World capitalist crisis threatens humanity

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A nese Consumers Reconsidering Rice Loyalty” July 17 New York Times article entitled “Japa­ attracted my attention when it reported that “Japan’s agricultural ministry, for now, says it is not considering an increase in rice imports, which are all but shut out by a 778 percent tariff.”

This enormous tariff led me to wonder if The Times had not made a typographical error. Perhaps the ac­ tual tariff figure was 7.78 percent or even 77.8 per­ cent? But an on-line Times correction 10 days later indicated that the only “correction” was in the name of the multinational corporation that actually did import rice into China, Seiyu Wal-Mart, which appeared in the original article as just “Wal-Mart.”

The multi-billion-dollar multi-national WalMart cor­ poration was apparently able to pay this 778 percent tariff and still make a profit by selling near slave-la­ bor Chinese-grown rice to Japan. But China is not the only country able to penetrate the Japanese market and still make a profit. U.S. rice producers, using the most sophisticated technology in the world—includ­ ing aerial seeding, genetically engineered low-water requirement strains, and super-modern harvesting and processing equipment—are on the same road but with different methods. The secret of Japan’s imperi­ alist competitors’ success is the employment of near slave labor on the one hand or the use of state of the art technology on the other.

The Times article, reflecting the concerns of U.S. business interests, continues: “‘We’d simply like to see demand dictate where U.S. rice goes, not the [U.S.] government,’ said Robert Cummings, chief operating officer at the U.S.A. Rice Federation.”

Japan’s present rice shortage was a product of the government’s ban on the sale of rice from some 18,000 acres of contaminated Fukushima farmland following the March 2011 meltdown of three tsunami-stricken nuclear reactors. Despite government guarantees that Japanese rice outside the Fukushima region was “suf­ ficiently” free from radioactive cesium and related contaminants, Japanese consumers tend to mistrust government assurances, especially given the long se­ ries of now refuted official proclamations.

If we may put the horror of the Fukushima disaster aside for a moment, including the resulting spread of deadly radioactive material in the atmosphere and oceans, the economic implications of a world driven by capitalism’s inexorable drive for profits at the ex­ pense of human life are revealing and go far beyond the present squabbles over rice tariffs.

World trade in the era of neo-liberal or laissez-faire/ free-trade capitalism is supposed to be regulated by agreements between the world’s major contenders. International institutions like the World Trade Orga­ nization (WTO) or treaties like the General Agreement on Tariffs and Trade (GATT) are supposedly aimed at restricting or eliminating tariffs and all other barriers 6 SOCIALIST ACTION AUGUST 2012 When treaties prove inadequate to mitigate the intensifying competi­ tion inherent in capitalism, the weaker nations and their peoples are driven to bankruptcy — as in the present economic crisis.

to “free trade.” The truth lies elsewhere.

As the U.S. Rice Federation states, demand and de­ mand only—the free market—“should” dictate the price of rice and its destination. But the Rice Federa­ tion neglects to mention that all international trade agreements and organizations are based on enforce­ ment of negotiated agreements between competing capitalists, agreements that include literally thou­ sands of exceptions—as with Japan’s huge rice tariff against foreign imports.

In the case of Japan, whose highly efficient auto in­ dustry constantly undermines the profits of U.S. car corporations, these tit for tat multi-billion-dollar agreements can have the effect of protecting one or more of its weaker industries against powerful com­ petition from other nations. Japan’s high rice tariff, for example, might be accompanied by an agreement to place a U.S. tariff or other such limitations on the importation of another Japanese commodity. Treaties like NAFTA (North American Free Trade Agreement) include innumerable protectionist exceptions of this type.

One nation’s concession to another with regard to Product A, for example, is given back in return for sim­ ilar dispensation to Product B, but almost always with a bonus to the most economically powerful of the ne­ gotiators. The weaker the competing nation, the more concessions it is forced to agree to in order to secure access to foreign markets and/or protect its own. The major ruling-class representatives of the world regu­ larly meet to negotiate the benefits for each of their countries, and then reduce these “government-ap­ proved” agreements to the status of international law.

When treaties prove inadequate to mitigate the everintensifying competition inherent in world capitalism, the weaker nations and their peoples are driven to near bankruptcy, as is the case with the present world Kyodo News / AP (Above) June 12 protest in Fukui city, Japan, against restarting of two nuclear reactors. Japan has been forced to put many rice fields out of production because of nuclear pollution, but has still placed a 778% tariff on rice imports from China (left).

economic crisis.

To increase their worldwide competitive edge in auto production, for example, Japanese corporations have shifted production to super-low-wage India. Last month workers at the New Delhi-based Maruti Suzuki factory, which makes half of all cars sold in India and is controlled by the Japanese automaker, were burned in a fire that destroyed a portion of the plant during a confrontation with police and management goons. One hundred workers were arrested while protest­ ing Suzuki’s contracting out thousands of jobs at subminimum wages and in violation of Indian law. “Tem­ porary contract” workers, with few rights, are paid a fraction of the wages of permanent workers—about $126 monthly as compared with $324 a month for permanent workers.

While there are numerous international agreements to eliminate tariffs and other trade restrictions that may temporarily mitigate this ongoing deadly compe­ tition, there are no such international agreements reg­ ulating wages, hours, and working conditions. Here, only capitalism’s law of the jungle applies—enforce the “race to the bottom” to maximize profits at the ex­ pense of workers everywhere and the environment!

Economic warfare takes its hardest toll on the work­ ers of the weaker capitalist powers, as is the case to­ day with Greece, Ireland, Spain, and Italy—where the ruling rich seek to mitigate their ever-declining prof­ itability by imposing draconian austerity programs that wipe out in a day gains won over decades. But the capitalist behemoths are not immune, as we see in the U.S., where the bankers and corporate rich are com­ pelled to do the same at the expense of U.S. workers, youth, and the poor and oppressed.

In the above equations, countries of the underdevel­ oped world have virtually no influence and are sub­ jected to the rape of their economies, resources, and people as well as the regular imperial installation of neo-colonial military regimes.

Economic warfare takes many forms, some de­ ceptively peaceful, and others overtly violent. The half-century embargo/blockade imposed by the U.S. against revolutionary Cuba is every bit a war, but by other means. Only Cuba’s socialist revolution has al­ lowed the nation to survive. Aimed at re-imposing the old colonialism, poverty, and exploitation on the hero­ (continued on page 7)

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ready beleaguered economy. The cost to Cuba of the or idled, cost the lives of one million Iranians and an ic Cuban workers and farmers, the embargo is aimed Iran, cynically demonized as a “terrorist” nation by placed British oil contracts with American ones after the U.S. government and its captive media, are today enforced by threatening U.S. warships in the Persian hammad Mossadegh, with the brutal Shah Mohammad force to Cuban sugar production. With the demise of lion a day in lost sales. In contrast to the U.S. empire, ners, Cuba lost some 85 percent of its trade and close with 1100 military bases around the world, Iran has goes, blockades, drone bombings, mercenary death to all of the market for the sugar it produced as the squads, armed interventions, renditions, and torture nation’s main cash crop. Cuba’s once state-of-the-art are matched by the less obvious but critical exercise sugar industry, which produced an average of seven of power in the economic arena. In both instances we millions tons yearly for decades—ranking sixth in the are witness to a social system, capitalism, driven to world—saw its sugar exports drastically decline. Its rels a day, or 52 percent, since the sanctions banning destruction by its inherent contradictions rather than access to spare parts and replacement machinery, as nian crude began July 1.” On an annualized basis Iran’s petitors from each country, driven by the same mad ment, reduced sugar production to below 1.2 millions Wished, as with the U.S.-financed 10-year war against aspect of this world social system heading for disaster. price of sugar, a result of the corporate machinations Iran beginning in 1979-80, waged by the then U.S.

surrogate Saddam Hussein dictatorship in Iraq. That mous “Communist Manifesto,” “Workers of the world war, which saw much of Iran’s oil facilities destroyed (continued from page 1: “Growing signs of new economic downturn”) afraid. Companies are afraid.’”

Europe’s auto sector—in which U.S. companies are big players—did particularly poorly in the second quarter. Ford suffered a 57% drop in global earnings in the second quar­ ter, largely on a $404 million loss in Europe, and lowered its 2012 profit forecast, citing overseas weakness.

GM lost 41% in the quarter, and has not made an annual profit on its Eu­ ropean operations for more than a decade. But Ford of Europe was prof­ itable until recently.

ArcelorMittal, the world’s largest steel maker, with operations on ev­ ery continent, suffered a 50% drop in income in the second quarter as raw materials prices rose and steel prices slumped. It has begun cutting production in Europe, and is gearing up to seek massive wage and benefit concessions from the 12,500 workers in the U.S. covered by union contracts.

“The protracted euro zone financial turmoil,” said The New York Times on July 25, “has all but killed demand for steel in Western Europe. ArcelorMit­ tal … produced more than a third of its worldwide crude steel in Europe last year. Nearly 100,000 of the company’s 260,000 employees work in Europe.”

Troubles for Germany Meanwhile, the continent’s biggest and (relatively speaking) healthiest economy, that of Germany, is show­ ing signs of being dragged down with the rest of Europe. On July 23, Moody’s downgraded its outlook for Germany, citing the huge potential cost of a euro breakup on the country and, alterna­ tively, the steep bill that would be paid to hold it together. The ratings agency pointed to the vast liabilities Germany would incur in a bailout of Spain and Italy and its banking system’s “sizable exposures” to those two countries.

The warning to Germany followed a rush by investors out of Spanish bonds, leaving the euro zone’s fourth-largest economy at greater risk of needing a bailout, and sparking a selloff on global markets. Moody’s also cited renewed concerns about Greece, saying, “The material risk of a Greek exit from the euro area exposes core countries such as Germany to a risk of shock.”

In a prime example of the multifactori­ al vicious circles of the world economy, the July 23 Wall Street Journal noted: “Among investors’ chief concerns is that Spain won’t be able to find buyers for the tens of billions in new debt it must issue this year to raise cash. That lack of demand results from a confluence of worries. Spain’s economy is deterio­ rating rapidly, weighing on the govern­ ment’s ability to bring in tax revenue; its financially strapped regions may need help from the central government;

... Capitalist crisis (continued from page 6)

at regime change—nothing less.

What applies to Japanese rice applies with brute its former USSR and Eastern European trading part­ well as oil to fuel its refineries and harvesting equip­ tons by 2005-6. Tractors and associated heavy equip­ ment had to be replaced by oxen to cultivate fields.

Equally horrific was the fact that the world market of the largest consumer nations, dropped by 50 per­ cent, further exacerbating the stresses on Cuba’s al­ and its sagging banking sector remains capable of dragging the country down.

“Many investors fear Spain could be stuck in a downward spiral of slackening demand.

The possibility that ratings firms could cut the country’s precarious credit rating, thus forcing some institutional in­ vestors to sell, looms.”

Further evidence of German weakness came in a July 24 Journal report that the country’s businesses cut their output at the fastest rate in more than three years in July, and in the broader euro zone companies cut back for the sixth straight month, rais­ ing fears of a recession spanning the 17-nation economy. “Output fell in the region’s two biggest economies, Ger­ many and France, suggesting the down­ turn isn’t limited to the weaker nations embroiled in the sovereign-debt crisis.

Falling output will make it harder for leaders to turn the corner on the crisis as tax revenues fall and social spending rises.”

Spain and Italy are respectively the euro bloc’s fourth and third-largest economies, and the economies of both shrank rapidly this year, making it in­ creasingly likely that Germany—which depends on the euro zone for around 40% of its exports—will be affected.

In Spain, 5.69 million people ended the second quarter jobless, raising the unemployment rate to a record 24.6%.

Youth unemployment rose to 53% in the second quarter. Yet as part of a new 65 billion euro austerity package, the government is set to lower unemploy­ ment benefits.

The Economist reported on July 7 that “within the euro area, the unemploy­ ment rate reached 11.1% in May, a re­ cord high on data going back to 1995 for the 17 countries now in the monetary union. The composite purchasing-man­ U.S. blockade exceeds $50 billion since 1960.

Gulf, costing OPEC’s third-largest producer $133 mil­ never invaded another nation and has no bases any­ where outside its borders.

Francisco Chronicle, “have plunged to 1.2 million bar­ the purchase, transport, financing and insuring of Ira­ losses will be $48 billion, or 10 percent of its economy.

move the dictators imposed by the U.S., they are pun­ Lluis Gene / AFP / Getty Images agers’ index remained well below the 50 level that separates expansion from contraction (50 represents no move­ ment, positive or negative).

And the magazine noted the global im­ pact: “That industrial fragility has now spread around the world. In America the Institute for Supply Management’s manufacturing index fell in June to below 50, for the first time in almost three years. New orders plummeted, which suggests that the weakness will persist. One of the main reasons was a sharp decline in new export orders, with manufacturers blaming slacker de­ mand in Europe and China. In its annual health-check of the American economy, the IMF this week said that recovery remained ‘tepid’ and fretted about the fallout from an intensifying euro crisis.

“In Asia, too, an industrial slowdown is under way. Japan’s Purchasing Manag­ ers Index (which tracks the willingness of companies to spend on their opera­ tions) slipped below 50 in June for the first time since November. After falling in recent months, China’s official PMI is now only just above that threshold [50.1 in July]. Any slowdown still hurts economies, like Brazil, that have thrived by selling commodities to China. Bra­ zil’s manufacturing sector contracted for the third successive month in June.” More vicious circles Let’s bring it home to the United States and look at a few particular manifesta­ tions of the vicious circles reinforc­ equal number of Iraqis.

In a similar manner the U.S.-led sanctions against “Oil shipments from Iran,” according to the Aug. 2 San When oppressed people anywhere fight back and re­ ate to ensure their profits.

(Left) July 19 union-led protest in Barcelona against cutbacks by Spanish government.

Wing the crisis. On June 21 Moody’s reported it was downgrading the credit ratings of 15 of the world’s biggest financial firms, including Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, and Citigroup.

The sharply lower credit ratings may worsen results for these banks in the very areas that prompted the downgrades. To finance their operations, Wall Street firms rely heavily on short-term loans last­ ing a few days to a few months. But the downgrades could push up the costs of these loans, as the lower credit ratings might encourage lenders to think there is a higher probability that the banks won’t repay the money. The same will be true of these banks’ derivatives, as their clients may now demand better terms given the ratings decline, terms that mean greater pressure on those banks’ profits, meaning possible further ratings cuts.

The feeling of sinking into a whirlpool is increasingly common for workers. For instance, the June 19 New York Times reported how layoffs of public workers were slowing the economy: “Since its post-recession peak in April 2009, the public sector has shrunk by 657,000 jobs. The losses … have accelerated for the last three months, creating the single biggest drag on the recovery in many areas.” Federal spending cuts are impacting states, which in turn cut aid to localities.

A similar vortex is sucking down con­ sumer spending: “The wage problems brought on by the recession pile on top of a three-decade stagnation of wages for low and middle-wage workers,” said Lawrence Mishel of the Economic Policy Institute. “In the aftermath of the finan­ cial crisis, there has been persistent high unemployment as households re­ duced debt and scaled back purchases.” The state of working-class fightback against these attacks in the U.S. is still severely limited—although the memory of recent upsurges from Madison to Oc­ cupy has not faded and may yet inspire a rising tide of resistance.

Given the global and mutually rein­ forcing nature of the various aspects of the crisis, U.S. workers would do well to look at other recent examples of fightback around the world, from the spreading strikes in Egypt to the mil­ lions who repeatedly rallied in Spain this summer. This is necessary not only in order to draw inspiration from oth­ ers’ combativity, but also to tighten ties with militants around the world fight­ ing the same global system, even if their mobilizations arise initially from spe­ cific, seemingly isolated manifestations of that crisis. n Similarly, the U.S.-sponsored coup in Iran in 1953 re­ replacing the democratically elected president, Mo­ Reza Pahlavi. Just who are the real terrorists? The ever-intensifying U.S. wars, sanctions, embar­ the conscious decisions of its leaders. Capitalist com­ logic, have no alternative but to participate and retali­ Working people have no interest in defending any Marx said it well in the closing admonition of his fa­ unite! You have nothing to lose but your chains.” n

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government hundreds of millions of dollars. We also offered the government a four-year deal that included a two year wage freeze, and modest cost-of-living sal­ ary increases in years three and four. The government rejected those proposals without any consideration,”

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SOCIALIST ACTION AUGUST 2012 7 ... Downturn

Given the global nature of the crisis, U.S. workers would do well to look at recent examples of fight­ back, from Egypt to Spain.