A new stage in the crisis of capitalism

After talk of the so called "credit crunch" gave way to optimistic comments about the "green shoots" in the economy, events in Greece caught the bourgeois commentators unaware. Now the world economy has once again been plunged into chaos and uncertainty as the governments of Europe try to contain the fall-out from the near-default of Greece and it is the workers who will be presented with the bill.

“To the toiling masses of Europe it is becoming ever clearer that the bourgeoisie is incapable of solving the basic problems of restoring Europe’s economic life.” (Trotsky, On the United states of Europe, 1923)

The stock markets of the world are in turmoil. The falls on the stock exchanges are a warning that the economic revival is in danger. The extreme volatility of the market over the past fortnight reflects a fundamental lack of confidence. All the lights are now flashing red.

The immediate cause of the panic is the crisis of the euro. This is ironic. Not long ago they were talking about the euro as a rival to the U.S. dollar as a global reserve currency. Now the convulsions of the euro are driving the world's stock markets down and raising fears that the world is about to fall back into slump.

The once prosperous euro zone is now teetering on the edge of a terminal crisis. The markets believe that the weaker euro zone countries will not be able to take the necessary action to reduce their deficits. The fears over the Greek debt problems have rapidly turned into fears over Portugal and Spain. Only by injecting huge funds from an emergency fund can the European bourgeoisie shore up the shaky edifice.

The global financial crisis of 2008 was related to sub-prime mortgages, but now the crisis is related to what one might call sub-prime government debt. In the past, the bonds of European countries were considered to carry virtually zero risk. But now sovereign default in one of the world's core economic areas has become a serious threat. The Economist put it like this: 2008 will be remembered as the year when the banks defaulted; 2010 will be remembered as the year when governments defaulted.

Europe’s troubles can lead to a general crisis of world capitalism. On Monday May 24, Washington Post carried a very interesting headline: “One false move in Europe could set off global chain reaction”. That adequately sums up the situation. The situation is so fragile that any small incident: a missed budget projection by the Spanish government, the failure of Greece to hit a deficit-reduction target, a drop in Ireland's economic output – could set off a chain reaction that could lead to a global slump.

The conclusion of the article is striking: “the future of the U.S. economic recovery in the hands of politicians in an assortment of European capitals”. This is most revealing. It shows the extremely fragile and unstable nature of the economic recovery, which finds its reflection in the extreme nervousness of global markets. Almost anything can cause a sudden collapse of “confidence”. Credit markets worldwide could suffer gridlock, throwing the world economy back into recession. The euro crisis is only the tip of a very large iceberg, and as with a real iceberg, the part you see is frightening enough, but the hidden part is what is really deadly.

In a distorted way, the nervousness of the markets is a reflection of the growing awareness of the bourgeois that the economic crisis will lead to a sharp revival of the class struggle everywhere. The question is simply stated: will governments be able to force the workers to accept huge cuts in the public sector budgets in the interests of saving capitalism? The spectacle of workers taking to the streets in Greece, Portugal and Spain has already given them an answer that they did not want to hear.

The crisis in Greece is only the accident through which necessity reveals itself. In Greece, the chain of European capitalism has broken at its weakest link. But there are several other very weak links. Even if they find a temporary solution to the problems of Greece, the fear that the contagion will spread to Portugal, Spain, Ireland and Italy. And Britain, though not part of the Euro Zone, will not be far behind.

Effects of globalization

At bottom the crisis is a manifestation of the fact that the productive forces on a world scale are coming into contradiction with the narrow limits of private ownership and the nation state. Like the Sorcerer’s Apprentice, the bourgeoisie has conjured up forces it cannot control.

In a sense, the bourgeoisie is the victim of its success. The capitalists attempted to overcome the limitations of the nation state by increased exploitation of the world market. After the collapse of the USSR, two billion people joined the capitalist world market. The entry of China, Russia, Eastern Europe, and the increased participation of India, provided them with vast new sources of markets, investments and raw materials.

However, dialectically, everything is turning into its opposite. The process has reached its limit. Globalization now manifests itself as a global crisis of capitalism. The factors that previously served to push the world economy up are now combining to push it onto a vicious downward spiral. We saw something similar in 1997 and 1998 when the East Asian financial crisis spread rapidly through Thailand, Indonesia, South Korea and other nations. Now Europe is facing the same prospect.

It may be argued that Greece, Spain, Portugal and Ireland represent only about four percent of world economic activity. But once the dominoes start to fall, the effect can pass rapidly from Greece to Portugal and Spain, then to Ireland and Italy, then Britain. Confidence in the euro would collapse, causing chaos in world money markets that would end in a new crisis in Wall Street. In the words of Cornell University economist Eswar Prasad: "the debt crisis and its ripple effects are bad news for all corners of the world".

The Washington Post continues:

“Inside the euro zone, banks are intimately linked, with a web of investments and cross-country bond holdings that could be a main vector for financial ‘contagion,’ with a default in one country weakening banks elsewhere.”

Europe in crisis

The crisis is pushing Europe, and its nation states, into dangerous and uncharted waters. There were growing fears about the exposure of banks to European governments and private borrowers. If nothing was done, European governments would have been faced by the same fate that was suffered by Lehman Brothers. Greece could be on an inexorable path towards default.

By May 7th, yields on the weaker euro-area countries’ government bonds rose sharply, as the markets showed their muscle. There is a real threat that foreign financing for these countries would cease altogether. The bond markets’ nervousness indicates that the investors are quite prepared to see whole nation states go under. They are firm believers on the old Chinese proverb: “What do you do when you see a man falling? – Give him a shove!”

It is true that all euro-area countries have an interest in avoiding a default. If Greece goes under, the markets’ attention would immediately pounce on Portugal, Spain, Ireland and Italy. Confidence in the euro would plunge. Yet the German bourgeois do not like the idea of paying the debts of “profligate” countries.

On May 2nd euro-zone governments and the IMF set out the terms of a €110 billion ($145 billion) rescue for Greece. That was far more than had previously been promised but it was not enough to settle investors’ nerves. Stockmarkets in Europe and America slumped on May 4th and fell again the next day. Greek bonds continued to trade at the level of junk bonds.

Caught on the horns of a dilemma, the European bourgeoisie did not know what to do. The policymakers have been accused of doing too little, too late. But in reality, whatever they did would be wrong. In the end Germany and the European Union were forced to act to save the euro zone. In the early hours of May 10th finance ministers, meeting in Brussels, agreed on an emergency plan to prop up the euro zone. The main element is a “stabilization fund”, worth up to €500 billion ($635 billion). Of this, €60 billion is to be financed by the sale of EU bonds.

The fund is to be supplemented by up to €250 billion more from the IMF. In addition, the European Central Bank (ECB) said it would purchase government bonds to restore calm to “dysfunctional” markets. It will offer banks unlimited loans at a fixed interest rate. Yet again the governments are handing out billions to the banks to prevent a collapse. But in the first place, there is no guarantee that there will not be such a collapse, and in the second, who will pay the bill for these huge sums?

The financial markets’ initial reaction was naturally euphoric. How could the sharks not be euphoric at the prospect of further billions of taxpayers’ money being shoveled down their greedy gullets? Germany’s stock market closed more than 5% higher on May 10th. France’s main index went up by almost 10%: big French banks are heavily exposed to Greece, so they also stand to benefit handsomely.

However, this euphoria soon gave way to a more somber view. The market knows that the whole thing has been hastily cobbled together, and there is no guarantee that it will work for long. The package, despite its impressive scale, only buys time for Greece and other vulnerable troubled governments to cut their budget deficits and to improve their lost export competitiveness. If that is not done, there will be an even worse crisis in the euro zone in a few months.

National conflicts

The appearance of European unity was in reality an illusion. Behind the façade of unity and solidarity, all the nation states jealously guarded control over their national interests and their national banking systems. These divisions have been cruelly exposed by the present crisis.

The parsimonious spirit that lies behind all the talk of an “international rescue” is shown by the long delays in approving the plan, which even then was further delayed by failure to agree on details such as the interest rate to be charged for access to funds. And immediately after the deal was signed, the conflicts between the national governments began.

Germany is insisting that the money will be raised and controlled by governments, not bureaucrats in Brussels. They do not want huge amounts of money being handed out without close monitoring. In other words, the money will be given to Greece with the strictest monitoring and control. Britain said it will not sign up to it.

Jean-Claude Trichet, the central bank’s president, was accused of “caving in to political pressure to help out spendthrift governments”. Axel Weber, the head of the Bundesbank, Germany’s central bank, who may succeed Mr Trichet when he steps down next year, openly criticized the ECB’s conduct in the pages of Börsen-Zeitung, a German financial newspaper. In his defence, M. Trichet maintains that the central bank was “fiercely and totally independent”, a statement that not many people believe these days.

A speech made by Merkel during a rowdy session of the German federal parliament made matters worse. She said that "the current crisis facing the euro is the biggest test Europe has faced in decades," and: “If the euro fails, then Europe fails". The already panicky markets plunged again.

Germany took a unilateral decision to ban the short selling of EU government debt and banks. The move was taken because of the German Chancellor's increasing desperation ahead of last Friday's vote on the euro bailout. The opposition MPs and increasingly her own coalition members are becoming increasingly angry. Merkel had to do something to prove that Germany was not simply writing a multi-billion euro cheque from the taxpayer to bail out Greece and others. She was trying to show that Germany was taking steps to defend itself.

This was no more than a mild attempt to control speculation. It has no chance of success. But the markets want complete freedom to pursue their predatory activities. The move wiped billions of euros off the value of shares and drove the single currency down to a four year low. It infuriated Germany's European partners, who had not been consulted. There were unprecedented public recriminations from Christine Lagarde, the French finance minister. There were naturally loud protests from London (both Labour and Tories were agreed), reflecting the completely parasitic character of British capitalism's reliance on finance capital.

Hypocrisy of German capitalists

The underlying sickness of European capitalism is reflected by the feverish movements of the stock exchanges. The financial world is being shaken by rumors of the possible collapse of the euro zone. All the official denials have not helped to calm the jittery nerves the markets. In this mood of panic, the bourgeois seek to find someone to blame. The Germans blame the Greeks. The Greeks blame the speculators. The French blame the Germans.

Increasingly, the finger is being pointed at Berlin. Germany, which was the engine of growth for the whole EU, its banker and de facto leader, is now the target of all the pent-up anger and frustration of its partners. Why are the Germans so stingy? Why did Merkel not do more to help Greece earlier? At a recent meeting of European leaders it is said that President Sarkozy threatened to leave the euro zone if Berlin did not help Greece

The criticisms of her neighbours do not go down well in with Berlin. The prostitute press in Germany and other countries are trying to portray the situation as “Europe helping lazy Greek workers.” That is a lie. This crisis was not brought about by the workers of Greece or any other country. It was created by the voracious and reckless actions of the bankers and capitalists of both Greece and the rest of Europe. And the present “rescue plan” is a plan to rescue, not Greek workers, but the bankers of Germany, France and other countries who own most of the debts of Greek capitalism.

The public displays of moral outrage in Germany reek of hypocrisy. German capitalism benefited more than any other from the introduction of the Euro. The German capitalists enjoyed a privileged position in the years of boom. Their exports invaded every market, taking advantage of the fact that weaker economies like Greece, Spain and Portugal, could no longer devalue the currency to protect their national market. German banks were happy to make profits out of lending to Greece, Spain and Eastern Europe. They made a lot of money then, but they are not prepared to accept losses now.

Germany’s dilemma

The problem is that, in the end, somebody has to pay the bills. Merkel managed to push through the euro zone-wide bail-out mechanism on May 21. But opposition among German voters is growing and it is spreading to Merkel’s coalition partners and political allies. “Once again, we’re Europe’s fools” was how Bild, the influential German newspaper, greeted news of the euro rescue plan. In the latest polls, 47 percent of Germans are in favor of returning to the deutschmark. In a crucial state-level election May 9 Merkel’s governing coalition was heavily defeated. This is a sign of mounting dissatisfaction with her Christian Democratic Union and its coalition ally, the Free Democratic Party.

The weaker members of the rich man’s club, known as the “Club Med” economies, currently have a 3 trillion euro mountain of debt and their ability to service it is in doubt. The “markets” are nervous about this. That is to say, the bankers are nervous, because they fear that they may not get their pound of flesh. That means, in the first place, the German bankers. Exposure of German banks to Club Med debt may be as much as 500 billion euros. Thus, despite all the huffing and puffing in Berlin, what is being discussed here is not aid to Greece, but aid to the German bankers and their European partners in crime.

From the point of view of German capitalism it was a case of “damned if you do, and damned if you don’t.” If they provided Greece (and other weak euro zone economies) with money, they would have trouble at home, and anyway there is no guarantee it will succeed. If they refused, a Greek default would have a domino effect throughout Europe and on a world scale, which would pull Germany down with everyone else. Therefore, Merkel was forced to swallow hard and approve a huge bailout.

At some point, Germany may conclude that further bailouts are just throwing money into a bottomless pit. At that point, Germany may decide to cut its losses. Germany may decide that the ECB should ignore its rules and purchase the debt of the weak euro zone governments by the simple device of printing money (“quantitative easing”). The euro zone, including Germany, would be paying for it this with the weakening of the euro and higher inflation.

The Germans complain a lot, but they overlook the fact that the euro zone provided Germany with considerable economic benefits. Since the euro was adopted, unit labor costs in Club Med have increased relative to Germany’s by approximately 25 percent, further improving Germany’s competitive advantage. Its neighbors are unable to undercut German exports with currency depreciation, and German exports have benefited. The result has been a massive €110 billion (2007) current account surplus for Germany towards the rest of the Euro-zone. That means that Germany exports €110 billion more to the Euro-zone than it imports, which is paid for by massive lending from German banks. For German capitalists this was of tremendous benefit in the short-run but in the long-run it is completely unsustainable.

In order to revive the deutschmark, Germany would have to reinstate the Bundesbank, withdraw its reserves from the ECB, print its own currency and then re-denominate the country’s assets and liabilities in deutschmarks. This would be difficult, but not impossible. The other members of the euro zone would face far greater difficulties if they wished to return to their old currencies.

However, since German banks own much of the debt issued by Club Med, the losses caused to Germany by a break with the euro zone would be far greater than remaining within the euro zone and financially supporting it, at least for the time being.

Greece – the sick man of Europe

Greece joined the Euro in 2001. At that time German capitalism was puffed up with its own importance following reunification. The moving of its political centre to Berlin in the heart of Europe symbolized its unlimited ambition to become the Master of Europe. Under these conditions the Imperial Master graciously accepted the accession of Greece as a further step towards consolidation of German domination of the Balkans, which began with the German-inspired intrigue to break up Yugoslavia.

However, Greek capitalism is the weakest of several weak links in European capitalism. The Greek bourgeoisie – one of the most corrupt and reactionary in Europe – thought that it was being very clever when it joined the European rich man’s club. Like the frog in Aesop’s fable, it blew itself up to an enormous size, and then it exploded.

Even in 2001, the real weakness of Greek capitalism ought to have been clear to a blind man. It was graphically expressed in the huge deficits in the current account, budget and public debt. As long as the boom continued, Karamanlis could comfortably maintain himself in power for four-and-a-half years. He easily won two elections. The Greek economy appeared to be healthy, with growth averaging over 4% a year up to 2007.

The tourists were streaming in, construction was booming as a result of the 2004 Olympics. Greek ship-owners were making record profits from China’s export boom; Russian oligarchs were buying expensive land on Aegean Islands. There were subsidies from the European Union. Last but not least, Greek membership of the Euro seemed a guarantee of future prosperity.

But the global economic crisis cruelly exposed the underlying weakness of Greek capitalism. As a direct result of the adoption of the euro, the Greek economy has lost competitiveness. Many Greeks are underemployed. This affects the youth in particular, with a sharp rise in youth unemployment and a reduction of openings in education. The unemployment rate for young graduates in Greece is 21%, compared with 8% for the population as a whole.

The growing mood of discontent that was seething beneath the surface was shown by the violent youth protests after Alexandros Grigoropoulos, a 15-year-old schoolboy, was shot dead by a policeman in December 2008. The murder triggered five nights of riots. The protests quickly spilled into the main streets of Athens, and thence across the country. There were violent clashes with riot police and tear-gas filled Syntagma Square. Groups of youths burned cars, broke shop windows decorated for Christmas and tossed in petrol bombs.

These demonstrations were on an unprecedented scale, resembling an uprising of the youth. Demonstrators attacked police stations and public offices in a dozen cities, causing damage estimated at more than €100m ($130m). Hundreds of school students battled with police after the teenager’s funeral. Others threw stones at policemen on guard outside parliament, shouting “let parliament burn”. This was already a warning to the ruling class. It showed the pent-up anger of Greece’s youth, which was only an extreme expression of a general discontent in Greek society.

Throughout history, every revolution has been anticipated by a movement of the youth – particularly the students, who are a sensitive barometer that reflects the buildup of contradictions and tensions in society. This was the case in Russia in 1901 and in Spain in 1930. In both cases, the demonstrations of the student youth were a warning of the revolutions of 1905 and 1931.

The protests caused paralysis of the authorities. The right wing government of Costas Karamanlis, terrified of provoking an even bigger movement, was unable to impose a curfew or order mass arrests. The memory of the military dictatorship in the 1970s was too fresh in people’s minds. Attempts to arrive at a consensus between political leaders on how to quell the unrest quickly broke down. On December 10th there was a 24-hour strike by public-sector unions, despite Karamanlis’s appeal for it to be cancelled.

These events caused alarm among the international strategists of Capital. On 11th December The Economist commented:

“There is something weird and frightening about the sight of a modestly prosperous European country—assumed by most outsiders to have recovered from its rocky history of coups and civil strife—that is suddenly gripped by an urban uprising that the authorities cannot contain.”

The events of December 2008 led inexorably to the fall of the Karamanlis government. George Papandreou, the Pasok leader, called for a general election. “Effectively there is no government…we claim power,” he said. The Pasok gained in popularity as the support for the New Democracy melted away in a welter of financial scandals.

The Pasok government

The general election on October 4th 2009 resulted in a landslide victory for the Panhellenic Socialist Movement (Pasok) that surprised both the political observers and the Pasok leaders. This was a clear reflection of growing popular discontent. 43.9% of voters backing the party, giving it 160 seats in the 300-member parliament. The centre-right New Democracy party was shattered. It won only 33.5% and 91 seats—its worst-ever showing at the polls.

This was the biggest victory for Pasok since it first came to power in 1981. It goes against the trend Europe in the recent elections where social democratic parties have been defeated. It was a clear vote for change. The Communist Party (KKE) took 7.5% and 21 seats, while Syriza, a left-wing coalition that arose from a split from the CP, took 4.6% and 13 seats. Laos, a far-right party, increased its share of the vote to 5.6% and won 15 seats – at the cost of the ND.

Unlike his father, Andreas Papandreou, and like Blair in Britain, George Papandreou has worked to pull the party to the right. Brought up in Sweden, and educated in the USA, he enjoys friendly relations with Obama. Initially he promised stimulus of up to €3 billion ($4.4 billion) to accelerate economic recovery and above-inflation increases in wages and benefits for public-sector workers. He also promised real rises in wages and pensions to encourage Greeks to spend again. He talked of exporting renewable energy, harvested on sunny mountainsides and windy Aegean Islands, and persuading Greek software developers abroad to set up companies at home, and so on and so forth.

But these reformist dreams immediately evaporated like a drop of hot water on a hot stove. They came into conflict with the harsh reality of economic crisis, collapsing tax revenues and a soaring budget deficit. The Karamanlis government admitted that Greece had manipulated its figures to qualify for the euro in 2001. Papandreou admitted that this year’s budget deficit was not 6.7% but 12.7%.

It is true that the Greek capitalists, with the mentality of a petty haggler in the marketplace who wishes to sell rotten fish by placing fresh ones on the top, tried to get round the problem by the simple expedient of falsifying the statistics to conceal the facts – something they are, incidentally, not alone in practicing. But sooner or later the facts become known. The source of the problem, however, was not in Athens and its faulty accounting.

The problem is precisely with the mechanism of the “free market economy”, which operates with the same rationality as a herd of antelopes in the veldt. As long as the market was heading upwards, they did not pay any attention to the niceties of economic and financial soundness. But once the markets head downwards panic sets in and a stampede begins. Now that the stampeded has begun, nothing can stop it. The speculators rush blindly from one market to another in search of a safe haven. In the process, they trample the crops, demolish houses and kill anyone who stands in their path.

The markets decide

There was an old saying: man proposes and God disposes. Nowadays it would be more correct to say: Man proposes but the Market disposes. With a budget deficit almost 13% and a public debt of 125% of GDP, international investors were not impressed with Papandreou’s promises, and sent him a little message to convey their opinion. Spreads on Greek government bonds over German Bunds began to widen, and have continued to widen ever since. This is the financial equivalent of laying hold of a man’s genitals and exerting a gentle squeeze.

Papandreou wants social peace with fiscal austerity. But the two things are incompatible. Papandreou wants to avoid direct confrontation with the trade unions, but he has only two alternatives: either he defends the interests of the workers or those of the capitalists. And he has made his choice. Papandreou is compelled to cut living standards in order to placate the almighty Market, just as Agamemnon was obliged to sacrifice his daughter Iphigenia in order to placate the Gods of Olympus. However, Agamemnon ended up very badly as a result of his actions, and his successor will not end up any better as a result of his.

The Greek premier is trying to hide behind the IMF and the anonymous “international speculators” that have brought Greece to its knees. But for the millions of Greek workers who are faced with savage cuts in their living standards, these arguments do not excuse the actions of the Pasok leaders. The Greek workers hate the speculators, the IMF and the bourgeois leaders of the EU. But they cannot forgive a government that, while calling itself socialist, has so readily bent the knee to the IMF and Brussels.

Immediately, Papandreou found himself ground between two millstones. The prime minister’s promises of fiscal austerity have not convinced the markets. For every step back the reformist leaders take, the bourgeois will demand ten more. The Economist remarked: “By Greek standards Mr Papandreou has been courageous, but he should have been braver still. Ireland set the pace on December 9th by producing a budget that sharply cut public-sector wages.” And it added: “Hard times, unfortunately, demand harsh measures.” Here is the real voice of the bourgeois: stony-faced, hard hearted, and completely impervious to human suffering. All must be sacrificed on the altar of Capital!

The austerity measures approved by the Athens government were too little for the bourgeoisie, but too much for the workers. The Greek workers, following their marvelous revolutionary traditions, immediately reacted with mass street demonstrations. Feeling themselves betrayed by the government they hoped would defend jobs and living standards, the workers of Greece have taken to the streets. For months, Athens and other cities have been rocked by mass protest demonstrations. One bourgeois commentator in Britain described the situation in the following terms: “Greek workers against European bankers.” That puts it very well.

Marx wrote that France was the country where the class struggle was always fought to the finish. The same can be said of Greece. The memories of the Civil War and the bitter divisions between Left and Right, and later of the Junta and the Polytechnic uprising of 1974 are burned on the consciousness of the masses. The divisions between the classes constitute a fault line running through Greek society that can explode at any time.

The question can be put very simply: the bourgeoisie cannot afford to maintain the concessions that were forced from them in the past. But the working class cannot tolerate any further attacks on their living standards and conditions. The workers of Europe will not stand with their arms folded while the conquests of the last fifty years are systematically destroyed. The developments in Greece therefore show what will happen in every country in Europe as the crisis unfolds.

The European Union

During the Cold War European capitalists attempted to form a bloc to defend themselves, on the one hand, against the might of the USSR, on the other hand, against the encroaching power of the USA. The collapse of the USSR and the achievement of a unified Germany in 1989 gave a further impetus to European economic integration. The German bourgeoisie and its political representative Kohl, had big ambitions. The euro was in large part an attempt by Berlin to achieve by economic means what Hitler attempted to do by force – to unify Europe under German domination.

The euro zone has a single central bank, the European Central Bank (ECB), and therefore has only one monetary policy, regardless of whether it is located in Athens or Berlin. But in reality, the whole project was dominated by German capital. Initially, Germany benefited from free access to other European markets, and the others benefited from access to seemingly unlimited supplies of capital, investment, loans, grants and credits. Everything seemed to be for the best in the best of all capitalist worlds.

In order to convince Berlin to share its currency with the rest of Europe, it was agreed that the euro zone should be modeled after the Bundesbank. The Euro itself was to be as strong as the deutschmark. As a condition for joining the euro zone, every country had to agree to rigorous “convergence criteria”. These were intended to synchronize the economy of the member states with that of Germany.

These criteria included a budget deficit of less than 3 percent of gross domestic product. Government debt levels were to be no more than 60 percent of GDP. An annual inflation could be no higher than 1.5 percentage points above the average of the lowest three members’ annual inflation. Now all these plans lie in ruins. As we predicted more than ten years ago, it is impossible to achieve convergence criteria for economies that are moving in different directions. Greece’s failure to comply with the Growth and Stability Pact is only the most blatant case. But the truth is that from the very beginning none of the euro zone member states — including France and Germany — have complied with the rules.

Now deep cracks have opened up which threaten to bring down the whole artificial construction and bury all the dreams of a united capitalist Europe. Sarkozy at one point threatened to pull out of the single currency if Germany didn't agree to pay up.

Big banks in France and Germany would be devastated if there was default in Greece or Portugal, since they have lent most of the money.

Will the euro zone break up?

The trouble with the euro is that it attempts to unite economies that are pulling in different directions. The European bourgeois are striving with all their might to keep the currency union together. They are acting on the old thieves’ saying: either we hang together or we will hang separately. But the crisis has revealed the underlying fault lines that threaten to break the euro zone apart and even pose a question mark over the future of the European Union itself. The tensions are increasing all the time.

When the euro was born a decade ago, it came with central rules limiting budget deficits and banning bail-outs. Yet the rules, which theoretically included huge fines for excessive borrowing, were never likely to stick, and were soon emasculated by France and Germany. The financial markets assumed that no euro-area country would ever be allowed to go bust: they assumed that the European Central Bank would always come to the rescue. Now, despite the latest bailout, this can no longer be taken for granted.

This time, Germany has agreed to back a “rescue fund”. But there are profound tensions in Germany. If the crisis deepens and the national tensions increase, it could possibly cause Germany to quit the euro zone altogether. The idea is rapidly gathering ground in Germany that Greece and the euro zone’s other weaker economies should be excluded from the currency union if they do not pay their debts. At one point it seemed that Chancellor Merkel herself was in favour of this.

It is therefore not at all ruled out that the present crisis will end with the “reconstitution” of the Euro zone, either by the expulsion of Greece or the withdrawal of Germany. But the latter variant would mean in effect, the total breakup of the experiment. It would plunge world currency markets into a deep crisis and wreck the weak economic revival.

If Greece were to withdraw from the euro, its central bank could print money and purchase government debt, bypassing the credit markets. It would also allow Athens to devalue, which would stimulate external demand for Greek exports and spur economic growth. The alternative is to resort to a painful “internal devaluation” via austerity measures demanded by the International Monetary Fund (IMF) and the EU.

The problem is that no one would want this new currency, particularly because it would be clear to everyone that the government would only be reintroducing it to devalue it. In effect, the drachma would only be accepted within Greece, and even there it would not be accepted everywhere. It would lead immediately to a black market, which would have to be put down by force. The cost of exit would therefore be prohibitively high.

How can the present crisis be resolved? In theory, the expulsion of member states is illegal. In any case, it would have to be approved by of all 27 member states, which poses the intriguing question: why should Greece approve its own expulsion? Even if it could be arranged, it is clear that Portugal, Spain and Ireland would not be very keen to vote for a measure that would provide a precedent for their own exclusion in the not-too-distant future.

Of course, there are very clever people sitting in Brussels whose creative powers can surely enable them to think of some bureaucratic solution that would bend the rules to allow the European Union to get rid of undesirable members without formally breaking the treaties. They could, for instance, set up a new European Union with a new “strong” euro zone, minus Greece (and any other awkward customers).

Such a step would eliminate one problem, but only at the cost of creating many new contradictions. Germany would greatly increase its power, and that is not something the rest of Europe would be enthusiastic about. In a new euro zone composed of, say, France and the Benelux countries, Germany’s economy would represent 45.6 percent of overall output, as opposed to 26.8 percent of euro zone now. Moreover, the excluded states might take their revenge by defaulting on their debts, which would have a devastating effect on the new euro zone.

Parasitism of capitalists

The bourgeois has long ago lost all interest in productive activity and productive investment. It seeks to make money out of money without having to bother with the painful and risky process of production. With a few exceptions, like China, where huge profits can be made from the exploitation of a vast pool of labour from the countryside, the bourgeoisie has tended to rely more and more on the parasitic service sector, and especially the financial sector. That is why they always present the crisis as a crisis of credit.

This is an entirely mystical way of presenting the question. Credit can never play an independent role in the economy. Credit is only a way of expanding consumption beyond its natural limits, either individual consumption of commodities, or the consumption of machinery, raw materials and labour power by the capitalists themselves.

The purely parasitic nature of modern capitalism is seen by the fact that when the banks ran up huge debts, the state immediately stepped in to shower them with vast amounts of public money. The bankers said “thank you very much” and then proceeded to pocket the money, or pour it into a black hole (nobody knows how deep it is or where it leads), helping themselves to generous bonuses in the process.

There is no sign of all this massive injection of public funds into the banks having any serious effect on the real economy. Economic life remains at a very low level and unemployment remains stubbornly high. There is very little real gain to be shown for such a huge expenditure of public money. The reason is not hard to explain. Given the huge amount of excess capacity on a world scale, there is little or no incentive for the capitalists to spend large sums of money on productive investment. There is one third excess capacity in the car industry on a world scale. Why should Ford and General Motors build new plants, when they already have too many factories and not enough paying customers?

“The banks must be saved!” That is all. The politicians immediately come running with an open cheque book. And the Social Democrat politicians run faster than anybody else. Having “saved the banks” (that is, having saved the bankers), the politicians then sadly inform a bewildered public that, well, actually, we never had the money to pay the bankers in the first place. We had to borrow it in your name and now you must pay it all back. Time for sacrifice!

Once the banks have pocketed the money of the state, the markets (that is to say, the same bankers) suddenly begin to shout: “Look! There is an unsustainable level of public debt! This must be paid immediately!” In the midst of this unholy hullabaloo, nobody asks the simple question: Why is there a high level of public debt? And nobody asks where all the money has gone to. Here we enter the mysterious realm of banking secrets, which must be maintained as absolutely as the secrets of the confession box in church.

What is the “credit crunch”?

As long as the world capitalist economy was going forward, markets were booming, profits were soaring, credit was easy. Nobody looked too closely at the balance sheets of companies, banks or nations. Everybody was enjoying the merry carnival of money making. The values on the stock exchange are soaring to heights that bear no relation to the real economy? Let them soar! The banks are lending money they do not have? Let them lend! Greece wants to borrow a billion or two? Let them have it!

But when the day of reckoning comes (as it always does) the mood of the bourgeois changes abruptly. Now nobody wants to lend money. On the contrary, they are all calling in their debts. Instead of the former cheerful open-handedness, there is a mean and grasping mentality, like that of a miser who greedily hoards his loot and guards it jealously so that nobody will see how much he has got. Hoarding is a typical feature of primitive capitalism in its early stages. In a crisis, it is as if the bourgeois have returned to their beginnings, like a man in the stage of decrepit senility who returns to a second childhood.

Now nobody wants promissory notes. They do not want promises of any kind, because they no longer trust anybody: creditors, bankers or governments. They want the real thing. They want cash in hand. And they want it now. This meanness takes no account of the real problems faced by families, businesses or governments. You do not have enough food to eat? Then starve, but pay me what you owe. Your business will have to close, and hundreds will lose their employment? Then close it, and be damned, but pay up! And if this absolute rule of Capital is appropriate in the case of individuals and businesses, why should a nation state be any different? It is the business of Capital to make money. Whatever problems may arise from this money-making activity is an irrelevant matter.

Marx describes this tendency to hoard money in a crisis:

“Countries in which the bourgeois form of production is developed to a certain extent, limit the hoards concentrated in the strong rooms of the banks to the minimum required for the proper performance of their peculiar functions. Whenever these hoards are strikingly above their average level, it is, with some exceptions, an indication of stagnation in the circulation of commodities, of an interruption in the even flow of their metamorphoses.” (Capital, vol. 1, Section 3, Money, c) Universal Money)

The role of gold

Paper money is only a promise to pay. In the past it was backed by gold and silver. But in the age of the senile decay of capitalism the bourgeois imagined that it could do without gold altogether. The bourgeois economists talked of the “demonetization of gold”. This is complete nonsense. Gold is a commodity, and like all other commodities, has an objective value, determined by the amount of socially necessary labour power expended on its production. Its value as a commodity is high because it is relatively rare and there are high costs involved in its discovery and exploitation.

However, gold has historically evolved as “the commodity of commodities” – that commodity through which all other commodities express their values, that is, money. It is a standard of price, and also serves as a universal measure of value, the equivalent commodity par excellence, to use Marx’s expression.

The Bretton Woods agreement of 1944, which set up the international monetary regime that prevailed from the end of World War II until the early 1970s, established the dollar as the medium of world trade (with the pound sterling as a secondary currency). In reality, however, currencies were still pegged to gold at a value fixed in dollar terms.

At that time the USA could dictate terms to the rest of the world. After the War, the productive apparatus of the USA was intact, while Europe and Japan were devastated. Two thirds of all the gold stocks in the world were in Fort Knox. The dollar was therefore “as good as gold”.

When the United States abandoned the gold standard in 1971, Washington liquidated the Bretton Woods agreement that pegged currency to gold. Currencies were allowed to float. While the U.S. dollar was still regarded as the world currency, the deutschmark began to emerge as a strong contender for this role.

The paper currencies in use throughout the world today are no longer backed by gold. Therefore they hold no value except the political decision to make them the legal tender of commercial activity. Refusal to accept paper currency is, within limitations, punishable by law. But this means governments must be willing and able to enforce the currency as a legal form of debt settlement. But what happens if a government has such a high level of debt that it is unable to meet its liabilities?

By abandoning the link to gold, the bourgeoisie created the conditions for the kind of currency competition and beggar-my-neighbour devaluations that was one of the main factors that transformed the crisis of 1929 into the Great Depression of the 1930s. In the last few years the US authorities were content to see the dollar slide against the euro and other currencies in order to boost its exports to the rest of the world.

Some of the more obtuse politicians actually believed the nonsense of the bourgeois economists about the “demonetization of gold”. Thus, Gordon Brown sold off Britain’s substantial gold reserves between 1999 and 2002, and in the process obtained a mere $4bn for what today would be worth more than $15bn. This little detail reveals at once the intellectual bankruptcy of bourgeois political economists and reformist politicians, which, in this case, contributed directly to national bankruptcy.

The flight into gold

As the credit ratings of Greece, Spain and Portugal fall, so the world market price of gold is soaring far more than most other commodities. This always happens in a crisis, when the capitalists look for a safe harbour to shelter from the storm. In uncertain times, the financial gamblers of yesterday suddenly lose their taste for risky operations. The hard-headed men of money are no longer interested in paper money, or promises of any sort, whether from private individuals, bankers or Greek Prime Ministers. They want only the real thing: cash in hand, ready money – real money, that is, gold.

Let the academics, the professors of economics with long lists of letters after their name, deliver lectures on the demonetization of gold. Those who really hold our economic destinies in the palm of their hand, are unimpressed by such lectures, which only confirm them in their instinctive belief that the most ignorant people in society are to be found between the four walls of universities. Instead, they repeat the words of Shakespeare in Timon of Athens:

“Gold? Yellow, glittering, precious gold?
No, Gods, I am no idle votarist! ...
Thus much of this will make black white, foul fair,
Wrong right, base noble, old young, coward valiant.
... Why, this
Will lug your priests and servants from your sides,
Pluck stout men’s pillows from below their heads:
This yellow slave
Will knit and break religions, bless the accursed;
Make the hoar leprosy adored, place thieves
And give them title, knee and approbation
With senators on the bench: This is it
That makes the wappen’d widow wed again;
She, whom the spital-house and ulcerous sores
Would cast the gorge at, this embalms and spices
To the April day again. Come, damned earth,
Thou common whore of mankind, that put’st odds
Among the rout of nations.”

The bourgeois are anxious to get their hands on gold, hoping its glitter will defy the laws of economics and maintain their fortunes until the dawn of better times. Indeed. Long before the crisis of 2007 many financial speculators were already getting rid of paper money and building up their stock of bullion. As soon as that happened, savvy shoppers followed. The big-time investors, as always, led the way, and are now being followed by everyone else, pushing the price of gold to astronomic levels.

Refineries in South Africa say they are overwhelmed by orders from Germany for Krugerrand gold coins. This indicates that ordinary people are buying gold, not just professional investors. In Germany memories of hyper-inflation in the 1920s still survive. The Austrian mint says it ran out of its stock of similar coins last week, as the price of an ounce of gold passed through the €1,000 barrier for the first time.

The “speculators” (read, capitalists) do not have any faith in the euro, and still less in the pound sterling. The dollar has risen recently, but this is a sign of desperation and the weakness of alternative currencies. It is certainly not justified by the strength of the US economy or the state of its finances. Under these conditions one would expect to see a flight from paper money into gold and other things that may hold or increase their value (works of art). And that is just what we are seeing.


The European bourgeois are looking to the future with dread. They must tread carefully, because they are walking on a minefield. With every step they take, the bourgeoisie and its political representatives must constantly look over their shoulders to see how the working class is reacting. That is the main problem. After decades of relative prosperity, the working class will not allow their living standards to be destroyed without a fight. And that is just as true of the German workers as it is in Greece.

Merkel paid the price on May 9th, when she suffered her worst political defeat in more than five years in office. The very evening when European finance ministers were meeting in Brussels to defend the stability of the euro, voters in North Rhine-Westphalia (NRW), Germany’s most populous state, ejected the chancellor’s allies from office. Voters unseated a coalition between her Christian Democratic Union (CDU) and the liberal Free Democratic Party (FDP) similar to the one in Berlin.

Merkel was not to blame for the euro crisis but when it came she delayed taking measures. On the one hand she wanted to exert extra pressure on Greece, but also Spain, Italy and Portugal to introduce draconian austerity packages. On the other she was hoping that bail-outs of Greece and other weak euro-zone members could be put off until after NRW’s election. But the delay only made matters worse. The defeat in NRW has deprived the Merkel government of its majority in the Bundesrat, the upper house of the legislature, which represents the states. To enact most money bills the government will now have to co-operate with the opposition.

The economic crisis is causing divisions at the top that sooner or later must lead to an open split in the government. The pressure will mount. Everyone is in favour of deficit reduction in principle but in practice it is another matter. Merkel now presents herself as the guardian of economic stability. But who will decide where the axe will fall? Some suggest cuts to education and child care. Health-care is another candidate for “reform” – that is, the axe. The crisis of the bourgeoisie is shown in the contradictory advice given to Merkel: “Be bold”, she is told, “but do not offend the voters”. How this miracle is to be accomplished we are not informed.

The bourgeoisie faces a dilemma, not just in Germany but in all Europe. The seriousness of the economic crisis means that they will have to inflict deep cuts on the workers and the middle class, but the social and political consequences of such actions will completely undermine them. To solve this dilemma is only slightly more difficult than trying to square the circle. Every attempt to restore the economic equilibrium will destroy the social and political equilibrium.

The German bourgeoisie is resentful of bail-outs, fearful about the euro’s stability and increasingly unwilling to identify Germany’s interests with those of Europe. This is a far cry from the grandiloquent speeches of Kohl about European unity and Germany’s role at the centre of it.

World economy

The looming crisis looks very similar to the last, with the financial system, and banks in particular, at the centre. This fact reflects the fundamental sickness of capitalism in the epoch of its senile decay. What is now being presented as a monetary crisis will become a prolonged economic and political crisis affecting every country in Europe.

Deutsche Bank analysts have warned clients that if the one trillion dollar EU rescue package fails to calm markets US GDP growth could be reduced by half to one percent over the next couple of years. "If the rescue program fails altogether, we are looking at a potentially much more negative picture, with the distinct possibility of a double-dip recession."

This will have profound effects on the entire world. The economic recovery has a very fragile character, and could be derailed by events that began in one small corner of Europe. World stock markets have given way to scarcely concealed panic. Instead of “green shoots”, respected commentators are beginning to talk ominously about another Great Recession.

The U.S. capitalists were hoping that they could dramatically increase exports to Europe. But the steep drop in the value of the euro (about $1.25, down from more than $1.50 in November 2009) makes American goods more expensive compared with those produced in Europe. The American economy will be hard hit by a new banking crisis and a fall in exports to Europe. It would be harder to borrow money or raise finance for businesses.

In a crisis the banks stop lending to each other and begin closing down credit lines, sparking a chain reaction throughout the financial system. The banking systems in Europe and the United States are closely interconnected and European banks must have serious repercussions in the USA.

Daniel Tarullo, a member of the Federal Reserve's board, recently warned that a repeat of the 2008 crisis which saw the near collapse of the US financial sector was "not out of the question." He told Congress last week that banks were going through spasms that "brought back memories of developments during the recent global financial crisis." The decline in the common European currency also makes it less likely that China will accept with U.S. demands to raise the value of their money, making it easier for U.S. products to compete.

Europe faced with a downward spiral

Some crises can be solved with reforms, which do not go beyond the established limits. This is above all the case after a long period of economic growth when capitalism has accumulated a layer of fat. It can use its accumulated reserves to prevent the crisis from developing into a deep slump.

In the recent crisis, the ruling classes of the world, beginning with the USA, was frightened at the social and political effects of a slump, and took extraordinary measures to prevent it. From the standpoint of orthodox capitalist economics these measures were completely irresponsible.

These measures had a certain effect, but did not solve anything fundamental. On the contrary, the huge levels of government debt caused by the bail-outs are a finished recipe for new and even more severe crises of an economic, social and political character.

Long ago Ted Grant predicted that in the event of a deep crisis, the bourgeoisie would use their accumulated reserves, and this is just what has happened. Over a period of more than half a century the capitalists have accumulated a layer of fat that could be used to prevent a deep slump from taking hold. But these reserves are rapidly being used up, and now the governments of the western world have been obliged to resort to the policy of deficit financing to prevent a total collapse. The result has been the creation of new and insoluble contradictions in the form of deficits that have no historic precedent in peacetime.

In the period following World War Two, in 1945-7, the USA financed European capitalism to the tune of $200 billion (in modern money). But in the first two years of the present crisis, the US government underwrote the banking system by $800 billion, and Britain (a far smaller economy) handed over $400 billion – twice the total amount of Marshall Aid. This situation cannot be sustained. The options of the ruling class are severely limited. Interest rates are close to zero, and cannot be further reduced to stimulate borrowing.

The huge debts left over from the previous period still have to be repaid, which will inhibit consumption and slow the recovery in Europe and worldwide. The recourse to “quantitative easing” is a desperate measure, which, if it continues, will lead to a combination of stagnation and inflation (“stagflation”). Thus, the capitalists will end up with the worst of all worlds.

The viability of the “rescue” package launched by the bourgeoisie in Europe depends on the implementation of brutal austerity measures. Failure to carry these out could lead to cutting off the cash, which is approximately the same as cutting off the vital supply lines that keep a critically sick patient alive. Even if it the plan were to “succeed” it would leave Greece with an intolerable public-debt burden. This so-called rescue means years of painful austerity for the people of Greece, without giving other countries any relief.

If there is a default in Europe, it will be accompanied by a massive contraction of consumption, which can drag the whole world economy back into recession. It will affect the USA and Asia. None of the contradictions has been eliminated. A new commercial real estate crisis is being prepared in the USA. Some say it might be due this autumn. This involves 6.7 trillion dollar, whereas the last sub prime crisis "only" involved 1.3 trillion. It could drag the whole financial system down into a complete collapse.

Fears are growing of a double-dip recession. The Chinese leaders are also worried. The Chinese spent massively to avoid recession but this has created new and insoluble contradictions. China has built up a colossal productive power, which cannot be absorbed by its internal market. If demand shrinks in Europe and the USA, where are they going to export? And since China has been the main engine of global growth as the world struggled to emerge from recession, a sharp slowdown in China could deal a heavy blow to the world economic recovery.

What future for Europe?

The euro and the European Union will probably survive this crisis because the consequences of a break-up would be very serious for all. Nevertheless, the crisis is so deep, and the confidence of the bourgeois so shaken, that some of the bourgeois strategists are beginning to contemplate the unthinkable. George Friedman wrote on the intelligence website Stratfor on May 25, 2010:

“We return to the question that has defined Europe since 1871, namely, the status of Germany in Europe. As we have seen during the current crisis, Germany is clearly the economic center of gravity in Europe, and this crisis has shown that the economic and the political issues are very much one and the same. Unless Germany agrees, nothing can be done, and if Germany so wishes, something will be done. Germany has tremendous power in Europe, even if it is confined largely to economic matters. But just as Germany is the blocker and enabler of Europe, over time that makes Germany the central problem of Europe.”

If the EU were to break up, where could Germany look? The obvious answer would seem to be France. But historically, France and Germany have been rivals, and even in the context of the EU this rivalry continued, with France aspiring to the political and military leadership of Europe, consigning to Germany the economic primacy. Unfortunately for France, economic power is always decisive in the last analysis.

France’s interests look southwards – towards the Mediterranean, the Middle East and North Africa. Germany, by contrast, looks east – to Central and Eastern Europe, the Balkans – and Russia. That is where Hitler looked for Lebensraum. What he failed to do by military means, the German capitalists hope to do by economic means. It is not ruled out that Germany in the future will expand its contacts with Russia, which represents a vast potential field for markets and investments, raw materials and cheap labour. But this could only be achieved by subordinating Germany to Russian interests. This would be bitterly resented by Washington and the rest of Europe, especially Poland.

The unification of Europe is a necessary task if Europe is not to enter into a path of slow and inglorious decline, as happened to imperial Spain from the 17th century onwards. It is a historically inevitable task, which capitalism has posed but is totally incapable of solving. Only the Socialist United States of Europe could succeed in radically abolishing the old frontiers and unite all of Europe, include Russia, the Ukraine and Turkey. It would be able to mobilize the colossal productive potential of what is, in fact, Eurasia, uniting the vast natural resources and agriculture of Russia and the Ukraine with the industries of Europe.

Robbing the poor to pay the rich

In 1939 the capitalists found a way out of the crisis through war. But this avenue is now closed. There is no question of Europe waging war against the USA, for example, or of conquering Russia (as Hitler attempted), still less of conquering China. Europe, despite its colossal potential, remains weak and divided, as the tiny Greek city states were divided in Antiquity, when they ended up under the domination of Rome.

The Marxist tendency pointed out long ago that the coming period will be a period of wars, revolution and counterrevolution. The recent upheavals in Iran, Kirghizstan, and Thailand, on the one hand, and Iraq, Afghanistan and Gaza, on the other, show the correctness of this assertion. There is colossal instability at all levels: economic, financial, social, political and military.

For reasons we have explained, a world war is ruled out at the present time. But there will be many small wars: wars over markets and natural resources, especially oil. This can be a source of international or national conflict, which inevitably leads to higher military spending. The bourgeoisie of all nations are preparing for the future by arming to the teeth.

Under these circumstances, the ruling classes of Europe have no alternative but to attack the working class. For the last half century, they bought social peace by granting reforms. But this option is no longer available to them. From the standpoint of the capitalists, not only can they not afford any new reforms: they cannot afford to maintain the reforms that were won by the working class over the last fifty years. In order to maintain their profits, they must destroy all these reforms, which the workers have come to regard as natural.

In reality they are not natural, but the product of decades of class struggle. It is worth remembering that democracy itself was only achieved through a long and bitter struggle. The ruling class, which now often speaks of its commitment to democracy, was opposed to each and every democratic advance. And like every other gain that was won through struggle, the democratic rights of the workers are under threat, beginning with the most important rights: the right to strike and demonstrate.

In the last period the capitalist system went beyond its limits. The unbridled expansion of credit (and consequently, of debt) has pushed world capitalism into an abyss of debt from which it is now striving to extricate itself. But in so doing, it has created new and indissoluble contradictions. The central contradiction is that the European working class is now a thousand times stronger than it was in the 1930s.

The peasantry, the main social reserve of reaction, has been practically eliminated. In Italy, Spain and Greece, the peasants were a majority and even in France and Germany they were a sizeable force not so long ago. Now they are a tiny minority and the working class is a decisive majority. The workers’ organizations are intact and have not suffered a decisive defeat since 1945. The students, who in the 1930s were a recruiting ground for fascism, have moved to the Left and are a now a recruiting ground for revolution, as they were in Tsarist Russia.

Given this correlation of class forces, the bourgeoisie regards the prospect of an all-out conflict between the classes with dread. But they have no alternative. The perspective is of a weak recovery, accompanied by high levels of unemployment and ferocious attacks on the living standards of the workers and middle class, the unemployed, the old and the sick. The poorest sections of society will be compelled to pay the bill for the crisis of capitalism. This fact, in itself, will have profound consequences.

For a whole historical period the bourgeoisie has had to base itself on the support of the reformist leaders of the unions and mass workers’ parties. But in the end, this basis will not be reliable. The crisis of capitalism is also the crisis of reformism. For decades the social base of reformism in the labour movement has been strengthened at the cost of the revolutionary wing, which has been weakened and isolated. Workers are practical people. If, as the reformists assured them, it was possible to achieve what they wanted under capitalism, then why go to all the pain and trouble of revolution?

These arguments carried weight as long as the reformists delivered the promised results. Reformism with reforms makes sense. But reformism without reforms, reformism with counter reforms, makes no sense at all. This is the lesson that the Greek Prime Minister Papandreou is learning, to his cost. The Greek workers voted massively for the Pasok in the last elections, because they hoped that the Socialists would protect their living standards. But the depth of the crisis of Greek capitalism ruled this out.


Despite their intentions, Papandreou and the other leaders were compelled to take drastic measures, not to protect the living standards of the Greek workers and middle class, but to save Greek capitalism. The two things are mutually exclusive.

Papandreou has promised to push through cuts totaling 45 billion Euros to reduce the budget deficit by an unprecedented 11 percentage points of GDP, to below the EU ceiling of 3 percent. But already there are suggestions that the planned deficit cut of more than 20 billion Euros in 2010 is too ambitious. In the context of an economic contraction of about 4 percent, this is the country's deepest recession since 1974.

Deep cuts in public spending will make things worse by reducing demand and causing a fall in tax returns. The increase in VAT and public sector pay cuts adds up to an estimated 10 percent loss in purchasing power. This hits small businesses hardest. About 60,000 small businesses are expected to shut down by the end of the year - around a third of the total. This will mean less income from taxes, not more, as the government claims.

Fuel tax increases, which have boosted the price of unleaded gasoline by 36 percent to 1.52 Euros a liter since February, have shrunk sales volume by up to 15 percent. On the other hand, with the collapse of construction, Greek unemployment rose to 12.1 percent in February, the highest monthly level on record and above an average 2010 estimate of 11.8 percent envisaged by the bailout plan. Higher unemployment will force the government to spend more on benefits than expected. And earnings from tourism receipts, Greece's biggest source of foreign currency, are set to shrink for a second consecutive year, by up to 15 percent.

Papandreou’s chances of actually implementing his austerity policy are therefore close to zero. In the end, no matter how much pressure is applied on the people of Greece, they will never be able to pay their debts. The so-called “aid” can only postpone the Day of Judgment. And the merciless pressure from Brussels to slash living standards, and therefore reduce demand, will only succeed in pushing Greece further along the road to national bankruptcy and default.

The threat of a chain reaction, beginning in Greece, that could drag the whole of Europe into a downward spiral, still hangs over Europe. One country after another will be pushed over the precipice, starting with the weakest ones. The rest, with a greater or lesser delay, will follow. The strategists of Capital are aware of the danger. An article by Thomas F. Cooley, professor of economics and dean of the NYU Stern School of Business, on 2nd June bore the title: This Greek Tragedy Is Only Beginning. In it he writes:

“For the next several years Greece will face a huge drop in output and consumption. The magnitude of the drop in Greece will dwarf the U.S.'s experience in its recent recession. It will take years for consumption levels to return to anything close to pre-crisis levels. Wages will fall, and access to capital markets will be limited. Greece will be forced to restructure its debt. Several of the other debt-burdened economies in Southern Europe will face similar, painful adjustments.(This Greek tragedy is only beginning, Forbes.com)


Portugal is a small economy, accounting for only 2% of euro-zone output and public debt. Before they turned their attention to Spain, the bond markets seemed to judge Portugal as the next weakest link in the euro zone chain. Portugal’s bond yields jumped to 5.7% on May 5th, an increase of 1.6 percentage points since the start of the year. Its public debt reached 77% of GDP last year. This is about average for Europe, but its budget deficit was 9.4% of GDP – a very high figure.

Portugal relies heavily on foreign capital and so is vulnerable to market bullying. Its net international debt rose to 112% of GDP in 2009, after a run of huge current-account deficits. About half of this is public debt; part of it is direct investment in big firms; but a large portion, some 46% of GDP, is channeled through the banking system.

Lisbon protests that Portugal has scrupulously observed the euro-zone’s fiscal rules, cutting its budget deficit from 6.1% of GDP in 2005 to 2.8% by 2008. Public-sector jobs have been cut by 10%. In 2006 the Portuguese held down real increases in pensions at a time when the economy was still growing rapidly, and relaxed the rules on hiring and firing.

These are the same kind of policies that the markets are demanding in Spain and Greece. But this was all to no avail. For every step Portugal takes to satisfy the markets, the latter demand three more. Portugal has been warned that if it is to refinance its existing debts at tolerable interest rates, it must lower the cost of public borrowing. That means it must undertake far more drastic action to cut the budget deficit.

The fall in the euro as a result of the crisis ought to help Portugal sell more in Angola, Brazil, China and America. But a rise in Portugal’s exports can only be at the cost of other capitalist economies. In the end, the government will have no alternative but to launch an attack on living standards. It has already pledged to cut unemployment benefit. Public pay could be frozen. Big transport projects could be scrapped and state-owned firms can be sold off to satisfy the implacable demands of the Men of Money.

This means that all the gains of the Portuguese Revolution of 1974-5 will be liquidated. But such a counterrevolution cannot take place without arousing fierce resistance from the Portuguese working class, which has never forgotten the revolutionary traditions that burst to the surface in those glorious days. At that time it would have been possible to have carried through the socialist revolution in Portugal, and this could have been accomplished peacefully.

The London Times in 1975 published an editorial with the title: “Capitalism in Portugal is dead.” This ought to have been the case. If it was not, the fault was not of the Portuguese working class, which behaved admirably. The fault was with the leaders of the Socialist and Communist Parties who were not prepared to take power when they could have done so. As a result, the bourgeoisie succeeded in containing the movement and reasserting its power.

For three decades the movement in Portugal has been pushed back. But as Marx explained, the Revolution requires the whip of the Counterrevolution. The attempt by the bourgeoisie to liquidate all the gains of 1974-5 will arouse the Portuguese workers and youth. Already there have been mass demonstrations on the streets.

The minority Socialist government has passed its economic programme (the PEC), but it needs the support of the right wing PSD and CDS to carry out an austerity policy. The working class has already reacted with mass demonstrations, beginning with May Day, when 130,000 demonstrators came onto the streets of Lisbon. This was followed up by another mass demonstration of 300,000 against austerity 29th May, mainly organized by the Communist Party, but also Bloco de Esquerda and the trade unions, above all the Communist-controlled CGT-In.

The crisis in Spain

Spain is a much bigger problem for Europe than Greece. It is Europe's fifth-largest economy, and if it follows Greece into a debt crisis the effects will be felt throughout Europe and beyond. The International Monetary Fund has warned that the Spanish economy needs "far-reaching and comprehensive reforms" of its labour market and banking sector.

In the last few years Spanish capitalism went up like a rocket and is now falling like a stick. More than any other country in Europe, the Spanish capitalists threw themselves into the orgy of speculation with merry abandon. As a result, the collapse of the housing market has hit Spain harder than anywhere else.

The Spanish economy had the fastest growth rate in the EU, but has been in recession for nearly two years, and in the first quarter of 2010, grew by only 0.1 per cent. The economic collapse is reflected in the frightful level of unemployment, which stands (officially) at 20 per cent – the highest in Europe (except Latvia) and one of the highest of any developed capitalist country. The deficit soared to 11.2 per cent of GDP. Zapatero wishes to reduce it to 9.3 per cent this year, 6 per cent next year and 3 per cent by 2013.

Zapatero wanted to avoid a clash with the unions, but under pressure from Brussels and the White House, he has made an about-turn, announcing a programme of painful measures which are supposed to save €15bn over two years.. "We need to make a singular, exceptional and extraordinary effort to cut our public deficit," he said. Barack Obama made a personal telephone call to Zapatero the day before his announcement to discuss the importance of "Spain taking resolute action as part of Europe's effort to strengthen its economy and build market confidence.”

This “exceptional and extraordinary effort” includes a 5 per cent pay cut for Spain's 2.5 million public sector workers this year, scrapping the €2,500 (£2,100) "baby cheque" for new mothers and a €6bn cut in public investment. Spaniards living on the minimum pension have seen their cost-of-living increases cancelled, and there will be cuts to state medical expenditure, payments to people caring for elderly parents. The plan also includes cuts to regional governments.

The fact that the American President had to ring Madrid shows the deep concern in Washington over the parlous state of the European economy, and the fears that the crisis in Europe will have the most serious consequences for the United States. Brussels welcomed the cuts promised by the PSOE government. The European Commissioner for Economic and Monetary Affairs, Olli Rehn, said that the measures "seem to go in the right direction" and that he expected similar announcements soon from Portugal.

EU Competition Commissioner Joaquin Almunia, a former leader of the PSOE, called the cuts "a logical step" that is necessary "to avoid greater evils in the financial markets and emerge from the crisis sooner". Thus, Washington and Brussels loudly applaud the fact that a “socialist” government is prepared to do the dirty work for them. Despite this, however, the right wing PP is attacking the PSOE and voted against its economic package.

Up till now Zapatero has avoided the type of unrest that has brought thousands on to the streets of Athens because he managed to preserve social benefits and protections in the face of repeated calls by economists and business leaders for “labour reform”. However, the austerity package has angered the unions. In an attempt to placate his base, the Socialist Prime Minister stressed that despite the new austerity measures, "the pillars of the welfare state will remain untouched". This is the same song that is being sung by governments all over Europe. But it does not make any sense.

"The behaviour of the trade unions has been and is impeccable during these times of crisis and will continue to be so, but [Zapatero's] announcement is a turning point," Ignacio Fernandez Toxo, president of the CCOO, has said. The union leaders were desperate to avoid a confrontation with the government. But the union leaders can only keep the unions in check if the government and the bosses offer them something in return. But nothing is being offered except cuts. Therefore, the union leaders are compelled to mobilize.

Until now there has been a low level of strikes because the suddenness of the economic collapse and the onset of high unemployment temporarily shocked the workers. This was entirely logical and was foreseen by the Marxists in advance. We had to explain this to the ultra left sectarians who, in Spain as everywhere else, imagined that the economic crisis would lead immediately to a wave of strikes and general strikes. Now a general strike is on the order of the day, not only in Spain but in other European countries. A national strike of civil servants has been called for 8 June and there is talk of a general strike.

The PP leaders have attacked Zapatero for letting the economy deteriorate to the point that Washington and Brussels had to push him into action. They are putting party interests before that of the general interests of the bourgeoisie. This fact is a reflection of the deep gulf between the classes in Spain, which was papered over by the Transition, but which has emerged once more. Even before the economy collapsed, the right wing had taken to the streets under the banner of the Church, using the kind of language not heard since the days of the Franco dictatorship.

As always, the reformists are preparing the victory of the right wing. The PSOE is losing ground in polls against the conservative Popular Party, despite a corruption scandal involving opposition leaders. According to the polls, the People’s Party would win an outright majority in parliament if elections were held now. But a PP government would face a radicalized labour movement. It would be a government of crisis, which probably would not last long and would only serve to deepen the polarization between the classes.

The crisis has exposed the deep fault lines that underlie Spanish society and politics, which were papered over, but not abolished, by the so-called “Transition” from the Franco dictatorship to “democracy”. In the next period these fault lines will open into an unbridgeable abyss between the classes.

The whole situation is beginning to change. Spain faces a period of heightened class struggle in which the workers will rediscover the traditions of the 1930s and 1970s. By implementing a policy of cuts, Zapatero has capitulated to the bourgeoisie. This is producing a mood of disillusionment among those workers who had changed their vote from the United Left (IU) to the PSOE in the last period, in order to block the advance of the right wing and because the IU leaders were offering no serious alternative.

Now that process will go into reverse. Through experience, militant workers will come to understand the limitations of economic strikes and turn to politics, and radicalized youth will look for the banner of Communism. Despite all its deficiencies, the IU will increase its vote and begin to pick up new members from the most radicalized layers of society. The audience for genuine Marxist ideas will grow irresistibly.


In Italy Berlusconi has just passed an austerity bill off 24 billion euros of cuts over two years. The ruling right wing coalition plans to freeze the wages of public sector workers. The age of retirement for women workers in the public sector will be raised to 65. Ten billion Euros will be cut from the local administration, which will force local councils to carry out deep cuts in social spending: schools, health etc.

Berlusconi won the elections thanks to the bankruptcy of the Centre Left and only maintains itself in power for the same reason. The Democratic Party shows itself to be completely impotent to take advantage of the crisis of the Berlusconi government. But the latter now has to preside over a programme of vicious cuts. The Italian capitalists are supporting the present package but want the government to go much further. The pressure from Confindustria is aggravating the splits within the ruling coalition.

The impotence of the Left means that all the attention of the working class is concentrated on the unions. The union leaders, as in other countries, are no more inclined to conduct a serious struggle than the leaders of the political “opposition”. At its national congress, the CGIL decided that it was not the moment to lead an offensive against the government. But they were forced by pressure from below to call a four hour general strike in June.

This is an early anticipation of how things will develop. The defeat of the Centre Left Coalition caused disappointment and disorientation in the working class. But this mood will not last long. The impotence of the “Left” opposition and the vacillations of the union leaders will not prevent the radicalization of the Italian workers. Beginning in the public sector, there will be a series of strikes and demonstrations, which will transform the whole situation.

France and Germany

The French bourgeoisie did very well out of the EU, although it never succeeded in winning ist goal of achieving political domination. The inexorable rise of Germany has pushed it into second place. But the general advance of European capitalism gave it a level of prosperity that enabled it to grant important concessions to satisfy the powerful and militant French working class.

All that has changed. The insistence with which Paris pressurized Berlin to pay the Greeks indicated the precarious state of French capitalism. The French banks are almost as exposed as those of Germany to the Greek economy. A Greek default would bring the financial sector of France to its knees, provoking a deep crisis. That is why the French capitalists protested more loudly than anyone else at the hesitations of Merkel. Finally, the Germans paid up, but now France is faced by a serious dilemma.

Charles Maurice de Talleyrand said that speech was given to man to disguise his thoughts. This is very applicable to the French President Nicolas Sarkozy. He has pledged to cut France's deficit to 3 per cent of GDP by 2013. But so far, only small savings have been announced, such as not replacing all retiring civil servants. But the main problem facing the bourgeoisie is the unfortunate fact that people are living too long, with the average French worker spending 24 years in retirement, well above average for a developed nation. Thanks to the militant tradition of the French workers, they have achieved a welfare state far superior to Britain and many other countries in Europe.

The fact that the French have achieved something resembling a civilized mode of existence is a source of deep resentment in London and Washington, where it is held up as the worst example of the “wasteful European model”. People are entitled to reasonable free health care and pensions. What a scandal! The defenders of the “Anglo-Saxon (i.e., barbarous) model” shake their heads in disbelief. This is no way to improve efficiency and create wealth (for the capitalists)!

The French bourgeoisie is inclined to agree. They have gradually succeeded in whittling away the gains of the past, such as the 30 hour week. But there is a problem. The French workers have a very irritating habit of going on strike and taking to the streets when they are attacked. They have on several occasions forced governments to retreat and even overthrown them. The government in Paris, well aware of the militant traditions of the working class, has so far not made any major commitments on spending cuts.

Nicolas Sarkozy is keen to push through a major “reform” that would raise the retirement age, currently 60. But he is compelled to proceed slowly, for fear of arousing the powerful French working class. His tactic is to cut, but slowly, inch by inch, while all the time making comforting noises about protecting social values, consensus and so on. However, at a certain point this gradualism will break down. The breaking point will probably be over the pensions issue. And the French workers will be on the streets once again.

Germany itself will begin a spending squeeze from next year and is expected to cut at least €10bn every year until 2016. Subsidies will be targeted, and there will be tax rises and departmental spending cuts. These harsh measures are intended to set an example to the rest of Europe. The excuse is that Germany has to comply with rules on dealing with debt written into its constitution. But this argument will have no effect on the powerful German trade unions, who will not take long to follow the example of the Greek workers. In this way, “contagion” applies not only to the financial markets but also to the class struggle.

Iceland and Ireland

The inevitability of sharp and sudden changes in the situation is shown by events in Iceland, a country that had enjoyed high living standards and political stability. In January 2009 protests in the capital Reykjavik brought thousands of people on to the streets in the biggest demonstrations the country has ever seen. As Parliament reconvened on 19 January, they were initially prevented from meeting, as 2,000 demonstrators blocked the parliament building. There were violent clashes between police and young demonstrators. As a result, the coalition government between the Samfylkingin (Social Democrats) and the Conservative Independence Party has broken up. The government of Iceland was thus the first to fall as a consequence of the present economic crisis. It will not be the last.

The class struggle is growing in Ireland, where, as in Iceland and Spain, a period of rapid economic growth and feverish speculation has ended in complete collapse. This is provoking a mood of anger. In February 2009 some 200,000 workers and their families took to the streets in Dublin, to demonstrate their opposition to the government's decision to impose a pension levy on 300,000 public sector workers. There was a factory occupation of workers by Waterford Crystal.

On 6 November, 2009 tens of thousands of people have participated in demonstrations in Dublin, Cork, Waterford, Galway, Sligo, Limerick,Tullamore and Dundalk. A major union SIPTU voted massively to join the public sector strikes on November 24th, when well over 250,000 Irish workers in the public sector were on strike. This is the shape of things to come.

Britain and Europe

Of the major European powers, Britain stayed out of the European Union (the EEC as it was then called), with the delusion that it could still maintain an important independent role in world affairs. This foolish dream was soon reduced to ashes, and the British bourgeois was forced to crawl on its knees to get into the EU. Even so, London was subordinated to Washington (this is what is known humorously as “the Special Relationship”) – a fact that did not pass unnoticed in Berlin, and, above all, Paris.

The British capitalists did not join the Euro, and this now appears as an act of supreme judgment. It allowed them to devalue the pound sterling, giving British exports an advantage over the Euro countries. This actually revealed the weakness of British capitalism, not strength. Devaluation of the currency was the method traditionally used by the weaker European economies to compete. By presenting the falling value of the pound sterling as an act of supreme judgment, the British bourgeoisie is merely advertising its own bankruptcy.

The British are not popular in Europe, where they are regarded with suspicion, not without reason, because of their dependence on the USA. When the Conservative leader Cameron went to Paris for talks with Nicolas Sarkozy, he could not resist making a smug comment about the euro, which visibly irritated the French President.

The following day, the British Prime Minister told Ms Merkel that not only was Britain outside the euro, but that he would block German proposals, tabled at meeting of finance minister on Friday, to give the EU new economic powers to police the budgets of single-currency member states.

"Britain wants a strong and stable euro zone," he said. But he immediately proceeded to throw a spanner in the machinery: "Britain is not in the euro and is not going to be joining the euro. So Britain would not agree to any arrangement or treaty that drew us further into supporting the euro area. Any treaty – even one that just applied to the euro area – needs unanimous agreement of all 27 member states, including the UK, which of course has a veto."

This is what someone called the gentle art of winning friends and influencing people. If the Germans did not express their indignation openly at this arrogant stupidity, it was only because they expected nothing else from the political representatives of the British ruling class. In Europe a lot of the anger at the financial system is directed towards London and New York, where most of the world's currency traders and debt investors are based.

Britain’s European partners, irritated by the British airs of superiority and angry at the “unfair” advantage obtained by the devaluation of sterling, have sharply reminded them of their responsibility to Europe, and demanded that they participate, with money on the table, to the rescue plan. Grumbling and cursing under their breath, the British bourgeois are obliged to put their hand into their pocket.

Cameron’s smug sense of superiority in the face of the Euro’s difficulties is out of place. It reminds one of the attitudes of another Conservative prime minister, Stanley Baldwin, who, in the 1930s, described Europe as a “madhouse”. Answering Baldwin, Trotsky remarked that Britain was only the last ward in the European madhouse, and the last ward was usually reserved for particularly violent patients.

Britain will not escape the general ruin because it is not a member of the Euro zone. The crisis in Europe will be expressed in falling demand and therefore a shrinking market for Britain’s exports, most of which are sold in Europe. The crisis in the euro zone (Britain's biggest export market) will undermine Britain’s recovery, which in any case is very weak. Cameron was told in no uncertain terms that Germany sees Britain (which has the EU's highest budget deficit), as a prime candidate for contagion if market panic over Greece, Portugal and Spain spreads.

The government in London is now a shaky coalition between the Tories, in whose ranks the anti-European chauvinists are the majority, and the pro-European Liberals. The Tory right wing is seething with resentment at what they see as the excessive influence of the Liberals in the government. The question of Europe is a very sore point, which can later provide the spark that ignites a crisis in the coalition.

Fearing that the markets will begin to attack the pound, the Tories have begun to slash public spending. The coalition Government declared that the "years of plenty" for public spending were over yesterday, as it admitted that its £6.2bn package of immediate savings was "only the start" of a huge programme of cuts. But the markets are unimpressed. The first wave of cuts amounts to only 1 per cent of total government spending and a fraction of the £156bn deficit in the public finances.

The Institute for Fiscal Studies (IFS) warned of more pain to come. It warned that these measures would cut borrowing by only £5bn this year. "This is less than a tenth of the fiscal repair job that Alistair Darling's 2010 Budget forecast suggested will be needed over the next few years," it said. The bosses want to see real cuts – not a manicure, but the amputation of arms and legs. Investors are waiting to see if the UK Government possesses the will and the ability to make the deep cuts they consider necessary. And the markets decide.

For the time being the wave of panic that swept across the euro zone countries has not spread directly to Britain, despite its huge deficit. But this is only a temporary respite. At present, Britain is waiting on the sidelines, watching cautiously as the euro agonizes. But the markets could target the UK at any time. It is a measure of the seriousness of the situation is that the new government expressed relief that increased tax receipts meant that the deficit was £7bn less than expected, and therefore “only” £156bn.

Britain will be affected by the crisis in the euro zone. Without growth in Europe, there will be little demand there for Britain's exports, just at the time when the Conservative-Liberal coalition is hoping for an export-led recovery. The euro is already weakening against the pound, partially eroding the competitive achieved by the depreciation of sterling.

The next period will see a far more serious attack on living standards, which will provoke an overwhelming response from the trade unions. In the 1970s Britain was notorious as the country in Europe with the biggest strike movement. But ever since the Thatcher government defeated the miners, the unions have been on the defensive. Now all that will change. There will be strikes and demonstrations not seen since the 1970s.

The mood of militancy will shake up the unions from top to bottom, pushing out the old conservative leaders and replacing them with others who are more responsive to the wishes of the rank and file. Given the organic connection between the unions and the Labour Party, the latter will be pushed to the left, as happened in the 1970s. The whole situation in Britain and the rest of Europe will be transformed.


“Most Americans know that the U.S. economy is in bad shape, but what most Americans don't know is how truly desperate the financial situation of the United States really is. The truth is that what we are experiencing is not simply a "downturn" or a "recession". What we are witnessing is the beginning of the end for the greatest economic machine that the world has ever seen. Our greed and our debt are literally eating our economy alive. Total government, corporate and personal debt has now reached 360 percent of GDP, which is far higher than it ever reached during the Great Depression era. We have nearly totally dismantled our once colossal manufacturing base, we have shipped millions upon millions of middle class jobs overseas, we have lived far beyond our means for decades and we have created the biggest debt bubble in the history of the world. A great day of financial reckoning is fast approaching, and the vast majority of Americans are totally oblivious.” (Global Research, 4 June, 2010)

When Obama rang Zaptero to urge him to carry out cuts, this was a de facto recognition of the umbilical chord that connects the crisis in Europe to the crisis in the USA itself. The above lines express the fact that the American dream is a thing of the past. The present generation of American youth will be the first since the Great Depression that cannot look forward to better living standards than their parents.

Even before the economic collapse, the rich were getting ever richer and the poor, poorer. Now an unbridgeable abyss is opening up between rich and poor, between “haves” and “haves-not” in the “land of the free”. The article quoted above listed fifty facts that underlined the seriousness of the crisis facing the USA.

In 1950, the ratio of the average executive's pay to the average worker's pay was about 30 to 1. Since the year 2000, that ratio has soared to between 300 and 500 to one. Two-thirds of income increases in the U.S. between 2002 and 2007 went to the wealthiest 1% of all Americans. The bottom 40 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.

More than 24% of all homes with mortgages in the United States had defaulted as of the end of 2009. Defaults on apartment building mortgages held by U.S. banks climbed to a record 4.6 percent in the first quarter of 2010. That was almost twice the level of a year earlier. Americans have seen the re-emergence of the tent cities and soup kitchens not seen since the 1930s.

According to a new report based on U.S. Census Bureau data, at the end of 2009 only 26 percent of American teenagers between the ages of 16 and 19 had jobs, which represents a record low since statistics began to be kept in 1948.

As a result, a critical mood already exists, especially among the youth in the USA. There is a questioning of the existing order and its values, which was not there before. This mood will be strengthened and generalized in the next period. Even the election of Obama reflected this mood, insofar as it expressed a deep desire for a change – a desire that has not been satisfied by Obama and the Democrats. Obama’s approval ratings have already collapsed.

We see the outline of the future transformation of the American trade unions in the election of Richard Trumka, the miners’ leader. Trumka does not want to mobilize the workers, but is under pressure. In the next period, the unions will be under tremendous pressure to put words into practice, not just in the USA but in all countries. In the USA the ground is being prepared for a break with the Democratic party and a Campaign for a Mass Party of Labour.

Already there are the first signs of a political rebellion against the Democrats. Less than two years ago North Carolina was one of the centres of the grass-roots army that propelled Barack Obama to victory in what was a conservative state. Now frustrated with the results, former Obama supporters have linked up with labour organizers to gather signatures to start a third party, North Carolina First.

The prime movers in this initiative is the SEANC and its parent group, the Service Employees International Union, possibly the nation's most politically powerful trade union. They are funding the effort, and immediately after it was announced, they hired more than 100 canvassers who are rounding up the signatures needed to qualify as a third party on the general election ballot.

"Our whole agenda is to turn that apple cart around and say, 'No more are we going to blindly support you because you're a Democrat,' " said Dana S. Cope, executive director of the 55,000-member State Employees Association of North Carolina (SEANC), which is leading the effort. "We're going to support you because you're right on the issues and if you're not right on the issues, we're going to remove you from office."

Chuck Stone, a longtime SEANC leader who is chairman of North Carolina First, asked: "Does it really matter if you put a Democratic label or a Republican label on them when they go up there and support big companies and big insurance?"

These comments are highly significant because they show the early beginnings of s shift in consciousness, the realization of the need to establish a political party that does not represent “big companies and big insurance” but the needs of ordinary working class people. This reflects the same process that the British workers experienced a hundred years ago, when they broke with the Liberals to form the Labour Party. But what the British workers took generations to achieve, the American working class can accomplish far more quickly.

Probably the movement for a third party in North Carolina will be merely an episode. But it is an episode that anticipates what will occur in the future. A Labour Party in the USA will attract to its banner all the most oppressed and revolutionary layers of society: African Americans, Latinos, the Native Americans, the women, the youth etc. The same enthusiasm that we saw in Obama’s electoral campaign will be reproduced on a higher plane and with even greater intensity. Very quickly, an American Labour Party will pass from the timid reformist policies advocated by the conservative union leaders to a very radical socialist policy.

Eastern Europe and Russia

Twenty years after the fall of Stalinism, the restoration of capitalism in Eastern Europe and the former USSR has solved nothing. For a while, on the basis of the world capitalist economic boom, the new capitalist classes of the former Stalinist states could establish something resembling stability.

The Asian crisis of 1998 caused shock waves, but on the basis of the devaluation of the ruble, the Russian economy soon recovered and grew, mainly on the strength of its huge oil and gas reserves. The economies of Eastern Europe benefitted from their connection with the EU. They exported their surplus workforce to Western Europe, which benefitted from this pool of cheap labour. In turn, the remittances sent home by the migrant workers provided an additional source of capital for Eastern Europe.

Now all that has turned into its opposite. The migrant workers have returned home to swell the ranks of the unemployed. A number of countries in Eastern Europe are faced with the specter of crisis and bankruptcy. Like Greece, Latvia has suffered a fiscal crisis that saw its debt rated as junk. In the fourth quarter of 2009 Latvia's GDP contracted by 18%, and it has fallen a further 10% in the first quarter of 2010. Wages have fallen by an average of 8.8%, and unemployment has reached more than 22%. This is a slump on the lines of the Great Depression.

Hungary is not far behind Latvia. In October 2008 Hungary was forced to seek a $25bn rescue package from the International Monetary Fund and the EU. Now Hungary faces a Greek-style financial crisis. The country's currency, the forint, dropped 6% against the dollar after comments of a representative of the new government. The cost of insuring the country's debt jumped by one percentage point. This means that it will be more expensive for the country to borrow money in the international markets.

This leaves markets and economists fearful that Hungarians will default on their home loans, sparking a banking crisis in the country. This will affect the economies of Germany and particularly Austria.

Romania's economy was severely hit by the recession, and shrank by 7.1 per cent in 2009. Unemployment jumped from 4.9% in January 2009 to 8.1% in January 2010.The government had to go to the IMF for help and got a €20bn rescue loan, on condition that it carried out a savage policy of cuts. This includes a reduction of public sector wages by 25% and pensions and unemployment benefits by 15%, with the aim of reducing the budget deficit to 6.8% of GDP. All government spending will be cut by 20% and anywhere between 80,000 and 300,000 workers out of a total of 1.4 million in the state sector will be sacked.

This has aroused the Romanian workers. On May 31 tens of thousands of public sector workers went on strike against the government’s austerity plan, which includes cuts in pay and pensions. According to a poll by the Bureau of Social Research, half of the people think that Romania is worse off today than under Ceausescu, with 56% saying that under the “communist” regime ordinary people were treated with more respect, and 60% of Romanians think that politicians are more corrupt today than before 1989. A similar position undoubtedly exists in other countries of Eastern Europe and above all in Russia itself.

In Russia, too, the economic crisis acted as a shock that is having profound political and social effects. The recent movement of the miners indicates that the Russian working class is beginning to recover from the psychological effects of the collapse of the USSR and capitalist restoration. These events show how quickly the Russian workers can move once they enter the road of struggle. On the basis of struggle, they will rediscover the old traditions and ideas of Leninism, which have lain dormant for a long time, but have never disappeared from the collective consciousness of the Russian proletariat.

The “New Normality”

In Britain, the capitalist country where the idea of bourgeois parliamentary democracy has sunk the deepest roots in the popular psyche, the scandal over M.P.’s expenses has led to a widespread questioning of organized politics and its institutions. In the USA there is a burning anger against the bankers and Wall Street, accompanied by a deep-seated desire for change.

In Greece, where a semi-insurrectionary situation is developing, the mood of popular discontent has taken to the streets. However, the present situation is rooted in the whole of the previous period. In most countries of Western Europe the working class has experienced almost five decades of relative improvement in living standards. The idea that all problems can be settled by reforms is deep-seated in the population because it corresponds with past experience.

It is true that the mass of workers of Europe and the United States have not yet grasped the real seriousness of the situation. They hope that the crisis will only be temporary, and that after a time things will return to normal. Naturally, the reformist leaders (both political and trade union) strive with all their might to reinforce this idea. But it is a profoundly mistaken idea.

One far-sighted bourgeois commentator, Martin Gilles, WestLB's Head Equity Strategist, has said that we can expect to return to normality – but it will be a "new normality". This interesting expression contains a profound truth concerning the nature of the new period we are now entering into. According to WestLB's Head Economist, Holger Fahrinkrug, global economic growth is expected to be only 3% this year, and average economic growth in the industrialized nations will be no more than 1.6%.

“However, WestLB does not expect to see a self-sustaining upswing with strong capital expenditure and significant increases in employment. On the contrary, employment will initially fall yet further.” (WestLB Report, November 26, 2009)

These forecasts were made before the start of the Greek crisis. In reality the outlook is even worse. But the most important thing to note is that the serious strategists of Capital have concluded that there is no possibility of returning to the “good old days” for the foreseeable future. The report continues:

“For the next few years, the US economy will display much weaker growth than is usual in the aftermath of a recession. It will be essential to overcome the country's extreme dependency on consumption and develop a new, viable growth model. The repercussions of the financial crisis on the real economy are likely to be with us for some time to come and bear down upon public finances, private consumption and investment activity.”

This is the reality of the crisis of capitalism. It is a long period of low growth, high unemployment, and constant attacks on consumption. Therefore, what is needed is a root-and-branch change in society, and therefore a root-and-branch change in the political and trade union organizations of the working class.

What now?

There have been periods of capitalist upswing when the capitalists were able to make concessions to sections of the working class and concede reforms. Such a period was the period before the First World War, and the period from 1945 to 1973. But the period we have now entered into has an entirely different character. It will see a long-term decline in living standards for entire populations. This fact has not yet been understood by the majority of the working class. But on the basis of events it will be burned into the consciousness of millions. It will have a profound effect on the class struggle everywhere.

The bourgeois of every country in Europe is following the same path, a path dictated not by the caprice of individual governments or politicians but by the gravity of the economic crisis. As a general rule, similar conditions will tend to produce similar results. The period we are now entering will be far more similar to the 1970s and 1930s than to the last thirty years.

The present situation is complex and contradictory, but this is only a way of expressing the transitional nature of the period, which contains elements from the past, which are struggling with elements of the new period. The old ideas and prejudices will not easily be eliminated. They are tenacious and deeply rooted in the psychology of the masses. Great events will be needed to shake up the masses to the point where they are ready to break with the old ideas and embrace new ones.

One might argue that the consciousness of the masses and the mass organizations is lagging far behind the objective situation, and this is correct, as far as it goes. But it does not go far enough. The consciousness of all classes is conditioned by the previous period. Marx explained:

“Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past. The tradition of all dead generations weighs like an Alp on the brains of the living.” (The Eighteenth Brumaire of Louis Napoleon)

It will take time for the workers of Europe to shake off the old habits and psychology shaped by the last period. For over half a century the workers of Europe have been accustomed to economic growth, full employment and steadily improving living standards. The idea gradually crystallized in their minds: today we are better off than yesterday and tomorrow we will be better off than today. Gradually, on the basis of a long period of economic growth, living standards improved and the class struggle was muted. The bad old days of the 1930s seemed like a bad dream. This was the material base upon which reformism was strengthened.

Now all this has reached its limits. Capitalism is faced with the most serious crisis in the last 70 years – possibly the most serious in its whole history. But after a long period in which the class struggle has been somewhat muted in many countries, the working class, like an athlete after a long period of inactivity, requires a period of “limbering up”, before it undertakes more strenuous and serious activities.

“National unity”

There is no political slogan so false, hollow, deceitful and reactionary as the slogan of national unity. But that is the slogan of the day in every crisis of capitalism. “We must all pull together in the National Interest!” This is the fighting slogan of all the bourgeois and reactionary parties. They wish to use the idea of national unity in order to convince the workers that they must accept sacrifice and austerity to “save the nation”, while the rich continue to fill their pockets.

In Britain, Conservatives and Liberals unite in a coalition government in the name of the National Interest. The trade union leaders everywhere attempt to hold the workers back on the same basis. To this we answer: the unity you are talking about is the unity of the horse and its rider. The latter sits on his back, digs in his spurs and shouts: forward! But when the rider is too heavy and the spurs dig in too deeply, a spirited horse will rear up and throw the rider to the ground.

Some people on the Left have argued that it is necessary to support the “solidarity plan” as a lesser evil. This argument is both false and dangerous. The worst aspect of the present situation is that the harsh measures adopted will prove useless in practice. All the cuts introduced by Papandreou, Zapatero and others will not solve the crisis. On the contrary, by slashing public spending, the cuts will reduce demand and deepen the crisis. Europe will enter a downward spiral that has no ending.

In Greece, as in Spain, the right wing New Democracy has opposed the austerity measures taken by the Pasok government for the sake of electoral popularity. But in reality they have nothing else to offer. The only road open to the bourgeoisie is to attack the living standards of the workers and the middle class. It is not a matter of personal caprice of this or that politician or government. It is a matter of life and death for capitalism. That is why all the governments in Europe, whether “Centre-Left” or “Centre-Right”, are pursuing more or less the same policies.

The bourgeoisie tells the Greek workers that they must accept wage cuts and work harder to compete with the German workers. They tell the German workers that they must accept wage cuts and work harder to compete with the French and British, and so on. In the end, if the workers receive less, the bankers and capitalist will get more profits. That is the kind of “solidarity” we are talking about here. It is the “solidarity” between the exploiter and the exploited.

The trade unions

The crisis of capitalism threatens the jobs, conditions and livelihoods of millions of workers in every country and continent. In the past, it may have been possible to win concessions without a fight. At a time when order books were full and the bosses were making fat profits, they might have been willing to arrive at concessions for the sake of peace. Under such conditions the leaders of the unions had an easy life. The idea was put about of so-called New Realism: that is, of class collaboration and the alleged identity of interest of Wage Labour and Capital.

Now all that has been consigned to the dustbin of history. Under conditions of capitalist crisis there is no alternative but to fight, not just to obtain concessions, but even to preserve the gains of the past.

All the attempts of the union leaders to arrive at a deal with the bourgeoisie in these circumstances are doomed to fail, for the simple reason that the capitalists have nothing to offer them. There is no way out on a capitalist basis. Under the dictatorship of the big banks and monopolies, there is no way forward for the workers of Europe except a future of constantly decreasing living standards and increased exploitation.

The period that now opens up before the European working class will bear a far closer resemblance to the 1930s than to the 1990s. It will be a period of storm and stress without parallel in history. There will be violent swings of public opinion to the left and the right. Under the hammer blows of events the consciousness of the masses will be transformed. The mass organizations, starting with the unions, will be shaken from top to bottom.

The seriousness of the crisis is forcing the bourgeois to take up an intransigent attitude in relation to the trade unions. The bosses have a strategy of taking on some key militant sections and defeating them in order to send out a message to the rest of the class. They are also taking advantage of the recession to go onto the offensive. The old, cozy relationship with the union leaders is no longer possible.

The refuse collectors’ strike in Denmark was very militant, although it took place in the midst of a general collapse of strike activity in the country. The intention was to take them on, use any means possible to smash them and then move on. This is similar to the struggle of the Mexican electricians. The struggle attracted the attention of the whole labour movement. The postal workers’ strikes in Britain had a similar aspect. The management seemed prepared to take on the workers, taking advantage of the more general mood and make an example of them. On that occasion, the union leaders found an excuse and backed off, but the problem remains.

It is natural that under conditions of crisis there will be a ferment in the unions and divisions will open up between different layers of the union bureaucracy. One can say that this is only a struggle between rival bureaucrats, and in a sense that is true. But it is a superficial view that does not take into account the fact that such struggles in the bureaucracy are a reflection of powerful pressures that are building up under the surface.

Crisis of reformism

All history shows that when the mass of the class moves into action, they always express themselves in the first case through the existing mass organizations, no matter how right wing, bureaucratic and reactionary the leaders may be. We have seen this many times in the history of the last 100 years.

The crisis of capitalism is also the crisis of reformism. In the long years of capitalist upswing that followed the Second World War, the reformists were able to grant reforms. But in the last period the Social Democratic governments have been carrying out a policy of counter reforms, undermining and destroying the reforms of the past. Now, with the developing crisis of world capitalism, the policies of reformism are revealed as bankrupt in the most literal sense of the word.

The reformist leaders (including the ex-Stalinists) usually confine themselves to parliamentary or electoral activity. In the hothouse atmosphere of parliament they become divorced from the lives and conditions of the masses and lose whatever revolutionary ideas they may have once had. They learn to be “respectable” and “statesmanlike”. That is, they learn to take upon their shoulders the responsibility for carrying out the dirty work of the bankers and capitalists. This is particularly the case in a crisis. They fall over one another to defend the system.

In reality, the bourgeois and the reformist politicians are trapped. They have exhausted the old tricks of the past. The policies of monetarism and unrestricted market economics have landed them in a mess. The policies of laissez-faire capitalism (“neo-liberalism”) have collapsed. The attempt to return to the old discredited policies of Keynesianism will only make things worse. A combination of the two will get the worst of all worlds. All the old recipes have failed.

The European bourgeois tried to get balanced budgets through the Maastricht Treaty but now this idea has been thrown out of the window. The public debt has soared. This is a measure of desperation. The unprecedented levels of public borrowing will not succeed in getting Spain or any other country out of the crisis, but it will mean a long period of austerity and attacks on living standards.

The aim is to solve the crisis of capitalism by driving down the living standards of the working class and place it at the mercy of Capital. But this will not work. The bourgeois will face an explosion of the class struggle. The period we are in will see movements involving millions. In the course of these struggles, the mass organizations will be under intense pressure from the bourgeoisie and the working class. This will inevitably result in a whole series of internal crises and splits. The formation of Die Linke in Germany was already an anticipation of a process that will take place in one European country after another.

Sectarianism – a dead end

All the attempts of the sects to build phantom “revolutionary parties” outside the existing mass organizations are doomed to ignominious failure. This was revealed graphically in the recent British elections, which indicate a complete collapse of the votes for the sectarian groups, although the conditions for their success were apparently ideal.

In Greece, which is rapidly moving in the direction of a pre-revolutionary situation, the masses are being mobilized through the trade unions. The largest confederations have ties with the ruling Socialist party, Pasok, while a minority leans towards the Communist Party of Greece (KKE).

On the fringes of the movement frustrated youths throw rocks and petrol bombs and attack property. As always, anarchist elements take advantage of this to spread confusion. The frustration of the youth is understandable, but such acts of petty violence lead nowhere. There are dangers in this situation. If the workers’ organizations do not give a lead, it can lead to terrorism, which in turn can easily be manipulated by the state security forces and infiltrated by provocateurs.

Impatience and frustration are always bad councilors. We cannot run too far ahead of the working class, but must patiently go through the experience with them. Our task is to penetrate the mass organizations, which will be shaken to the foundations by the crisis. At a certain stage the emergence of mass left wing and centrist currents is inevitable. We must establish friendly relations with these currents and assist them to overcome their limitations, confusions and vacillations, and win them to the policies and programme of Marxism.

The slogan of the general strike

In more than one country the idea of a general strike is beginning to occupy a central role. There has even been some talk about an all-European strike or day of action. But what is proposed is not an indefinite general strike, but a limited general strike of 24 hours, or less. An indefinite strike can pose the question of power, but a one-day general strike is a demonstration of strength. It can play an important role as a means of mobilizing the workers (even for one day) and, if it is successful, can be a step forward in giving the workers a sense of their power, increasing militancy and raising consciousness.

However, we must also understand that on many occasions the trade union leaders have used one day general strikes as a safety valve – a convenient method of blowing off steam. In Italy in the past, the union bureaucrats called many general strikes of one day, four hours, one hour, and so on, in order to channel the militancy of the rank and file and wear the workers out. In Spain, Greece and France also the union leaders have called general strikes, allowing the workers to express their anger for a few hours on the streets and then afterwards merely returned to “business as usual.”

Naturally, Marxists will agitate in favour of a general strike as a means of mobilizing the maximum numbers of workers in struggle. Particularly where there has not been a general strike for a long time, it can serve to give the workers a sense of their power and raise their fighting spirit. Marxists will make use of such actions to raise class consciousness and extend our influence and authority among the workers, beginning with the most advanced elements.

However, we do not make a fetish of the idea of general strikes, or present them as a panacea. Such tactics will only serve to miseducate and confuse the advanced workers and our own comrades, especially the youth. Where a 24 hour strike has taken place, the question is posed: what now? Do we call for another 24 hour general strike? Or a two day stoppage? Under certain conditions, the capitalists may make concessions under pressure. But even then, they will later take back with the right hand what they have given with the left. Wage increases will be cancelled out by inflation etc.

Moreover, in the present situation, the capitalists are not in a position to grant serious and lasting concessions. The entire situation compels them on pain of extinction to liquidate the concessions they have made over the last fifty years. Under such circumstances the idea that the workers can “force” the capitalists onto a different road by mass pressure is a delusion. In essence, it is only a repetition of the old arguments of the anarcho-syndicalists before 1914, who regarded the general strike with the same kind of awe that fervent Catholics regard the Immaculate Conception.

Trotsky answered this false idea in advance. In an article written in 1931, when Spain was in the grip of a widespread strike movement, he wrote the following:

“In reality, in spite of the mighty sweep of the struggle, the subjective factors of the revolution – the party, the organization of the masses, slogans – are extraordinarily behind the tasks of the movement – and it is this backwardness that constitutes the main danger today.

“The semi-spontaneous spread of strikes, which have brought victims and defeats or have ended with nothing, is an absolutely unavoidable stage of the revolution, the period of the awakening of the masses, their mobilization and their entry into struggle. For it is not the cream of the workers who take part in the movement, but the masses as a whole. Not only do factory workers strike, but also artisans, chauffeurs and bakers, construction, irrigation and finally agricultural workers. The veterans mould the limbs, the new recruits learn. Through the medium of these strikes, the class begins to feel itself as a class.

“However, the spontaneity – which at the present stage constitutes the strength of the movement – may in the future become the source of Its weakness. To assume that the movement also in the future will be left to itself without a clear programme, without its own leadership, would mean to assume a perspective of hopelessness. For the question involved is nothing less than the seizure of power. Even the most stormy strikes – all the more so the scattered ones – do not solve this problem.” (The Spanish Revolution, January, 1931).

The depth of the present crisis places on the order of the day a fundamental transformation of society. Half measures are of no use, and, in the best case, can only have a temporary effect. But as Largo Caballero once remarked, you cannot cure cancer with an aspirin. Drastic problems require drastic solutions.

A transitional programme needed

The relation between economic crisis and the class struggle is not automatic, as some ultra left sectarians believe, but dialectical and contradictory. At first the masses are in a state of shock. They cannot believe that the crisis is so serious. Surely, if we take the necessary steps, accept a temporary reduction in living standards, everything will come right in the end?

But time passes, and the crisis, far from improving, becomes ever deeper, threatening to destroy all social stability. The reforms and concessions conquered over half a century are under threat, and with them the semi-civilized conditions of life. The masses are threatened with a systematic destruction of their lives. The middle class is threatened with ruin. Society is threatened with disintegration and barbarism.

Under such conditions, the innate conservatism of human beings is shaken to the core. People are compelled to reconsider their most cherished beliefs and their most deeply-held dogmas. Even the most formerly inert and “non-political” layers begin to move into action. Things begin to turn into their opposite.

As Trotsky pointed out in the above quotation, the only real solution for the problems faced by the working class is that the proletariat must take power into its own hands. But this idea has not yet been grasped by even the most advanced workers, never mind the mass of politically untutored workers. Great events will be needed to convince them of the need for a radical change. But events are already delivering one shock after another. In the coming period, the existing consciousness will be shaken to the foundations, preparing the way for a revolutionary transformation.

In order to assist this development, it is necessary to work out a programme of demands that will enable us to move from A to B, starting out from the existing conditions and consciousness. What is needed is a serious plan of action. This must insist on the central idea of the expropriation of the big banks and monopolies, for workers’ control, for a socialist plan of production.

Already we see the early beginnings of an anti-capitalist mood developing, especially among the youth. At a time when governments are asking people to sacrifice while pouring public money into the banks, bank profits are booming and bankers’ bonuses have again reached record levels. Many people are therefore questioning the role that bankers have played in this crisis.

What is required is a socialist policy, a fighting policy to defend jobs and living standards. Not a single penny to the bankers and capitalists! Let the bosses pay for their crisis! We demand decent conditions and wages! If the bosses cannot guarantee these things, to hell with them and their system! For the expropriation of the banks and big monopolies under workers’ control and management! No to the Europe of the big banks and monopolies! For the Socialist United States of Europe!

The beginnings of the European revolution

What we see unfolding before us is not the Greek, Spanish, or Italian revolution, but the early stages of the European revolution, which is a vital link in the chain of the world revolution. The capitalist system is in crisis everywhere. It is a world crisis of capitalism. It is one single, indissoluble process, where the turbulence in one part of the globe swiftly communicates itself to every other part.

Lenin once said that politics is concentrated economics. The economic crisis must eventually find a reflection in the minds of millions of men and women, who will find their lives turned upside down. The old routines are violently upset, the old ideas and prejudices challenged at every step, the old institutions shaken to the foundations. This universal turbulence can last for years, with sudden swings to the left and right.

The words of Leon Trotsky have never been more relevant: “The world political situation as a whole is chiefly characterized by a historical crisis of the leadership of the proletariat.”

In the past a prerevolutionary situation would not last for long. It would de swiftly resolved either by the victory of the revolution or the counterrevolution. But now things are different. On the one hand, the bourgeois cannot move immediately in the direction of reaction. On the other hand, the working class is being held back by its leadership.

Trotsky wrote in 1938:

“The economy, the state, the politics of the bourgeoisie and its international relations are completely blighted by a social crisis, characteristic of a prerevolutionary state of society. The chief obstacle in the path of transforming the prerevolutionary into a revolutionary state is the opportunist character of proletarian leadership: its petty bourgeois cowardice before the big bourgeoisie and its perfidious connection with it even in its death agony.

“In all countries the proletariat is racked by a deep disquiet. The multimillion masses again and again enter the road of revolution. But each time they are blocked by their own conservative bureaucratic machines.”

These lines could have been written yesterday! But the power of the bureaucratic apparatus is not absolute. The mass organizations are subject to the pressures of society. The workers will turn repeatedly to the old traditional organizations, for the simple reason that there is no alternative. They will put them to the test time and again, peeling off one layer after another of the old leadership. This inevitable process of learning by successive approximations will be expressed in the rise and fall of leaders and currents.

The ideas we defend do not represent the present consciousness of the masses, which is rooted in a past that has already receded into history. Our ideas are a faithful reflection of the present and the future. Under the hammer blows of events, the masses will learn to distinguish between what is true and what is false. There will be a whole series of crises and splits, from which eventually, a genuine mass revolutionary tendency will emerge.

The Marxists, who aspire to the leadership of the working class, will have no shortage of possibilities in the coming period. But we must ensure that in the turbulent period that we have entered, a period of war, revolution and counter-revolution, that we build the forces of Marxism. We must find a road to the workers and youth, winning new adherents, educating cadres, and gathering the forces we need to build a genuinely mass Marxist International. There are no short cuts. There is no other way.

London, 9th June, 2010.

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