What’s happening in Cyprus is hugely significant, says duvinrouge. Cypriots are having the money in their bank accounts taken by the government. The question people are now asking is if it can happen in Cyprus, can it happen anywhere?
To understand what is happening requires an understanding of the nature of the crisis, the crisis of overproduction. Capitalism is based upon commodity production: things are produced for sale, to sell for money, not for immediate consumption. Furthermore, the price must be higher than the costs of production for a profit to be realised. Profit is the objective, not the satisfaction of human needs. But the problem with commodity production is the commodity that acts as the universal equivalent – money – must grow in line with commodity production in general for all the commodities to be sold. If money gets hoarded, e.g. capitalists refuse to invest because profit rates aren’t high enough, then we have stagnation, even a depression. This hoarding of money is what most Keynesians, and some Marxists, see as the cause of the current crisis. Hence they argue that the government must step in with fiscal stimulus until the capitalists return to their senses and start investing again. Crises due to hoarding are possible, but this is not overproduction and not the current crisis.
Overproduction occurs because credit money, created by banks through fractional reserve banking, grows too big. People and companies are buying things on credit. But although they notionally owe the money to bank, the bank never really had the money in the first place, it created it. Hence banks can find themselves exposed when they over lend. This is what happened to Northern Rock, RBS, Lloyds and of course many others, most notably Lehman Brothers.
During the boom phase and the growth of credit money everything looks fine. Profit rates appear sky high, there may even be full employment. But as debt saturation is reached the repayment of debts becomes a problem. As soon as a debt defaults start, previously looking healthy organisations get into trouble dragging down others. It’s like climbers roped together, as one falls the others are in danger of being taken down as well.
In 2008 the US authorities took a chance in letting Lehmans’ go under; it almost took the world economy and capitalism down. Only after many rounds of ‘quantative easing’ (essentially giving the banks money for their government and other bonds, which the banks will never buy back) they still haven’t resolved the crisis. This is because all they have done is stopped the destruction in credit money by moving the bad debts to the government books. This has now given them the excuse to cut government spending and roll back the state. This means the end of the welfare state which was used so well by social democracy to prevent revolution.
These attacks on workers through government ‘austerity’ is matched by below inflation pay rises in the private sector, even outright wage reductions. No forgetting the unemployment. Banks in particular are sacking huge numbers. Then of course there’s pension funds being raided and increases in the retirement age. All excused by the fact that we are living ‘too long’.
We’re told that there is no alternative. Well, as the people of Egypt glimpsed in Tahrir Square, there is an alternative. An alternative that doesn’t have crises of overproduction. An alternative where production isn’t based on profit. An alternative that is based upon human needs and dignity. An alternative where the people have direct democratic control of what is produced, how it is produced and who consumes it. An alternative that finally gives humanity control of its destiny. An alternative called communism.