The Guardian August 7, 2002


World Crisis:
The "Argentinisation" of the US

by Pablo Riezni

The series of monumental international corporate bankruptcies having as 
their epicentre the United States, and the Wall Street crash, have opened a 
new stage of the world crisis. They make it clear that its centre is 
located in the leading capitalist power.

This last weekend the gigantic WorldCom, the second largest long-distance 
telephone provider in the US, responsible for 50 percent of all Internet 
traffic in that country and owner of the Latin American telephone 
conglomerates Embratel (Brazil) and Avantel (Mexico), declared bankruptcy.

It is the biggest corporate bankruptcy in the US. The declared assets of 
WorldCom, as of last March 3, were US$103.8 billion.

That represents a huge jump with respect to the US$63.4 billion involved in 
the fall of Enron, the energy monopoly, which collapsed towards the end of 
2001; and quadruples the assets of the principal bankruptcies registered up 
till then, that of Financial Corp of America and that of Texaco, in 1987 
and 1988, respectively.

In the first half of the current year, other monopolies have collapsed with 
assets that far exceed US$100 billion.

The list, in any case, is still open, and includes AOL-Time Warner, Xerox, 
Johnson & Johnson and Squibb Laboratories, only to name the most well-known 
cases.

The most representative European and Japanese conglomerates must also be 
added.

The case of Asia is a good example because it has been in a depression for 
more than a decade and because the efforts to save the banking system have 
failed in spite of the Homeric state subsidies, which have taken the 
Japanese public debt to US$8,000 billion.

According to The Economist (4-13-02) the Japanese banks are 
converting their unrecoverable debts into the stocks of equally bankrupt 
companies which, in turn, fix up their own accounts by inflating them with 
stocks... from the insolvent banks; all of which may lead to a kind of 
Japanese-style "Big Bang".

On the other trunk of the capitalist tripod, Europe has its own, beginning 
with Germany, where "the banking landscape is going through a series of 
unprecedented storms" (Le Monde, 23-6-02).

In the eye of the storm is to be found the powerful Deutsche Bank, whose 
assets are eight times greater than those of WorldCom  US$800 billion  
and whose stocks have fallen 50 percent in 2001.

The landscape of bankruptcy extends to England, France, Italy and Spain, 
where WorldCom-like cases abound. We will save the details because the 
important thing is that the crisis emanates from the very heart of world 
capitalism.

End of an era

The United States was presented until last year as the symbol of a kind of 
immortal capitalism.

In 1999 the stock index on Wall Street reached 10,000 points, quadrupling 
in value from at the start of the decade, and the gurus were giving a 
prognosis that it would be triple that in the next period.

Three years later, the stock market has crashed to 50 percent of its value, 
that is, a capital loss of US$6,000 billion. According to the British 
Guardian (7-18-02) "we are standing at the edge of the precipice".

Since the interest rates are at very low levels, the dollar is devaluing 
and the budget deficit is increasing in order to counteract the recession, 
the resources of the State are not working against the crisis.

When, in 1998, the Russian "default" threatened to wipe out the US capital 
market, the Federal Reserve came to the rescue with a massive emission of 
loans at low interest.

In 2001, when the recession began, the cost of money went down to hardly 
1.75 percent per annum, which permitted the refinancing of debt and 
stimulated injections of funds into the Stock Market, a new reduction would 
be irrelevant and might create "panic", as pointed out by the Financial 
Times commentator (16-7-02).

The collapse of the dollar, in turn, reveals that the US has ceased to be 
an aspirator of resources from the rest of the world.

The indebtedness, since the start of the '90s, quadrupled product growth. 
The depreciation of the dollar means now that capital is leaving the US.

And this is only the beginning. The US industrial chambers of commerce 
welcomed the devaluation of the dollar because it slows imports, stimulates 
exports and should reduce the enormous deficit of the foreign sector, of 
US$450 billion.

But a greater devaluation would turn the outflow of capital into a 
stampede.

The passing from over-valuation to devaluation has been the dominant sign 
since the Asian crisis of 1997. But the devaluation of the dollar is the 
last stop on the line, because it is the paper currency of world-wide 
reference, since it produces the revaluation of all other currencies and a 
general deflation of prices, incomes and benefits.

A breakdown is on the way

Starting with the crisis of the '70s, an enormous drainage of resources 
from the semi-colonial countries to the imperialist metropolis was put into 
motion, by means of the payment of the foreign debt; the economies of East 
Europe were looted, which led to the collapse of the old USSR; there was an 
increase in the exploitation of the working class in the metropolitan 
countries (increased flexibility and casual labour; systematic lowering of 
wages).

In spite of this, towards the end of the '80s, the results were miserable 
in terms of recuperation of capitalist activity.

The stock market crashes of the years '87 and '89, the collapse of a part 
of the US financial system (the savings and loan associations), the 
recession in Japan and in Germany, showed this.

In the '90s, New York became the new Rome of international financial 
capital. The resulting speculative hypertrophy is now in the midst of 
exploding. The "corporate bankruptcies" show the "excess" of capacity and 
of productive forces.

In the field of telecommunications, in the automobile industry or steel 
production, in the great transport or energy services; in the ground-
breaking computer or biotechnical industries, in the banking system... 
wherever you look the scene is always the same: over-accumulation, over-
investment, surplus of companies and of capital that can no longer be 
revalued at a rate of profit compatible with its need for reproduction.

A brutal destruction of social riches that take the form of capital, 
appears as the "remedy" for a capitalist way out that would imply economic 
and social catastrophes never before seen.

This time the US does not get off. This is revealed by the fact that we 
have passed rapidly from the "financial scandals" to a political crisis.

Bush, Vice-President Cheney and other high-ranking officers of the White 
House begin to look like the Menem of the River Plate, accused of being 
accomplices and even the authors of the most diverse goings on.

The fall of the Yankee colossus poses a vast process of social and 
political dissolution.

And, since the fish begins to rot from the head, the yankee bourgeoisie 
itself lacks confidence in the government's capacity of dealing with it.

In an extraordinary statement, that seems extremely Argentine-like, an 
economist of the Morgan Bank has just interpreted the Stock Market crash as 
evidence of "the markets perceiving a crisis of leadership that not only 
includes the White House but also the corporations and Wall Street itself" 
(Financial Times, 15-7-02).

The corporate and stock market bankruptcies transform the swindle known to 
Argentine savings account holders into child's play.

In Bush's country, 80 million Americans keep their savings in stocks. The 
pension funds are going broke with the process of bankruptcies.

A new stage has opened up in the world crisis. The world economy is 
"Argentinising".

* * *
Prensa Obrera (Workers' Press)

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