Great Depression

On the economics of the "Corona Pandemic"

What happens when a real economic crisis meets a fictitious economic crisis?

Real economic crises, in which a natural catastrophe destroys a large part of the means of production and thus deprives people of their livelihood, have only occurred on the fringes of the industrialized world since the Industrial Revolution. And even in the so-called »developing countries« or »failed states«, famines and extreme impoverishment have no longer been the necessary consequence of natural disasters since the beginning of the 21st century. The technical means necessary to counteract the consequences of natural disasters are available worldwide. If they are not applied in some parts of the industrialized world, the reason is not that these means do not exist, but that in the capitalist competition between nation-states, the losers of this competition do not have sufficient means.

Fictitious economic crises, in which all means of production remain unchanged and yet people are deprived of the economic basis of their livelihood, have occurred repeatedly based on the capitalist economic order – for example the Great Depression (1929), the so-called oil crises (1970/79), the debt crises in Latin America (1982), Japan (1990) and Asia (1997) as well as the dot-com bubble (2001) and the global financial crisis (2008). Although, unlike in the case of natural disasters, the material conditions of production had not changed, and although raw materials, machines, and labor were still available, functional production facilities and machines were shut down during these economic crises, large parts of the population lost their jobs and were put out of earning a living. In these fictitious crises »there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity – the epidemic of over-production.«(1) It was not the loss of production, but its opposite, that caused these crises. There was not too little production, but too much: too many factories, too many houses, too many consumer goods.

Great Depression 2.0

Hermann Lueer



157 pages, 14.12 $

Overproduction as the reason for the increasing impoverishment of large parts of the population exists only based on the capitalist mode of production. In capitalism, the economic connection of the members of society does not result directly from the planned production and distribution of useful things. In a market economy, private ownership of the means of production and exchange of commodities determines the economic relationship of the members of society. With the privatization of the means of production and the trade in commodities, the social relationship of people is established via the market. Everyone must first successfully sell their commodity - even if it is their labor power - to be able to buy on the market. People do not organize production together but in competition against each other. In capitalism, it is not the needs of individuals and not the existence of the means of production that determine access to the wealth of society, but individual solvency and the prospect of a profitable business for the owners of the means of production. If there is no prospect of a worthwhile business for the private owners of the means of production, if there is not enough solvency, then the needs of the people do not count, then existing means of production are shut down and the population becomes impoverished alongside the riches of society. The class of laborers wrote Marx and Engels, who have to sell themselves piece by piece, and who live only as long as they find work, find work only as long as their work increases capital.

Coping with the "real economic crisis" resulting from the Corona pandemic is not a problem in the industrialized world of the 21st century.

For example, if the pandemic results in the loss of workers due to illness or precautionary quarantine, non-essential production can simply be temporarily halted, while the forces released can be used to maintain or expand the production needed to supply the population. The problems of rapidly increasing bankruptcies and unemployment and, as a result, the loss of income and the corresponding impoverishment, which are currently accompanying the corona pandemic, only exist in connection with privatized means of production. Loss of income and livelihood and the isolation of entire parts of the country are only hindering the containment of the pandemic in a market economy, in which production presupposes worthwhile private business and existing solvency. It is only based on the capitalist calculation that extensive global supply chains threaten to tear down since it is only based on the capitalist valuation of the workforce that production capacities migrate from low-wage countries to low-wage countries. The fact that there are numerous deaths not only as a result of the pandemic, but in parallel with it in the course of competition and loss of income, is not a consequence of the natural disaster, but a result of the privatization of the means of production.(2)

Coping with the fictitious economic crisis is proving to be an evolving contradiction.

In the course of the economic crises of recent decades, the political representatives of capitalism fought against the »epidemic of overproduction«. With each new economic crisis, too much wealth in the form of goods and means of production in relation to the solvency of the population increasingly threatened to become the ruin of society. The contradiction underlying this absurdity – that workers must first earn money before they can buy, and employers only buy manpower if there is a prospect of successful sales for them – can be temporarily resolved with the help of promises of payment in the form of credit. In capitalism, in which privatized means of production lie idle despite existing needs and willing workers, as long as they are not set in motion by the prospect of money, the trust in the future solvency of the debtor, which is bindingly fixed in the loan or securities contract, becomes a means of growth. With the speculation of creditors on the success of the transactions, the additional solvency required for the upswing of capitalist business comes into a capitalist economy via credit or securities. Thus economic growth is generated which is not possible to this extent in capitalist terms without the solvency achieved through credit and securities, i.e. without the speculative anticipation of a successful business or the income generated by it. Without the solvency anticipated through credit, there would have been means of production in addition to the needs and the working capacity of the population, but they would not have been applied as private property, because with the lack of solvency the capitalist reason for their application would simply have been missing.

Supporting bad loans with state guarantees and promoting new loans was accordingly, within every fictitious economic crisis, the contradictory economic policy to prevent the looming global depression of the capitalist economic order. The granting of credit by the financial sector supported by a policy of low interest rates by the state is intended, in the course of crisis management, to enable capitalist enterprises and private households once again to operate with greater monetary power than they had achieved on their own accord. Ultimately, however, the upswing spurred on by expanded credit money creation stands and falls with confidence in future business. Speculation on future successful business – which is booked in the legal relationship between financial capital and the »real economy« as if it had already occurred – must, albeit with a time lag, always prove to be real, otherwise only the debts will indeed grow, and the wealth promised by the debts and booked as receivables will become increasingly illusory. If there is a generalized loss of confidence in the future success of the business, solvency will be withdrawn just as it was originally granted through the loan. Suddenly everyone wants to see money instead of credit, and since the equation applies in capitalism that without money there is no solvency, without solvency there is no business, without business prospects there is no production, even existing production capacities are shut down and the impoverishment of the population grows alongside overcapacities. Society finds itself, on an extended ladder, »put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilization, too much means of subsistence, too much industry, too much commerce. The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of bourgeois society, endanger the existence of bourgeois property.«(3)

With helicopter money to socialism?

Too much debt, too little growth, and excessively low interest rates stated the Bank for International Settlements (BIS) as the central bank of the central banks in 2015 in its annual report concerning the results of economic policy measures since the »global financial crisis« and added with a warning: »Room for maneuver in macroeconomic policy has been narrowing with every passing year. In some jurisdictions, monetary policy is already testing its outer limits, to the point of stretching the boundaries of the unthinkable.«(4) The goal of this macroeconomic policy, not to create a credit crunch, has been achieved through extremely low interest rate policies and massive purchases of government and corporate bonds by central banks. The global debt ratio, which consists of loans from households, governments, and companies, reached an all-time high of 322% of global economic output in the third quarter of last year.(5) However, the »global financial crisis« that has been smoldering since 2008 could not be overcome even by this speculative anticipation of future income.

In 1848 Karl Marx and Friedrich Engels wrote in the manifesto of the Communist Party:»And how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented.«(6) With the imminent collapse of business activities promoted by monetary easing after the »global financial crisis«, the states are facing a more massive crisis in the wake of the corona pandemic with reduced funds and thus a dilemma that has worsened compared to the situation after the »global financial crisis«. A further takeover of debt as part of rescue programs for private companies would push up public debt further and significantly reduce the already ailing creditworthiness of the states. New rounds of monetary easing would be necessary to prevent the increasingly obvious state bankruptcy.

Under the term »helicopter money«, originally coined by Milton Friedman, considerations are therefore being made as to whether the necessary crisis management could not be better achieved directly through the printing press. According to this consideration, central banks should move to so-called »monetary financing«, in which the lack of demand is stimulated by the government spending more money and having this additional money transferred directly from the central bank without having to repay the money. The serious thinking behind this proposal, which at first sight seems absurd, goes back to the so-called »Chicago Plan«, a memorandum addressed to US President Roosevelt by a group of economists in 1933 in the wake of the Great Depression.(7) The core of the proposal, which has been further developed from various sides into a reform of the existing monetary order, is the abolition of the banking sector's ability to create credit money in favor of controlled money creation by an independent central bank body. Instead of allowing the banking sector to create more than 90% of the book money following its private business interests, the money supply is to be increased or reduced in a targeted manner concerning inflation, employment, and growth via an independent public money creation committee. The additional money can then be put into circulation by the government following its economic policy priorities via government spending, tax cuts, repayment of existing government debt, or direct money allocations to the population. In a working paper published by the International Monetary Fund in 2012, the prospects of a fundamental reform of the existing monetary regime along the lines of the »Chicago Plan« have already been assessed positively. A state-controlled money creation that is proportional to the growth of the gross domestic product and, above that, largely inflation-free would not only curb economic swings up and down but would also lead to a considerable reduction in private and public debt.(8)

However, the results of capitalist competition between nation-states and corporations cannot be permanently annulled by monetary policy without at the same time calling into question the capitalist monetary order. If, for example, the Argentinean state permanently compensates the failures of Argentinean companies in the competition on the world markets with monetary policy, everyone knows that this attempt does not lead to the utilization of Argentina's production capacities, which are superfluous on the world market, but to the devaluation of Argentina's national credit. The idea that the effects of the successful rationalization efforts of US corporations on the domestic labor market could be avoided by creating money is no less absurd. If companies that cannot use their production capacities to full capacity due to uncompetitive prices are permanently helped by monetary policy to use them to full capacity, it will be easier for all companies to simply raise prices instead of rationalization efforts.

The dilemma between unemployment and inflation, which arises from the capitalist mode of production, will not be overcome even through state-controlled printing and distribution of money. In view of the growing debt ratio worldwide, which is increasingly shattering the credibility of traditional monetary and fiscal crisis management measures, the transition to direct financing through central banks is therefore not a brilliant idea, but only the last resort to postpone the Great Depression of the capitalist economic order once again. In this sense, the former head of the British Financial Markets Authority, Adair Turner, is already a step closer to the truth. In his plea to risk the new monetary regime, he writes under the title "Between Debt and the Devil".

"Monetary finance is like a dangerous medicine, which when taken in small amounts can help cure severe illnesses but when taken in excess can be fatal ... the alternative route to nominal demand growth - private credit creation - is just as dangerous.«(9)

The coincidence of the real economic crisis caused by the Corona pandemic with the capitalist financial crisis threatens to create a world economic crisis, which differs from the »Great Depression« at the beginning of the 20th century in that it was prepared as a more universal crisis within the framework of globalization and that the resources needed to deal with it have already been extensively used up due to the increase in global debt. The counter-program to further capitalist crisis management consists of slaughtering the sacred cow of private ownership of the means of production and, based on the complete socialization of the means of production, to engage in planned production to supply the members of society.

»You are horrified at our intending to do away with private property. But in your existing society, private property is already done away with for nine-tenths of the population; its existence for the few is solely due to its non-existence in the hands of those nine-tenths. You reproach us, therefore, with intending to do away with a form of property, the necessary condition for whose existence is the non-existence of any property for the immense majority of society. In one word, you reproach us with intending to do away with your property. Precisely so; that is just what we intend … Communism deprives no man of the power to appropriate the products of society; all that it does is to deprive him of the power to subjugate the labor of others by means of such appropriations.«(10)

(1) Karl Marx and Frederick Engels, Manifesto of the Communist Party, p. 17

(2) Karl Marx and Frederick Engels, Manifesto of the Communist Party, p. 18

(3) Karl Marx and Frederick Engels, Manifesto of the Communist Party, p. 17

(4) Bank for International Settlements, 85th Annual Report, Basel, 28 June 2015, S. 21


(6) Karl Marx and Frederick Engels, Manifesto of the Communist Party, p. 17

(7) The concept underlying the Chicago Plan was originally formulated under the leadership of Henry C. Simons and later revised and comprehensively presented by Irving Fisher (Irving Fisher, 100%-Money, New Haven 1935). Current developments in the context of the so-called "New Currency Theory" can be found in Joseph Huber, James Robertson, Creating New Money (2000) and Andrew Jackson, Ben Dyson, Modernising Money (2012)

(8) Jaromir Benes, Michal Kumhof, The Chicago Plan revisited, IWF Working Paper, August 2012

(9) Adair Turner, Between debt and the devil: money, credit and fixing global Finance, Princeton University Press 2016, p. 232

(10) Karl Marx and Frederick Engels, Manifesto of the Communist Party, p. 23