"It is a moment Karl Marx would have relished. From every angle financial capitalism is taking a battering" (The Guardian).

 Every day that passes sees capitalism descend deeper into crisis and chaos.  The collapse of Lehman Brothers in the US, the emergency nationalisation of insurance giant AIG the effective takeover of HBOS before it collapsed, and now the likelihood of the nationalisation of all the toxic debt build up by the bankers and bosses in the US. 

This is the biggest crisis facing the economic system of capitalism since the 1930’s. It has shattered the illusion that so-called “free markets” are the best way to run the world.

These events have destroyed the current ideological foundations - and much more besides - of capitalism. Neo-liberal capitalist governments like Bush in the US and Brown’s in Britain have been forced to turn to the “discredited” ideas of nationalisation. Bailout’s to the tune of billions of pounds to save the interests of big business – but no bailouts for hard pressed homeowners faced with the nightmare of losing their homes. Two million have lost their homes in the US with 10 million more facing foreclosure.

The Financial Times and others have referred to these bailouts as “socialism for the rich”. But ordinary workers and their families are facing a nightmare of repossessions, unemployment and rising prices.

The roots of the crisis are well known. They lie in the disintegration of the housing market in the US and particularly the subprime sector, which lent to mostly poor people who had no prospects of repaying their inflated mortgages. However, there is not just one financial problem but now a chain of looming crises, unexploded bombs, which could yet ignite, with further huge slabs of masonry falling off the 'financial architecture' of US and world capitalism.

HBOS

HBOS for example was very exposed to the collapsing mortgage market in the UK. It held 20% of all mortgages in Britain, and yet had to borrow more than half of its money from other financial institutions to cover its lending practices. With the prospect of a huge rise in the numbers of people being unable pay off their mortgages and banks refusing to lend to each other HBOS was a ticking time-bomb.

Now tens of thousands of workers will face losing their jobs. The new so-called “super bank” after the takeover by Lloyds/TSB holds 30% of the mortgage market and will itself face possible collapse as the recession deepens. 

This crisis will extend - in fact, it already has done - into the 'real economy', both in Britain - which has entered a recession - and in the US. This has inevitably drawn in Europe, Japan, the rest of Asia and, ultimately, China. It will be the workers in the finance sector - and most of them are white-collar workers - who will be the first to suffer. Sixty-three thousand have already gone down the road, mostly in London and New York. A further 40,000 jobs in UK financial services could vanish in the next year or so.

But the well-oiled, well-dressed 'masters of the universe' who, despite their crocodile tears, will not really suffer. Unemployment will now rise substantially, with an estimated half a million lost jobs adding to the dole queues in Scotland and throughout Britain. These events represent a massive indictment of neo-liberal capitalism, the untrammelled rule of the 'market', in which a handful of billionaires can ruin the lives of millions.

The solution is not just the 'de facto' capitalist nationalisation of AIG, Northern Rock, Bear Stearns or Fannie and Freddie. These failing institutions should not only have been nationalised, but put under workers' control and management, with compensation paid to their shareholders based on proven need and with protection for small depositors. This would be the start of laying the basis for a socialist and democratic plan of production for the economy as a whole.

Capitalism has failed. Moreover, it has failed at a time when capitalism was making super-profits and seemed, at least to the capitalists, to be a spectacular success. But now they will aim to make working people pay for this crisis by dragging us into the abyss of unemployment and poverty. We need socialism, not for the rich but for the working class and the poor internationally.  

Join us today. 

Philip Stott is a member of Solidarity Dundee and The CWI