The Continuing Global Slump

Since the outbreak of the global slump in 2008 we have been treated to an incessant stream of predictions that “the crisis is over,” that we have “turned a corner,” and that “the recovery is now underway.” Each time the cheerleaders have been proved wrong. To the dismay of apologists for the system, the slump has now stretched on for more than five years. And there is no obvious end in sight.

World-wide, there has been no recovery in employment. There are now 50 million fewer people in paid work than when the crisis started. Not only is the Eurozone now officially back in recession, but a number of its economies are in outright depressions. Spain and Greece are each struggling with unemployment rates above 25 percent – and over 50 percent for youth. Even the U.S. economy, notwithstanding a big rebound in corporate profits, is plagued by a jobs deficit of ten million (5.2 million that have not been recovered since 2008 and another 4.8 million required just to keep pace with population growth). The real rate of unemployment in the U.S. – including discouraged workers who have stopped looking for a job and those working part-time who seek full-time employment – hovers around 15 per cent. For racially oppressed groups, jobless rates are at depression levels, well above 20 percent for both African-Americans and Latinos.[1]

Meanwhile, the so-called “emerging economies” that were called upon to keep the engine of capitalism ticking (always an absurd proposition) have entered major slowdowns. Known colloquially as the BRICs (for Brazil, Russia, India and China), they have felt the crunch of declining demand for their exports from the recession-ravaged nations of the Global North. In Brazil, growth rates plummeted from 7.5 percent to barely two percent as of mid-2011. And South Africa, always heavily reliant on exports, staggered under the weight of a jobless crisis in which one in every four workers lacks paid employment.[2]

As Global Slump emphasizes, all of this involves immense human suffering. Behind the abstractions of raw numbers lurk poverty, disease, hunger, stress, damaged self-esteem, gender violence, the diminution of hopes and dreams.

Yet – and this cannot be stressed enough – there is a logic to such suffering. Or, to put it more accurately, there is a capitalist logic to it. For it is through immensely destructive episodes – crises or depressions – that capitalism eventually restores itself (if, that is, we allow it to do so).

Some readers will find odd my suggestion that destruction is logical or rational for capitalism. After all, doesn’t capitalism need people working and spending money?

The problem with the question is that it ignores the inherently contradictory character of capitalism.[3] Of course it is better for businesses if there is lots of demand for their goods. But the purpose of a capitalist enterprise is not to make sales; it is to make profits. The ability of firms to accumulate, invest, grow and beat out their competitors depends on profitability. And once capitalism gets into a systemic crisis of the sort that broke out in 2008, profitability cannot be restored without enormous destruction. There are two key mechanisms by which this happens.

The first involves destroying excess or unproductive capital. If firms in one industry after another are forced into bankruptcy and/or gobbled up by the competition, those that remain will eventually restructure and reorganize themselves to produce at lower cost (and higher profits). Having bought up bankrupted assets on the cheap, and having taken over the market shares of failed companies, they will be in a position to invest again.

The second capitalist mechanism for exiting a crisis involves driving down working people’s living standards. Put simply, by devaluing human life and the costs of reproducing people – via lower wages and benefits and reduced “social wages” (the public services available by way of pensions, social assistance, health care and education) – capital reduces its costs of doing business. And it is the latter strategy, reducing the costs of reproducing people, that has dominated thus far.

The reason for this is simple. In addition to funneling trillions of dollars to bail out the financial sector, the world’s central banks, particularly those in the Global North, have lowered borrowing costs to just a hair above zero. This means that faltering companies can stay alive by borrowing money that is virtually free. That is why there has been nothing so far like the wave of corporate bankruptcies witnessed during the Great Depression or across the 1980s. And because such a wave of bankruptcies would once again rock the financial system, nothing like it should be expected in the short term.

That leaves austerity as the capitalist class’ principal strategy. Here, they have racked up considerable success. Not only have public services been drastically curtailed, so have living standards generally. In the U.S., median incomes contracted more than four percent during the “recovery” since 2010 and have now declined to where they stood in 1995. That represents the elimination of all wage gains in the past 17 years. In the U.K., meanwhile, living standards have been pushed 13 percent below their 2008 levels.[4] Now, all of this may be bad for “the economy” in the abstract: reduced incomes mean less spending and less employment. But we don’t live in an economy in the abstract. We live in a capitalist economy whose imperative is profit. And reduced incomes are highly functional for capital.

To that end, governments everywhere have embarked on programs designed to increase the precariousness of everyday life. They know that insecurity makes it harder for workers to fight back, and so they are using every weapon in their arsenal to render workers less comfortable, confident and secure. They are attacking labour rights, undermining job security, driving down wages, benefits and social entitlements, and relying heavily on migrant labourers. Indeed capital’s ideal precarious worker for the age of austerity is the migrant who enters a country bound to a single employer, with no rights to live and stay beyond the length of their employment contract. In Canada, the proportion of entrants admitted under the Temporary Foreign Worker Program is skyrocketing, and the same is true for similar programs elsewhere.

Not surprisingly, austerity and growing precariousness have done wonders for corporate profits, which have risen persistently since 2009. However, in the absence of significant destruction of capital, those profits are sitting idle rather than being invested in new means of producing wealth. By early 2012, U.S. corporations were sitting on nearly $2 trillion in cash, a record amount. European firms were doing the same, holding around two trillion euros. And that is the dilemma capital faces at the moment. Austerity has boosted profitability, but it has not made investment attractive. Moreover, the lack of a new investment boom sets limits to just how high profits can rise (indeed, by mid-2012 corporate earnings seemed once again to be faltering). Consequently, the system keeps spinning its wheels unable to acquire the traction required for a sustained recovery and expansion.

And so, the capitalist class and their governments continue to do what they know best: enforce ever-greater sacrifices on working people. Greece, of course, is the center of the austerity storm. Pensions there have been cut in half, wages slashed by a third. Homelessness is soaring and soup kitchens struggle to keep up with those in need of food. Suicide rates have risen alarmingly. Notwithstanding all that, the “troika” – the European Central Bank, the IMF and the European Commission – demand more blood. Already, the Greek government has tabled a budget for 2013 that will cut billions more from pensions, wages and social benefits, notwithstanding their own forecast that the Greek economy will contract once again by nearly five percent. The whole purpose of these cuts is to prove to international capital that Greece will abide by the discipline of financial markets and that, should it receive new “loans” from the troika, it will use this money only to pay back global banks. Perish the thought that some of these funds might find their way to teachers, nurses or pensioners. Indeed, to say the money is “loaned” to Greece is entirely false: these funds enter a special account through which they are channelled directly to banks. And for that purpose the Greek people are being bled dry.[5]

Here we encounter the true face of capitalism in the age of austerity. Forget claims for prosperity and abundance. The system has reverted to its fundamental meanness. Year after year, decade after decade, if we let it, it will offer up declining living standards, diminished social services, growing precariousness and insecurity, especially for women, migrants, youth and the elderly.

How long this can go on is a question of politics, not economics. Even central bankers are worried on this account. The governor of Tunisia’s central bank recently mused, “I do not see how you can have a country continue to be squeezed for 20 years, 30 years. So Greece is still a big question mark.”[6]

Global Slump, of course, contains just such a question mark. Its final chapter is entitled, “Toward a Great Resistance?” And the question mark is decisive. For although there has been wave after wave of inspiring resistances, they have yet to converge in the unified Great Resistance necessary to produce the breakthrough to a new way of organizing human social life.

Since the book was written, we have seen the amazing struggles of the “Arab Spring,” the popular mobilization in Wisconsin and the Occupy movements.[7] We have witnessed tremendous student upheavals in Chile, Puerto Rico and Québec. One general strike after another has swept Greece. Teachers in Chicago have waged an uplifting mass strike that garnered huge public support.

Thus far, however, political organization has lagged behind the outbreaks of struggle. The radical left has not yet managed to create the organizational forms capable of connecting and coordinating these many resistances. It has not assisted these many struggles in generating the sort  of sustained popular forms that can unite a myriad of struggles of the oppressed around common social and political goals. The construction of such organizational forms will take many years of struggle, collaboration, education and debate. But without such a project, the inbuilt tendency for movements to sectionalize rather than generalize will prevail.

At the same time, however, we must be clear that no meaningful, enduring unity can be built unless it challenges the forms of oppression and domination that are reproduced at all levels of our societies. That is why no genuinely radical working class project is possible unless it is shaped to the core by feminist, anti-racist and sexual liberationist values and commitments. Fortunately, some key struggles of our era offer us a glimpse of what is possible in that direction.

Take the September 2012 strike by Chicago teachers. While many commentators were caught off guard by the militancy and self-organization of the teachers and by the enormous support they received in working class communities, it should have come as no surprise. All of this was the result of years of dedicated work by the Caucus of Rank and File Educators (CORE), which had long mobilized in solidarity with community groups at the neighbourhood level to stop closures of local schools. In 2010 CORE candidates won a majority of positions on the executive of the Chicago Teachers Union (CTU) and then produced a brilliant document entitled, The Schools Chicago’s Students Deserve. There, they made the case for adequate funding, smaller classes, enriched curriculum and for challenging “the apartheid-like system” in Chicago that privileges schools in wealthy white neighbourhoods while starving those in poor and predominantly Latino and African-American communities. In so doing, they positioned their union as a champion of class and racial justice.

By taking a stand on behalf of the city’s working-class students and their caregivers, the CTU took a page from the teachers of Oaxaca (discussed in Chapter 6) and broke out of the narrow corporatist model of trade unionism that focuses exclusively on wages and conditions. They made the quality of education, opposition to racial and class apartheid, and the participation of parents central to their vision for education in their city. The result was that, on day three of their strike, huge demonstrations of support took place in largely African-American and Latino neighbourhoods in Chicago’s South and West sides. And this public support was crucial to the considerable gains made by the CTU, notwithstanding its inability to beat back all concessions.[8]

Democratization was also key to the transformation of the CTU. The revitalized union created House of Delegates meetings where teachers elected from every school would discuss, debate and shape union policy and action. Delegates also convened open air meetings at hundreds of schools to directly involve rank and file teachers in the running of their strike and in deciding its course of action.

Assembly-style democracy was similarly critical to the Québec student strike, which overturned substantial increases to fees at public universities. The strike by nearly 200,000 students featured nightly marches through the streets of Montreal, often involving bitter conflict with police, and was sustained by regular general assemblies at which students could debate and vote upon the direction of their movement. These experiences of direct democracy were crucial to sustaining energy and morale across the months-long strike, which also saw important experiments at neighbourhood assemblies launched by strike supporters.

The Québec student strike, like that of the Chicago teachers, took on some of the trappings of what Rosa Luxemburg described as peoples’ strikes – strikes that go beyond typical trade union limits as they blossom into movements involving more and more oppressed people, who raise a growing range of social and political demands.[9] In the case of the Québec students, this involved advocating free higher education for all – a genuinely radical demand that challenges all the premises of austerity and neoliberalism. What we fight for, explained two student activists, “is education as a right accessible to all, not as a commodity available to those with the thickest wallets. This is education dedicated to the common good.”[10]

In struggles such as these, we discern the outlines of the sort of social and political vision required if the isolated battles of the Age of Austerity are to cohere into a Great Resistance that can move beyond the bounds of capitalism. The Québec students, argued two other participants, advanced “an alternative vision of society based on direct democracy, real equality and the common good.”[11] In that vision reside vital elements of the common program we will need to remake society. Given the suffering and hardship imposed by the age of austerity, this becomes an increasingly urgent task.

David McNally is a member of Toronto New Socialists and the author of books including Global Slump and Monsters of the Market: Zombies, Vampires, and Global Capitalism. 



1- See International Labour Organization, World of Work 2012; “Call it a depression,” Economist, May 2, 2012; “Still Crawling Out, New York Times, April 8, 2012; “‘Real” Unemployment Rate Shows Far More Jobless,” CNBC, August 2, 2012 (available at:

2-See Gideon Rachman, “The Brics have taken an unhappy turn,” Financial Times, October 8, 2012.

3- This is the flaw in Keynesian critiques of austerity (such as those advanced regularly by Paul Krugman in the New York Times): they assume that the goal of capitalism is to increase employment and incomes, rather than to maximize profits.

4- James Politi, “US median income lowest since 1995,” Financial Times, September 12, 2012; Larry Elliott and Randeep Ramesh, “UK wellbeing still below financial crisis levels,” Guardian, October 23, 2012.

5- See David McNally, “Greek Lessons: Democracy versus Debt-Bondage, February 25, 2012, available at:

6- Mustapha Kamel Nabli as quoted by Eric Reguly, “Jobless tide could sink austerity leaders,” Globe and Mail, May 3, 2012.

7- For my first responses to the Arab Spring see my blogs, “Night in Tunisia: Riots, Strikes and a Spreading Insurgency,” January 18, 2011, available at; and “Mubarak’s Folly: The Rising of Egypt’s Workers,” February 11, 2011, available at

8- Lee Sustar, “What the Chicago teachers accomplished,” Socialist Worker, September 26, 2012, available at See also Keeanga-Yamahtta Taylor, “Racial justice and the teachers’ strike,” Socialist Worker, October 1, 2012, available at

9- See Rosa Luxemburg, The Mass Strike, the Political Party and the Trade Unions, available at

10- Camille Roberts and Jeanne Reynolds, “Quebec students hail their movement’s victories,” Toronto Star, September 23, 2012. The demand for free post-secondary education was advanced by CLASSE, the most militant of the mass organizations of Québec students.

11- Matthew Brett and Rushdia Mehreen, “Just the Beginning: Beyond the Quebec students strike,” The Bullet, n. 711, October 10, 2012, available at