Excerpts from a recent interview with Osvaldo Martinez, director of the Research Center for World Economy and president of the Cuban National Assembly’s Economic Affairs Commission.
Mass layoffs all around the world, rising unemployment rates and poverty indexes, bankruptcy of companies and banks are some of the most obvious effects of the crisis. At which stage of the crisis are we?
Osvaldo Martinez: The crisis is just beginning, and no one can predict with certainty how long will it last nor its intensity. We are facing something more than a mere financial crisis: it is a global economic crisis that affects not only international finances but also the real economy. Due to the high degree of development achieved by speculation and financial capital in recent years, the extent of the breakdown in the financial sector, and the highly globalized economy, we can deduct that the present crisis will be worse than the Great Depression that occurred in the 30’s.
What has been happening since August 2008 is the explosion of the speculative financial bubble, caused particularly by neoliberal policies. Right now the crisis is beginning to affect the real economy, that is, the economy that produces real goods and services, development of technology, and values that can be used to satisfy needs. How much more will it affect the real economy? It is hard to say. There are many opinions on this subject. Some suggest that the crisis may last between two and five years. If we use historical references, we see that the crisis of the 30s started in October 1929, developed at full speed until 1933, and the economies had not fully recovered their previous levels of activity when the Second World War started in 1939.
What finally "solved" that crisis, and I say "solve" because this is only the solution that capitalism gave to the crisis, was the destruction of productive forces caused by the war, which allowed post‑1945 capitalism to initiate a new growth stage based on reconstruction. Every crisis, linked or not to a war, is above all a process of destruction of the productive forces.
Which sectors have been worst affected?
Martinez: The explosion of the financial bubble has caused the collapse of stock markets and the bankruptcy of important corporate speculators (the so-called investment banks, which in fact are not productive investors but speculative investors). Large banks have become bankrupt, credit has been affected at a global level, since it has become scarce and expensive. There has been a decrease in the prices of raw materials and oil. Sectors of the real economy commence to be affected by the crisis, as with the motor industry in the USA: the three largest companies, General Motors, Ford and Chrysler are receiving support from the government to avoid bankruptcy. Several airlines have closed down. Flights have been reduced. Unemployment is on the rise. Tourism is also affected. It is a snowball effect, which can lead to the deepening of the crisis during 2009.
To some specialists, this is one more cyclic crisis of the capitalist system, one of those described by Marx in the 19th century. But it has also been said that it is not just "one more" but, given the huge dimensions it has reached, it is the expression of the internal destruction of capitalism. What is your opinion on this matter?
Martinez: The current crisis is, without doubt, another cyclic crisis of capitalism. It is one more in the sense that the system in place since 1825, when Marx noted the first crisis, has suffered hundreds of similar crises. A crisis is not an anomaly, rather, it is a regular feature of capitalism, to the point that it is even necessary to the system. Capitalism follows a particular logic, since it needs to destroy productive forces in order to pave the way for another stage of economic growth. However, the current crisis is undoubtedly the mark of a deep deterioration within the capitalist system.
I believe the crisis can reach serious dimensions, but I do not think that, on its own, represents the end of the capitalist system or its definitive destruction. Marx argued with great lucidity that capitalism does not collapse due an economic crisis. Capitalism has to be brought down through political actions.
So do you agree with what Marx said, and later supported Vladimir Lenin and Rosa Luxembourg, that despite the self-destructive nature of capitalism, there has to be a revolution to bring it down?
Martinez: Of course. To think that capitalism will collapse on its own, due to a spontaneous force like an economic crisis, is to believe in utopia. The crisis may create conditions that favor anti-capitalism political movements. As long as politics are tactfully handled and as long as there is a leadership that takes advantage of the situation, the crisis creates favorable conditions because it generates more poverty, unemployment, large scale bankruptcy and the desperation of the masses.
Throughout history, large-scale economic crises have been linked to revolutionary movements. For example, during the First World War there was a profound capitalist crisis, and the success of the first socialist revolution in Russia was linked to this. The crisis of the 1930s, however, was linked to the appearance of fascism. The desperation of the masses in Germany and Italy provoked a crisis that was used by the right wing to create extremist right wing, fascist, chauvinist and nationalist governments.
What I want to stress is that nothing is inevitably written in history. It all depends on the expertise and the handling of the political forces that are in competition. In the present situation, it is possible to think about change: we are in a situation that may have us seeing a surge in the radicalization of anti‑capitalist movements.
If it is just another cyclical crisis, but at the same time it is different, what factors characterize it?
Martinez: I think the differences are down to the context. The present crisis is especially complicated because the global economy is also complicated, much more than the economy of 1929. Firstly, the level of economic globalization is vastly superior. The degree of interconnection that national economies had back in 1929 was incipient. In 1929 there was no internet, no email, no aviation; they depended on telegraphic communications, telephones had not been perfected, and planes were just starting to cross the skies.
Today, every event that happens in a powerful economy has an impact, in a matter of minutes, on the rest of the world. Markets are greatly interconnected, especially global financial markets, and that means that the world economy is like a spider web in which we are all trapped. A movement in any part of the spider web is felt everywhere else. Because of all this, the capacity for this crisis to spread is larger than in 1929. This is the first difference.
Secondly, the level of financing in the global economy is also vastly superior. The amount of speculative capital and the nature of the actions that occur are much more intense than in 1929. Back then there were stock markets, but their functioning was simple. Today, financial speculation has reached an immense sophistication, which is in turn one of its weakest points. The speculative operations are so sophisticated, risky, loaded with fraud and unreal, that they have constituted the basis of the global financial breakdown.
Up until now there have been no radical measures put in place to stop the crisis. However we are seeing how the state, especially the United States, intervenes more and more to avoid the bankruptcy of companies… and by doing this it is taking on a prominent position which reminds us of the Keynesian methods used by Franklin Roosevelt. Today many claim that neo‑Keynesianism will be the alternative…
In essence they are trying to apply neo‑Keynesian methods in a diffuse manner. We can see evidence of this in what Barack Obama has announced regarding a large scale reconstruction of the road network. That is a typical Keynesian resource to generate employment and income, and to stimulate demand. But at the same time, measures like this are combined with others that are contradictory, such as rescuing bankrupt companies and giving out large amounts of funds to put back together the speculative structure, which failed and collapsed.
This is a clear expression that the neoliberals continue to hold positions of power. We are witnessing a battle between a neo-liberalism that refuses to disappear and a neo‑Keynesianism that wants to become established.
I doubt that neo‑Keynesianism can turn out to be the solution, even if it is strictly applied. This is because the current crisis has new components. The crisis combines elements of over- and underproduction; it is a crisis that has attacked the environment, it is not only economic but also environmental, and with this human survival and the conditions of human survival are at risk.
Do you mean that, as it has already happened, Keynesianism will only be a temporary solution that will deal with the problems without getting to the roots?
Martinez: Of course. We cannot consider Keynesianism and neo-Keynesianism as infallible recipes that will solve the economic problems of capitalism. Capitalism has suffered crisis with both neoliberal and Keynesian policies. Between 197 3 and 1975 there was a severe capitalist crisis that occurred under Keynesian policies, and that was a factor that provoked the substitution of Keynesian ideas by neoliberal policies.
We should not believe in the false dichotomy that affirms that neoliberalism provokes the crisis and Keynesianism resolves it. Simply put, the system is contradictory and has a tendency to develop periodic economic crisis. Whether they are neoliberal or Keynesian, economic policies can facilitate, stimulate or postpone the situation, but they are not able to eliminate capitalist crisis.
Then there is one solution left: socialism…
Martinez: Without a doubt. I am more convinced than ever before that the dilemma presented by Rosa Luxemburg is in evidence: "socialism or barbarism". I do not believe that humanity will go back to barbarism, simply because our survival instinct is the strongest of all.
I believe rational conditions will prevail, and rational conditions imply a sense of social justice. I think we will overcome capitalism, and the practice of creative socialism will prevail. This means socialism being a continuous search, without forgetting its basic principles; however from these basic principles stem the possibilities for experimentation, polemic and creativity.
And that would be the socialism of the 21st century?
Martinez: I believe so.
Ecuador’s President Rafael Correa, during the conference at Havana University in January, explained that one of the problems of socialism is that it has followed a development model similar to that of capitalism; that is, a different and fairer way to achieve the same thing: GDP, industrialization and accumulation. What do you think?
Martinez: Correa raised a good point. The socialism practiced by some socialist countries did no more than repeat the development model of capitalism, in the sense that the objective was the growth of productive forces. By doing this it constituted itself in quantitative competence with capitalism, and ignored that the capitalist model of development is a social structure unable to provide for the whole of humanity.
The planet would not survive otherwise. It is impossible to fall again into concepts like one car for each family, the model of North American idyllic society, etc… It is necessary to conceive another model of development which is compatible with the environment and which has a more collective way of functioning.
Although Correa was right in many things, I do not agree with him in one thing. In one of his TV interviews he mentions the socialism of the 21st century, with which I agree, but then claims that several things would become obsolete. Amongst them, he mentioned class struggle, when that is one of the political struggles of his country, Ecuador, which is now immersed in an episode of class struggle that he is trying to resolve with his project.
Who opposes his project? It is undoubtedly the oligarchy and the bourgeoisie. Who can he rely on to support him against the enemy? The workers, the peasants, the indigenous peoples. I am not thinking in the classic definition of "class," but in the undeniable existence of social classes, and the struggle between them is undeniable and evident. If we renounce class struggle, what would be left? Cooperation between classes? I don’t think Ecuador can complete its project of 21st century socialism with the cooperation of people like Gustavo Novoa, the Catholic Church or those who try to overthrow Correa.
The world has built many expectations around the figure of Barack Obama. What role can he play with regard to solving the crisis?
Martinez: I do not have high hopes of change. I believe that Obama’s government can represent a cosmetic change rather than a profound structural change in North American policies. I think he represents the position of a certain political sector in the United States which understood that it was impossible to continue a regime so unpopular, worn out and unpleasant as that of George Bush. However, there is something we must take into account, and at least give him the benefit of doubt: Obama’s ideas are one thing, and where the deepening economic crisis may take him is another thing. And once again I have to use the 30’s as an example.
In 1932, when the crisis was full‑blown, Franklin Roosevelt took over as president. His ideas were nothing extraordinary, there was nothing that could have had people guessing what would happen next: his policy of active state intervention, support by trade unions or the regulation of private economies. All those measures were taken more as the result of what the crisis forced him to do, than as a result of a pre‑existing political philosophy. Something similar could happen with Obama, but we must give him the benefit of doubt to see where the crisis will take him.
In the past few weeks there has been a lot on talk on the role of Latin American integration. Although this process is only starting, there have been changes at structural level that point towards integration. How can integration help us face the crisis as a region and as a country?
Martinez: I think that the integration of Latin America and the Caribbean will be a key strategic factor in the future of the region, and not as an appendage of the United States. For decades, Latin American integration has been rhetoric, never practice. But we have seen the beginning of a new space, marked by the Summit of Salvador de Bahia, which took place in December last year, where Cuba joined the Rio Group. We also have the ALBA (Bolivarian Alternative for the Americas), a model of integration based on solidarity and cooperation, not on the market.
This situation coincides with a crisis that is forcing Latin America to rethink her position in the global economy. This also coincides with a profound crisis in the neoliberal policies that governed the region during the last 30 years. It is a great moment, and there is a real possibility that true Latin American and Caribbean integration will become a reality.
Some authors point at the idea that following the current crisis, the world economy will be structured in large regional blocks: one in Asia, another one in North America and a new one established by Latin American countries. The possibility is very interesting.