By Colin Foster
"Capitalism has had a rotten time lately", says the big business magazine The Economist. "Not as rotten as in 1917..." (when the Russian workers took state power) it adds, in case its readers panic.
Indeed not. Yet Paul Krugman, the USA's best-known orthodox economist, reckons "there's an Ice Age just over the horizon". Both those opinions were written before the big telecom company WorldCom collapsed after revealing that it had fraudulently puffed up its profits by no less than $3.8 billion.
The WorldCom fiasco - belonging to the same type as the Enron crash and the more recent scandal at Xerox - highlights the underlying problems.
Profit rates in the USA have been declining since 1997. According to recent detailed Marxist analyses, they have been squeezed essentially by the ballooning of the "unproductive" sectors of the capitalist economy, sectors like finance, insurance and real estate, which produce no new value but suck in value created in other sectors.
Add up the figures for total value-added in the US economy, subtract the amounts paid out in wages - which can be done straightforwardly from official US government statistics - and the conclusion is clear.
Try to estimate profits by adding up the figures reported by individual companies, though, and you get a very different result.
Those "profits" still look quite good. In other words, lots of companies are fiddling their figures, in small ways and big ways, to make their profits look healthy and keep their share prices high.
In a period of boom, and for a short time, that sort of fiddle can "work" without disasters. The disasters come when growth slows down.
The fiddles become larger and more desperate. Eventually, some of them are exposed. Companies collapse. Share prices crash.
There are four large bubbles which the tumbling wreckage could pierce and explode. US households have a huge mountain of debt - credit card bills, overdrafts, mortgages.
US corporations, too, are operating with historically high levels of debt. Their share prices have ballooned out of all proportion even to their overstated profits.
And the whole US economy depends - has depended for many years - on a constant influx of foreign capital. In a few years' time, on current trends, the resulting pile of US debt to the rest of the world will have risen so high that just paying interest on it will keep the debt expanding indefinitely, with no obvious way of controlling it.
In all of those four ways, the relative prosperity of US capitalism - its boom in the 1990s, and the relative mildness of its recent recession - depends on creditcontinuing to spiral up. If credit starts to implode on any of those four fronts, then the whole economy is likely to spiral down, and credit will probably start imploding on
the other fronts.
The US government and the Federal Reserve Bank can do some things to stop or limit an implosion. They have done some of those things already, reducing interest rates for example. But their tools are limited, certainly in proportion to the size of the bubbles.
The US economy is by far the world's biggest, and a sizeable downturn in the USA will produce a downturn world-wide. And worse. The dollar is still the basic currency of world trade. If international capitalists stop pouring their funds into the USA, then the value of the dollar will drop relative to other currencies, even faster than
it has already dropped. The process will feed on itself - why put your stash into dollars, when dollars are losing value relative to other currencies?
Such are the vast amounts of "hot money" sloshing round the capitalist world that it is quite possible for such a self-feeding process to escalate beyond the point where all the world's central banks put together can do much to stop it. And a decline of the dollar would do more than shift the relations of the USA to other capitalist economies. It would disrupt the basic fabric of world trade.
No-one knows how long the US economy's credit bubbles can hold up. It is not impossible for them to be shrunk gently, rather than imploding catastrophically. But there is certainly more to the WorldCom and Enron scandals than a few individual capitalists cutting corners.