production around the world. As the productive economy stagnates, capitalists have turned to financial speculation.
This surplus of accumulated capital with nowhere to go is without precedent. Transnational corporations recorded record profits during the 2010s at the same time that corporate investment declined. Worldwide corporate cash reserves topped $12 trillion in 2017, more than the foreign exchange reserves of the world’s central governments.
In the wake of the Great Recession of 2008 the US Federal Reserve undertook a whopping $16 trillion in secret bailouts to banks and corporations around the world. But then the banks and institutional investors simply recycled the trillions of dollars they received into new speculative activities in global commodities markets, in cryptocurrencies, and in land around the world, fuelling a new global ‘land grab.’
As opportunities have dried up for speculative investment in one sector, the transnational capitalist class simply turns to another to unload its surplus. As a result, the gap between the productive economy and fictitious capital grew into an enormous chasm.
In 2018, for example, the gross world product or the total value of goods and services, stood at some $75 trillion, whereas the global derivatives market was estimated at a mind-boggling $1.2 quadrillion. This accumulation of fictitious capital gave the appearance of recovery. But it only offset the crisis temporally into the future while in the long run exacerbating the underlying problem.
In addition to speculation, mounting government, corporate, and consumer debt have driven growth. Consumer credit has served the dual purpose of class pacification and of generating demand even as real incomes dropped for the immiserated majority subject to austerity and ever more precarious forms of employment.
State and corporate debt have also reached breaking point. The global bond market – an indicator of total government debt worldwide – surpassed $100 trillion in 2017, while total global debt reached a staggering $215 trillion in 2016.
Worldwide corporate debt has soared to $75 trillion, up from $32 trillion in 2005, while corporations have issued $13 trillion in bonds, more than twice bond debt on the eve of the 2008 collapse. A default on consumer, state, or corporate debt will set off a further chain reaction in the downward plunge of the global economy.
In sum, financial speculation, pillaging the state, and debt-driven growth cannot resolve the structural crisis of global capitalism. They are ‘fixes’ that did not resolve the underlying structural conditions that triggered the 2008 financial collapse.
The massive concentrations of transnational finance capital destabilise the system as global capitalism runs up against the limits of these fixes. The global economy has been a ticking time bomb in the last few years. All that was needed was something to light the fuse. That has come in the form of the coronavirus.
The Coming Upheavals: no return to normalcy
The ruling groups have already turned to new bailouts of capital. The US government injected an initial $1.5 trillion into Wall Street banks. Trump has promised tax giveaways to corporations and multibillion-dollar relief for airlines, the oil industry (including fracking), and private medical companies, among others. The White House promised that its response to the pandemic will be ‘centred fully on unleashing the power of the private sector'.
Yet it is unlikely that there will be similar bailouts for the billions of poor workers around the world who face a daily struggle for survival. The International Labour Organisation predicts that 25 million people worldwide will lose their jobs as a result of the virus, although this is considered a substantial underestimate. Up to a billion children worldwide have been affected by school closures. Hundreds of millions of transnational migrants and refugees have no access to health infrastructure. Prisoners in overcrowded jails the world over, the homeless, and those in war zones are sitting ducks for the virus. Capitalists will try to utilise mass unemployment and job insecurity to impose further discipline and austerity on labour.
The capitalist crisis unleashed by the coronavirus, it would seem, may be even more deadly for impoverished workers than the virus itself. As one popular grassroots organisation in my hometown of Los Angeles, Union del Barrio, has warned, the coronavirus ‘has unmasked the sick brutality of capitalism’ and requires a new level of solidarity and struggle from below.
The ‘rotten core of individualist consumer culture is exposed and, in the end, the only thing we can be sure of is that this grotesque system of monetised chaos and social inequity will likely condemn many of our communities to elevated levels of viral exposure,’ it declared. ‘To the degree that we can be disciplined in maximising solidarity among those closest to us will be the measure of how we can challenge the hysteria and neoliberal individualism promoted by the mainstream capitalist media.’
A Democratic win in in the upcoming US presidential elections is unlikely to alter the course of neoliberalism or the hegemony of transnational finance capital. Joe Biden, the likely Democratic nominee, who has been beholden to the financial industry throughout his career, has already made clear that Wall Street will be in charge of economic policy should he win. In early March it was reported that he is considering billionaire banker Jamie Dimon, the CEO of J P Morgan Chase, as Secretary of the Treasury.
Yet neoliberalism simply does not have any more reserves with which to contain financial chaos and economic implosion. The implacable drive to accumulation will impede solutions to what has truly become a crisis of humanity. Renewed capitalist stability, if it can even be achieved, would require a more profound restructuring – including the rebuilding of public sectors devastated by 40 years of neoliberalism – than Biden and the financial and corporate interests he represents, along with the liberal and social-democratic elite around the world, could possibly accomplish or would even want to.
But these are not the only forces from above who will seek to capitalise politically on the current calamity. There has been a rapid political polarisation in global society since 2008 between an insurgent far-right and an insurgent left. The crisis will surely animate far-right and neofascist projects that have surged in many countries around the world and will surely do the same for popular struggles from below. Social upheaval and political conflict will escalate.
Crises are times of rapid social change and open up the possibility of pushing society in many different directions, depending on the outcome of battles among contending social and class forces.
The ruling groups will intensify their class warfare from above. They will turn to extending the global police state to contain mass discontent from below as capitalist hegemony breaks down. This global police state, as I have discussed elsewhere, is driven by the twin imperatives of social control of the mass of immiserated humanity and the opportunities for unloading surplus and accumulating capital opened up by the expansion of state military spending and by privatised systems of transnational social control and repression.
The state policy levers that have kept the economy afloat since 2008, principally quantitative easing, will no longer work. As financial speculation and debt-driven growth reach the breaking point, this militarised accumulation may take over as the primary driver of the global economy. Historically, wars have pulled the capitalist system out of crisis while also deflecting attention from political tensions and problems of legitimacy.
States around the world have been centralising the response to the pandemic and declaring national emergencies. Such centralised coordination may now be urgent to confront the health crisis.
But centralisation of emergency powers in authoritarian capitalist states may well be used after the virus has been brought under control to contain discontent, heighten surveillance, and impose repressive social control – that is, to push forward the global police state.
Military and police forces are being deployed in countries around the world. In the United States, the National Guard has been activated in at least 27 states and the US Department of Justice secretly asked Congress to suspend constitutional rights during the health emergency.
In Europe, NATO members are preparing for ‘Defender 2020’ exercises scheduled for May and June and involving what security officials are calling ‘the most extensive transfer of US soldiers to Europe in the past 25 years'. Is martial law to follow?
The crisis triggered by the pandemic will leave in its wake more inequality, more political tension, more militarism, and more authoritarianism. Short of overthrowing the system, the only way out of the crisis is a reversal of escalating inequalities through a redistribution of wealth and power downward. That will not come without a fight.
Consciousness seems to be growing worldwide on the need for grassroots solidarity and mutual aid in the face of the pandemic. Left and progressive forces must position themselves now to beat back the threat of war and the global police state and to push the coming upheavals in a direction that empowers the global working and popular classes to confront the crisis in accordance with their own interests.