Crisis of World Economy, Fascism and World War

Ajay Sinha

Topmost institutions and think tanks of world capitalism, in the initial months of 2023 (March and April), have released a plethora of statistics along with numerous significant and useful research reports on the current health of the world economy (such as World Bank’s “Global Economic Prospects” and “Falling Long Term Growth Prospects” as well as USA’s The Conference Board’s “Global Economic Outlook”). These reports elucidate the terrible and almost incurable condition of the world economy that’s going to the extent of becoming permanently ill, and therefore also hints at its masters to go into a state of alarm. They have primarily exposed the irreparable rot that has arisen in world capitalism and capitalist democracy due to the parasitic tendency of finance capital reaching its pinnacle! A complete and exhaustive analysis and evaluation of this is important, for which this article will have to be continued in further installments. This is a difficult but necessary task, because only through this we will be able to assess why fascist forces are rising all over the world presently, despite the possibility of a proletarian revolution not being the immediate cause for panic among capitalists in any country. Obviously, it will also help to understand how in what sense the character and danger of today’s fascism, and therefore the path and method of defeating it, will differ from the fascism of the last century; will also be different from then; That is, it will help to understand how the task of banishing capitalism from the stage of history forever is intertwined in the revolutionary program of defeating today’s fascism.

Looking in its entirety at the landscape of crisis in capitalism that emerged after the second World War, we find that the economic crisis and recession, that destroyed the so-called Golden Age of Capitalism in the 1970s, continues even today in one form or another, and not only in an extended and deeper form but with multifold intensity than before. This means that since the 1970s itself, the global capitalist economy has been in decline and deteriorating. Repairs have been made in between, but after every repair, within a few days, it has deteriorated even more as compared to before. Although it was already ailing, the successive failure of the measures undertaken through onset of neoliberal policies from 1982-1990 and then from 1991-2000 in order to achieve growth and capital accumulation (i.e. measures that were dependent on capital accumulation not through profits derived from expansion of value production, but through profits derived from financial means), which became the background or pretext of the eruption of the Great Recession of 2008-09, has infected it with a new incurable disease. Since 2008-09, this decaying disease has taken an alarming form. The masters of world capitalism have understood that owing to the long period of decline, capitalism is merely taking breaths, while the rest of its body and organs have become useless. Therefore, it is natural that the confidence of the entire capitalist class has been shaken. The big bourgeoisie especially has fallen victim to a certain kind of fearful mentality, especially with regard to futility of expecting a way out of the vortex of sluggish growth of world economy, continuously falling rate of profit and recurrent economic recession. Not only the rate of profit, even the confidence of the capitalist class that it can return once again to the era of growth and progress as before has seen a sharp decline. They have become afraid that, as the historical legitimacy of their rule has already been finished, its political legitimacy is also on the verge of ending. That’s why they have been compelled to take refuge in fascism. Moreover, what they fear more is that as the crisis has become permanent in nature, therefore, the compulsion to stay under the shelter of fascism is also permanent. Maintaining the sham of democracy even to a minimum is also becoming difficult. It is also aware that a stable rise of fascism, an increasing compulsion to continuously imprison the people in a suffocating environment (devoid of all liberties), and the untenable rise in unemployment, inflation, poverty etc., can lead to the mass unrest getting out of hand at any time without warning and prior notice. This definitely intensifies the threat of a proletarian revolution. There is no need to turn the pages of history here. The recent example of Sri Lanka is in front of us, as is the mass outbursts of the working class and masses in all of Europe and America. The revolution, which seemed distant, has started to appear quite close despite the weakness of subjective forces. The bourgeoisie is aware of this. The intensification of its despair and its simultaneous rapid shift towards fascism or extreme right-wing forces, the erosion of democratic rights, and the gradual decimation of democracy have become its compulsions. The new phase of capitalist dictatorship is going to be a phase of the combined rise of extreme far right-wing forces and fascism. But in any case, restoration of the old, a decade-old democratic environment, is a daydream. It is definitely a symbol of the rise of fascism, possessing new characteristics in some respects, which is a combined result of the desperation of the capitalist class alarmed by the permanent crisis of world economy and the remote prospects of proletarian revolution arising from it. Therefore, there should be no doubt that fascism of the 21st century is, and should be, different in some respects from the fascism of the second and third decades of the last century.

Even among capitalist-imperialist think tanks, a consensus has now emerged that the possibility of this crisis, strongly persisting in world capitalism, coming to an end is not just slim, but rather negligible. Therefore, even from this limited perspective, i.e., keeping the possibility of the onset of proletarian revolution as distant, we will still arrive at the conclusion that the extremely sluggish, stagnant, senile, sickly, and moribund world capitalist order, is bound to undergo a historical regression. Should anyone really be surprised by this?

Why do we refer to the current crisis in the global economy as permanent? We say so after studying all the economic factors and forces at work in the economy, while knowing that according to historical and dialectical materialism, nothing in the world can be permanent or stable forever. However, based on our understanding of dialectics itself, we have arrived at this conclusion that the crisis of world capitalism has become a permanent crisis in a dialectical sense. Just as dialectics explains the relationship between relative truth and absolute truth, it also applies to the relationships between the permanent and the temporary. As such, it is true that truth is relative, but Marxist-Leninists do not deny the existence of absolute truth. In that sense, we should not deny the possibility of something being permanent. Lenin writes – “To be a materialist is to acknowledge objective truth, which is revealed to us by our sense-organs. To acknowledge objective truth, i.e., truth not dependent upon man and mankind, is, in one way or another, to recognize absolute truth. And it is this “one way or another” which distinguishes the metaphysical materialist Dühring from the dialectical materialist Engels. We must learn to put, and answer, the question of the relation between absolute and relative truth dialectically.” (Materialism and Empirio-criticism, 1909)

We believe that in the same way, we should also be able to and should learn to address the questions regarding the relationship between “permanent” and “temporary” as well as “stable” and “unstable” in a dialectical manner and learn to provide responses. Being dialectical and being relativist are two different things. For a dialectical materialist, accepting the existence of relative truth does not mean completely denying the existence of absolute truth. Lenin writes – “For Bogdanov (as for all the Machists) recognition of the relativity of our knowledge excludes even the least admission of absolute truth. For Engels, absolute truth is compounded from relative truths.” (ibid)

The crisis of world capitalism that began in the midst of 1970s, although initially affected the mature economies of developed Europe, America, and Japan, but later spread throughout the world and is now showing no signs whatsoever of abating. To say very briefly, the cause of the onset of Great Recession of 2008-09 was – first, the disruption of the process of capital accumulation based on the expansion of value production due to the economic recession of mid-1970s, followed by the new process of capital accumulation that came in its place, based on the expansion of financial profits generated mainly from financial assets, getting disrupted once again near 2000. The crisis that broke out in 2008-09 was an indication that the new form of capital accumulation based on financial profits had no future. It is necessary to clarify here that this does not mean that value production had ceased, and that the generation of profit based on value production and capital accumulation based on that had come to a complete stop. The question is what was, or still is, the main and growing trend. Even after eruption of the 2008-09 crisis, a return of the previous trend to primacy is not possible. Understanding this is most important today. Furthermore, even if the path of capital accumulation through financial profits is not secure or stable, it is imperative to understand what will happen next. Answering this is difficult, but one thing is certain that the rapid development of automation in developed countries, which has already significantly reduced the amount of living labor in commodities, will continue to reduce it so much so that value, law of value and labour etc. i.e., the foundation of capitalism itself will be eradicated. The danger of a complete stoppage of the process of capital accumulation has emerged. In this situation, it is highly doubtful that the process of capital accumulation based on value production will take primacy. All that remains is the complete dominance of finance capital and finding paths for the expansion of profits derived from it. This path is of speculation, of the expansion of derivative markets through the stock market, and of the absorption the surplus finance capital in the government debt or private debt market, while profiting from rising interest rates. However, any such capital accumulation through this will further progressively give birth to factors that would, in the future, disrupt itself i.e., this process of capital accumulation itself. It’s true that this needs to be understood closely and in detail, but it is unlikely to be possible at this time given the scope of this article.

The economic factors that completely destroyed the so-called Golden Age of Capitalism (the period between 1948 and 1973) had their origins in that period itself. After the exposure of the limitations of the old ways of solving the crisis of mid-1970s, surplus capital moved towards investments in financial assets in order to make profits. This was an entirely new situation and phenomenon. The situations created by it, along with the peculiar phenomenon of the Eurodollar market that had taken shape already and the subsequent abandonment of the Gold Standard, collectively led to a massive expansion and growth of the power and form of monopoly finance capital. Later, the rise of internet and containerization transformed the Eurodollar into a hot currency and the finance capital into a highly volatile form that could disappear in an instant, and thus greatly aided finance capital in taking complete dominance over the world economy. In this way, financialization of the world economy occurred on a large scale, and the process of capital accumulation based on the profits generated from it (financialization) became the main trend of capital accumulation, which significantly accelerated automation in industries. There took place unimaginable growth of technological capital in total capital. On the other hand, finance capital profiteering from debt market emerged as a major trend which further escalated the parasitism of finance capital. Today, when this parasitic trend has reached such a cliff that it is pushing the whole world towards a catastrophic end, it has become paramount to keep a complete vivid picture of this situation as well as to actively exhort humankind to struggle against it with all its might and to cross the limiting horizon of capitalism for nothing less than self-preservation. This task is completely intertwined with the task of defeating fascism today. The parasitic tendency inherent in monopoly finance capital, which was discussed by Lenin in his thesis, has become so strong and advanced today that it has really pushed the world capitalist economy into a state of general crisis.

When Lenin and Stalin had discussed the rise of monopoly finance capital and capitalism getting trapped in a general crisis after victory of the Soviet Revolution, then imperialism was surrounded by proletarian revolutions and national liberation movements, and even the world market was divided due to the triumph of socialism in a large part of the world. However, the situation is different today. Nevertheless, world capitalism has been surrounded from all sides, and is deeply mired in internal contradictions due to symptoms of economic crisis escalating rapidly owing to the contradictions inherent in the process of capital accumulation. However, it is true that it has also made the possibility of proletarian revolutions and socialism more imminent and acute.

Therefore, those who are not being able to understand today’s economic crisis properly, neither are being able to understand fascism nor comprehend the revolutionary situations that are constantly taking a recognizable form. Evidently, due to these reasons, our movement is not being able to fully understand and present even its tasks. They often say that during the time of Lenin and later Stalin, imperialism-capitalism was surrounded not only by the increasing possibility of expansion of socialism and proletarian revolutions but also by a wave of national liberation struggles, and therefore it was correct for them to say that global capitalism was trapped in a general crisis. But today, the situation is completely opposite and it is we who are surrounded by the all-round onslaught of imperialism and capitalism. However, such people forget to see how world capitalism today is entrapped in an irreparable and irreversible crisis, created by itself, for which even the rise of fascism is unable to provide a solution, but rather is further intensifying it.

Here, it is pertinent to understand one other thing. Lenin had written about the possibility of fast growth in world capitalism even after it getting trapped in a general crisis. People continue to repeat that statement verbatim today. It is definitely not an indication of one’s prowess, but rather, after an extent, is an indicator of one’s foolishness. We should not be simply repeating Lenin’s words in a dogmatic fashion, devoid of consideration for the specific context and period. Rather, we should concretely analyze his statements in the context of the new types of negative and reactionary factors that have emerged in today’s world capitalism. In other words, we must understand the essence of Lenin’s teachings by placing it in appropriate context. If today, after a hundred years have passed, someone claims that the possibility of rapid growth in capitalism is still present, just as it was during Lenin’s time, then it is undoubtedly incorrect and foolish both.

After the Second World War, the encirclement around imperialism weakened, and immediately after Stalin’s death, it was socialism that got encircled. The victory of revisionism, defeatism, and opportunism in the hitherto Lenin’s and Stalin’s Soviet Union and the infiltration and victory of revisionism and opportunism in communist parties worldwide due to it, the complete disintegration of Communist International, the aspirations and needs of the newly liberated countries’ capitalist class for rapid capitalist development, as well as the ability of capitalism led by the US to write a golden saga of development on the ruins left by a destructive World War on the American model of development of world capitalism (mainly, of negotiations between capital and labour under fixed exchange rate and protectionist policies of Bretton Woods’, and of generating profits for finance capital through welfarism which was based on the organized political power of the working class by which the proletariat was made an accomplice of capitalism) forced the working class for a historical retreat. This can’t be denied by anyone. In developed countries such as of Europe, America, and Japan, various ideological currents of socialism emerged as accomplices of bourgeois ideology to deceive the working class.

It is true that after the Second World War, there was rapid growth in world capitalism, especially in developed countries, and along with it, capitalism also saw more or less fast development in newly liberated countries. However, this very rapid development in developed countries once again pushed them and world capitalism into crisis. The crisis that emerged in 1970s was completely different from the previous crises, including even the minor crises in 1950s and 1960s. This crisis was different especially in the sense that it created obstacles in the traditional path of capital accumulation. Its biggest case in point is that even after the defeat of socialism and communist parties concretely all over the world, this crisis, once it manifested in 1973, never went away. We have discussed this earlier as well.

The Covid-19 pandemic has significantly deepened the economic crisis, persisting generally since the 1970s and particularly since 2008-09, which was already irreparable and stable. After the end of the pandemic, signs of growth emerged, generating some enthusiasm and hope among the bourgeoisie. However, as was expected, the expectations turned out to be short-lived. Reports in 2023 indicate that reality was quite the opposite. There are announcements being made of the collapse of any prospects for long-term growth, particularly in reference to leading and advanced economies. In addition, it is being said that countries with developing economies are also headed towards a grim situation soon. Among the top think tanks of capitalism, there is a consensus that the collapse of any prospects of long-term growth has become a general and stable phenomenon. Global Economic Outlook (of The Conference Board) sees them in a collapsed state even in the 2030s.

Actually, the continuation of falling rate of profit for so many years and the prolonged period of depression have proven to be lethal. It has pushed the world economy into a prolonged cycle of sluggish development. Putting profits back into the production sectors as investment has become difficult. Due to limitations of capitalist relations, the continuing process of capital accumulation and thus the continuous increase in productivity, after reaching a peak, has reduced the amount of living labour in commodities to such an extent that the further process of capital accumulation has created a situation of destruction of value, laws of value and labour. That is, the very foundation of capitalism on which it has stood and ruled from the beginning is on the verge of ending. Ben Reynolds writes in his book ‘The Coming Revolution’ – “In a segment of his notes called “The Fragment on Machines”, Marx wrote that the development of technology would push capital beyond the premises of the law of value. As automated machinery became increasingly productive, he argued, direct labor would occupy an increasingly unimportant role in production. Ultimately, surplus labor would no longer be required in the development of wealth and could no longer be applied to produce value. At this point, labor time could no longer serve as the measure of value. Production based on exchange value would break down and the law of value would collapse. By expelling labor from the production process, capital was not building a foundation for its continued development. It was creating “the material conditions to blow this foundation sky high.””

Ben further writes – “This was a remarkable prediction. Marx argued that capitalism would collapse as a result of its own internal development. As the amount of living labor embodied in commodities approached zero, the law of value would no longer be able to function. The collapse of commodity production did not depend on a revolution of the working class. It was as inevitable as the progress of automation and the development of technology itself.” As implausible as this may sound in our own time, when the first “lights out” factories have already been developed, one can imagine how shocking this prediction would have been in the middle of the 19th century.”

Ultimately, this has led to even capital accumulation reaching the point of being disrupted. If living labor in commodities has reached a point of being finished, naturally production of value itself will ultimately be finished. In this regard, we can see and understand from Marx’s words in “On Fraction of The Machines” given in his manuscript “Grundrisse”, in the context of the large-scale automation that has taken place in developed countries today. Marx writes – “The exchange of living labour for objectified labour – i.e., the positing of social labour in the form of the contradiction of capital and wage labour – is the ultimate development of the value-relation and of production resting on value. Its presupposition is – and remains – the mass of direct labour time, the quantity of labour employed, as the determinant factor in the production of wealth. But to the degree that large industry develops, the creation of real wealth comes to depend less on labour time and on the amount of labour employed than on the power of the agencies set in motion during labour time, whose ‘powerful effectiveness’ is itself in turn out of all proportion to the direct labour time spent on their production, but depends rather on the general state of science and on the progress of technology, or the application of this science to production.

“Real wealth manifests itself, rather – and large industry reveals this – in the monstrous disproportion between the labour time applied, and its product, as well as in the qualitative imbalance between labour, reduced to a pure abstraction, and the power of the production process it superintends. Labour no longer appears so much to be included within the production process; rather, the human being comes to relate more as watchman and regulator to the production process itself. No longer does the worker insert a modified natural thing as middle link between the object and himself; rather, he inserts the process of nature, transformed into an industrial process, as a means between himself and inorganic nature, mastering it. He steps to the side of the production process instead of being its chief actor. In this transformation, it is neither the direct human labour he himself performs, nor the time during which he works, but rather the appropriation of his own general productive power, his understanding of nature and his mastery over it by virtue of his presence as a social body – it is, in a word, the development of the social individual which appears as the great foundation-stone of production and of wealth. The theft of alien labour time, on which the present wealth is based, appears a miserable foundation in face of this new one, created by large-scale industry itself. As soon as labour in the direct form has ceased to be the great well-spring of wealth, labour time ceases and must cease to be its measure, and hence exchange value [must cease to be the measure] of use value. The surplus labour of the mass has ceased to be the condition for the development of general wealth, just as the non-labour of the few, for the development of the general powers of the human head. With that, production based on exchange value breaks down…

“Capital itself is the moving contradiction, [in] that it presses to reduce labour time to a minimum, while it posits labour time, on the other side, as sole measure and source of wealth. Hence it diminishes labour time in the necessary form so as to increase it in the superfluous form; hence posits the superfluous in growing measure as a condition for the necessary. On the one side, then, it calls to life all the powers of science and of nature, as of social combination and of social intercourse, in order to make the creation of wealth independent (relatively) of the labour time employed on it. On the other side, it wants to use labour time as the measuring rod for the giant social forces thereby created, and to confine them within the limits required to maintain the already created value as value. Forces of production and social relations – two different sides of the development of the social individual – appear to capital as mere means, and are merely means for it to produce on its limited foundation. In fact, however, they are the material conditions to blow this foundation sky-high.”

Therefore, there is not only a permanent crisis today, but a crisis emanating from the danger of demise of “value”, “law of value” and “labour” etc., which form the basis of capital accumulation, is about to come.

This has created a new situation. In the United States, which is the homeland of finance capital, the share of profits being generated from capital invested in financial sectors out of the total profits has been increasing consistently since the 1980s. The non-financial sectors there, such as manufacturing, have themselves played a role in advancing the financial sectors. Today, the share of profits generated from the financial sector as part of the total profits has increased significantly, accounting for over fifty percent almost. This situation is prevalent in all developed countries. Their economies have undergone near complete financialization, but its grip has tightened over emerging economies as well, implying that even these economies will slow down under the influence of parasitism of finance capital. This has been squarely recognized by World Bank in its report. It’s true that the world economy as a whole has been strangled by the reactionary interests of finance capital.

Take the issue of government debt. The surplus capital, majority of which can’t be invested, is being consumed by the government itself by taking on debt, primarily to finance war expenditures. In addition to that, the policy of persuading the common masses to take on loans for their livelihoods is on the rise. The stranglehold of highly volatile finance capital on the economy can be abundantly seen, in the prevalence of policies like education loans and health insurance instead of allocating provisions in the budget for free public education and healthcare, in using microfinance for poverty and unemployment alleviation, in prioritizing policies that push the economy towards stagflation, abolition of all social security laws, in formulation of various policies for the flow of finance capital, vast expansion of debt markets, stock investments, and real estate businesses that cater to the interests and dominance of finance capital, and the significant expansion of the insurance market. Due to this, not only the real rate of profit but even the volume of profit is declining, while the share of fictitious profits coming through financial channels as part of total profit has increased significantly.

The volume of speculative and fictitious capital and derivatives market in the economy has increased to such an extent through manipulation of market value of shares, that although the financial magnates get huge returns, the small investors are ruined. The direct impact of this is on the sluggish growth of economy, and it’s having an even more pronounced negative effect compared to before. It has given rise to alarming levels of unemployment, destitution and expropriation. There is a significant decline in real wages. Even nominal wages are seeing a decline.

In this way, sufficient capital accumulation today, particularly in developed and advanced economies like the United States, Japan, and Europe, is neither being achieved through the surplus value derived from commodity production, nor through financial profits derived from financial sectors. The limits of both these channels have become evident. In developed and advanced leading economies, the extent of capital accumulation achieved through profit or surplus value derived from commodity or value production is such as if it has reached its peak, beyond which the possibility of capital accumulation seems to no longer exists.

In the 1980s, in a country like the United States, the share of financial profits out of total profits had reached around 15 percent. In the 1990s, it reached around 40 percent of total profits. Similar conditions prevailed in G7 and OECD countries. In the first half of the first decade of 21st century, through the share market, basing on fictitious calculations made up from speculations and expectations in the financial market, the growth of financial speculation and expansion of volume of fictitious capital and derivatives market had taken place to such an extent that its size became several times larger than the total global GDP. [“On the eve of the crisis of 2008-09 AIG had placed $3 trillion in bets, with no assets to cover potential losses. By the peak of this orgy of fake value production in 2007, the “value” of the derivatives market was estimated to be three times the size of the global economy.” (Ben Reynold’s The Coming Revolution… (2018))]

If we want to briefly describe the nature of the crisis looming over capitalist accumulation today, we can say that before the outbreak of the crisis in 2008-09, capital accumulation in developed countries saw growth for some years, basing on profits derived from financial assets and other methods and instruments of the financial market. However, the Great Recession of 2008-09 disrupted everything and the process of growth in capital accumulation based on financial profits came to such a halt that it has not been able to recover properly, remaining disrupted on a large scale even till today. As a result, in developed countries, the process of capital accumulation through both the means, one based on profits derived from value production and the other on profits derived through financial means and channels, which has to keep going as long as capitalism exists, has been severely impeded.

Now, taking into account the development of capitalism and the dominance of finance capital worldwide. In the 1980s itself, finance capital had expanded its empire throughout the world through Structural Adjustment Programs (SAPs). Today, finance capital has established its dominance in all countries and sectors across the world. Even in emerging economies, finance capital has created (or will soon create) a situation similar to that it has created earlier in developed countries. To fully understand this, we need a comprehensive and factual analysis of the periods of the fall of the new global imperialist-capitalism system established post Second World War (a US-controlled Bretton Woods system based on negotiations between capital and labour, in which the rule of finance capital was based on government protectionism under fixed exchange rates and exemption to bargain between capital and labor), and since then to the subsequent fall of the neoliberal system with the outbreak of the 2008-09 crisis (which included globalization, privatization, direct attacks on labour etc., but its primary intent was to overcome the obstacles in the process of capital accumulation based on value production, which primarily involved carrying forward of the process of capital accumulation based on profits derived from financial means and channels), and finally since then to the imperialist-capitalist system of the present day.

Let’s briefly discuss the causes and effects of the abandonment of the Gold Standard. We find that the manipulation of debt and finance (as Ben Reynolds says) became the medium for supporting employment and demand in an artificial manner, as well as sustaining growth artificially. For large-scale production of consumption goods, instead of investment in fixed capital, policy of increasing demand through negotiations between capital and labour was taken; and for dealing with surplus capital, in place of government protectionist policies, a policy of channeling profits and surplus value to government and private debt channels was taken. However, there’s a limit to the debt incurred to address the crisis of surplus capital and the artificial consumption, demand and growth based on this debt, especially when the value of the world’s reserve currency, the dollar, is pegged to the value vested in a fixed amount of gold. The question was: how will the debt be repaid if it does not create any new value? This meant that if the goal is to obtain financial profit based on the speculation and manipulation of debt and finance and that further capital accumulation is to take place based on this and not primarily on value production, then it was clear that first and foremost it was necessary to free the value of the dollar from the value contained in gold, by abolition of the Gold Standard under regime of the Bretton Woods mechanism of fixed exchange rates; and that is exactly what was done, after which the structural barrier vanished or was made to vanish that was being created by inflation (which came as a natural result of the policy of promoting growth based on government debt) before the capitalist state, in the path of incurring debt to sustain growth and ensuring profit of finance capital in the face of continuously falling growth rate.

Debate Through the Eyes of Michael Roberts and His Graphs

If we take the trend of GDP growth and trade growth, then this period of depression in the world economy has been continuing since 2008-09, the factors of which, as mentioned earlier, came into existence in the mid-1990s, i.e., in the year 1996-97. Economist Michael Roberts writes about this in detail. We consider the most important of these factors to be the shift towards the decisive control of finance capital of the world economy. The graph 1 given below shows together the decline in global growth and global trade, so that we can easily get an idea of the whole picture of the world-economy today and hence the magnitude of the current situation.

Additionally, if we look at the falling rate of profit, we can trace the beginning of the current crisis back to the 1970s itself. The graph given below prepared by economist Dipankar Basu (Graph 2), which Michael Roberts presents in one of his blogs, fully confirms this.

The above graph prepared by Dipankar Basu first of all indicates that the crisis has entered a permanent phase of depression and it is explainable on the basis of Marx’s Law of The Tendency of The Rate of Profit to Fall (LTRPF) as its relevant explanation in the present-day world capitalism, both theoretically and empirically. Before going further into this discussion, let us see another graph given below (graph 3) similar to this one prepared by Michael Roberts.

Roberts’ graph above shows the period of 1982 to 1996 as the neoliberal period of recovery of rate of profit. We would like to call this neo-liberal phase of recovery a phase where recovery was due to the financialization of the economy and its decisive shift towards complete control of finance capital during which the process of capital accumulation proceeds on the basis of financial profits. Ben Reynolds writes about this in detail in his book ‘The Coming Revolution: Capitalism in the 21st Century’.

The answer to why the rate of profit increased in this neoliberal phase has been already shown above with the data presented by Ben Reynolds, that a large part of it came from financial channels. This is a question that has been long anticipated and demands a complete explanation. We will try to complete it in the next issue. Also, we should mention here that the internationalization of capital (we must remember the rise of euro-dollar since the late 1950s and also the increase in its international circulation through the Internet) and the decisive shift towards control of finance capital began even before this neoliberal phase of recovery, or according to Roberts, it began during this period of 1982-1996 itself. We should also remember the role of vapour-like capital, a new version of finance capital, in how it led to the collapse of the Bretton Woods institutions along with progressively moving forward to take control of the world economy. Thus, the recovery of rate of profit in the neoliberal phase was definitely a different kind of recovery, largely driven by the dominance of finance capital and the decisive shift towards the dominance of finance capital over the world economy. This means, this era’s capital accumulation includes the story of an era of financial profits taking the lead role. It also gives us a concrete understanding of the role of finance capital in the post-1982 period.

Moreover, the answer to what caused the rate of profit to rise in the neoliberal phase, though much moderately in comparison to the peak it rose to in the mid of 1960s, is provided by Michael himself. He says that a part of the reason that caused the rise in rate of profit in neoliberal phase is the profit coming from financial sectors or unproductive sectors. In the first half of 1990s, to summarise, a decisive shift in the rise of financial sector and the profit coming from this sector came and engulfed the world economy dominated by G-20 countries. Having reached a peak point, which is not a peak in comparison to the mid-1960s peak, the rise or a decisive shift towards the tendency of rate of profit coming from financial sector got matured and then boomeranged i.e., this maturity itself finally pushed the world economy into another new and long period of depression, which Roberts believe began in 2008-09.

The fact is that the recovery in rate of profit had acquired a predominant tendency to effectively come from the financial sector (unproductive sector) before ”the fall of globalisation and neoliberal phase” which is said to have occurred in, most probably, the last years of 1990s. Robbert Michael himself admits it. He writes –

“However, during the neo-liberal period, the US rate of profit based on the global data (which does not distinguish productive and unproductive sectors) rises much more than the rate of profit on just the non-financial sector using the Basu-Wasner calculations. That suggests that the neo-liberal recovery in profitability was mostly based on a switch into the financial sector by capital – another explanation for the fall in productive investment exhibited in the US in that period.”

Roberts further writes –

“Basu and Wasner have also produced a profitability dashboard for the rate of profit in the US which distinguishes non-financial corporate profitability from corporate profitability. I compared the Basu et al (global) results for the US rate of profit against their results for the US non-financial corporate rate of profit. Both series follow the same trend and turning points (see graphs 2 and 3). So, the divergence at this level is not a significant problem.”

Graph 4 given above, further proves the point that the US rate of profit on the basis of extended PWT fall down having hand in gloves with the fall in non-financial rate of profit, along with this ”shown” and open secret discovery that there is a gap between the two, the US overall rate of profit being on the higher side than that of the rate of profit of the non-financial factor, about which, I have already quoted Michael saying that ”the neo-liberal recovery in profitability was mostly based on a switch into the financial sector by capital – another explanation for the fall in productive investment exhibited in the US in that period.”

So theoretical presentation as well as empirical evidence both have come on the surface with the availability of quality data and database. So, the predominant logic in some communist circle that if we hold responsible the dominance of or shift towards financialisation of world economy for the present bad shape of and doomed world capitalism, it goes against the Marx’s law of LTRPF is proved incorrect.  It rather leads the LTRPF to its logical goal i.e., the dead end for capitalism or the arrival of the period of irreversibility of falling rate of profit in the form of Long Depression with some mild and temporary recoveries coming now and then or few and far between, forming the lower and lower peaks on the down slide road.

Most of the counteracting factors that Marx discussed in his Capital Volume III have been shielded and the remaining are getting more and more shielded due to the uncontrollable dominance of finance capital. It will lead to or rather it has all the signs that say it has already led to, a perilous dead end or a black hole where world capitalism had entered, though dialectically. The current period of long depression is like a very long and unending downslide tunnel having no sign of any light whatsoever, or whatever light remains is fading fast. Actually, here we should read Michael Roberts’ ‘Contradictions in the 21st Century Capitalism’, Marx’s Grundrisse (Fractions of the Machines) and Ben Reynolds’ ‘The Coming Revolution’. In his given book, Ben Reynolds writes – “As economist Greta Krippner has shown, financial profits assumed an increasingly dominant role as a portion of all US profits from the mid-1980s onward. In 1985, financial profits only accounted for around 15 per cent of US profits. By the mid-1990s, profits from FIRE investments surpassed manufacturing as the largest share of corporate profits in the US economy, reaching over 40 per cent of the total before 2008. By contrast, profits from the service industries -the main source of employment in the post-industrial economy- never exceeded 10 per cent.”

So, we have to agree that the easiest, quickest and predominant role in acquiring profitability or maintaining a rate of profit based on financial sector during the period post-1982 period of neoliberal phase has changed the whole scenario of world capitalism, saturated the economic situation of the world in a manner from where there is no possibility of reversal. The revival of rate of profit based on non-financial sector has now become impossible and dismal. And this doesn’t go against LTRPF. Rather it does the opposite. It leads LTRPF to its logical goal where we rightly conclude that bourgeois system has lost every hope of revivability that was once inherent in it. 

So, we conclude that the theory of financialisation of world economy, that most probably took place decisively in the neoliberal phase, doesn’t topple LTRPF. There is no theoretical hitch in saying that it is the progressive financialisation of the economy that has led to the present-day hopeless condition for capitalism. We faced no difficulty in establishing it theoretically but it is true that we did have to face the lack of empirical evidences. Now we have that. So, it will not be much long before we finally come out with the conclusion that the world capitalism has entered into an unending phase of Long Depression in the manner that has been said above.

We also conclude that no series of continued recessions, war, destruction, bankruptcy will ever lead to ”clustering” of economic developmental or growth factors that would one day end this Long Depression. Only a hugely destructive world war, like the WW II (which will possibly be nuclear), can do this. But it does not seem likely, because such a war will also destroy the paradise of the financial capitalists and the richest people in the world, because today there is a danger of the 3rd world war turning into a nuclear war, which will destroy them. This is troubling even those who are responsible for bringing the possibility of war closer, i.e., the magnets of finance capital. This is the most likely outcome or scenario in the face of Russia-Ukraine war and Putin’s open nuclear threat mongering which, as said earlier, has the potentiality of endangering and putting at risk the big capitals’ heavens too. So, what is possible is an undecisive though cut-throat, long drawn and tiring World War with a lot of wear and tear for already tottering world capitalism and its growth. The present international geopolitical situations and rivalries between Russia-China and the Anglo-US imperialism in the main throws this likelihood only. Aiming to defeat one in an undecisive world war means that there will be no final victory for any of the rival groups. So, the old method (involving world war) of recovering from long growth fatigue is now not going to work the old way. 

Where will this scenario lead to, finally? Does it give us any hope to think that the world capitalism will ever recover from the ongoing Long Depression? We find an answer in an emphatic NO.

Data presented by ‘The Conference Board’

The growth outlook released by ‘The Conference Board’ for the next decade also proves that what is being said above is completely true. It has released a growth outlook till 2035 for countries all over the world. We find that not only the leading and mature economies of the world are in depression, other economies are also going to become like them, that is, they will also end up in depression sooner than later. It is also evident that the badly damaged health of world capitalism is not going to recover in the near future.

 It is true that these institutions are not able to hide this naked truth and hence are ‘openly’ admitting it. Although it is also true that they are still playing hide and seek regarding some facts and conclusions. However, it is true that they are forced to be more careful than before. That’s why the American research organization ‘The Conference Board’ in its Global Economic Outlook Report (March 2023)[1], first wants to present a rosy picture of the world-economy. It says –

“Global real GDP growth should pick up steam in 2024 to 2.5 percent and be more evenly distributed among regions. Tailwinds to growth in 2024 will largely come from fading shocks related to the pandemic, elevated inflation, and monetary policy tightening. However, growth rates in 2024 and beyond are likely to be below the prepandemic trend … The 10-year economic outlook signals a prolonged period of disruptions and uncertainties …” (bold added)

This quote is a fragment of the same paragraph of the same report but the contradiction or difference in the beginning and end of the paragraph (in bold) is clearly visible. There is hope in the beginning part, but latter, as it discusses the projection for the next decade, the truth comes out. The despair of objective truth begins to appear through words, as in the last sentence of the quote, which openly talks about the long duration of the crisis: “However, growth rates in 2024 and beyond are likely to be below the pre-pandemic trend …The 10-year economic outlook signals a prolonged period of disruptions and uncertainties …”

See the table (graph 5) given below, which presents an outlook on the annual average real GDP growth of important countries across all regions till 2035. This table, which is a part of the Global Economic Outlook, presents not only the global real GDP but also the real GDP growth of different countries in various sectors (remember, including factors like productivity growth and employment growth) for the next decade. It provides an aggregated picture of what can be expected or anticipated regarding the growth, expectations, or possibilities, etc. The main contributors to this are the US (1.6 per cent), France (1.0 per cent) and Germany (1.0 per cent). The report card for EMDEs is: 3.6, 3.8, 3.6, 3.4 (all in percentage). India’s report card is also similar i.e., 5.0, 4.8, 4.7, 4.3 (all in percentage) respectively. See also China which is 5.1, 4.7, 4.4, 4.1 (all in percentage) respectively. Similarly, the global growth rate is 2.3, 2.5, 2.6, 2.6 (in all percentages) respectively. Here we can look at the forecast for the growth rate of mature and leading economies, emerging economies and especially China and India from 2023 to 2024, 2024-29 and then 2030-35[2]. The report card of mature economy is 0.7, 1.2, 1.4, 1.3 percent respectively. (See Graph 5)

World Bank and other leading institutions of global finance capitalism believe that there is no hope of change in this situation for the next decade. But they still do not accept the real fact that since the decisive control of finance capital (since the mid-1990s, i.e., since 1996-97) and especially since the first decade of the 21st century, the hopes of revival or resuscitation of the world economy are completely over or destroyed. While this is the present reality in the matured and advanced economies of Europe, America, Japan and China, but even for countries with Emerging Markets and Developing Economies (EMDEs in short) this will soon become a reality in the near future. However, these reports express confidence in EMDEs (capable of keeping the wheel of global capitalism spinning), but immediately after such statements, they start mentioning the obstacles that are arising firstly, due to the steady and sustained decline in growth in the matured and advanced economies and secondly, due to the severe and ruthless financial situation arising as a result of the extreme levels of profiteering and arbitrary behaviour of stone-hearted finance capital being nurtured in these sluggish economies. Then the question arises, that on what basis are EMDEs being trusted? How will such badly tottering emerging economies save the sinking boat of global capitalism? Actually, all these are talking points and there is no substance in them. As a solution, these reports suggest that countries with developing economies should be reformed rapidly — meaning all those same pro-capital (actually pro finance capital) reforms to be applied there that have ensured the decisive triumph of finance capital in the economies of all countries (from the advanced to emerging or low-income countries) and have consolidated the economic and financial crises that emerged anew after 2000. There is nothing surprising in this. Scholar economists and researchers of capitalist think tanks thrive on the crumbs of world-capitalism. So, there is nothing surprising that they will try to revive the dying and decaying world capitalism till the last breath. If nothing else, they will leave no stone unturned to prove the dead alive.

A detailed analysis of the Global Economic Outlook reveals the following trends:

1) Matured economies will experience a significant decline in growth. The growth rate is projected to decrease from 2.7 percent in 2022 to 1.3 percent in the period of 2030-35. This decline will persist throughout the decade with minimal improvements, indicating a situation of slow and downward growth.

2) EMDEs (Emerging Market and Developing Economies), which were expected to drive the global economy according to ‘The Conference Board,’ will witness a sharp decrease in their growth rates. The growth rate for EMDEs is estimated to decline from 6.9 percent in 2022 to 3.4 percent in the period of 2030-35, which is less than half of the initial rate. Moreover, this decline will be consistent throughout the decade.

3) India’s growth rate will follow a similar pattern, decreasing from 6.8 percent in 2022 to 4.3 percent in the period of 2030-35. The decline in growth will continue year after year throughout the decade.

4) China’s growth rate is projected to be 5.1 percent in 2023, an improvement from 3.1 percent in 2022. However, it will gradually decline over time and eventually settle at 4.1 percent in the period of 2030-35, which is even lower than India’s projected growth rate.

Can any hope of development in the world capitalist economy be derived from these figures, which have been released by a well-known research institution of the American capitalist class (The Conference Board)? Any person who is not intoxicated will say that there is no such hope. But ‘The Conference Board’ claims otherwise. It believes that there are tailwinds in growth in emerging economies, including India and China, albeit in comparison to developed countries. The reason it cites is the lesser pressure of inflation in these countries. Based on this, it claims that the purchasing power of people in Asia will remain higher, resulting in increased economic activities and thus leading to development in Asian countries like India. Is this true? Let’s examine it with the example of India.

The Risk of Inflation-Induced Economic Slowdown in India

Let’s try to understand the reality through a reference to an article by RBI Deputy Governor M.D. Patra published in ‘The Hindu’ on March 22, and then through an editorial article in the same newspaper titled ‘Spectre of Stagflation’ published a few days ago. The newspaper refers to a section of an article published in the official bulletin of the Reserve Bank of India, quoting officials of the RBI, led by Deputy Governor Michael D. Patra, stating that “unlike the global economy, India would not slow down – it would maintain the pace of expansion …”. However, in the same bulletin, despite all the hopes, the significant inflation is presented as a major concern – ” consumer price inflation remains high and core inflation continues to defy the distinct softening of input costs”. Meaning, initially, they deny the risk of a slowdown in India while acknowledging the global economic slowdown in major economies. But later, they highlight the challenge of dealing with inflation (both headline and core inflation) on the domestic front, emphasizing that “markets are bracing for tighter financial conditions.” They further state, “Fear is creeping back.” Thus, the situation for the architects of capitalism has become that of the saying, ‘Can neither spit nor swallow.’ In reality, the danger they fear is the risk of inflation-induced stagflation, which the entire world is facing and where the uncontrolled whims of finance capital play a direct role. In this depression, the public and the world capitalism both will have to bear the consequences of the way they are playing a bloody game by creating strict financial conditions and circumstances, solely for excessive profits. The public is suffering, and the suffering will only increase further. However, it is also true that global capitalism will soon find itself in a completely moribund state in terms of growth. In the next decade, how much growth and development will take place in the Indian economy is evident from the Global Economic Outlook on real GDP growth, which shows that India’s economic development in 2035 will be more than one and a half times lower compared to today.

If there is talk of “inflation-induced crisis”, we should see the editorial on March 20th published in ‘The Hindu’ titled “Spectre of Stagflation”, whose just second heading was, “Higher credit costs may further dampen consumption”. It went on to say, “The latest global financial developments and recent economic data in India are together raising fears that several major economies worldwide, including India’s, may be headed for a spell of debilitating stagflation.” The above editorial uses warning-filled strong words to emphasize that high credit costs can further dampen consumption, as a result of the “latest global financial developments and recent economic data in India”. This means that the whims of financial magnets have created this fear that “several major economies worldwide, including India’s, may be headed for a spell of debilitating stagflation.” (Bold is ours).

The editorial issues a clear warning that India can get stuck in the grip of stagflation[3].  According to the editorial, contrary to the Reserve Bank of India’s previous estimate, inflation has consistently remained high in India[4].  It was estimated to reach 5.57 percent, i.e., to stay below the threshold of 6 percent, but on the contrary, it is predicted to be above 6 percent in the last quarter of 2022. Whether this figure presents an accurate picture or not is under skepticism, as expressed by us and others like us.

The figures from the NSO indicate that the retail inflation rate was 6.44% in the last week of February 2023, while it was 6.52% in January 2023. The editorial states that both these figures contradict the Reserve Bank of India’s previous estimate (5.7%) for the final quarter of 2022-23. The editorial argues that in order for the RBI’s estimate to be accurate, the retail inflation rate will have to fall by up to 4.1% in March. In other words, the repo rate would need to decrease by more than 230 basis points compared to the current level. In other words, it suggests that there will have to be a significant and rapid softening in retail prices. Therefore, the situation is so explosive that no one has confidence in any forecast regarding any factor responsible for an increase in the growth rate. The concrete reason behind this, the editorial says, is that core inflation has remained at 6.2% for the past three months. Not only that, despite a 250-basis point increase in RBI’s benchmark interest rate, core inflation has been hovering above or around 6% since May 2021. There has been a consistent increase in credit costs. Additionally, there has been a decline in both consumption and demand. In this way, it is impossible to prevent an increase in prices without jeopardizing the expectation of high growth rates. When core inflation remains high, reducing retail inflation becomes even more challenging. That’s why a strict monetary policy is deemed necessary. In the Monetary Policy Committee meeting held in the first week of April (on April 6, 2023), although no steps were taken to increase the inflation rate, it was not reduced either. However, Governor Shaktikanta Das, along with the need to keep a close watch, has mentioned the possibility of implementing even stricter monetary policies in the future if necessary[5].  This means that the likelihood of the problematic situation of getting stuck in stagflation remains. In other words, the spectre of stagflation has not gone far away. Moreover, it is particularly concerning that despite a marginal decline of 5-basis points in the Composite Food Price Index last month, there has been an increase in the prices of food items included in the food basket. It is known that the four main categories of food items in the food basket, responsible for more than one-fifth of the Consumer Price Index, have played a significant role in the annual increase in inflation as well as the subsequent progressive tightening. In February 2023, inflation in grains (which are our staple food items) and their products increased up to 16.7%, while the headline inflation reading[6] for milk and its products also rose by 9.65%. Similarly, inflation for fruits increased to 6.38% (from 2.93% in January).

Therefore, there are significant risks and dangers in the path of growth momentum on the domestic front. These risks become quite crucial considering the vulnerabilities of developed economies to recessions. If there is a failure in maintaining price control, it may necessitate the adoption of a stringent monetary policy under the pressure of financial capital, leading to the emergence of stagflation. This, in turn, is bound to result in a decline in the growth rate due to the recent negative developments in the global financial situation. However, the said editorial, lets out a sigh of relief by holding the GST, fuel prices, supply, etc. for exacerbating the crisis, while the overall economic perspective is worrisome. The truth is that today, the recession and crisis primarily stem from the dominance of finance capital and the anarchy caused by it. The excess of capital has been replaced by the excess of financial capital. The colossal size and global hegemony of finance capital has engulfed the entire world in its clutches.

However, the editor of ‘The Hindu’ is not alone in his fear of the crisis of stagflation. The capitalist think tanks and institutions of the entire world are fear-stricken. By presenting alarming figures of projected development until 2035, they are expressing this very fear. It is a different matter though that they are still reluctant in acknowledging this naked truth that the entire world has turned towards an irreversible recession. We need to fully understand that the darkness in the entire universe will not disappear by the emergence of a single bright spot (as India is being portrayed today) for a few moments. 

Overall, we want to say that world capitalism is suffering from a never-ending economic crises and depression, and we are currently experiencing a prolonged economic depression. The economic factors that have given rise to it were already evident in 1997. To be more precise, its roots can be traced back to the economic crisis of 1973-74, which marked the end of the golden age of capitalist development. Therefore, the foundation of today’s long depression is very deep, and hence, all the measures taken to end it have been rejected in practicality and proven unsuccessful one by one. In 1997, the average rate of return on capital started declining in the leading, advanced, and major capitalist economies. We find that despite some minor improvements (mainly driven by economic slowdown and heavy financial injections), the profitability of capital has reached and is maintaining its lowest levels yet. Furthermore, we also believe that the revolution led by the working class against capitalism and fascism is imminent. Therefore, among the tasks presented before the working class and its leading forces, the most important one is to take up tasks keeping this revolutionary situation in mind. First and foremost, it is imperative to establish a revolutionary party as the general headquarters of the working class’s armies, and in its absence, to construct a core and centre of the anti-fascist revolutionary front. Thirdly, we consider fascism’s global occurrence to have a relatively permanent character similar to the permanent nature of crisis of global capitalism. Due to this, there are differences between today’s fascism and the fascism of the 1930s, and therefore it is necessary to make certain distinctions in the fight against it. Similarly, we also view the Third World War to be of an indecisive and inconclusive nature, about which we will discuss further. Altogether, due to these reasons, we foresee a rapid end to the future of capitalism and the imminence and proximity of revolution despite the weaknesses of revolutionary forces. The permanent nature of the crisis of capitalism and fascism are also strengthening the subjective forces because it, by intensifying the objective factors of the end of capitalism, is creating such a situation which is helpful in making the subjective forces morally and then materially stronger.

[This article has been translated from the original article named ‘विश्व अर्थव्यवस्था का संकट, फासीवाद एवं विश्व युद्ध’ published in Yatharth (Apr-May 2023 Joint Issue). Click here to read it.]

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[1] It is necessary to mention that the organization ‘The Conference Board’ who prepared this report, includes the contribution of total factor productivity in the GDP growth. Marxist economists (such as Michael Roberts) have a different opinion on total factor productivity. Roberts says it is a favourite concept of neoclassical economists but considers it a false measure, perhaps because it also includes the contribution of newly invented management techniques. It is evident that this leads to a shift towards higher growth rates, which can help mitigate the decline. Michael Roberts writes – “Neoclassical economics likes to use a more sophisticated measure of productivity called total factor productivity (TFP). This supposedly measures the productivity achieved from ‘innovations’. Actually, this is just the residual from the gap between real GDP growth and the productivity of labour and «capital» inputs. So, it is really a rather bogus figure.” However, even after including these figures, there doesn’t seem to be any glimmer of hope in the data. Michael Roberts, in his article “The Contradictions in 21st Century Capitalism,” mentions the earlier reports of The Conference Board. He writes – “But taking it at face value, the US Conference Board finds that total factor productivity dropped to zero for the global economy in the 2010, indicating «stalling efficiency in the optimal allocation and use of resources» (The Conference Board, 2022). It is called total factor productivity (TFP) and shows how much of the growth in the productivity of labour is due to new technology and management innovations. TFP growth has been in terminal decline in the major economies (Figure 5). [Revista de Estudios Globales. Análisis Histórico y Cambio Social, 1/2022 (2), 15-37 21, The contradictions of 21st century capitalism]”

[2] Let us leave the data of previous years as they are presented with slight dishonesty. For example, the growth rate between 2008 and 2011 is not included because then the average growth rate would have been different. Similarly, the growth rate for 2020 is also not included. In other words, this table is based on the intention of not portraying the economy with a weak average growth rate, which is the reality, and instead tries to present a slightly healthier average growth rate. However, we don’t mind it much because the truth of the actual situation will still become evident. And this is being reflected here as well.

[3] ”…the rising uncertainty about the growth momentum sustaining in the face of the heightened risks of a recession in advanced economies raised the risk that higher credit costs may further dampen consumption. Yet failure to engender price stability could lead to stagflation” – the editor writes.

[4] Repo rate was not reduced even in the recent meeting of MPC. 

[5] The RBI Governor, Shashikant Das, said – ”It is now necessary to assess the accumulative impact of actions taken so far.” He continued in the same breadth – ”So, the job is not yet over” meaning thereby that ”the MPC (Monetary Policy Committee), however remains watchful and won’t hesitate in taking further actions in its future actions” – ‘ET Now’ wrote on April 6 2023. 

[6] calculated cost to purchase a fixed basket of goods.