July 16--The G7, the seven so-called "industrialized democracies," are meeting in London in the midst of a developing world economic crisis of most serious proportions. They are said to be primarily discussing how to formalize a new relationship with the USSR.
The principal issue, according to the capitalist press, is how much to lend to or invest in the USSR and how far the seven should be willing to go to meet its economic needs. The U.S., Britain and Japan say that depends on how soon the Gorbachev administration will completely dismantle the socialized sector in the USSR and restore the capitalist system.
That is the focus of the issue, according to the capitalist press and the releases coming out of the G7.
No `help' for USSR
While it doubtless is a principal consideration at this particular G7 meeting, it is not the intention of the present article to focus on this issue. We have written a great deal on it in recent months. However, it is necessary to disabuse our readers of any notion that these seven "democracies" have gathered for the purpose of helping the Soviet Union, even if it were to become a capitalist country.
The seven most industrialized, predatory imperialist powers are interested in no such thing. They won't help develop a huge capitalist economy in the USSR, which would become a rival to them. On the contrary, their plans are calculated to transform a dismantled and fragmented Soviet Union into a neocolonialist market.
The real problem for the imperialists is whether at the present moment they have the wherewithal financially and economically to do this. And they are divided among themselves on how to share the expected booty which they hope will accrue to them in the future.
Dealing with bank failure
At the moment, however, they are most seriously concerned with other critical problems that they must deal with in secret and that concern the fate of their own exploitative system.
The most sensitive issue they are facing arises from the collapse of a mammoth bank with worldwide connections and branches across the entire spectrum of Third World countries, involving millions of oppressed people.
The Bank of Credit and Commerce International, said to have assets of $20 billion, was shut down on July 5. The New York Times of July 6 said in its headline: "Seven Nations Charge Fraud and Seize a Banking Empire. Britain Finds the Bank of Credit and Commerce Concealed Losses."
This bank, according to the New York Times and other newspapers, operated in as many as 69 countries (by some accounts, more than 70). This makes it a truly extraordinary banking venture. All its officers, from the top executives down to the smallest unit, are Third World.
Its founder was Agha Hasan Abedi of Pakistan. The ruler of Abu Dhabi, Sheik Zayed bin Sultan al-Nahayan, and other Abu Dhabi officials together own 77% of the shares in the bank. It made large loans to a group of Pakistani and Arab businessmen, including Sheik Kamal Adham, the former head of Saudi intelligence; Saudi banker Khaled bin-Mahfouz; Saudi businessman Ghaith Pharaon; and Sheik Mohammed bin Rashid of Dubai.
Let us say at the outset that the collapse of the bank is a symptom of the deeper malaise which is afflicting the international banking system; that in turn reflects the deep-going crisis in the capitalist economy. But having said that, it is necessary to ask: In light of the fact that the BCCI operated in at least 69 countries, who had the right to shut it down?
The Times says, and it is repeated in all the other capitalist newspapers, that it was shut down by Britain, Luxembourg, the Cayman Islands, Spain, Switzerland, France and the United States.
Even a superficial observer can readily tell that the Cayman Islands as a financial entity are nothing more than a dummy corporation for the operation of big outside banks.
Luxembourg, with a population of 365,000, is a tiny duchy where some 280 foreign banks operate. It has about as much political authority or meaningful regulatory powers over them as a town clerk.
We next look at Spain. Financially, it is a debtor nation and beholden to the imperialist powers of Europe and the U.S. Its capital stake in this huge worldwide venture is not even stated.
Financial powers behind the bank
We are therefore reduced to the U.S., Britain, France and Switzerland, which are the financial powers behind the bank. They agreed among themselves that London, which has the biggest stake, should take the initiative in shutting down the BCCI, and that France and the U.S. would support it. The principal officers and the stockholders, all of them Third World, weren't informed, not even Sheik Zayed.
Furthermore, the CIA has been deeply involved in the bank for an unspecified amount of years. So that this handful of imperialists, without legal sanction from any authoritative body representing the 69 countries in which the bank operates, took it upon themselves to shut the bank down. They forced all of its branches, with the exception of those in the U.S., to close their doors, leaving hundreds of thousands if not millions of depositors in some of the most oppressed countries expropriated of their savings.
The collapse of the bank is at bottom a symptom of the severity of the general capitalist banking crisis. Nevertheless, the whole intent and purpose behind this bank was to drain the meager deposits of oppressed peoples in the Third World countries and bring them into the milieu of high finance in the imperialist metropolitan countries.
Over the past ten days, since the announcement of the seizure of the bank and its assets, each detail let out by the capitalist press has reinforced the view that this is nothing more than a giant ripoff, a form of expropriation as cruel and as brutal in its deadly effects as a military invasion.
And now in London, Bush, Mitterrand and Major are faced with how to deal politically with this economic catastrophe that has been inflicted on oppressed peoples by the operations of their capitalist, imperialist system. The issue is how to deal with it in the event there is a political explosion, and how to divert attention from their own complicity, their own criminal conduct.
It may well be true that the officialdom of the bank was involved in deceit, fraud, mismanagement, and so on. But these are surface manifestations which have accompanied every bank failure over the years. In world political terms, what it represents is a predatory assault by imperialist countries against oppressed peoples. It brings out once again that one of the most critical issues in world politics and economics is the struggle between the oppressed nations of the world and the oppressing imperialist countries.
The collapse of this bank and the manner in which the imperialists dealt with it are a financial counterpart to the brutal invasion of Iraq. The same powers are deeply involved. These are the same countries--the U.S., Britain and France--that took time out from their meeting today to once again threaten Iraq with the use of military force.
Global competition
But this is not the only problem which concerns the seven. Perhaps an even more serious question that they have to consider is their own interimperialist struggle. The Wall Street Journal (July 15) puts it rather well on its front page: "A new era is at hand in global competition: U.S. vs. a united Europe. When G7 meets this week, Atlantic rivalry may be at the center of disputes." Indeed, it is.
"Move over, Japan," continues the Journal. "A new self-assured Europe is on the rise and is rapidly becoming the leading target of U.S. complaints." What follows is a long story about how Europe is becoming unified and is challenging U.S. dominion over the continent.
The article quotes a report of the Rockefeller-sponsored Trilateral Commission that the prospects for friction seem to be increasing. That's an elegant way of saying that the imperialist antagonisms are sharpening and that, rather than the facade of unity and solidarity which gets such a high profile, there is a venomous capitalist competition over markets, sources of raw material, and colonial booty. All the unity shown during the period of the invasion of Iraq is being dissipated by the interimperialist antagonisms which the G7 are trying to paper over.
And, as the Rockefeller spokespeople say, the tensions are growing rather than narrowing.
Chemical-Manny Hanny merger
The Germans, French and Japanese must have been taken completely by surprise by a well-timed announcement on the second day of the G7 meeting. Two of the most powerful banks in the U.S. and the world, Chemical Bank and Manufacturers Hanover Trust, announced plans for the largest bank merger in American history.
Of course, the merger is a result of the devastating effects of the economic situation in the United States, most of all in the banking sector. But what significance does it have in the light of the interimperialist rivalry which affects not only Europe but also Japan?
Out of the merger of these two banks will come one with combined assets of $135 billion, dwarfing any commercial bank in Europe. This can have a great impact on the competition vis-a-vis trade and commerce.
There is about $100 billion worth of trade between Europe and the U.S. every year. This merger will greatly facilitate U.S. exports to Europe. This new financial colossus will have the means and wherewithal to financially expedite and if need be even subsidize U.S. exports by lowering the interest rate on loans provided to the exporters.
This will adversely affect the furtherance of European unity. The much-vaunted unity of the European Community, the so-called twelve, does not abolish the contradictions and rivalries among the European imperialist powers. It is merely an attempt to limit U.S. and Japanese economic intervention and also to limit imports from Third World countries that may be competitive.
Of course, the many years of importing cheap labor from North Africa and elsewhere, particularly following World War II, constituted an important basis for the capitalist recovery of Europe. France, Germany, Switzerland--all benefited from the big immigration. This is equally true for the United States and Britain.
The unification of Europe, if it does take place, does not abolish European interimperialist rivalry. It exacerbates the relationship between the less and the more developed. It certainly doesn't abolish but intensifies the class antagonism between the working class and the bourgeoisie.
Europe can only become united by the abolition of not merely trade barriers and the like, but of the capitalist system, the system of wage slavery and exploitation.
Regional blocs and capitalist competition
The general tendency in the attempt to form new regional blocs, such as the European Community or the emerging U.S. "free trade" alliance with Canada and Mexico, is to intensify capitalist competition at the expense of the working class. It pits the workers in the more developed countries against those in the oppressed countries to the advantage of the imperialists.
The Chemical-Manufacturers Hanover union is sure to set off a wave of mergers among the 12,000 banks in the U.S. As reported, the first victims of the present merger are the workers--6,200 will be laid off immediately.
But the banking crisis is also merely a symptom of the crisis of capitalist production. The wave of bank mergers results from the inability of the smaller institutions to sustain the viability of industrial enterprises during a period of protracted recession caused by capitalist overproduction. Rising inventories and shrinking markets are reflected in the inability to repay loans. These nonperforming loans, which until now seemed confined mostly to the foreign sector, have now unloosed an epidemic of losses in the U.S.
Who'll insure the insurers?
Nothing so much symbolizes the character of the crisis as the collapse of what until now was regarded as a pillar of conservatism--the insurance industry. Both Executive Life in California and Mutual Benefit in New Jersey are being taken over by the state, although their losses stem from different areas of the economy. Executive Life had much of its assets in junk bonds; Mutual Benefit was done in by the falling real estate market. In both cases, hundreds of thousands of policy holders, many of them pensioners, may be affected.
It is impossible to separate the banking crisis from the insurance crisis. The banks are the depositories of the insurance companies. If it turns out that there is a run by policy holders to cash in their insurance, it will certainly usher in a new crisis on the scale of the early 1930s, before the Roosevelt administration declared a banking holiday.
There is one major difference between then and now. At that time, the intervention of the capitalist government through its Federal Reserve system had been minimal. The Hoover administration and its predecessors, Coolidge and Harding, practiced a much more limited form of state capitalist intervention than at present.
Today, the capitalist state is firmly integrated with the banks and the insurance companies. It has sustained them, notwithstanding the fiction of a separation between the public and private sector.
But what really makes a fundamental difference between the two epochs is the gargantuan growth of the military. In the 1930s the military-industrial complex as such was in its infancy, notwithstanding World War I. Today the military-industrial complex, the Pentagon, is the single most formidable factor in depressing the capitalist economy.
Of course, military expenditures first stimulate the economy, but this eventually turns into a depressant, as the war against Iraq has clearly illustrated.
Where, then, can the capitalists turn in their efforts to stem the tide of recession and crisis? Only to further assaults on the living standards of the masses, as the growing list of layoffs shows.