The bourgeois thought globalisation had solved their problems. They imagined that they had discovered something entirely new. In fact, it was not new at all. Marx explained in the third volume of Capital how the development of world trade can temporarily prevent a crisis, but only at the cost of preparing an even bigger crisis in the future. In the last two decades the bourgeoisie has developed the world market on an absolutely unprecedented scale. This has undoubtedly helped the capitalist system to get certain results and explains the shallowness of recessions in the recent period. But the emergence of China as a major economic power is preparing new contradictions on a world scale.
It is certainly not a minor thing that 1,000,000,000 people should enter the capitalist world market, as has happened in the case of China. China has played the role that the capitalists had originally intended for Russia. It provided them with a vast field for the export of capital and commodities, new markets and investment opportunities. In other words, they saw China only as a market, but did not adequately understand the longer term implications (capitalists tend not to think about the long term). By investing massively in China, they have created a mighty industrial rival that is now in a position to challenge them on world markets.
This is already a phenomenal result, but it has its limits. The movement in the direction of capitalism and the abandonment of a planned economy is preparing the way for a massive crisis of overproduction in China. Thus, whereas China has moderated the effects of the last two world recessions, it can now have just the opposite effect.
From a Marxist point of view, the massive development of industry in China is a progressive thing because it develops the power of the proletariat. According to official statistics the number of mass protests in China has risen from 10,000 in 1994, to 74,000 in 2004. This is an indication that revolutionary developments are being prepared in China.
A serious slump – perhaps led by a crisis of overproduction China – is now being prepared in which all the factors that served to propel the world economy forward in an upward and apparently unending cycle, will turn into their opposite. Previously the West saw China as a gigantic market but it does not require much intelligence to see that if you build factories in China, they will start to produce export commodities in massive amounts. This is already happening and the Americans are increasingly alarmed by this.
This economic giant has now overtaken the USA as an exporter of high tech. goods. With cheaper labour costs, modern machinery and high productivity, China has become a formidable force on the world market. In 2004 China exported $180 billion in high tech goods. The result has been a furious outcry particularly from the US capitalists. There is a growing protectionist mood in Congress, fuelled by congressmen whose position is being threatened by unemployment in their own states. Charles Schumer, the most vociferous representative of this group, put forward a bill that threatened to impose a 27.5% tariff on Chinese imports. He did not succeed, but it shows the direction in which the situation is moving.
There is now a ferocious struggle for even the smallest markets. This is threatening the future of world trade and undermining attempts to liberalise it. This explains the failure of every one of the world trade summit meetings: first Seattle, then Cancun. The same protectionist tendencies can be observed in the Doha round of talks on world trade. Here we see the complete hypocrisy of the demagogy about “free trade”. The strong capitalist economies of Europe, Japan and the USA forced the weak countries of Asia, Africa and Latin America to open up their markets under the banner of “free trade”. As a result, the native industries were decimated and whole nations ruined and forced into debt from which they cannot escape. But when the poor countries ask for free trade in agriculture, which would afford them some relief by giving their agricultural exports more access to the lucrative markets of North America, Europe and Japan, the doors are immediately slammed in their faces.
The deadline for the Doha talks is June 2006, at which point the permission of the US Congress for the negotiations expires. Yet no progress has been made. They are haggling like miserly peasants at a medieval horse fair. The main bone of contention is agriculture. Although this only accounts for three percent of total world output and less than ten percent of total world trade, it nevertheless accounts for 60% of the benefits of the Doha round. But the USA, Japan, and particularly the EU are not prepared to make meaningful concessions. They all put the interests of their rich farmers first. The US government subsidises its farmers to the tune of $19.1 billion, while the EU farm subsidies amount to a colossal $75 billion.
Contrary to the prejudices of the bourgeois economists, globalisation is not set in stone. It can be reversed, just as it was reversed in the past. Before the First World War there was major globalisation. In some ways it was even more than now. That was certainly true in terms of immigration and labour markets. However, this tendency was reversed in the interwar period. The slump turned into a prolonged depression, characterized by beggar-my-neighbour protectionist policies, competitive devaluations and so on.
Protectionism is in fact an attempt to export unemployment. In the event of a deep recession, with high unemployment, the main capitalist powers will attempt to solve their problems at the expense of other countries. The tensions between Europe and the USA, between the USA and China, which already exist, will become exacerbated. The whole fragile fabric of world trade will be put under enormous strain, preparing the way for protectionism and trade wars. This is implicit in the present situation.
The growth of protectionism can be seen in the increase in the number of bilateral or regional agreements. In 2004 there were 206 such agreements, compared to only 89 in 1995. These bilateral agreements, which have been pushed hard by the USA, are an attempt to by-pass the WTO, which Washington sees as inimical to its interests. But other countries are following in the footsteps of the USA. The latest involves Asia, where China and ten other countries of South-East Asia are preparing a free trade deal that will affect 1.800 million consumers. The objective, which will probably not be reached, is to reduce tariffs for most products to zero by 2010. From this it is clear that China is laying claim to economic hegemony in Asia, which will inevitably lead to a direct collision with the USA, with not only economic but also military implications.
European capitalism is in a state of long-term decline, reflected in a low rate of growth and high rates of unemployment. In place of growth there is economic stagnation. The whole European project is starting to become unstuck. The row between Britain and France over the EU budget, and the debacle of the European Constitution, are only two symptoms of this fact.
The ambition of the EU to dominate all Europe up to the borders of the former Soviet Union have created new contradictions. Eastern Europe lags far behind the rest of the EU. Unemployment in Poland is officially 18 percent, and in reality far higher. Entry into the EU will solve nothing for these countries, but will place a severe strain on the EU itself. Countries like Poland and Hungary have a large and backward agricultural sector that cannot be easily integrated into the EU, where the Common Agricultural Policy is already absorbing huge amounts, imposing a severe strain on the budget and exacerbating the conflicts between France and her “partners”.
The conflict between Britain and France over the budget centred on two questions: the British rebate and the CAP, which pays out a generous subsidy to France. The viciousness of the dispute exposed the underlying contradictions between the EU nations and exploded the myth of “European solidarity.” Far from advancing to a European “super-state”, the process towards European unity has been halted and is in the process of being reversed. Of course, the European bourgeois cannot accept the destruction of the EU, and the euro may be maintained. But the original terms of the Maastricht Treaty are as dead as the dodo.
Britain, having lost her status as a world power, has been reduced to a second-rate country off the coast of Europe. Its decline is graphically illustrated by the so-called Special Relationship with the USA. The slavish subordination of Blair to Bush in all matters shows the complete impotence of Britain, which has lost most of its industrial base. Blair and Brown used to boast about Britain’s economic success, based in market economics. But all that has evaporated. Its rate of growth is now no more than 1.5% the lowest for 12 years. The clash with France ended badly. Blair was obliged to make a humiliating retreat over Britain’s contribution to the EU budget, while Chirac conceded nothing at all. With the onset of recession and high rates of unemployment, there will be many more conflicts between the EU states.
The attempt to impose a common currency has, as we predicted in advance, caused an aggravation of the economic crisis. This is particularly clear in the case of Italy. Italy is now the sick man of Europe. The crisis in Italy is extremely serious. In the past, the Italian bourgeois got out of crises by resorting to the devaluation of the lira and increasing budget deficits. Now, with the euro, neither of these options is possible. The Italian ruling class must place all the burden of the economic crisis on the shoulders of the working class. This has led to a whole series of general strikes that have completely undermined the Berlusconi government. The bourgeoisie has no alternative but to send the working class to the school of Prodi. It will be a very hard school.
A few months ago The Economist published an article saying that to solve the problem of the Italian economy they need to lay off 500,000 workers in the industrial sector, and cut wages by 30%. This shows the real plans of the bourgeoisie. It shows how much pressure will be on the Centre-Left government when it comes to power. It will be forced to carry out attacks on the workers. But it will also be under the pressure to carry out policies in the interest of the working class. This will open up a ferment of opposition in the ranks of both the RC and DS, with big possibilities for the Left Wing and the Marxist tendency, which has already made important gains.
Italy is now in the front line of the class struggle in Europe. But Germany and France – two key EU countries – are not far behind. In both countries there is a deep political crisis. The result of the EU constitution referendum in France was a bombshell. It was not just a vote on the EU constitution or even against Chirac. It was a protest against the whole situation, a vote against the whole political Establishment.
The riots in the French banlieues reflected the accumulated contradictions in French society (which have been building up since 1968). It reflects the burning anger of the dispossessed youth which sees no future for itself in the present system. This feeling of alienation has many causes: poverty, discrimination, racism, police violence. But in the last analysis, it is a reflection of the fact that in the present period even in an economic boom, unemployment remains very high. In France, according to the official statistics (which always understate the real position) there is around ten percent unemployment. But for young people the figure is twenty percent, and for young North Africans forty percent.
The burning of cars is a blind protest against inhuman conditions, against unemployment, bad housing and social decay. The bourgeois throw up their hands in horror at the violent manifestations of discontent. But who are responsible for this? In the first place, the capitalists and their hired agents, the politicians and police who preside over appalling conditions of social deprivation, and in the second place the reformist leaders of the workers’ parties and unions, who have been incapable of giving a political and organisational outlet to the discontent of the youth.
The representatives of the ruling class often come to the same conclusions as the Marxists. After the riots and the EU referendum, President Chirac is reported to have said: “There is a profound malaise in France.” That is undoubtedly true, but not only in France. In Germany there are over four million unemployed and a budget deficit of 32 billion Euros. As a result Germany is now passing through its worst crisis since the end of World War II. It is ironic that the CDU has taken over the government just at this time. In the past, the bourgeois parties were in power during a boom and handed power to the Social Democrats when the economy was in trouble. The latter could then do all the dirty work and then could be kicked out and replaced by the open representatives of the bourgeoisie.
Angela Merkel likes to present herself as a “reformist”, by which she means that she stands for a policy of vicious counter-reforms and cuts. The German capitalists are no longer capable of giving reforms and concessions as they did in the past. On the contrary, they cannot tolerate the reforms they have already conceded. But in the last elections the people were precisely voting against “reform”. The stage is therefore set for an explosion of the class struggle in Germany and a growing polarisation to the left and right. An anticipation of this is the left split in the SPD even at this very early stage.
The situation in Germany today already bears certain similarities to the unstable and turbulent days of the Weimar Republic. Everywhere we look, we see the same process. There were two general strikes in Belgium. In Greece there were two important general strikes. In December 2005 there was a general strike in Greece against the right wing ND government. Almost at the same time in Ireland there was a mass demonstration of 100,000 people in Dublin in support of the ferry workers and against attacks on pensions and workers’ conditions.
In Spain the right wing government of Aznar was overthrown by a mass movement that acquired almost insurrectionary characteristics in only a few days. This demonstrated the revolutionary potential of the Spanish working class that is deeply rooted in its past traditions. The bourgeoisie is not reconciled to the Zapatero government and is mobilising the forces of reaction on the streets. The workers and students have staged strikes and demonstrations to press for their demands. The Church and even sections of the army officers have been involved in a reactionary conspiracy to bring down the elected government. There are striking similarities with the 1930s, with a massive polarisation to the right and left. The same symptoms are developing, at different rhythms, in other countries in Europe.
The political crisis is not confined to Europe. We see it also in Israel, Canada, Pakistan, and many other countries, including the USA itself. The immediate cause of the crisis may vary significantly: it may be economic, but also military, a political scandal, a terrorist act, or any number of other causes, but ultimately the real cause is the same. Hegel pointed out that necessity expresses itself through accidents. The slow, almost imperceptible mood of discontent reaches a point where it must find an expression.
In Australia the right wing won a sweeping victory in the last election, which gave them a majority in both the senate and the lower house. This followed a period of economic boom when the Australian economy grew by five percent a year. Yet the Australian ruling class put heavy pressure on the Conservatives to launch an unprecedented brutal attack on living standards. As a result there have been mass demonstrations in all the main cities involving at least half a million people. This happened in a country where there had been no significant movement of the working class for a long time. Yet the workers reacted immediately to the attack on their living standards.
Thus, the crisis is manifesting itself everywhere. If it was a case of one country or another, one could conclude that these were merely accidental phenomena. But that is not the case. These are clearly indications of a general tendency. They indicate that we have entered into an entirely different historical period on a world scale. The period we are entering will be more like the turbulent 1930s than the 1960s or 1950s.
The “war on terror”
Imperialist arrogance, greed for plunder and rabid reaction on the part of Bush and his clique were the motives for the US military adventure in Iraq. This was quite unnecessary and has had the most serious consequences from the standpoint of US imperialism. Who can deny this? With an occupying force of 130,000 troops equipped with the most sophisticated modern weapons, they have not succeeded in pacifying Iraq. It is now no longer a question of if, but when they will leave.
They will leave behind a total mess. Despite all the bragging propaganda, the elections have solved nothing. A recent official Iraqi opinion poll says that more than 50% of Iraqis now consider they were better off under Saddam Hussein. 85% want the Americans to leave. The USA is desperately trying to create an Iraqi army in order to withdraw its troops before the military situation deteriorates any further. But how? In their efforts to get a base, they have split Iraqi society along national and religious lines.
Washington gave concessions to the Shiites, which alienated the Sunnis and also the Kurds. As a result they have allowed Iran to intervene. The tensions between Teheran and Washington have been heightened as a result. Now they are attempting to redress the balance, offering concessions to the Sunnis, including the offer to include former Baathists in the army and security forces that they previously dominated. This has infuriated the Shiites and increased the danger of sectarian conflicts and violence.
The invasion of Iraq is having a profound effect in the USA itself. Recent polls show a sharp increase in opposition to the Iraq war, which 54 % now think was a mistake. Only 34% of Americans now think there will be a positive result. Apart from the large number of US soldiers killed and wounded, the economic costs are enormous. The occupation of Iraq is costing the US Treasury not less than six billion dollars each month. Not even the richest power on earth can stand such a drain of resources indefinitely. Sooner or later they have to withdraw with tail between legs.
Let us recall that the declared aim of Washington was to defeat terrorism. What are the results? On all sides the risk of new terrorist attacks has increased, not diminished, with al Qaeda operating freely not only inside Iraq but in countries like Jordan, a key US ally which was relatively stable, but no more. Saudi Arabia looks increasingly unstable. The Lebanon is on the brink of civil war. In other words, they have succeeded in destabilising the entire Middle East.
As for Bin Laden, he was supposed to have been killed several times but is still alive and active in the tribal areas between Afghanistan and Pakistan, together with his Taliban friends. This was hardly what Bush and Rumsfeld had in mind when they began their adventure.
Israel is also passing through a political crisis that is without precedent since the state was established. The fact that Sharon was unexpectedly laid low by a stroke was an historical accident of the purest kind. But the question must be asked: how does it come about that the entire political life of Israel has been plunged into crisis on the basis of one old diseased man. This is a reflection of a complete impasse – the expression of an unstable system.
This turbulence is not directly caused by economic factors, but at bottom the crisis of Israeli capitalism affects the psychology of the masses in a decisive way. In the past, the Israeli population (like the Australians) enjoyed a privileged standard of living. In the early days, when the Zionist Labour Party was in power, it carried out reforms that benefited the masses and even paid lip service to “socialism”. Now all that has been reversed. The economy is in crisis. There is ten percent unemployment and there are soup kitchens in Israel. Instead of reforms there are counter-reforms.
Under these circumstances, there has been a split in both the Labour Party and the Likud. This places on the agenda the beginnings of a polarisation to the right and left in Israel, which can have a profound effect on the whole situation over a period. The problem consists in the lack of leadership and the national question that constantly serves to distract the attention of the masses from the class questions.
In the Palestinian territories there is also a growing discontent with the corrupt bourgeois leaders of Fatah. Mahmoud Abbas aspires to be an American stooge. But he is not even very successful at this. He cannot control the masses, and Washington has no use for a stooge who cannot keep the masses under control. The manoeuvre in Gaza has led to few benefits for the people who live in the direst poverty with mass unemployment.
The recent elections led to a sweeping victory for Hamas, which reveals the depth of discontent with the corrupt and impotent Palestinian Establishment. But the masses are suffering from exhaustion after years of struggle and hardship. Even the decision of Hamas to participate in the elections was a tacit admission of this fact. In reality there can be no way out for the Palestinian people other than the revolutionary road: the overthrow of both the corrupt and bankrupt leadership and the reactionary Zionist ruling class in Israel. This cannot be achieved without the support of at least the decisive section of the Israeli working class.
The conditions are beginning to exist for forging a genuine unity in struggle of the Palestinian masses and the Israeli working people. But the prior condition is the abandonment of the counterproductive tactics of individual terrorism and the systematic building of contacts between the workers and youth of Palestine and Israel. For this a genuine revolutionary party and leadership are necessary.
London, February 1, 2006