The capitalist crisis in Europe

Below is an article submitted by a reader in Germany, Markus Winterfeld.
We have included commentary following the article and encourage readers to comment as well.

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It started before corona. When the virus subsides, Europe will be at the crossroads

Signs of recession since 2019

When the corona virus will have passed in a month or two, there will be a short capitalist boom, catching up the missed production and consumption since the beginning of the year, before the world will return back to crisis mode. The capitalist world economy, with its centers in the US, Europe, China and Japan, has been in decline long before the corona outbreak. World market prices for commodities like oil, copper, iron, wheat, soy and pork meat, which form the backbone of any economic expansion, have peaked around 2015. Just to name one example, the price of copper, a mineral which is used both in cars and civil construction, had quadrupled between 2000 and 2014, mostly due to the demand by the Chinese industry, but has halved since.

As in any of the crises of the last centuries, the first victims were the now post-colonial countries, whose economic existence is based solely on the export of mineral and agricultural goods. Both free-market and more state-led capitalist countries in South America and the Middle East, from Chile to Venezuela and Bolivia, from Saudi Arabia to Lebanon, have seen their national income decline, unemployment and debt rising, with social unrest following. In Chile, a price increase of 0,04 USD for the subway was enough to explode in several weeks of nation-wide unrest, which resisted all deadly attempts by the state to crush it.

By mid-2019, the crisis was manifesting itself also in the capitalist centers, namely in Europe, with industrial production shrinking since mid-2019. The current crisis is marked by the historic decline of the automotive industry, which has been the capitalist key industry in the post-WW II period. Just as there is a global overproduction in commodities, with capital producing ever more but unable to find solvent buyers among the deprived masses of the world’s labouring class, there has been a stark overproduction in cars. The automotive industry has therefore shifted mostly to luxury cars, which have made up most of the industry’s profit, and are naturally aimed at that segment of society whose income does not depend on wages but on the rise of stocks and the real estate market. Now, overproduction has reached even this segment. In 2019, German car production has fallen to the levels of 1997. In the last months of 2019 and the beginning of 2020, all major car makers have announced dramatic job cuts for their German production sites. Among these are BMW (6,000 job cuts), Ford (5,000), Mercedes (10,000), Volkswagen (9,000), Audi (9,500), as well as the part manufacturers Continental (5,500). Other segments of industry, e.g. the remaining European steel industry, are not better off. And it should be noted, that these numbers were announced before the actual recession has hit, and do not include any forced layoffs due to the bankruptcies that are soon to follow.

Economic measures running out

Economically, Europe’s capitalist economy is staring down the prospect of a complete economic crash, not unlike Argentina in 2000. In the first months of the corona virus outbreak in China, the virus was used as a welcome excuse to temporarily close factories and to sell off long-lasting overproduction stocks; now it is used as an argument to call for more central bank spending, in order to solve economic problems that have been manifest long before the virus. But the central banks’ intervention have lost their power since 2009; in most of the world, the actual or the real interest rates are already in the negative, meaning that capital can borrow at almost zero interest rate. It was thought that this supply with “cheap money” would fuel capitalist growth, but since 2009 it resulted at best in stagnation. The capitalist industries are not faced with a lack of credit supply, but with a lack of worldwide profitable markets, which no central bank policy can magically bring about. The reduction of the general interest rate has, however, fueled the increase in prices for the stock market and commodities, which, according to Marx, are priced not according to their “actual” value (i.e., the amount of labour needed for their production), but are what Marx calls “fictitious capital”, whose price rises and falls in inverse relation to the general interest rate. It was seen as a warning sign of serious economic problems that the last round of interest-lowering in February 2020 has not produced the desired effect of pushing up the stock market, as previous rate cuts have, but stocks continued to fall. The problems are within the capitalist economy itself, not within the sphere of finance and money. The financial tools that have kept the capitalist economy alive since the almost-crash in 2009 might have lost their effectiveness.

The social outlook

Even without any additional effect by the corona epidemic, the scale of the announced layoffs is massive. In Germany, whole regions that depend solely on the automotive industry will face tens or hundreds of thousands of formerly highly-paid skilled workers, that will be unable to pay their house loans. There is currently no discussion about the social roots of the crisis in any media or by any political party, no explanation that crises are part of the capitalist economy; without these, it is natural that the hundreds of thousands who will find their skills out of demand will turn to conspiracy theories and the fascist right. Already, the German far-right AfD party has positioned itself as the protector of the automotive industry, promising the lowering of environmental standards, the return of the Diesel engine, and the expansion of coal mining (as well as wage cuts) in order to keep production going and profits flowing.

All of these measures might give the German industry a competitive advantage against other nations in a declining world market, although none of them will solve capitalism’s crisis. It is the same policy that governments all over the world have turned to in the last years: even in a declining market and under overproduction, one’s own market share can be increased by undercutting other nations, just as Brazil’s Bolsonaro is burning the last rain forests to throw more and cheaper Brazilian cattle onto the world market. Although lesser-known, Bolivia’s “socialist” Morales has been doing the same; one of his last actions in office was the ceremonial sealing of Bolivia’s first shipping container of frozen cattle to China.

If one thing is for certain, it is that in the coming months, capital and the state will use every means at their disposal to prevent the collapse of capitalist profit production. Fascism is an option. At the beginning of the year, in Germany a red line was crossed when for the first time in post-WWII history a local government was elected based on the combined votes of the liberal, the conservative and the fascist AfD party – in order to prevent a minority government by a left-wing, green and social democrat coalition. Only after direct intervention of Merkel, the fascist-elected liberal prime minister was forced to step down. At this point, the new government had been applauded by many in Merkel’s conservative party; one party member, the former head of the German Verfassungsschutz, an agency which, according to the constitution is tasked with the protection of democracy, exclaimed: “most importantly, the socialists are gone.” It was the same sentiment that led the German ruling class in the 1930s to support the rise of Adolph Hitler.

Already, the AfD can count on wide support among the German police forces, military and judiciary, which will be seen as a key token by the ruling class once any popular unrest arises. In the past months, several times fascists networks have been discovered in the German military, hoarding weapons and keeping kill-lists of left-wing politicians; most got mild sentences.

If it might be hard at the present moment to imagine a descent into fascism or war, we should remind ourselves that in 1930, nobody would anticipate a Hitler government, WWII or the mass-murder of the European Jews; just as in 1914, nobody would anticipate the “civilized” capitalist countries turning into a war of annihilation, supported by the European workers’ parties.

On the other hand, with every step of capitalism towards barbarism, the vision of a world which is not based on capitalist profit and competition manifests itself as the only alternative. It is this spectre that all powers of the old world are afraid of.


Hi Markus,

There are plenty of useful and interesting facts in there.  However, it seems somewhat catastrophic/cataclysmic.  Is any significant section of the German ruling class – let alone other ruling classes in the imperialist countries – about to turn to fascism?  While state power is being strengthened, I just don’t see the bourgeoisies of the West in such desperate straits as to hand over power to fascists.  Are we on the verge of anything resembling the Great Depression?  Again, I just don’t see it.  Another recession – sure, I can see that as a possibility.  But a cataclysmic breakdown?

The Great Depression arose out of a long period of the falling rate of profit which sent capital into stocks, bonds, real estate, etc until that became vastly inflated and completely out-of kilter with the real economy and the pack of cards came down.  Something similar, although on a much less catastrophic level, took place with the GFC.  But the capitalists managed that, without resort to fascism.  They have plenty of less problematic mechanisms – and fascism is hugely problematic for them – they can deploy.  They have been managing a kind of crisis capitalism ever since the postwar boom came to an end in the early 1970s (a bit later in Japan and Germany).  In most of the major capitalist countries it is business as usual in terms of who they have as their political managers and I just can’t see evidence that the bourgeoisies are going to throw caution to the wind in the next six months or so.  Or that there is going to be an economic meltdown of such a cataclysmic scale that would force their hand to do so regardless of whether it was their ideal option or not.

There is a tendency on the left to see breakdowns everywhere.  There used to be a big Trotskyist current in Britain called the Healyites.  In the 1970s, hardly a few weeks went by without them declaring capitalism was about to melt down and the British ruling class were going to resort to a military coup, as if Britain was some Third World banana republic rather than an imperialist centre with vast reserves on which to draw.

They whipped their members into a frenzy with this.  I guess it helped that they had a lot of histrionic types as they were big in the acting fraternity – Vanessa Redgrave was probably their most famous leader, and her brother Corin (another actor) was on their CC too.  They had a heap of actors, producers, writers, directors (Ken Loach was one of them, but fortunately veered off in the 1980s).  They largely disintegrated in the mid-1980s as Healy was a serial sex pest, if not worse, and eventually some of the leaders below him had had enough. One of the funny things was that in the industry they were strongest, the car plants, an opposition arose, led by their leading figure at Cowley car plant, that began challenging the intellectuals and the Actors Equity people about the imminent collapse of capitalism and impending military coup.

The Healyites were extreme, but far from alone.  Tariq Ali, who was a key leader of the International Marxist Group, one of the main far-left groups in Britain, although mainly campus-based, co-wrote a crucial IMG orientation document in about 1972, declaring that all the decisive battles in Europe would be fought in the next five years.  The battles that would decide the nature of Europe – socialist or fascist – for hundreds of years.  Well, of course, they were not and poor Tariq (who I actually quite like in some ways; he’s pretty solidly anti-imperialist) went off and joined the British Labour Party a decade later.

Various other Trotskyist and Maoist groups have pushed similar catastrophic collapse lines.  I think it’s important to make really sober analyses.

I would tend to use the figures to show how capitalism has some serious problems but continues to kind of bounce along the bottom.  There is no new dawn for it, nothing on the scale of the postwar boom and that the current malaise-ridden state of capitalsim is probably as good as it gets.  It has never really recovered from the end of the postwar boom.  That if we want better we are probably going to need to get rid of capitalism.  But the problem is that while capitalism is exhausted, the working class in most of the imperialist world is either also exhausted or just plain unprepared to fight.  Without a serious, fighting working class, the system can survive indefinitely.  Was it Lenin who said there are no hopeless situations for the ruling class?

The other thing about the 1930s and now.  There was a radical, insurgent working class in the 1930s.  Their existence made it harder for the capitalists to find a way out within normal bourgeois democracy (thus having to resort to fascism) and also stopped the capitalists from resorting to ‘normal’ capitalist economic reforms, thus becoming an actual factor in the onset of the Depression.

Philip Ferguson


Hi Phil,

Thanks for your comments, which I really appreciate. I believe that this discussion among us is important.I think you are mistaken if you trust that the current crisis is just a cyclical depression.

The cyclical depressions of the last century were short dips in an otherwise ascending course of the capitalist world economy.

What is before us, is much deeper. In 2008, a crash was narrowly avoided by immense state intervention and central bank policies around the world. I think everybody who looked at the 2008 crash — even bourgeois economists, but perhaps of more relevance, all Marxist theoreticians concerned with crisis theory (Paul Mattick Jr.; Andrew Kliman; the people at the critiqueofcrisistheory blog) — agreed that the root causes of this crisis have not been solved.

The past crises have been solved by an expansion of global capitalist production. In all cases, there was unclaimed territory into which capital could expand (both socially and economically). For example, it was the aftermath of the Great Depression of 1929 that saw the expelling of the farmer-peasants from the US midwest and their substitution by industrial capitalist agriculture; a profitable field of investment, that required huge amounts of “fixed capital” in the form of machinery, roads etc, guaranteeing capital a field of profitable investment. The same is true for NZ, where, if I remember correctly, e.g. the Coromandel road was only built in the 1930s, as a measure of public relief works, and turned the otherwise petty commodity producing farms into capitalist ventures, with direct access to the world market. Finally, the last depression in Europe lasted until about 1936, and ended only with the beginning armament, not only in Germany, but also in France, UK and Italy.

The problem today however, is that this expansion has come to an end. The last big step — and the last big boom — for capitalism was the industrialization of China, which for almost a decade swallowed much of the world’s surplus product. The capitalist surplus product consists not in commodities for consumption, as the classical underconsumption theory believed, but in surplus capital — machinery, raw materials, means of consumption for the expanding labouring class. But it can only be invested, if new profitable venues for investment are found. Currently, there are no more areas of profitable investment, which capitalism can industrialize for an extra profit, except some parts of central Asia. What we have before us, is the historical movement of capitalist expansion coming to an end, and what we see are the same symptoms of global capitalist stagnation, increasing inter-imperialist tensions, that Rosa Luxemburg saw in the early 1900s. If we may now say that she was wrong — obviously, capitalism survived –, it is true that it did so only after two inconceivable wars and a complete breakdown of civilization.

The fact that the working class is not ready, or nowhere to be seen, is of no importance. The crisis tendency is based in capitalism’s own laws.I think one of the biggest task is that we need to change our conception of the struggle ahead. We are still thinking it in the old antagonisms, the ones inside capitalist class society. It is natural that as this form of civilization breaks down, so are its characteristic forms of antagonism. Marx once remarked that “in the eighteenth century a number of mediocre minds were busy finding the true formula which would bring the social estates, nobility, king, parliament, etc., into equilibrium, and they woke up one morning to find that there was in fact no longer any king, parliament or nobility. The true equilibrium in this antagonism was the overthrow of all the social relations which served as a basis for these feudal existences and for the antagonisms of these feudal existences.” The same might hold true for parliament; for the labour unions; etc.

I think we are making a mistake if we cling to the idea that capitalism will miraculously solve the current crisis; all signs are pointing in a completely different direction. And if there should be a solution, if capitalism should successfully restructure itself on a global scale, it is clear that it will involve some sort of big war.This is just to elaborate a bit more on the crisis question. I would be interested what you say.

Markus Winterfeld


I agree with Markus re 19th-century recessions.  Capitalism was still on its upward arc.  And I agree the crisis tendencies are immanent in capitalism.  The law of the tendency of the rate of profit to fall goes on outside what the working class is doing.
However, if the working class is not doing much it gives the capitalists all kinds of space.  They can offset TRPF with various policies ranging from driving down the price of labour-power below its value to mass layoffs to wars in which they beat up their capitalist rivals etc.  At present the quiescence of the working class in most of the western capitalist world has allowed them all kinds of manoeuvring room.  Very different from the 1930s.
I think the key turning point was the end of the postwar boom in the early 70s (later in Germany because it had a much newer industrial base, like Japan).  In the 50 years since then, there has never been anything comparable to the long boom.  Peaks and troughs are less pronounced.  So we had the global recession of the early 70s, where the capitalists resorted to Keynesianism but it only made things worse, so they resorted to more supply-side economics and the ‘new right’ and ‘neo-liberal’ era.  Basically austerity for the working class and welfare for the bourgeoisie, although a section of inefficient capitalists were let go to the wall too (eg a lot of the British shipbuilding, vehicle manufacturing, engineering).  It took a long time to recover from the recession/s and years of malaise when the postwar boom ended.  And, of course, there was a shift to the artificial economy.
Then there was the 1987 global crash.  In NZ, half the paper values were knocked off the stock exchange and I think half or almost half the companies on it went bust.  Hit the developed capitalist west hard and took years to recover from.

In the late 1990s we had a major crash in East Asia, and that took years to recover from.  Then the GFC, which has also taken years to recover from.

Yet, capitalism has shown a great deal of resilience.  In no small part because of the state of the working class.

I think eventually the resilience will end.  But I don’t think there are any signs it is about to end now.

Also, most of the working class, of course, do not live in the old developed West anymore.  They live in the Third World.  That is now the centre of the working class, especially the industrial working class, the key section of workers (not the only section, but the key one) in terms of producing surplus-value.  Fortunately, they have not been house-trained and are quite bolshie in terms of economic strikes and also well ahead of the First World working class in terms of political consciousness (not just trade union consciousness).

The existence of cheap consumer goods produced the third world, and of super-profits from there, also gives the ruling classes in the imperialist world more manoeuvring room.

I agree with Markus it is important not to just reproduce the mantras from the past.  We have to be sensitive to new trends.  But I just don’t see any new trend to an imminent breakdown of the capitalist system – look what they’ve weathered in just the past 45 years! – and a chunk of the left has a tendency to see breakdown where it is not.  They’ve been doing this for decades.

Philip Ferguson


One comment

  1. Hi Phil,

    I think we both agree that one of the current problems of the left is that it is not able to give an explanation of the capitalist crisis. The left, in all its different currents, hopes that the crisis goes away soon, like a bad dream, so that afterwards it can continue with the same politics it has used for the last fifty years.

    These politics can be summed up as: redistribution of capitalist profit. The left doesn’t know any other. A situation in which these very profits, however, run out, is unthinkable. The left-wing political playbook ends here.
    If we take the prospect of a long and deep crisis seriously, we have to let go of redistribution politics and think more radically, in terms of the difference between profit and material supply, between value and use-value. The longer the current crisis continues, the more these questions will be not only of theoretical, but also of immediate practical importance.

    This means, at the same time, that the organized working-class, in the form of labour unions and labour parties, will not be the main subject of the current struggles. They will play a supporting role, but the era when the workplace was the site of social struggle has ended. When the capitalist profit machine is coming to a halt, these working-class organizations will be forced to accommodate. Under the prospect of massive closures, they will sign everything. The only successful social movement of the last five years were the French yellow vests. They started out by distancing themselves from labour unions, and therefore were in the beginning completely ignored by the left or slandered as right-wing. After only a couple of weeks, they won a victory over Macron, which the whole of the French labour movement, one of the best organized in the world, with all its attempted general strikes etc., failed to gain. The same misconception, that the current crisis will be over soon and we can come back to capitalist normalcy, leads the left to ignore current attempts at social struggle.

    I disagree, however, on the value of the argument that because capitalism has weathered all past crisis, it will weather this one as well. We can point out very precisely what led capitalism to revive after the last crises. The last big expansion, from 2000-2009, was caused by the industrialization of China, a country of 1 billion people. It took ten years, and it has come to an end. There are no more places that remain outside capitalism, instead what we see outside the first world are the ruins of capitalist development (South and Central America; Africa; the Middle East). If capitalism is going to come out of this crisis, it will need measures we have not seen. And I think it is of high importance to face the possibilities of barbarity, of which this society is capable of.

    I think that one of the biggest differences we have from the bourgeois ideology machine, is that we know that capitalism is a contradictory society, and we can explain the crises, which, in the final analysis, rest in the value form of the product.


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