Capitalism's loot and plunder

by Anna Pha

Turn on the news, and its odds on that stock markets will have taken 
another dive or have shot-up again. There is almost daily news that yet 
another US corporation has gone bust leaving its employees high and dry or 
has just revised its profits downwards by a billion or so dollars. If you 
are lucky you might catch the corporate shredders working overtime as 
company executives race to hide their crimes and incompetence.

Wall Street has taken a hammering. The value of stock is down by 48 per 
cent since March 2000 — what amounts to a staggering loss in share market 
value of US$8 trillion (A$14.8 trillion). To put this enormous loss into 
perspective, it is more than 20 times the Gross Domestic Product of 
Australia. And half of that loss — US$4 trillion — occurred in the past 
few months.

Stockmarkets in Britain and across Asia have tumbled. Australia has not 
been immune either, with the big banks and insurance companies among the 
latest to feel the cold winds of economic instability.

Enron, Global Crossing, Tyco, Xerox, WorldCom, Ansett, HIH, and many others 
have all been hit. "Forbes" magazine reports that nearly a quarter of its 
top 500 shareholding companies made losses last year.

The 27 telecoms remaining on its list (there were many casualties) declared 
losses totalling US$64 billion last year, and only one of nine airlines 
declared a profit.

While some companies have gone under because of trading difficulties, a 
large number were brought down by the many and varied speculative, 
fraudulent, and corrupt practices of their directors and senior management. 
They helped themselves to billions of dollars and left their companies 
riddled with debts and drained of assets.

Politicians, regulators and judges were bought off. Workers lost their 
jobs, entitlements and retirement savings.

Major banks are now under a question mark. JP Morgan Chase and the 
Citigroup have come to the attention of investors because of their role in 
Enron. Other banks are no doubt up to their necks in other Enrons. There 
are concerns about the security of outstanding loans.

Closer to home, ANZ has revealed an exposure of $232 million to the 
troubled telco Marconi. There are fears that the banks, especially the big 
four, have other exposures that could result in heavy losses.

The insurance companies are also under question. Falling share prices and 
bankruptcies could wipe their asset base. Insurance companies rely heavily 
on company investments for their profits.

Casino economy

At stake are not only the funds of the extremely wealthy but of millions of 
workers and retirees whose savings are now tied up on stockmarkets.

The structure of savings and investment capital has undergone a revolution 
over the last 15 to 20 years. The risk has largely shifted from the 
financial institution to the people with savings.

Instead of banks holding deposits and guaranteeing (as far as is possible) 
a fixed income and the repayment of the deposit, workers and retirees are 
being encouraged into investment packages. The financial institution makes 
profit out of fees for managing their savings, without guaranteeing a 
return or even the repayment of the money invested.

The amount of income and money left in the end will depend on the honesty 
of the financial institution or the luck of the markets. It's a big gamble.

At the same time as the savings of workers and retirees are being gambled, 
there are other important changes in the primary methods by which wealth is 
being accumulated by big business.

Parasitic

Speculation plays a much bigger role. Enron is a good example. While on the 
surface it was one of the largest energy companies in the world, Enron was, 
in reality, a powerful financial institution, trading in "virtual" 
electricity and not beholden to the laws governing the financial sector.

Workers lost their jobs and billions of dollars of their savings were 
milked when Enron collapsed.

The transnational corporations (TNCs), particularly in the finance sector, 
have generated new "industries" that amount to pure gambling and 
speculation.

A typical bank would have once made almost a 100 percent of its profits 
from interest rate margins (the difference charged to borrowers and paid to 
lenders). Now it might only raise a third of its income from interest rate 
margins, another third from pure speculative activities and the remainder 
from fees for providing (previously free) service and advice to customers.

Boom built on debt

Frederick Clairmont, writing in Third World Resurgence (Jan-Feb 
2001) warned that the US economy was facing a meltdown.

"It's long boom which caused some of its admirers to dub it as 'a miracle 
economy', was built on a foundation of foreign debt. As foreign investor 
confidence wanes and the inflows of capital necessary to sustain this 
essentially parasitic economy dry up, the US economy will be in the throws 
of a severe crisis which will have a devastating impact on an already 
faltering world economy", said Dr Clairmont.

He pointed out that from 1994 to 1999, the US stockmarket capitalisation 
had hit unprecedented and cataclysmic heights, rocketing from 81 percent to 
184 percent of Gross Domestic Product (GDP).

This "miracle" was fuelled by foreign direct investment and the purchase of 
US treasury bonds and other US securities. In recent years, before the 
present decline in stock values commenced, more than 25 per cent (one in 
four dollars) of foreign global investment was invested in the US.

The US economy is by far the world's biggest debtor and the flight of 
capital from the US as investors pull out of the share market and sell 
securities will have disastrous consequences, not only for the US economy 
but for the economies around the world.

At the same time as stockmarkets were inflated the real earnings of US 
production workers were falling. Dr Clairmont quotes a fall of 14 percent 
in the real earnings of workers in the private sector between 1973 and 
1995.

It is not just the US economy that is living on credit. Millions of people 
in countries such as the US and Australia are also living on credit on a 
day-to-day basis as they lose their jobs or find their wages squeezed.

Third world countries are faced with crippling unpayable debts which are 
draining their economies of what little they have.

The attack on workers' wages and hence the purchasing power of workers has 
been accompanied by a massive attack on working conditions.

There has been a classic crisis of "overproduction" whereby the workers who 
are producing more and more, are being paid less and less and, as a result, 
are not able to purchase all that is produced.

But this global crisis of overproduction is only one aspect of the crisis. 
The big corporations which have been awash with capital, have sought to use 
their capital in other, non-productive, ways to acquire even more wealth.

They have turned to mergers and takeovers, to buying up public assets as 
they are privatised, speculating on futures' markets, currencies and 
anything else they could find to gamble with.

This "growth" had no relationship to the real underlying economy and was of 
no benefit to working people. It was money that could have been spent on 
higher wages, better working conditions, shorter working hours and, most 
importantly, job creation.

Not only was the exploitation of working people increased but many were 
thrown out of their jobs. Economic rationalist (neo-liberal) policies gave 
TNCs a free run to do what they liked where they liked whenever they liked.

Rotten to core

The capitalist system is facing a long and deep economic crisis which could 
have extremely serious political and ideological consequences for 
capitalism.

Will it be as bad as the 1930s? The greatest fear of governments is the 
threat that such a crisis and the unchecked fraudulent and corrupt 
behaviour of managements will lead many to question the credibility of the 
capitalist system itself.

They fear the loss of investor confidence and the subsequent withdrawal of 
billions of dollars of savings from the stockmarkets of the world. The 
people of Argentina demanded their money. The banks refused to pay out.

"My administration will do everything in our power to end the days of 
cooking the books, shading the truth, and breaking our laws", said US 
President George W Bush.

Australia's Prime Minister John Howard is equally anxious to ensure 
investors stay with the market. "There is a strength and resilience and a 
stability about the Australian economy which is very important", Howard 
said.

They fear not only a mass exodus from stockmarkets but the pressures that 
are mounting for strict regulations to curb and control the operations of 
the corporate sector.

The present situation is unsustainable economically, socially and 
politically. The big corporations and governments are now caught between 
curbing some of the excesses of monopoly capital and, at the same time, 
giving them maximum freedom and power to squeeze monopoly profits out of 
the system.

It has reached a point where the priority question (for the capitalist 
class) is the protection of the capitalist system itself. The massive 
crisis facing capitalism and mounting opposition to the policies and 
effects of the crisis have to be resolved. It is no longer adequate to 
voice confidence or to say that there is no alternative.

It is in these conditions that capitalist governments are resorting to more 
and more oppressive, authoritarian measures to prevent any resistance or 
even criticism of the system's failings.

Just as sections of capital resorted to fascist measures during the 1930s' 
depression, capitalist governments are preparing the way now with 
repressive anti-democratic legislation to yet again repress opposition and 
retain the rule of capital.

It is becoming more and more pressing that the various left and progressive 
democratic forces unite locally and globally to curb the powers of the 
transnational corporations. To achieve this new type governments are 
required — governments that will give priority to the needs of the people 
not the needs of the corporations.

Trade unions and various community groups, environmentalists, indigenous 
peoples, small farmers, small business people are all victims of this 
savage and brutal system. United, they can bring about fundamental change 
so that governments, not private monopolies, govern and economies serve the 
people.