The World Crisis of Capitalism and Perspectives for the Class Struggle

The World Crisis of Capitalism and Perspectives for the Class Struggle

Written by Alan Woods Friday, 03 September 2010

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The discussions on World Perspectives are the foundations from which everything else flows in terms of the perspectives and work in each country, our priorities, tasks, etc. The instability on a world scale has only deepened since the World Perspectives document was drafted, in the autumn of 2009. But the main lines of the perspectives have been entirely confirmed by the march of events. The following is a summary of the main points in the lead-off given by Alan Woods at the 2010 World Congress on the basis of notes taken by delegates.

Workers in France protesting in January 2009. Photo by Grégoire Lannoy.

[listen to audio file of Alan Woods’ speech]

There are periods in world history that represent turning-points in the whole situation. We are now living in such a period. The bourgeois press talks incessantly of recovery, but there is no recovery. They have spent billions on the banks, but the banks are not lending. Why are they finding it so difficult to climb out of the recession? It is because they used the methods for getting out of a recession during the boom – something that is completely irresponsible form the standpoint of the bourgeoisie itself.

They used low interest rates to avoid recession. Without this there would have been a recession sooner. But now the recession is far more serious than it would have been otherwise. Marx explains the role of credit in capitalism. It serves to artificially expand the market beyond its normal limits. But borrowed money must be paid back with interest. It does not remove the fundamental contradictions of capitalism. All it does is delay the crisis, but exacerbate it when it comes.

This crisis is not a crisis of liquidity and credit, as they assert. Marx explained that it is not the lack of money that causes the crisis but the crisis that causes the lack of money. During the boom credit was easy to obtain. Poor people in America were lent money that they could not possibly repay. Banks bought these debts and then lent more money. The result was an enormous accumulation of debts that could not be repaid. For every dollar earned in the USA, 1.4 dollars was owed.

They say that they have learned the lesson of history. But Hegel said that anyone who has ever looked at history will know that nothing has ever been learned from history. The bourgeois economists thought the boom would last forever. They invented a theory, the “Efficient Market Hypothesis”, according to which supply and demand necessarily balance each other and overproduction is impossible. In reality, this is not a new idea but only a rehash of Saye’s Law, which Marx answered long ago.

These ideas have now collapsed. There is a growing sense of panic in the ruling class. The governments don’t know what to do. We have never seen a situation like this in the entire 200 year history of capitalism. The scale of it is immense, reflecting all the contradictions that have been piling up for the last 30 years.

Greece and the crisis of the Euro

The crisis of the Euro immediately becomes a world crisis. The cause of this is that the global economy means that any crisis in one sector immediately affects the rest. The German and French banks lent money to Greece. They must have known there was a risk that it would never be paid back, but while the boom continued and huge profits were being made, “who cares!” Greece is a small peripheral European economy. How can it cause such a serious crisis?

Dialectically everything is changing into its opposite. The same factors that pushed the economy up, now conspire to push it downwards into a deep crisis, which they cannot control. Globalization now manifests itself as a global crisis of capitalism. One sector affects all others, producing a domino effect. The Greek crisis rapidly became a crisis of Spain and Portugal. And Italy will be next, to be followed soon by the UK.

The EU is pressuring Greece to carry out deep cuts because there is no alternative from a capitalist perspective. But this is causing an explosion of the class struggle, which shows what the future is preparing for the rest of Europe. In order to pay their debts Greece must stop paying wages, pensions etc. Already they have cut wages by 20-30% and pensions by 30-40%. 20% of the working population will be unemployed by the end of this year. Public investment has been frozen. Greece now has a much bigger public debt than in 2001.

There have been seven general strikes in Greece this year – and there will be more. But the Greek government will carry out all the cuts and the Greek economy will collapse, because the cuts will further reduce demand, provoking a deep slump. And at the end of it all, Greece will never pay back loans. Sooner or later, Greece will default and it seems likely that it will be kicked out of the Euro zone. But this will open a social crisis not seen since World War II. It will be like Germany 1923.

In order to prevent a collapse, the EU created a special fund of around one trillion Euros. Why such “generosity? We must ask who lent the money to Greece. The answer is, mainly German/French banks. Thus, if Greece defaults Germany will face a collapse of its banks. However, this fund didn’t solve anything. It just delayed the problem.

Huge bank debts have become huge state debts. To give an idea of the scale of the problem, in1990 Japan’s public debt was 65% of its GDP. Now it is around 200% of its GDP. Earlier this year The Economist stated in an editorial: “from an historical point of view 2008 will be remembered as the year banks collapsed. History will record 2010 as the year states collapsed.” This has already happened in Iceland, which is a very small and peripheral economy. Others will follow.

Fundamental contradictions

What is the cause of capitalist crisis? We must remind ourselves that the two main barriers that are standing in the way of progress are:

Private ownership of the means of production

The nation state

The bourgeois partially overcame the first contradiction by increasing credit (which they can’t do any more). They managed temporarily to solve the second contradiction through globalization – a massive increase in world trade, a general reduction of tariffs, and the intensification of the global division of labour.

Under modern conditions the limits of the nation state are too narrow to comprise the immense productive capacity that has been built up. But the entry of China, Russia and Eastern Europe into the capitalist world market, and the greater participation of countries like India means that for the first time in history the entire world population is participating in the world market. This acted as a powerful stimulus for a time.

In China millions of peasants flocked to the towns and cities and were incorporated into the labour market. Foreign capitalists invested huge sums on the building of modern factories, where the workers work as virtual slave labour with Dickensian conditions. This was a vast source of surplus value to be exploited by Capital. In the short run it provided huge profits.

But we explained that sooner or later these huge factories in China must produce commodities which must be sold on foreign markets. Despite its size, there is no way China’s internal market could absorb all this. China must export to the USA and the EU/EU. – but this gives rise to new contradictions.

With the growth of unemployment in the USA, anti-Chinese moods and protectionist tendencies are getting stronger. Remember that protectionism is merely an attempt to export unemployment. Thus, globalization did not eliminate any of the fundamental contradictions of capitalism but only serves to reproduce these contradictions on a vast scale.

The bourgeois politicians and economists have no solution to the problems but they all agree on one thing: “We must attack living standards.” This is without doubt the deepest crisis in history, but we are faced with a seeming contradiction: why is the number of strikes so low?

Lag in Consciousness

Dialectical Materialism teaches us that human consciousness is a conservative factor. It always lags behind events. And the present consciousness of the workers of Europe and the USA is the product of the last 50 years, a long period of improved living standards, of reforms, etc. As a result, the working class has not yet understood the true seriousness of the present crisis. They believe it to be something temporary, a departure from the norm, which will eventually pass. The working class is temporarily stunned and will accept the cuts until it reaches a critical stage when they will say: enough is enough!

The union leaders and the leaders of the reformist parties play upon this mood. They advise the workers to make sacrifices, to accept cuts and tighten their belts for a while. Then all will be well. The crisis will come to an end and we will return to “normality”. To this comforting illusion a bourgeois commentator replied: “Yes, sooner or later we will return to normality. But will be a new normality”.

The period we are now entering will not be like the last period. Not only can the bourgeoisie not afford any new reforms. It cannot afford to maintain the reforms that were conquered in the past. There is plenty of money for the banks, but not for hospitals, schools or pensions. The perspective is one of years or decades of low living standards, unemployment, cuts and austerity

But the bourgeoisie faces a serious problem. The working class has been enormously strengthened for the last 50 years. Its organizations are intact. The workers of France, Italy and other countries are not going to accept the destruction of the elements of a civilized existence without a fight. The stage will be set for an explosion of the class struggle. But this will take time, which is something our Spanish ex-comrades didn’t understand.

Unless and until the capitalists eliminate the colossal levels of excess capacity and debt, there is no hope of any real recovery. This means years and decades of social instability. As we explained in advance, we are entering a period of wars, revolution and counter-revolution. Already we see the outlines of this in several countries. There was an insurrection in Kyrgyzstan, which was subsequently diverted into sectarian violence due to the lack of leadership. Do not forget that without the Bolshevik Party under Lenin and Trotsky the 1917 Revolution would have ended in an orgy of Black Hundred reaction. And then the “experts” would say: Revolution? What Revolution? There was never any possibility of revolution in Russia in 1917!

The Iranian Revolution

We have seen a semi-insurrection in Bangkok, in which the masses showed tremendous courage but were again defeated due to the lack of an adequate leadership. Last, but not least we have the marvellous revolution in Iran. Millions moved into action despite terrible repression. Now, inevitably, it has temporarily declined. That is not surprising. What I found surprising is just how long it lasted given the lack of leadership

To have succeeded, the movement would have required a general strike and soviets. If a revolutionary party, like the Bolshevik Party, had been present, it would have been relatively easy to overthrow the regime. But the so-called “vanguard” gave no leadership. This was a shameful abdication of responsibility.

“Whoever wants a pure revolution will never see one” Lenin said. Some hopeless people deny that this was a revolution. But it has recently emerged from people who have deserted from the Revolutionary guards, that the regime was on the point of being overthrown during the Ashura uprising on 26 Dec. The masses fought back against the police, and a jet plane was prepared for Khamenei to escape from Iran.

We said the Iranian revolution had begun. In the same sense, the Russian Revolution began in February 1917 and in 1931 the Revolution began in Spain. But revolutions are not one-act dramas. They go through periods of advance and retreats, as with the “2 black years” in Spain and the “July Days” in Russia in 1917, when the Bolsheviks were driven underground and Lenin had to flee to Finland. But such stages merely prepare new and even stormier advances. It will be the same in Iran.

If we turn to Iraq, we see the limits of the power of US imperialism. The invasion solved nothing. In reality, the USA was defeated by the resistance of the Iraqis. The war was an immense drain on resources, costing the USA $2-billion a week. Not even the wealthiest country could stand such a haemorrhage of blood and gold. And now they are forced to leave.

All they have achieved is the destabilization of the Middle East, a key area for imperialism. The Arab bourgeois regimes in Saudi Arabia/Egypt/Morocco/Jordan are now hanging by a thread. There have been big strikes in Egypt. A successful Iranian revolution would cut across whole situation. I don’t know exactly what kind of government would replace the present Iranian regime, but it will definitely not be a fundamentalist regime! That is finished!

There are the beginnings of a change everywhere. Even in the USA there is a change. The vote for Obama was at bottom a vote for change, but of course there is no change. In the last period 2 million people lost their homes in the USA. There are tent cities and soup kitchens, just like the 1930s. Even in California there is high unemployment and deep cuts. They are even closing the parks! This means that American dream is finished. And there is a questioning of the system, which was not the case before. Support for Obama has fallen sharply, from 60% to 40%. In all countries there is a deep sense of anger, frustration, rage and injustice which is preparing the way for revolutionary developments in all countries at this or that speed.

Crisis of leadership

Trotsky wrote in The Transitional Programme that one can reduce the crisis of humanity to the crisis of leadership of the proletariat and its organizations. That remains the case today. In one of his last articles, Trade Unions in Epoch of Imperialist decay Trotsky explains that there is an organic tendency on the part of the union leaders to fuse with the capitalist state. We see this now everywhere. But it has its limits.

In all countries the trade unionists are desperately trying to do deal with the capitalists. They want a peaceful life. They want to get a deal that they can sell to their members. But in these times the bourgeois have nothing to offer except cuts and more cuts. Therefore we can predict that even the most right-wing union leaders will be forced to struggle, or else be pushed aside. All deals will break down.

In Italy the CGIL leaders wanted a deal, but it was not possible. They were compelled to call a general strike, although they limited it to four hours. In Spain also the union leaders wanted a deal – but no deal was possible. So in September there will be a general strike in Spain. We will see the same thing in other countries in the next period

However, we must be careful with the general strike slogan. The former leaders of the Spanish section had a fetish about this. They carried the slogan of the general strike on cover of every issue of paper. This is entirely incorrect, although if you constantly repeat “it is twelve o’ clock”, you will be right twice a day at least.

Let us be clear, an indefinite general strike poses the question of power – it is a revolutionary action. But a one-day strike is just a big demonstration. We support such actions, of course, because through them the workers can get a sense of their own strength. But to imagine, as our former comrades did, that this can defeat the plans of the bourgeois, is a mistake.

So serious is the present crisis that strikes, in and of themselves, do not solve the question. Just look at Greece, where the union leaders can repeatedly call general strikes in order to tire the workers out. These strikes will not force Papandreou to abandon his programme of cuts. On a capitalist basis he has no alternative but to continue. Therefore, inevitably the strikes will begin to fall off in Greece.

But the important thing is that the advanced layers of workers and youth will draw political conclusions. The Marxists must tell the truth to workers, and the truth is, as Trotsky explained to the Spanish Communists in 1931, that even the stormiest strikes settle nothing fundamental. Through strikes the workers will learn lessons. We must explain that there is no solution to the fundamental problems while capitalism exists. The only solution is for working class to take power.

The Venezuelan Revolution at the crossroads

At this moment in time, Latin America is at the front rank of the world revolution, but that can change. The Venezuelan revolution has lasted for 11 years. This fact in itself shows that the situation is not the same as in the 1930s. At that time a revolutionary situation could not last long. It would be quickly settled by the victory of the revolution – or the counter-revolution.

However, now there is a different correlation of class forces. In the past, revolutions were quickly stamped out if not victorious. Today, the USA can’t intervene successfully, at least directly. The Venezuelan bourgeois is not strong enough to impose reaction, but the workers are partly paralysed by the lack of revolutionary leadership and the pressure of reformism.

The Venezuelan Revolution now finds itself in a particularly dangerous period. After such a long time there is an element of tiredness and disillusionment. It is not excluded that the right could win the elections in September. This will pose the question of power point-blank. Either we finish the job and liquidate the power of the bourgeoisie, or there will be a threat of counter-revolution. The role of the Venezuelan Marxists here can be extremely important if we can win over the key layers of activists who seek a revolutionary solution.

In China there is a real perspective of class struggle. The development of industry develops the working class – the biggest and potentially most powerful working class on the planet. The young workers in the factories in China won’t tolerate bad conditions. There has been a wave of strikes and suicides of workers. I am told that in Guangdong strikes have been legalized. This is a sign of the times.

In Afghanistan the war cannot be won. The imperialists have destabilized Central Asia and Pakistan. Wherever you look there is extreme turbulence at all levels – economic, social, political and military. These are symptoms of a system in terminal decline. There is no way out on the basis of capitalism. The only way out is for the working class to come to power. Sooner or later, in one country or another, this will be placed on the agenda.

The question is therefore not whether the workers will fight. The question is whether this International will be in a position to intervene in a serious way in the movements that will inevitably occur.

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