The following is an edited version of a draft document on world perspectives, written in mid-November, that will be discussed at the December 2014 meeting of the International Executive Committee (IEC) of the Committee for a Workers’ International (CWI). The meeting will be attended by comrades from 35 countries, from all continents. This document does not cover developments in South America, which are dealt with in a separate draft. The amended document will be published on socialistworld.net, later in December.
Eleven years ago, George Bush and the neo-cons who sustained his presidency saw their military ‘triumphs’ in Afghanistan and Iraq as laying the basis for establishing a ‘new Rome’. They calculated that this would allow them to impose a ‘New World Order’ through military might. We answered this in the analysis, resolutions and publications of the CWI. We also stressed that only an independent mass movement, led by the working class, was capable of having a lasting effect. Through the mobilisation of the poor masses, it was possible to create a mass movement to overthrow Saddam and the social system – landlordism and capitalism – upon which his regime rested. By the time of the last IEC, events in the Middle East and elsewhere had left the doctrines of the neocons in ruins and punctured the puffed-up arrogance of US imperialism.
Moreover, in the first stages of the Middle East and North African revolution – Egypt and Tunisia – the US giant was paralysed. Previously, the invasions in Iraq and Afghanistan were justified by imperialist propagandists and their local stooges on the grounds that the masses were incapable of overthrowing the regimes by their own efforts. The Kurdish petty-bourgeois parties also echoed this theme; the Iraqi masses were demoralised, too weak to rouse themselves from previous defeats – the smashing of the 1991 Shia uprising – to perform this task. Additionally, they were hopelessly divided, owing allegiance to rival parties, etc. Moreover, the majority Shia and the minority Sunni in Iraq were set at each other’s throats and therefore incapable of carrying through a successful uprising to a conclusion.
We strenuously argued against this and were vindicated later through mass movements, which actually overthrew the Ben Ali dictatorship in Tunisia and the Mubarak regime in Egypt without any help from outside. US imperialism was left frustrated, completely incapable of intervening in the first period. However, they were provided with the opportunity to gain a foothold for the counter-revolution, through the intervention in Libya – supported by some alleged Marxists – and later in Syria, Bahrain, etc. The revolutionary élan and determination of the masses of North Africa and the Middle East, shown in the revolution, found a big echo throughout the region and in the US and the advanced industrial countries.
Bourgeois ideologists consistently attempt to demean such revolutionary events, to wipe out the memory of the masses and their capacity to undertake successful revolutionary struggles by their own independent actions. The consciousness of such events – even though they have taken place only recently – can only be cemented by a mass revolutionary party with a farsighted leadership. If there is no such party, the consciousness of the masses can be dulled and thrown back. Today, the picture that the bourgeois, their parties and media paint of the process of the revolution is that it was never a revolution and the situation facing the masses today is bleak, and not just in the neo-colonial world. The unspeakable horrors – unparalleled suffering, poverty and mass unemployment, found in the advanced industrial countries – are the accepted ‘norm’ and will get worse through the enduring economic crisis.
All the more reason why in periods like we have recently passed through– in Europe, at least, one of mild reaction and in the Middle East in the main of outright reaction – any current analysis must continue to emphasise the fighting potential of the working class. Sufficient to mention here the mass strikes on pay in Britain prior to next year’s general election, the partial general strikes in Italy, the looming general strike in Belgium, and the mass rebellions regarding the national question in Scotland and in Catalonia. In Ireland, the mass campaign against water charges has mobilised a national hundred thousand-strong demonstration and other protests across the country. We are playing a key role in this as well, and at the same time created a minor earthquake in the recent by-elections for the Dáil (for a detailed report and analysis, see: ‘Stunning Dublin by-election victory, huge water protests…new chapter for working class resistance’, 4 November 2014, http://www.socialistworld.net/doc/6964). The great victories of Ruth Coppinger and Paul Murphy, achieved against the odds, were triumphs for the Irish comrades and the CWI. In Paul’s case, our Irish section succeeded in defeating Sinn Féin, who could be the leading force in the next Irish government following the general election expected in 2016. The Labour Party was also wounded, possibly fatally, and the sectarians, led by the SWP, marginalised. Their sectarian intervention in this year’s European election was decisive in then defeating Paul and temporarily removing a spokesperson and champion not just of the CWI but of the international workers’ movement. The Dublin by-elections once more underline the political tenacity of the CWI, like Antaeus in Greek mythology: when cast to the ground, we just regain greater and greater strength. This flows from the clear perspectives of the CWI, based as it is on the granite-like confidence in the willingness of the working class to struggle even where this appears at first to be difficult, to gain victories. Seattle, in this respect, was a milestone, indicating the possibilities of significant victories for a small organisation which can then lead to a revival of the workers’ movement. Ireland is another staging post in this process, which will be repeated in other countries and on other continents.
Not the least has been the tumultuous events in Hong Kong, which are an overture to the coming revolution in China. However, the Middle East conflict shows the other side. Like ink spreading on blotting paper, nationalist and sectarian clashes have spread remorselessly throughout the region. The Middle East and North Africa is not the only region affected. In fact, we now have an unprecedented world geopolitical crisis. This is the bourgeois view of the world situation: “There is hardly a shortage of geopolitical risk these days. The Islamic State of Iraq and the Levant (Isis) has seized big swaths of territory. An undeclared war has broken out between Russia and Ukraine. There has been armed conflict between Israel and Hamas. Libya is in chaos. Uncertainty hangs over nuclear negotiations with Iran. Yet the sum of these risks is trumped by the old-fashioned forces of supply and demand. While there may be a surplus of geopolitical risk in the world, there is an even greater surplus of oil.” [Financial Times, 18 October 2014]
The murderous one-sided war between Israel and the Palestinians with the mountains of dead and mutilated, including children, as well as the desperate homeless, has added to the legacy of hatred and bitterness, the consequences of which are not yet clear. We have witnessed the ongoing murderous Syrian conflict, with countless victims, and now the virtual disintegration of Iraq, which the Economist sees along with Syria as ‘disappearing’, cancelling out the Sykes-Picot line drawn arbitrarily almost a century ago by British and French imperialism. How many times did the CWI warn that the result of the Iraq war and the overthrow of Saddam would only lead to a number of ‘Saddams’, as the country fractures into ethnic and religious zones?
Then on top of this, there are the qualitative worsening prospects for the economic situation in virtually all spheres of the world economy. Uncertainty deepens with each passing day and month, as capitalist economic institutions and their spokespersons announce ‘disappointing’ figures for growth. The eurozone, the world’s second-biggest economic area, is in retreat from even its recent feeble recovery. Germany, its economic powerhouse is currently stagnating and repeatedly comes close to outright recession. Its continued dependence on exports means that German capitalism is vulnerable to sudden shocks. Japan, the world’s third-biggest economy, “may also be on the edge of a downturn”, the Economist speculates. Added to this is the dramatic 20% plunge in the oil price, which is a key economic indicator and in the present situation also affects geopolitical developments.
The rapid development of oil from the ‘shale revolution’, in the US in particular, has increased US output by 80% since 2008, an additional 4 million barrels of oil annually which is one of the factors driving down the world price of oil. This has given the US, near ‘energy independence’, particularly from its former reliance on the Middle East, led by Saudi Arabia and parts of Africa. This has been a key factor in the limited US economic recovery, generating an estimated extra two million jobs. The current plight of the unemployed in the US would be a lot worse but for this key economic factor. The rapidity with which this situation has developed is indicated by the fact that in 2012 the OPEC oil price stood at more than $110, and it is estimated that if it fell to $80 for a year, US motorists would have an extra $160 billion in their pockets, which the Financial Times said “is equivalent to a sizeable tax cut” without having to clear Congress!
On the other hand, Japan is entirely dependent on foreign oil and China imports 60% of its needs and could see gains from lower fuel prices. However other countries have been affected adversely; 40% of Russia’s state budget income is oil revenue. Lower oil prices complicate the country’s economic difficulties, already affected by the sanctions that have been imposed following developments in the Ukraine. Saudi Arabia could also be severely affected over time, which in turn could trigger political upheavals in the ‘kingdom’, with the Shias, the poorest and most discriminated against, coming out onto the streets in a movement similar to that seen in the region recently. In 2011, Saudi Arabia was compelled to unleash a $160 billion spending plan as unrest flooded onto the streets during the ‘Arab Spring’ throughout the region, including violent protests in Yemen, Bahrain, Oman and Kuwait. The Saudi regime has accumulated massive reserves estimated at $747 billion, more than three years of spending. But if oil stays at $80 a barrel for a year this will considerably eat into these. For Nigeria, which depends on oil and natural gas exports for around 80% of revenues, the falling oil price is a disaster. Its foreign reserves are even smaller now than they were at the time of the 2008 oil price crash ($37.8bn compared with $53bn) and the government has now started to warn of “tougher times ahead”. Other oil producers, including in Latin America, could also be seriously affected.
Of course, it is the overall economic prospects of world capitalism that are mainly responsible for the drop in the price of oil and the extremely gloomy prognostications of the capitalist institutions which flow from this. The IMF has cut its estimate of global growth this year from 3.4% to a little over 3%, yet as recently as April it was expecting a 3.6% increase. A similar downgrade exists for the ‘emerging markets’. Brazil and Russia remain ‘in a torpor’ with the only supposed bright spot being India, which nevertheless has slashed growth-rate expectations! These countries have to adapt to the end of the ‘commodities boom’, which according to one expert means that “the commodity cycle is over”. Moreover, this development has had a structural effect on the economies in the neo-colonial world; past, favourable conditions for commodity producers are unlikely to return quickly. China, a huge commodity market, is now calculated to have overtaken the US in the past few months as the largest economy in the world, but it too is slowing down.
This led the IMF’s chief, Christine Lagarde, to warn of a “new mediocre era of low growth for a long time.” This completely confirms the past and current economic analysis of the CWI, that capitalism displayed ‘depressionary tendencies’ even before 2008 and now, in some regions at least, is experiencing an outright ‘depression’. Martin Wolf of the Financial Times writes that the best capitalism can hope for is what he calls a “managed depression”. Larry Summers, former US Treasury Secretary, has recalled the phrase “secular stagnation”, first used in the 1930s.
The scaled-down expectations of the capitalists are reflected by the fact that only Britain and the US in the advanced capitalist world can be pointed to as ‘models’ to be followed: “The US and the UK in particular are leaving the crisis behind and achieving decent growth”! In crude figures this may appear to be the case but the reality is that this is at the expense of the working class, with its share of national income falling severely. Workers are experiencing a ‘joyless boom’. Wages have consistently lagged behind the rise in the cost of living with British workers losing at least 10% of the real value of their wages in the last 10 years. The gap between rich and poor has grown massively, with poverty now at a level not seen in Britain since the Victorian age of the 19th century. Moreover, the jobs which have been created are very low paid, many part-time, ‘Mickey Mouse’, ‘self-employed’ jobs, many of which soon fold because of the lack of a market. Average wages are completely insufficient to maintain living standards, let alone improve them. This has fuelled our campaign in Britain for a minimum wage increase to £10 an hour, which has received great support from workers and youth, and the backing of the Trade Union Congress. The great success of our comrades in the US with the ‘15 Now’ campaign – which has been taken up by workers throughout the US – has undoubtedly had a big effect on workers everywhere, and particularly in Britain.
As far as the US is concerned, the official figures do not reflect the real situation, with deteriorating living conditions for huge swathes of the US population. Moreover, the number working in the US has not returned to the level of the pre-recession period before 2008. Many workers have just dropped out of the labour force. Despite this, the September job review showed that “private payrolls have grown by 10 million over the last four and a half years, the longest uninterrupted streak in history”. Yet Obama is not reaping the political benefits from this. Just 39% of voters approve of his handling of the economy, according to YouGov opinion pollsters, and 56% disapprove. According to the Economist, voters astonishingly now trust Republicans more than Obama and the Democrats to manage the economy! This is despite the fact that Obama stepped in to save the banks and industries like the automakers, but it hasn’t fundamentally helped working-class people at all. One worker reckoned that he makes 20% less than he did in 2007: “I’m slowly but surely going broke, though I’m working like a madman.”
Inequality began to widen more than two decades ago in the US. However, general growth and an ability to borrow helped to cover this up for considerable sections of the population. During Ronald Reagan’s first six years in office, GDP grew by 22% while median income grew 6%. During Clinton’s first six years GDP grew 24%, median income 11%. Growth began to slow from 2000, undermining both the mean and median figures. In George Bush’s first six years GDP rose by 16%, but median incomes fell by 2%. Under Obama, it has been even worse: GDP is up 8% percent, and median income is down 4%, according to the Census Bureau.
The current ‘impressive decline’ in US unemployment partly came about because many people just gave up looking for work, and so are not counted as unemployed. The gap between income and expenditure was also covered before the recession partly by borrowing on the basis of rising house prices. Following the collapse of the housing bubble, household income began to drop. So, as we have pointed out many times, any growth up to the 2008 crash was mostly debt-fuelled.
The same goes for any growth that has taken place in the six years since the crash of 2008. The total burden of world debt – private and public – has risen from 160% of national income in 2001 to almost 215% in 2013. In other words, contrary to widely held beliefs, the world has not begun to de-leverage and the global debt to GDP ratio is still growing, breaking new heights. One of the authors of the annual Geneva Report commissioned by the International Centre for Monetary and Banking Studies, Luigi Buttiglione the head of global strategy at hedge fund Brevan Howard, said: “Over my career I have seen many so-called miracle economies – Italy in the 1960s, Japan, the Asian tigers, Ireland, Spain and now perhaps China – and they all ended after a build-up of debt." In an upswing, carefully controlled credit can lubricate the system, leading to a spiral of growth. But the massive borrowing, which took place during the upswing in the US and worldwide continued during the crisis because of the fear of complete economic collapse and what this would mean for the political consciousness of the working class and their growing opposition to the system. The injection of credit has been astronomical. The US Federal Reserve bought $4.5 trillion of assets, the Bank of England, £375 billion so far and the Japan Central Bank will have bought over $1.5 trillion of assets by April 2015.
It was the overall ‘lack of confidence’ that led to the meltdown in stocks and shares in October 2014, which developed at considerable speed as well as spreading to most parts of the world. There were many underlying factors which sparked it off, some of which we have mentioned above. But perhaps the main one was the promised withdrawal by the US Federal Reserve of the quantitative easing programme that cost over $3,600 billion. That was the main factor in leading to a stampede out of stocks and shares, which in turn has now raised starkly the possibility of a repeat of 2008, only worse. Like drug addicts, the capitalist world has got used to massive injections of liquidity. The economic theorists of the system are not sure what effect quantitative easing has! The former US Federal Reserve chairman, Ben Bernanke, in answer to whether QE was working, joked: “The problem with QE is it works in practice but it doesn’t work in theory”! In reality, this monetary measure has only worked partially in theory but hardly in practice. However, the mere threat to partially phase this out – with no real alternative other than the continuation of failed austerity programmes – resulted in panic stations.
Bermuda Triangle of endless austerity
The choice for capitalism seems to be reduced to either further debt-fuelled growth, including the perpetuation of low interest rates, with the danger of inflation further down the road or the maintenance of savage austerity. At the same time, some capitalist economists have concluded that the massive growth of inequality that we have seen in the last 15 years ‘beyond a certain point’ is bad for the system. The huge growth in the share going to CEOs of companies and the relentless pushing down of wages seriously repress ‘demand’.
So serious is the situation that the Bundesbank has suggested that German trade unions should fight for wage increases, which they would support! However, this policy is not intended to apply to the rest of Europe, which must be kept on ‘rations’. Even rotten German social democracy, in coalition with Merkel’s Christian Democrats, has ruled out any significant shift in economic policy, particularly throughout the rest of Europe.
But another section of the capitalists is now afraid that they will be trapped in a Bermuda Triangle of endless austerity. This threatens to provoke a new crisis and a revolt of the working class. There are no easy options on the table. However, the maintenance of high global debts, despite the efforts of different governments to reduce them, is provoking a new combination of spiralling debts and low growth that could trigger another financial crisis. In consequence, the bourgeoisie swings from optimism to deep pessimism. Since 2007, the ratio of total debt, excluding the financial sector, has jumped in China to 261% of GDP. Martin Wolf states: “One can debate whether this level is sustainable. One cannot debate whether such a rapid rate of rise is sustainable; it cannot possibly be so. The rise in debt has to halt with possibly significantly more adverse effects on China’s rate of growth than today’s consensus expects.”
The present situation indicates a frozen system symbolised by a ‘paradox of thrift’, mentioned by Keynes, with corporate ‘savings’ dramatically rising throughout the world, partly because bosses feel a greater need to protect themselves against the free market turmoil. There is also little opportunity for capitalist productive investment, which results in massive corporate cash hoards amounting to 44% of GDP in Japan, 34% of GDP in South Korea and similar piles in other parts of East Asia. The same inexorable pattern of rising cash hoards while wages stagnate or fall is evident elsewhere. So dangerous is the current situation that we are informed that the British and US central banks have conducted financial tests – ‘war games’ – about how they would handle another Lehman Brothers-style banking crisis! This reinforces the idea that further events along the lines of 2008 and worse are being seriously considered by the financial institutions with the aim of trying to put in place preventative measures to stop them happening, or if they cannot, what rescue measures the financial institutions of capitalism need to take. It seems that Japan and the euro area are most at risk but the whole of world capitalism threatens to be dragged down.
In addition, the parasitism of ‘modern’ capitalism is revealed by the process of company ‘buybacks’ of their own shares, which even the financial press has denounced as “corporate cocaine” and continues to increase. Record profits have been accumulated on a massive scale and buybacks have increased partly because currently there is no profitable outlet, but also because it piles up the wealth of the capitalists, particularly of the CEOs, which adds to eye-watering inequality as well as boosting share prices. This in turn leads to a drop in investment, which signifies a lack of confidence of the capitalists in their own system. While the heads of companies grow fat, workers living standards fall. In Britain, if the national minimum wage had kept pace with the salaries of the top 100 company heads since 1999, it would now be almost £19 instead of the measly £6.50 an hour! This led the Guardian (London) to ask the question: “For some reason broadcasters rarely ask CEOs about the gulf between their pay and that of the poorest staff in their organisations.” This is linked to the “pervasive belief, held by 76% of Americans, a record high, that their children will not have a better life than they have had, and the view of 60% that America is in a state of decline.… The widespread discontent is evident amongst just about every segment of the population.” [Right-wing economist Irwin Stelzer of the US Hudson Institute, the Sunday Times (London)]
Stanley Fischer, the vice-chairman of the US Federal Reserve, warned in August about a “permanent down shift in the potential of powerhouses such as the US, Europe and China”. This is one more indication that the economic soothsayers of capitalism are beginning to catch up with the analysis that we have made since the beginning of the 2008 crisis. He goes on to state that “the falling rate of productivity and labour force participation in the US, among other factors may have scared the country’s ability to generate economic growth”. Such openly pessimistic conclusions for the future of US capitalism – and by implication world capitalism – have become more and more common as the working class as well as big sections of the middle-class are beginning to draw their own conclusions: “They lay bare a crisis of faith in the global elite.” [New York Times] This organ of US capitalism concludes : “There has been an implicit agreement in modern democracies: It is fine for the wealthy and powerful to enjoy private jets and outlandishly expensive homes so long as the mass of people also see steadily rising standards of living. Only the first part of that bargain has been met, and voters are expressing their frustration in ways that vary depending on the country but that have in common a sense that the established order isn’t serving them.”
This has big political implications, both for the mood and consciousness of the US and world working classes, for the present as well as the future. It is not ‘fine’ for the rich to pile up wealth, even during ‘boom times’. The big anti-capitalist demonstrations around the turn of the century began in Seattle in 1998 before the shine had fully come off capitalism. But it is true that the great mass of the population can often ‘tolerate’ a situation, so long as the system is ‘delivering’ the basics for the majority. That is clearly not happening now. Hence the 2013 victory of Kshama in Seattle, which heralds similar political upheavals throughout the US.
Bernie Sanders, the US Senator for Vermont, has been under intense pressure from the growing left to repeat the success of Kshama in Seattle and take the decision to stand as an independent socialist candidate in the 2016 presidential election. But it is not at all certain that he will do so. However, similar campaigns are being waged in a number of cities and states for radicals to stand on left platforms. The mid-term elections showed the continuing potential with Socialist Alternative’s Jess Spears winning over 8,500 votes (17.6%) standing for the Washington State legislature. While in New York State, where Howie Hawkins, a socialist standing as the Green party candidate, won over 173,600 votes, 4.9%, nearly triple the 60,000 he won in 2010. Similar developments are taking place elsewhere but it is not yet clear whether the campaign will succeed in persuading sufficient numbers to stand and thereby offer the US masses a real alternative nationally and locally. However, one thing is clear: the ground has already been prepared for the creation of a sizeable left radical or socialist alternative in the next period. This would probably take the form of an alliance in the first instance, leading later to the beginning of a mass party. Such a development, given the position of the US internationally, would have huge significance and stimulate a similar process in countries which also do not yet have a mass workers’ party.
Moreover, as the world’s policeman, US capitalism tends to build into its foundations all the explosive factors of world capitalism. At this conjuncture, a number of factors are combining to create a ‘perfect storm’ for US imperialism. Events in the Middle East, with the rise of Isis, have compelled Obama, who was elected on the pledge to withdraw from Iraq and Afghanistan, to do a somersault. He is the fourth president – Bush senior and junior, Clinton and now Obama – who have been compelled to preside over a Middle Eastern military intervention, although restricted at this stage to a bombing campaign.
This meshes with the underlying economic crisis, and a growing social crisis, particularly as it affects people of colour. Obama is the president who has expelled from the US more immigrants than all previous presidents put together! Then came the explosive events in Ferguson with the callous murder of Michael Brown by a heavily militarised police force. A similar murder took place in October, which reignited incendiary events in the town. The CWI supporters in the US intervened very successfully, including African-American and other members of Socialist Alternative. Moreover, this is just one field in which the discontent of people of colour is manifested. They expected big changes and invested great hopes in the first black president to be elected in the US. Yet African-Americans have fallen further behind economically more than in any other presidency since the Great Depression. One black American pastor asked in 2013: “Why are we so loyal to a president who is not loyal to us?” The median non-white family in the US today has a net worth of just $18,100 – almost a fifth lower than it was when Obama took office. White median wealth, on the other hand, has risen by 1% to $142,000. In 2009, white households were seven times richer than their black counterparts; that is now eightfold. In other words, in relative and absolute terms, blacks are doing worse under Obama. Of course, there are many poor white families too.
Yet the paradox is that in the mid-term elections, those sections of the black population who voted supported Obama. Of course, this is a manifestation of ‘lesser evilism’, a conscious understanding on the part of the black population, and of people of colour in general, that Obama is a disappointment, but a Republican victories, and possibly a Republican president in 2016, will be much worse. This is not a permanent state of mind. This section of the population, which is amongst the poorest in the US, will rally to a new mass party, just as fervently if not more so than other layers of the population. A test of a revolutionary organisation is whether it can find a road to the most oppressed, downtrodden layers of the population. In the US Socialist Alternative has already rallied to its banner a significant section of blacks, Hispanics and other people of colour who can play a decisive role in the development of a committed, revolutionary organisation.
Obama’s position is precarious as he is now in danger of becoming a lame-duck president in his last two years in office. In the mid-term election campaign, Democrats treated him as a lucrative fundraiser rather than a vote winner. Obama was kept away from crucial contests as increasing numbers saw him as being firmly in the pockets of big business while pretending that he really stands for the ‘people’. But the sweeping Republican mid-term gains did not reflect a turn to the right; rather a huge drop in turnout, down to 36.3% of those eligible to vote, which was the lowest in a mid-term election since 1942, in the middle of the Second World War.
Our US comrades pointed out that before the election, “one poll showed 70% supporting the idea of throwing out all incumbents”. In the vote itself, the Republican gains stand “in sharp contrast to the shift to the left in U.S. society”, as in these elections “ballot initiatives to increase the minimum wage passed in Alaska, Arkansas, Nebraska and South Dakota, the latter two reliably Republican states. In San Francisco, voters passed a referendum for a $15 minimum wage by an overwhelming 77% margin. In Oregon, Alaska and Washington DC, voters approved measures to legalize possession of marijuana. Two of the three anti-abortion measures proposed at the state level failed. So voters in many cases supported positions rejected by the right wing while not voting for Democrats.” This means that the potential for struggle has not been reduced by these elections; in fact the likelihood has increased as working people and youth respond to Republican attacks and see that change depends on what they themselves do.
One of the multiple features of the current US situation is the fact that Congress is held in contempt by the US people, less popular, according to polls, than head lice and cockroaches! It is a dysfunctional system, completely out of touch with the popular mood, dominated by big business corporate finance, with its rotten lobbying system, and incapable of reflecting the yearning for a change. This is the reason why Congress is deadlocked and this is unlikely to be fundamentally different now after the mid-term elections.
At the same time, there is growing anger at the vast gulf between rich and poor, which has resulted in even Alan Greenspan – former head of the Federal Reserve and fervent apostle of the great advantages of US capitalism – declaring that although he has been a lifelong libertarian Republican, “inequality is the most dangerous trend afflicting America”. The US population, in a number of polls, displays greater opposition to inequality, and growing hatred of the rich than elsewhere. The 1% – or more accurately the 0.001% – is seen to engage in tax evasion and fraud on a massive scale. But despite this tax dodging, the tax returns themselves reflect the growing pay inequality. In Britain, employment has risen by 1.3 million in the past five years, but the number of taxpayers has fallen by 2.2 million. More than 40% of American households pay no income tax. In contrast, the highest-paid 1% earners in Britain contribute 28% of all income tax, while in America it is 46%. In 1979, those shares were 11% and 18% respectively. Corporation tax shows the same concentration. In Britain, just 830 firms pay almost half of all corporation tax. Five American industries account for 81% of the country’s corporate tax revenue but just a third of its companies. This has a bearing on state revenue because the rich and smaller percentage of the population tends to avoid paying tax, which in turn is linked to growing state deficits and further austerity, which bears down on the poor because they ultimately pay the price of the rich’s evasion.
US – A weakening power
At the same time the US, with the weakening of its power, is no longer able to impose its economic agenda on the world. The World Trade Organisation is presently blocked by a group of countries, including Cuba and Venezuela, on agriculture and a number of other issues. It is spent almost two decades without concluding an agreement and is now described to be in an existential crisis. Similarly, the Transatlantic Trade and Investment Partnership (TIIP) talks are also deadlocked.
In addition, the long-term health of the system is increasingly called into question by the growth of technology. We have explored this issue a number of times, most recently in the November 2014’s Socialism Today. In some industries, the introduction of automation will be a “jobs killer”. Robert Gordon, the US economist, estimates that 47% of US jobs are threatened from this quarter. Some, including the Economist magazine, overestimate the ability of capitalism to find new markets, and moreover have a utopian perspective of how this issue can be harnessed to the benefit of all within the framework of capitalism. Yet even the ‘sober’ Economist warned about the future of capitalism, becoming “wealth without workers, workers without wealth”. It emphasises that: “wealth creation in the digital era, has so far generated little employment. Entrepreneurs can turn their ideas into firms with huge valuations and hardly any staff… a maker of virtual-reality headsets with 75 employees, was bought by Facebook earlier this year for $2 billion. With fewer than 50,000 workers each, the giants of the modern tech economy such as Google and Facebook are a small fraction of the size of the 20th century’s industrial behemoths.”
This also widens the gulf of inequality between nations: “In 1820 the world’s richest country—Britain—was about five times richer than the average poor nation. Now America is about 25 times wealthier than the average poor country. The Gini coefficient for between-country inequality stood at only 16 in 1820 (i.e., very low). It soared to 55 in 1950, and has been stable since. The driving force of inequality since 1820, in other words, has been industrialisation in the West.” These astonishing facts and figures alone are sufficient for us to conclude that an unprecedented era of conflict – an intensification of the class struggle – is beckoning, both within nations and on a world scale. The US will be an epicentre of the struggle and the convulsions there will therefore be greater, with colossal ramifications for the class struggle and therefore for opportunities for the growth of powerful socialist parties.
Economically Europe remains mired in depression, which threatens to worsen in the next period. We have characterised the political situation throughout the continent as one of ‘mild reaction’. However, this is beginning to change, as indicated at the beginning of this document, with the big movements in Scotland, Ireland and perhaps a big collision industrially in Belgium, where the end of this year will have seen a mass workers’ demonstration, three regional and one national general strikes, in Italy and elsewhere. But similar explosions are possible anywhere, given the underlying tense social and political situation.
This was shown by the violent clashes in Italy at the meeting of the European Central Bank, convened in Naples, one of the poorest areas of Italy, which is experiencing its third recession since 2008. Unemployment in the eurozone stands at 11.5% with an estimated 18.3 million of those looking for work in the euro area still without it. Italy saw unemployment amongst young people rising to a fresh high of 44.2% of those aged between 15 and 24. There is undoubtedly an explosive mood in Italy – as in southern Europe generally – which can spill over into big movements on the streets.
The most important new development is the appearance of a sudden worsening of the economic position of Germany, because it is still the powerhouse of Europe and therefore has a continental effect. But its economy is becoming unstable. Industrial production fell 3.1% in August and 0.3% in September. Overall Germany’s, the economy dropped by 0.1% in the second quarter and then grew by 0.1% in the third. However a drop into recession is possible. In the teeth of the world recession, Germany was able to sustain its position at the expense of the rest of Europe. With barely contained glee, the Financial Times states that Germany’s “growth model has helped to drain demand from the rest of the eurozone, unnecessarily denied German workers and households a higher standard of living and left it vulnerable to external shocks.” By this they meant that it was too reliable on exports, which are now severely affected by the world recession. Exports dropped by 5.8% in August, but grew in September. It also growls that German capitalism received a competitive edge because of the “holding down of wages… [which] have fallen since 2000, suppressing consumption growth. It is particularly unhelpful, as other eurozone countries struggle to rebalance their economies, for German companies to snap up any export demand on offer.” Additionally, German investment has fallen five percentage points as a share of GDP since 2000 and labour productivity per hour has grown less than 1% a year since 2005. German capitalism’s rivals are seizing on this opportunity to pile on the pressure – demanding that they carry through deregulation, in the same manner that they have demanded this of others: “their own glass house could also do with some structural adjustment.” [Financial Times]
As the prospects for Europe emerging out of recession dim, the market stagnates and may even decline. So too, with the euro itself, which has fallen to a two-year low. Consequently, capitalist-imperialist antagonisms within Europe have intensified, as they have on a world scale between the different power blocs. This manifests itself in the growing antagonism between those like France, Spain, Italy, etc. – who wish for a loosening of the euro’s monetary constraints – and German capitalism and the core countries around it. The calculation is that if the budgetary constraints were loosened to more than 3% of GDP this would generate ‘demand’ and, together with other measures such as a continuation of a form of quantitative easing, would show a way out, at least temporarily. The European financial authorities calculate that this would have a chance of avoiding the dreaded deflation if the ECB stepped in to purchase private sector assets on a sufficient scale – involving expenditure up to €1 trillion, including Greek and Cypriot ‘junk bonds’. Yet all the ingredients still remain for the collapse of the euro, despite reassurances that, unlike in 2012, the ‘danger’ has passed.
It hasn’t! Colossal pressures are building up on national governments, particularly through permanent levels of high unemployment, as it acts on the youth, while the IMF has said that there is a good chance of a sudden collapse of the euro. As the problems pile up, investors and capital are beginning to flee Europe, with the continent’s weaknesses beginning to act as a drag on the world economy which could last for years. Deutsche Bank now argues that the world is burdened by a ‘euroglut’. It points out that at the beginning of this century, the recycling of China’s surplus into US Treasuries resulted in the conundrum of exceptionally low US bond yields: “We expect Europe’s huge excess savings, combined with aggressive European Central Bank easing, to lead some of the largest capital outflows in the history of financial markets.”
On a European level the problems are intractable under the present financial settlement and are accumulating. Such are the disparities now between ‘Northern’ Europe and the South, it will become increasingly difficult for the governments of the latter to maintain the euro, which is a pernicious form of internal devaluation. It is likely that some kind of break will be initiated by southern Europe, but it cannot be excluded that Germany or some other North European country, or even Italy or France will take the initiative to break from the euro, which will be followed by others
What is true on a continental level is doubly so in relation to individual countries that make up the EU. It is only possible here to give a thumb nail sketch of the main economic and political features in some of these.
In France, the government has already announced that the budget deficit will be at least 4.4%, well in excess of the 3% limit. Public expenditure amounts to 55% of GDP. This is just one reflection of the past gains of the French workers, many of which they still retain. Up to now, different governments, both of the ‘left’ and right, have nibbled at these but have not taken the axe to them, as France’s erstwhile allies have done. The present right-wing Prime Minister, Valls, who comes from the extreme right of the Socialist Party, has been compelled to assure the working class that the 35-hour week remains ‘sacrosanct’. It is highly unlikely that his assurances will be kept. If the government remains intransigent, it will face a media firestorm, with threats from big business to relocate outside the country, as have already been made. The only way to withstand this pressure will be to appeal to the working class, carry out a radical programme and prevent capital fleeing the country, through state control of all incomings and outgoings, which is only possible through the nationalisation of the banks in the finance sector.
The ECB and the European Commission may still act carefully in regard to France and ‘kick the can further down the road’. However, this cannot continue indefinitely – this road is finite. If it goes on too long the ‘rules’ will become meaningless and the whole ‘project’ will collapse. The presidency of Hollande is in deep trouble, ground as he is between the millstones of the pressure of the working class and that exerted by the capitalists with their panoply of power. His poll ratings are at unprecedentedly low levels. He came to power pledged to take some measures against austerity but instead folded at the first hurdle and capitulated to the market and ECB demands for ‘more austerity’. This in turn provoked big strikes in the autumn of 2013, which led to the bourgeois press speculating early in 2014 about “the end not just of Hollande, but of the Fifth Republic”. But this year, the big union federations have only mobilised half-heartedly.
According to the polls, in a new presidential election, Marine Le Pen would defeat Hollande. And it is not entirely ruled out, such is the deep crisis besetting France, that he or his successor may be forced into a new presidential election, against the background of a new round of mass strikes and growing opposition from the right. The far right could win such an election. However, if Le Pen wins the presidency, this will act as a thunderclap to awaken the French and European working class, which can lead to mass movements on the streets and factories, reminiscent of an element of the days of 1934 when they came out to show that they would not allow a French Hitler to come to power.
Presently there is no visible mass point of reference for the working class on the political plane after Mélenchon threw in the towel and abandoned the leadership of the Left Front. But opportunities will be presented, which we must participate in, to develop a viable working-class based antifascist movement in all countries in Europe where the far right has a substantial presence. The Greek comrades have initiated a very effective committee along these lines, which can find a wider echo in the next period. In Austria, the continued strength of the far-right Freedom party, which is currently the largest party in the opinion polls, is a serious complicating factor. However, its position is not completely dominant; in the polls it gets under 30% and there is continual opposition to its racist demagogy while the widespread opposition to the metal bosses’ recent attempt to cut real wages showed again the potential power of the workers’ movement.
Italy is not far behind France in the scale of the effects of the crisis in Europe. In the past, the country was known for its high-performing small and medium-sized businesses, particularly in manufacturing. Last year, an eye-watering 372,000 businesses, many of them family firms, closed wreaking havoc in what was once a stable and traditional section of Italian industry. This is just one measure of how the economic crisis – long kept in the background by the press and the capitalist media – has driven a stake into the heart of Italy.
This comes at a time of weakening of the Italian working-class organisations, one of the giants in the past of the European labour movement. Prime Minister Matteo Renzi, a Tony Blair-like ‘superstar’ who has received the endorsement of Blair himself, seeks to complete the process of effectively dismantling the power of the labour movement during his period in office. He openly confessed that his task was to “finish off communism”, by which he did not just mean Stalinism but the idea of struggle solidarity and militancy, the hallmarks of the Italian labour movement in the past. However, the recent electoral successes of the Democratic Party (Pd) belie the huge loss of membership resulting from its electoral consensus approach – down nearly four-fifths over the last two years.
He bribed the electorate in the European elections with an £80 payment to low-income families, which will run for at least a year. This was enough for him to score a victory but, according to authoritative consumer bodies, his ‘gift’ will have “almost invisible” effects because consumption in June rose just 0.1% compared with a year earlier. If anything, the economy is destined to get worse in the next few months. ‘Reform’ of the Senate was seen as the first vital step in ensuring the passage of more ‘reforms’. This has opened speculation about tensions in the government. Unemployment is a particularly sensitive issue as hordes of unemployed Italian youths scour Europe in search of even low-paid jobs. The few jobs available in the South are scooped up by the Mafia, which still exercises iron control over the distribution of jobs, while “up to 70% of shops pay protection money”.
The Renzi government has also stoked up resentment as he shoves the unions out of the way while he tries to bulldoze through his neoliberal measures. He ‘gave’ union leaders 60 minutes each, in an ‘audience’ starting at 8am, to discuss a revamped Employment Bill, crucial to his government’s “credibility as a liberalising administration”. One union leader commented: “Only once before has such an absence of social dialogue been seen in Europe… with Thatcher.” The reason for the brevity of his discussions with the union leaders was because he wanted ‘inconvenient’ workers’ representatives out of the way in time for him to host a one-day, European Union jobs summit, a gathering to discuss how to cheapen the wages of Italian and European workers. In order to get the acceptance of the bill from the union leaders, alongside support from the ex-Communist Party elements still in the Democratic Party (Pd), he turned it into a vote of confidence for the government. Turmoil followed with 26 Pd senators objecting to the documents, which were vague and lacked detail. The Five-Star Movement (M5S) objected to the government granting itself wide powers to frame enabling legislation. Some of their leaders were expelled from the Chamber amidst uproar. Other violent scenes ensued. But the proposals were accepted with 165 in favour and 111 against.
Renzi has also lined up with France in its opposition to the EU rules: “I prefer France with a 4.4% budget deficit to Marine Le Pen as president next time.” Italy’s deficit will certainly overshoot the 3% limit by a considerable amount. Renzi also declared recently: “I prefer arrogance to a lack of ambition.” He then went on to state: “My ambition – for Italy – is not to do better than Greece, but to do better than Germany”. In the process, he is approaching a head-on collision with the Italian working class, which is already moving from below as the strikes and demonstrations in Genoa last year, October’s mass protest in Rome and the recent call for a general strike action from the CGIL indicate. On the surface, Italy does not appear to be gripped by the laws of revolt but the masses are mulling over events and, like many other countries in Europe, will move into action in the near future, presenting us with big opportunities to intervene and grow.
In Spain, the ‘regime of 1978’, as it is known on the left, resulting from the ‘transition’ to democracy, is in decomposition. This is against the backdrop of the continuing economic crisis, with debt set to top 100% of GDP for the first time in decades, and €100 million per day going on interest rates alone! Spanish capitalism faces deep crises on every front, as evidenced by the collapse of the two-party system, the territorial crisis relating to Catalonia, the panicked abdication of the king and the explosive rise of Podemos.
The national question is part of the bedrock of Spanish capitalism, which continues to show itself incapable of resolving it. The banning of the Catalan government’s proposed referendum on independence by the Constitutional Tribunal, at the behest of the Rajoy government, brutally exposed the anti-democratic nature of the regime. We support the right to self-determination but for Spanish capitalism the independence of Catalonia, whose economy represents 20% of Spanish GDP, would be a disaster.
The acceptance of the ban on the referendum, and organization of an alternative informal consultation organized by volunteers (which was also challenged legally by Rajoy) by the Catalan government of the right-wing CiU party also exposed its bankruptcy and that of the Catalan business class which has betrayed the struggle for self-determination time and time again. However, the mass participation (about 30%) in the alternative consultation, which of course saw a big majority voting for independence, shows that repression and wavering will not make the issue go away.
The working class and its organisations must put itself at the head of the movement for national rights and self-determination in Catalonia, based on a united movement with its class brothers and sisters throughout the Spanish state and internationally, under the banner of a struggle for emancipation for all and a free and voluntary socialist confederation of workers’ republics throughout the peninsula and beyond.
The spectacular rise of Podemos, which only 9 months after its birth heads the polls, shows the political volatility which exists, in the context of the crisis of Spain’s tried and tested two-party system. It also shows – in the debacle of the United Left (IU), which had been growing until Podemos’ emergence - the potential disaster which a turn to the right and coalitionist policies can spell for left formations. Initially, the capitalists will rally around the PP and PSOE in order to resist Podemos’ rise and the instability and change it represents, as shown by the increasing clamour for a ‘grand coalition’ following the next general elections. However, such a development could set in motion a new phase of decline for these two parties, especially the ex-social democratic PSOE which risks a PASOK-style annihilation.
In this context, capitalism will also attempt to ‘domesticate’ Podemos, as the possibility of a Podemos-led government becomes more viable. The shift towards a more moderate position in the speeches and interviews of Podemos’ main leaders, especially Pablo Iglesias in recent months, partially reflects this, with the party’s programme on the debt, ending austerity, etc., moving to the right as it approaches the possibility of power, in a similar way to Syriza in Greece. Despite rhetoric about ‘horizontal structures’, etc. Podemos is currently organised along very top-down lines, which has provoked some discontent.
CWI comrades have a key role to play in engaging with the rank-and-file activists of supporters of both Podemos and the IU (United Left), arguing for a united front from below based on the active mobilisation of the working class, and revolutionary socialist policies. Though in great danger, the IU as a force is not yet dead by any means, and could still play a decisive role in events, if its growing critical sectors – in which we play a role – manage to win the leadership and redirect its course.
The movement in Portugal is also passing through a certain lull, with no serious national mobilisation since the June 2013 general strike, which nearly brought down the right-wing coalition government. The failure of the leadership of the mass left parties, the Communist Party and Left Bloc, to form a united front on the basis of a struggle for power, has allowed both for the emergence of right-wing populist forces, and for a certain (temporary) revival of the moribund PS, under new leadership. The growing CWI organisation will redouble its efforts in the next period, and fight to play a catalyst role in the struggle for unity based on a revolutionary programme, forty years after the April revolution.
Despite herculean resistance by the Greek working class to Troika-imposed austerity measures since 2010, including over 30 general strikes, savage cuts were successfully carried out by successive Greek governments. These defeats for the working class are primarily the responsibility of the union leaders, who through limited 24-hour strikes refused to decisively step up militant action to defeat austerity, and allowed militant strikes that faced State repression to be isolated and defeated. The setbacks are also due to