Civil rights, Democracy, Economy / Finance, Neo-liberalism, Populism

Capitalism in chaos!

Mar 12 2020

By Antonio Martins* – Outras Palavras, Brasil

Panic in the markets: the global crisis shows a tendency to be prolonged and deep. The “Davos Class” will respond with more inequality and less democracy. But a path has opened for the opposite way out – provided the Left is willing to reinvent itself.

History, capricious as it is, sometimes repeats itself as farce. But, on other occasions, it offers a second opportunity for those defeated. In 2008, when capitalism experienced the worst crisis in eight decades, there was no force able to gather the strength (or indeed new ideas) in order to convert the situation into criticism and transformation. The system recomposed with additional brutality as it met no effective resistance. The bankers were saved by states as they were showered with mountains of money. As soon as they emptied the public coffers, the super rich claimed there were “fiscal imbalances” and therefore it was urgent to slash social rights and social spending! Twelve years later, this set up has led us into a crisis – again. Coronavirus, as we will see below, is only a subtle vibration that causes the house of cards of financialized capital to shake – so fearsome, but so fragile. In the face of such emergency, the owners of the world have already signaled that they crave more of the same: fresh sacrifices from societies, imposed without examining, debating and even less resolving the huge imbalances. But today, this “way out” sounds like a more of the same and – more importantly – we presently hold a sketch for an alternative.


One week ago, Outras Palavras first wrote about a relationship between the Coronavirus sanitary crisis, the shudderings of the financial markets and the risks of a big classic recession – with businesses closing down, banks breaking and mass sackings. On this Wednesday (March 4), a long article in the Financial Times, written by veteran economic analyst John Plender and reproduced two days later by Brazilian newspaper Valor Econômico, showed in greater detail the dramatic scope of the problem. The FT represents a kind of journalism by the elite and for the elite; information kept away from the headlines and from television news programs, produced and published for those who control the power and the money. The central issue of the published analysis is: the global financial markets are as contaminated with bad debts today as they were twelve years ago. The pandemic has thrown a spanner in the works, which, in order to keep working, has to whirl non-stop. “If the Coronavirus continues to spread, the frailties of the system have the potential to unleash a new debt crisis”, the author warns.

Data is eloquent. The gigantic pile of global debt grows unabated: it reached 253 trillion dollars in the last trimester of 2019 and today amounts to 322% of the planet’s GDP. But, more than numbers, the danger lurks in the process that has led to such record, in the increasingly foolhardy practices adopted by banks as they seek to maximize profits and in the slightest tumble that can blow it all to smithereens.

Plender explains: the global financial system is drenched in cash. After saving the banks, between 2008 and 2009, in an operation that involved about 30 trillion US dollars, the USA kept providing them with plenty of money, in an operation that became known by the hermetic name of “quantitative easing”. Government bonds yielding only after years or decades, and that were in the hands of the banks, were exchanged for hard cash. This is the trickle-down theory, a grotesque way to heat up paralyzed economies. It is alleged that, if the very rich receive a lot of money, something will eventually percolate down to the whole of the economy.

The flooding unleashed by the many states was so vast, the analysis continues, that banks have no use for so much money. As they seek to profit, they lend it out imposing practically no conditions at all, guilty of what is known as the “moral risk” and thus generate a credit bubble that can burst at any moment. In 2008, the weak link was the real estate sector. In order to allow the building and sale of  houses to carry on indefinitely, banks offered loans to families who had no means to pay it back and, with the crisis, people ended up losing their homes. Today, the weak link is global corporations.

The graph below shows the evolution of American businesses’ debts. It increases continually, as percentage of GDP (from 15% to 27%), from the mid-1980’s up to the 2008 crisis. It stumbles with the recession and is reduced to around 20%. But it rapidly recovers: it has already reached beyond 30%. The banks, writes Plender, are lending even to “zombie businesses”.

As this engine whirs away, debts are renewed. But what if it stops? The article quotes a recent IMF report on global financial instability. If recession hits, even if only half as strong as 2008, “businesses with debts in total of US$ 19 trillion [twice Brazil’s GDP] will not have sufficient income to pay what they owe”.

 Recession has not yet hit. But the rapid expansion of the Coronavirus, with its potential to cool down the economy and paralyze very important sectors, brings tingles to the spine. The explosion of a pandemic leads families to reduce spending – and this is particularly serious in times of growing inequality. Even in the USA, shows The Economist, more than 10% of the families would not be able to face the extra expense of US$ 400 (R$ 1.8 million). In the face of risk, they cancel purchases. In other countries, schools are sending pupils home, forcing parents to stay in for longer hours. In dozens of cities, commerce endures lack of trade. Activities such as air travel suffer even more intensely. “Big jets arrive empty into deserted airports”, laments The New York Times. Such gloomy perspectives caused oil prices to tumble 30% on March 9. A lot more than the war for markets between Russia and Saudi Arabia, the certainty that the fall in consumption will be abrupt looms over the globe. This will contaminate other agricultural and mineral commodities and will hit hard countries like Brazil, who rely on the export of primaries.

In times of regulated capitalism, governments would momentarily rescue the debilitated sectors and the crisis would be sat out as the illness naturally receded. In the present financialized phase, any economic solidarity evaporates. Markets evaluate and price debts daily. Speculators sniff out their preys’ troubles. Companies in distress are forced to pay increasing interest rates in order to roll their debts and thus enter a spiral that can easily lead them into arrears. And if a large enough number of important business collapse, the next victim in the line of contagion are banks.

Exuberant as ever, financialized capitalism is about to expose its also novel fragility. To single out the spanner as the cause for the machinery’s malfunction would be, of course, insane. But how did we get to this point? And how to build, this time, a different way out from the one imposed in 2008?


In politics, it is always serious matter to live on devoid of an alternative horizon, crushed by the opponent’s agenda. But in acute moments, it results in disaster. Twelve years ago, when capitalism sunk into a crisis not seen since the post-1929 Great Depression, the forces that struggle to prevail over the system and topple it have lost the opportunity to impose a big defeat. They were unprepared.

In the agenda of a nascent movement critical of neoliberalism, which gained expression in the World Social Forums, featured the denunciation of global finance’s predatory character. But the movement was at loss to propose something to societies when, in September 2008, the banking system crashed and huge institutions – from the investment bank Lehman Brothers to General Motors – began to collapse.

Defenders of the system found room to lead the search for a way out. Their choices have shaped the world since then. It resulted in a much more brutal capitalism, featuring vast attacks on social rights and democracy. It ended up opening paths for something previously non-existent or marginal: the far-right groups and politicians that today govern part of the world. The conservative exit was operated in two steps.

The first phase was launched as early as 2008, when tons of public money were shifted to save the banks. The arguments in favor of doing so were solid: banking crises result, indeed, in panic and devastation. Bank’s clients lose their savings. The freezing of credit breaks businesses and leads to mass sackings – which in turn leads production and consumption to collapse, multiplying victims, in a quick-paced chain reaction. Rescue operations were carried out with speed and awe – but in the absence of protest.

The second phase was started in April 2009 and signaled capital’s recovery. A fake consensus was built within public opinion, according to which the states were broke and it was necessary to “tighten the belts”. The cause for the governments’ fiscal difficulties was carefully hidden away, which is precisely the huge effort made in order to save the banks, claiming instead that the collapse was due to the “inefficiency” of public service and the politicians’ propensity for “spending”. This was an ideological operation of massive proportions, which is not possible to detail in this text.

What matters here is results. “Austerity” policies were deployed throughout the West. Timing varied: in Europe, where the Welfare State is huge and generous, they were adopted as early as 2009; Brazil, which was governed by the Left and enjoyed a more favorable international situation,  the same took place only in 2015, at the beginning of president Dilma’s second term. But the meaning was the same: reduction of social rights; lowering of workers’ bargaining clout; creation of more savage forms of labor exploitation; lowering to the maximum what the states spend in redistribution public policies.

The attitude of the Left – both traditional leftists and the then emerging altermundistas (“Another world is possible”) – was essentially reactive. Faced with spending cuts, enormous demonstrations erupted in countries such as Portugal, Spain, Ireland, Italy. In 2011, the Arab Spring flared up. Movements such as the Indignados in Spain, or Occupy in the USA, spread the world over – branching out in later eruptions such as in 2013 in Brazil. But nowhere an alternative mobilizing multitudes emerged or managed to advance beyond negation. The most emblematic disaster took place in Greece. “Austerity” policies devastated the country to the point of smashing the political system and making room for the emergence a left-wing party, Syriza. As it took office, the new prime-minister, Alexis Tsipras, consulted society in a popular referendum, about approval for the policies that smothered the majorities. The NO option won. The European Union then applied the full force of its economic and financial might to strangle the country until it capitulated. Democracy needed to submit to the markets’ diktats.

Two main consequences ensued. The absence of a horizon, in an environment marked by inequality and the hollowing out of democracy, opened a new path for politicians who support the authoritarianism of “strong men” against the supposed efficiency of collective decisions. In 2008, Jair Bolsonaro was an lackluster deputy of the “lowest clergy” in Brazil’s Congress; Donald Trump, a billionaire of deplorable habits known as the host The Apprentice; Rodrigo Duterte, mayor of a medium-sized city in the Philippines. In the following period, they experienced meteoric ascents. The legions of followers they cultivated resent the degradation of life conditions and the indifference of their “representatives”; and they delude themselves with the notion that the problems of the world will be solved if everyone is content with one’s “allotted place” in the social order.

From the economic point of view, capital’s victory in 2008 opened a series of triumphs for finance. Saving the banks was followed by “quantitative easing”. The timid measures that, in the crisis’ immediate aftermath, had established limits to banking activity, were swiftly eliminated. Inequality exploded to the point that the planet’s 500 richest billionaires gain, each year, an increase in patrimony equivalent to 545 times the budget of the World Health Organization – who should be in charge of tackling a pandemic such as the Coronavirus.

But it was precisely this illusion of infinite potency that propitiated the great debt orgy. Now, it threatens the system as a whole.


How will the power and money lords react in the face of a fresh threat to their reign? The opening salvos suggest more of the same. Central banks reduced interest rates in the course of this week. All over the world, the average now is 1% a year. There is talk of protecting struggling banks and buying shares with public money, in order to shield speculators at risk. The trickle-down logic reaches utmost exuberance. The far-right is bothered: further inequality may spark popular uprisings – which is fatal for their project. But politicians like Bolsonaro and Trump don’t have the faintest idea of how to lead the way out of this mess, in the face of a situation at once complex and dangerous

From the perspective of the criticism of capital and of the attempts to topple it, the scenario is not that of 2008. Experience has shown that saving the financial system with public money leads to curbing social rights and public policies. And, in the course of time, a concrete alternative to “rescue” policies has been developed. It is incipient. But it gains multitudes and forms majorities wherever it is presented. It expresses a way clearly more promising than the attachment to programs from centuries past and to mere reactivity. It requires, in order to become an effective response, more articulation. Is the institutional Left willing to do it?

The outlines of a new program that is being gestated, little by little, starts with a proposal that was born much earlier than the present-day crisis: Citizens’ Basic Income. If states are able to channel tons of cash to financial markets, how come they cannot do the same directly to citizens, evading the perversities of trickle-down policies? At a time when technological unemployment is such an evident threat, would it not be a huge step forward to offer each human being, independently of work, the conditions for a dignified life?

Although distributing money to people may be, in such conditions, a huge step forward, it still amounts to a solution on an individual level. A much more effective step forward would be to build public systems that transcend the very need for currency. In a certain sense, the Commons. Education, health, housing and transport express today marked features of contemporary needs. They were strongly commodified in the last few decades. Capital knows their centrality – this is why it longs to capture them. But, due to their very nature, they evade the cold logic of profit. Good medical service, or a good school, are not ones that yield increased gains to shareholders, but they are those that contemplate, with humanity and without waste, the populations’ needs. This is why such four items (health, education, transport and housing) should be publicly offered – in conditions of excellence, for free or at very affordable prices. Impossible? Why so, if it is possible to transfer tens of trillions to billionaires?

Jeremy Corbyn, who will soon step down from the British Labour Party’s leadership, was the first internationally relevant politician to propose the inversion of quantitative easing. If states can offer so much money to the financial aristocracy, asked him in 2017, when he took up the task to shake the party bureaucracy, why not launch a social quantitative easing policy in favor of public health and education? Since then, the proposal has widened.

In 2019, Alejandria Ocasio-Cortez, a US latina congresswoman, proposed the Green New Deal, which at once revisits and lends popular meaning to the environmental agenda. Yes, states need to wake up from slumber and decisively act against global warming and the devastation of nature. But this movement should not result in less public action and diminished offer of jobs – but instead, it should result in more. A huge investment in infrastructure is needed to, for instance, replace oil for solar and eolian energy; to guarantee that workers in the declining industries migrate to the next one; to build railway networks in place of roads; to provide cities with public transport networks so efficient as to allow for active policies against the dictatorship of the automobile. Such investment will demand the effort of tens of millions of workers. This is why states should launch policies of Guaranteed Dignified Jobs.

As a natural development of the Green New Deal, Modern Monetary Theory is revisited. First proposed as early as the beginning of the twentieth century, it has been updated. It embodies a radical negation of “austerity” policies. It says that states can create new currency, grounded on collective decisions. It induces, in reality, a fresh vision of currency itself. It is no longer a commodity, but the expression of a social relation based essentially on trust. If societies build projects in common, then they should also be able to use currency as a tool for the mobilization of resources in favor of such transformations. 


An Arab proverb says that three things go but never return: water flowing by, an arrow released and a lost opportunity. The financial crisis taking place now at once confirms and proves the adage wrong. It is as if, in 2008, we experienced only a rehearsal. The policies adopted in the aftermath of the crisis only deepened the flaws of financialized capitalism. The repetition therefore offers – to use a dated metaphor – a kind of rewinding. It is as if we could respool the film, making it return to 2008: to the same spot where the policies now in force were launched, in order to consider them afresh before they are applied again, with added strength.

It will all depend on two conditions. Will the present-day Left know how to reinvent itself? If it does not, will social and political subjects rise up to take its place?


*Journalist and editor of the website Outras Palavras (Other Words). He was the founder of the Brazilian edition of Le Monde Diplomatique and participated in the construction of several free media initiatives. translation from Portuguese to English: Gavin Adams

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