The words of W.B Yeats, from his poem ‘Easter 1916’, sum up the current world situation: “All changed, changed utterly.” 2020 is the opening of a new era, as we have explained in the previous CWI analysis. Fundamental changes are taking place in the world economy, geo-political relations, and a colossal polarization between the classes on a global scale. All of the trends we see developing today were present prior to the onset of the COVID-19 crisis. However, they have been razor-sharpened and accelerated at lightning speed. For revolutionaries and socialists, it is necessary to audaciously face up to historic new challenges and tasks, both politically and in our interventions in the social upheavals which are taking place. All of the consequences of the dramatic upheavals taking place are not yet fully clear. However, it is certain that capitalism will not be able to go back to the pre-corona situation, much less the situation which existed pre-2007-08.
A prolonged period of economic recession or depression will mark the 2020s. Any ups and downs in the economy will not eradicate the poverty and pauperisation facing tens of millions, or the lack of job security for those in work. Social and political earthquakes not seen for decades, perhaps since the 1930s, are on the agenda, as recent social explosions in the US and other countries have shown. What was yesterday considered improbable today can become probable or likely. We are faced with the prospect of revolution and counter-revolution confronting each other in the sharpest manner for decades. It is necessary to be alive to this and not lag behind by viewing the world and class struggles through the prism of yesterday.
The world situation is dominated by the ferocious struggle unfolding between US imperialism and China. This reflects the prolonged decline of US imperialism and the rapid rise of China as the second world power. The rise of China has accelerated dramatically in recent years. Whilst in 2000 it accounted for 3.5% of global GDP, by 2019 it had soared to 14.5%. It is now the world’s largest creditor and is owed a staggering $5 trillion, and holds over $3 trillion in reserves. The steps taken to recentralise the economy even before the onset of this crisis have enabled them to act rapidly and quite effectively both economically and in management of the health crisis. The Chinese regime is now taking some steps to try and establish a digital currency. This is beset with problems and difficulties but they may aim to try and use this as a counterweight to the dollar. Whether they can succeed in this is another question. The decline of US imperialism will at a certain stage be reflected in a weakening of the dollar’s pre-eminent position as the main global currency. An outbreak of competitive currency clashes is one likely aspect of the crisis as it develops.
The growth of China and the decline of the US is resulting in a major shift in the tectonic plates affecting geo-political relations and alliances. The US, despite remaining the largest global power, is unable to impose itself as the sole single global power. It has been pushed back economically and weakened in its sphere of influence. This decline is now reflected in the mass social explosion which has rocked the US in recent days. We should remember that the decline of British imperialism in the first half of the 20th century provoked big class battles and revolutionary convulsions. This process is now developing in the US where events are developing at lightning speed and often in a violent manner. As Trotsky commented on a strike in the US, where the class divide is raw, it can often assume the character of a mini civil war.
Goodbye to the 1990s and globalisation?
The 1990s, following the collapse of the ex-Stalinist states in the former Soviet Union and Eastern Europe, was marked by a phase of globalization and integration of the world economy. This process went a long way, reflected in the integration of the EU, the establishment of the eurozone, trade deals like NAFTA, and integration of the world global economy. China was a part of this process and saw a big expansion of trade, especially with the US, forming a crucial part of the supply chain for the US and Europe. This process took place during a relatively stable period of growth in the capitalist economy despite some shocks and crises.
This situation had its limits and, as the CWI argued at the time, this process would go into reverse with the onset of a serious recession in the global economy. Others, even some on the Marxist left, thought the process irreversible and even spoke of the development of a single European capitalist class. Yet even at the height of the globalization process, the limits imposed by the nation-state under capitalism were not fully overcome. This prognosis was borne out following the crash of 2007-08 and a process of de-globalization began to set in as the ruling classes sought to defend their own national interests.
The severity of the current recession or slump triggered by the COVID-19 crisis has rapidly accelerated this trend. It has driven the US and China to resume hostilities in the trade war after a truce was negotiated in January. Tariffs on Chinese imports to the US are the highest since 1993. Chinese venture capitalist investment in the US was down 60% on levels recorded two years ago. Export controls curbing semiconductor sales to China have been introduced; the door has been opened for the government’s pension fund to stop investing in some Chinese companies and has moved to limit imports of electrical equipment used in the power grid.
Trump has railed that he will completely break links with China. There is a decoupling of the two economies taking place. How far this process will go is not clear at this stage and it has its limits; however, it can go a long way given the rivalry which now exists between these two global powers. There are big risks in this for the US economy, hence sections of the US capitalist class are resisting it. Whilst the nationalist rhetoric of Trump against China and the steps he has already taken are driven by his almost psychopathic obsession with being re-elected, this conflict is also driven by US imperialism’s decline and China’s ascent. China can also be rocked by economic and social upheavals which can check or cut across its growth.
US imperialism is caught in the ‘Thucydides trap’, named after the Greek historian who wrote on the wars between Sparta and Athens (431-404 BC), where a declining power when confronting a rising one is automatically driven to war. Whilst an all-out military war between China and the US is neither desired by either nation nor possible because of nuclear weapons, they are driven to a trade war as US imperialism is compelled to take steps to protect itself. In doing so they can inflict further damage on the US economy. This may limit how far Trump is prepared to go.
Yet war is a continuation of politics by other means and a trade war is subject to much of the same logic as military warfare. Events have momentum and a dynamic of their own. There are some similarities in the clash between China and the US with the situation which existed in the run-up to the 1914-18 war, in the sense that a series of clashes and the formation of rival blocs took place before the outbreak of war. Sections of the ruling classes tried to avert war and mass protests against it took place in many countries. Yet events and the interests of the capitalist class in each country had their own dynamic as one clash followed another, forcing a response. How far the process of decoupling goes is unclear and it will be difficult, but it is taking place and will have big repercussions on the world economy and world relations.
Trump has called for an expanded G7 to include India and Russia with the aim of cementing an anti-Chinese bloc or alliance. However, it was enough to provoke heated exchanges between German chancellor Merkel and Trump, according to some reports. Even if some bloc is cobbled together, an alliance of Trump, Putin, and Modi is not the most stable grouping of friends! However, it may simply be another rant sucked from Trump’s thumb to be cast aside when the next whim comes along. Yet it does illustrate how out of this crisis the emergence of two or more unstable poles could develop from the clash between the US and China as part of a geo-political realignment.
China has strengthened its position internationally as a consequence of this crisis. It is using the current situation to assert control over Hong Kong and has been extremely bellicose in relation to Taiwan. What will ultimately be the exact correlation of forces between China and the US is unclear at this stage and it will be in flux. The prospects of social upheavals in China itself and the onset of a deep economic crisis there means that the unfolding clash between these two powers will probably not be in a straight line of ascent and descent but will fluctuate.
In the 1990s the CWI argued that a process of de-globalization, protectionism, and other steps would follow the globalization and integration of the world economy with the onset of a serious recession or depression. Recently the British journal The Economist carried a leader headlined, “Goodbye globalization”, which concluded: “Wave goodbye to the greatest era of globalization – and worry about what is going to take its place.”
This does not mean that an instant reversion behind national borders to the nation-state economy and a total collapse of the global economy is posed. It will mean outbursts of clashes over trade, protectionism, tariff wars and the break-up of blocs such as the Eurozone or the EU as currently constituted and the various capitalist powers take measures to defend their own interests.
A new era of capitalist recession or depression begins
All of these features of this new era flow from the catastrophic state of the global economy and the prospect of a prolonged period of recession or depression. The COVID-19 virus is not played out and a new spike in any country will have devastating consequences on health and also on the political and economic situation. Within this recession or depressionary period, small, ephemeral upturns will inevitably take place especially as the ‘lockdown’ is eased or ended. However, these will be followed by further recessions and slumps. The new period we have entered is likely to be marked by an increasing frequency of capitalist crisis. This is important because it is not a boom or recession that drives workers and the middle class to seek a revolutionary solution to the crisis. It is the rapid switch from recession to even a small upturn and back to a recession that will have a dramatic effect on the class struggle, political polarization, and consciousness.
‘Modern Monetary Theory a way out or a dead end’
Capitalist commentators and some on the left are desperately searching the storerooms for a way out of the cataclysm capitalism is confronting in the 2020s. Some think they have found one in the ‘Modern Monetary Theory’ (MMT). Until recently this was side-lined to a few blog pages. Now it being discussed by capitalist commentators, and is increasingly being advocated by some on the left like Alexandria Ocasio-Cortez and Bernie Sanders’ former adviser Stephanie Kelton. They have also argued for a guaranteed job provision.
These ideas can get some traction and support amongst workers and young people. They can be seen as an ‘easier’ way to deal with the crisis than overthrowing capitalism. Sections of the capitalist class may also take them up in a desperate bid to try and find a way out of the crisis. All of these ideas are advocated within the limits of capitalism. The current left leadership is not capable of contemplating anything outside of the framework of capitalism. Even the reformists in the 1930s were compelled to speak of socialism as an alternative system, even though in practice they did not challenge capitalism. When confronted with the worst crisis since the 1930s, the vast majority of the ‘left’ leadership is not even prepared to consider this possibility and fear posing socialism as an alternative.
Yet what do the ideas of ‘Modern Monetary Theory’ amount to? Its advocates describe themselves as “post-Keynesian”. However, having searched for something new, in essence, they have simply donned the gown of Keynes. They argue that the piling up of debt indefinitely by federal governments that control their own currency is not a problem and that it has no limits providing interest rates are low or zero. The only problem, they argue, is inflation. This, they claim, can be avoided as long as there are enough workers to meet growing demand.
Yet the central problem facing capitalism today is precisely the lack of a market and demand. This will be massively compounded by the tsunami of unemployment which is hitting country after country and is coupled with declining incomes for those with jobs together with the accumulation of massive personal debt. Moreover, this policy would be inoperable within the eurozone where each country would inevitably want to adopt different levels of expenditure and debt levels, which is prohibited within the currency area.
A massive injection of government funding can avert a total collapse for a period. The capitalist class has been compelled to vomit out its neo-liberal programmes and has injected trillions into the economy along with other measures of state intervention. This is likely to continue in order to try and avert a complete collapse of the economy. Germany has now announced a further package of 130 billion euros. These measures can lead to a certain increase in demand amongst a layer but not enough to resolve the underlying causes of the crisis. These packages have been crisis management rather than a solution to the crisis. These policies can continue for a period in the industrialised capitalist countries. But this is not the case in the neo-colonial world where the massive class polarisation is having devastating consequences for millions of workers and the poor.
Yet the indefinite pumping up of a debt bubble in the industrialised countries will cause it to burst at some point when hit by a shock in the global economy. Historically, the ratio of debt to GDP was much higher in the period following the Second World War in the advanced capitalist countries including in the US. It was reduced over the protracted period of capitalist upswing following that war based upon rebuilding war damage, especially in Europe, the creation of new markets and massive growth in world trade, plus the application of Keynesian methods after the war. The situation today is exactly the opposite. The world is plunging into recession or even slump in some countries. The prospect for major, sustained growth is not in sight. Worsening conditions for workers and a drop in purchasing power will be reflected in the real economy as the underlying economic laws of capitalism assert themselves. Capitalism is in a systemic crisis and a cure within the system is not possible.
The example pointed to by Kelton in order to justify MMT is Japan, which has tried every conceivable application of capitalist economic policies. Between 1992 and 2008 no less than 18 stimulus packages were applied. None of them resulted in a return of significant economic growth. ‘Abenomics’ has now made it easier for employers to fire workers and has led to a dramatic increase in irregular employment, which reached 37.5% of the workforce in 2015 and is substantially higher today.
Japan has a debt-to-GDP ratio of 240%. Most of Japan’s debt is held by its own citizens rather than foreign creditors, reducing the likelihood of default. This has been sustained for approximately twenty years but with what result? Economic collapse was avoided but at the cost of more than two decades of stagnation with consequences for the working class. ‘Lifetime employment’, once held up as an exemplary feature of Japanese capitalism in the post-war period, is now a pipe dream for millions of workers trapped in irregular employment. The child poverty rate amongst single-parent households is 56%, the highest in the OECD prior to the COVID-19 crisis. Is this the best these new advocates of Keynes can offer as an alternative today? Japan is not an example of a success story; it is a dire warning of prolonged stagnation and worsening conditions.
Japan’s ability to sustain a high debt ratio for a lengthy period is due to it being the third largest imperialist country. Whilst the industrialised capitalist economies can sustain a high level of debt for a period, this is not the case for the neo-colonial world. The threat of debt default is ever-present in these countries. As the partial postponement of debt repayments in Argentina and Lebanon have shown, the debt crisis is likely to erupt in the coming period as a major issue. It could trigger another major global financial crisis and upheaval in the countries burdened with unsustainable debts.
The supporters of MMT often link it to the question of a ‘Green New Deal’ as a way out of the crisis. It is possible that in some countries there will be an investment in an environmentally friendly economy. However, the capitalist class will not be able to do this on a generalized global level given the scale of the investment required. It will not resolve the question of the lack of a market. At the same time, the lurch back to nationalist protectionist measures globally will cut across any steps taken in this direction as each capitalist class takes the necessary steps to defend its own interests and reopen its economy as rapidly as they can. Already, air pollution levels in China have returned to the pre-pandemic levels as the economy is re-opened, mainly due to the return use of fossil fuels.
Social explosion rocks the US
As the drama of the social eruption of bitterness and anger in the US and around the world has shown following the brutal murder of George Floyd by the police in Minneapolis, a new era of class struggle has been entered. This is the biggest movement in the US since the civil rights movement of the 1960s. A crucial difference today is that in the 1960s the white working class was still enjoying rising living standards and prosperity. Today, living standards have been slashed and mass unemployment threatens millions of white workers.
The movement in the US has triggered a marvellous wave of massive protests around the world, particularly of young people. More than 50,000 marched in London and Vienna. London then witnessed a subsequent march of 100,000 and Washington saw 200,000 take to the streets. As we saw in Latin America in the movements which swept the continent prior to the pandemic, these global movements graphically illustrate one aspect of the permanent revolution. The multiracial, multi-gender and class composition of these protests is a crushing refutation to those who capitulated to the ideas of identity politics, although these ideas will inevitably be present in these movements.
The events in the US represent a turning point in the most powerful imperialist power. They come after a revival of the movement in Ecuador, Lebanon, and the first wave of small but significant protests in Chile. The protests of the Nissan workers in Barcelona, the Renault workers in France, and transport workers in Argentina and elsewhere are a harbinger of what is going to erupt in many countries in the short term. These mass protests have taken place despite partial lockdowns remaining in place and the threat of contracting the virus. The loss of fear reflected in this illustrates the bitterness, anger, and class polarisation which has exploded.
In an incredible turn of events, curfews have been imposed in more than forty cities in the US. Mass demonstrations have taken place in big cities and small towns across the country. Hundreds if not thousands have been arrested for defying the curfew. Brutal repression by the police has been used against those who have taken to the streets. In scenes almost reminiscent of some events in Latin America, military helicopters flew low over protesters in Washington, the classic use of counter-insurgency methods employed in other countries by military regimes including the use of agent provocateurs. Military armoured cars were deployed on the streets of Washington around the White House and also in Minneapolis. The police in Iowa, on the fifty-first anniversary of the Stonewall riots in New York, stormed into a gay bar brandishing weapons as it offered shelter to the protesters.
Trump clearly wants to try and crush the movement which has erupted, using Bonapartist methods of repression if necessary. He would like to impose an authoritarian regime if he could. The mass movement and opposition from the capitalist class will prevent him from doing this, reflected in his withdrawal of the National Guard from Washington. This represents a humiliation and defeat for him. However, as we have seen, strong repressive measures can and will be used. The repression already deployed has merely enraged people further and drawn wider layers into the movement. Yet the apparent display of strength by Trump is in reality a reflection of his weakness and the falling levels of support. His erratic behaviour and the actions he has taken are an indication of his desperation. He is out of control of the more far-sighted sections of the ruling class. All the main opinion polls now point to a substantial lead for Biden. Even the Republican Mitt Romney has said he won’t vote for Trump as has George W Bush and Colin Powell. It is possible that the more far-sighted sections of the ruling class could even remove him before the elections should he continue with his authoritarian and provocative actions.
The scale of the movement, its multiracial character, and the bitterness reflected in the protests have provoked open and bitter divisions within the ruling class. Shakespeare warned in Hamlet “Madness in great ones must not unwatched go”. Sections of the ruling class, including the military, are in a collision with him and his dynasty which has features of the decadent Czarist regime in pre-revolutionary Russia or Louis XVI in pre-revolutionary France. In an unprecedented move Trump’s own Defense Secretary, having initially taken Trump’s line then effectively repudiated him. The military chiefs have opposed him and have been in discussion with other leaders in Congress, as have the Democrats. Even George Bush came out against him.
Sections of the police in some cities and the National Guard have laid down riot shields and batons and even joined the protesters in some cases. Elements of a split in the state machine are evident in the situation. This confirms our analysis that elements of civil war and features of a revolution are present. The armed protests against lockdowns by the right, which were untouched by the police, and some exchange of gunfire during these protests, illustrate this process.
At this stage, the working class as a class has not yet moved into action. Apart from some actions by some bus drivers to refuse to transport arrested protesters to prisons with the support of their union, in the main the trade unions have not moved into action and have been absent from the movement. This obstacle will need to be overcome by the working class in the coming period.
This has been a feature of all of the mass movements which erupted prior to the pandemic – Lebanon, Chile, Iraq, etc. This and the lack of organisation are obstacles that will need to be overcome if these struggles are to be successful. The demand for building democratic action committees in all of the local communities, which then join up together across towns and cities, linking together with local trade union organisations and elected committees in the workplaces, is a crucial question in the US. Faced with brutal repression. the question of these bodies organising defence committees in the local areas and on protests is now an essential task for the movement.
The capitulation by Sanders in his refusal to break from the Democrats and form a new party in the light of what has now taken place is shown starkly to be a criminal lost opportunity. Apart from a few statements Sanders and Cortez have played no role in the movement and raised nothing about how the movement should be taken forward.
These events have dramatically changed the situation in the US. Even should the movement pause for a period it has forced to the surface all of the underlying contradictions in US society and the class polarisation which exists. These are not going to be resolved. With 40 million losing their jobs and 54 million on food banks or going hungry, the scene is now set for increased polarisation and bitter struggles in the coming months and years, despite what is likely to be a limited ‘bounce back’ from the depths of the lockdown. The question of the need for a new party will be posed even more sharply should Biden and the Democrats win the next election. Despite a significant layer that mistrusts or even hates Biden and the Democrats, the pressure to rally behind them in order to defeat Trump is certain to be a powerful mood in the run-up to the election in November. While the mood to ensure Trump is defeated is understandable, socialists will need to skilfully and patiently explain how Biden and the Democrats offer no alternative and what steps need to be taken to prepare for the next stage of the struggle following the election.
The need for a revolutionary socialist alternative
The failure of Sanders and Cortez to offer an alternative in this crisis has been repeated internationally during this crisis. Reminiscent of what the mass social-democratic parties did at the outbreak of the First World War in 1914 when they capitulated to their own capitalist classes and supported the war today the ‘left’ has generally wrapped themselves in the flags of national unity during the crisis and argued now is not the time to challenge their respective governments. Any criticism they have made has been weak and ephemeral.
DIE LINKE in Germany voted for the government’s programme. The Left Bloc in Portugal did the same and PODEMOS in Spain is in the government. None are prepared to put the system in the dock and pose the need for a radical socialist alternative. Now, when faced with the catastrophe of Johnson’s bumbling administration, Kier Starmer, the new Labour leader, has timidly found his voice to whisper a few criticisms but refuses to lead a struggle to force the government out.
The cataclysm in Brazil under Bolsonaro finds P-SoL joining a front – “Movimiento Estamos Juntos” (We are together) – not only with the PT but with parties of the capitalists and the right including the former President Fernado Henrique Cardoso. This classic popular front will fight for “life, liberty and democracy”, and “set aside old disputes in search for the common good. Left, centre and right united” to defeat Bolsonaro.
As in 1914, those defending the genuine ideas of revolutionary socialism are relatively small in number. Yet those who stood out against the imperialist war and defended genuine revolutionary socialist ideas were set to win massive support and were able to carry through the Russian revolution in November 1917. Although the situation is, of course, not exactly the same as this crisis, as class struggles unfold, revolutionary socialists can win big support and grow in large numbers as a basis from which big revolutionary parties can be built in the coming years. The emergence of new broad mass workers’ parties, which the CWI supports, will also be an important part of this process.
The youth, especially the working-class youth who have taken to the streets in recent days, have brought with them the anger and bitterness against the system which has been accumulating in the run-up to the COVID-19 crisis. The COVID-19 crisis has concentrated this further. They have come onto the streets with openness to the idea of socialism. This crisis is polarising and radicalising a whole layer of young people especially. As in war and revolution we need to be prepared for leaps forward in political consciousness as the crisis unfolds. This turning point in the US is set to be mirrored in other countries. Multiple uprisings and social explosions are placed on the order of the day.
The CWI and revolutionary socialists need to audaciously intervene in the movements that are taking place and be prepared for even greater social and political earthquakes. Many of the demands put forward in Trotsky’s ‘Transitional Programme’ are extremely pertinent to the crisis currently unfolding. Where they are relevant we need to boldly take them up. By doing so, along with other aspects of our analysis and programme, even small revolutionary forces can make significant and major gains, and assist the working class in its struggle for an alternative to decadent capitalism in its death agony.