THE GREAT IMPLOSION: Second and third catastrophes on the horizon?

by GRANT MORGAN 27 February 2009 The Economist magazine, the world's most famous propagandist of corporate globalisation, has long presented an ultra-optimistic face to the world. But no longer. Now The Economist is starting to speculate gloomily about a break-up of the European Union as countries in eastern Europe slide into bankruptcy, endangering not only many of the continent's big banks but also the viability of the euro-zone itself. The magazine's latest cover story editorial carries this grim sub-heading: "If eastern Europe goes down, it may take the European Union with it." (Full story below.) While various scenarios for saving eastern Europe from bankruptcy are floated by The Economist, even its editor doesn't sound at all convinced about their practicality. Significantly, the editor fails to mention that important west European economies, such as Italy and Spain, are likewise teetering on the very brink of bankruptcy. It's a continent-wide economic earthquake whose shock waves look likely to bring down banks, institutions and governments, and possibly shake Old World capitalism to its foundations. If these things come to pass, they will constitute the Second Catastrophe of the Great Implosion, as I call the current mega-crisis, which was sparked by the bursting of America's housing and credit bubbles. Barack Obama has just addressed a joint session of Congress in Washington, delivering two mutually contradictory messages. First, he admitted that the world's largest economy is reliant on historically high deficits as the government's eye-watering welfare payments to corporate America become the last line of defence for a market in meltdown. Second, he promised to move swiftly towards reducing the deficits, without giving any indication of how such an economic miracle could actually happen. Why should Obama talk so fervently about reducing the deficits? After all, US public opinion is fixated on something else entirely: the need for ever-bigger government bailouts of a failed economy. The answer is as simple as it is un-American. The US president is addressing not his "fellow Americans", but rather China's market Stalinist government, the biggest lender to the world's most indebted nation. The commander-in-chief of the planet's most feared military machine is appealing to America's former enemies, the dictators of Communist China, to keep on propping up "the leader of the free world". If the Chinese were to stop or even reduce their buying of T-bonds, as US Treasury bonds are called, or demand a level of interest payments judged to be ruinous to the US economy, then we would see the Third Catastrophe of the Great Implosion: the bankruptcy of the home of the world's reserve trading currency, the greenback. That would send world trade, already reduced to its lowest level in decades, into a deadly tailspin. These ominous developments indicate not only the ideological bankruptcy of 21st century capitalism, but also foretell its likely economic bankruptcy in the not-too-distant future. And when the heartlands of capitalism plunge into prolonged economic ruination, as they did in the Great Depression of the 1930s, all that looks "solid" and "certain" can vanish in a puff of corporate cigar smoke. The international left needs to unite around realistic strategies to protect people from market meltdown and its twin evil, the climate crisis. To do so, we leftists must educate ourselves to interpret the economic danger signals. And we must organise ourselves to play the leadership role of our lives. The future of the world is now at stake. At times of global emergency, the opinions and the actions of small groups of leftists can assume an importance way beyond what is possible in capitalism's "ordinary times", that seemingly calm era when the seeds of today's chaos were planted. See The Economist editorial Eastern Europe's woes: If eastern Europe goes down, it may take the European Union with it (26 Feb 2009) Grant Morgan is a longtime socialist campaigner and writer based in Auckland, New Zealand. He invites websites to publish this analysis, and readers to give feedback. Email grantmorgan@paradise.net.nz