SocialismToday           Socialist Party magazine

Issue 204 Dec/Jan 2016/17

The futile search for capitalist stability

Donald Trump’s election under the banner of ‘America First’ adds a new volatile ingredient to world relations but he will face the same objective situation as Barack Obama before him – a weakened US imperialism in a multi-polar world, with the prolonged era of stagnation eating at the very possibility of stable capitalist rule. Analysing world perspectives, we are carrying here extracts from a draft statement of the International Executive of the Committee for a Workers’ International (CWI), written in early November by PETER TAAFFE.

The crisis of world capitalism is deeper and the bourgeois strategists are filled with greater foreboding about the prospects of their system than even a year ago. A constant theme is the lack of ‘legitimacy’ of capitalism: in the economic sphere, in world relations, on the environment and climate change, and in their reflection both socially and politically. Above all, there is a real fear, although largely unspoken, that the obvious failures of capitalism mean that we are living ‘on the edge of the volcano’, bourgeois-speak for mass upheaval and even revolutionary change.

This is so notwithstanding the reactionary features epitomised in the intractable crisis in Syria and the Middle East, with its deep religious sectarianism, mutual slaughter of innocents on both sides, and the fallout through the mass exodus of refugees fleeing for safety and a better life. This has turned the Mediterranean into a grave for tens of thousands. Even if they eventually make it to the ‘safety’ of Europe, they are met with more and more fences, walls and barbed wire, which mock the ‘free movement of people’, an alleged cornerstone of the European Union (EU).

The war and its fallout in neighbouring countries possess an element, on a smaller scale, of the first world war. It has already lasted almost six years, with no end in sight. The world’s ‘great powers’ are all involved – the US and Russia in particular, together with their local ‘allies’ – but neither they nor the bloody jihadists with their fascistic methods offer any long-term solution. Only the working class and a rebuilt labour movement in the region, in collaboration with the international labour movement, can offer a way out of this bloody morass through class unity and socialist change.

Decline of US power

The impotence of these great powers to impose a solution is itself a reflection of the astonishing and rapid change in world relations, with the relative decline of US imperialism in particular. The philosophy of the ‘end of history’, the dominant mantra in the aftermath of the collapse of Stalinism, has long been discredited. It is also only 13 years since the Iraq war, when US imperialism formulated the doctrine of the ‘unipolar’ world and sought to reinforce this with its accompanying military doctrine of ‘full-spectrum dominance’. This meant that the world would be compelled to dance to the unilateral military and political tune of US imperialism.

However, this gave way to a multi-polar doctrine, with the US forced to collaborate with Russia and China. The US has been forced to recognise the military reach of Russia in the Middle East – built on oil income and resources, despite its economic weakness – as well as a still rising China with its economic strength and growing military enhancement particularly, but not exclusively, in Asia.

In the multifaceted Syrian conflict, while backing opposing ‘proxies’, the US and Russia were forced to collaborate against Daesh/ISIS, while being compelled to strike blows at one another like criminals chained in a cart. Small military clashes between Russia and the US cannot be completely ruled out given the heightened tensions.

They clash in other regions, such as in Ukraine and now the Baltic states, where the US is perceived correctly to be seeking once more to encircle Russia through the expansion of NATO. However, this is not a rerun of the ‘cold war’, which was a conflict between two different and antagonistic social systems, one a bureaucratically-dominated state-owned, planned economy, and the other capitalism.

The conflict now is between two capitalist-imperialist states, for increased power, income and prestige, as well as military and strategic position. This will not result, however, in a new world war, hinted at by some bourgeois commentators, although conventional military clashes, some of them serious, cannot be ruled out between nuclear-armed powers. The US will try to further undermine and limit Russian power, as it will with China in relation to Asia and elsewhere. But this is more likely to take the form of ‘containment’, as was the case during the cold war, in the form of economic and other sanctions. These were applied against Russia following the war in Ukraine and the incorporation of Crimea into Russia.

The ‘tilt’ towards the Pacific, launched by Barack Obama, has the same aim of further enhancing the economic power and military influence of US imperialism at the expense of China in the region. But the US will not have it all its own way. In a conflict with China it is perceived as being weaker than before. Even the Philippines, a formerly loyal ally of the US, has distanced itself from the US. Rodrigo Duterte, the bloodthirsty president who has compared himself to Hitler, has threatened his own ‘tilt’ towards China. This is an attempt by Duterte to manoeuvre between America and China to the advantage of the Philippines and himself.

It also reflects the changing relationships in the region between the US and China. The former is still the overwhelmingly dominant military power, but China is catching up rapidly. There have, moreover, already been some clashes in the South China Sea – with 30% of the world’s trade passing through this area – and these are likely to increase as the jostling for power grows in the region.

We are now confronted with an uneasy ‘three-power’ domination of the world with the US, China and Russia all seeking to call the shots. The US remains in the driving seat by virtue of its still pre-eminent economic and military power. On the basis of present trends, however, China will probably emerge as the dominant world power although this, in turn, is dependent on how China develops economically, socially and politically in the short and medium term.

Stalling China?

‘Will China grow old before it becomes rich?’ is a pertinent question, given its demographics, with its now abandoned one-child policy historically holding back population growth. In crude economic terms, China is destined to overtake the US, as has been commented on many times. But it is not just a question of the growth of gross domestic product (GDP) in measuring the overall economic position, it is also a question of productivity and purchasing power. In this respect, China lags far behind the US, although there has been a significant growth in the ‘middle class’.

Not least is the inevitability of mass uprisings, as the Wukan revolt has indicated, which can come very quickly, even in the next period. Growth has slowed and trade with the rest of the world has contracted significantly. Most of the informed bourgeois commentators have belatedly come to the same conclusion as ourselves and now describe China as ‘state capitalist’. Despite the Beijing regime’s many resolutions and declarations about ‘moving towards a market’, the ‘dismantling of the state sector’ has not been fully implemented. This has meant that the state has been able to intervene directly in a manner which has not been open to ‘free-market’ capitalism in the US and Europe, etc.

This has meant that the regime, particularly after the world crisis of 2007-08, has been able to pump in credit on a monumental scale. This has produced a ratio of debt-to-GDP of 270%, which under a ‘pure’ capitalist regime in the west would have already caused a major collapse along the lines of Greece. In the past, $1 of credit produced $1 of growth. Now it takes $6 of credit to generate the same effect!

The regime’s pumping in of credit allowed China to seemingly defy the laws of economic gravity and continue to grow, albeit at a lower rate than the turbocharged figures in the past. This in turn meant that some of the countries in the neo-colonial world linked to the commodity boom which the growth of Chinese industry facilitated could go ahead while Europe and America, in particular, and the rest of the world were still suffering the effects of the 2007-08 crisis.

That is now a thing of the past. Quite apart from the upheavals and revolutionary events that will take place in China, the world economic stagnation has already had a devastating effect on the neo-colonial world. The alleged newfound ‘stability’ of the neo-colonial world was a chimera that belied the continued poverty and suffering of the masses. But even this will be torn away by the savagery of capitalism in a new crisis.

Fading ‘African miracle’

Already, Africa has witnessed mass protests, such as the revolutionary events in the Democratic Republic of the Congo where a successful general strike has given the ‘yellow card’ to the Kabila regime to go after a two-year crisis that has gripped the country. Oil-producing Nigeria, the most populous country in Africa with nearly 200 million people, has been plunged into a severe crisis as a result of the contraction of the oil price and the consequent depletion of the revenue accruing to the state. President Muhammadu Buhari summed up the speed with which the crisis has gripped the country when he plaintively declared: "Suddenly, Nigeria appears to be a poor country".

He could be lamenting not just Nigeria’s plight but the whole continent’s future prospects on the basis of capitalism and imperialist domination. Nigeria’s population has doubled in 30 years and it is anticipated the continent as a whole will double to 2.5 billion people by 2050. Half the population will live in cities with a preponderance of young people. This will mean huge pressure and collapse without the creation of new jobs and the development of infrastructure, which is unlikely on a big scale in this new phase of capitalist crisis.

We have to remember that the North African revolution – the so-called ‘Arab Spring’ – was powered by what sociologists call the ‘youth bulge’: youthful populations combined with mass unemployment. The presence of these two factors on a huge scale, which is beyond the capacity of capitalism to solve, is almost a guarantee of mass upheavals and revolution. The first signs of this are present in a whole series of countries. However, the Nigerian trade union leaders’ failure to successfully organise last May’s general strike and that country’s increasing ethnic and religious conflicts and insurgencies are warnings of what can develop if the workers’ movement cannot offer a way forward. And not only in Nigeria. There is not one stable regime in sub-Saharan Africa.

South Africa occupies for the whole of Africa, particularly the working class, a central position as the most industrialised country in the continent. The first victory of the ANC and the initial development of independent working-class organisations, the trade unions, represented a big step forward. This was positive and held out the prospect for the South African masses of deliverance from hated apartheid capitalism through the establishment of socialism. Cosatu, the national trade union federation – initially a pole of attraction which unified the movement – has now moved to the right and split. The metalworkers’ union, NUMSA, currently offers the best route to build an independent workers’ movement.

The leadership of the ANC had already begun to move towards the right even while Nelson Mandela was in prison, and bent all their efforts to derail the splendid revolutionary movements of the South African revolution. The rule of the ANC president Jacob Zuma represents the degeneration of the ANC culminating in the organic corruption, including opulent palaces, which mocks the obscene poverty of the mass of the working class and youth.

The ANC vote slumped in this year’s local elections to its lowest ever, with an increased clamour for Zuma to go. The government is besieged from the left by workers through strikes, because of the rise in the cost of living, and also by students who have conducted successful struggles against university fees as well as the iniquitous educational system. It is also challenged from the right by the victory of the Democratic Alliance – with its roots in the apartheid regime – in Johannesburg and Cape Town.

The Economic Freedom Fighters (EFF), led by the former leader of the ANC youth wing, Julius Malema, also reflect in a distorted fashion a leftward movement. Their success is at least partly the result of the refusal of the trade union leaders, particularly in NUMSA, to take to the open road of a new mass workers’ party, which the Workers and Socialist Party (WASP – the South African section of the CWI) has consistently advocated. Once such a party is formed, as it surely will be given the mighty collision between the classes that looms, it could occupy a lot of the ground that the EFF currently claims as its own.

India-Pakistan tensions

A similarly disturbed period of upheavals and conflict is also posed for Asia. The recent clashes between India, an Asian giant, and Pakistan have raised the prospect, or at least a threat, of war between the two countries over the disputed territories of Kashmir. The prospect of any clash is always serious, given that both possess nuclear weapons, but is unlikely to lead to all-out war or even a limited head-on conflict.

With an eye on the US and its own recent experiences at the hands of terrorists, Indian prime minister Narendra Modi has recently attacked Pakistan as the ‘mother of terrorism’, hoping to engender support and material gains for India at the expense of Pakistan. There is some truth in this given the fact that Pakistan, in particular the Pakistani army, originally fostered, cosseted and used the Taliban in Afghanistan against Russia. Even after the Russians retreated, when the Taliban and Al Qaeda turned on one of their benefactors, the US, the Pakistani army, particularly its intelligence wing the ISI, while making disapproving noises, took no action against them.

In reality, the Taliban from their base in Afghanistan was useful and necessary as a buffer against a much stronger India. Also, the Pakistani regime was not averse to letting home-grown fanatical terrorists off the hook occasionally to launch attacks on India. Now, however, the army has set out to crush sections of the Taliban following its bloody and vicious attacks on army-run schools in Peshawar. This, combined with a certain limited industrialisation in some areas of Pakistan – financed by China – means that the Taliban and its cousins, ISIS/Daesh, are on a very short leash and will be crushed by the army if they step out of line. There is now room once more for a genuine workers’ movement and party.

In India, as we predicted, the economic fireworks promised with the coming to power of the Modi government have not materialised. On the contrary, the economic conditions of the masses have stagnated and, in some sections, considerably worsened. This, and the attacks on the labour law, provoked the recent 180-million-strong general strike. This action underlined the huge potential power still possessed by the Indian working class, but which has been muffled and stultified by the trade union leaders. The latter did little or nothing to ensure, not just the strike’s success, but also to prepare the working class, and through them the impoverished Indian masses, for further action against rotten Indian capitalism, upon which Modi and his government rests.

Prospects for the world economy

As we have pointed out previously, the capitalist economists recognise the inevitability of a new recession or even a slump, at a certain stage, although they do not fully understand why this will be so. What will happen in the short term is more difficult to anticipate. There is a deep economic malaise, indicated by the contraction of world trade which at its height was almost twice the growth of the world economy. Now, the growth in world trade volumes amounts to just 1.7%, according to the OECD. World growth is meagre compared to what went before; there is a ‘lack of demand’, which is the central problem. This is accentuated by the eye-watering growth in worldwide inequality. This is fuelled by the explosion of credit and debt, which amounts to a colossal three times global GDP! At the same time, there is a ‘savings glut’, a massive hoarding of profits, much of this held in offshore accounts to avoid taxation.

The avoidance of a deep recession or slump in the aftermath of 2007-08 was a consequence of the relatively successful actions of the central banks in propping up capitalism in Europe and the US. The European Central Bank has also been instrumental in insisting that banking reserves should be built up to prevent a new run on the banks. However, this has not avoided the scare over Deutsche Bank and the threat of collapse of other banks in Europe, particularly in Italy.

Economic factors have always played a key role in the balance of power between the different imperialist blocs, and the economic perspectives we outlined previously have been largely borne out. The crisis of 2007-08 left a powerful imprint which still has a profound effect on the consciousness of all classes, even on the capitalists themselves. Eight years ago this autumn, the collapse on Wall Street plunged the world economy into an economic downturn that resulted in losses of trillions of dollars – $22 trillion in the case of the US over five years – with millions of workers made redundant (8.8 million in the US, 1.2 million in the UK).

Promises were made by bourgeois politicians and governments that things would change. However, in the words of The Guardian newspaper: "Nearly a decade later, what is most striking is how little has changed today". A generalised recovery has not taken place despite the many ‘emergency’ measures that have been taken by governments and central banks: quantitative easing, unprecedentedly low interest rates, intervention by the central banks to prop up the banking sector, etc.

Where absolute economic output has returned to pre-2008 levels, and in a few countries exceeded it, this has not led to the elimination of mass unemployment. Greece and southern Europe generally are in the grip of a depression every bit as bad as the 1930s, and the generalised impoverishment which flows from this. Even in the US, where a total of 15 million new jobs have been created since 2010, this has not prevented a plunge in living standards because these new jobs are mostly low-paid, the product of the so-called ‘gig’ economy.

New financial crisis

No less important are the economic consequences of what happened after the financial crisis in the neo-colonial world. The institutions of world capitalism – the OECD, Unctad, etc – have warned that the world is on the verge of "entering a third phase of the financial crisis". The subprime crisis of the US has been repeated in the neo-colonial world with the pumping in of trillions of dollars into ‘emerging markets’. It is estimated that the flood of credit which has poured into Latin America in particular, but also in Asia and Africa, amounts to half of the bank loans and bonds in the first half of the decade. Over $7 trillion was pushed into ‘emerging markets’. This has lumbered these countries with debts which are becoming unpayable – and could lay the basis for a new movement to refuse to pay the debt.

This has contributed to the economic collapse that has affected countries like Brazil which faces its worst crisis in decades. In effect, the Brazilian masses are to be put on ‘rations’ with expenditure in the public sector ‘frozen’ for 30 years. This, on top of the recent severe contraction in the economy, will result in class tensions being ratcheted up. The first reflection of this has been the re-emergence of the right, with the removal from office of Dilma Rousseff and the possibility of the successful prosecution of Lula. This has led to a working-class polarisation in opposition to the parliamentary coup, with memories of the military regimes of a relatively recent period still present.

Latin America is passing through a complicated and difficult conjuncture. This follows the failure of the ‘left’ governments in Venezuela, Bolivia and Ecuador to make serious inroads in attacking capitalism. At the same time, there is an advance in the process of capitalist restoration in Cuba. In addition, the ‘centre left’ governments in Brazil and other countries have been discredited and we have seen the electoral victory of the traditional right-wing capitalist parties. At a certain stage, however, this will give way to a new resurgence of the left and class struggle.

New anti-capitalist mood

The turmoil that will result from this is also an expression of a new, growing anti-globalisation mood. This will form part of a growing and wider hostility to inequality and capitalism itself. The bourgeois are well aware of this, with their journals full of trepidation about the growing hostility towards raw, brutal atavistic capitalism.

They were very lucky that the ‘great recession’ had been preceded by the collapse of Stalinism, and the bourgeois ideological campaign which flowed from this against ‘socialism’ and the idea of working-class collectivism in running and organising society. Let us remember that Fidel Castro compared the collapse of the ‘Soviet Union’ to the sun dying out! A reference point for the planned economy, albeit one controlled by a bureaucratic elite, was dismantled. In its wake, independent mass ‘socialist’ and ‘communist’ parties collapsed, with their leaderships deserting to the side of the bourgeois. The working class was politically disarmed in the teeth of the ravages of this crisis. They were politically stunned, not capable of drawing clear class answers at that stage. The genuine, conscious Marxists and socialists were isolated. To be sure, the mass of the working class put up ferocious resistance against austerity: more than 40 general strikes in Greece, similar movements in Spain, Portugal, Italy, etc.

However, a new economic crisis – likely to be the second in one decade – will have much greater social and political consequences. Not just anti-capitalist or anti-austerity ideas but socialism and Marxism, a debate about what kind of socialism, will once more become live issues before big audiences. There will be other, much greater opportunities to create sizeable organisations, mass formations which, learning from the past, can establish a powerful point of reference for attracting the best workers and young people.

The effects of the endemic crisis have led to an unprecedented questioning even in the ranks of the capitalists about the viability of their system, with deeply pessimistic conclusions being drawn about future prospects for the ‘west’, for globalisation. Even The Economist, which is unflinching in its championing of globalisation, is compelled to emphasise the disadvantages: "Only in London and its hinterland in the south-east has real income per person risen above its level before the 2007-08 financial crisis and most other rich countries are in the same boat… The real incomes of two thirds of households in 25 advanced economies were flat or fell between 2005 and 2014, compared with a 2% rise in the previous 50 years. The few gains in a sluggish economy have gone to a salaried gentry".

At the same time, there has been an unprecedented concentration and centralisation of capital, a huge domination of the monopolies with 10% of public companies generating 80% of the profits. The top US firms, the Fortune 100, have seen their share of wealth increase from 57% to 63% during the ‘recession’. In the home of so-called ‘free-market’ capitalism, the US, the hi-tech billionaire Peter Thiel declared bluntly: "Competition is for losers".

In the light of the quite obvious tendency towards the elimination of the competitive character of early capitalism, with competition playing a key role in the allocation of capital between different firms and industries, the very reason for being of the system is called into question. There is now an open recognition that without the once denied ‘state intervention’, ‘modern’ capitalism would not be able to function. New British prime minister Theresa May has abandoned the doctrine of Margaret Thatcher – "there is no such thing as society" – and has unashamedly declared that the state will need to intervene. Moreover, completely opposite to the previous prime minister, David Cameron, she has even appealed to the ‘working class’ and attacked ‘austerity’, in words but not in deeds.

Uncontrolled capitalism

Some bourgeois commentators have pointed to the uncontrolled character of capitalism today. Questions arise about the situation whereby financial transactions are more reliant on the use of algorithms, which are without much human control, are ‘passive’ and attuned to the huge increase in speed in which financial transactions take place, often involving small amounts but traded in their millions. It demonstrates both the lack of real supervision of what is taking place and the potential for actions that can spin out of control, and artificially provoke a crisis, on the basis of unchecked mathematical conclusions.

This reveals the outmoded, parasitic character of capitalism today, where neither the capitalists nor the managers of their capital play any role. It points up the issue of technology which has the potential to liberate humankind – on condition that it is under the control of the workforce and a socialist society. Without this, as is already the case, it will be a jobs killer, and a new, vicious weapon of war through killer robots, etc.

The conclusion to be drawn from the foregoing analysis is that the CWI has every opportunity of growing substantially in most parts of the world given the chronic crisis of world capitalism. It will not only be the economic and social issues which will present opportunities to win new forces. Big possibilities exist to intervene on the environment, in Black Lives Matter and the struggle against racism. The next period could be one to lay the foundations for the CWI to become the most important Trotskyist force worldwide and to lay the basis for mass formations.

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