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The crisis has entered a new stage

30 April, 2020 · News> Global situation> Weekly Report

Strike at Gazprom in Yakutia, Russia, this week.

This week we highlighted the first “de-escalation” plans, the first wave of bankruptcies in the oil sector, the collapse of tourism in the Mediterranean and the snares of the “new normality” they intend to impose on us. But these were certainly not the only important issues. To wrap up the week we want to highlight the unfolding political crisis in Brazil, the continental conflict with Argentina, the impact of the recession in Europe, the global development of militarism and the worldwide strength of workers’ struggles.

The accelerated breakdown of Bolsonarism

In Brazil, the Covid crisis, with more cases than the whole of China, is accelerating the decay of bolsonarism. The fall of two “superministers” has been followed by a real power struggle with the Federal Police (PF) and the Supreme Court (STF) following the dismissal of the head of the PF in an attempt to stop the investigation into a network propagating hoaxes – among other things about the Covid – involving Bolsonaro’s son Carlos.

This is not just another wakeup call from the core of the Brazilian state. After invalidating the appointment of an evangelical pastor who is a personal friend of Bolsonaro, the STF has finally ordered an investigation of the President in what could be the first step towards an “express” impeachment.

But the crisis within the Brazilian state does not stop there. Its background is above all a fracture over the country’s imperialist orientation. And it keeps coming back. This week Bolsonaro defended Guedes in his public reappearance and sent a clear message to the military: “This is the man ruling the economy“. Guedes, in case there was any doubt, charged against Argentina.

But the military, who block every attempt by Guedes to control the state budget, will not be deterred from claiming that they rescued Petrobras and the oil industry precisely because of their own relationship with China.

And as if two internal fronts were not enough, a third front is opening up with increasing intensity outside the country: Mercosur.

Argentina: Double checkmate against Brazil and Chile

Argentina’s weak and battered industrial capital panicked over the Mercosur-South Korea agreement. Confinement is hitting Argentinian capital in general even harder than expected. The agreement with the large debtor funds is not progressing. There is a high probability of a declaration of bankruptcy by the state. And the chances of bringing Brazil to a common front are practically zero. At this point there have not even been any open channels of communication between both governments for weeks.

Fernández knows well that he has little chance of dealing with a politically decaying Brazil. He also knows that he can only find adverse governments, well aligned with Brazil, on all its borders. So he starts a risky move that unsettles even his own foreign minister.

On the one hand, Argentina uses the “Group of Puebla” to push the Chilean opposition to unite under a common candidacy and defeat Piñera. Piñera speaks directly of interference and tries to turn it into an international clash.

On the other hand, the Argentine government announces that it will no longer participate in the negotiations of the Mercosur trade agreements, with the exception of the pact already made with the European Union and the European Free Trade Association (EFTA). But instead of responding with a political argument against the treaty with South Korea, it is placing all the blame on Covid.

This logically scared off the agricultural export bourgeoisie, the speculative wheat markets were turned upside down and even dairy farmers called for caution.

But the presidents of the bloc are phoning one by one – except for Brazil, of course – the Casa Rosada. And there Fernández reveals his cards. The free trade agreements that Brazil is promoting with South Korea, Canada, India and Lebanon are dangerous, and at a time when South American industries are weaker than ever – when even the Bank of Spain is calculating massive drops in GDP – their capacity to finance themselves to compete in the new markets is non-existent. Brazil, with a doctrinaire Guedes and a crazed Bolsonaro, is driving South American industries into the abyss. Instead, Fernández assures the Uruguayan Lacalle, it is a matter of compensating the weight of a drifting Brazil with new incorporations in the continent and focusing on moving forward with the agreement already signed with the EU.

The EU in recession

Brussels was quick to congratulate itself about Argentina. A period with more hunger for markets than ever is coming.

Germany is expecting a 6.3% drop in GDP and is already beginning to feel a drop in exports. Automotive giants such as Daimler and Volskwagen have drastically reduced their profit expectations for this year. The employment figures are no more cheerful: 10 million workers affected by temporary layoffs and more than 308,000 new unemployed.

Sales expectations are disastrous across the continent, with the Netherlands recording the biggest drop in the economic sentiment index (-32.6 points), ahead of Germany (-19.9), and France (-16.3). And things are no better in the South, among other things because the chances of Italy, Spain or Greece getting their tourism industry back on track within the rest of the year are virtually nil.

In Spain the GDP data, published today, show a fall in GDP of 5.2%. With half a million fewer workers employed, it is not surprising that the first signs of a real “liquidity trap” are appearing: families and companies are accumulating deposits, while deflation is increasing in spite of the spectacular rise in food prices (4%). In other words, prices are falling, but that does not mean that more is being consumed. The old Keynesian instrument of state capitalism would now lower rates, subsidize families and create public employment. But the euro is, to all intents and purposes, a foreign currency outside the control of each constituent government and no longer capable of encouraging investment without pushing the banks into the abyss. And fiscal policy, although autonomous in its details, is subject to deficit and debt conditions that guarantee a deflationary euro in line with German interests. Only with the deficit that has already been generated, Spain will remain stuck in the EU for quite some time. As if that were not enough, the incompetence of the bureaucratic apparatus delays until June the payment of temporary layoffs to workers and that of the aid to lower-income families further decreasing consumption.

Militarism and class struggle

This week we also learned that global military spending is back at Cold War levels after the biggest increase in ten years. When we go down to individual countries, it is clear that militarism is a general trend. The US has the largest budget… and has increased it for the first time in seven years, but is followed by India and China with annual spending of $261and $71.1 billion respectively. But the most important thing to note this year is that military budgets not only grow faster than GDP but continue to grow when GDP falls short. Wages fall, essential public service provisions fall, but military spending keeps rising. And it will increase even more, because if now 70% of spending is concentrated in the US, China, India, Russia and Saudi Arabia, the expectation is that regional arms races will open up. Crises do not reduce war tensions, they feed them.



On May 1st we will close the count of the “covid strikes”. More than 400 strikes have taken place. There were certainly many more that we could not find out about given the almost universal information blockade they have suffered. Many of the strikes are still open and new ones are erupting every day, already merging with the response to the conditions of the “de-escalation” and the reactions to the first attacks on wages and layoffs.

A new phase of economic recession and political crisis is beginning worldwide. All the contradictions of the system have accelerated with the pandemic and the ability of capital to recover will depend on its ability to impose a massive transfer of income from labor to capital in each country. The losses and needs of capital are even more brutal than in 2009. But unlike ten years ago, we are entering this new phase with a working class that has mobilized under an almost universal program of demands and that in not a few cases has been strong enough to overcome the unions and twist the arms of companies and governments. But this was not even the first act. It has been the overture.