Global economic crisis:

The failure of capitalism

by Gamini WARUSHAMANA

The global economic crisis and the Euro zone crisis cannot be explained as being the so-called 'cyclical nature' of the capitalist economy. It is a systems failure, the failure of the capitalist system.

In the present scenario, the living conditions of the working class are deteriorating, the deputy general secretary of the World Federation of Trade Unions (WFTU), H. Mahadevan told Sunday Observer Business.

Mahadevan was in Colombo last week to participate in the Asia Pacific regional meeting of the WFTU.

The WFTU in Greece is the oldest international trade union. It was set up in 1945 in Paris and it was the only international trade union at the time. After two or three years the US and British trade unions broke away and formed the International Confederation of Trade Unions (ICFTU).

WFTU has been working with the objective of propagating socialism and its struggle against imperialist exploitation of the working class in all parts of the world. Today, the organisation represents over 80 million workers in about100 countries.

Following are excerpts of the interview.

Capitalism has failed and the economic crisis is the expression of this failure. The Washington Consensus institutions have continuously failed over the past five decades. There were 124 banking crises during this period in the world in addition to the regional economic crisis.

The Latin American crisis in the 1980s, the Scandinavian, Japanese and East Asian crises in the 1990s, the 2007 sub prime crisis, the global financial meltdown in 2008-2009 and again the present day Euro Zone crisis apart from the many exchange rate crises faced by countries and many oil shocks are examples.

Jobless recovery

After the global financial crisis in 2008, there was a recovery but it was a jobless recovery. Millions of youth come into the labour market every year but this capitalist economic system cannot create jobs for them. Unemployment and underemployment has become a serious issue.

This situation was created by neo liberal globalisation. Under this system the son gets shoes cheaper but the father loses his job.

Today under neo liberal globalisation, finance capital plays a significant role and it is controlled by the International Monetary Fund (IMF), the World Bank (WB) and the World Trade Organisation (WTO).

These three organisations are controlled by multinational corporations and thereby they control the global economy. They dictate terms to other countries, particularly to the developing countries.

Their objectives are: to create one world market, one corporate universe and create maximum profit. This is their motto and they have slogans such as liberalisation, privatisation and globalisation.

These are the 'medicines' prescribed by the 'three doctors' of neo liberal capitalism - IMF, WB and WTO. But after having these medicines in quantity, the illness has not got cured but increased many fold.

Free market is not a fair market

According to UN reports, the per capita income of half the world's population is less than $2 per day and the purchasing power of the people is declining in terms of real wages. Developed countries should contribute 0.7 percent of their GDP to official development assistance but this is not done by many of them. They give only loans and get back the money. They do not help.

Corporates control governments everywhere and multinational corporations are richer than some nations. Out of the 100 largest economic entities, 50 are transnational corporations. This is the world created by neo liberalism and free market.

The free market is not a fair market. The system is creating monopolies. Technological monopolies are being created by technology companies. The world financial system is controlled by financial monopolies. Access to natural resources too is increasingly being controlled by monopolies. The media and communication sector is also under monopolies. Today in all these sectors companies play a more unequal role than before.

Philadelphia Declaration of the ILO

Foreign Direct Investments (FDI) and financial investments are coming into developing countries but they lay conditions for liberalisation of markets. Labour reform is one and they promote subcontracting and hire and fire policies by reforming labour laws.

Unequal treatment of migrant workers is another issue. These policies violate the Philadelphia Declaration of the ILO – 1944, which states:

(a) labour is not a commodity;
(b) freedom of expression and of association are essential to sustain progress;
(c) poverty anywhere constitutes a danger to prosperity everywhere;

(d) the war against want requires to be carried on with unrelenting vigour within each nation, and by continuous and concerted international effort in which the representatives of workers and employers, enjoying equal status with those of governments, join them in free discussion and democratic decision with a view to the promotion of common welfare.

Even after six decades, these are relevant to the well-being of the working people. Organisations such as the ILO are not powerful today and many countries in the world, including India have not yet ratified this convention.

Inequality is widespread under this capitalist economic growth. For instance net wealth of the 40 richest persons in India is $170 billion while top 10 of them account for $112 billion. Top executives of corporates too get huge salaries and there are 578 executives who get an annual salary of Rs. 1 crore. Out of them 230 executives get Rs. 2 crore, while millions are living without jobs and others working in sweatshops on contract under the system of subcontracting.

The reality of the Indian people has been shown by the Prof. Arjun Sengupta committee report and it said 77 percent of the Indian population subsist on Rs. 20 or less per day. Around 50 percent of the world's hungry live in India, 42 percent of Indian children under five years of age suffer from malnutrition. This is the economic miracle the Indian capitalists are boasting about. This system cannot meet the needs of the people but meets the greed of the corporates.