The New Worker
The Weekly paper of the New Communist Party of Britain
Week commencing 29th July 2011
THE UNITED States stands on the edge of a financial catastrophe as leaders of the Republican and Democrat parties are playing a game of chicken over the country’s debt plans.
The Obama government has until 2nd August to raise the limit on US debt from $14.3 trillion (£8.8 trillion) or face the prospect of default on its debt — a prospect that would throw global capitalism into crisis. Throughout the world countries and companies are holding US debts — seen until now as an absolutely safe investment with repayment guaranteed. These debtors will lose that security and could lose vast amounts of money.
Furthermore banks all around the world hold US bonds and use them to trade in. These could become worthless overnight, leaving banks, once again, unable to trade with each other sparking banking collapses as we had three years ago — and no governments in a position to bail them out a second time.
The Obama government wants to reschedule the debt by allowing it to go higher and organising a plan to pay it back that involves yet more public sector spending cuts but also a reversal of some of the big tax cuts that wealthy Americans have enjoyed during both the Bush and Obama governments.
And it is this aspect that has the Republicans digging their heels in and insisting that the debt repayment plan must be based on public spending cuts alone. Obama is doing little to challenge this obscene greed of the very wealthy. He seems more keen to appease the rich Republicans and Tea Party nutters than to defend the millions of working people who voted for him.
American unemployment is rising and the feeble stimulus package agreed a couple of years ago has faltered. The Republican argument was that tax cuts were needed to give the wealthy enough money to invest and rebuild industry.
They got the tax cuts but they did not invest — not in industry anyway.
The banks dad not use their bail out money to invest in industry either — they just went back to the insane speculation and gambling in the froth, wind and water world of futures, hedge funds and so on. Like gamble-aholics they seem compelled to go back to the mad markets where they believe that positive thinking and will power alone will bring money falling into their laps.
The problem is that this belief in magic has been reinforced by the bail-outs of three years ago. The money that landed in their laps when their system started to collapse was taxpayers’ money. Governments around the world were compelled to provide the bail-outs or see their banks collapse — leading to no wages being paid, no money available, no buying and selling possible and real hunger and civil unrest.
Most people, even in the wealthiest countries, do not have enough food stored in their kitchens to last more than a few weeks. Third world hardship would very quickly descend.
But the bail-outs put western governments deep into debt causing massive public spending cuts and cuts in working class living standards. There are no resources to repeat the bail-outs.
This is the threat the rich Republicans are holding over the Obama government. In Britain Liberal Democrat business minister Vince Cable described them as “nutters”. And the Democrats are trying to appease both the Republicans and the banks.
The contradictions within capitalism are starting to pull the whole system apart. The odds are the US government will sort out a deal — at the cost of the American working class, which has already taken huge hits. But sooner or later these contradictions will bring the whole thing down.
Fortunately throughout the world the organised working class is developing in strength politically and economically — as in China, Latin America, South Africa and so on.
But those of us living in the heartlands of global imperialism could be facing dramatic changes. History shows that workers will respond by organising emergency measures very quickly — as they did during the General Strike of 1926 and during the miners’ strike of 1984/5.