‘We are facing something more than a mere financial crisis’

First published in English in Socialist Voice, March 23, 2009

Cuban economist Oswaldo Martinez, with Fidel Castro

An Interview with Cuban economist Oswaldo Martínez

2009 started off badly. The international economic crisis is the top priority of governments, companies, international organizations and individuals preoccupied with having a roof to sleep under and food on the table.

The situation has surprised almost everybody, albeit Cuba to a lesser degree. Almost a decade ago, Commander Fidel Castro warned that the conditions were being created for the outbreak of a crisis of enormous dimensions.

Oswaldo Martínez, director of the Research Centre for World Economy and chair of the Cuban National Assembly’s Economic Affairs Commission, had also alluded to the subject on several occasions. Looking back, the Economics PhD says: “They criticized us heavily, they called us catastrophists, but finally the crisis is here.”

Mass lay-offs all around the world, rising unemployment and poverty, shutdowns of companies and closures of banks are some of the most obvious effects of the crisis. What stage of the crisis are we in?

The crisis is just beginning, and no one can predict with certainty its duration or intensity. We are facing something more than a mere financial crisis: it is a global economic crisis that affects not only international finances but also the real economy. Due to the high degree of development achieved by speculation and financial capital in recent years, due to the extent of the breakdown in the financial sector and due to the high degree of globalization of the world economy, we can confidently conclude that the present crisis will be the worst since the Great Depression that occurred in the 30s.

What has been happening since August 2008 is the explosion of the speculative financial bubble, caused particularly by neoliberal policies. At this point the crisis is beginning to affect the real economy, that is, the economy that produces real goods and services, development of technology, and values that can be used to satisfy needs. How much more will it affect the real economy? It is hard to say. There are many opinions on this subject. Some suggest that the crisis may last between two and five years. If we use historical references, we see that the crisis of the 30s started in October 1929, developed at full speed until 1933, and the economies had not fully recovered their previous levels of activity when the Second World War started in 1939.

What finally solved that crisis, and I say “solve” in inverted commas because this is how capitalism solves a crisis, was precisely the Second World War; it was the destruction of productive forces as a result of the war that allowed post-1945 capitalism to initiate a new growth stage based on the reconstruction of everything that had been destroyed by the war. Every crisis, whether linked to a war or not, is above all a process of destruction of the productive forces.

Turning to the current situation, I would not presume to make a precise forecast on the duration of the crisis, but I will say that it is far from having hit bottom.

Which are the sectors that have been worst affected?

The explosion of the financial bubble has caused the collapse of stock markets and the bankruptcy of large corporate speculators (the so called investment banks, which in fact are not productive investors but speculative investors). Large banks have become bankrupt and credit at a global level has become scarce and expensive. The prices of raw materials and oil have plunged. Sectors of the real economy, such as the motor industry in the USA, are beginning to be affected by the crisis: the three largest companies, General Motors, Ford and Chrysler, are receiving support from the government to avoid bankruptcy. Several airlines have closed down, and flights have been reduced. Unemployment is on the rise, tourism is also affected. It is a snowball effect, which can lead to a much deeper crisis in 2009.

To some specialists, this is one more cyclical crisis of the capitalist system, one of those described by Marx in the 19th century. But it has also been said that it is not just “one more” but, given the huge dimensions it has reached, it is the expression of the internal destruction of late capitalism. What is your opinion?

I think that the current crisis is, without doubt, another cyclical crisis of capitalism. It is one more in the sense that the system that has been in place since 1825, the date of the first crisis identified by Marx, has suffered hundreds of similar crises. A crisis is not an abnormality of capitalism, rather, it is a regular feature and is even necessary to the system. Capitalism follows a particular logic, since it needs to destroy productive forces in order to pave the way for another stage of economic growth. However, the current crisis is undoubtedly the mark of a deep deterioration within the capitalist system.

I believe the crisis can reach very serious dimensions, but I do not think that, on its own, it represents the end of the capitalist system or its definitive destruction. One of the things that Marx argued with great lucidity was that capitalism does not collapse through an economic crisis. Capitalism has to be brought down, through political actions.

So you agree with what Marx said, and Vladimir Lenin and Rosa Luxemburg later demonstrated, that despite the self destructive nature of capitalism, there has to be a revolution to bring it down?

Of course I do. To think that capitalism will collapse on its own, due to a spontaneous force like an economic crisis, is to believe in utopia. The crisis may create conditions that promote large anti-capitalist political movements. A capable leadership of the masses that is adept at the art of politics can take advantage of the favourable conditions created by the greater poverty, unemployment, large-scale bankruptcy and desperation of the masses generated by the crisis.

Throughout history, major economic crises have been linked to revolutionary movements. For example, during the First World War there was a profound capitalist crisis, and the success of the first socialist revolution in Russia was linked to this. The crisis of the 1930′s however, was linked to the rise of fascism because in Germany and Italy the desperation of the masses as a result of the crisis was successfully turned by the right toward far-right, fascist, chauvinist and ultranationalist positions.

What I want to stress is that nothing is inevitably written in history. It all depends on the skill and expertise of the contending political forces. In the present situation, I think that it is possible to think about change: we are in a situation that in my view is quite likely to result in a radicalization of anti-capitalist movements.

It is yet another cyclical crisis, but it is different; what makes it unique?

I think the differences lie especially in the context. The present crisis is particularly complicated because the global economy is much more complicated than it was in 1929. In the first place, the level of economic globalization is vastly greater. The degree of interconnectedness of national economies back in 1929 was still incipient, corresponding to the technologies available at the time, especially in transportation and communications. In 1929 there was no internet, no email, no jet planes; they depended on telegraph communications, telephones were still quite underdeveloped, and planes were just starting to take to the skies.

Today the situation is very different. Globalization ensures that whatever happens in a powerful economy has an impact, within minutes, on the rest of the world. Markets are greatly interconnected, especially global financial markets, and that means that the world economy is like a spider web in which we are all trapped. A movement in any part of the spider web is felt everywhere else. Therefore, the capacity for this crisis to spread is infinitely greater than in 1929. That is the first difference.

Secondly, the level of financialization of the global economy is also vastly greater. Speculative capital and its operations play a much greater role than in 1929. Back then there were stock markets, but their functioning was much more simple. Today, financial speculation has achieved immense sophistication, and this sophistication is at the same time one of its weak points. That is, the speculative operations are so sophisticated, risky, unreal and fraudulent that they have been at the basis of the global financial breakdown.

Up until now no steps have been taken that are sufficiently radical to curb the crisis. However, little by little, we are seeing how states, above all the United States, have been intervening to avoid the bankruptcy of companies… with a “protagonist” approach reminiscent of the Keynesian methods used by Franklin D. Roosevelt to overcome the 1930s crisis. Today many claim that “neo-Keynesianism” will be the alternative.

In essence that is what they are trying to do: to apply neo-Keynesian methods in a very diffused manner. We can see this in what Barack Obama has announced in connection with a major public works program including the reconstruction of the highways system (roads, bridges, etc). That is a typical Keynesian method of generating employment and income and stimulating demand. But at the same time, measures like this are being combined with others that are contradictory, such as rescuing bankrupt speculators and allocating huge amounts of money to reconstitute the speculative structure which has failed and collapsed.

This is in contradiction to classic Keynesianism, and a clear expression that the neoliberals continue to hold some key positions of power; in fact, they have not been removed. We are witnessing a battle between a neo-liberalism that is unwilling to die and a neo-Keynesianism that is supposedly being established.

I very much doubt that neo-Keynesianism, even if it is strictly applied, can be the solution to this crisis, because the current crisis has new components. The crisis combines elements of over- and under-production simultaneously; it is a crisis that coincides with an attack on the environment so massive that it is not only economic, it is also environmental, jeopardizing the survival of human beings and the conditions for human life on this planet.

Do you mean that, in the form it has taken, Keynesianism will only be a temporary solution that will paper over the problems without getting at the roots?

Of course. It is inconceivable that Keynesianism and neo-Keynesianism can be an infallible recipe to resolve the economic problems of capitalism. Capitalism has suffered major crises with both neoliberal and Keynesian policies. Between 1973 and 1975 there was a severe capitalist crisis that occurred under Keynesian policies, and that was a factor that brought about the substitution of neoliberal policy for Keynesian policy.

We should put no credence in the false dichotomy according to which neoliberalism provokes the crisis and Keynesianism resolves it. Simply put, the system is contradictory and has a tendency to develop periodic economic crises. Whether they are neoliberal or Keynesian, economic policies can facilitate, postpone or stimulate, but they are not able to eliminate capitalist crises.

Then there is one solution left: socialism …

Without a doubt. I am more convinced of this than ever before and I believe that we are very clearly faced today with the quandary posed by Rosa Luxemburg: “Socialism or barbarism”. I do not believe that humanity will regress to barbarism, if only because our survival instinct is the strongest of all.

I believe rational conditions will prevail, and rational conditions imply a sense of social justice. I think we will overcome capitalism, and we will come to implement a creative socialism, socialism as a continuous search, which is not to deny that the system has certain general basic principles in common to all socialisms. However, based on these principles, there are immense possibilities for experimentation, controversy and creativity.

And that would be the socialism of the 21st century?

I think so.

President Rafael Correa, in a lecture he gave in the main assembly hall at the University of Havana in January this year, explained that one of the problems of socialism is that it has adhered to a development model similar to that of capitalism; that is, a different and fairer way to achieve the same thing – GDP, industrialization and accumulation. What do you think?

Correa raised a good point. The socialism practiced by the countries of the Socialist Camp replicated the development model of capitalism, in the sense that socialism was conceived as a quantitative result of growth in productive forces. It thus established a purely quantitative competition with capitalism, and development consisted in achieving this without taking into account that the capitalist model of development is the structuring of a consumer society that is inconceivable for humanity as a whole.

The planet would not survive. It is impossible to replicate the model of one car for each family, the model of the idyllic North American society, Hollywood etc. – absolutely impossible, and this cannot be the reality for the 250 million inhabitants of the United States, with a huge rearguard of poverty in the rest of the world. It is therefore necessary to come up with another model of development that is compatible with the environment and has a much more collective way of functioning.

Although I heard Correa say many correct things, there was one that seems incorrect to me. In his TV interview, when he was talking about this socialism of the 21st century, with which I am in full agreement, he referred to things that would be obsolete and would have to be done away with. Amongst them, he mentioned the class struggle, but I think that what he was explaining in his lecture in the main assembly hall about the political struggles that confront him in Ecuador, what he was describing is nothing more than an episode of the class struggle in which the agenda he represents is immersed.

Who opposes this agenda? It is undoubtedly the oligarchy, the bourgeoisie. Who can he rely on to support him against those enemies? The workers, the peasants, the indigenous peoples. What I have in mind is not a narrow classic definition of “class”, but the undeniable existence of social classes, broadly speaking, and the struggle of those classes is undeniable and evident. If we renounce the class struggle, what would we be left with? Class collaboration? I do not think Ecuador can proceed to 21st century socialism with the cooperation of people like Gustavo Novoa [Former president of Ecuador (2000-2003), now living in exile in the Dominican Republic -SV] or that sector of the Catholic church and all those who are now trying to overthrow Correa.

Many expectations have developed worldwide in relation to the presidency of Barack Obama. What role can his government play with regards to solving the crisis?

I do not have high hopes of change. I believe that Obama’s government may represent a certain change in U.S. politics that is more cosmetic than substantive. In my opinion, he represents the position of a certain political sector in the United States which understood that it was impossible to continue with a regime that was as unpopular, worn out and disagreeable as that of George Bush. However, there is something we must take into account, and at least give him the benefit of the doubt: Obama’s ideas are one thing, and where the deepening economic crisis may take him is another thing. And once again I have to use the Thirties as an example.

In 1932, when the crisis was full-blown, Franklin D. Roosevelt was elected president. His ideas were nothing extraordinary, there was nothing in his election platform that would suggest what would happen next: his policy of active state intervention in the economy, of basing himself on the trade unions or regulating the private U.S. economy along the lines of a national economy.

All those measures were taken more as the result of what the crisis forced him to do, than as a result of a pre-existing political philosophy. Something similar could happen with Obama; we must give him the benefit of the doubt to see where the crisis might take him.

In the past few weeks there has been a lot on talk about the role of Latin American integration in confronting the crisis. Although this process is only in its initial stages, there have been changes at the structural level that point towards integration. How can integration help us face the crisis as a region and as a country?

I think that the integration of Latin America and the Caribbean will be a key strategic factor in the future of the region, of course, and I do not mean integration as an appendage of the United States. For decades, Latin American integration has been not much more than rhetoric, and not practice. But now we are seeing the beginning of a new period, characterized in particular by the Summit of Salvador de Bahía, held last December, when Cuba joined the Rio Group. We also have the ALBA (Bolivarian Alternative for the Americas), a new model of integration based on solidarity and cooperation, not on the market.

This situation coincides with the big crisis that is forcing Latin America to rethink her position in the global economy. This also coincides with the profound crisis in the neoliberal policy that dominated the region during the last 30 years. It is a great moment, and I think that there is a real possibility that true Latin American and Caribbean integration is beginning to take firm steps.

Some commentators are arguing that in the wake of the current crisis the world economy will be structured in large regional blocks: one in Asia, another that will continue to exist in North America, and a new one taking shape in Latin America. This is a very interesting possibility.

Martinez was interviewed by Luisa Maria Gonzalez García, a journalism student at the University of Havana. The interview was published in Spanish on March 14, 2009 in Apporea.

Translated for Socialist Voice by Richard Fidler. A somewhat different translation by Damaris Garzón was published in CubaDebate .