Last week's crisis summit of European leaders resulted in defeat for the German Chancellor Angela Merkel, who capitulated to the demands of the French, Spanish and Italian leaders. Financial support for Italy and Spain can now take the form of funds going directly to their banking system. This means a relaxation of the imposition of swingeing austerity measures. Italy and Spain will not be humiliated like Greece, Ireland, Portugal and Cyprus have been in the recent past. Angela Merkel swallowed this defeat in the vague hope that it might eventually lead to a tighter fiscal and political union, which will be used to boot out errant nations and ring-fence contagion. But, like the collapse of Lehman Brothers in 2008, no one knows which banks, companies and nations may eventually be dragged into the maelstrom if and when, Greece, or other nations, default.

The Greek government will now demand that they be treated in the same way as the Spanish and Italians and that present austerity measures should come to a halt. They will warn Chancellor Merkel that the alternative will be a revolutionary upheaval in Greece. All this confirms that, had Syriza, the leftist electoral coalition, won the elections in Greece, their demand to remain in the Euro and simultaneously cancel austerity measures was by no means utopian.

It appears that no European leaders have a steady hand in the current climate. There are times when any fool can be successful in business or politics, and it appears that steering a successful course is guided by a divine and "invisible hand". In such circumstances a brash self-confidence infects the upper elite and their minions, who rule over the fate of nations and people. This self-confidence generated an ignorant arrogance which characterized the post-Soviet Union era and the great boom that followed. Some celebrity entrepreneurs strutted on the world television stage revealing their supposed brilliance by spotting, nurturing and unleashing the innate talent of others, or by charitably "helping the poor to help themselves". Every cent earned by this modern bourgeoisie reinforced the illusion of inspired genius, each charitable act, or brave deed that billionaires engaged in, enhanced the fantasy that we lived in an age of incredible progress governed by an enlightened form of capitalism.

However, ages and their progressive claims must be judged in relative terms.

John Maynard Keynes predicted that by 2030 we would work no more than 15 hours a week. Each advance in science, culture and technique could serve to enrich the quality of life of the masses, but alas this vision clashed with the laws of the capitalist mode of production. Instead each advance in productivity begat a new method for the exploitation of man and the planet in the pursuit of profits. In Europe, the wealthiest region of the world, the working day is being extended and intensified, annual leisure time is shortened and working life prolonged.

We are constantly informed that a mystical curse and evil people caused the economic deluge called "the global financial crisis". Blame is apportioned to the bad governance of financial systems, poor structural forethought in the design of institutions, greedy bankers, speculators and embedded politicians. This combination supposedly corrupted paradise, or the nearest approximation to it, that man can create. Instances of "legal" tax avoidance by the obscenely rich generate occasional fury; however such instances have always occurred. The justified anger of honest citizens who suffer the consequences of the multiple bank and national bailouts, finds its expression in popular slogans like "make the bankers pay" or "tax the rich"!

Karl Marx explained that underlying the dynamics of capitalism are cycles of growth and contraction governed by the rise and fall of overall profit rates. Marx's identification of the long-term Tendency for the Rate of Profit to Fall provides a vital key to unlock the workings of today's systemic crisis of capitalism. He explained that as the relative proportion of capital invested in the means of production rises, and that of living human labor declines, the rate of profit falls. Investment is then curtailed and a crisis ensues. It appears variously as overproduction, a crisis of finance, debt, currencies, trade and unemployment. This fundamental underlying economic law allows us to better comprehend the background of the current global crisis. The corporate and national debt crises in Europe are only decisive because the current capitalist investment strike exposes systematic weaknesses and prevents their being overcome.

The relentless and incessant claim that the government books can only be balanced by harsh austerity measures is not made true by repetition. So protest movements that challenge the dominant mythology erupt in various forms - like Occupy Wall Street, the Indignados, the ferocious miners' strikes in Spain, and the rising Greek electoral coalition of leftists, Syriza. They generate brief moments in the psychology of the urban crowd, which temporarily imagines an alternative world, only to see the tide subside as reactionary "logic" somehow revives itself. But as surely as the tide goes out, so it returns with new vigor. This is the "now hidden, now open" class struggle, of which Marx spoke in the Communist Manifesto.

In the Great Depression of the 1930s, the USSR acted as a pole of attraction with its alternative model of economic development. Today's extraordinary contrast between broad socio-economic development in China and the capitalist crisis in the West shows that this role must be played by China's political economy. China has brought about radical social improvements for hundreds of millions of people - through housing, health-care reform and the building of modern urban societal infrastructure - at exactly the same time as austerity became the guiding principle in Europe and the United States.

China's planned sector of the economy was a major factor holding up the Chinese capitalist sector during the sharp downturn in demand from 2008, and it is one of the peculiarities of the modern age, that this also limited the depth of the economic crisis of Western capitalism.

The electoral victory of the Socialist Party in France, driven to vote left by the anger of its citizens, cut deeply into German Chancellor Angela Merkel's tough-talking, arm-twisting policies, which are designed to punish the Greek people. It is not surprising that Angela Merkel changed course under pressure, with one eye on the grand European scheme, and the other on German elections in 2013. One can expect the orientation of her policy to shift towards ever-greater interventionism. Indeed, the general rhetoric of European politicians is likely to turn against "speculators" whom they can blame for undermining the European project.

Simultaneously the plight of Greece reveals a fundamental incapacity, within the capitalist economic system, to fully unify the interests of all Europeans. The nation state still dominates the governance of the European Union. Germany and France are its hegemonic states. The expulsion of weaker states and the potential consequences of this move is now everyday discussion in the corridors of Berlin and Paris.

Some compare the danger of the fall of Athens to the collapse of Weimar Germany, when Communist revolutionaries and Hitler's Nazis Party faced off against each other in mortal combat. Hitler's victory unleashed an orgy of violence throughout the world. Others compare the eurozone crisis to the incompetence of the powerful decision makers in the face of the Great Depression 1929-33, where firm action to prevent economic collapse, was supposedly not taken in time.

No matter what, the continuing economic weakness in Europe and the United States will be in sharp contrast to the rapid and broad-based growth in China. Knowing this, it has become the full time job of certain economists to predict a China collapse. Their favorite theme is the prophesy of an impending property or banking collapse, which, it is claimed, is about to bring China's economy crashing down, due to an alleged "unsustainable model" that pumps money towards low profit state investment projects. These predictions of a Chinese collapse failed to materialize during the biggest recession since the 1930s. As the capitalist world teeters on the brink of a new slump, the vitality of China's system of public ownership of the banks and major industries will again prove its resilience and will gain increasing support in Europe.

The author is a columnist with China.org.cn. For more information please visit:

http://www.china.org.cn/opinion/heikokhoo.htm

Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.

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