Manufactured Crisis Over US Debt Ceiling Sets Stage for Bipartisan Assault on Social Security and Medicare

[AP Photo/Mariam Zuhaib]

By Barry Grey

Republished from World Socialist Website.

It is now one week out from the “X-date,” June 1, when the US will purportedly default on its debt obligations, triggering a “catastrophe,” unless the Democrats and Republicans can agree on a bipartisan deal raising the debt ceiling in return for brutal cuts in social programs on which tens of millions of working people rely.

Behind the mutual recriminations between the two capitalist parties and the stage-managed crisis negotiations, there is a basic agreement: All of the social gains made by the working class in the course of more than a century of struggle must be wiped out to pay for the drive by the American ruling class to remove, by force of arms, Russia and China as obstacles to US hegemony, even if it means triggering a nuclear war.

The social cuts implemented in an eventual debt limit/budget deal will be only a down payment. They will set the stage for an assault on the core entitlement programs—Medicare and Social Security—extracted from the ruling class in the class battles of the 1930s and 1960s.

President Joe Biden and House Speaker Kevin McCarthy of California walk down the House steps Friday, March 17, 2023, on Capitol Hill in Washington. [AP Photo/Mariam Zuhaib]

On Wednesday, with the talks between President Joe Biden and House Speaker Kevin McCarthy having hit a “speed bump” and the financial markets indicating increasing nervousness, the Washington Post published an editorial backing Biden’s proposal for a two-year spending freeze and $1 trillion in cuts over the next decade. At the same time, the newspaper owned by Amazon billionaire Jeff Bezos reiterated its demand that both parties tackle what it deems the real problem, the cost of the mandatory programs that stand outside of annual discretionary spending—Social Security and Medicare.

“Mr. McCarthy keeps claiming the nation has a ‘spending problem,’” the Post wrote. “The part he leaves out is the spending problem is driven largely by the fact that Social Security, Medicare and health-care costs are shooting up. Yet House Republicans and Mr. Biden don’t want to touch Social Security and Medicare.”

The editorial is part of an expanding wave of media commentary on the need to “reform” or privatize these core social programs. On Sunday, CNN’s “State of the Union” program featured Louisiana Republican Senator Bill Cassidy, a so-called “moderate” who advocates tying Social Security to the stock market and essentially privatizing it.

“Face the Nation” host Margaret Brennan interviewed congressmen Brian Fitzpatrick, Republican of Pennsylvania, and Josh Gottheimer, Democrat of New Jersey, members of the “moderate” Problem Solvers Caucus in the House. Fitzpatrick declared:

Medicare will run out of money in 2028. Social Security will run out of money in 2034 … until we tackle the mandatory spending and get a handle on our long-term sustainability of our debt and deficit, we’re just playing around the margins.

McCarthy himself spoke along similar lines before his meeting Monday with Biden, while refraining from explicitly targeting Social Security and Medicare. “I don’t want you to think at the end of the day, the bill that we come up with is going to solve all this problem,” he told reporters. “But it’s going to be a step to finally acknowledge our problem and put one step in the right direction. And we’re going to come back the next day and get the next step.”

Biden has already made a large down payment on the new austerity drive with his ending of the national COVID-19 emergency, which has not only increased the risk of infection and death from the ongoing pandemic, but authorized state governments to review their Medicaid rolls in order to terminate people’s benefits. The Kaiser Family Foundation estimates that between 5.3 million and 14.2 million people will lose Medicaid coverage just through that process alone.

Graph showing decline in tax receipts even as corporate profits rise. [Photo: This graph was published by the Center for American Progress. (online)]

Far from increased social spending driving the rise in the national debt, it remains sharply down, when adjusted for inflation and population growth, from the levels preceding the bipartisan Budget Control Act of 2011. That bill, which followed the financial collapse of 2008, the multitrillion-dollar bailout of Wall Street, and the imposition of wage and benefit cuts and wage tiers under the auto restructuring overseen by the Obama administration, marked the first use of the debt ceiling, previously raised as a matter of course, to impose brutal attacks on the working class.

In all the media coverage, no explanation is given as to the real causes of the soaring national debt or why it is the working class that must pay the price.

What are the real sources of the increase in the national debt to its current $31.4 trillion?

• Military and war spending: The United States spent between $4 trillion and $6 trillion on the 20 years of war in Iraq and Afghanistan, according to a Harvard analysis.

  Last year alone, the Biden administration allocated $113 billion in arms to Ukraine and this year proposed a record $1 trillion Pentagon budget. Last week at the G7 summit in Hiroshima, before returning to the US and holding budget talks with McCarthy, Biden announced an additional $375 billion in arms for the right-wing puppet regime in Kiev.

• Tax cuts for corporations and the rich: The George W. Bush administration enacted two rounds of tax cuts, overwhelmingly benefiting the wealthy. The Obama administration made them permanent in 2012. That has cost $4 trillion over 10 years, according to the Congressional Budget Office.

  The Trump tax cut of December 2017 handed over $2 trillion to the corporate elite, including the reduction of the official corporate tax rate to 21 percent. As Biden noted in his press conference last Sunday from Hiroshima, 55 US corporations that made $400 billion last year paid zero in taxes, and US billionaires pay an average tax rate of 8 percent.

  According to the US Bureau of Economic Analysis, corporate profits rose by 20 percent between 2014 and 2020, while corporate tax receipts fell by more than 60 percent.

  In 2018, according to the Organization for Economic Cooperation and Development (OECD), corporate tax revenue as a share of GDP in the US, at 1.1 percent, was lower than every other member country except Latvia.

Graph showing the US has the second-lowest percentage of corporate tax revenue as a share of gross domestic product, just above Latvia. [Photo: This graph was published by the Center for American Progress. (online)]

• Bank and corporate bailouts: The Bush and Obama administrations enacted $2 trillion in emergency measures following the subprime mortgage collapse in 2008 and the ensuing Great Recession. In addition, the Federal Reserve funneled trillions more to Wall Street through its program of “quantitative easing.” Meanwhile, tens of millions of workers lost their homes and life savings as a result of the criminal practices of the bankers.

  The Trump administration, with the support of the Democrats in Congress, allocated $3.4 trillion in the March 2020 CARES Act to unfreeze the Treasury bond market and rescue banks and corporations from the impact of the COVID-19 pandemic. The Fed added trillions more through its expansion of “quantitative easing.”

War mongering, greed, and criminality have impelled the policies pursued by the parasitic American ruling elite and driven up the national debt.

Fascism and the Politics of the Past

By Yanis Iqbal

Fascist groupings are in the ascendant throughout the world. While some are emerging from the political peripheries - slowly but steadily gaining traction on the terrain of ideological hegemony - some have already taken the reins of state power. This new wave of fascism poses an important question: why did the intensifying crisis of neoliberalism strengthen the Right instead of revitalizing the Left? The post-1990s trajectory of austerity and immiseration should have bolstered the appeal of progressive forces among the masses. However, what we have been witnessing is the growing hold of extremely conservative ideas on the proletariat.

Non-synchronicity

Ernst Bloch, a German Marxist philosopher, witnessed a similar situation as the left-wing camp in his country was trounced by Nazism. His response to this contradictory development resonates with the current conjuncture. Bloch deployed the concept of “non-synchronicity” to understand fascism, writing, “Not all people exist in the same Now. They do so only externally, by virtue of the fact that they may all be seen today. But that does not mean that they are living at the same time with others”. There are social strata that have been left behind in the process of modernization. These layers express their dissatisfaction with the present by looking back, towards a better past.

In other words, fascism draws from the future in the past, calling up mythologized forces, responding to modern disenchantment, joining a romantic anti-capitalism - roots, soil, homeland - among rural strata with fears of decline and genuine impoverishment among middling urban strata and a youth out of step with the capitalist drive toward abstraction and immateriality. Fascism, therefore, expresses an authentic longing for something different. It creates new figures, synthesizing various elements into hybrid structures, using materials from elsewhere - fairytales, myth, kitsch, Romanticism, occultism and magic, masculine qualities (strength, openness, decency, purity), as well as vitalist philosophy (will, life, creation, instinctive knowledge).

The palingenetic ideals of fascism serve transhistorically as a medium for processing every historical present. The subjects of fascism are called upon to leave a shameful normal life and to enter a proud life of bravery. It is important to note that pride and shame are fundamentally related. Feeling pride involves a realization of the ideals that define the faults and errors that cause us to feel ashamed. Shame collapses the “I” with the “we” in the failure to transform the social ideal into action, a failure which, when witnessed, confirms the ideal, and makes possible a return to pride. In the fascist case, the return to pride depends on the positioning of the subject as someone who confesses to being part of the imminent chaos and decline. Thus, the enactment of shame functions as a means of returning to pride. This return involves correcting wrongdoings by defending the survival of the nation, the people and the race.

Destroying Public Discourse

Fascism’s nostalgic idealizations are always empty. And yet, we know that the emptiness of the mythically constructed past that the Right holds out as a lost version of a better life as well as the emptiness of its promises with regard to the contradictions of capitalism are precisely the point of the underlying strategy. Empty times and spaces are effective spaces for the creation of the fears, fantasies, and hopes that the Right seeks to cultivate. Vague references to a better past ask the audience to fill in the gaps in content and logic with their own nonsynchronous projections; a rhetorical model of broad strokes, vague slogans, provocations, and propositions clearly replaced articulated programs. The point is not precision or the communication of actual information but the establishment of spaces in which anomy and anxiety can play themselves out and which can amplify discontent rather than finding answers to it.

The invocation of historically indeterminate imageries has real consequences for electoral battles and discursive struggles. Eberhard Knödler-Bunte argues that the entanglement of fascist ideology in the past turns it into a “depoliticized mass movement.” The “fascist public sphere,” Knödler-Bunte contends, is ultimately nothing other than “a politicized public sphere aimed at real depoliticization.” Hence, fascism operates on an innately contradictory ground - establishing a public sphere that encourages politicization while simultaneously reducing political dialogue and thought to impoverished versions of public deliberation.

Knödler-Bunte’s arguments help us understand the strategy of contemporary right-wing governments that lower the bar of public and political discourse in order to replace political dialogue with emotionally charged slogans. Paired with the mere semblance of rebelliousness, these tactics obfuscate structural problems and promote a depoliticized discourse, including pseudo-political branding efforts, disinformation campaigns, and conspiracy narratives, in place of political analysis, debate, and programmatic thinking. The extreme Right has traditionally relied on this co-optation of revolutionary energy and its displacement from a critique of capitalism to a vehement yearning for a hazy past.

Liberatory History

Fascism has a constitutive contradiction: the rising tensions between the ironclad rhythms of the working day and the promise of a magical rupture with these empty homogenous routines. Demagogic talks about national-cultural regeneration are always in dissonance with the brute system of surplus value extraction. In order to use these weaknesses of fascism to its own benefit, the Left needs to adopt a liberatory conception of history. Instead of turning to the past to restore lost forms of order, we may understand the past as a rich collection of unheard appeals, unfulfilled hopes, of silenced demands for freedom - and such a relation to the past in turn shows us what is missing in the present and what cries out for completion.

Understood in this manner, the past denotes for us not mythical unity and purity but the history of systemic injustice, oppression, and exploitation, which in turn means that the past contains the energy that leads the way into the future. The past is not just what was. It is that which was never allowed to be, that which never could be, and it therefore points towards that which may yet be. A truly utopian and revolutionary imagination examines the past as an archive of emancipatory struggles that were repressed or abandoned but that reach into our present and herald a future through their continuous demand for realization.

The Austerity Election

[Photo: Morry Gash-Pool/Getty Images]

By Ezra Brain

Republished from Left Voice.

As the 2020 presidential election is approaching its climax, both Joe Biden and Donald Trump are continuing to try to sell this election. For Biden and his supporters, this election is about rescuing democracy from the creeping authoritarianism of Donald Trump. For Trump and his supporters, this election is about continuing the “great American comeback” and fighting back Biden’s supposed “radical socialism.” However, as we enter the final stage of the election, we should be very clear what this election is actually about for the capitalists: deciding which of the candidates will be better at demoralizing and attacking the working class through the implementation of austerity.

It’s The Economy, Stupid

James Carville’s famous 1992 saying that “it’s the economy, stupid” in regards to the Bill Clinton campaign rings more true today than ever. The full impact of the current economic crisis is still unknown. What is generally understood is that Trump’s promise of a “V-shaped recovery” — a recovery where the economy recovers as fast as it crashed — is not happening. In an October 3 article, the New York Times declared that while the “pandemic depression” is over, the “pandemic recession” is beginning. 

In that article, Neil Irwin points to the deep ongoing unemployment crisis, writing, “[the jobs numbers imply] that even as public health restrictions loosen and as vaccines get closer, the overall economy is not poised for a quick snapback to pre-pandemic levels. Rather, scarring is taking place across a much wider range of sectors than the simple narrative of shutdown versus reopening suggests.”

Even this statement could be overly optimistic. In a September 30 article for the Financial Post, David Rosenberg argues that “We are in a depression — not a recession, but a depression. The dynamics of a depression are different than they are in a recession because depressions invoke a secular change in behavior. Classic business cycle recessions are forgotten about within a year after they end. The scars from this one will take years to heal.”

The current crisis is the deepest in decades as successive waves of mass layoffs have left millions without work. Indeed, many of these layoffs were due to industry-wide shutterings such as in airlines, hospitality and the arts. It is unclear if some of these jobs will ever return, adding to the scars of the crisis In addition, an untold number of small businesses have closed due to this crisis as even major corporations filed for bankruptcy. For a period during the height of the first wave of the pandemic, the capitalists were in bad shape.

This crisis isn’t just limited to the United States. In recent weeks, the New Zealand economy has shrunk more than it has any time since the Great Depression, and the European recovery has become a “summer memory,” in the words of the New York Times. In Argentina, about half the country is in poverty as Latin America experiences their worst economic contraction ever. 

In short, the impacts of the crisis are deep and on-going. Add to this the very likely fact that another shutdown could be looming on the horizon, and it becomes clear that whoever occupies the White House next will be principally tasked with addressing the economic crisis before essentially anything else. The next president will be the “Pandemic Recession President.”

Austerity on the Horizon

Given that either Trump or Biden will be charged with addressing the current crisis, it is important to understand that — on economic matters — they are largely unified. Both men support bailouts for big business and austerity for the working class. Indeed, in the current moment, the bailouts for businesses are even larger than they were in 2008, there’s been essentially no oversight on how businesses use this money, and it’s all funded with taxpayer dollars. So, essentially, the government is fleecing the working class, who are deeply struggling, in order to funnel more money to the capitalists. They will then throw up their hands about the deficit and how we need to decrease spending, and rather than stop writing corporations blank checks, they will “balance the budget” through cutting programs for the most vulnerable. 

This is what austerity is:  the government slashes government spending (almost always on social services), ostensibly in order to get out of an economic crisis. However, austerity is really just an excuse for capitalists to find ways to grow their profits through increasing exploitation of the working class. Unsurprisingly, under austerity, it is the working class and the most vulnerable who disproportionately pay the price. 

Austerity was most famously in the news during the economic crisis of 2008. Europe specifically was devastated by austerity imposed by politicians of both the Left and the Right. As an example, the United Nations expert on extreme poverty wrote a report about the impact of austerity on the UK. The report says:

It thus seems patently unjust and contrary to British values that so many people are living in poverty. This is obvious to anyone who opens their eyes to see the immense growth in foodbanks and the queues waiting outside them, the people sleeping rough in the streets, the growth of homelessness, the sense of deep despair that leads even the Government to appoint a Minister for suicide prevention and civil society to report in depth on unheard of levels of loneliness and isolation. And local authorities, especially in England, which perform vital roles in providing a real social safety net have been gutted by a series of government policies.  Libraries have closed in record numbers, community and youth centers have been shrunk and underfunded, public spaces and buildings including parks and recreation centers have been sold off.  

That’s just a taste of the wreckage that austerity brings. It destroys the social safety net in the midst of an economic crisis that plunges millions into poverty. As more and more people are thrown into precarious situations, things like health, education, and retirement become underfunded and overburdened. The results are disaster and despair. 

Both the Democrats and the Republicans are unified behind austerity. We can see this in the fact that the bailouts passed so far have bipartisan support. Another example is how, in their recent city budget, the almost entirely Democratic New York City Council voted for a devastating austerity budget. Indeed, we too soon forget that the crippling austerity that was forced upon Puerto Rico was done under Obama. 

Both Trump and Biden will oversee deep cuts to the practically non-existent social safety net of the United States. Education will be gutted, and so-called “entitlements” programs may be privatized. Any bailout money that comes will continue to be funneled into the pockets of big capital.  

Biden is the Man for the Job? 

While the race for president is far from over — and if 2016 taught us nothing else, it taught us not to call the race before it’s over — the chance of Biden taking power is seeming increasingly likely. He’s ahead by an average of 10.8% nationally and is leading in most swing states. In addition, Biden has more support among billionaires and sectors of the capitalist class than Trump does and is raising significantly more money from Wall Street than Trump.

The answer to why Biden is drawing this support from capital is clear: they think that he will be the best at implementing austerity. The rich and big businesses want to ensure that there is a smooth implementation of austerity so that they are able to continue to enrich themselves off of our labor without pushback. Their hypothesis that Biden is the man to do that certainly has precedent.

In the UK, Labour Prime Minister Tony Blair was able to continue the devastating policy of Thatcherism and use his “left” trappings to solidify it. Indeed, Blair didn’t just continue Thatcher’s austerity; he added to it. Two months after promising during the election to not introduce university tuition fees, he did — marking the first time that British universities had tuition fees since 1962. While Blair faced some pushback for his austerity, because he was a member of a supposedly left-wing party, he didn’t face nearly the amount of public pushback that Thatcher did before him. 

In the United States, Bill Clinton was able to escalate Reaganism and deepen the neoliberal offensive but faced little public backlash because, as a Democrat, he had a shield against criticism. Thomas Frank put it best when he said: “Bill Clinton was not the lesser of two evils, he was the greater of them. The magic of him being a Democrat was that he did things that Republicans could have never accomplished. Welfare reform, the crime bill, NAFTA—things that injured members of his coalition. Clinton got done what Reagan couldn’t do and what Bush couldn’t do.”  

However, we don’t just need to look to past examples to see that Biden intends to be no friend to the working class in the current crisis. Biden’s website touts his experience running the “recovery” in 2009, but for working people, there never really was a recovery. Instead, an entire generation was forced into precarious labor and crippling student debt while millions lost their homes. That is the legacy of the Obama-Biden “recovery.”  And Biden is proud to have overseen it. Obama was an austerity president, and Biden will be the same. 

Frank’s words have a disturbing resonance in the current moment. As Biden is leading a coalition that includes most of the Black Lives Matters movement, much of the organized left, and all of the progressive wing of his party, what will he be able to do with them as a shield? Capital is supporting him for a reason. What will he be able to do that Trump can’t? 

We’ve been down this road before, and we cannot go down it again. We cannot — we must not — give our faith and support to a candidate who promises his capitalist donors that “nothing [will] fundamentally change.” We are in the midst of the worst economic crisis since the Great Depression, and both Biden and Trump are going to ensure that there is more money for big business and more austerity for the working class. 

However, it is important to note that the current moment is very different from the 1990s. The global capitalist crisis is deeper, and years of neoliberalism have begun to polarize people to the left. Additionally, Biden’s control over his coalition is much weaker than Clinton’s was. Indeed, while the prevalence of lesser evilism is helpful for whipping votes for Biden but it does lead to a large sector of Biden’s electoral base who disagree with policies. This could result in him being in a very weak position as president as his coalition is held together by opposition to Trump, not support for Biden. All in all, the task seems much harder for Biden than it did for Blair or Clinton.

In addition, if Trump is able to pull out a win, we should be very clear that he will also bring crippling austerity. His first term has already shown him to be a tireless ally of capital — especially given that many of his policies seem intended to specifically enrich himself and his family personally — and he is already withholding aid as part of a political tactic. However, Trump’s instability is leading him to be a more erratic ally to capitalists than Biden would be. Especially in the face of both the pandemic and the uprisings against police violence over the summer, Trump showed that he was not able to calm the situation, leading to frequent crashes in the market. While it is not set in stone yet, it does seem like a growing sector of capital is done with Trump and have decided to put their eggs into Biden’s steadier basket.

To resist the coming austerity, we must mobilize and organize to resist the coming onslaught of austerity. The only way to do this is through using the power of the working class to attack the capitalists and their politicians where it hurts: we need to withhold our labor through strikes and work stoppages. The capitalists are counting on the fact that Biden will be a more stable servant of capital who will receive less resistance as president when he implements austerity. We have to prove them wrong. Biden or Trump, we must be ready to fight back every single time the capitalists try to make us pay for their crisis.  

The Protracted Crisis of Capitalism

By Prabhat Patnaik

Republished from People’s Democracy.

THERE is a commonly-held view that the current crisis in capitalism, which has resulted in a massive output contraction and increase in unemployment, is because of the pandemic; and that once the pandemic gets over, things will go back to “normal”.

This view is entirely erroneous for two reasons. The first which has been often discussed in this column, has to do with the fact that even before the pandemic the world economy was slowing down. In fact ever since the financial crisis of 2008 following the collapse of the housing bubble, the real economy of the world had never fully recovered. Small recoveries were followed quickly by collapses; and the low unemployment rates in the United States that had prompted Donald Trump’s triumphalism, were to a very large extent explicable by the reduced work participation rate after 2008. In fact if we assume the same work participation rate in 2020(just before the pandemic), as had prevailed on the eve of the financial crisis, then the unemployment rate in the U.S. was as high as 8 per cent as compared to the less than 4 per cent mentioned in official figures.

This slowing down in turn has been a result of the operation of neoliberal capitalism which has massively increased the share of economic surplus in output, both within countries and also at the world level, by keeping the vector of real wage-rates unchanged, even as the vector of labour productivities has increased; and this increase in the share of surplus, or this shift from wages to surplus, has lowered the level of aggregate demand for consumption goods, and hence of overall aggregate demand, as workers spend more on consumption out of a unit of income than the surplus earners.

The pandemic has occurred in this context, so that even after it gets over, the world will still be stuck with the crisis of over-production which had already engulfed it well before the pandemic. To get out of this crisis it is necessary to use State expenditure, provided such expenditure is financed by either taxes on capitalists or by a fiscal deficit ; State expenditure financed by taxes on workers will not help, since workers consume the bulk of their incomes anyway, so that State demand only substitutes workers’ demand without adding to aggregate demand.

But neither fiscal deficits nor taxes on capitalists are liked by finance capital, so that State expenditure as an anti-crisis measure is ruled out. This means that, even after the pandemic is over,not only will the crisis continue, but it will do so without any counteracting measures, at least as long as neoliberal capitalism lasts. This crisis therefore marks a dead-end for neoliberal capitalism.

There is however a second reason why even after the pandemic gets over, capitalism will still remain engulfed in a crisis; and this has to do with the fact that even if the demand for consumer goods recovers to the level where it had been before the pandemic, investment goods production will still remain below what it had been, and this very fact will also ensure that even the consumer good output does not get back to the level where it had been before the pandemic. This is what happens when an economy receives a major shock, of the kind that the pandemic represents for the world economy.

An example will make the point clear. Suppose before the pandemic the economy was growing at 2 per cent per annum. Then capitalists, anticipating a 2 per cent rate of growth, would have been adding to their capital stock also at 2 per cent. If the capital stock was 500, output was 100, then investment would have been 10, and consumption would have been 90. Let the share of post-tax profits and post-tax wage-bill in total private post-tax incomes be 50:50; and let all wages and 75 per cent of profits be consumed. If government consumption (assuming a balanced budget for simplicity) happens to be 20, then this 90 of consumption would have been divided as 20 by government, 30 by capitalists and 40 by workers.

Now, suppose, for argument’s sake, that after the pandemic, consumption recovers to 90. All of it can be produced by the existing capital stock requiring no additional investment. Moreover, there is no reason why the capitalists should expect output to grow at 2 per cent next year; so they would not add 10 to capital stock as they had done before the pandemic. Let us assume that they add only 5 to capital stock, and wait to see what happens before deciding to add any further to capital stock.

Two things will happen in such a case. First, in the capital goods sector, output will be only half of what it had been before the pandemic; likewise capacity utilisation in the capital goods sector will be only half of what it had been before the pandemic. Second, even the consumption demand of 90 cannot be sustained. Assuming the same ratios as above, an investment of 5, which must equal private savings, will generate a total consumption demand of only 55 (given by 20 of government+15 of capitalists out of total post-tax profits of 20 + 20 of workers). Total output will be only 60, equalling consumption of 55 and investment of 5.

The 90 of consumption therefore, which we assumed the world economy to reach, for argument’s sake, will not even materialise. The consumption goods sector’s capacity utilisation will be 61 per cent of what it had been before the pandemic (55 divided by 90). This will be higher than the ratio of capacity utilisation in the investment goods sector compared to what it had been before the pandemic (in fact it will now be only 50 per cent of what it had been earlier).

Any severe external shock to the capitalist system has this effect, namely that investment recovers only after a long time; and precisely for that reason even the recovery of consumption, though less delayed than the recovery of investment, also takes a fairly long time.

In other words, even if there had been no crisis of over-production engulfing world capitalism before the pandemic, the sheer external shock represented by the pandemic would have kept the system mired in crisis for quite a long time. The existence of an over-production crisis predating the pandemic only makes matters worse.

This is exactly what had happened in the U.S. in the recovery from the Great Depression of the 1930s. The consumption goods sector had recovered relatively faster than the investment goods sector, as a result of Roosevelt’s New Deal which had enlarged government spending. The recovery of the investment goods sector occurred only when there was an increase in armament expenditure in preparation for the war, which is why it is said that the recovery from the Great Depression was made possible by the war.

But the New Deal had meant larger government spending which is why at least the consumption goods sector had recovered somewhat, even before the war. Globalised finance capital today does not even allow larger government spending within any economy, either by taxing capitalists or by enlarging the fiscal deficit, the only two ways that such spending can increase aggregate demand. Therefore even the depression in the consumption goods sector will last much longer that in the 1930s, so that, altogether, world capitalism will remain sunk in a protracted crisis for a very long time.

In an economy like India where the government obeys the dictates of finance capital quite slavishly, the prospects of recovery are even bleaker. None of the measures adopted by the government to revive the economy addresses the issue of demand, because the government does not understand that the crisis is because of insufficient aggregate demand. In fact, the government measures are such that they will only aggravate the deficiency of aggregate demand, thereby worsening the crisis rather than alleviating it. As the crisis gets aggravated, however, the government will resort even more strongly to repression against the working people, and intensify even further its communal agenda.