Global financial crisis

1. It is beyond question that the capitalist world system is in the grip of a global crisis: its symptoms and its consequences are clearly visible. Although the crisis has its familiar economic, political, social, and ecological aspects in the western industrialized countries, it is in fact a crisis of the world-capitalist system as a whole - and consequently of the countries of the Third World too. The socialist countries have also not been spared - depending on how much they have become integrated into the capitalist world-system. At the origin of the crisis is the gradual erosion of global hegemony of the USA, one of its outcomes is the development of internal contradictions or difficulties within the growth and partnership model in the industrialized countries.

2. The world economic crisis threatens the economic future of all countries. It places a heavy strain on the international trade, finance and monetary systems and raises the spectre of trade warfare, competitive devaluations and financial collapse. It has had a strong impact on developing countries, resulting in a severe curtailment of their growth and seriously impairing their prospects for the years to come.

3. Today international financial markets resemble a global casino where traders gamble on minute market fluctuations that have no grounding in real economic activities. In 1980, the daily average of foreign exchange trading was $80 billion. Today, more than $1.5 trillion flows daily across international borders. Private financial flows to developing countries grew from $44 billion in 1990 to $256 billion in 1997. Today, nine-tenths of capital flows are speculative, rather than productive in nature.

4. Both the global financial crisis and the global economic crisis which it is a part of are inherent in the nature of the world capitalist system. They are inherent in a situation where the driving force of economic activity is the runaway profit-seeking by a few in total disregard of the needs of society and the majority. Inasmuch as the global economic crisis is not merely a financial crisis, capitalist financial and macroeconomic management alone will not resolve the basic systemic crisis of mass poverty, oppression and exploitation.

5. The conventional view is still that the economies of the rich countries are so strong that the Asian crisis will have little negative effect. It is now possible for Asian countries to sell goods at prices far below those achievable by Western producers. The consequences of this reality seem potentially far more serious than most analysts seem willing to recognize. We may well see deflation rather than inflation: this can carry acute dangers for economic systems.