Sri Lankan government imposes austerity budget

Sri Lankan President Mahinda Rajapakse, who is also the country’s finance minister, presented the budget for next year to parliament on November 21. Following the dictates of the International Monetary Fund (IMF), he has maintained the current wage freeze and imposed new burdens on workers and the rural poor, while making further tax concessions to big business. Read more>>>

The crisis of the euro

Since this year began, hardly a month has passed without a major summit to decide on new measures to save the euro. Now the year is approaching its end, and the crisis of the euro is deeper than ever.

The creation of the European Financial Stability Facility (EFSF); its increase and leveraging; acquisition of government bonds by the European Central Bank; harsh austerity measures in Greece, Portugal, Spain, Italy, and France; the monitoring of the Greek budget by the troika of the EU, the European Central Bank and the IMF; changes of government in Portugal, Grece, Italy and Spain—all these measures, which have dominated headlines in recent months, failed to stop the onslaught of the financial markets. On the contrary, the markets are now panicking.

The debt crisis has moved from the periphery of the eurozone to its core. After Greece, Ireland and Portugal, Spain, Italy and even France have to pay such high interest for their government bonds that they can no longer escape the debt trap. On Wednesday, even a German bond sale worth €6 billion failed to attract buyers. Analysts described this as a “motion of no-confidence for the entire Euro zone.”

Many experts no longer believe that the euro can survive in its current form. A poll by Reuters of 20 prominent academics, policymakers and business leaders found that only six believe that the currency union will survive. An additional ten saw a new “core” eurozone with fewer members as a possible alternative.

The collapse of the eurozone would have disastrous economic and social consequences—on this point experts agree. It would plunge the continent into social upheavals and national conflicts similar to those in the first half of last century.

In this context, national tensions in Europe are increasing. France and Italy, supported by Britain and the US, are calling for joint European bonds (euro bonds) and unlimited ECB funds for indebted countries to satisfy the insatiable appetite of the financial markets. Germany has rejected this categorically, insisting that every country must restructure its own budget through hard austerity measures, even if this means—as in the case of Greece—recession and ruin.

When European Commission President José Manuel Barroso presented his own plans for euro bonds on Wednesday in Brussels, Berlin reacted hysterically. The media fumed over “Barroso’s provocation,” and Chancellor Angela Merkel denounced his initiative in front of Parliament. “Never before in the history of the EU has a President of the Commission been publicly slapped by a German Chancellor in such a way,” the Süddeutsche Zeitung commented.

Alexander Dobrindt, the general Secretary of the Bavarian CSU, attacked Barroso in the Bild tabloid as “a mercenary of the Dolce Vita states, who want to get their hands into our cash box”. Economy Minister Philipp Roesler insisted as well, that Germany will take no financial responsibility for other Euro states. “We say ‘no’ to euro bonds,” he said. “A transfer union would be wrong because it would mean German taxpayers pick up the costs. Euro bonds are wrong because they would mean a rise in interest rates for Germany.”

Meeting with French president Nicolas Sarkozy and the new Italian Prime Minister Mario Monti on Thursday, Chancellor Merkel insisted on her ‘No’ to euro bonds. Instead she announced that Germany and France will present proposals for changes in the EU treaties within a few days. The aim is to give Brussels the means to enforce even harsher austerity measures. Those who violate the Stability and Growth Pact “must be called to account,” Merkel insisted.

There are indications that Merkel might ultimately agree to euro bonds, as she agreed to the EFSF and other measures after initial opposition. But she will ask for a high price. In return, the German government is asking for a tightening of the Stability Pact, enabling Brussels to install a veritable dictatorship over the budgets of individual member states. This would allow the EU to drop the burden of the crisis on the people without bothering about public opinion and democratic procedures.

Euro bonds aim to save the assets of the banks and the funds of the super rich with public money, while the burden of the crisis is shifted on the working class. Nonetheless, the Social Democrats, the Greens and the German Left Party are enthusiastically calling for euro bonds.

Euro bonds would just as little resolve the crisis, as the EFSF and other measures have done.

The idea that Germany can tear Italy, France and Spain out of their difficulties by its economic strength is an illusion. Even if one ignored the fact that Germany itself is highly indebted and very susceptible to the fluctuations of the world economy due to its dependence on exports, its economy is not large enough. The German GDP of $3.3 trillion is only one fifth of the GDP of the entire European Union, and just half of the combined GDP of France, Italy and Spain.

Furthermore, the basic cause of the crisis is not the indebtedness of the European countries. In fact, the average debt in the EU is considerably lower than in the US, Japan or Britain. Rather it is an international crisis of the capitalist system whose epicenter is in the US. Europe is the target of the financial markets’ attacks because it is internally riven and split.

The European Union has not “unified” Europe, it has only subordinated it to the most powerful financial and industrial corporations; nor has it overcome national antagonisms, which resurge whenever the crisis intensifies. The capitalist class is organically incapable of unifying the continent in the interest of its people, because capitalist private property is insolubly tied to the nation state.

A progressive resolution of the crisis is possible only on the basis of transforming existing property relations. The banks, large corporations and major private fortunes must be expropriated, subjected to democratic control and devoted to serving society as a whole. Social needs must take precedence over the drive for profit.

Such a socialist perspective can be realized in the economically and socially closely-knit continent of Europe only through the close international collaboration of the working class. The aim must be to build the United Socialist States of Europe. The alternative, as in the 1930s, is the balkanization of the continent and a slide into dictatorship and war.

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ILO report warns of sharp employment downturn, social unrest

The International Labour Organization, an agency of the United Nations, released a report Monday pointing to a disastrous global jobs situation and a “vicious cycle” sending the world economy into a new downturn.

“The next few months will be crucial for avoiding a dramatic downturn in employment and a further significant aggravation of social unrest,” warns the opening editorial to the World of Work report, released ahead of a G20 meeting later this week.

In addition to documenting the employment situation, affecting both advanced and “developing” countries, the reports presents a damning portrait of contemporary world capitalism: growing financialization, declining taxes on the wealthy and corporations, and a collapse in the share of income going to the working class.

Three years after the crash of 2008, “economic growth in major advanced economies has come to a halt and some countries have re-entered recession, notably in Europe,” the ILO notes. “Growth has also slowed down in large emerging and developing countries.”

The vast majority of countries categorized as having advanced economies—mainly in the United States and Europe—have seen a slowdown in employment growth in the most recent quarter, and more than half have seen employment declines. At the same time, about half of those countries categorized as “emerging or developing” have seen declines in employment, including Russia and Mexico.

The advanced economies have 13 million fewer jobs today than in 2007, with the United States (6.7 million) and Spain (2.3 million) accounting for more than half of this figure. Due to the growth in the labor force, to restore pre-crisis employment rates, 27 million jobs would have to be added in advanced countries, and 80 million globally, over the next two years.

The jobs situation is particularly bleak for young people, and this holds true in almost all parts of the world. “Among countries with recently available data, more than one in five youth [aged 15-24], i.e. 20 per cent, were unemployed as of the first quarter of 2011—against total unemployment of 9.6 per cent.”

According to the ILO’s projections, which are predicated on the assumption that there will not be renewed decline in global growth, the global employment rate in advanced countries is not expected to return to pre-crisis levels until far past 2016.

Figure 1. Employment Rate Projections for Advanced Economies (ILO).

The prospects of a recovery in employment and economic growth are undermined by a number of factors, including a renewed financial crisis in Europe and a turn by governments throughout the world to fiscal austerity. Sharply declining wages for workers, particularly in advanced countries, is leading to a fall-off in consumption.

“In short,” the ILO writes, “there is a vicious cycle of a weaker economy affecting jobs and society, in turn depressing real investment and consumption, thus the economy and so on.”

Any prospect of a return to growth is also undermined by increasingly bitter national conflicts between the different capitalist powers. “While in 2008-2009 there was an attempt to coordinate policies, especially among G20 countries, there is evidence that countries are now acting in isolation,” the report states.

The ILO expresses the hope that governments will institute job-creation programs to resolve the crisis. However, the impossibility of this happening is highlighted by the fact that the report cites the United States as the only major advanced country to advance a “national jobs plan.” In fact, the Obama administration’s proposal, even if enacted in full, would be no more than a drop in the bucket. Since it was announced in September, it has already been scaled down significantly. Whatever is passed will consist largely of tax cuts for corporations.

The economic crisis is, predictably, producing a sharp increase in social discontent. The year 2011 has already seen a significant growth of the class struggle, beginning with the revolutionary upheavals in the Middle East and North Africa. They have since expanded to Europe, Latin America, and the United States, including in the Occupy Wall Street movement that began in September.

According to a metric of “social unrest” based on various indicators, including unemployment, the ILO calculates that 40 percent of the countries surveyed have seen a significant increase in the prospect of unrest. The likelihood of social unrest has increased particularly sharply in advanced countries. Moreover, the majority of countries worldwide reported a collapse of public confidence in national governments.

Dissatisfaction over the availability of quality jobs is over 80 percent in sub-Saharan Africa and over 70 percent in Central and Eastern Europe. It is over 60 percent in the Middle East and North Africa, though significantly higher in some countries, including Egypt.

Anger over the jobs situation is higher than 70 percent in Greece, Italy, Portugal and Spain—countries that are currently at the center of the European-wide drive to slash social programs and eliminate all previous gains of the working class.

The financialization of the world economy

Global social conditions have deteriorated sharply since the Crash of 2008, precipitated by the collapse of a massive speculative bubble inflated over the previous decade. While the fall of global stock markets led to an immediate decline in the wealth of the financial aristocracy, the actions of governments, led by the United States, have served to quickly reverse this trend.

In addition to documenting global labor conditions, the ILO report includes some important data on the financialization of the world economy, and the parallel process of wealth transfer—both before and after the 2008 crash.

It notes, disapprovingly, that in the aftermath of the crash “countries have increasingly focused on appeasing financial markets” rather than restoring employment, and that this “has often centered on fiscal austerity and how to help the banks—without necessarily reforming the bank practices that led to the crisis, or providing a vision for how the real economy will recover.”

In 2008, the capital share among financial corporations worldwide fell by more than 25 percent, after a decade of steady growth. Only a year later, however, shares were back to pre-crisis levels, a direct product of the various bank bailout schemes.

Figure 2. Evolution of capital shares by type of corporations (ILO)

''On the other hand,” the ILO noted, “the decline in the non-financial sector has been more gradual, but capital shares for this group—which account for 87 percent of employment in advanced countries—continue to decline.”

This has produced what the report refers to as a “paradox”: “The impact of the global economic crisis of 2007-08 on the financial sector was short-lived initially—despite it being at the very origin of the downturn.”

The growth of corporate profits since the crash have accrued largely to financial corporations. Non-financial corporations, moreover, instead of investing have funneled money into the stock market. “In 2009, more than 36 per cent of profits were distributed in terms of dividends, compared with less than 35 per cent in 2007 and less than 29 per cent in 2000…”

This process of financialization is part of a longer-term trend, in which wealth accumulation through speculation has increasingly replaced productive investment. Far from reversing this trend, the economic crisis has only exacerbated it.

At the same time, an ever smaller share of income has gone to the working class. According to the ILO, “the wage share—the share of domestic income that goes to labor—has declined in almost three quarters of the 69 countries for which data is available.” This is also a long-term trend.

In addition to direct infusions of money into the banks, the transfer of wealth to the corporate and financial aristocracy has been facilitated by a tax policy that places an ever greater share of the tax burden on the working class.

 

Figure 3. Top personal income tax rate—world average (ILO)

Between 2000 and 2008, 43 percent of countries decreased their top income tax rate, while 70 percent of countries decreased their corporate profit tax rate. During the same period, 30 percent of countries increased value added taxes or consumption taxes, which disproportionately target the working class.

Overall, the top personal income tax rate globally fell from 31.4 percent in 2003 to 29.1 percent in 2009. Corporate taxes have fallen from 29.5 percent to 25 percent in the same period.

Again, this trend has only continued since the 2008 crisis. The proportion of government revenue from regressive consumption taxes has increased, while the income and corporate taxes have declined.

The ILO’s policy recommendations, on the other hand, are both grossly insufficient and utterly incapable of realization within the framework of capitalism. In addition to a jobs program, it hopes that governments will cooperate to increase the share of income going to the workers, while placing greater constraints on the financial system.

What the report in fact demonstrates, however, is that any attempt to resolve the crisis in the interests of the working class runs into direct conflict with the capitalist system and the financial aristocracy that controls it. (WSWS)

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The euro crisis: Major powers plan new bank bailout

With the major powers lurching back into recession, governments on both sides of the Atlantic are planning another huge bailout of the banks. There are significant differences over how such a bailout should be organised, but there is general agreement that hundreds of billions more in public funds must be allocated to cover the banks’ losses from a sovereign debt default by Greece.

As occurred following the Wall Street crash three years ago—except on an even bigger scale this time—the wealth of the financial elite whose speculative activities triggered the global crisis will be underwritten through the plundering of state treasuries. This will be carried out even as governments intensify their attacks on the working class in the name of “fiscal consolidation.”

To offset the new handouts to the banks, even more brutal austerity measures will be imposed in Greece and other highly indebted European countries that have already been thrown into slump and mass social misery, and social cuts will be expanded in the rest of Europe and the US.

This is the meaning of the demands coming out of last weekend’s International Monetary Fund meeting in Washington to “recapitalize” European banks and expand the reach of the €440 billion European Financial Stability Facility (EFSF) by having it underwrite far bigger sums to be pumped into the financial markets by the European Central Bank (ECB).

These measures—aggressively promoted by the US and the IMF against the resistance of Germany and other northern euro zone countries—are being linked to a scheme to “restructure” Greek government debt by means of a 50 percent discount on the value of Greek state bonds. The massive losses European and American banks would suffer as a result of such a “managed default” would be covered by the new bailout organized through the EFSF and the ECB.

German officials have come out against such a European-wide bailout scheme, the cost of which would be largely borne by Germany. Instead, Berlin is planning its own national bailout of German banks in connection with a Greek default.

Over the weekend, a number of American and British newspapers wrote of a so-called “big bang” and “shock and awe” plan to deal with the European debt crisis. The resources available to the EFSF would be leveraged to reach €2 trillion and the European Central Bank would be given carte blanche to print up euros and increase its purchases of the government bonds of Greece, Ireland, Portugal, Spain and Italy.

Stock markets in the US and Europe soared Monday and Tuesday in anticipation of a new bailout of the banks and speculators. The first wave of bailouts three years ago enabled major banks and corporations to dramatically increase their profits even as unemployment reached depression levels in the US and most of Europe. The gap between wealth and poverty has widened, with the bourgeoisie utilizing the crisis to drive down wages and dismantle the remaining remnants of the welfare state.

The most recent wealth report issued by Merrill Lynch and Capgemini concluded that the combined wealth of the nearly 11 million “high net worth” individuals increased by 17 percent in 2009 and 9.7 percent in 2010, reaching a total of $42.7 trillion. This sum is far higher than the combined state deficits of all the countries in Europe and North America whose people are being impoverished as a result of austerity programs.

In Germany, which has pushed relentlessly for the implementation of austerity policies across Europe, private fortunes have increased over the past 15 months by a total of €350 billion—exactly equivalent to the total debt of Greece. Der Spiegel magazine recently reported that the Swiss bank deposits of Greek multi-millionaires totals €600 billion euros—nearly double the country’s public debt.

Tensions between the US and Germany have intensified in the run-up to a key vote this Thursday in the German parliament on an extension of the existing EFSF. On Monday, US Treasury Secretary Timothy Geithner warned that Europe did not have “very much time” and needed to “get on with it.” President Barack Obama complained that Europe was “scaring the world” with its inaction.

The response from Berlin was prompt. German Finance Minister Wolfgang Schäuble declared that the government had no plans to expand its current commitment to the EFSF. Chancellor Angela Merkel, addressing the German association of industrialists, declared that Germany was opposed to any further stimulus measures or increase in debt.

As the economic crisis deepens and Europe, following the US, sinks into recession, conflicts between the trans-Atlantic allies are escalating. At the same time, rivalries within the European Union itself are intensifying. Some senior European political figures with a sense of history have already pointed out the dangers arising from a break-up of the euro zone.

In comments earlier this month, the finance minister of Poland, Jacek Rostowski, warned that a collapse of the European project could result in war within a decade. Rostowski told reporters that war is likely “not in the months ahead, but maybe over a ten-year time frame.”

This is the future that capitalism holds out to the world’s people: depression, dictatorship and war. The current crisis represents the failure of the world capitalist system. It must be replaced by a new system based on public ownership and control of the productive forces under the democratic control of the working people, and a planned economy geared to social needs, not private profit—that is, by socialism.

This requires the mass revolutionary mobilization of the European, American and international working class to break the stranglehold of the banks and corporations and establish workers’ governments. (WSWS)

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America: The land of poverty

The census bureau figures that came out Tuesday, showing the largest number of Americans living in poverty since records began in 1959, are a damning indictment of American capitalism and the entire political system.

In 2010 there were 46.2 million people—almost one out of every six residents—living below the official poverty line, including 16.4 million children. Of these nearly half, or 20 million, were described as living in deep poverty, subsisting on less than half the income the US government says is needed for basic food, shelter, clothing and utilities.

As it is the government’s poverty threshold—about $22,000 for a family of four and $11,000 for a single person under 65—is insufficient to maintain a decent standard of living. A more accurate measure would be twice the official poverty line, or about $44,000 for a family of four. More than 100 million Americans—one in three—are below this threshold.

The main factor behind the growth of poverty is the jobs crisis, which has only gotten worse since 2010, the year after the recession supposedly ended. Tens of millions of workers are jobless or forced to work part-time, low-wage jobs that are insufficient to keep them out of poverty.

The young generation is being hardest hit. Median income for ages 15-24 fell 9 percent last year. For those 25-34, nearly 6 million doubled up in households with parents and friends to save money, up 25 percent from before the recession. Of these, the poverty rate was at 8.4 percent; but the rate would have risen to 45.3 percent if their parents' incomes were not taken into account, according to an analysis of the census report by Bloomberg Businessweek.

The explosion of poverty over the last three years—along with home foreclosures, homelessness, hunger and the growing number of uninsured—takes place alongside of the accumulation of fantastic levels of wealth by the financial aristocracy that controls the economy and political system.

This is the culmination of a three-decade long process, in which the ruling class, under both Democrats and Republicans, carried out a conscious policy of transferring an ever greater portion of society’s wealth into the hands of the corporate and financial elite. In the name of the free market, they slashed taxes on the corporations and the rich, deregulated industry and the banks and backed a corporate offensive against the jobs and living standards of the working class.

In the aftermath of the collapse of Wall Street investment firm Lehman Brothers on September 15, 2008, three years ago today, the government handed trillions of dollars to the banks with no strings attached. The corporations and the banks are now sitting on a cash hoard of $2 trillion, while refusing to hire any workers.

The ruling class is pursuing a deliberate policy of high unemployment to further drive down wages and benefits and boost their profits. In the auto industry, for example, the corporations, with the backing of the Obama administration and the trade unions, are seeking to return conditions of work to what they were in the 1930s, with newly hired auto workers making poverty wages and lacking the most elemental rights and protections.

In the face of the worst social crisis since the Great Depression, the Obama administration has done nothing, responding with complete indifference to the ever growing levels of social distress. The new figures on poverty did not even rate a mention during the president’s stop in North Carolina where he promoted his phony jobs bill, which will provide further tax cuts and handouts to big business.

Far from providing any relief, the Democrats and Republicans are committed to slashing trillions from the very social programs that helped lift millions out of poverty in the 20th century. One of those targeted by Obama’s bipartisan deficit reduction committee is Social Security, which kept 20 million seniors and disabled adults out of poverty last year, according to the census report.

The ultimate aim of the corporate and financial elite is clear: the abolition of these programs and everything that does not directly contribute to their wealth.

Immediate steps must be taken to address this crisis. The Socialist Equality Party calls for:

1. The launching of a public works program to hire 20 million workers to rebuild the nation’s infrastructure and guarantee the right to a livable income to all workers and their families.

2. Requisitioning of wealth of the financial elite by imposing a 90-percent tax on all incomes over $500,000. The $2 trillion on the balance sheets of the corporations and banks must be confiscated and put into a publicly controlled fund to create jobs and eliminate poverty.

3. The grip of the financial aristocracy must be broken by nationalizing the banks and major industries and transforming them into public entities, controlled democratically by the working class.

The battle facing workers in the US is part of an international struggle. The plundering of the American people has come at the same time as capitalist governments around the world conduct a social counterrevolution, from Greece and the rest of Europe, to the Middle East, Latin America and Asia. Throughout the world, they claim there is no money for basic social needs.

Nothing can be done without the working class entering into mass social and political struggle. None of the social achievements of the past—decent wages, health care benefits, public education, pensions—was won without the most bitter struggle against the resistance of the ruling elite. The determination of the ruling class to turn the clock back to the 1930s must be countered with the mobilization of workers in every factory, workplace and neighborhood throughout the country.

The social rights of the working class depend on the reorganization of society, based on a democratically drawn up and scientifically elaborated plan—to meet social needs, not private profit. This is the fight for socialism.

The Socialist Equality Party is spearheading this struggle and we call on all workers and young people to join our movement and build it as the revolutionary leadership of the working class. (WSWS)

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The European debt crisis and the threat of dictatorship

Just two weeks ago, the Greek parliament passed a fresh round of austerity measures which will have a devastating impact on the living conditions of Greek workers. The parliamentary vote was preceded by a propaganda campaign by the finance houses, banks and leading European politicians, declaring that the new austerity measures were the only way to assuage the money markets and stabilize the euro.

Since then, the European debt crisis has only intensified. In line with the pattern throughout the crisis, the new round of social cuts and privatizations has been seized on as a benchmark to demand even more brutal attacks on the living standards of the working class in Greece, across Europe and internationally.

One week after the passage of the Greek austerity package, Moody's downgraded Portuguese government bonds to junk status. A few days later a combined assault by hedge funds and rating agencies forced up the interest rate on Italian government bonds and precipitated a near-panic over that country’s sovereign debt.

This move by the financial markets was in response to reports that the austerity program agreed by the Italian government might be watered down in the course of its passage through parliament. Responding to the market offensive, the Italian finance minister announced he was doubling the total of spending cuts to be carried out over the next three-and-a-half years. Within days, a sweeping austerity package for Europe's third largest economy had been passed.

At the start of this week, European finance ministers met in emergency session to discuss means to pacify the markets. In a major concession, they agreed to reverse their existing policy and make available the resources of the European Union bailout fund to directly buy up Greek debt.

The markets reacted to this concession with a renewed offensive. On Tuesday, Moody's downgraded Ireland's debt to junk status, and on Wednesday, Fitch Ratings downgraded Greek sovereign debt, declaring that default by Greece was "a real possibility."

At the same time, the major credit rating firms put US government debt on watch, warning that failure to raise the debt limit by August 2 would be considered a default.

These developments demonstrate that there is no peaceful or rational solution to the European debt crisis within the framework of the existing economic and political order. That is because the sovereign debt and euro crisis is an expression not simply of a conjunctural downturn, but of a fundamental and systemic crisis of the world capitalist system.

The Wall Street crash of September 2008 was the outcome of decades of ever more reckless financial speculation, centered in the US but increasingly characteristic of all of the major capitalist countries. A mountain of debt was created to finance an unprecedented enrichment of the ruling elite and this process of wealth creation was increasingly separated from the creation of real value.

In fact, the growth of a global financial aristocracy was based on the destruction of industry and productive infrastructure in the US and other advanced capitalist countries and a ruthless assault on the jobs, wages and living standards of the working class.

The result was an economy geared to the outright plundering of the social wealth and wedded to the creation of financial bubbles, resting on a banking system that was essentially insolvent. The inevitable bursting of the US home loan bubble in 2007-2008 exposed the insolvency of the financial system.

None of the measures taken since the crash have resolved the underlying crisis of the banks. On the contrary, they have shifted the losses from the banks to the state through massive government bailouts, while piling new forms of debt on top of the existing ones.

The bourgeoisie has only one answer to this dilemma—ever more savage attacks aimed at reversing all of the social gains won by the working class in the 20^th century. At the same time, each national ruling elite adopts an increasingly aggressive and nationalistic posture toward its competitors, fueling the growth of militarism and war.

The representatives of finance capital are well aware that their counterrevolutionary policy will provoke social upheavals. Their answer is the preparation of new and more repressive forms of rule.

In its latest publication for subscribers, Aon, a risk insurance broker, warned against investment in Greece. The firm placed Greece on its “world map of terror dangers 2011,” declaring that the risk of a “revolution, a coup or a civil war” in the country is “high.”

A blog last week on the web site of the Wall Street Journal noted the growing economic crisis in a succession of European countries. It commented on the emergence of mass opposition in Greece in an article entitled: "Better Save Some of That Tear Gas for Portugal, Spain, Italy."

Such warnings are not restricted to Europe. Former US National Security Advisor Zbigniew Brzezinski warned this past week that mass unemployment and the growth of social inequality in the United States could lead to civil unrest. In an interview on the cable TV channel MSNBC he said: "I don’t want to be a prophet of doom--and I don’t think we are approaching doom--but I think we’re going to slide into intensified social conflicts, social hostility, some forms of radicalism. There is just going to be a sense that this is not a just society."

The conclusion is increasingly being drawn within bourgeois circles that the type of social devastation to be imposed cannot be carried through by traditional parliamentary means.

In Germany, the discussion on the necessity for "post-democratic" forms of rule is led by the Berlin professor, Herfried Münkler. The solution to the euro-crisis, Münkler argues, is not democratization, but rather more power for the German and European elites.

In a similar vein, the Financial Times published an editorial July 14 entitled: “Preserving Italy’s Fiscal Credibility” which declared that “Italy needs more than austerity” and called for the removal of Prime Minister Silvio Berlusconi and “his replacement by a broadly based government led by technocrats”—i.e., a government whose personnel had been hand-picked by the banks.

Either the crisis will be resolved by the bourgeoisie on the basis of mass poverty, dictatorship and war, or the working class will resolve the crisis through its politically conscious, collective and internationally coordinated revolutionary action. As Trotsky wrote in the 1930s, the alternative is socialism or barbarism. (WSWS)

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