World Economy: The world economy and the class struggle

Genoa and the worsening world economic situation necessitate that the Committee for a Workers’ International (CWI) fully takes stock of the present general economic, social and political situation in order to prepare our members and wider layers of activists to intervene in the stormy events which loom.

The events in Genoa, coupled with material that has appeared in the bourgeois press has underlined for the ruling classes internationally the seriousness of the situation they face, particularly as far as the world economy is concerned. This is very clearly outlined in a recent issue of The Economist (Special Report, The World Economy, 25 August).

The opening line of this report sums up the panic which has now gripped the bourgeoisie: "One by one, economies around the world are stumbling. By cutting interest rates again this week – for the seventh time this year – the Federal Reserve hopes it can keep America out of recession. But in an increasing number of economies, from Japan and Taiwan to Mexico and Brazil, GDP is already shrinking. Global industrial production fell at an annual rate of six per cent in the first half of 2001."

As we have stated in many occasions, the US economy is the Atlas which has so far held up the world economy. Now, it threatens to turn into its opposite and drag the whole of world capitalism into an economic abyss. Technically, the US economy is not yet in recession (described as a drop in production in two successive quarters) although US manufacturing industry is in a deep crisis. This is an international phenomenon, with the manufacturing sector in a number of countries contracting and a slaughter of jobs taking place. But this is not yet fully reflected in the economy as a whole (Britain’s famous ‘two-speed’ economy for instance).

It was expected that the figures at the end of August would actually show US growth rates for the second quarter of this year to be close to zero or negative. In the event, the US economy is staggering along at the rate of 0.2 per cent! The euro zone is stagnant and probably developing at a zero rate as a whole. Italy and Germany, who account for half the economic output of the euro zone, both stopped growing in the second quarter of this year.

Some bourgeois economists – in Britain in particular – have pedalled the myth that because Germany has a higher proportion of industry compared to weakened British capitalism and the crisis is expressed in particular in manufacturing industry at the moment, Britain will escape the worst effects of the crisis. This is pure wishful thinking. It is true that industry expresses the crisis more clearly at this stage but ultimately this will also be reflected in the ‘service sector’. In addition, the contraction in the US economy and in the euro zone, together with Japan, will seriously affect the exports of British capitalism – as well as its returns on its foreign investments – and the performance of the British economy as a whole.

According to The Economist, total world output probably fell in the second quarter for the first time in two decades. As far as the US economy is concerned, the hopes of the Bush administration are that tax cuts can cushion or even mitigate the effects of a recession. Some bourgeois economists claim to see the upward slopes of a new economic upswing. However, it is not at all certain that the tax rebate cheques that the US government has mailed, which mean a benefit on average of around $300 per taxpayer, will have the desired effect of continuing the US consumer-spending spree. As the experience of Japan has shown, and against the background of massive lay-offs and redundancies in the US, the expected tax benefits could be saved rather than spent because of the changed situation and the fears for the future. The tax relief comes at the same time as the US federal budget has gone into the red again. The surplus has rapidly turned into a deficit even before recession has begun. Other countries will experience the same effects when the cost of unemployment and lower tax revenues set in.

Koizumi – the new great hope?

As far as Japan is concerned, there is a general acceptance that it is a hopeless economic basket case. The new Japanese prime minister, Koizumi, was projected as the new great hope. Through ‘structural reforms’, the introduction of draconian measures to deal with the debt overhang (bad loans, etc), it was envisaged that this could finally provide the basis for a revival of Japanese capitalism. However, Koizumi’s programme is an example of the cure being inestimably worse than the disease.

Even the serious bourgeois commentators who were urging him on to take drastic action are now drawing back in horror at the consequences of what this involves. Figures released by Japan’s Ministry of the Economy and Trade underlined the catastrophic position of Japanese capitalism. At the end of August these showed a 2.8 per cent drop in production in mines and factories, the fifth consecutive monthly fall. Japan’s gross domestic product is expected to shrink in the third quarter for the second quarter in succession, fulfilling the official criteria for a recession. This is described as the "fourth recession in a decade". This is not entirely accurate, as Japan has been in a depression for a decade.

Has there ever been a period in the recent history of any major capitalist economy where it has stagnated for so long a period? Even the stagnation of the US in the 1930s was shorter than the situation that Japan has faced in the last ten years. In reality, Japan has experienced a period of depression, characterised by virtual stagnation in production with just one or two years of very small, anaemic growth. A previous Japanese prime minister described the position of Japan as "a slump". Now Japan is on the verge of an even deeper slump.

The situation was summed up by a headline in the British newspaper, The Independent: "More jobs lost as Japan’s economy goes into freefall" [29 August]. The number of unemployed rose by 230, 000 in a year to reach 3.3 million, the biggest total since official records began in 1953. This is officially five per cent of the labour force, but in actual fact hidden unemployment probably puts Japanese unemployment figures at 10 per cent or more.

The economic situation facing Japanese capitalism means that the day of reckoning, which to some extent they have postponed for a decade, can now no longer be avoided. The country’s finance minister has stated: "Japan is suffering from a rapid hollowing out of industry". An avalanche of job cuts has been announced by the giants of Japanese capitalism. Toshiba has announced that it would reduce its Japanese workforce by 19,000, Hitachi plans to slash 14,700 jobs, mostly in Japan, and so on. Japan’s biggest electronics manufacturers announced combined jobs cuts of 65,000 in August alone. Some Japanese economists claim that the economy is now contracting at an annualised rate of four per cent.

Economic catastrophe

A reflection of this catastrophe is the rapid further drop of the Nikkei stock market index, which at the end of August closed at its lowest level for 17 years. The consequences have been socially catastrophic and are visible everywhere. The idea of a job for life has gone out of the window. Almost a million people have lost their jobs in the last four months and 180,000 university graduates were unable to find jobs, 60,000 more than a year ago. Among those aged 15 to 24 the official unemployment rate is nearly 10 per cent and there are only 60 vacancies for every 100 job seekers. Moreover, the banking crisis has gone from bad to worse. The amount of bad loans now stand at $1 trillion. The Financial Times reports "that new bad loans would grow so fast that banks would make no reduction in bad loans this year and next… The news that bad loans disposal is going to be a bigger and deeper problem than hoped comes as unemployment has hit a record high of five per cent. Even this figure is regarded as the beginning of the story of bankruptcies" [30 August].

It is against this background that the Koizumi regime has promised to withdraw loans from insolvent companies, which in turn will lead to massive bankruptcies and redundancies. The proposed measures of the government could result in the loss of 600,000 jobs, which Koizumi has tried to soften by promising a social safety net for workers forced into unemployment. But as the British Independent comments: "Since coming to power he has furnished few concrete details". It is quite clear that if Koizumi implements his programme it means, in effect, a declaration of civil war against the rights and conditions of the Japanese working class. Even if he is prevented from going the whole way it is certain that the whole of Japanese society will be shaken from top to bottom and that the Japanese working class will begin to move into action. Our small forces have to prepare for this and seek a road particularly towards the youth who will be radicalised by the situation developing in Japan.

What will be the consequences of these developments for the rest of the world? It is important for us to explain to our own members and then to the workers we can reach, why this situation is developing. At the same time, we seek to give an explanation of the character of this recession and its consequences. Will it be a recession along the lines of what has been seen on previous occasions since 1945? Will it, on the other hand, be a deeper recession or a slump far greater in its consequences than we have seen in this period?

The bourgeois now generally agree that the watershed was 1997. This is a point that we made at the time. We pointed out then that the Asian crisis followed by the crises in Latin America and Russia represented a decisive turning point in the development of the world economy. It seemed to be contradicted by the ‘rebound’ in Asia and elsewhere. Now, the serious bourgeois economists agree with us that 1997 was the turning point: "The global recession of 2001 is very much a by-product of the previous downturn of 1998… indeed, I would argue that the two downturns should be viewed more as a continuum of one long, drawn-out global business cycle – one that could go down in history as the world’s first recession in this modern era of globalisation" [Stephen Roche, Morgan Stanley’s chief economist].

We emphasised that that the 1997 crisis had left in its wake a massive increase in poverty and a worsening of the conditions of the masses in Asia, Latin America and Russia. Moreover, these countries had only experienced a partial ‘rebound’ in the sense that they exported their problems, finding a temporary respite in the US market, ‘the market of last resort’. The Economist article also makes the point that we have emphasised in relation to globalisation. Undoubtedly, the increased integration of the productive forces on a world scale acted in a spiral effect, as described by Marx, in increasing and to some extent extending the economic cycle of the 1990s. Now, this has turned, as we warned, into its opposite.

The very dominance of the US economy, which drew in the exports and the capital of the rest of the world, acted to extend the boom of the 1990s but stored up future problems. Conversely, the slowdown in the US has already had huge effects, particularly in the neo-colonial world. The inevitable deterioration of the US economy will have catastrophic results for the rest of the world in the period opening up. Stephen Roche "reckons that the United States accounted for two-fifths of world GDP growth over the past five years, either directly or indirectly, by sucking in imports from other countries. That dependence has left the world more vulnerable to an American slump".

Moreover, with barely concealed alarm, The Economist also agrees with our analysis that this recession or slump will be much more synchronised than any other post-1945 economic contraction. They declare: "The most striking aspect of the current slowdown is that it is more widespread than in previous world slumps in 1975, 1982 or 1991. Those three years were all officially designated as world recessions, yet global GDP growth ranged between 1.2 per cent and 1.9 per cent as recession in some parts of the world was offset by growth elsewhere. (This is why growth of two per cent or less is generally considered to be a world recession.) In 1975, even as the jump in oil prices pushed rich economies into recession, Latin America and Asia remained relatively strong. In 1990-91, America went into recession, but Japan, Germany and most emerging economies continued to boom". GDP growth in the three largest economies of the world (the US, Japan and Germany) is now at its weakest position since 1982 and industrial production is falling quicker than in any recession since the mid-1970s.

Crisis of overproduction

In other words, this coming recession will be much worse than the previous post-1945 downturns and could be more prolonged. This crisis is an example of a classical crisis of capitalism described by Marx and elaborated by Trotsky. The phenomena of overproduction or ‘excess capacity’ together with contracting or falling profits, are features of this crisis. As Marx remarked in the third volume of Capital: "Overproduction of capital is simply overaccumulation of capital, although overproduction of capital always includes overproduction of commodities". This in turn, generates a vicious circle of "stagnation of production and the laying off of part of the working class" accompanied by "the collapse of the credit system" leading to, in the words of Capital, "disturbances and stoppages in the capitalist production process, crisis and destruction of capital… The results are generally chronic overproduction, depressed prices, falling and even wholly disappearing profits".

Again, The Economist makes the point: "The third way in which this downturn may differ from previous ones is that it has not been caused by a collapse in demand after central banks have raised interest rates to fight inflation, instead it is an investment led downturn. America’s long expansion in the 1990s encouraged rosy expectations about future growth and profits, encouraging overinvestment financed by heavy borrowing. When there is excess capacity and an overhang of debt, interest rate cut demands tend to be less effective in reviving demand. Investment led recessions, which were common before the Second World War, tend to be deeper and to last longer because it takes longer to purge financial excesses and overcapacity than it does to tame inflation".

Here is The Economist acting as a serious representative of capitalism and warning its class not to entertain too many illusions that this recession will be short and shallow. Of course, because capitalism is a system which works in the blind nobody can predict accurately the character of the coming recession or how long it will last. But nevertheless, all the factors at hand point in the direction of the conclusion that we have drawn and which is now underlined by The Economist, of a lengthy general stagnation of the productive forces. This does not preclude a partial ‘upswing’ at some time in the future, the timing of which cannot be worked out a priori. But if there is growth it will most probably be anaemic, faltering and not on the scale of the 1990s, which are now, economically at least, well and truly over.

These ‘pessimistic’ economic conclusions of the writers of The Economist are not plucked from the air. In their own way, they attempt to explain the factors which have led to the present recession and possible future slump. What are the forces that have driven in the direction of a global slowdown? First of all and interestingly, in view of the past illusions in the role of information technology (including from Economist writers), they point to the collapse in the IT bubble and the bursting of the NASDAQ index in the US. The hype over the ‘new economy’ (which we have to remember affected even some ‘Marxists’, such as the ex-comrades in Liverpool) led to a massive overinvestment in IT and gross exaggerations of future profits. Now, in the second quarter of 2001, business investment in the US fell by an annualised rate of 15 per cent and by an estimated 18 per cent in Japan.

A second factor was the collapse in stock markets everywhere, which has eroded the so-called ‘wealth effect’. The Economist gives staggering figures on the extent of this contraction: "Twenty per cent average fall in share prices since early 2000 has wiped $10 trillion off global wealth. Stock markets have fallen by even more in Europe and Asia than in America. Households in Europe hold fewer shares than their American counterparts, so the wealth effect on consumers is smaller. However, the plunge in share prices has seriously dented business confidence and investment plans". And we have to remember that shares in general are still massively overvalued and a further contraction, and a sizeable one at that, is to be expected in the coming period.

A third factor is the jump in energy prices in the oil consuming economies which, while not on the scale of previous increases such as in the 1970s, has nevertheless acted to squeeze profits and affect global growth. Although oil prices have fallen over the last 12 months (from $37.50 to $25 a barrel) they are rising again. And of course the fourth factor, referred to above, is the very integration of the world economy, which has meant that the US economic problems have quickly affected the rest of the world. The effects of this have been particularly felt in a whole series of neo-colonial countries or so called ‘emerging economies’. Argentina can only be described as experiencing a slump and a deep one at that. Mexico is already in recession and Brazil is likely to follow.

As far as the countries in SE Asia are concerned they are more exposed now than they were in 1997, paradoxically because their so-called ‘rebound’ resulted in increased exports to the US and Japanese markets. In their home markets domestic demand remained flat but they appeared temporarily to have exported their way out of difficulties. That now is recoiling on them and will deepen the social and political problems that face them. One thing is absolutely clear; the economic consequences now, never mind in the future, for Asia are certain to result in a further radicalisation of the masses. We should not forget that one of the consequences in the collapse of 1997 was the Indonesian Revolution and the overthrow of the Suharto regime the following year.

In passing, we have to say that the recession has destroyed many of the arguments put forward in the past to explain the boom of the 1990s, which we answered at the time. We were told that new technology, particularly IT, had revolutionised industry and resulted in historically high rates of productivity, particularly in the US. We explained that the figures were probably exaggerated, and due to the economic cycle in any case. Some sections of the left swallowed the arguments of the bourgeois on this issue hook, line and sinker. What do we discover now? According to the International Herald Tribune, recent figures, "cast doubt on a central new-economy claim by the Federal Reserve Board chairman, Alan Greenspan, and others. They argued that accelerating productivity gains in 1999 and 2000 were evidence that the computer revolution was at last providing a foundation for more rapid economic growth in the long run. But most of these gains turn out to be the result of an accounting error"!!! [31 August 2001].

World trade

The expansion of world trade at a record rate also played a key role in globalisation and in furthering and extending the boom of the 1990s. Now, however, world trade is contracting and is expected to decline even further in the future. The Economist points out: "Over the past decade world trade has grown 2.3 times as fast as world gross domestic product, compared with only 1.4 times in the previous two decades. American imports now amount to six per cent of the GDP of the rest of the world, twice as large as in 1990. But in the first half of this year, American imports fell at an annual rate of 13 per cent; imports of IT equipment fell at a rate of almost 50 per cent". The forecast of the Economist Intelligence Unit is that the growth in the volume of world trade will drop to only three per cent this year, from 13 per cent in 2000. They comment: "That would be the sharpest slowdown since 1975". Even the IMF now warns that the world economy could suffer a prolonged downturn.

So these serious representatives of capitalism agree with the analysis of Marxism, but from an opposite class standpoint, that all indications point to a deep recession and possibly a slump. They soberly examine the likely length of such an economic crisis and its depth. They ask: "How long will the world economic downturn last"? And, quite correctly, they also point out that most bourgeois economists still have illusions of an early bounce back by the US and the world economy. However, some of the speculators who have grown fat in the 1990s are not at all in agreement with these economists. For instance, Warren Buffett, the world’s second richest man and allegedly the most "successful money manager" has warned "investors to expect another eight years of economic stagnation and weak US stock markets". The Guardian in Britain reports: "The septuagenarian head of Berkshire Hathaway has been telling executives to prepare for a famine of almost biblical proportions after the feast of the late 1990s".

The ‘optimistic’ wing of the bourgeois economists believe that the cuts in interest rates, together with other factors such as the inevitable drop in oil prices because of the recession, will push up real incomes and profits and lead to a world economic revival. But, as The Economist has pointed out: "Unfortunately, the balance of risks lie on the downside". Not least of their fears is a sudden collapse of the dollar. There has been a 25 per cent increase in the dollar’s value in the last six years, which to some extent has defied the laws of economic gravity because the US economy is running a massive deficit, currently $30 billion a month. In order to sustain this the US needs to attract about $1 billion of foreign capital a day and encourage foreign investors to hold on to their current US assets to prevent the dollar from falling. In other words, to some extent the fate of the dollar is in the hands of foreign investors and speculators who have poured into the US to consume its assets and, up to the recent period, have continued to invest. As the Financial Times remarked, in an editorial headlined "Synchronised sinking": "…If further falls in asset prices and fears of unemployment should cause the consumer to retrench", there would the be, "Then the possibility of a catastrophic global collapse exacerbated by a plunging dollar and serious disarray in financial markets" [3 September].

However, the nightmare scenario is an aggressive and sudden slide in the dollar. This nightmare could be realised as profits continue to fall and the stock market bubble deflates. Investors, seeing the recession deepening in the US and with problems at home, could suddenly pull the plug by starting to sell their US assets in order to raise cash and confidence in the dollar then slumps. If this happens it will not just have an effect on the US but will have world repercussions, creating what the British Guardian has called "a global chain reaction" with a full-blown financial crisis superimposed upon a slump.

Risk of default

Added to all of this, of course, is the risk of default by a number of countries particularly in the neo-colonial world. Recently, Argentina and Turkey have been on the brink. But the US, forced to abandon its threatened non-interventionist economic policy, and contrary to what Bush said in the presidential election campaign, has been compelled to intervene through the medium of the IMF and propped up both countries with loans. In the past month, Argentina has received $8 billion in loans but this is widely considered to be ‘too little, too late’. This will do nothing to improve the already miserable conditions of the Argentinean masses and has been partly given to prop up the De La Rua administration with elections for the Senate and part of the Congress looming in October. Already there has been a split from De La Rua’s party on the issue of ‘corruption’, which probably betokens a further development of populism, not just in Argentina but in Latin America as a whole.

The Argentinean crisis has already had a devastating effect, not just on the working class but on the middle class as well. As has been pointed out in articles in the journals of the different national sections, the discontent over mass unemployment of 20 per cent, the appearance of shanty towns on the outskirts of the major cities of Argentina, is reflected in the seven general strikes that have taken place in the last 18 months alone. In a situation that has some parallels with the CIS, workers who have managed to cling on precariously to jobs have not been paid for months. Argentina is at boiling point and, despite the recent intervention of the IMF, is destined to sink even further into the economic morass.

As we pointed out, Asia will face a new period of turbulence and upheaval. The preparedness of workers to struggle is magnificently highlighted by the two-day general strike against privatisation by five million workers in South Africa. A whole series of defensive battles for jobs and conditions is inevitable by the working class internationally. Yet, despite the worsening of the economic situation, we have also seen offensive struggles such as the refusal to accept a wage increase of 10 per cent by the Volkswagen car workers in Mexico. Undoubtedly, the increased profits of this car giant were a factor in the workers pressing for more substantial increases now. Additionally, public sector workers in Brazil have been on strike for a 74 per cent increase in wages.

Europe, which has experienced important strikes in the past period, will face an intensification of struggles on the part of the working class as a reflection of the change in the economic situation in the next period. There have been important strikes of metalworkers in Italy, even prior to Genoa. In July, Belgian transport workers struck against privatisation. In Spain, 40,000 telecommunication workers came out on strike in June. And a very successful strike took place in Galicia in the same month against the vicious so-called ‘labour law’ of the Aznar government. Moreover, this strike was in the teeth of opposition not just from the government but also from the leaders of the trade unions, particularly the Workers’ Commissions. With some similarities to what happened in Greece at the time of the general strike, where the movement developed from below, the strike in Galicia was very successful and could be an anticipation of national action against the measures of the Aznar government.

Some of these and other significant developments and should be discussed by socialists and worker activists internationally. Additionally, of course, there have been some very important struggles in France, Germany and Italy in this period. A key factor for Europe is the introduction of the euro in January 2002. Short of a world economic crash, it now seems certain that the euro will be introduced at this stage. The International Secretariat of the CWI, of course, was wrong on the timescale, as we have explained previously, in relation to the euro. We considered that on balance it was not likely to be introduced at this time. We corrected this analysis, which was based on an earlier expectation of world economic recession following the Asian crisis of 1997. The postponement of that crisis has in turn allowed the bourgeois to proceed with the introduction of the euro.

However, there are grave misgivings on the part of the bourgeois at the prospects of a long life for the euro, at least in the form in which it is to be first introduced. The very introduction of the euro represents, in a technical sense, the biggest monetary exercise since the immediate period following the Second World War. There are all kinds of fears: the possibility of widespread fraud; the holders of funds from the black economy have been divesting themselves of their ‘ill-gotten gains’ by rapidly buying up property and luxury items such as yachts, in places such as Majorca; security guards are threatening to strike because of the fear of what criminals will attempt during the process of the introduction of the euro.

But the more serious question is the effect that the introduction of the euro and economic and monetary union (EMU) will have in this turbulent economic period. Milton Friedman, the guru of monetarism, has described the euro as a "grave error". Like us, he has pointed out that the ‘one size fits all’ interest rate is inappropriate for the different economic situations which exist in, for instance, Ireland where an increase in interest rates is necessary, or in Italy where a certain loosening needs to be carried out.

But the powers who are most concerned about the effect of the euro are paradoxically the very authors of monetary union themselves, particularly representatives of German capitalism. One central banker has described the stability pact, which dictates budget deficits of no more than three per cent as a "medieval torture chamber". Hans Eichel, the German finance minister, has also made a scathing attack recently on the stability pact, but retracted under pressure from his ‘partners’ in Europe. The Economist quite bluntly states that the stability pact is "barmy" and it was a "pity" that Eichel had retreated.

Euro hesitations

The hesitations in the upper circles of the German government have been prompted by the entirely different economic situation today compared to the time when EMU was first envisaged. Germany is stagnant, is heading towards a recession, and is burdened with growing unemployment and the cost of continuing to prop up eastern Germany, as well as being the main economic pillar of the European Union. Therefore, even Germany has concluded that it will be difficult, if not impossible, for them to remain within the limits set by the stability pact. Such a target is possible in a period of economic upswing but is entirely problematical in a period of economic stagnation, never mind a serious recession or slump. Moreover, under the terms of the stability pact, to go outside the limits risks a fine of 0.5 per cent of GDP against the offending country. There is a let-out clause but it is highly complicated and if the stability pact had been applied in the last 15 years, France and Germany would have had to pay substantial fines on three occasions!

In such a situation public opinion in Germany and France would be inflamed with enormous pressures to break with the stability pact and the whole EMU project. The consequences, however, of remaining inside this framework mean that the German government or any European government, faced with the rise in its budget deficit, prompted by falling government income due to the growth in unemployment etc., will be compelled to actually raise taxes and cut public spending. The Economist has described this as "self-flagellation similar to what happened in the 1930s". The EU will be forced to amend or to ignore the main precepts of the stability pact. The EMU could hold together for some time but under the blows of a serious economic recession and particularly of a slump, not just the most vulnerable but also the most powerful countries, the very pillars of the EU, could opt out and with this will come the collapse of the euro. (This is not at all an exhaustive examination or analysis of the euro but is the main lines in which we believe the situation will develop. We will return to this in future written material.)

What is vital for activists and socialists internationally in this period is to grasp that the change in the economic situation will have huge social and political consequences, which in turn can open up an even more favourable situation for the CWI as a whole and for every party and organisation affiliated to it.

Genoa was undoubtedly an important symptom and an important pointer to what can happen. It is not an accident that on the one side the bourgeois is preparing in an "extra-parliamentary" fashion to confront the working class, if necessary. Undoubtedly, the fascist elements in the Italian state went too far and have inflamed public opinion in Italy and internationally. In Sweden, for instance, a reappraisal is taking place about the role of the police, with increased criticism of how they acted in Gothenburg. At the same time, the proposals of the German and Italian governments to create a "pan-European mobile police unit" is the music of the future. It is linked to an expectation, dim though that may be in the minds of the bourgeois at the present time, of a further escalation of the class struggle.

On the other hand, a section of the bourgeois reflected in the ex-social democrats, has been forced to bend and seeks to accommodate the growing anti-capitalist mood which is developing within European society. This is reflected in Jospin’s demagogic attempt to ‘reach out’ to the anti-capitalist, anti-globalisation demonstrators. He has even embraced the idea of the Tobin tax. This is at a time when Professor Tobin himself, interviewed on British TV, concluded that it was "not likely" that his proposal would be introduced because "the US is opposed and if they are opposed nothing will happen".

Undoubtedly, Jospin has made this proposal – we must remember on the heels of similar suggestions in Belgium a few months ago – because of the proximity of presidential elections in France, where he is planning to stand against Chirac next year. There are indications that sections of society who would previously have voted for Jospin and the ‘Socialists’ are profoundly disappointed and have even posed the question of linking up with the ‘Trotskyists’ around the LCR. In taking this stand, spokespersons for Jospin have indicated that they have their eyes on the 6 to 10 per cent of the French electorate who have indicated they will vote for the candidates of the LO or the LCR in the French presidential elections.

One thing is absolutely clear: big defensive battles will take place on a European-wide scale in the industrial field. At the same time, politically a new period is opening up with a widening and reinforcing of the mood against capitalism, globalisation, etc. The issue of racism on a European scale is a key question which we have got to intervene in and address. Clearly a new and exciting period is opening up for the working class and for the forces of socialism and Marxism.

Events will not develop in a straight line; there will be pauses and even periods of reaction. The Middle East at the present time is a cauldron and the perspectives of how the situation will develop there will have to be outlined in a further statement by the CWI. The semi-partition of the area, horrendous as this seems, is one of the possibilities in the situation. At the same time, despite all the efforts of imperialism to hold the situation together, Macedonia could fall apart and civil war between the ethnic Albanians and Slavs could erupt. This, in turn, could open up a wider conflict for a Greater Albania on the part of the ethnic Albanians, followed by a wider conflict involving Greece, Bulgaria and Turkey with all the unknown consequences that will bring.

How does this general situation impact on consciousness? Undoubtedly, we are starting from a lower level than before 1989. But it would be absolutely false for us to base ourselves upon what appears to be the present consciousness or what appears to be on the surface. Already there are elements of the 1960s in the situation on a world scale and particularly in Europe at this stage. This is reflected even amongst some intellectuals in the shift towards the left, also artists, film stars, etc. Above all there is ferment amongst the youth. It is important that CWI members maintain and even step up our work in this period.

Above all, the conclusion that we would draw from this is that, while there are still elements of the past in the situation, the most decisive fact is the change that we have described economically above, which will be reflected politically and socially in the next period. The main practical conclusion that we can draw from this is that CWI and its affiliated organisations and parties can grow. We cannot even use the terminology that this is a ‘more favourable situation’. This is now a favourable period, which must be reflected concretely in the growth of the forces of the CWI.

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September 2001