1. What are the fundamental reasons for the international financial crisis? What are its effect on capitalism?
We see the financial crisis as one combined with a cyclical economic crisis of over-production of commodities and over-accumulation of capital. The overturning of the socialist systems in the former eastern Europe and the Soviet Union helped facilitate the penetration of Western monopoly capital into the labour, raw materials and commodity markets of Europe, Asia and Africa on an unprecedented scale. This escalated the cyclical over-accumulation and over-production. Over the same period, real wages were held down by corporate and state power in the main imperialist countries – especially in the USA – while economic demand was maintained by the massive extension of household, government and corporate debt. Ballooning credit, notably through the housing market, was itself facilitated by the 'big bang' of finance capital as markets were deregulated and globalised, fuelling the invention and spread of financial derivatives. The over-extension of credit, based on unsustainable debt and on paper assets whose value was largely fictitious, precipitated the beginning of the banking crisis. The resulting credit freeze, state bail-outs and compensatory cuts in public, social and welfare spending ensured that the cyclical downturn in the main capitalist economies was all the sharper, more synchronised and more prolonged. Growing resistance to imperialist super-exploitation in the former and remaining colonies and semi-colonies in Asia, Africa and South America also began to restrict the possibilities for Western monopolies to maintain, extend or revive high levels of profitability.