Now we have seen the Japanese stock market decline by more than half since the beginning of 1990. There is a chronic credit and banking crisis facing finance capital in Japan--a deep deflationary crisis. You may have read in the late 1980s that the value in dollar terms of a relatively small portion of real estate in Tokyo had shot up to more than that of all the real estate in the state of California. What did you think when you read that? Even a person who is the most bedazzled by the fetishism of capitalism, even the most zealous worshipper at the altar of the commodity, knew that was a little much; it boded trouble.
It is important to remember that private banks, not the government, create almost all the money that circulates. They do it by granting loans. And in case problems develop, banks are supposed to have assets with real value to stand behind all those checking balances they crank out. In Japan, the estimated market value of real estate makes up a big portion of those bank reserves, and the shifting ticker prices of stocks--yes, common stocks!--make up another big hunk. Land and stock prices puffed up like a giant balloon throughout the 1980s in Japan and have been plummeting just as sharply ever since, creating big problems for Japanese banks.1
The post-World War II capitalist land reform in Japan--imposed by U.S. occupation authorities under Gen. Douglas MacArthur--was designed from the outset to serve the interests not of working farmers, but the restoration of a stable bourgeois state. It was nothing like the Homestead Acts enacted during and after the Civil War in the United States, or the land reforms in much of Europe following the French Revolution and revolutions of 1848--even with all their bourgeois limitations. Japan also never went through a bourgeois banking reform like that carried out in the United States in the wake of bank failures at the opening of the Great Depression of the 1930s.
Today U.S. capitalism accounts for a little over a quarter of manufactured goods worldwide, and more than 15 percent of world exports. This represents a relative decline from what Wall Street and Washington had established in the decade or so after the close of World War II. The enormous absolute size of U.S. imperialism's wealth and productive capacity, however, has meant that the effects of the deepening world capitalist crisis are hitting its German and Japanese rivals substantially harder.For some time now, the relative position of German and Japanese capital has been slipping in the world imperialist system.
Since the mid-1980s, U.S. capital's share of the world export market has been rising a bit once again, while Tokyo's and especially Bonn's shares have been falling. U.S. businesses have taken back markets in computer chips and hardware, machine tools, automobiles, and other industrial goods. And this trend will likely continue until the world bourgeoisie faces some cataclysmic crisis.
The U.S. rulers continue to suck in capital from all over the world, even though German long-term interest rates are several points higher than comparable U.S. rates. We should ask ourselves: Why do the biggest banks in Japan, Germany, and elsewhere transfer capital to North America to buy up pieces of paper--Treasury bonds--from the U.S. government? Why do they buy up these pieces of paper that promise to give you dollars thirty years from now, no matter what they are worth by then? It is certainly not that the U.S. capitalist economy is so rosy.
Bankers around the world know what happened on Wall Street in October 1987, and they know the shape of the U.S. banking system. But they also know the much shakier condition of the banks in Japan, and what has been happening in Germany since "reunification." Bankers put their money where they anticipate it will be safer. But these enormous currency transfers increasingly turn the day-to-day business of banking into speculation, further destabilizing the world capitalist system.
Unimaginable sums of money are traded back and forth every day. With the development of computers and telecommunications, the speed and quantity of international transactions in a single twenty-four hours is mind-boggling.
In fact, the total dollar value of all the transactions on all the foreign currency markets for just seven business days equals the dollar value of world capitalist trade for a full year. The main function of world currency trading throughout most of the history of capitalism has been to balance out import and export deficits and surpluses between countries and repatriate the profits of superexploitation. As recently as the early 1970s, annual currency trading across borders was still only a fraction of world trade. Today, however, no government or big-business statistical agency really knows the exact scope and size of this currency trading, although most public estimates put it at more than $1 trillion each day.
As profit rates decline, capitalists look for more and more ways of using money to make money. Investing in plants and equipment does not bring them sufficiently competitive returns, so they keep inventing new kinds of paper instruments to trade and speculate with, including accelerated currency speculation.
Capitalists have faced a long-run decline in profit rates at least three times before in the history of world capitalism, and each time it has led to a deep crisis before it could be turned around. But the speed of international communication today, the enormity of the monetary amounts involved, and the percentage of the world's working people brought under capitalist exploitation since the post-World War II decolonization make the potential scope and explosiveness of the coming crisis truly staggering.
Instability and sharpening conflicts will continue to mark the imperialist world. There will be more banking and credit crises in the years ahead. and along with them, confidence in the bourgeois leaderships of the imperialist countries will continue declining, too.
1. In January 1999, commercial land prices in Japan were more than 75 percent below their level at the opening of the decade. By the opening of 1999, Japanese banks held some $1 trillion in bad loans. And the Tokyo stock market in early 1999 was almost two-thirds off its 1989 peak. Gripped by its worst recession in half a century in 1998-99, Japan's official jobless level reached above 4 percent for the first time in decades. Hidden unemployment reached double digits, as the grinding economic crisis hit the Japanese toilers harder than at any time since the post-World War II "takeoff."
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