How the financial crash of 2008 unfolded

The neo-liberal capitalist model which was embraced and glorified by the bourgeoisie and their supporters in parliaments and the capitalist media over the last twenty years in 2008 spectacularly collapsed. The very idea that governments should intervene to regulate, let alone nationalise, banks, financial institutions and industry was up to now ridiculed as being outdated, primitive and discredited.
After the collapse of the Stalinist dictatorships in Russia and Eastern Europe, one of the most outspoken exponents of neo-liberalism, Francis Fukuyama, argued that the progression of human history as a struggle between ideologies had come to an end. His conclusion, that the fall of Stalinism represented the end of history and that liberal "free" market economics was the final stage of economic evolution, was accepted by the political establishment across the world, including the tops of the former workers' parties, such as the Labour Party in Britain and Australia, and the Social Democrats in Germany. The propaganda which followed was used to attack genuine socialist ideas and used ideologically to justify to workers that neo-liberal policies of privatisation, de-regulation, and attacks on workers and public services were needed. Even the majority of trade union leaders went along with these reactionary ideas.
This opened the way for a massive offensive against workers internationally. Intensification of exploitation of workers, shifting production and industry from the advanced capitalist countries to low wage economies and removing barriers to exploit foreign markets, led to a huge shift in wealth from workers to the super-rich.

The ideological impact of the current collapse of the global financial sector and the expected world recession is only beginning to be felt. However, it is already leading to a questioning of capitalism and a revival in socialist ideas, including from some surprising quarters. Even the Archbishop of Canterbury, Dr. Rowan Williams has had to admit that Karl Marx, the founder of modern socialism was correct in his analysis of capitalism. Writing in the British right-wing journal, The Spectator, he says "Marx long ago observed the way in which unbridled capitalism became a kind of mythology, ascribing reality, power and agency to things that had no life in themselves; he was right about that, if about little else."
He was joined by the Archbishop of York, Dr. John Sentamu, who labeled those involved in "short-selling" as "bank robbers and asset strippers". It must have slipped the archbishop's mind that the Church of England itself was profiteering from their £5 billion investment portfolio though!
Even in the belly of the beast of US imperialism, socialism is once again being discussed, albeit by figures such as rightwing Republican Congressman Jeb Hensarling who voted against the original bail-out package claiming it would put the nation on "the slippery slope to socialism". It is a bitter pill to swallow for the neo-conservatives who have worshiped at the altar of the free market for so long. Announcing the $250 billion part nationalisation of the US banking sector, Bush was at pains to explain it was "not intended to take over the free market but to preserve it." US Treasury Secretary Henry Paulson added "We regret having to take these actions. Today's actions are not what we ever wanted to do – but today's actions are what we must do to restore confidence to our financial system" and "Government owning a stake in any private US company is objectionable to most Americans — me included, yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable." The howls of horror at "socialist" measures from the Hensarlings of the world are therefore unfounded. The moves to nationalise and part-nationalise the banks are not socialist, but a desperate attempt to save the system. It was necessary for the capitalist state to intervene to shore up capitalism and avoid a complete collapse of the economy, leading to a 1930s-type depression. This however does not mean they will be succeed in avoiding such a devastating slump.

Socialists do not support the bailing out of the banks. It does not represent genuine nationalisation as socialists stand for. It is a case of "socialism for the rich", where the risks and debt are socialised, but the profits and assets are privatised. These steps are also designed to be temporary. As soon as conditions permit, it is intended to hand back these financial institutions to the private sector. But the depth of the crisis means the state may be left with no choice in propping up the banks for far longer than expected. Even if they are forced to keep the banks partly or wholly in public hands for an extended period, they will continue to be run in the interests of the rich as they always have been. They will be not be used to maximise returns for the working class.
While different governments may bring their own representatives on to the executive boards of the banks, this will be to assist the transition back to private ownership and to steer the banking system towards boosting the profitability of big business. The financial wizards or "masters of the universe", who appeared to magically accumulate huge sums of money apparently from thin air will continue to live in luxury. Working class people (the actual creators of wealth) will be told they must pay the price.
A socialist government would bring all the banks and financial institutions fully into public ownership and co-ordinate a central plan to provide cheap credit and zero-interest loans to people struggling to buy a home. Any compensation would only be paid to individuals on the basis of proven need. Instead of the banks being run by completely unaccountable wealthy bankers, enriching themselves with huge bonuses and salaries, a socialist banking system would be run democratically by elected committees representing bank workers, trade unions, customers and government representatives, all living on a workers' wage and subject to recall.
This does not mean disposing of every economist and financial specialist. Their talents and expertise would be used to provide a banking service for the needs of all. The motivation to make as much profit as quickly as possible, regardless of the consequences, would be removed. Instead of paying dividends to private shareholders, revenue from a socialist banking system would be used to invest in quality public services to cater for people's needs.

As a result of the mass impoverishment and horrific conditions which neo-liberalism created in many countries, mass movements have developed against the excesses of capitalism. Across Latin America, movements of workers, youth and indigenous peoples have shaken the continent and the corrupt political elites who had opened the door for major multi-nationals to take over public services and rob countries of natural resources and wealth.
Companies such as Bechtel Corporation were allowed to take over the water service in Bolivia, leading to massive hikes in water charges. Hundreds of thousands of Bolivians were left with no water supply. A massive movement developed from below which eventually forced the Bolivian political elite to re-nationalise the water service.
However, even though there is mass support from the populations of these countries for the nationalisation of the major sectors of the economy, these regimes have refused to take such steps. They are still trapped in the belief that there is no alternative to capitalism. They wish to make compromises with their national capitalist class in the vain hope that they will accept reforms which benefit the working class and poor.
However, capitalism will do everything in its power to protect their profits and power. Any attempts to give a bigger slice of the cake to workers will be met with fierce opposition by big business, who will move to remove these regimes from power. Such measures have already been attempted in Venezuela. The right-wing has repeatedly tried to overthrow the government of Hugo Chavez in different ways, from attempted military coups to bosses' lock-outs and food shortages. In Bolivia, the right-wing with the involvement and support of US imperialism is attempting to split the country, threatening to drag it into civil war, in order to keep ownership of the country's valuable energy resources and topple Evo Morales from power.
In order to prevent such a scenario, it is urgent that the working class develop its own independent organisations which fight for the overthrow of capitalism and for the establishment of a workers' government which takes the commanding heights of the economy out of the hands of the multi-nationals and the super-rich minority and runs it democratically for the benefit of all. Such a step would receive huge support from workers and the poor across Latin America and the world. It is important for socialists to study developments in Latin America as the revolutionary processes underway on that continent are not down to people in Latin America having some exclusive socialist gene. The crisis which capitalism has caused in Latin America is now spreading worldwide and will result in a similar revolutionary process in the rest of the world.

The fact that capitalism has been forced to use the state to intervene into the finance sector and nationalise banks is a living example of the inability of private ownership and the market to develop an economy which can cater for people's needs. This is not exclusive to the finance sector. The same straitjacket of the market applies to all industry and every aspect of the capitalist economy.
The scandal of starvation and malnutrition across the world is another illustration of the inability of the profit-driven market to cater for the needs of all. According to the UN Food and Agriculture Organisation, more than 25,000 people died of starvation every day in 2003. As a result of the panic on stock markets, speculation on crops and foods saw an explosion in food prices. Between 2006 and 2008, the average global price for rice rose by 217%, wheat by 136%, maize by 125% and soybeans by 107%. For people living in the neo-colonial world, the increases were far higher. The numbers dying of starvation today are without doubt higher than 2003. Capitalist governments continue to ignore this reality. While trillions of dollars are being handed to the rich across the world in the form of "rescue packages" and bail-outs, the amount invested to prevent mass starvation is miniscule in comparison. The budget of the UN World Food Programme in 2008 was $2.9billion, a drop in the ocean! There is more than enough resources in the world to provide every single person with a decent standard of living. According to the Stockholm International Peace Research Institute, more than $1204 billion was spent on arms in 2006 alone. The problem is this wealth is concentrated in the hands of a tiny elite. The top 500 multinationals in the world account for 70% of world trade. These giant companies, which dominate the lives of billions, should be taken into public ownership and run democratically as part of an international plan to raise people out of poverty.
This would also enable all the talents of individuals to flourish and be put to use for socially productive causes, based on co-operation, not the laws of the capitalist jungle, where greed is promoted above solidarity. Planning is essential within the structure of any business. In every factory, production is fine-tuned and run according to a plan. But in the capitalist market, where there is no planning, chaos reigns. A socialist plan of production would be far more efficient in delivering goods and services, allowing people to work fewer hours and able to freely participate fully in the running of society.

It is widely acknowledged that there is no national solution to the world economic crisis. Yet each country has moved to defend the interests of its own ruling class before thinking about the "greater good" of the world economy. The decision of the Irish government to guarantee the savings of accounts in Irish banks led to panic as banks across Europe feared people would abandon their bank and open accounts in Irish banks. Soon other countries in the EU were forced to take similar measures. This episode of disunity is a warning of the coming major problems which will threaten the very institutions of the EU itself which we are now starting to see in Greecefor example. This crisis of global capitalism will also seriously test the euro. Some countries may be forced to break from the currency. The very existence of the euro altogether has been put into question as the different economic and political interests of each country run into conflict with each other.
While capitalism has internationalised trade, most companies still base themselves in a home country. In this respect, capitalism has proved incapable of moving beyond the confines of the nation state. Globally, tensions between countries, especially between US imperialism and the emerging super-powers of China and Russia, will lead to global instability and even the outbreak of regional wars, which can dwarf recent conflicts like that between Russia and Georgia.
Again, it will be working class people and the poor of all countries who will be made to pay. As more workers and youth in the US are discovering, the imperialist wars in Iraq and Afghanistan are not in their interests. They are being fought, ultimately, to defend the interests of US big business. Due to capitalist globalisation, the struggles of workers will tend to have a greater international aspect than ever before. The traditions of international solidarity, such as seen in the massive movement against the war on Iraq, will re-emerge in the struggles of workers, demonstrating the potential for a socialist world.
Writing in their joint work, The German Ideology, Marx and Engels stressed how the struggle for socialism has to be international, explaining "everyone will be freed from … particular local and national limitations, brought into a practical relationship with the products (including intellectual products) of the whole world, and enabled to gain the capacity to delight in all the fruits of world-wide human creativity."

The opportunities for building a mass socialist movement internationally will open up in the coming period. Capitalism will never collapse out of existence. After the 1929 Wall St. crash, economies collapsed but capitalism survived, resulting in the horror of the second World War. Throughout the 21st century in dozens of countries, there were many times when the working class was within a hair's breadth of taking power and transforming society along socialist lines. Tragically, despite great sacrifice and heroism, those opportunities were missed because of the betrayal of the leaders of the workers' movement. What was missing was a mass revolutionary party, soaked in a Marxist understanding and method and rooted in the working class, which could have provided essential leadership in the struggle for socialism. Today, capitalism promises only economic hardship, war and untold damage to our environment. The need to build a socialist alternative has never been greater.