The October 19, 1987, crash on the New York Stock Exchange was the steepest plunge in stock prices in this century, a larger and faster drop than the 1929 crash that signaled the coming Great Depression. Between Wall Street's opening and closing bells October 19 there was a 23 percent plummet in average stock prices, resulting in roughly $500 billion in losses. The Chicago futures market fell even more sharply, diving 36 percent in 10 hours over two days. The crash culminated a stock market slide that had begun in late August; overall, share prices fell by more than one-third over that period. This came on top of a collapse in the bond market, with prices of U.S. government securities falling 26 percent between late March and October 19.
Unlike the 1929 crash, the dive on Wall Street did not pause at the U.S. borders. With explosive computerized rapidity, over the next twenty-four hours it spread to every other stock market around the world. Hundreds of billions more dollars in paper values were destroyed. This reflected the tightening interlinkages, especially since World War II, of the U.S.-dominated imperialist world system of capitalist monetary relations, credit, production, and trade. Rather than buffering the shocks from the crash in New York, stock markets from London to Hong Kong, from Tokyo to Toronto, from Sydney to Mexico City helped drag each other down.
The most devastating decline hit the exchanges in semicolonial countries. The Hong Kong stock market ended trading altogether for a week. Shares on the Mexico City exchange dropped 75 percent in October, setting off a loss of nearly one-third of the peso's value and a capital flight of more than $2 billion from Mexico over the next two months....
Repeated and unpredictable sharp one-day declines over the months since October keep reminding the masters of finance capital that it is not within their powers to prevent a sudden recurrence of an even more devastating crash.
At the same time, however, the exploiters' ceaseless quest for the highest returns will eventually force them to pour money capital back into stocks, sending volumes and prices soaring once again. Under capitalism, the blind laws of the market are ultimately more powerful than the mightiest state in matters of values and prices. And in a world where almost everything is a commodity, that is powerful indeed.
The near meltdown on October 19 also further exposed the vulnerability of the capitalist world to the towering pile of government and private debt whose buildup worldwide has accelerated since the early 1970s. The indebtedness of the oppressed countries of Latin America, Africa, Asia, and the Pacific increased at a dizzying pace in the 1980s as these nations suffered the combined blows of exploding interest rates at the opening of the decade; the deep 1981-82 recessions that rolled through the United States and several other capitalist countries; and the sharp drop in the prices of most raw materials and other commodities sold by Third World countries on the world market.
The total debt owed by the capitalists and governments of these countries to the wealthy families that own the major imperialist banks reached the almost unimaginable figure of $1.2 trillion by the end of 1987, more than twelve times its level in 1973. Much as bankers in the United States goaded farmers into bigger and bigger debt loads throughout the 1970s, the massive borrowing that resulted in today's Third World debt was initiated, pushed, and sustained by finance capital, which stood to profit mightily off the interest payments.
Mounting international debt slavery has not only meant economic and social devastation for hundreds of millions of peasants and workers; it has also increased the instability of the entire imperialist banking system. The so-called Third World debt crisis is in fact a dance of death between the capitalists in the imperialist countries and those in the semicolonial world, in which the primary victims of an international monetary calamity will be the working people of both the oppressed and oppressor countries.
Over the past century trade in stocks, bonds, and other commercial paper-the devices that Karl Marx called "fictitious capital"(1)-have become integral to the very functioning of the world capitalist system: its interrelated banking and monetary operations, government finance, domestic and foreign trade, industrial production, mining, and agriculture. Capitalism does not operate on the basis of a "real economy" in which the ups and downs of production determine the conditions of both capitalists and working people, and a "paper economy" whose price gyrations affect only speculators and middle- class professionals who play the markets. The trading in stocks and bonds, together with intertwined credit and monetary flows, are part and parcel of the capitalist mode of production....
The explosive expansion, internationalization, and accelerating transaction speed in the securities markets have become necessary to the circulation of money capital and its interpenetration with industrial, mining, and agricultural production and trade. In order for the surplus value created by the labor of working people to be transformed into profits, the capitalists must compete among themselves to sell the commodities produced in the fields, mines, mills, and factories. They must compete to maximize further gains from their accumulated profits, whether by plowing this money capital back into production or finding other sources of investment or speculation that they believe will yield a larger return.
The circulation of money capital, Marx observed, is the "most striking and characteristic form of appearance of the circuit of industrial capital, in which its aim and driving motive-- money-making and accumulation-appears in a form that leaps to the eye (buying in order to sell dearer)." Under capitalism, he pointed out, "The production process appears simply as an unavoidable middle term, a necessary evil for the purpose of money- making." Frederick Engels, in preparing a second edition of volume two of Capital a decade after Marx's death in 1883, added in light of further experience: "This explains why all nations characterized by the capitalist mode of production are periodically seized by fits of giddiness in which they try to accomplish the money- making without the mediation of the production process." Today the world capitalist system has evolved to the point that just such a fit of giddiness has become unavoidable. Its duration and volatility remain to be seen.
1. Fictitious capital-in the form of stocks, bonds, and other securities issued by businesses or the government- is a paper title to claims on money capital.
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