Perspectives for world capitalism 2012 (Draft discussion document)

We begin today the publication of the IMT’s analysis of the world situation. This is a draft document that is the basis of discussion within the Tendency and will be voted on with possible amendments at this year’s world congress of the IMT. Part One deals with the general crisis of world capitalism, to be followed by an analysis of specific areas of the world.

The situation is moving at lightning speed on a world scale. After the Arab Revolution, events followed in quick succession: the movement of the indignados in Spain; the wave of strikes and demonstrations in Greece; the riots in Britain; the movement in Wisconsin and the Occupy movement in the U.S.; the overthrow of Gaddafi; the fall of Papandreou and Berlusconi; all these are symptoms of the present epoch.

These sudden sharp turns indicate that something fundamental has changed in the entire situation. Events are beginning to impinge upon the consciousness of ever-broader layers of the population. The ruling class is increasingly divided and disoriented by the depth of a crisis they never expected and have no idea how to solve. Suddenly they find themselves unable to maintain control of society by the old methods.

Instability is the predominant element in the equation at all levels: economic, financial, social and political. Political parties are in crisis. Governments and leaders rise and fall without finding any way out of the impasse.

Most important of all, the working class has recovered from the initial shock of the crisis and is moving into action. The advanced elements of the workers and youth are beginning to draw revolutionary conclusions. All these symptoms mean that we are entering the opening chapter of world revolution. This will unfold over years, possibly decades, with ebbs and flows, advances and retreats; a period of wars, revolution and counterrevolution. This is an expression of the fact that capitalism has exhausted its potential and has entered a phase of decline.

This general observation, however, does not exclude the possibility of certain periods of recovery. Even in the period 1929-39 there were cyclical variations, but the general tendency will be in the direction of longer and deeper recessions, interrupted by shallow and ephemeral booms. The “recovery” that followed the slump of 2008-9 is indicative of this tendency. It is the weakest recovery in history—the weakest since 1830, according to the bourgeois economists—and merely paves the way for an even deeper slump.

This reflects the fact that the capitalist system has arrived at a dead end. Capitalism has been piling up contradictions for decades. At bottom, the crisis is a manifestation of the rebellion of the productive forces against the narrow straitjacket of the capitalist system. The main barriers that are blocking the development of civilization are, on the one hand, private ownership of the means of production and on the other hand, the nation state.

For a period, this contradiction was partially and temporarily resolved by an unprecedented expansion of world trade (“globalization”). For the first time since 1917 every corner of the globe is united in one vast world market. However, the contradictions of capitalism were not abolished by this, but merely reproduced on a vast and unprecedented scale. Now the bill is being presented.

“Globalization” now manifests itself as a global crisis of capitalism. The tremendous productive capacity that has been built up on a world scale cannot be used. This crisis has no real parallel in history. The scale of it is far greater than any crisis in the past. The strategists of capital are like the ancient mariners who have entered an unexplored ocean with neither map nor compass. There is now a general crisis of confidence in the ranks of the bourgeoisie internationally.

The bourgeoisie postponed the evil day by using up the mechanisms that would normally be used to get out of a slump. Now this is impossible. The banks are not lending, the capitalists are not investing, the economies are stagnant, and unemployment is growing, indicating that the feeble recovery after 2009 will at a certain stage collapse into a new slump.

The crisis of European capitalism finds its mirror image in the fluctuations of the bond markets that demand an increase in risk premiums for one country after another. Greece, Ireland, Portugal, Spain, and Italy have fallen one by one into the trap of the market, which condemns them to pay usurious rates of interest on their already swollen national debt. By so doing the “markets” render a difficult situation completely impossible.

Now the international rating organizations are threatening to downgrade France and Germany, and in fact the whole of the eurozone. It is a kind of deadly contagion that has infected all the eurozone’s big countries. The constant turmoil on world markets shows the nervousness of the bourgeoisie, which at times borders on panic. They are like a thermometer that measures the intensity of a fever. The bourgeois economists stand around the bed of the patient and shake their heads, but have no effective medicine to prescribe.

The panic, which is reflected in the wild gyrations of the stock exchanges and bond markets, has spread rapidly from Europe to America. In vain, Merkel and the others rail against the irresponsibility of the rating agencies. The latter reply that they are merely doing their job: they are accurately reflecting the general anxiety about the global economy and lack of confidence in the politicians to address it. But in so doing, they give a further push to economies that are tottering on the brink of the abyss.

Change of epoch

Lenin explained that there was no such thing as an impossible situation for capitalism. Until it is overthrown by the conscious exertions of the working class, capitalism can recover from even the deepest crisis. As a general proposition, this is undoubtedly correct. But this general affirmation tells us nothing about the concrete situation we are now facing, or the likely outcome. We must analyse the historical moment concretely, taking into consideration where we have come from.

In the history of capitalism definite periods can be observed. For example, the period before the First World War was a long period of economic upswing that lasted right up until 1914. This was the classical period of Social Democracy. The mass parties of the Second International were formed in conditions of full employment and a relative improvement of living standards for the European working class. This led to the nationalist and reformist degeneration of the Social Democracy, which was exposed in 1914, when they nearly unanimously sided with “their” bourgeois in the war.

The period that followed the Russian Revolution of 1917 was of an entirely different character. It was a period of class struggle, of revolution and counterrevolution that lasted until the outbreak of the Second World War. The slump that began with the Wall Street Crash of 1929 and turned into the Great Depression was preceded by a period of feverish speculation, which has many analogies with the boom that preceded the present slump.

The Depression of the 1930s was only ended by the war itself. In 1938, Trotsky predicted that the war would end in a new revolutionary upsurge. This was correct, but the way in which the war ended was different to what Trotsky had expected. The military victory of the USSR strengthened Stalinism for a whole period. The Social Democracy and Stalinists were able to abort the revolutionary wave in Italy, France, Greece and other countries. This was the political premise that prepared the way for a new upswing in capitalism, which Lenin and Trotsky had regarded as a theoretical possibility in 1920.

The reasons for the upswing of 1948-74 have been explained in previous documents (See Ted Grant’s Will There be a Slump?,, 1960). It is sufficient here to point out that this was the result of a peculiar concatenation of circumstances that is impossible to repeat. Such a perspective is ruled out at the present time. The upswing in capitalism lasted for almost three decades and, like the period before the First World War, led to a further degeneration of the Social Democracy and the Stalinist parties and unions in Europe and the other advanced capitalist countries. However, even at this time we saw the biggest general strike in history in France in 1968.

This period was interrupted by the first recession since the end of the Second World War that began in 1973-4, coinciding with a wave of revolutionary upsurge: revolutions in Portugal, Spain and Greece, mass strikes in Britain, a revolutionary ferment in Italy, and revolutionary upheavalin Latin America – particularly in the Southern Cone: Chile, Argentina and Uruguay – and in the rest of the ex-colonial countries. The working class in Europe and in other zones at that time was moving in a revolutionary direction. But the betrayals of the leaderships of the Social Democracy and the Stalinists created the conditions for the recovery of capitalism.

The period that followed in the 1980s can be described as a period of mild reaction. The bourgeoisie attempted to reverse the policies of Keynesianism, which had resulted in an explosion of inflation and an intensification of the class struggle. This was the period of Reagan and Thatcher, of monetarist economics and a counter-offensive against the working class.

Collapse of Stalinism

This was further intensified by the collapse of Stalinism. New areas of the globe were pried open to the capitalist market and investors. A vast pool of hundreds of millions of cheap workers, formerly inaccessible to the capitalists, and growing consumer markets in South East Asia, China, the former USSR and India (which also saw the opening up of its markets through the destruction of protectionist barriers) provided the oxygen that prevented the recession of 1990 from becoming a Depression, and temporarily gave the system a new lease on life.

In the 1990s and 2000s, the bourgeoisie and its ideologues were puffed up like the frog in Aesop’s fable. They succumbed to the delusion that the “free market” could solve all problems, if only it was left to itself. Previously, the bourgeois worshipped the state as a bountiful God, now they cursed it as the source of all evil. The only thing they demanded of the state was that it should leave them alone.

The tendency towards growing statization (the “encroaching socialist society”) was thrown into reverse. In place of nationalization there was a wave of privatization. The new situation was rationalized by the economists in the theory of the “efficient market hypothesis”, according to which markets had a built-in tendency towards equilibrium, in which demand and supply would automatically balance each other out, and therefore crises of overproduction were impossible. This was not a new idea but only a regurgitation of Say’s Law that Marx answered long ago. [See, Theories of Surplus Value, Marx 1861-3, Chapter XVII, Ricardo’s Theory of Accumulation and a Critique of it. (The Very Nature of Capital Leads to Crises),]

The 2008/09 crisis marked another turning point. It completely undermined all the theories of the bourgeois economists. It unleashed powerful shocks that are still reverberating. It marked the end of a prolonged period of apparent financial stability and order. It punctured the dream of the bourgeoisie that they had discovered the philosopher’s stone that would finally put an end to the vicious cycle of booms and slumps.

In reality they had discovered nothing new. The boom was a hut built on chickens’ legs: a model based on a massive expansion of speculation in housing, fed by an unprecedented credit expansion and the absolute domination of finance capital. The parasitical service sector expanded exponentially at the expense of genuine productive activity. The stock exchanges became even more like casinos, addicted to gambling on a massive scale, and the bankers threw themselves into this merry carnival of money-making with reckless abandon.

The purely parasitic element in capitalism flourished in the last period. This in itself was an indication of the senile decay of capitalism: the crushing domination of finance capital and the rise of “services” at the expense of manufacturing industry; a massive expansion of credit and fictitious capital; all kinds of swindling and unbridled speculation on the stock exchange and in the big banks.

The speculative element has been present in every capitalist boom since the Dutch Tulip Bubble of the 17th century. But the extent of it in the recent period surpasses anything seen in the past. The trade in derivatives alone amounts to US$650 trillions of dollars and represents a massive fraud. The capitalists employ an army of people who specialise in making derivatives as complicated as possible in order to conceal this fraud from the public. This was supposed to provide greater stability to the markets, but in fact it is a major element in increasing instability. This has contributed powerfully to the present collapse, and the aftermath of debt renders it all the more difficult to get out of the slump. At the same time there has been an unprecedented development of the concentration of capital.

Our tendency expected the slump to occur before now. However, it was postponed due to the factors outlined above, and this had a certain impact on our perspectives. But the first thing we have to ask ourselves is this: by what means was the slump postponed and what were the consequences? We explained the fundamentals in a perspectives document 12 years ago (OnaKnife'sEdge: Perspectivesfortheworldeconomy, We pointed out that the bourgeoisie had postponed the slump by using the methods that ought to be used for getting out of a slump. They held down the rate of interest while expanding credit to an unheard of degree. That is to say, they avoided a crisis but only at the cost of making the eventual slump all the deeper.

The capitalists always try to get around present contradictions by putting off the inevitable crisis to the future, when the whole unsound edifice will fall on their heads with even greater force. Credit has definite limits and cannot expand endlessly. At a certain stage the whole thing begins to unravel. All the factors that drove the boom turn into their opposite. The seemingly endless upward spiral turns into a downward spiral that cannot be controlled.

The problem faced by the bourgeois is easily stated: they can no longer use the usual instruments to get out of the slump as they have already used them up during the boom. Interest rates are near zero in the U.S. and Europe, and zero in Japan. If you account for inflation, which in the U.S. and Europe is higher than the rate of interest, it means that in real terms the interest rate is negative. How can they decrease interest rates any further than this to instigate growth? How can they increase state expenditure when all governments are burdened with colossal debts?

How can consumers spend more when they must first pay back the current massive debts inherited from the boom? And what is the point in investing in more production when the capitalists see no markets to sell their goods? For the same reason, lenders have no interest in expanding credit. Since they see no point in investing in producing goods for saturated markets, the bourgeois prefer to make money by speculating on the money markets.

A vast amount of money is constantly moving around the world seeking to make more money by speculating against currencies like the euro. They act like a pack of hungry wolves following a herd of reindeer, seeking out the weakest and sickest animals. And now there are plenty of sick animals to choose from. This speculative activity is adding to the general instability, imparting an even more convulsive character to the crisis.

Protectionist tendencies

If you accept the market economy, you must accept the laws of the market, which are very similar to the laws of the jungle. To accept capitalism and then complain about its consequences is a futile exercise. The reformists (especially the left reformists) continually harp on the Keynesian idea of solving the crisis by increasing public spending. But there is already a huge public debt to be paid off. Instead of increasing public spending, all governments are cutting spending and laying off public sector workers, thus further exacerbating the crisis.

It is an expression of the desperation of the bourgeois that they are grasping at straws. In America and Britain they once again reverted to “quantitative easing”, i.e. printing more money. This will not solve any of the problems, but will intensify them in the long run. When it eventually feeds its way into the economy, it will produce an explosion of inflation, preparing the ground for an even deeper slump in the future.

The hopeless confusion of the economists is illustrated by the strange spectacle of Jeffrey Sachs, the man who unleashed neo-liberalism onto Eastern Europe, calling for a global version of the New Deal. The problem is that any such suggestion is anathema to the Republican-dominated US Congress, which is hell-bent on pursuing the opposite policies.

Neither free market economics nor Keynesian stimulus policies have worked, or can work. Governments and their economic advisers are in a state of despair. There is no more money for fiscal stimulus, but austerity policies only serve to depress demand even further, thus aggravating the slump.

The greatest fear is that a new recession will provoke a resurgence of protectionist tendencies and competitive devaluations, as happened in the 1930s. This would have catastrophic effects on world trade and pose a threat to globalization itself. All that has been achieved in the past 30 years can unravel and turn into its opposite.

The measures announced by the Swiss National Bank (in September 2011) to push down the value of the Swiss franc is a warning of the way things are drifting in the direction of protectionist policies and competitive devaluations. It was this that turned the 1929 Wall Street Crash into the Great Depression of the 1930s. Something similar can happen again.

Downward spiral

Trotsky wrote in 1938: “The capitalists are tobogganing towards disaster with their eyes closed.” We need one change to that statement: The capitalists are tobogganing towards disaster with their eyes wide open. They can see what is happening. They can see what is coming with the euro. In America they can see what is coming with the deficit. But they have no idea what to do about it.

Since the collapse of 2008, the authorities have committed trillions of dollars to rescue the financial system, but to no avail. The European Commission has continually downgraded its outlook for economic growth in the eurozone, which has now come to a virtual standstill. Stagnation, however, is only the most optimistic variant. Everything now points to a new and even steeper fall than in 2008-9.

In the months after the bailout of the banks, the bourgeois tried to console themselves with talk of a recovery. But, as we have seen, this is the weakest recovery in history. There are no “green shoots”. In reality, the world economy has not recovered from the slump of 2008, in spite of the trillions of dollars pumped into the economy. By such desperate means they succeeded in avoiding an immediate slump on the lines of 1929, but these panic measures did not resolve anything fundamental. On the contrary, they have produced new and insoluble contradictions.

The bourgeoisie avoided the collapse of the banks, but only at the cost of provoking the bankruptcy and collapse of entire states. What happened in Iceland is a warning of what awaits one country after another. They have turned the black hole of the private financial system into a black whole of public finance.

Now the European politicians are moaning that the Greeks falsified financial data to conceal the true state of their finances. “If we had known this we would never have allowed Greece to join the eurozone”, they complain. But it is supposed to be the job of bankers to analyse data from loan applicants and to uncover falsehoods. The charge against the Greeks can thus be extended to the bankers. How could they not have discovered the Greek deception?

The answer is that they didn’t want to. The financial institutions were all involved in the speculative racket and making huge profits out of speculating in everything from home mortgages to the purchase of government bonds. In this speculative orgy of money-making the bankers were not particularly interested in assessing the quality of a given loan. On the contrary, they connived with borrowers to make their debt look more attractive.

The U.S. subprime crisis tells exactly the same story. The banks lent a lot of money to people who did not have the means to buy their own home. In fact, they pressurized people into buying on credit. The resulting debts were then sliced up and repackaged and sold on for speculative purposes. Huge amounts of money were made from this speculation. As long as the money was rolling in, they did not worry about the finances of the Greek government, or of insolvent homeowners in Alabama, Madrid or Dublin.

It is no exaggeration to say that the capitalist class in this period completely lost its head. Like a drunken libertine, the bourgeois became intoxicated with its success. They lived only for today, and the devil take the future! Like most libertines, they overlooked the inconvenient detail that they were living on credit, and incurring debts that sometime would have to be paid. And like most libertines, they eventually woke up with a bad headache.

But here the analogy ceases. The headache was immediately transferred to the state, which obligingly passed it on to the whole of society. The bankers arose from their bed refreshed by a transfusion of billions of public money, while the rest of society was presented with the bill.

The public is now waking up to the fact that our so-called democratic society is in reality ruled by the unelected boards of directors of the banks and big corporations. These are linked to the state by a thousand strings, and also to the political elites who represent them. This realization has led to the abandonment of the old comforting belief systems, and a fracturing of consensus. Society is rapidly being polarised. This presents a colossal danger to the ruling class.

Dialectically, all the factors that drove the economy upwards are combining to drive it down. Society is entering into an agonizing downward spiral that seems to have no end. The working class in Europe and the US has conquered through struggle what we may call the conditions for a semi-civilized existence. The continuation of these social conquests has now become intolerable to the capitalist class. The capitalist system is bankrupt in the most literal sense of the word.

Who will pay for these debts? The economists have no idea how to get out of the crisis. The only thing they agree on is that the working class and the middle class must pay the bill. But for every step back the people take, the bankers and capitalists will demand ten more. That is the real meaning of the attacks that have been launched everywhere.

But certain things must flow from this. Both the English and French revolutions began with a crisis over the debt. Both states were bankrupt, and the question was posed, “Who pays?” The nobility refused to pay. That was the initial cause of the revolution. We face an analogous situation today. The workers will not sit with their arms folded while the ruling class systematically destroys all the gains of the last half century.

The Greek working people rose up in revolt against these impositions. Their example will be followed by the workers of Italy, Spain and every other country in Europe. Debt servicing (interest) is the third largest expense of the Spanish government, after healthcare and unemployment benefits: $35bn annually. The Spanish crisis expresses itself most acutely in unemployment. There are nearly 5 million people out of work: 1 in 5 of the population. In the South there is nearly 30 percent unemployment. Half of the youth are unemployed. This was what produced the movement of the “indignados”.

“Contagion” is on the order of the day, not only on the economic but also on the political plane. Protests over spending cuts and tax increases have spread from Madrid to Athens, from Athens to Rome, and from Rome to London. In the U.S., the Occupy movement has spread like wildfire, expressing the same pent-up discontent and frustrations. The stage is set for an explosion of the class struggle everywhere.

Our tendency did not think the euro could even be founded, because of the impossibility of uniting economies headed in different directions. But for a while they in fact got away with this, due to the prolonged capitalist boom. In a 1997 document, “A Socialist Alternative to the European Union”, we pointed out that the euro would collapse “amidst mutual recriminations.” This scenario is now beginning to unfold before our eyes.

The crisis of European capitalism

The eurozone is passing through the most serious crisis in its entire history, which places a big question mark over its future existence. As we predicted long ago, in a serious crisis, all the national contradictions come to the fore, as we now see with the fractious relations between Greece, France, Germany and Italy. The European Union is facing the day of reckoning.

None of these things were supposed to happen. The terms of the Maastricht Treaty prohibited big debts and budget deficits. But Maastricht is now only a dim memory. Theoretically, since all are members of the same single currency, with the same central bank setting a single benchmark interest rate, each country should be able to borrow at near enough the same rates. However, in 2010 the markets began to distinguish between the stronger eurozone economies—Germany and its satellites (Austria, the Netherlands and a few others), and the weaker economies like Greece, Ireland, Spain, Portugal and Italy. Now, even stronger economies, such as France, Austria and the Netherlands, are being affected. Standard & Poor's has even warned that 15 of the 17 eurozone members could have their credit ratings downgraded, with a question mark being placed even over Germany.

Increasingly, the latter are being charged punitive rates for money borrowed from the money markets. The increased charges make the burden of debt heavier and even harder to repay. So when a credit agency like Moody’s lowers the credit status of a country, this action becomes a self-fulfilling prophecy. The yield on Italian bonds rose to almost 7.5 percent before the collapse of the Berlusconi government.

We pointed out even before the euro was launched that it is impossible to unify economies that are pulling in different directions. Now some bourgeois economists are warning that the pressures and tensions building up can lead to the collapse of the single currency. For the first time, the question is openly being aired of the possibility of the breakup, not just of the euro, but of the EU itself. The slump in the euro is an expression of the insoluble contradictions of the European Union.

We have already seen the failure of some major European banks, which has contributed to a general climate of nervousness. In the United States we saw the failure of MF Global, the largest Wall Street firm to collapse since the Lehman Brothers implosion in September 2008.

At a certain point, all this could trigger a similar effect to the collapse of the Austrian Credit-Anstalt bank in May 1931. The fall of Credit-Anstalt, which was considered to be invulnerable, caused the dominoes to topple across continental Europe, and the resulting wave of panic was felt as far away as the U.S. In the same way, a Greek default could spread the financial crisis, not just across Europe but across the globe.

Greece: the weakest link

The crisis in Europe began in Greece, and although it was somewhat delayed in Germany, Austria and Scandinavia, it has begun to spread. Sooner or later, they will all be pulled into the maelstrom.

In an attempt to calm the markets, France and Germany initially insisted that Greece remain an “integral” part of the single currency. But although these bold speeches had the effect of temporarily stabilizing the markets, they were mere words and were soon scattered to the four winds. Greece was forced into what amounts to a partial default. The international finance markets, however, are in fact working on an assumption that Greece will default completely.

In 2010, Athens borrowed the equivalent of 10.5 percent of annual economic output, just to fund general government spending. Greece clearly cannot pay its debts, and the only result of the austerity imposed on it by the eurozone leaders is to push it further into the morass of recession, unemployment and misery. Even if the latest plan is carried out to the letter—which is supposing a lot—the Greek deficit will still stand at 120 percent of GDP by the year 2020, while the people of Greece will suffer further falls in living standards.

In return for “aid”, the Greek government is being squeezed to extract the last drop of blood from the Greek people, but in the end Greece will not be able to pay its debts. That is the first problem. The second is that countries like Finland, Slovakia and the Netherlands are raising problems over wider bailout funding. More importantly, the mood in Germany is hardening on this issue.

It seems almost inevitable that Greece will eventually be ejected from the EU. But this will have the most serious consequences both for Greece and the entire EU. All the objective conditions for revolution existed in Greece in the last eighteen months:

  • The capitalist class was split, and had lost its confidence
  • The middle class was wavering and inclined to support a revolutionary overturn
  • The working class was in struggle and prepared to make the greatest sacrifices to move forward

What more could one expect from the Greek working class? What more could they do? If they did not take power, it was not their fault, but the failure of each and every one of the so-called leaders. The failure of the leadership is all that was holding back the workers. If the leadership of the Greek Communist Party had adopted a correct Leninist standpoint, both in terms of its programme and in terms of applying correctly the policy of the united front, the question of power would already have been posed. In many ways the situation was far more advanced than it was in Russia in February 1917.

After the first general strikes in Greece, the slogan of the 24-hour general strike became meaningless. The movement had gone beyond that. The only adequate slogan was that of an indefinite general strike. But in a situation like that of Greece, this raises the question of power. You cannot play with this slogan. It has to be linked to the development of organs of popular power—action committees or soviets—linked to the trade unions.

It is possible that a section of the ruling class is toying with the idea of a coup. But after the experience of the Junta in the 1960s, the Greek workers would not accept passively the imposition of a dictatorship. Such a move would certainly result in civil war. The problem is that the bourgeois would not be confident of winning. The Greek working class is far stronger than it was then; its organizations are intact and have not suffered a serious defeat for decades.

For this reason, and not from any sentimental attachment to democracy, the ruling class will attempt to achieve its ends by other means, starting with a government of “national unity”. This will end in a further intensification of the class struggle, a sharp polarization to the right and left and a series of unstable bourgeois governments. Before matters can be decisively settled in either a revolutionary or counterrevolutionary way, the pendulum will swing violently to the left and right. Before the ruling class resorts to open reaction, the working class will have many opportunities to take power.

Back to the Drachma?

Some on the Greek Left are advocating exit from the Euro without posing the question of the Socialist United States of Europe. “Bring back the drachma!” is their nationalist cry. But in practice, if a capitalist Greece leaves the European Monetary Union, it would inevitably mean leaving the EU as well. This would leave it with no trade agreement with Europe. To imagine that the EU would remain with its arms folded while cheap Greek products invaded its markets is completely utopian. An isolated Greek economy would immediately find itself the victim of protectionist measures, as the Swiss bank UBS pointed out:

“The idea that a seceding state would immediately have a competitive advantage through devaluing the NNC [new national currency] against the euro is not likely to hold in reality. The rest of the euro area (indeed the rest of the European Union) is unlikely to regard secession with tranquil indifference. In the event that a NNC were to depreciate 60 percent against the Euro, it seems highly plausible that the euro area would impose a 60 percent tariff (or even higher) against the exports of the seceding country. The European Commission explicitly alludes to this issue, saying that if a country was to leave the euro it would ‘compensate’ for any undue movement in the NNC.” (Global Economic Perspectives, 6 September 2011, UBS)

The UBS roughly estimates the cost for a weak country like Greece that chooses to leave the euro. It assumes that any such country leaving the euro would see its currency fall by around 60 percent against the rump euro bloc. Such an event cannot be compared to the mild adjustments of the Exchange Rate Mechanism convulsions in the 1980s or early 1990s. Instead, the more appropriate parallel probably lies in the economic implosion of Argentina a decade ago.

“The mass sovereign and corporate default would generate an increased risk premium for the cost of capital—assuming that the domestic banking system is in any way capable of providing capital. At a very conservative estimate, this would entail a 700bp risk premium surge. If the banking system is completely paralysed (again, Argentina provides some precedent, or the U.S. banking system during the collapse of the U.S. monetary union in 1932-33) then the cost of capital de facto increases an infinite amount. In the extreme paralysis of finance, capital is not available at any price.” (Global Economic Perspectives, 6 September 2011, UBS)

The Swiss bank further assumes a decline in the volume of trade of 50 percent, and the adoption of protectionist tariffs to offset the currency depreciation of the seceding state. It also assumes losses to the banks of around 60 percent (“Of course, we are also assuming a run on the banks before secession takes place.”)

“Taking all these factors into account, a seceding country would have to expect a cost of €9,500 to €11,500 per person when seceding from the euro area. It should be borne in mind that while bank recapitalization could be considered a one-off cost, the cost of higher risk premia and trade stagnation would be borne year after year. So the initial economic cost would be €9,500 to €11,500 per person, and then a cost of around €3,000 to €4,000 per person would be felt each year thereafter.”

And the bank adds: “These are conservative estimates. The economic consequences of civil disorder, break-up of the seceding country, etc, are not included in these costs.”

The Greek Revolution, in turn, must be linked to the perspectives of a European revolution. But the Lefts, and especially the Stalinists, are infected with the disease of nationalism. They imagine that the problems in Greece can be solved within the narrow confines of capitalism and within the borders of Greece by leaving the EU. This is a road to disaster. In reality, there is no future for Greek capitalism, either inside the EU or outside.

Is there a parallel with Argentina?

A re-established drachma would be worthless. The collapse of the currency would fuel inflation, wipe out savings, and cause massive unemployment. It would be a situation like 1923 in Germany, which destroyed the currency and brought about a revolutionary situation.

There would be a run on the banks, as occurred in Argentina a decade ago, when desperate people took to sleeping in front of cash points so they could withdraw money as soon as the machines were refilled. Before a default, companies and individuals withdraw as much cash as possible. In Greece, money is already flowing out, much of it to Cyprus, Switzerland and London.

In Argentina's case, defaulting on $93bn of foreign debt—the largest ever national bankruptcy—resulted in a 60 percent fall in domestic consumption as households saw their assets wiped out and inflation took hold. All imported goods, whether a BMW or a bag of rice, became unaffordable luxuries.

The banks would shut their doors. Supermarket shelves would stand empty. The rich would fill their suitcases with dollars and head for the nearest airport. Stephane Deo of UBS writes: “If a country has gone to the extreme of reversing the introduction of the euro, it is at least plausible that centrifugal forces will seek to break the country apart... monetary union break-ups are nearly always accompanied by extremes of civil disorder or civil war.”

In a national bankruptcy, lending comes to a halt and corporate life seizes up. Unemployment and poverty soar. In Argentina's case, the jobless rate came close to 25 percent. By 2003, the numbers in “extreme poverty” reached 26 percent of the population, with more than 50 percent deemed below the poverty line. The workers took over failed businesses and ran them under workers’ control. Local assemblies, which helped distribute food and organise healthcare, also sprang into being.

The economic collapse in Argentina produced a revolutionary situation, but there was no revolutionary party capable of leading it. In 2001 there was an insurrectionary situation in Argentina. President Fernando de la Rúa fled by helicopter from the roof of the Casa Rosada palace. Days later the country officially defaulted. If a genuine Bolshevik leadership had existed they could have taken power. The sizeable “Trotskyist” sects there proved utterly incapable of carrying the movement forward, and the opportunity was lost.

Up to this point, the parallels between Athens and Buenos Aires are very clear. A Greek exit from the euro would be just as painful. And there would be serious political consequences. But here the analogy ceases. Once the revolutionary opportunity was missed, the ruling class recovered its nerve and the situation was eventually reversed. Once assets in Argentina became 80 percent cheaper, foreign buyers returned. Argentina bounced back from the horrors of December 2001 faster than expected, thanks to the devalued peso.

This led to a swift recovery in exports and the country soon swung into a massive trade surplus. Economic growth rose to 8.7-9.2 percent between 2003 and 2007 and unemployment fell. This is taken as a hopeful precedent for Greece. But the comparison is misleading. The Argentine economy benefited from the world boom in capitalism and the soaring demand for its agricultural produce, such as Chinese demand for soya. But a Greek default will take place in very different circumstances: a world economic slump, contracting markets, falling demand and protectionism.

Greek capitalism would derive no benefit from the devaluation of its currency, but would suffer the dire consequences of imported inflation, hostile protectionist measures from its former EU partners, the collapse of its banking system and the drying up of credit and investment. It would mark a new and fatal twist in a downward spiral of economic, social and political crisis pregnant with revolutionary possibilities.

Threat to the EU

After dragging down Greece, Ireland, Portugal and Spain, the wolves turned their attention to Italy, which has an enormous mountain of debt, amounting to around 120 percent of the country's gross domestic product. This is the second-highest level in the EU after Greece. Moreover, Italy has €335bn of loans maturing in 2012, much more than Greece, Ireland and Portugal put together. It will need to borrow hundreds of billions, and each time it asks for a loan, investors around the world are likely to worry whether they will be repaid, given its huge public debt.

This poses a threat to the very existence of the eurozone. The European Central Bank might be able to keep Greece afloat for a period (although even this is extremely doubtful). It managed to stage a bailout for Ireland and Portugal, which has solved nothing. But there is simply not enough money in the ECB to bail out countries the size of Spain or Italy. Any attempt to do so would soon exhaust the bank’s funds.

Top EU officials have warned that the eurozone crisis could wreck the European Union. The leaders of Germany and France were forced to give more money to Greece in a bid to avoid a default that would have caused chaos. European Commissioner for Economic and Financial Affairs Olli Rehnsaid:

“Whatever way you look at it, it is absolutely certain that a default and/or exit of Greece from the eurozone would carry dramatic economic and social and political costs, not only for Greece but also for all other euro area member states and EU member states, as well as for our global partners.”

At the onset of the Greek crisis, the bourgeois consoled themselves with the idea that only the states on the edges of Europe were in trouble. But the idea of what the markets regard as the risky periphery got bigger and keeps expanding from one day to the next. European stock markets experienced new and ever steeper falls. The idea that you can isolate Greece—or Britain, or Ireland—is a foolish illusion. They are all in the same boat, and the fact that some may be first class passengers doesn’t save them if the boat starts to leak where the second class passengers are seated.

What does all this mean for the people of Ireland and Portugal? It means that all the sacrifices have been in vain. The workers and farmers of Ireland are being asked to make ever bigger sacrifices to pay the moneylenders. But, as in Greece, the continuing attacks on living standards only serve to undermine the economy. Ireland is even less able to pay its debts than previously.

When Greece defaults, the Irish and Portuguese will say “Why should we pay?” The consequences of a Greek default for the rest of Europe would therefore be extremely serious. It would trigger a chain reaction of collapsed banks in other countries. French banks are heavily exposed to Greece, but so are German banks. Austrian banks are exposed to Italy, and so on. The results would be catastrophic for Europe, and not only for Europe.

The markets have lost confidence in European banks, threatening to provoke a banking crisis not only in Spain and Italy but also in France and Belgium. The Franco-Belgian bank Dexia had to be nationalized in October to prevent collapse. This was supposed to be a “healthy” bank. In fact it came 12th out of the 90 biggest banks that underwent the famous European Banking Authority’s “stress tests” in July 2011. Shares in three French banks plummeted over concern at exposure to Greek debt. Moody's downgraded Credit Agricole and Societe Generale, and left a big question mark hanging over BNP Paribas.

The French banks are particularly exposed to Greece. The accumulated debt of France is €1.6tn (83 percent of GDP). The state debt is increasing at 7-8 percent per year, in spite of the cuts. In 2011 the deficit was €150bn. If this continues it will lead to a general collapse of finances in France as in Greece. That is what encouraged Sarkozy to say he will “do everything to save Greece.” But this kind of “aid” is like being tightly embraced by barbed wire.

The trouble is that, while everybody wants to save the euro, nobody wants to put their hands in their own pockets. It is a measure of the desperation of the leaders of Europe that they have been pleading with the BRICS grouping—Brazil, Russia, India, China and South Africa—to provide money to help solve their difficulties.

All this talk has led nowhere. Sarkozy went to China, where he was politely but firmly informed that China was not prepared to help. The reason is that they are not sure they would get their money back. In any case, they fear that their own economy may be slowing down, so they will need the money to help themselves. As is well known, charity begins at home.


German Chancellor Angela Merkel has warned that the eurozone risks a “domino effect” if it does not pull together. “The top priority is to avoid an uncontrolled insolvency, because that would not just affect Greece, and the danger that it hits everyone—or at least several countries—is very big,” she said. “I have made my position very clear that everything must be done to keep the eurozone together politically, because we would soon have a domino effect.”

These are not idle words. The crisis is spreading fast. Italy's debt stands at 120 percent of gross domestic product, and places Italy directly in the line of fire of the bond markets. Italy's borrowing costs hit a new high over debt fears. In September 2011, the interest rate on Rome's five-year government bonds rose from 4.93 percent to 5.6 percent, but soon soared to an impossible 7.5 percent. If yields remain above that level, then markets develop their own unstoppable momentum.

Italy is one of the seven leading industrial nations (G-7) and the eurozone’s third-largest economy. A crisis in Italy would have devastating effects in the whole of Europe. The trigger for the market uncertainty was the instability of the government in Rome. Deep scepticism about the country's finances is what led to the fall of Berlusconi.

Italian capitalism has dragged behind its main rivals. This weakness was partially masked by the boom, but was cruelly exposed by the global economic and financial crisis. Since the start of the crisis, Italy has only been able to manage growth of a single percentage point annually. In the first quarter of 2011, it was just 0.1 percent, well below the eurozone average of 0.8 percent, with no prospects of a recovery. Investors suddenly started asking how the government in Rome plans to ever pay off its debts.

In these conditions, Giorgio Napolitano, President of the Republic, appealed to the opposition for “national resolve.” And he quickly got what he wanted. All three opposition parties in parliament pledged not to stand in the way of the passage of a package of austerity measures. But Berlusconi’s programme was too little for the bosses and too much for the workers. The Italian parliament endorsed the Berlusconi government's 54.2 billion euro austerity package, but this was immediately followed by demonstrations and a general strike in early September.

The ruling class knew, therefore, that it could not depend on Berlusconi to defend its interests and that is why they moved against him. The President of the Republic, Giorgio Napolitano stepped in and asked Berlusconi to resign. He then appointed Mario Monti a life senator and immediately gave him the task of forming a new government. The government is made up of unelected so-called “technocrats”: bankers, lawyers and so-called technical experts. The task of such a government is to impose draconian austerity measures quickly. Initially, it enjoys the support of all the main political groupings in the Italian parliament, except for the Northern League.

The manner in which Monti was imposed on the Italian people as prime minister is an indication of how severe the crisis is. The bourgeoisie of Europe is running whole countries by imposing bankers and EU bureaucrats on them (Papadimos in Greece was an ex-ECB Vice-President), doing away temporarily with the niceties of bourgeois parliamentary democracy.

Such a government, however, cannot last for long as it lacks what many bourgeois commentators have termed “democratic legitimacy”. Once its measures become clear to the workers and youth there will be a massive backlash and the country will have to go to elections.

Under these circumstances the bourgeoisie eventually will have no alternative but to pass the poisoned chalice to the “Centre-Left”, whose ex-Communist leaders are eager to drink it to the dregs. The leaders of the “Left” in Italy behave as their equivalents in every other country. No sooner does the ruling class lift its little finger than they fall over themselves in their haste to demonstrate to the capitalists that they are “responsible statesmen” who can be relied upon to hold high office. This shameful conduct may convince the ruling class that the “Left” can safely be entrusted with the administration of capitalism, but the working class will pay a heavy price for this “responsibility”.

Economists have repeatedly stressed that “Italy isn't Greece or Portugal,” and “Italy's economic fundamentals aren't that bad.” That may be true, but it will not convince the markets in their present state of nervousness. The Corriere della Sera appealed for calm: “It doesn't help to get excited about international speculators. If we conduct ourselves seriously then we have nothing to fear. Unfortunately we have not been serious up until now. For that, the markets are paying.”

The question is: exactly how are Italians supposed to demonstrate their “seriousness” to the markets? The answer is provided by Greece: only through massive cuts in living standards. The present mood of sullen acquiescence will turn into fury. The scenes we have witnessed in Greece will be replicated in Italy, despite all the efforts of the leaders to avoid it.

Germany and the euro

Twenty years ago, after the collapse of the U.S.SR, the German ruling class had big ambitions. Their idea was that a unified Germany could dominate Europe, achieving by its economic muscle what Hitler failed to do by military means. Over the past two decades, France has been increasingly pushed into second place and Germany now rules the roost in Europe.

These ambitions of the German ruling class have blown up in its face. The economic destiny of Germany is now indissolubly linked to a Europe that resembles a hospital ward for the terminally sick. The idea of a closer European Union appealed to those sections of the German ruling class that still entertain delusions of grandeur. But the past 20 years have also convinced Germany that such ambitions can come with a very hefty price tag. This contradiction has been exposed by the recent debate on the possible creation of “Eurobonds”.

Germany has a lower level of debt relative to other European countries. In the last decades, the German capitalists have been relentlessly squeezing the workers. In 1997-2010, hourly productivity in German manufacturing went up by 10 percent, while wages were cut by about the same amount. The overall effect has been to cut unit labour costs by 25 percent relative to the countries in the European periphery (PIIGS). Although German workers earn more than most other European workers, the rate of exploitation is higher. This is the secret of German competitiveness. The problem is that in the end you need to sell the goods somewhere.

During the boom period, Greece – and the rest of Europe – was buying German goods—with German credit. This was a consumer boom, and also a banking boom. The Germans loaned lots of money and made lots of money from the interest. But all this has a limit.

The strength of Germany is more apparent than real. The destiny of the German economy depends on what happens in the rest of Europe. If the euro goes down, it would have a devastating effect on Germany. Germany is expected to carry the whole of Europe on its back, but its shoulders are too narrow to bear such a weight. The Germans are attempting to prevent a Greek default, not out of altruism, but in order to save the German banks. They hope to stop the rot from spreading to other countries. German banks hold €17 billion in Greek debt, but have €116 billion in exposure to Italian debt.

Germany had to prop Greece up. They simply had no choice. However, Germany cannot afford a Spanish or Italian default. But neither can they afford to bail these countries out. The realization is gradually dawning in Berlin that the rapid spread of the economic crisis threatens to drag Germany down. They failed to solve the Greek crisis by a huge injection of cash. And there is not enough money in the Bundesbank to underwrite the debts of Spain and Italy.

That is why the idea of “eurobonds” is opposed by Germany, who would have to foot the bill. It would also require a new round of EU treaty negotiations. This would be a most painful experience, which, far from leading to a united Europe, would expose all the underlying contradictions and frictions between the different nation states. Instead of creating a united Europe, it could actually hasten the breakup of the EU.

When Greece goes, the question is immediately posed of the contagion spreading to other countries. Ireland, Portugal, Spain and Italy will fall like dominoes. Banks will collapse, starting with the Greek and Cypriot banks, and then proceeding to the UK and U.S. financial system, both of which are unsound. An economic collapse in Europe would send a Tsunami racing across the Atlantic, putting pressure on the dollar and threatening to undermine the unstable financial set-up in the USA.

Europe and America

Fallen capital -  Illustration: LatuffFallen capital - Illustration: LatuffThat is why the USA is following the unfolding crisis on the other side of the Atlantic with growing concern. It is urging the Europeans to put their house in order, but it conveniently overlooks the mess in its own house. It is suffering from “deficit attention disorder”, together with a growth crisis, high unemployment and a deep political crisis.

The Americans are desperately calling on Germany to “do more” to pull Europe out of crisis. The Germans must cut taxes; they must boost the economy; they must send more money to Greece; they must lead a coordinated fiscal stimulus across northern Europe. Germany must do this and Germany must do that. But who are the Americans to tell the Germans what to do?

U.S. Treasury Secretary Timothy Geithner warned that the failure of the EU to solve the Greek crisis represented a serious threat to the global economy. In an unusual move, Geithner attended the talks between European Union finance ministers and central bankers in Poland, where he lectured them as a headmaster would lecture little children. Afterwards he said that European states “now recognize they are going to have to do more” to resolve the crisis.

Yes, say the Europeans, but who pays for all this? To this question there can only be one answer: France and Germany, or more correctly, Germany, which is Europe’s banker of last resort. Those who have talked big about a Marshall Plan for Greece are now politely requested to put their money where their mouths are. But this is easier said than done. It immediately raises political problems that cannot easily be overcome.

The analogy with the 1948 Marshall Plan is misplaced. After the Second World War, the USA saved European capitalism with a big injection of capital through the Marshall Plan. But now conditions are very different. In 1945 the U.S. had two-thirds of the world’s gold in Fort Knox, and therefore the dollar was “as good as gold”. Then the U.S. was the world’s biggest creditor nation; now it is the world’s biggest debtor. Far from rushing to the aid of Europe, Obama is pleading with the Europeans to sort out their problems, or else the fragile economic recovery in the USA will be placed in grave jeopardy.

Above all, when the Marshall Plan was implemented, the world capitalist economy was entering into a phase of upswing that lasted almost three decades. None of these factors exist now. Germany is the leading power in Europe but it does not possess the virtually unlimited economic reserves that the USA enjoyed in 1945. Although it is a powerful economy, it is not strong enough to bear the weight of the accumulated deficits of Greece, Ireland, Portugal, Spain, Italy and the rest. Most importantly, Europe and the world are not on the verge of a long period of upswing but, on the contrary, on the eve of a new recession and a prolonged period of economic difficulties and austerity.


The USA itself came close to defaulting on its $14.3 trillion public debt in August 2011, when the Obama administration patched up a last-minute deal to raise the debt ceiling. The crisis caused an open and bitter split between the Republicans and Democrats, who represent different layers of the capitalist class.

Until recently, nobody mentioned the huge debts of the USA. But now that has changed, since the rating agency Standard & Poor's announced in August 2011 that it was downgrading the U.S. credit rating to AA+ from its top rank of AAA. Moody's said it was also considering cutting the U.S.’ AAA debt rating, citing the rising possibility that the U.S. could default on its debt obligations.

The U.S. government currently runs a $1.5 trillion budget deficit, requiring it to issue debt in the form of treasury bills, bonds and other securities. The overall public debt of $14.3 trillion is a sharp increase from the $10.6 trillion when Mr. Obama took office in January 2009. Most is held by the public, with the rest held in U.S. government accounts.

This was not the first time that Congress has voted to raise the debt ceiling, giving government access to the cash it needed. It has voted to raise the U.S. debt limit 10 times since 2001. Since May, the U.S. federal government has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating. U.S. Federal Reserve chief Ben Bernanke has said a default would cause a “major crisis”. This is an understatement. A U.S. default would be the scenario for Armageddon in the world money markets.

Although both bourgeois parties defend the interests of the capitalist class, they had different ideas on how to go about this defence. The Republican Party wanted deep cuts. Obama was prepared to accept cuts but wanted to appease the working class by increasing some taxes on the rich. But this is anathema to the Republicans in Congress, who were under the pressure of the Tea Party fanatics who want no taxes at all. In the end they were forced to reach a deal by raising the debt ceiling, as they have done previously. But the vote was tied to over $1 trillion in automatic cuts that have now been triggered by the failure of the so-called “Super Committee” to agree on even steeper cuts.

Up until now, the dollar has held up because it is seen as a “safe” haven for money in a time of global financial and monetary instability. But if the U.S. deficit persists, confidence in the value of the dollar will fall, bringing a sell-off of dollars and a sharp fall of its value. The Federal Reserve believes the odds of a U.S. recession in 2012 are more than 50/50. According to Fed economist Travis Berge, “Prudence suggests that the fragile state of the U.S. economy would not easily withstand turbulence coming across the Atlantic. A European sovereign debt default may well sink the United States back into recession.” It is for this reason that the Americans are so concerned about Greece and the future of the euro. Thus far the attention of the money markets has been concentrated on Europe. But a collapse of the euro would immediately throw into relief the real weakness of the dollar.

From Wisconsin to Wall Street

The economic crisis falls with special force on the USA, and will have its most dramatic effect there. There has been very little hiring in the so-called recovery. In fact, there have been fewer jobs created than are needed just to keep up with population growth, let alone to make up for the over 8 million that were lost at the height of the crisis. During the 3rd quarter of 2011, there were 1,226 extended mass layoff events, involving 184,493 worker firings. And that’s considered an improvement on the recent past.

What economic growth there has been has come through an increase in exploitation of the existing workforce. The extraction of both absolute and relative surplus value has increased in the recent period. In other words, fewer workers are working longer and harder for less pay. That leads to GDP growth and more profits. But it does not lead to jobs. The official unemployment rate is 9 percent, but the real figure is likely twice that. Millions are no longer even counted as they are no longer looking for work. There are five unemployed U.S. citizens looking for each job vacancy. That does not include those who have given up the search for employment. 14 percent now rely on food stamps and U.S. poverty is at record levels.

At the same time the Fortune 500 List shows that in 2010, profits for the Fortune 500 grew by 81 percent. These 500 companies and their subsidiaries generated nearly $10.8 trillion in total revenues, up 10.5 percent from 2009. This is out of a total GDP of $14.7 trillion. That means that these 500 companies along generated 73.5 percent of the total U.S. GDP. This is how concentrated wealth is in America. Just the top 10 companies in the Fortune 500 employ over 4 million workers.

All this explains the collapse of support for Obama and the Democrats in the midterm elections. There is growing discontent and it is finding a voice and a practical expression. The mass protests in Wisconsin showed that something is changing in the USA. These were unusual because normally, people just protest for a day and then go home. But inspired by the Egyptian events, the protests grew to massive proportions, with tens of thousands on the streets of Madison, backed by fire-fighters and policemen protesting in solidarity, many of the latter with “cops for labor” inscribed on their backs.

Among the slogans shouted were: “Fight like an Egyptian!” and “From Cairo to Madison, Workers Unite!” In October 2010, he AFL-CIO organised a labour march on Washington DC. This was the first nationwide labour demonstration since 1981. The union leaders wanted to turn it into a pro-Democrat rally but that found no echo among the workers.

Subsequently, the USA was rocked by demonstrations “against corporate greed”. These protests, organized by the spontaneously-created Occupy Wall Street movement, are beginning to cause concern in the ranks of the bourgeoisie. The New York Times Sunday Review carried an editorial (8 October, 2011), which is worth quoting at length:

“At this point, protest is the message: income inequality is grinding down that middle class, increasing the ranks of the poor, and threatening to create a permanent underclass of able, willing but jobless people. On one level, the protesters, most of them young, are giving voice to a generation of lost opportunity. (...)

“The protests, though, are more than a youth uprising. The protesters’ own problems are only one illustration of the ways in which the economy is not working for most Americans. They are exactly right when they say that the financial sector, with regulators and elected officials in collusion, inflated and profited from a credit bubble that burst, costing millions of Americans their jobs, incomes, savings and home equity. As the bad times have endured, Americans have also lost their belief in redress and recovery.

“The initial outrage has been compounded by bailouts and by elected officials’ hunger for campaign cash from Wall Street, a toxic combination that has reaffirmed the economic and political power of banks and bankers, while ordinary Americans suffer.”

It is a myth that the people of the United States are naturally reactionary. Let us recall what the Bible says: “For the first shall be last and the last shall be first.” That is pure dialectics! Precisely because the American workers have been politically more backward than the European workers, they can jump over their heads.

CNBC howled that the protesters “let their freak flags fly,” and are “aligned with Lenin.” Unfortunately, this judgment is a little premature. The protesters—at least most of them—are not yet aligned with Lenin. But they are learning from experience. And a few blows from a policeman’s club teach them more about the precise nature of the capitalist state than a reading of State and Revolution.

While the American workers do not have a mass labour party, they also do not carry the weight of a reformist leadership which uses its authority to hold back the workers, as is the case in Europe and elsewhere. They are fresh and lack the reformist and Stalinist prejudices of the European workers. The American workers can therefore develop very quickly once they start to move.

This can already be seen in the Occupy movement. The brutal police repression with which the movement in Oakland was met also shows how frightened the U.S. ruling class is of the revolutionary potential of such a movement. An indication of what can come was seen in the call for the general strike in response to the brutal police repression, an extremely positive step in the right direction, showing an instinctive awareness on the part of the youth of the need to link up with organised Labour. This was the first time for 70 years that the idea of a city-wide general strike was discussed openly by sections of the trade union movement in the United States.

The Occupy movement is in fact just the tip of the iceberg of a much more widespread current of opposition. The defeat of the anti-trade union law through a referendum in Ohio in November 2011 was another indication of this. The vote of 61 percent to reject the legislation represented a major victory for organized labour, which harnessed its significant resources to help achieve the result. This shows the real mood developing among U.S. workers.

It was Marx and Engels who raised the perspective of a labour party to break the workers from the parties of the bourgeoisie. The creation of such a party will be a historic event in the United States. Even if founded on a reformist programme, it will be a magnet that will immediately attract unionized and non-unionized workers, the youth, blacks, Latinos, women, and the unemployed. Under the conditions of social crisis, an American labour party can move sharply to the left, developing rapidly in the direction of centrism.

Wherever the capitalists look they can find no solution. The illusion that Asia could save them is fast evaporating. They are waking up to the fact that Asia, despite its colossal productive potential, cannot make up for the loss of demand and production in Europe and the USA. This is highlighted by the case of Japan, which has gone from being a model of growth to a country plagued by long-term stagnation, rising unemployment and growing social contradictions.


capitalism-in-chinaIn the 1990s, Japanese governments introduced a series of stimulus programmes and were also forced to implement a number of bank bailouts such as the $500 billion bank bailout in 1998. Thus, from having a budget surplus in 1991, the country ended up with a deficit of 4.3 percent by 1996 and 10 percent by 1998. In 1995, its debt to GDP ratio stood at 90 percent. Today it has a 225 percent GDP debt level, and its economy was severely hit by the earthquake, although it was already slowing down even before that.

Japan has gone from the average annual growth rate of 10 percent of the 1960s to the 5 percent of the 1970s and 1980s, finally ending up with near zero growth after the 1997 crisis. In the same period the general level of unemployment has gone up from 1.5 percent (1960-75) to 2.5 percent (1975-90) to today’s level of 5 percent. However, for the youth the situation is far worse. Unemployment for 15-24 year olds jumped to 10.5 percent in 2010.

There has also been a high degree of casualisation in the labour market in Japan. Over 40 percent of the country's workforce is now part-time only. Many workers are now employed on short-term contracts. Gone are the days of jobs for life, which was a key element that allowed for social and political stability for such a long time.

As a consequence, political conclusions are beginning to be drawn, particularly by the youth. This is leading to growing youth protests and a greater interest in left-wing literature. A manga comic book based on Marx’s Capital was a best-seller. And the 400,000-plus-strong Communist Party has been attracting thousands of young people to its ranks.


In the past, China provided relief to a world economy facing stagnation and slump. China can no longer do this. The Chinese economy, although still maintaining high levels of growth, is showing signs of faltering. This has serious social and political implications. Marxists understand that the rapid growth of the Chinese economy in the last period enormously strengthened the working class. The Chinese ruling clique avoided a social explosion because the constant growth of the productive forces gave people hope of future improvement. But now all the contradictions are coming to the surface.

After a long period of very rapid growth, China shows signs of slowing down. For three straight quarters (January through to September 2011), year-on-year growth slowed, as the government, concerned about rising levels of inflation, restricted lending and raised interest rates. The problem arises from the fact that U.S. and European demand for Chinese goods has weakened.

The main problem is that the fast-growing economies of Asia have to sell their goods on the world market. China still has a relatively high rate of growth. Its industries are still churning out a mass of cheap commodities. But China must export to continue to produce. Where is the market for these commodities if the economies of the USA and Europe are in a slump?

As John W. Schoen, Senior Producer at the new site commented in September 2011:

“Policymakers in China, the world’s third largest economy behind the U.S. and EU, face their own set of tough choices. Rapid growth rate has fuelled inflation that is running at a double-digit rate, according to analysts -- much higher than official targets. To contain inflation, Beijing has raised interest rates five times and lifted banks' reserve requirements nine times since October [2010]. If it clamps down too hard, though, a deeper economic slowdown could reverse China's efforts to lift hundreds of millions of people out of poverty.

“China is also coping with a banking hangover of its own, after years of massive government lending for expansion of state-owned enterprises and infrastructure upgrades. Recession's second act would be worse than the firstsecond act would be worse than the first, , By John W. Schoen, Senior Producer, September 22, 2011]

The Chinese authorities revealed they had not understood the full extent of the crisis that broke out in 2008 in the advanced capitalist countries. They saw it as a recession that would soon be over and they implemented polices accordingly. In 2008, the US$586 billion stimulus package was introduced with the aim of keeping buoyant the Chinese economy, creating greater internal demand as export markets shrank. This, however, came at a price, with a significant increase in central government public debt. Chinese public debt grew very slowly in the past, from zero percent of GDP in 1978 to around 7 percent by 1997, to just under 20 percent in 2003. But as a consequence of the public spending in the face of the world crisis of capitalism, it shot up to 37 percent in 2010.

As The Global Post reported (July 8, 2011):

“China's banks have been engaging in risky ‘off balance sheet’ lending somewhat reminiscent of Enron’s shenanigans. Last week, Beijing released a national audit revealing that local governments owe an estimated $1.65 trillion in outstanding loans. This week, Moody’s has indicated that the problem is significantly worse, by as much as $540 billion. And that's only local government debt. It doesn’t include the central government’s huge obligations, or those of banks that are essentially guaranteed by Beijing. Even for a miracle economy like China's, that’s a lot of debt.”

In the same article, Victor Shih, a U.S.-based expert on China’s economy, in answering the question “How much debt does China have?”,explained the following:

“That depends on what you include. Large sectors of the Chinese economy are owned by the government. The debt of these state-owned enterprises is what’s called a ‘contingent liability’ — ultimately it’s the responsibility of the government. If you count all of these liabilities, then you get to an extremely high number, something like 150 percent of the Chinese gross domestic product, or more.

“A more restricted definition is debt that’s owed by either the central or local governments. That is about 80 percent of China's GDP.”

Whichever way one looks at it, in massively increasing public spending, China has upped its level of public debt significantly. For now it has provided stimulus and allowed the economy to maintain high levels of growth. But this cannot go on forever. China’s debt is still low compared to that of countries like Japan, the USA and many European countries, but it is going up. So long as China’s economy keeps growing it can finance this level of debt, but if there is any significant slowdown then all the contradictions of the situation will come to the surface.

Apart from the future financial crisis that all this will provoke in China, there is also the fact that the growth of the economy has generated huge and rising inequality: “communist” China is one of the most unequal countries on earth. A small number have become very rich but the conditions of millions of workers resemble those of Britain in the times of Charles Dickens. This has given rise to unbearable tensions, reflected in a rise of suicides of young workers, strikes and peasant disturbances.

High rates of growth should not be regarded as a guarantee for social stability. Egypt grew at an average of 5.5 percent since 2003, and in some years the rate of growth was over 7 percent. This rapid growth coincided with the biggest strike wave since World War II and it ended in revolution. There are lessons here for China in the future. The authorities are worried. During the Egyptian revolution, Chinese censors scrubbed “Egypt” from the search engines. China has invested in creating a huge internet police that monitors what people are doing online.

They think that if you can stop people from finding out about revolutions in other countries, they can stop people drawing revolutionary conclusions about the situation in China. But the point is that what will lead to revolutionary upsurges in China are the living conditions of Chinese workers and peasants. And no amount of internet police can hide that from the Chinese people.

Inflation stands above 6 percent, which is high enough in itself, but food price inflation exceeds 13 percent. The purchase of foodstuffs accounts for more than one-third of the monthly spending of the average Chinese consumer. High inflation has persisted despite the government measures. Measures like restricting the amount of money banks can lend and hiking interest rates five times since October 2010 have not had the desired effect.

A totalitarian regime resembles a pressure cooker with the safety valve clamped down. It can explode suddenly, without warning. Although it is difficult to get accurate information, the published reports, which understate the real position, suggest that unrest in China has become increasingly frequent. Every year China experiences tens of thousands of strikes, peasant protests and other public disturbances, often linked to anger over official corruption, government abuses and the illegal seizure of land for development.

Food prices are of particular concern to the Chinese government, as they directly affect the lives of millions of workers and peasants in the country. The “Communist” Party leaders fear this could cause social unrest as workers suffer the consequences of the price rises. Sharp clashes will inevitably emerge between the ruling economic and political strata and the masses.

The crisis of the global economy has led to falling profits and investments, a situation that is aggravated by a drying up of credit. This forces many factories to resort to seek unofficial credit at usurious rates of interest. They face a choice of paying these rates or cutting wages. The result is pay cuts or even failure to pay any wages at all.

In November 2011, Guangdong’s acting governor said the province’s exports dropped 9 percent in October from the previous month. Provincial leaders are also contending with widespread protests by farmers over land seizures. Factories are cutting the overtime that workers depend on to supplement their low basic salaries. There have been strikes and demonstrations in car, footwear and computer factories in Shenzhen and Dongguan, two leading export centres in southern Guangdong province.

The Chinese Academy of Social Sciences has estimated that there were more than 90,000 “mass incidents” in 2006, with further increases in the following two years. The ruling class is preparing for unrest on a far bigger scale. China increased its domestic security budget by 13.8 percent in 2011, to 624.4bn yuan (£59bn). For the first time in its history China now spends more on the maintenance of internal order than on defence.

This indicates that they are well aware of the danger that these widespread grievances will eventually burst out in an explosion like that which swept away the regimes in Tunisia and Egypt. Explosive developments in China can occur when they are least expected. We must be prepared.


India SlumsThe total population in India was last reported at 1,210.2 million people in 2010, up from 434.9 million in 1960, increasing by 178 percent during the last 50 years. India has 17.54 percent of the world’s total population, which means that one person in every 6 people on the planet is a resident of India. Together with China, it is destined to play a decisive role in the future of Asia and the world.

India, like Brazil and China, achieved high rates of growth thanks to the boom in world trade. But this did not solve any of the problems of Indian society. It has led to a big increase in inequality, with the privileged elite enriching itself, while the masses remain sunk in a sea of appalling misery.

In the last decade, roughly 159 million have been added to the working age population, but only 65 million got employment of any type whatsoever. The per capita production and consumption of food has been declining over the medium term, and malnutrition in a large section of the population is at levels comparable to sub-Saharan Africa. Nearly half of all children under five suffer from moderate to severe malnutrition; a third of adults suffer from chronic energy deficiency. A new measure of “multidimensional poverty” (which takes into account deprivations of nutrition, child mortality, schooling, enrolment, electricity, sanitation, drinking water, flooring, cooking fuel, and assets) finds that there are more poor people in just eight states of India than in all of sub-Saharan Africa.

Such is the scene after two decades of “economic reforms”, which were trumpeted as modernising India and turning it into a “tiger” economy. As a result of 20 years of the complete opening up of the economy to imperialist penetration, today 100 of India’s richest people own assets worth one-fourth of the country’s GDP, while more than 80 percent of the people live on less than 50 cents a day. Over 250,000 farmers, driven into desperation by a vicious spiral of poverty and debt, have committed suicide. This obscene inequality is what the free marketers describe as “progress”. And now the world crisis has begun to affect India.

The rupee has fallen to a record low. It declined by 15 percent in the second half of 2011, and the decline shows no sign of halting. The rupee’s fall is raising costs of importing materials, components and machinery for Indian companies. A further drop will lead to increased inflation, especially in fuel, 80 percent of which is imported. The Reserve Bank of India (RBI) raised interest rates 12 times since March 2010 from 4.75 percent to over 8 percent. Inflation in July 2011 was 9.22 percent, which was well above the RBI’s target rate of 4 percent to 4.5 percent. Food prices are rising even faster. The bottom 40 percent of India spends 65 percent of their income on food. With food prices growing as they are, many will be faced with malnutrition or even starvation.

A combination of falling world demand, increasing inflation and higher interest rates will prove fatal to India’s much-vaunted economic expansion. This will be reflected in a rise in unemployment and falling living standards. Millions of people will be condemned to unemployment, underemployment, selling goods on the streets or simple starvation.

There has been a wave of worker unrest in many parts of India, such as the strike of workers at the Comstar Automotive Technologies plant in Maraimalai Nagar in Tamil Nadu, the strike of 2,500 workers of the German engineering conglomerate Bosch in Mumbai, and the wildcat strike of workers at the port of Chennai to protest the death of a colleague in a dockside accident. Workers achieved an important victory after a two-week long and bitter strike at the Maruti Suzuki plant in Manesar over trade union recognition.

The existing parties offer no solution. There will be state elections in 2012 in Uttar Pradesh, Gujarat, Punjab, Manipur, Uttarakhand and Goa. The Congress government is faced with defeat, but the BJP is also unpopular. The CPs, in the eyes of many workers and youth, have been discredited by their reformist and class-collaboration policies.

The desperation of the masses is shown by the spread of the Maoist insurgency, which is now active in many states. In 2010, there were several major attacks by Maoists, including a train derailment that killed over 150 civilians, another attack that killed 26 policemen and dozens of other attacks that killed scores of security forces and civilians. Maoist attacks continued in 2011, including the dismemberment of 10 police officials in Chhattisgarh state. Despite the military clampdown, the arrests, tortures and massacres, there has been no progress in preventing Maoist attacks.

India is not the only Asian economy to experience a slowdown in growth. Eight of the 10 most-traded Asian currencies declined in 2011, reflecting the area’s heavy dependence on exports to the U.S. and Europe. The perspective is one of slower growth, rising unemployment, falling living standards and heightened class struggle in every country in Asia.


The News - picture from article on rawlakot protestThe News - picture from article on rawlakot protest - click to enlargeAfter more than six decades of formal independence the rotten Pakistani bourgeoisie has shown its complete inability to play a progressive role. The position of Pakistan is far worse than India’s. It is an unmitigated disaster.

According to sources in the Ministry of Finance, during the first quarter (July-September) of the current fiscal year, 2011-2012, foreign investment from the developed countries dropped by a massive 83 percent and the country only received foreign investment of $50.1 million. In numerical terms, this figure denotes a drop of $241.8 million.

Pakistan’s international trade gap increased by 31.38 percent in the first four months of 2011 over the previous year, owing to the highest-ever increase in imports and a fall in export earnings.As a result, the trade deficit reached $6.871 billion in July-October 2011, from $5.230 billion over the corresponding period in 2010. The current account deficit also widened to $1.209 billion in the July-September period of 2011, as against $597 million over the same period in 2010.

The country's total debt is 66.4 percent of GDP. According to the figures released by the Central Bank, Pakistan’s total debt liabilities in the 2010-11 fiscal year (FY11)—which includes domestic, external, and the debt of public sector enterprises (PSEs)—stood at a staggering 12 trillion rupees or U.S.$139.5 billion.

According to official figures the projected population for 2015 is 191 million, up from the current figure of approximately 170 million, making Pakistan the sixth most populous nation on earth. Every Pakistani man, woman and child is indebted to the tune of Rs61,000 while the Government of Pakistan (GOP) continues to borrow heavily. Soon Pakistan will not be able to service its $60 billion external debt. In order to avoid immediate bankruptcy, Islamabad will have to resort to printing money, which will lead to further inflation.

According to the 2011 Legatum Prosperity Index, Ethiopia, Zimbabwe and the Central African Republic are the only three countries worse off than Pakistan. Their “Safety & Security Sub-Index” points out that Sudan is the only country worse off than Pakistan. Their “Education Sub-Index” shows that the Central African Republic, Mali, Sudan, Ethiopia and Nigeria are the only five countries worse off than Pakistan. According to the 2011 Failed State Index, even countries like Rwanda, Burundi, Ethiopia and Burma are now better off than Pakistan.

Four out of every 10 Pakistanis have fallen below the poverty line: an estimated 47.1 million Pakistanis are living in extreme poverty. Over the past three years, an average of 25,000 Pakistanis per day—every single day of the past three years—has fallen into extreme poverty.

Malnutrition rates are high and ominously climbing, and are often linked to 50 percent of infant and child deaths; there is one doctor—of unknown credentials—for every 1,183 people. Pakistan’s literacy rate stands at 57 percent, which, despite official exaggerations, is amongst the lowest in the world. Pakistan is ranked 142 out of a 163 country index when it comes to the percentage of its budget allocated to education.

Washington needs the support of Islamabad for its war in Afghanistan. But it does not trust the leaders of Pakistan—neither the political or military ones. It has pushed the Pakistan army into a bloody war in the border areas, which have never been under the control of the Islamabad government. It sends its unarmed drones to bomb the tribal areas inside Pakistan, and kills many civilians who have nothing to do with the terrorists. It did not inform the Pakistani government or army of the raid that killed Bin Laden. In short, it treats Pakistan and its government with the same imperialist arrogance that the British displayed in the days of the Raj.

The fatal involvement of Pakistan in Afghanistan has served to destroy whatever semblance of political stability existed before. The state is deeply fractured and undermined by corruption, drug dealing and internecine conflicts between different sections of the army and the ISI. The murder of Bin Laden by the Americans on Pakistan territory brought all these simmering conflicts to the surface immediately.

Zardari is an obedient stooge of the Americans, but he is obliged to walk a very shaky tightrope to stay in power. The PPP government, corrupt and venal, is extremely unstable. Zardari is trying to balance between the different elements in the state apparatus and U.S. imperialism. It is hated by the masses, but they can see no alternative. The military, which in the past would have intervened, are divided and afraid to take power under these circumstances. This peculiar combination of circumstances is the reason why the present situation has been prolonged. How long it can continue is another matter.

The extreme social instability reflects a huge growth of discontent, which is seething beneath the surface. This presents big opportunities for the Marxist tendency, which, despite all the frightful objective difficulties is growing steadily in numbers and influence. The situation is extremely explosive and can change very suddenly. A new edition of 1968 is implicit in the whole situation. This will present our organization with big challenges but also huge opportunities.


Ten years of American occupation in Afghanistan have achieved nothing, except to destabilize the entire region. And what has it achieved? The real intention was to make South-Central Asia an American sphere of influence. Instead, they have created a chaotic situation not just in Afghanistan, but also in Pakistan.

Hamid KarzaiHamid KarzaiThis has sucked in all the neighbouring states: Pakistan, India, China, Russia and Iran. All are intriguing, manoeuvring and jockeying to take over when the Americans leave. In his recent pronouncements on the war, President Obama, in a phrase frequently heard around Washington, was presenting Afghanistan as a victory. In practice, the USA is bogged down in a conflict that they cannot win.

Once the U.S. has completed its fall-back in Afghanistan, Washington hopes that some semblance of military and economic equilibrium can be restored, so that progress toward a political solution can be made. But this is a Utopian dream.

On 1 November 2011, President Hamid Karzai thanked General Stanley McChrystal, the U.S. former commander of NATO troops in Afghanistan, for a mission he called sincere and courageous and for all his efforts and services during his command. Karzai knows that once the U.S. army leaves his days are numbered. But at the same time as he tries to ingratiate himself with the Americans, he is also secretly engaged in negotiations with the Taliban and the Iranians. This shows the completely unviable nature of the situation.

Although the USA will be forced to leave Afghanistan with its tail between its legs, they will have to retain sufficient military force to prop up the Kabul regime and prevent a new Taliban takeover. They will also want to retain their ability to strike at terrorist bases on either side of the Durand Line. This is a recipe for further instability in both Afghanistan and Pakistan. Events in Pakistan and India will in turn affect the situation in Afghanistan. These countries are now completely interdependent.

The whole of Central Asia has been destabilized by the fall of the Soviet Union and the interference of the USA in Afghanistan. The colossal turbulence in the region was shown by the popular uprising in Turkmenistan and above all the strike wave in Kazakhstan, which shows the revolutionary potential of the proletariat even in the most difficult conditions. Above all, the fate of the whole region will be determined on the perspective of revolution in Iran and China.

The revolutionary movement of the Arab masses naturally had a large impact in sub-Saharan Africa, stirring up the masses that for decades have been forced to live in the most desperate conditions. Immediately after the beginning of the Arab Spring, eruptions of mass discontent were seen in many sub-Saharan countries, especially in Burkina Faso, Senegal, Malawi, Zambia and Swaziland, but minor eruptions occurred in all African countries, and in general the level of tension between the masses and their rulers has significantly increased.


Three countries can be marked out as being of key strategic importance in Africa: Egypt, Nigeria and South Africa. That is because they have sizeable populations and relatively developed economies with an important proletariat. Egypt is dealt with elsewhere in this document, under the Arab Revolution below, so we will touch on Nigeria and South Africa, to highlight the general processes taking place.

In Nigeria, which with its 170 million inhabitants is the most populated country in Africa, the social contradictions are glaring. Although the Nigerian economy has been officially growing at over 6% for the past five years, the poverty rate keeps increasing and youth unemployment has risen to an unprecedented 47%. This is a recipe for class struggle. The Nigerian workers have moved again and again in many general strikes and mass demonstrations. The main problem has been the lack of a political leadership to carry the struggles further.

In recent years the pressure to create a political party of the masses pushed some elements within the trade union bureaucracy to set up the Nigerian Labour Party. But the leaders of the trade unions, being afraid that they would not be able to control the development of such a party, have not put their full weight in mobilising for it. Thus the Labour Party, although it has great potential, is still a very small organisation that does not play a significant role nationally. The organisation that the mass of workers look to continues to be the Nigerian Labour Congress, the main trade union federation in the country.

This was evident in the mass movement that erupted in January, sparked off by the government’s plan to remove the subsidy on fuel. This movement, which led to a 5-day general strike, was very different to past protest movements. The rallies saw hundreds of thousands of protestors taking to the streets, accompanied with the election of neighbourhood committees in some areas, which indicates that the masses were trying to take their destiny into their own hands. Also, given the political vacuum on the left, with the Labour Party reduced to a mere bargaining tool in the hands of a few bourgeois elements, the JAF (Joint Action Front) and LASCO have assumed greater importance for the most advanced workers and youth. This indicates that a process of radicalisation is taking place, as in all countries across the globe. What we witnessed in January can be considered as the first shots of the Nigerian Revolution. What is evident is that the Nigerian workers were inspired by the movements in the Arab countries, and in the present conditions the calling off of the general strike will not be the end of the movement, and renewed outbursts of class struggle are inevitable in the coming period.

Although important developments have taken place all over Africa, the key to the continent remains South Africa, by far the most developed industrial power. Sixteen years after the downfall of the apartheid regime, the South African masses are yet to see real change in their lives. Although South Africa by many accounts has immense mineral resources, 31% of the population of working age is unemployed. Among the youth the unemployment rate exceeds 70 percent and about a quarter of the population lives on less than $1.25 pr. day.

In these conditions the South African masses are becoming more radicalised by the day. In 2010 1.3 million civil sector workers went on strike and hundreds of thousands more were ready to join in. This trend of massive strikes continued in the summer of 2011 where hundreds of thousands of metalworkers and other industrial workers went on strike for several weeks. At the same time the townships of South Africa are brewing with anger and mass uprisings are witnessed on an almost monthly basis in one township or another protesting cuts and inconsistency in the delivery of basic utilities and the growing corruption that is clogging up all parts of South African society.

The pressure from below is starting to reflect itself in the tripartite alliance between the ANC, SACP and COSATU. In the last years a divide has started to develop between the parts of the alliance that are closer to the state apparatus and the parts that are closer to the workers and youth. This process has been especially reflected in the development of the ANC Youth League whose populist leader, Julius Malema has swung sharply to the left. In recent years Malema has put forward the idea of nationalising the mines in South Africa – an idea that is a part of the Freedom Charter, viewed by many as the programme of the ANC. The youth have responded enthusiastically to this call. Also the leaders of COSATU have responded in favour, but at the same time the proposal has been met with fierce resistance from the ANC and SACP leaderships who have instead suspended him from the ANC.

In June 2011 at the congress of the ANCYL, the nationalisation of the strategic sectors and the commanding heights of the economy was adopted as part of the programme of the ANCYL. This is an indication of how ripe the situation is for revolutionary socialist ideas.

In general, the capitalist system has nothing to offer the African masses except rising inflation, unemployment and the most desperate poverty levels. 50% of Africans live on less than $2.5 a day. The average poor person in sub-Saharan Africa is estimated to live on only 70 cents per day, and was poorer in 2003 than he or she was in 1973. The present crisis of capitalism is aggravating this situation and under these conditions the masses of the continent are beginning to draw conclusions and moving to the left. They will play an important role in the general movement towards revolution on a global scale.

The Arab Revolution

22 November, Tahrir Square22 November, Tahrir SquareThe Arab revolution marks a fundamental turning point in history. It shows how quickly events can develop. The revolutions in Tunisia and Egypt seemed to happen suddenly, without warning. At least, that is how it appeared to the bourgeoisie. The problem is that the so-called experts of the bourgeoisie understand nothing. The economists, politicians, and journalists foresee nothing and can explain nothing.

Bourgeois empiricism is incapable of understanding the processes that are at work at a deeper level. Only the method of dialectical materialism can provide a scientific explanation of this. Marxism explains how things can and do and will suddenly change into their opposite. Marxist theory provides us with the superiority of foresight over astonishment.

The Arabs were portrayed as passive, apathetic, backwards and submissive. But they said exactly the same about the Russians before 1917. Here racial prejudice rubs shoulders with a superficial and unscientific view of history. One finds the same kind of prejudice in some so-called Marxists who are always moaning about the so-called low level of consciousness of the masses. For such people dialectics will always remain a book sealed with seven seals.

The events in the Middle East and North Africa are not an isolated phenomenon but part of a world process. The Arab Revolution was an anticipation of what will also happen in Europe and North America. Up until now, the situation was most advanced in Latin America, but the Tunisian events changed all that.

In a matter of weeks, the Arab revolution leapt from one country to another. The impact was felt by millions of ordinary workers and youth around the world who were able to watch the revolution unfold before their very eyes. Here were dramatic and inspiring scenes of millions of people mobilizing, organizing, fighting, and prepared to face death in order to change society. For the first time in decades, the idea of revolution ceased to be a mere abstraction and took on a very concrete aspect.

This confirms everything we have said in the past about the international character of the revolution and the leading role of the working class. It also confirms the need for a revolutionary leadership in order for the revolution to succeed. As Trotsky said of the Spanish workers in the 1930s, the workers of Tunisia and Egypt could have made not one, but ten revolutions. What was missing was the revolutionary leadership. This will mean that the Arab revolution will take on a protracted and convulsive character, passing through many stages.

In Egypt and Tunisia the overthrow of Ben Ali and Mubarak was a great step forward. But it was only the first step. What is required is the overthrow of the regime itself, not just the individual who stood at its head. The demand for the confiscation of the wealth of these parasites, and of the imperialists that supported them, links democratic demands to socialist demands.

With their astonishing bravery and spirit of sacrifice, the marvellous revolutionary Egyptian proletariat brings to mind Barcelona 1936, when the workers rose spontaneously with no party, no leadership, no programme, no plan and smashed the fascists almost with their bare hands. But then, the masses never have a preconceived plan when the revolution erupts.

The Revolution has already achieved much. An important element in the equation has been the role of women—always a sure sign that the revolution has aroused the masses. It has cut across religious division and across gender, language and nationality. It unites the broadest masses in struggle.

The role of the Islamic fundamentalists and the Muslim Brotherhood in these events was deliberately exaggerated by the western media. In fact, they are pillars of the regime, used by the imperialists as a convenient bogeyman. Under the pressure of the masses the Islamist organizations have already begun to split into different factions along class lines.

To a large degree, the revolution has, and will continue to expose political Islam as nothing but a fog behind which right-wing bourgeois politics of all shades stand. However, this is not a linear process. In the absence of a truly revolutionary leadership, the movement must necessarily take a number of detours and learn through painful experience, through trial and error.

Many bourgeois elements within society have swung their weight behind Islamic liberals and conservatives, such as the Ennahda in Tunisia and the Muslim Brotherhood in Egypt. But, because there is no clear class alternative being posed, at the same time these parties and tendencies are able to attract the support of some layers of the masses. This is especially the case when the movement ebbs temporarily. In these conditions the masses come to see these parties as opposition forces untainted by the old regimes.

However, unlike the empiricist bourgeois “experts”, who do not hesitate to declare this the victory of Islamic fundamentalism in the Middle East, it would be wrong to automatically see the electoral gains or the temporary growth of the Islamic parties as a defeat for the revolution. It is merely one stage in a long drawn out process. Whoever comes to power in the context of the Arab revolution will immediately be faced with demands from the masses who want a solution to their main problems—poverty, unemployment and lack of democracy—in this world and not the next.

Therefore, the next period will see the rise and fall of many tendencies and parties. None of these parties challenges capitalism as a system. In fact, they defend the capitalist order and that is why they will not be able to address the main demands of the people and will therefore come into conflict with the masses at some stage. The workers and youth are still imbued with confidence from their victories in the spring of 2011. They will test every party that comes to power. Initially there can be a period in which they wait to see what is being offered, but inevitably these parties will be found wanting. Therefore, the rise of “Islamic” organisations does not mean the final defeat of the revolution; on the contrary, it is the preparation for future uprisings.

Stages in the revolution

A revolution is not a single event, it is a process. Every revolution goes through stages. The first stage is like a big carnival, with the masses coming to the streets with a sense of great euphoria. The masses have the feeling of “We’ve won!”

In such a situation, slogans and tactics must be concrete. They must reflect the real situation. We demand complete democracy, immediate abolition of all reactionary laws, and a Constituent Assembly. But the question is: who will call the Constituent Assembly. The Egyptian Army? But that was an integral part of the old regime. The workers and youth must continue to struggle, on streets, in factories, until all their demands are met.

The immediate demands are democratic. But that was also true in Russia in 1917. The objective tasks of the Russian Revolution were democratic: overthrow of the tsar, formal democracy, freedom from imperialism, freedom of the press, etc. But the Russian Revolution showed that the democratic demands could only be achieved by the assumption of power by the working class. That is why the democratic demands must be linked to the socialist demands.

The Bolsheviks conquered power on the basis of democratic demands: peace, bread and land—not socialist slogans. In theory you could have these under capitalism. But that time has passed already. We live in the epoch of imperialism in which the theory of permanent revolution is fully valid in explaining the inability of the bourgeoisie to carry out the left over democratic tasks. As well as this Lenin linked these transitional demands to another demand: all power to the soviets. In this way, using most advanced democratic slogans, he linked the actual level of consciousness of the masses to pose the central question of workers’ power. Similarly in Egypt we say: “You want democracy? We do too! But don’t trust the Army or the Muslim Brotherhood—let’s fight for real democracy!”

Revolutions do not develop in a straight line. We see a similar process in every revolution. In Russia, following the overthrow of the tsar in February, there was a period of reaction in July and August, followed by a new upswing of the revolution in September and October. In Spain, the overthrow of the monarchy in April 1931 was followed by the defeat of the Asturian Commune in October 1934 and the victory of reaction in the Bienio Negro (the “two black years”), which was only the prelude to a new upsurge in 1936 with the election of the Popular Front.

Given the absence of a Bolshevik leadership, it was inevitable that the Egyptian revolution would be pushed back. However, those who made the revolution realize that they have been cheated. They say: what has changed? Fundamentally, nothing. It’s like the July Days in Russia. Therefore the revolution moves into another stage, beginning with the youth, who have exclaimed “Nothing has changed!” This is an inevitable stage: part of the school of experience.

We cannot say for sure what will follow in the immediate period. Probably there will be a series of unstable bourgeois regimes. It will not be easy. The masses will have to learn through painful experience that the working class must take power or it can all end very badly. There will have to be an extended process of inner differentiation. There will be defeats, even serious ones. But in the prevailing conditions, every defeat will only be the prelude to new revolutionary upheavals.

If this had all happened 10 years ago, they might have consolidated bourgeois democratic regimes much more easily. But now there is a profound crisis: they cannot offer anything to the masses. They cannot even do it in the U.S.—how can they do it in Egypt? There will be no bread, jobs, etc.

In 1915 Lenin wrote:

“Whoever expects a ‘pure’ social revolution will never live to see it. Such a person pays lip-service to revolution without understanding what revolution is.

“The Russian Revolution of 1905 was a bourgeois-democratic revolution. It consisted of a series of battles in which all the discontented classes, groups and elements of the population participated. Among these there were masses imbued with the crudest prejudices, with the vaguest and most fantastic aims of struggle; there were small groups which accepted Japanese money, there were speculators and adventurers, etc. But objectively, the mass movement was breaking the back of tsarism and paving the way for democracy; for this reason the class-conscious workers led it.

“The socialist revolution in Europe cannot be anything other than an outburst of mass struggle on the part of all and sundry oppressed and discontented elements. Inevitably, sections of the petty bourgeoisie and of the backward workers will participate in it—without such participation, mass struggle is impossible, without it no revolution is possible—and just as inevitably will they bring into the movement their prejudices, their reactionary fantasies, their weaknesses and errors. But objectively they will attack capital, and the class-conscious vanguard of the revolution, the advanced proletariat, expressing this objective truth of a variegated and discordant, motley and outwardly fragmented, mass struggle, will be able to unite and direct it, capture power, seize the banks, expropriate the trusts which all hate (though for difficult reasons!), and introduce other dictatorial measures which in their totality will amount to the overthrow of the bourgeoisie and the victory of socialism, which, however, will by no means immediately ‘purge’ itself of petty-bourgeois slag.”

These lines are perfectly applicable to the Arab Revolution today.


Banner opposing foreign intervention, Benghazi, last yearBanner opposing foreign intervention, Benghazi, last yearThe Left has displayed enormous confusion over the events in Libya. On the one hand, some people capitulated to imperialism to the extent of supporting the military intervention of NATO. This was both naive and reactionary. To allow one’s judgment to be clouded by the hypocritical chorus of the hired media and to swallow the lies about a so-called “humanitarian” intervention to “protect civilians” was stupid in the extreme.

However, the other tendency on the Left was no better. They went to the other extreme and backed Gaddafi, who they painted in rosy colours as a “progressive”, “anti-imperialist” and even a “socialist”. None of this was true. It is true that the Libyan regime (and also the Syrian regime) had a different character to the regimes of Tunisia and Egypt. But that did not fundamentally change its oppressive nature, or qualify it as genuinely anti-imperialist.

The Gaddafi regime had a very peculiar character. Initially, Gaddafi had a mass base as a result of his anti-imperialist rhetoric. The regime, which posed as “socialist”, nationalized the majority of the economy, and with vast reserves of oil and a small population, was able to provide a relatively high standard of living, health and education for the majority of the people. This gave the regime considerable stability for a long time. It also explains why, after the initial uprising against him, Gaddafi, in spite of everything, was still able to muster enough support to resist for several months and was not immediately overthrown.

However, it was a system that concentrated all power in the hands of one individual, effectively preventing the development of anything resembling political or even state institutions. There was no ruling party (political parties were banned), a very small bureaucracy, and a weak, divided army. Gaddafi maintained himself in power through a complicated system of repression, patronage, alliances with tribal leaders and a network of informal contacts.

Over the last 20 years—and in particular the last decade—the Gaddafi regime had begun to loosen the state’s control over the economy and was attempting to reach a deal with imperialism, opening up its markets and adopting “free market” economics and “neo-liberal” policies. It introduced some market-oriented reforms, including applying for membership of the World Trade Organization, reducing subsidies and announcing plans for privatization.

This move towards market economics led to a fall in living standards for many Libyans and the enrichment of a minority, mainly the Gaddafi family. This was one of the main reasons for the popular discontent that led to the uprising. The insurrection in Benghazi was a genuine popular revolution, but in the absence of a revolutionary party it was hijacked by the bourgeois politicians of the so-called National Transitional Council. These elements were self-appointed, unelected and responsible to nobody. They forced their way to the fore, elbowing to one side the revolutionary masses, mainly the youth, who did all the fighting.

The result has been a confused and messy situation, which could easily degenerate into chaos. Throughout all the revolutionary upheavals in the Middle East and North Africa the imperialists were unable to intervene. But now they understood that they had a chance to play a role in the situation. The Americans, French and British entered into contact with the National Transitional Council, which is an alliance of bourgeois elements and some former ministers in the Gaddafi regime.

The new rulers of Libya are even more eager to throw themselves into the embraces of the imperialists. But despite the demonstrations of “friendship” in Benghazi, the mass of Libyans hate and distrust the imperialists. They know that the Libyan revolution gathered Western support because the land is so rich in oil, and that the British, French and Americans only wish to plunder the country’s natural resources.

In analysing any phenomenon we must distinguish carefully between the different tendencies, separating what is progressive from what is reactionary. In the case of Libya, this is not always easy. The movement in Libya clearly contains many different elements, both reactionary and potentially revolutionary. There are a number of forces vying for leadership of the revolution. This struggle is not yet decided and it can go in a number of different directions. The fate of Libya is not yet decided and will be decisively influenced by international events and particularly the developments in Egypt.


As in Libya, the effects of the revolutions in Tunisia and Egypt were felt in Syria, with similar results. The masses believed that to overthrow the regime all that was needed was to organise mass rally after mass rally. But the situation has proven to be more complicated than that. The regime clearly had some remnants of support among at least a section of the population. This together with the lack of a clear revolutionary leadership, and crucially without the working class coming out decisively, is what led to the stalemate for months.

July 22. Photo: Syriana2011July 22, Hama. Photo: Syriana2011The Syrian Ba’ath regime in the past was based on a planned economy modelled on that of the former Soviet Union, which allowed for significant economic development in the 1960s and 1970s. In the 1980s, however, the economy began to slow down. After the collapse of the USSR the regime began to move towards capitalism. As a consequence of this transition, greater and greater social polarisation emerged with a minority elite enriching itself at one end of the social spectrum and growing poverty at the other end. Unemployment shot up and some estimates indicate that it stands above 20 percent; for the youth this figure would be far higher.

It is this growing social polarisation that is at the root of the revolution in Syria. The Syrian regime is now more hated than ever by the masses, but as in Libya, the imperialists have seen an opportunity to intervene and attempt to impose their own stooges on the Syrian revolution and divert it along safe channels.

Splits have emerged within the armed forces, with many officers declaring themselves the “Free Syrian Army”. This indicates that many rank and file soldiers are in sympathy with the revolution and a section of the army elite seeing the writing on the wall, in an attempt to gain credence among the masses, have jumped ship before it sinks completely. These officers have called for a no-fly zone to be imposed by the imperialists, which indicates they will play a counter-revolutionary role within the revolution.

What is lacking in Syria is a clear Marxist leadership that can explain to the masses that the regime must indeed and can be brought down, but that in its place, what is required is a planned economy under the direct control of the workers. Without such a leadership the revolution is being pushed in the direction of a “democratic bourgeois counter-revolution”. This will not solve any of the burning problems of the masses. In fact, social inequalities will increase further and at an even faster pace than before. Over time, the masses will learn that it is not enough to merely overthrow a dictator like Assad. They will learn that on a capitalist basis, none of their problems will be solved.

The imperialists are seriously concerned at developments in the Arab world, which occupies a central place in their geopolitical calculations. The fall of Mubarak was a serious blow to their strategy in the Middle East. This will force them into an even closer relationship with Israel, now the only reliable ally they have left in the region. They will also do everything in their power to shore up the Saudi regime and the reactionary sheikhs in the Gulf States.

Recently, the United States made a $60 billion arms deal with Saudi Arabia. It hopes to sell thousands of bunker busters to the UAE. They are manoeuvring to save the monarchist clique in Bahrain, where the masses are beginning to move once again, despite the ferocious repression and the presence of Saudi mercenaries.

But all these manoeuvres will ultimately be to no avail. The Saudi regime intervened in Bahrain out of fear for its own safety. The royal family is rotten, corrupt and hypocritical and is now facing a crisis of succession. At the same time, the living standards of ordinary Saudis have been falling and the situation facing the millions of immigrant workers is appalling. The head of the Wahhabi clergy has warned the regime to make immediate concessions and raise living standards or what happened in Tunisia and Egypt could happen in Saudi Arabia.

The genie has been released from the bottle, and cannot easily be put back. The revolutionary upheavals have already spread to Libya, Syria, Djibouti, Yemen, Bahrain, Jordan, Oman, Algeria and Morocco. And the masses, once aroused, are not easily pacified by promises, as the events in Egypt have shown. The revolution will go through all manner of vicissitudes, ebbs and flows, ups and downs. Periods of advance will be followed by periods of lull, tiredness, disappointment, defeats and even reaction. But these will only be the prelude to new and even more dramatic revolutionary upsurge.


The Arab revolution has also had a big effect in Iran.When the Iranian Revolution began in June 2009, thousands of Iranian youth had incredible hopes. But the movement reached an impasse after the massive Ashura uprising in December 2009. The Arab revolution served as a new impulse, reviving the movement again in February and March 2011. Hundreds of thousands repeatedly took to the streets. But the movement, tired and disoriented, due to the treachery of Mousavi, Karroubi and the other Liberal parliamentarians of the Reformist movement, did not succeed in developing into anything that went beyond demonstrations and was thus defeated after its last spasms in April 2011.

After almost two years of revolutionary struggles, the movement is now at a low ebb. But nothing has been solved. The ever-deepening economic crisis, with steeply rising inflation, unemployment rates, and the removal of subsidies on basic goods, will provoke a mood of dissatisfaction in the masses, including those layers that did not participate in the mass movements of 2009.

Although the movement has been defeated this does not mean that the situation is static in Iran. In the summer of 2011, massive movements, consisting of tens of thousands, emerged in the Azeri areas as well as the Kurdish areas of Iran. Also, as we predicted, while there has been a decline of the “democratic” movement there has been an increasing activity of the working class. Since the spring of 2011, the number of strikes has been steadily rising.

The most interesting characteristic of this workers’ movement is that it is led by fresh layers of mainly casual workers who have not participated in the strikes of the preceding period. Especially in the petrochemical industry, which is gaining strategic importance for the regime, a series of strikes, several weeks long, and involving thousands of workers, has disturbed the apparent calm on the surface of Iranian society. These strikes are an anticipation of a new wave of the revolutionary movement on a higher plane.

The tensions in society find their reflection in splits at the top, including an open conflict between Khamenei and Ahmadinejad. This crisis at the top is a symptom of the growing crisis in society, which is in a very fragile and nervous equilibrium, and which sooner or later, must lead to new and even more explosive upheavals.

Israel and Palestine

Last, but not least, Israel has experienced the biggest mass protests in its history. Netanyahu was terrified by the Egyptian Revolution, as his closest regional ally was toppled. Then, in the summer of 2011, the people came out onto the streets protesting against rising prices, and demanding better living conditions and decent housing. Netanyahu, trying to play down the scope of the movement, said the protestors were being paid by foreign powers. But it is difficult to convince people of this, when up to 500,000 out of a population of less than seven million were on the streets. This marvellous movement gives the lie to the sects who view Israel as one reactionary bloc.

The Palestinians have also been affected by the Arab revolution. They see that Abbas has completely betrayed the Palestinian cause. His attempt to get the UN to recognize a Palestinian state was a desperate effort to recover some credibility but, predictably, has led nowhere. The idea will gain ground among the Palestinian youth of the need for another Intifada. In the present climate, this would change everything.

In such conditions, the Zionist ruling class of Israel is looking for a diversion from the domestic issues. And, as in the past, Iran is used as the bogeyman, presented as a threat to all Jews in Israel. This explains why Israel is once again threatening to attack Iran. The Israelis also feel threatened by the increasing influence of Iran in the region.

All this sabre-rattling is presented by the media as being about curbing a “dangerous” rising nuclear power; but it has deeper roots than that. The Israelis and the Iranians, are both beating the war drums to divert attention away from the rising social conflicts at home. They are both very interested in an armed clash, as this could be used to calm down the movements developing from below and also unify the increasingly split ruling circles at the top. However, an all-out war is ruled out. It would be a limited aerial attack against strategic military and nuclear sites—as the Israelis have done in Syria and Iraq in the past. The growing possibility of such an attack is also increased by the fact that the U.S. is increasing its military presence in the Gulf as it withdraws its last forces from Iraq.

If Israel embarks on such an attack, however, it would detonate an explosion throughout the Middle East. The masses would take to the streets against Israeli and U.S. imperialism, shaking every standing regime. Even in Iran, the regime could not hope for more than a temporary relief through such a conflict, as—like all military conflicts—it would bring to the fore all the contradictions within society and expose the true nature of the regime to the last of its remaining supporters. Both the Israeli government and the Iranian regime feel the heat from the masses and therefore cannot afford to back down—they are forced thus to constantly step up their mutual provocations.

The proletariat of the Middle East is the decisive factor in the whole equation. The building of a strong Marxist tendency in the Arab world is an urgent task. It will have to be built in the fire of events. The Arab revolution will last for years with ups and downs like the Spanish Revolution in the 1930s. There will be a process of inner differentiation. A left wing will crystallize, and an extreme left wing. We must find a way to connect with this process.

In the last year and a half the Arab revolution and the stormy events in Europe have thrust themselves to the forefront. The Latin American revolution, by contrast, appears to be unfolding at a slower pace than previously. Such developments are inevitable, reflecting the combined and uneven character of the process of the world revolution. But there are also important developments in Latin America, with some decisive events being prepared in the coming months.

Latin America

Latin America and the Caribbean were severely affected by the world recession of 2008-09, with an overall fall of GDP of 2.1 percent in 2009. The severest impact was in those countries whose economies are more closely linked to the U.S., such as Mexico, which suffered a fall of 6.1 percent. However, the region was generally able to recover quickly and strongly in 2010, with a GDP growth of 5.9 percent (6.4 percent for the 10 countries of South America). This economic growth is closely linked, in most cases, to the export of raw materials to China—the region now represent 25 percent of China’s total imports of primary products—and the influx of Chinese investments.

In 2010 alone, China invested in Latin America an amount which is double what it had invested in the previous 20 years. China has emerged as the largest export destination for Brazil, Chile, and Peru, and the second-largest export destination for Argentina, Costa Rica, and Cuba. The economic recovery is therefore very much dependant on what happens with the Chinese economy and is already showing signs of slowing down (to an estimated 4.4 percent in 2011 and a forecast of 4.1 percent in 2012). A sudden slowdown in China combined with a return of the US and the EU to recession would abruptly put an end to the region’s recovery.

This economic growth has been to a large extent responsible for the election of the PT’s Dilma Rousseff in Brazil, the re-election of Christina Kirchner in Argentina and the re-election with a massively increased majority of Daniel Ortega of the FSLN in Nicaragua. It has also played a role in the temporary stabilisation of relations between Colombia and Venezuela and the agreement for the return of Zelaya to Honduras brokered by these two countries. At the same time we have seen the heroic movement of the students in Chile, which has lasted for many months and involved hundreds of thousands of students and workers, and has completely broken the post-Pinochet political consensus in the country.

A similar movement of the students has taken place in Colombia and we see the beginning of a mobilisation of the students in Brazil. We also saw the opening of the new political stage in Peru with the electoral victory of Ollanta Humala who defeated the candidate of the oligarchy and imperialism, Keiko Fujimori (despite the fact that once in power he moved sharply to the right). In 2012 we will see major battles being waged in the Mexican elections, where Andres Manuel Lopez Obrador has been selected as the PRD candidate, and the crucial Venezuelan presidential elections.

The setting up of the CELAC

The setting up of the CELAC (Community of Caribbean and Latin American States) has raised some expectations within the labour movement and the youth in Latin America, who see it as an alternative to the Organisation of American States (OAS) under the supervision of US imperialism. The CELAC has set itself the aim of deepening the integration of Caribbean and Latin American countries within a framework of "solidarity, cooperation, complementarity and political agreement," but it is impossible to advance decisively on this road given the capitalist nature of the economy and its national states, the heterogeneity of the countries and governments that make it up, the reactionary character of the national bourgeoisie and their servile dependence on imperialism.

The historical weapon of national liberation, of the expulsion of imperialism, is the class struggle. Under all circumstances we must explain that without the expropriation of the landlords, bankers and monopolies, both imperialist and Latin American, and without the harmonious socialist and democratic planning of the immense natural resources of the sub-continent on the part of working people there is no possibility of a genuine anti-imperialist liberation of the Latin American countries. Our slogan remains that of the struggle for a Socialist Federation of Latin America as a first step towards a Socialist Federation of the Americas, the only orientation which can offer a way out for the dominated and exploited peoples.


Hugo ChavezHugo ChavezThe Bolivarian Revolution has reached an impasse. The failure to carry out the main tasks of the Socialist Revolution has, as we predicted long ago, led to a chaotic situation of economic stagnation, inflation, factory closures and falling living standards. This, together with the poison of bureaucracy and corruption, has created a dangerous situation where the fate of the Revolution is in the balance.

The Bolivarian Revolution could have been carried through to the end on many occasions, easily and without civil war. Particularly following the defeat of the 2002 coup, it would have been possible to carry out the socialist revolution peacefully. The counterrevolutionaries were demoralized and could offer no resistance. The masses were aroused and confident and had the support of the decisive sections of the armed forces. One word from the President would have been enough to finish the job. But the word never came.

A Revolution is a struggle of living forces. Despite all the mistakes and setbacks, the Bolivarian Revolution still has huge reserves of support in the masses. But these reserves are being paralyzed by the dead hand of the chavista bureaucracy. The problem is one of leadership.

The constant vacillations, swinging from left to right and back again, the unwillingness to take decisive measures against the counterrevolutionary oligarchy means that many opportunities have been thrown away. The balance of class forces is now less favourable than what it was a few years ago.

The impending Presidential election signifies a crucial turning-point. Decisive events are being prepared in the next 12-18 months that will have important consequences for the fate of the Venezuelan Revolution. The disappointment of the masses may be expressed in widespread abstention, which could hand victory to the counterrevolutionary opposition. But this outcome is by no means certain.

For more than a decade, the main motor force of the Revolution has been the enormous revolutionary élan of the masses. At every key moment, the workers and peasants have rallied to the Revolution. It is possible that, as the date of the election approaches and the threat of counterrevolution looms large in the consciousness of the masses, they will rally once more to give victory to Chavez.

The bureaucracy is the main ally of the counterrevolution and is systematically undermining the Revolution from within. Many of these bureaucrats come from a Stalinist background. That is the source of their cynicism and pessimistic appraisal of the revolutionary potential of the masses. The typical bureaucrat has an arrogant attitude to the masses and a cowardly servility to the bourgeoisie, which he regards as the natural holder of power.

In addition, it is clear that those sections of the Cuban bureaucracy that are moving in the direction of capitalist restoration in Cuba are pressurizing him to halt the Revolution in Venezuela and arrive at an agreement with the bourgeoisie.

These elements have completely broken with socialism and communism and have no interest in supporting a socialist revolution in Venezuela or anywhere else. All they want is a friendly bourgeois regime in Caracas that will supply them with oil. But their actions will secure the opposite result. They are preparing the way for the fall of Chavez and the victory of the counterrevolutionary bourgeoisie, whose first act will be to cut all relations with Cuba.

It seems that everything is conspiring to defeat the Venezuelan Revolution, despite the undeniable heroism of the masses. All of the “left” currents are behaving in a criminal fashion in Venezuela. The ex-Stalinists in the PSUV are playing their usual counterrevolutionary game, supporting the reformists in the leadership of the party. But these ex-Stalinists are not the only obstacle in the path of the working class.

The UNT trade union federation, which had an enormous revolutionary potential, was wrecked by the irresponsible adventurism of Orlando Chirinos and the other so-called Trotskyists. These elements were in the leadership of the UNT and refused to do anything to materially further the struggle for socialism. They aborted the movement for factory occupations and workers’ control. Now Chirinos is organizing demonstrations against nationalization.

For more than a decade, Chavez has served as a rallying point for the revolutionary forces. Chavez may well want to carry through the socialist revolution but he does not have a clear idea of how to do it. Furthermore, he is surrounded by a gang of bureaucrats and reformists and worse. The constant vacillations and swings to the left and right have served to confuse and disorient the masses. The situation has dragged on for too long and people are getting tired.

Chavez is attempting to lean on different classes, swinging first one way and then another. After the election setback in September 2009, he seemed to come quite close to nationalizing the whole of the economy. But he continues to vacillate. The Enabling Law allows him to really take power and expropriate the landlords and capitalists, and to appeal to the workers to take control of the factories and to the peasants to take over the land. But this has not been done.

It is the failure to expropriate the landlords, bankers and capitalists that has led to the present mess. We support all of the nationalizations, as far as they go. But partial nationalizations do not work; even less so if the companies are not administered under workers’ control as part of a rational plan of production for the entire country. Unless you take over the decisive planks of the economy, including the banks, you cannot plan the economy.

The policies of reformism are supposed to be “practical” but in reality they make it impossible for the economy to function. We get the worst of all worlds: the disadvantages of a market economy with all its chaos and anarchy, combined with all the corruption and bungling of a bureaucratic system. The result is chaos.

The interests of the bourgeoisie and the bureaucrats are increasingly identified. There is a Fifth Column within the Bolivarian Movement that is conspiring to defeat it from within. This constitutes a mortal threat to the Revolution. But a far bigger threat is the disillusionment and passivity of the masses.

The masses are tired of endless talk of socialism and revolution, when the situation is deteriorating. The situation is further complicated by Chavez’s illness. One cannot play hide and seek with a revolution. It is time to decide. If it is not decided in one way, it will be decided in another. The elections of 2012 will be the critical point. The mood of disillusionment among a growing layer of the masses could lead to passivity and abstention, while the right wing is energized by the set-backs in the revolution.

It is impossible to predict the result, but the final outcome will not be decided by the ballot box alone. It may be that Chavez will win by a small majority. In that case, it is likely that the opposition would cry fraud and bring their supporters onto the streets. This could bring Venezuela to the point of civil war, which the counterrevolutionaries could not be sure of winning.

The creation of a popular militia will be an important factor in the equation. The chavistas have arms and, despite inadequate training and discipline, could win in an armed clash with the counterrevolutionaries on the streets. This would give a new impulse to the Revolution.


The future of the Cuban revolution has profound implications for the whole of Latin America and beyond. After the collapse of the USSR, Cuba continued to hold out, just 90 miles from the most powerful imperialist country on earth. The positive effect of the nationalized planned economy in the fields of healthcare, education, housing, employment were in stark contrast to the conditions in neighbouring countries in Latin America. Furthermore, there was a generation which was still alive which had lived through the revolution. The other difference was that in Eastern Europe, people compared themselves to Western Europe. Cubans compare themselves largely to Latin America.

But now there is a question mark over its future.

The collapse of USSR means that there is no longer a powerful Stalinist model with influence and ideological authority. Many people are thinking critically and there are passionate, open debates about what happened in the USSR and drawing conclusions for Cuba. On the other hand, it is clear that elements in the state bureaucracy are going over wholeheartedly to the counter-revolution, and are positioning themselves to reap the benefits from the restoration of capitalism.

The most important over-riding factor, however, is the severe economic crisis on the island. Marxism explains that in the last analysis, the viability of a given socioeconomic system is determined by its ability to develop the productive forces. As long as the system could provide the people with good healthcare, education and guaranteed jobs and housing, it could maintain itself, and the ruling party had legitimacy. But when this is no longer the case, social unrest can emerge, together with a questioning of the way society is run and moods of cynicism and scepticism, especially among the youth.

Two interlinked factors led to economic crisis: the collapse of the USSR and the world crisis of capitalism. The fall of the Eastern bloc meant the disappearance of subsidies and favourable terms of trade, leaving Cuba completely at the mercy of the world market.

“Socialism in One Country” is a reactionary utopia. If the Soviet Union and China, both huge countries with vast human and material resources, could not defend themselves against the pull of the capitalist world market, how can a small island with few resources and a small population hope to survive? The only real solution is world revolution, beginning by spreading the revolution to Latin America.

Viva FidelNow extremely dependent on the world market, Cuba has been badly affected by the capitalist world crisis. Services represent 75 percent of GDP. The export of medical services (Cuban doctors in Venezuela) is double the income from tourism. Thus, the Cuban economy has gone from depending on the USSR to depending on Venezuela.

The world crisis of capitalism has meant a collapse in prices for Cuba’s main export (nickel), a drop in remittances from Cubans working in the US, a fall in the tourist industry and lower foreign direct investment. To make things worse, three waves of hurricanes battered the island from 2008 and 2009, causing US$10 billion in damage to housing stock which was already in a poor state.

In 2009, Cuba had a current account deficit of US$1.5 billion. Cuba had to default on its payments in 2009/10 to its debtors. This lowered its credit rating for future loans, making it harder to borrow money and imposing further burdens on the population. It was forced to massively cut back on food imports, and to adopt other measures of adjustment.

A big part of the “salary” of the Cuban workers is in social benefits, not actual cash wages. There is more or less free housing, free high quality healthcare and education, and people pay almost nothing for phone calls and electricity. Public transportation is almost free but highly deficient. However, over the last 20 years the health service has eroded. Cubans have the highest ratio of doctors to population, but many are not in Cuba. The education system is also suffering deterioration. Teachers may earn more as taxi drivers, so they will drive a taxi instead of teaching.

Above all, the productivity of labour is very low. Since the state can't guarantee decent wages or subsidies, practically everyone is forced to be involved in some kind of illegal or semi-legal activities to cover all the necessities. They must resort to the black market to obtain convertible pesos. In this way a parallel economy develops, with huge mark-ups on basic products.

Gradually, the idea takes hold that “private enterprise” is better than collective solutions. The planned economy is being undermined from within. The idea that individualism and “wheeling and dealing” are the way forward becomes more dominant. In the absence of workers’ control, corruption and bureaucracy grows, further undermining the planned economy.

Everybody knows that the present situation cannot be maintained, that something has to change. But what? Raul Castro says: we need to be efficient. But how is efficiency to be achieved? There are only two options: either return to capitalist market economics or establish Leninist norms of workers’ democracy.

A section of the state bureaucracy stands for a return to capitalism, although they cannot be open about their real aims. They refer to the Chinese and Vietnamese models of “socialism”. They say they do not want to abandon socialism, only “improve it”. But down this road lies capitalist restoration. The economic measures, which have already been taken, all go in the direction of introducing market mechanisms in the running of the economy and pushing people into the small business sector. All these are open doors through which the powerful pressure of the world capitalist market penetrates and dissolves Cuba’s planned economy.

In the final analysis, the fate of Cuba will be determined on the international plane. The general perspectives for world revolution are favourable for the survival of a Cuba with a planned economy on conditions that Leninist workers’ democracy is established and that it is linked to the international workers’ movement. But the longer this is delayed, the more the pro-capitalist forces will advance in Cuba, and could reach a tipping point.

For us, the key question is the ownership of the means of production. We must try to find a road to the best elements that are fighting against capitalist restoration and defend the nationalized planned economy, while at the same time advocating workers’ control and the extension of the socialist revolution to Latin America as the only way out.

The victory of the socialist revolution in Venezuela would be a major step in the direction of breaking the isolation of Cuba in the world capitalist market. But the pro-capitalist sections of the Cuban state bureaucracy, with their narrow nationalist mentality, do not see that the failure to carry out the revolution in Venezuela constitutes a serious threat to the future of the Cuban Revolution. By constantly putting the brakes on the Venezuelan Revolution, they are like a man in a tree sawing off the branch he is sitting on.

Lenin said that politics is concentrated economics. For Marxists the importance of economics is the effects it has on the class struggle. In the Second World Congress of the Communist International, Trotsky pointed out that every measure the bourgeois take to deal with the crisis will intensify the class struggle.

Through what stage is the world revolution passing?

We see the evidence for this on all sides. In 1921 Trotsky wrote:

“So long as capitalism is not overthrown by the proletarian revolution, it will continue to live in cycles, swinging up and down. Crises and booms were inherent in capitalism at its very birth; they will accompany it to its grave. But to determine capitalism’s age and its general condition—to establish whether it is still developing or whether it has matured or whether it is in decline—one must diagnose the character of the cycles. In much the same manner the state of the human organism can be diagnosed by whether the breathing is regular or spasmodic, deep or superficial, and so on.” (First Five years of the Communist International, vol.1, Report on the World Economic Crisis and the New Tasks of the Communist International)

Marx explained long ago that no economic system ever disappears before it has exhausted its full potential. Today the capitalist system shows clear signs of its exhaustion. But capitalism has long since ceased to play a progressive role on a world scale. It fulfilled its historically progressive role and has gone far beyond its limits. It is incapable of developing the colossal potential of the productive forces. The present crisis is proof of that.

The two fundamental obstacles to human progress are on the one hand private ownership of the means of production and on the other hand the nation state. There were many factors that caused the post-war upswing. But the main one was the colossal expansion of world trade. This enabled capitalism to overcome—partially and for a temporary period—the limitations of private ownership and the nation state. This tendency was enormously expanded over the last three decades. But now this seems to have reached its limits.

The present crisis is an entirely different situation to what we faced in the past. It is more similar to the situation that Trotsky wrote about in 1938. What we are experiencing is not a normal cyclical crisis of capitalism. It is something far deeper and more serious: an organic crisis of the capitalist system, from which there is no way out, except further crises and deep cuts in living standards.

This is something entirely new, and this explains the perplexity of all the bourgeois economists. They have completely lost their bearings. They resemble the old definition of metaphysics: a blind man in a dark room, looking for a black cat which is not there. The bourgeois is seriously worried. A new recession would be “disastrous,” according to Roger Altman, a senior Treasury official in the Clinton administration. “We could be in for a repeat of the experience of 1937, when America fell back into recession after three years of recovery from the Great Depression,” he wrote in the Financial Times.

The bourgeois strategists understand that a new global recession will have the most serious social and political consequences. They are increasingly gloomy in their prognostications. The same UBS report quoted earlier warned of the danger of civil disorder as a result of the economic crisis in Europe:

“When the unemployment consequences are factored in, it is virtually impossible to consider a break-up scenario without some serious social consequences. With this degree of social dislocation, the historical parallels are unappealing. Past instances of monetary union break-ups have tended to produce one of two results. Either there was a more authoritarian government response to contain or repress the social disorder (a scenario that tended to require a change from democratic to authoritarian or military government), or alternatively, the social disorder worked with existing fault lines in society to divide the country, spilling over into civil war. These are not inevitable conclusions, but indicate that monetary union break-up is not something that can be treated as a casual issue of exchange rate policy.

“It is certainly worth noting that several countries of the euro area have histories of internal division—Belgium, Italy and Spain being amongst the most obvious. It is also true that monetary union break-ups in history are nearly always accompanied by extremes of civil disorder or civil war.” (UBS Global Economic Perspectives 6 September 2011)

The conclusion could hardly be more pessimistic:

“The question is not how a liberal democracy develops, but whether a liberal democracy could withstand the social turmoil that surrounds a monetary union fracturing. We lack evidence to support the idea that it could.”

These lines show how concerned the strategists of Capital are. They see the impossibility of reaching a durable social and political equilibrium. They also understand that the normal instruments of bourgeois democracy will be tested to the limits by “extremes of civil disorder.”

That is correct, as far as it goes. However, it is unlikely that the bourgeoisie would risk moving directly towards a civil war, either in Greece or any other developed capitalist country. Only after exhausting all other possibilities would the bourgeoisie consider the option of a military coup, which is fraught with dangers for it.

The class struggle

There have been big movements of the class struggle in the recent period, mainly in Southern Europe. Naturally it does not begin in the stronger countries of Northern Europe. But their turn will come, as we can already see in Britain and France.

Already, in the autumn of 2009, there was a huge upsurge against cuts in France with 3.5 million workers on the streets. These protests were not confined to the big cities, but took place in hundreds of small towns: as much as a quarter of the population was on the streets in these smaller areas. Oil refineries were blockaded, and there were big movements in the schools and universities. Moreover, 65-70 percent of the population was in favour of the movement.

This was an anticipation of what is to come. After that we have seen the biggest general strike in Portugal since the 1975 revolution. In Italy we have seen mass demonstrations in Rome and a general strike. In Greece there have been as many as 13 general strikes over one year. In Britain there was the biggest demonstration called by the trade unions in history, followed by the biggest strikes since 1926.

The Governor of the Bank of England, Mervyn King, has said Britain is facing the biggest fall in living standards since the 1920s. Pensions are to be cut by 40 percent while profits are soaring. Barclays bank made record profits, and paid just 2 percent in tax. The incomes of the directors of the top FTSE 100 firms rose by 49 percent in 2011. This is stoking the fires of anger, which was reflected in a wave of riots of the dispossessed youth in London and many other cities.

There have been huge youth movements in Spain, directly inspired by Egypt’s Tahrir Square. As in Egypt so in Spain, the high level of youth unemployment is what led to the explosive movement of the indignados. In turn, the Spanish actions inspired a similar occupation of the squares in Greece. Athens was choked with tear gas as the police of the social democratic government dispersed the revolutionary youth. Even in the Netherlands there were 15,000 students protesting at The Hague.

Events, events, events are the key to the situation. And great events are being prepared, which will shake up society to the depths and produce dramatic changes in consciousness. We have already seen this in Tunisia, Egypt, Spain and Greece. Even in Eastern Europe we have seen big movements in Albania and Romania. In Bulgaria, even the police have been out on strike. In Russia we saw the massive increase in votes for the Communist Party, which has started to attract a layer of youth, indicating that there also the situation is beginning to turn. These are extremely important developments that represent a turn in the situation in Europe. Others will follow with a greater or lesser delay, according to the prevailing conditions.

What is true of Europe is also true on a world scale, as is shown by the Arab Revolution and the protest movement in the USA.


For years the so-called Lefts have been bleating about the “low level of consciousness” of the masses. These people are incapable of looking at things dialectically. They are hypnotized by the present situation, and cannot see things in their development and change. Incapable of understanding the real movement of the working class, they are always taken by surprise by events. They are condemned to study history by observing its backside.

This approach has nothing in common with Marxism. It is a mixture of crude empiricism and idealism. They set out from an ideal norm of consciousness and condemn reality because it does not conform to their ideal norm. Hence, for them, the working class is never conscious enough. Yet throughout history revolutions have been made, not by educated pedants but precisely by the “politically untutored masses.”

Contrary to the prejudice of the idealists, human consciousness is not revolutionary or progressive, but profoundly conservative. People don’t like change. They like stability, because it is more comfortable. They will stubbornly cling to the existing order, its morality and prejudices, to the familiar parties and leaders, until events force them to change.

Profound shifts in consciousness arise out of the experience of the masses. This is not a gradual evolution, but has a violent and convulsive character. Revolutionary consciousness does not develop smoothly in a continuum, from right to left over time. A revolution is precisely that critical point where quantity becomes transformed into quality and there is a sudden leap.

How did revolutionary mass consciousness develop in Russia? When the strike broke out at the Putilov works in 1904, the Bolsheviks and the Mensheviks were not in the lead. In the first stages of the 1905 Revolution it was a priest, Father Gapon – who was also a police agent – with all his backwardness and prejudices who led the movement, precisely because he personified and reflected the stage that the masses had reached.

In the early stage of the 1905 Revolution, the revolutionaries were isolated from the masses, When the Bolsheviks showed up with their leaflets calling for the downfall of the monarchy and the establishment of a constituent assembly, the workers tore up those leaflets and often times beat up the Bolsheviks. But in the evening of the Ninth of January, immediately after the Bloody Sunday massacre, the workers came back to the Bolsheviks with one demand: “Give us guns!”

Every other tendency underestimates the seriousness of the current situation, which has no precedent in recent history. It is true that the consciousness of the workers is lagging behind objective reality. They have not yet realized that this represents a complete break with their past experience. Most people believe that some kind of correction will return the situation to normal. But a writer in The Economist pointed out correctly, “Yes, sooner or later we will return to normality. But it will be a new normality.”

There can be no return to the “good old days” when the ruling class in the advanced capitalist countries could grant concessions and reforms to buy class peace. Now all the gains of the European and American working class are under threat. From the standpoint of the bourgeoisie, it is precisely these things that stand in the way of the capitalist class resolving its crisis.

There has already been a dramatic change in consciousness of the ruling class. Twenty years ago they were puffed up with arrogance after the fall of the USSR. Now all that has gone. The old confidence has gone and they are looking to the future with dread. During the boom the capitalists developed delusions of grandeur, especially after the fall of “communism.” They really believed that their system would last forever. The alleged superiority of market economics would solve all problems if only the state would leave the market alone to perform its miracles.

Now everything has been stood on its head. At this moment in time the capitalists are completely dependent on the state for their survival. The banks expect their losses to be paid by the state—that is, by the taxes of the working class and the middle class, upon whose shoulders the whole weight of the crisis is to be placed. But this will have profound effects on social relations, politics and the class struggle. This has started already.

In the past, the bourgeois bought social peace by granting concessions, giving a slice of the surplus value produced by the workers back to them. They had sufficient room for manoeuvre to do this on the basis of the enormous profits they extracted during the boom. But this has now disappeared. The only ones who really believe in the market economy are the leaders of the labour movement, who in a period of crisis, constitute the main bulwark of the capitalist system. This will mean that the labour organizations will be shaken by crisis after crisis. Sooner or later, the old right-wing leaders will be spewed out and replaced by other leaders who are more responsive to the pressure from below.

Limits of spontaneity

The millions of people who have come out onto the streets and squares of Spain and Greece to oppose the policy of cuts and austerity do not trust the politicians and trade union leaders. And who can blame them? In both Greece and Spain the governments that are carrying out these attacks are supposed to be “socialist”. The masses deposited their confidence in them, and find themselves betrayed. They conclude that in order to defend their interests they must not leave things to the politicians but take action themselves. This shows a correct revolutionary instinct.

Those who sneer at the movement as “merely spontaneous” display their ignorance of the essence of a revolution, which is precisely the direct intervention of the masses in politics. This spontaneity is an enormous strength—but at the same time it can become a fatal weakness of the movement.

Of course, the mass movement will necessarily suffer from confusion in its initial stages. The masses can only overcome these shortcomings through their direct experience of the struggle. But it is absolutely necessary for the masses to pass beyond the initial confusion and naïveté, to grow and mature and to draw the correct conclusions.

Those “anarchist” leaders—yes, the anarchists also have leaders, or people who aspire to lead—who believe that confusion, organizational amorphousness and the absence of ideological definition are both positive and necessary, play a pernicious role. It is like trying to maintain a child in a state of childishness, so that it is forever unable to talk, walk and think for itself.

Many times in the history of warfare a big army composed of brave but untrained soldiers has been defeated by a smaller but disciplined and well-trained professional force led by skilled and experienced officers. To occupy the squares is a means of mobilizing the masses in action. But in itself it is not enough. The ruling class may not be able to evict the protesters initially by force, but they can afford to wait until the movement begins to die down, and then act decisively to put an end to the “disturbances”.

It goes without saying that the Marxists will always be in the first line of any battle to improve the conditions of the working class. We will fight for any conquest, no matter how small, because the fight for socialism would be unthinkable without the day to day struggle for advance under capitalism. Only through a series of partial struggles, of a defensive and offensive character, can the masses discover their own strength and acquire the confidence necessary to fight to the end.

There are certain circumstances in which strikes and mass demonstrations can force the ruling class to make concessions. But this is not one of them. In order to succeed it is necessary to take the movement to a higher level. This can only be done by linking it firmly to the movement of the workers in the factories and the trade unions. The slogan of the general strike comes to the fore. But even a general strike in and of itselfcannot solve the problems of society. It must eventually be linked to the need for an indefinite general strike, which directly poses the question of state power.

Confused and vacillating leaders are capable of producing only defeats and demoralization. The struggle of the workers and youth would be infinitely easier if they were led by courageous and far-sighted people. But such leaders do not fall from the skies. In the course of struggle, the masses will put to the test every tendency and leader. They will soon discover the deficiencies of those accidental figures who appear in the early stages of the revolutionary movement, like the foam that appears on the crest of the wave, and who will vanish just like that foam.

Through their experience, an increasing number of activists will come to see the need for a consistent revolutionary programme. This can only be provided by Marxism. Ideas which for decades were listened to by small groups will be eagerly sought out, first by hundreds, then by thousands and hundreds of thousands. What is required is, on the one hand, the patient preparatory work of the Marxist cadres, on the other hand, the concrete experience of the masses themselves.

Tactics and strategy

Tactics and strategy are different things, and may even, apparently, contradict each other under certain circumstances. Our long-term strategy is very clear and we must maintain it. When the masses begin to move, they will turn in the first place to the existing mass organizations of the working class. But in order to build the Marxist tendency it is not enough merely to repeat correct general propositions. We must proceed from the concrete conditions of the movement at any given stage. And these conditions do not remain the same but change constantly.

Tactics by their very nature have to be flexible, and we must be able to change them within 24 hours, if necessary. In warfare, strategy might involve attacking a certain position. But if that position is too well-defended, and our forces are not sufficiently strong to take it, we will have to reconsider our tactics. Instead of a frontal attack on the position, we may decide to concentrate our forces on a secondary, but more accessible objective. Having secured that objective, we will be in a stronger position to return to the main point of attack.

The new situation has not yet found a reflection in the mass organizations, with the exception of the unions, which stand closer to the class than the parties. Certain things flow from this. If the mood of anger in society does not find an outlet in the mass organizations, it will find other manifestations.

Movements like the indignados in Spain arise because most workers and youth feel they are not represented by anybody. These people are not anarchists. They display confusion and lack a clear programme. But then, where would they get clear ideas from? These spontaneous movements are the consequence of decades of bureaucratic and reformist degeneration of the traditional parties and unions. In part, this represents a healthy reaction, as Lenin wrote in The State and Revolution, when he referred to the anarchists.

With their usual impressionism, the sects are completely intoxicated by these new movements. But we must not allow our judgement to be clouded by ephemeral phenomena. We must also understand that these movements have limitations that will quickly be exposed by experience itself. The new movements are alienated from the mass organizations, feeling they do not represent them. On the other hand, the new movements themselves have not understood the seriousness of the situation. They are trying to pressure the bourgeois government to change policy, not understanding that the situation does not allow that. This will ultimately lead them to a dead end.

At a certain stage, these new mass movements will subside, leaving the mass organizations as the only mass political expression for the workers. The mass pressure on these organizations will grow, shaking them from top to bottom. There will be a series of crises and splits, which will lead to the growth of a mass left wing at a certain stage. We must always bear this firmly in mind if we are not to degenerate into an isolated sect.

The fate of the sects should serve us as a warning. They are in crisis because all their attempts to build “revolutionary” parties outside the traditional mass organizations of the proletariat have ended in ignominious failure, although the objective conditions for this were as favourable as they will ever be. Their failure to understand the way in which the working class moves dooms them to impotence. They will be swept aside as soon as the class begins to seriously move.

The movement of the masses can only be through the workers’ traditional organizations. Of course, this process does not take place overnight or in a straight line. There will be many zigzags and contradictory developments, and that is why our tactics must be flexible. But ultimately, the main developments will flow through the mass organizations.

A new world war?

The bourgeoisie now finds itself in the deepest crisis in its history. But we must be careful how we explain this. Lenin pointed out that there is no final crisis for capitalism. History shows that the capitalists can always find a way out of even the deepest crisis, unless they are consciously overthrown by the working class. But the bare assertion that the capitalists can find a way out of the present crisis tells us nothing. What we must ask is: how long will this take, and what will be the cost?

In 1939, they resolved the crisis through war. Can they do this again? Polish Finance Minister Jacek Rostowski, whose country currently chairs EU meetings, told the European Parliament in Strasbourg. “If the eurozone breaks up, the European Union will not be able to survive.” He even warned that war could return to Europe if the crisis undermined the EU. Certainly, all the contradictions are coming to the fore. However, the perspective is not of a new world war, as in 1914 or 1939, but an intensification of the class war.

The analogy with 1939 is superficial and misleading. The situation is not at all comparable. In the first place, the war in Europe was only possible after a series of decisive defeats of the working class in Italy, Germany, Austria and Spain, as Trotsky explained. The class balance of forces is now completely different. The workers’ organizations are largely intact, and the bourgeoisie cannot turn immediately towards reaction in the form of military police states.

Apart from the class balance of forces, which is the main reason a world war is ruled out, there is another reason why the European ruling class will not lightly move in the direction of fascism or Bonapartism. They burned their fingers badly in the past when they handed power to a gang of fascist adventurers and unbalanced dictators. In the case of Germany, it led to a disastrous defeat in war and the loss of a big part of their territory. A more recent case was the Greek Junta that took power in 1967. That ended in a revolutionary uprising in 1973. They will think twice before repeating the experience. Only if the workers are decisively defeated would the prospect of dictatorship arise.

In addition to the internal balance of class forces, one must also take into account the balance of power between the main nations. In order to deal with the question of war, it is necessary to pose it concretely: who is going to fight whom? This is a very concrete question! There are tensions between Europe and the USA, which can lead to trade wars in the future. But the crushing superiority of the USA means that no power on earth can take it on in a war. All the European countries together cannot wage war on the USA.

Despite its industrial muscle, Germany is in no position to invade Russia as it did in 1941. On the contrary, it is increasingly subordinate to Russia’s interests in Europe. We see a similar change in Asia, where formerly backward China has become a formidable industrial and military nation. Can Japan invade China like they did in the 1930s? Just let them try! This is not the same China as in 1930. For the same reason, the USA cannot hope to reduce China to a position of colonial slavery, as it planned to do in the past.

There are growing tensions between different countries. China is engaged in massively increasing military spending. Beijing is buying an aircraft carrier and developing long-range missiles. To counteract this, the US is holding joint military manoeuvres with Vietnam and deploying more troops in the region. Vietnam is also strengthening its military fire power, ordering submarines and jets from Russia. There are serious tensions on the Korean peninsula, as a result of the severe crisis of the North Korean regime, which could implode at any moment. The Chinese are concerned about this, fearing that the regime could collapse on their border. Under certain conditions these fault lines could erupt into military conflicts. But a world war between the major powers is ruled out.

On the other hand, the world crisis means that there will be small wars all the time—like the wars in Iraq and Afghanistan. These will add to the social discontent and exacerbate the class struggle in Europe and the USA. The power of US imperialism is colossal but it is not unlimited. We can see the limitations of US military power in Iraq and Afghanistan. They only attacked Iraq when its army was effectively broken by years of blockade. Even then, the attempt to hold Iraq in subjugation was defeated by a guerrilla war. The mightiest power on earth, after preparing to leave Iraq, will also be forced to withdraw from Afghanistan, leaving a chaotic situation behind it.

The threat of reaction?

We have pointed out repeatedly that all the attempts of the bourgeois to restore the economic equilibrium will destroy the social and political equilibrium. Greece is proof of this assertion. Already social and political stability have been destroyed. And the realization that all the sacrifices have been in vain will make the austerity utterly intolerable. The result will be a turbulent period of revolution—and counterrevolution—that can last for years.

The working class will suffer many hard knocks which will shake up the consciousness of the workers and youth and toughen them up. The horrific events in Norway are a warning of what is to come. Formerly peaceful, prosperous, democratic, Nordic Norway, which had seemed invulnerable to crisis, was convulsed by the murder of Young Socialists perpetrated by a fascist gunman. The truth is that relations between the classes in the Scandinavian countries were somewhat softened after World War II.

The absence of big class battles blunted the sharp edges of the class struggle. This softness has had a corrosive effect within the labour movement with the spread of alien class ideas: feminism, pacifism, and other petty bourgeois ideas have penetrated the movement and have had a debilitating effect. And this is not just the case in Scandinavia.

For decades it appeared that the Scandinavian countries were models of peaceful reform. That’s what they thought in Norway until this comfortable schema was overturned by the terrible massacre of the Labour Youth.Despite the verdict of a Norwegian court, this was not the act of a single madman. It shows the contradictions that have built up within capitalism and that threaten to destroy the internal cohesion and stability of even the most developed capitalist states, not excluding the USA itself.

In the 1970s, the Gladio Conspiracy showed just how fragile a plant bourgeois democracy is. The bourgeoisie can pass from democracy to dictatorship as easily as a man passing from one carriage of a train to the next. However, in order to do this, certain conditions must be fulfilled. Just as there are laws that govern revolution, so there are laws that govern counterrevolution. The capitalists cannot simply go over to dictatorship because they wish to do so, any more than we can carry out the socialist revolution because we desire it.

The U.S. Central Intelligence Agency warned in a report that the tough austerity measures and the dire situation could escalate and even lead to a military coup in Greece, according to a report by Germany’s popular daily Bild. According to the CIA report, on-going street protests in crisis-hit Greece could turn into escalated violence and rebellion, and the Greek government could lose control. The newspaper said the CIA report talks of a possible military coup if the situation becomes more serious and uncontrolled.

It is possible that a section of the Greek ruling class is toying with the idea of finding a solution to their problems by moving towards reaction as they did in 1967. However, the Greek workers remember 1967 and the crimes of the Junta. Any move in that direction now would provoke civil war. This is recognized by an American political analyst, Barry Eichengreen (Professor of Economics and Political Science at the University of California, Berkeley) in a recent article, significantly entitled: Europe on the Verge of a Political Breakdown: “In Greece itself, political and social stability are already tenuous. One poorly aimed rubber bullet might be all that is needed to turn the next street protest into an outright civil war.”

Barry Eichengreen is not alone. Paul Mason, the economics editor of BBC2’s Newsnight writes: “In the chancelleries of Europe, above all in Berlin, these are questions that are impossible to mention. There is a total mismatch between political expectation and what is imminent. It reminds me—as so much of 2011 reminds me—of 1848. Metternich sneering out of the window at the irrelevant mob, a few hours before his unceremonious overthrow, Guizot unable to breathe with shock as he resigns his ministry, Thiers, prime minister for one day, suffering a bout of 19th Century Tourette's in his carriage, hounded by the masses…”

The most intelligent bourgeois strategists are seriously alarmed by the developments in Greece. The problem is not so much that this could lead to civil war. The problem is that the Greek bourgeoisie would not be sure of winning such a war. The working class is undefeated. Behind them they feel the support of the mass of the Greek population—not just the workers and peasants, not just the students and intellectuals, but also the small shopkeepers and taxi drivers and even many retired military officers who are driven to revolutionary conclusions by the sudden collapse of their living standards.

At this moment in time, there is no basis in any country of Europe for a Bonapartist or fascist solution. The fascist organizations today are mostly small sects without mass influence. Even the attack in Norway was not an expression of strength, but of weakness. Terrorism is always ultimately an expression of weakness and an inability to reach the masses.

Role of reformism

The bourgeoisie does not need the fascists at this moment in time. Any attempt to move in the direction of fascism or Bonapartism at this point would simply provoke the labour movement to action. The politicians in Brussels fear that Greece is becoming ungovernable. If it has not yet become so, it is thanks to the reformist leaders. That is why for the immediate future, the bourgeoisie must rule through the reformist parties and trade unions.

In Greece, the Pasok leadership took upon its shoulders the task of saving capitalism. Papandreou was anxious to prove his “statesmanlike qualities”, that is, his devotion to the interests of the bankers and capitalists. He was willing to accept all the odium of the austerity programme, and ultimately to sacrifice himself on the altar of Greek and European Capital.

It is precisely the reformists who are implementing the cuts, either directly or by supporting the right-wing governments’ attacks on living standards as a “patriotic duty”. In Greece they entered a so-called “national unity” government with the New Democracy and also the extreme right-wing LAOS party. In Italy they collaborated fully in voting in favour of the “technocratic” Monti government. In both Greece and Italy, these so-called governments of national unity represent the unity of the bosses against the workers in organizing further severe attacks on living standards.

As a result of the bureaucratic and reformist degeneration over decades, but especially over the past half century, the leaders of the mass organizations of the working class have transformed themselves into massive obstacles to the revolutionary movement. It is a monstrous fact, but a fact nonetheless. It is a dialectical contradiction that, precisely at a time when capitalism is in its deepest crisis in history, all the leaders of Labour Movement have embraced the “market”.

Once you have accepted the existence of capitalism, you must carry out the dictates of Capital. That explains the conduct of the reformists who everywhere act as the administrators of capitalist crisis, carrying out a programme of cuts and attacks on living standards to defend the interests of the bankers and capitalists. In this, the “Lefts” are no better than the right wing. They share the view of the right wing that there is really no alternative to capitalism, and must act accordingly.

They have abandoned any perspective of the socialist transformation of society. The difference is that whereas the right-wingers perform their services to Capital enthusiastically and unhesitatingly, the Lefts believe that it is possible to have capitalism with a human face. They want to add a teaspoon of sugar to the bitter medicine. But life has prepared a harsh lesson in realism for left reformism. Irrespective of their subjective intentions, the Left merely acts as a cover for the right-wing reformists.

The same is true of the former “Communist” leaders who have become transformed into vulgar Social Democrats. These leaders are completely out of touch with the real mood of the working class. Anyone who thinks the Italian, Spanish or Belgian workers, or the workers of any other country will take these cuts without a fight is living on another planet.

Without the reformist leaders, capitalism could not last even for a week. For that very reason, talk about the danger of fascism and Bonapartism makes no sense at the present time. The ruling class all over Europe must base itself on the leaders of the workers’ mass organizations at this stage. Any attempt to move in the direction of fascism or Bonapartism at this point would simply provoke the labour movement to action.

Of course, this can change. The present crisis can last for years. At a certain point, the ruling class will say: there are too many strikes, too many demonstrations, too much disorder. We need to restore Order! Then there could be a movement towards reaction. But even in such a case, the ruling class would have to proceed carefully, first testing the ground by moving towards parliamentary Bonapartism.

The ruling class is not in a position to launch an all-out attack on the Labour Movement. On the contrary, the pendulum will swing to the left. The working class will have many opportunities to take power into its hands before the ruling class can turn to reaction. Of course, the movement of the working class is never in a straight line. We have time, but not unlimited time. The bourgeoisie cannot use open force at this stage. But that can change, and will change. Defeats are inevitable. At a certain stage, the bourgeoisie can win support to a demand for the restoration of order. However, that is not an immediate perspective in any developed capitalist country.

The role of the youth

One of the most noticeable factors in the movements that have swept the world has been the mobilisation of the youth, who at all stages have been at the forefront of the struggle. Young students and workers, because of their position, are a very sensitive barometer of the underlying contradictions in society. In the Arab world, almost 75 percent of the population is under the age of 35. Of these, almost 70 percent are unemployed and most have to struggle to make a living in the informal economy. Moreover, the suffocating suppression of all democratic rights puts an extraordinary pressure on the youth who by their very nature are rebellious against such constraints.

Real Democracy now! Photo: arribalasqueluchanReal Democracy now! Photo: arribalasqueluchanThe position today of the youth in the advanced capitalist countries is fundamentally not that different from the position of the youth in the backward countries. In Spain, youth unemployment for those below the age of 25 is more than 40 percent, and the situation in the rest of Europe is rapidly moving in the same direction. At the same time, bourgeois democracy is quickly losing its legitimacy in the eyes of the youth who correctly see it, and all established parties related to it, as a cloak for the dictatorship of the bankers.

A Pew Research poll recently found that households in the US headed by people age 35 and younger were worth an average of just $3,662 in 2009, 47 times less than the median net worth of households headed by people 65 and older. With unemployment and debt at record levels, there is no light at the end of the tunnel for this “lost generation.”

The young generation growing up in the advanced capitalist countries today, is the first since the Second World War that can expect to see a lower living standard than their parents. They have no memory of the “golden days” of reformism, where capitalism could afford to give a few minor concessions, allowing the reformist leaders to build up authority that they could translate into social peace. They have no memory of the struggles of the post-war period when the workers moved through their traditional mass organisations. The only experiences they have are of the counter-reforms of the 90s, and the constant betrayals of the social-democrats and, to a certain extent, the Stalinists.

Therefore, the youth view all established political forces with mistrust. The authority of the leaders of the traditional mass organisations among the youth is at a historical low. Since the beginning of the crisis, the youth have been hit hard, but have not seen the reformist and Stalinist leaders representing their interests. The traditional organisations are still heavily weighed down by a stifling careerist bureaucracy and therefore at this stage are not reflecting the aspirations of the movements that have taken place. On the contrary, the leaders of the Labour Party in Britain, the PASOK in Greece, and the Democratic Party in Italy are bending to the pressures of the capitalist class and doing their utmost to appear as “statesmen”.

This situation will change in the future, starting first with the trade unions. Already we can see the pressure on the trade union leaders to do something. In several countries they have been forced to call general strikes, for instance. However, we are still in the very early stages of a process of inner differentiation within the mass organisations.

Thus, while the youth, especially its active layers, are drawing revolutionary conclusions, the leaders of the official mass organisations are desperately clinging to the capitalist order. That is why they cannot satisfy the radicalised youth who are looking for ideas that completely break with the system. The youth act boldly and energetically, and this creates great opportunities for the Marxists who can approach the youth directly under their own banner. If the Marxists adopt a flexible approach to this revolutionary youth, big gains can be made.

Ebbs and flows inevitable

A perspectives document is not merely a list of facts and figures. It must deal with the fundamental processes of the World Revolution. We should try to draw the threads together and draw conclusions. We have now entered into the most turbulent time in human history, with a sharp upturn of the class struggle everywhere. We have entered a period where we can see bourgeois regimes fall, just like the Stalinist regimes fell 20 years ago. The bourgeoisie is uncomfortably aware of this and is increasingly alarmed.

Everywhere we see the symptoms of decline. Such symptoms are familiar to students of history who are acquainted with the decline and fall of the Roman Empire. Scandals rock the bourgeoisie in France, Italy and Britain. The scandal in Britain is the deepest, affecting every institution: the press, the politicians, the bankers, and the monarchy.

Wisconsin, 12 March. Photo: Mackenzie HolmesWisconsin, 12 March. Photo: Mackenzie HolmesEvents in Wisconsin show the beginnings of ferment in the US as well. This does not mean, of course, that the red flag will fly over the White House tomorrow. But it means that the same process is happening everywhere, at different speeds and in different conditions, even in the richest and most powerful country in the world.

However, we must not adopt a superficial and impressionistic attitude to events. The masses cannot stay on the streets indefinitely. Sudden and sharp changes are rooted in the situation. In one country after another, the working class and the youth are already taking the road of struggle. The revolutionary ferment will unfold over years, maybe decades. We must expect ebbs and flows. There will be moments of great advance, but also other moments of tiredness and disappointment and even periods of reaction.

There will inevitably be setbacks and defeats. But in such a period, defeats will only be a prelude to a new revolutionary upswing. Let us remember that even in 1917, there were ups and downs in the Revolution. After the defeat of the July Days, Lenin had to flee to Finland and remain underground almost until the October Revolution. But the revolutionary conditions gave rise to a new upsurge. We see exactly the same pattern in the Spanish Revolution in the 1930s.

The road we have chosen is not going to be easy, but very difficult. We must steel our cadres so that they are not unduly affected by ephemeral developments in the class struggle. This is an epoch of revolutions, but also of wars and counterrevolutions. This means that tremendous opportunities are open to the Marxist tendency everywhere. However, the prior condition for success is that we train our cadres in the Marxist method.

Revolutionary perspectives

Twenty years ago the Stalinist police states with their powerful repressive apparatus fell one after another under the pressure of mass upsurges. Ted Grant pointed out that the collapse of Stalinism was a dramatic event, but it was only the prelude to something far bigger: the crisis of capitalism. And that’s what we are witnessing today.

What was astonishing about the fall of Stalinism was the ease with which the workers overthrew what seemed to be all-powerful states with huge repressive apparatuses. The same thing can happen under capitalism, as we saw in Tunisia and Egypt. In the moment of truth the old regime fell like a house of cards. Situations like May 1968 can be repeated and generalised.

The one thing that was missing from the revolutionary situations that arose in Tunisia, Egypt and Greece was a revolutionary leadership. This is something that cannot be improvised. It must be prepared in advance. How is that done? What is the duty of the Marxists in this situation? We do not yet aim to reach the masses with our propaganda. That is beyond our ability. We aim at the most advanced elements of the workers and youth. We do not put forward “easy” agitational slogans that merely tell the workers what they already know. The workers need to be told the truth. And the truth is that under capitalism the only future that awaits them is one of permanent austerity, falling living standards, unemployment and poverty.

The older layer of tired and demoralized elements will tend to drop away and will be replaced by younger and more vigorous elements who are prepared to fight. As we have explained, the masses will put all the existing parties and leaderships to the test. There will be a whole series of crises and splits to the right and the left. At a certain stage a mass left wing will emerge. The right wing will be shattered by events.

Someone might object: “but the masses in Greece and Spain and Italy don’t know what they want!” But they know what they don’t want! There is a questioning of capitalism which was not present before. However, we must be realistic. The masses cannot stay on the streets indefinitely. There will inevitably be periods of lull, during which the workers will think deeply about what has happened, criticize, differentiate and draw conclusions. It is precisely in such periods that the ideas of Marxism can gain a powerful echo; on condition that we are patient, that we listen to what the masses are saying and put forward the correct slogans.

Our duty, to use Lenin’s expression, is to patiently explain. We must explain that only the expropriation of the bankers and capitalists and the replacement of capitalist anarchy by a democratically planned economy can provide a way out of the crisis. In particular, we must counter the nationalist poison of the Stalinists, who, in the case of Greece, advocate a return to the drachma, by advancing the slogan of the United Socialist States of Europe, the only real alternative to the bankrupt bosses’ EU.

In the revolutionary events that are coming, the advanced workers and youth will learn. Of course, movements like the indignados in Spain display a certain amount of naïveté and confusion, but that it inevitable. There is always confusion in the early stages of a revolution. That is because the masses do not learn from books, but from experience. If we work correctly we can help them to draw revolutionary conclusions, and come to understand the need for Marxism and a revolutionary organization.

The ideas of Marxism are the only ideas that can lead the working class to victory in Europe, in the Middle East, and throughout the world. These are our weapons. In the military academies of the bourgeoisie, the future officers study past wars in order to prepare for future wars. In the same way, we must prepare our cadres as the future officers of the revolutionary proletariat. Every comrade must study the past revolutions in order to apply the lessons for future revolutions.

In the past, our perspectives were correct but may have seemed a little abstract. Now they are very concrete. This reflects, on the one hand, the maturing of the conditions everywhere. On the other hand, it reflects the fact that the IMT is actively participating in revolutionary events. We are no longer simply observers and commentators but active participants.

Tremendous opportunities to build the organization are before us. However, the organization will not build itself. It will require hard work and sacrifice from each and every comrade. We must be filled with a sense of urgency to build the forces of the revolutionary International. If we do not do it, nobody else will.

What is happening should fill us all with enthusiasm, determination and confidence in the future of socialism. By basing ourselves on a scientific analysis, and applying intelligent and flexible tactics, we can connect with the best elements of the youth and the working class, and raise the whole International to the level of the tasks posed by history.

February, 2012

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