Published on WSWS, by Nick Beams, May 14, 2011.
Last week commodity prices fell on world markets in what the Financial Times described as an “epic rout”—the worst sell-off since the collapse of Lehman Brothers. This week markets were again on the rise. Next week, who knows? Another sell-off, a banking collapse, a sovereign debt default, a repeat of the still unexplained “flash crash” on Wall Street a year ago when the market plunged nearly 10 percent in minutes, or something completely unexpected?
The unprecedented volatility in international financial markets is sounding a warning. It points to two fundamental features of the global capitalist economy: none of the underlying contradictions that set off the global financial crisis in September 2008 has been resolved; and the policies of the major governments and central banks are coming into increasing conflict as each of them acts in its own national interest under the slogan “every man for himself and the Devil take the hindmost.”
The commodity price fall on May 5 was led by oil, which dropped more than 10 percent in what traders described as an “horrendous” plunge. The subsequent rush for the exits saw the world’s biggest commodity hedge fund Clive Capital hit by losses of more than $400 million, mostly incurred in just one day. In a letter to clients, however, the fund’s management was at a loss to explain what had caused the oil market to be “annihilated” … //
… A major factor in the inability of the eurozone countries to provide anything even resembling a solution to the debt crisis is the deep divisions among them, especially between France and Germany.
Policy has been determined on the basis that there can be no “restructuring” of Greek or other sovereign debt because this would lead to major bank losses and even a financial meltdown along the lines of that which followed the collapse of Lehman Brothers. Consequently, a kind of Ponzi scheme has been put in place in which loans are rolled over and new debts are financed.
But such a system cannot continue indefinitely. At a certain point it will lead to what the Financial Times called a “forced sovereign restructuring and [an] ensuing wave of bank collapses.”
Underlying the turmoil is the fact that financial markets have long ago outgrown national boundaries and operate through a complex set of interrelationships that enmesh the globe—beyond the control of any government or group of governments and regulatory authorities.
The chaos of the system recalls the comment by Marx in the Communist Manifesto: “Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells.”
This chaos and the ever-increasing social devastation inflicted on hundreds of millions of people signifies that the profit system and the nation-state system in which it is rooted must be overturned. The blind irrationalities of the market must be replaced by conscious management of the global economy and democratically-controlled economic planning to meet human need, in accordance with the laws of reason. That can only be achieved through the taking of political power by the working class and the establishment of international socialism. (full text).