World Perspectives 2016 – An update

The following document was discussed and approved at the recent congress of Lal Salaam, the Pakistani section of the IMT.

[This document should be read in conjunction with the World Perspectives 2016 document approved at the World Congress of the IMT this year and is an update on the situation since the document was drafted.]

The capitalist system has entered the most serious crisis in its history; it is a decaying and decrepit system that has survived well beyond its natural limits. This explains the constant deterioration of living conditions for billions of human beings, the wars going on in several parts of the world, as well as the damage to the environment. These are the effects of the predatory and increasingly anarchic and irrational capitalist mode of production.

As was outlined in the 2016 World Perspectives document, capitalism is going through an organic crisis from which there is no way out. On the one hand, we see colossal overproduction (or “overcapacity” as it is referred to in the media). On the other hand, the whole system is drowning in a sea of debt (both public and private) that absorbs much of the wealth being produced (the surplus value extracted from the workers).

The public deficits of the OECD countries have grown eightfold since 2007, bringing the total public debt of these countries to the astronomical level of 50 trillion dollars. In the euro zone alone total deficits in the same period have grown twelve times and the overall debt has gone over the 8.6 trillion euro mark. [Note: The OECD, Organisation for Economic Co-operation and Development, has 35 member countries, and historically has been considered an organisation of the most developed capitalist countries of the world, although countries such as China, Russia and Brazil are not members].

Even the so-called “emerging countries”, the BRICS [Brazil, Russia, India, China and South Africa], saw a significant decline in their economies. China grew in the second quarter by 6.3% (double digit growth figures are a thing of the past), Brazil has experienced a fall of 5.7%. Russia is stagnating and in decline; in the second quarter its economy contracted by 2.1%.

Just one statistic sums up the irrationality of this system: 62 billionaires have amassed wealth equivalent to that of half of the whole world's population (Oxfam figures).

As Marxists, we understand the impossibility of reforming the reactionary and degenerate character of the capitalist system, which has its main limits in the private ownership of the means of production and the existence of national borders.

Crisis and escalating protectionism

The crisis, which has been going on now for almost ten years, has led to deep changes in the world economy of a historical character.

The first evidence of the changes taking place is to be found in the development of world trade. Prior to the crisis the national shares of world industrial production were shifting – away from the traditional industrial centres. But the crisis put an end to delocalisation, a phenomenon which had been developing massively since the1980s. As a result, the rise of the so-called emerging countries has slowed down compared to the past.

China, after having had double-digit growth figures and an impressive development for twenty years, with an unprecedented expansion in its share of world industrial production (8.3% in 2000, 14.3% in 2007, 28.3% in 2012, and 32.8% in 2014) has now reached its limits. So-called globalization seems to have come to a halt.

World trade, which was growing at a fast rate in the 1990s and 2000s, has slowed down sharply to a modest pace since the outbreak of the crisis, and is now actually lower than GDP growth.

In 2014 world trade grew by 3.3%, already lower than GDP (+ 3.4%). In 2015, world trade grew by 2.6%, and according to the World Trade Organisation, “World trade will grow more slowly than expected in 2016, expanding by just 1.7%, well below the April forecast of 2.8%, according to the latest WTO estimates. The forecast for 2017 has also been revised, with trade now expected to grow between 1.8% and 3.1%, down from 3.6% previously. With expected global GDP growth of 2.2% in 2016, this year would mark the slowest pace of trade and output growth since the financial crisis of 2009.”

There are many parallels between the present situation and the crisis that began with the 1929 Wall Street crash and lasted throughout the 1930s in the industrialized world of the time. The crisis back then turned into real depression, not because of the collapse of the stock markets, but because of the credit squeeze and the drastic fall in world trade, with the concomitant escalation of protectionist measures worldwide.

In theory, no government admits to being protectionist. In reality, they are almost all protectionist, to a degree not seen for decades. An analysis published by Global Trade Alert  – perhaps the most detailed analysis produced so far of protectionist measures introduced since the crisis of 2008 – explains that conflicts around the world are not only of a military nature, but they have also entered the realm of trade and finance.

In autumn 2009, the G20 countries adopted rules with the aim of preventing countries from responding to the financial collapse of the previous year with protectionist measures such as those that led to the 1930s depression. This all proved to be wishful thinking, as since then they have introduced the sum total of 4,400 protectionist measures that place restrictions on trade and financial incentives. (See link here)

This year alone, between January 1 and August 19, the G20 countries introduced 340 measures that discriminate against the commercial interests of other countries. This is more than four times the number of similar measures in 2009 in the same time frame. Of these measures, 179 were introduced by the G7 countries plus Australia, and 111 by the BRICS. The strongest economies, in other words, lead the race to introduce protectionist measures. They did this in particular with five discriminatory criteria: limits on foreign participation in tenders; trade finance; import tariffs; state aid (the most common); defence of one’s own trade.

The worst offender was the US, the most protectionist country in absolute terms, with 1,066 protectionist measures introduced since November 2008, followed by India, Russia, Argentina, Brazil, Germany, the United Kingdom and Italy; Germany being the European country with the highest number of such measures. Even the free trade agreements that were previously being negotiated are now being questioned. It is an open secret now that TTIP is dead and buried.

In fact, protectionist measures are now being introduced in all areas of economic activity, in finance, currency exchange, trade and industry. We have the recent protectionist measures that different countries have adopted, beginning with France and Germany, in defence of their own auto industry and other branches of the economy. Just as in the big crisis of the 1930s, they all pay lip service to the idea that protectionism is a dead end, while at the same time they all continue to practice it. Now, as then, the ground is being prepared for conflicts on a much higher level, but this time on a truly global scale.

Can China save capitalism?

This of course does not mean that capitalism is destined to remain in a state of permanent recession, or that the economic cycle has been abolished. The relative economic recovery that we witnessed in Europe in 2014-15 was due in particular to the fall in the value of the euro and the fall in the price of raw materials, but already this year we are seeing a new trend in the opposite direction. Brexit is having its effects and all growth estimates have now been revised downwards, and a new world economic slowdown is being prepared.

In the past, economic stagnation in the imperialist countries was balanced by the growth in the so-called "emerging countries" and of China in particular. Several elements contributed to this: 1) The development of information technology and communication from the mid-1980s onwards; 2) the opening up to the world market in the 1990s of the former planned economies (the USSR, China, Eastern Europe, etc.); and 3) the entry of China into the WTO in December 2001.

These three factors and the early stages of industrialization of the so-called emerging countries have now lost their impetus. Whereas twenty years ago Chinese workers earned around $50 a month, today in the Shanghai area in China or Sao Paulo in Brazil, wages are on a par with those in Southern Italy, for example.

China continues to invest at an unprecedented rate, but whereas prior to 2008 investments were highly productive, now they are of an increasingly speculative character. Equally alarming is the fact that most of the debts are beyond central government control, as they are financed by the exponential growth of the so-called “shadow banking” sector, i.e. by lenders who provide credit outside official channels. In the last five years the annual emission of credit has quadrupled, while the ratio of total debt to GDP has gone up by 60%, reaching 180% of GDP (240% if we include shadow banking).

As George Soros put it a couple of years ago, “The rapid growth of shadow banking has some disturbing similarities with the subprime-mortgage market in the U.S. that caused the financial crisis of 2007-2008.” (Soros Sees China Shadow-Banking Risks Similar to Subprime, Bloomberg News).  In other words, a banking crisis could be on the agenda in the next few years in China.

As we saw in Europe and the US, credit bubbles tend to end up as sharp slowdowns in lending to companies and households and a consequent drop in GDP. The Chinese economy in 2014 experienced its lowest economic growth since 1990, dropping to 7.4%, the. And for the first time in 16 years growth missed the government’s annual target (7.5%). According to Morgan Stanley estimates, the growth rate of GDP in China could slow to 5-6% over a decade and this will have serious repercussions not only on the world economy (beginning with those countries that export raw materials to China) but also on the balance inside China itself. For Europe a growth rate of 5-6% would be equivalent to a new boom, but for China it would not be enough to absorb the significant population increase and the massive influx of millions of people who every year move from the countryside to the cities in search of a job.

It is likely that in a relatively short period of time, China will use up all the resources that in recent years have allowed the government to apply Keynesian policies to stimulate domestic demand. And whereas five years ago China had no major debt problems, it now definitely does and they are huge.

The massive infrastructure investments (a six-fold increase in spending on public works in five years) and the pumping of a huge amount of money into the economy have not had the desired effect of raising the rate of growth that continues to decline compared to the past.

Very soon the revenues will not be sufficient to pay even the interest on the debt and hundreds of thousands of Chinese companies may go under, a perspective that is of great concern to the government, but that it is unlikely that it will be able to avoid it.

All this demonstrates the correctness of our perspective that the global crisis would drag China down and not vice versa.

It is also confirmed by the fall in foreign direct investment (FDI), which globally has fallen since 2011. In recent years, a growing number of multinationals with headquarters in the advanced capitalist economies, especially the United States, have begun to repatriate, with so-called reshoring of some of the plants they had previously delocalised.

The slowdown in China, as we have explained, has ramifications for the wider global economy, impacting directly on countries such as Australia and Brazil, that up until recently had been booming on the back of China’s growth. But China’s slowing economy is also having destabilising effects internally, with a growing level of strikes and protests.

According to the data collected by China Labour Bulletin, there were almost 1400 workers’ strikes and protests in 2014, more than double the 2013 figure (over 650) and three times that of 2012 (382). This phenomenon continued through to 2015 with a dramatic escalation, with double the number of strikes of 2014, 2,774 incidents compared to 1,379. And during the first half of 2016 strikes and protests rose by a further 20 per cent compared to the first half of 2015. The tens of thousands of mining workers in Shuangyashan city in the Heilongjiang province in China who clashed with the police for days in March earlier this year, demanding the state-owned mining company to distribute wages owed to workers, is a clear example of what is to come.

The Chinese working class is beginning to put its imprint on the situation. This also explains the measures taken by the government to tighten up on security, with a clampdown on dissent and protest. This will not stop the process which has begun in China, one which will eventually lead to an unprecedented rise in class struggle, which will lead to direct conflicts with the regime.

Banks, Brexit and EU

As we have explained in other documents, the Brexit voted in Britain has shaken the very foundations of the European Union and has enormously added to the instability of the entire capitalist world.

The speculator G. Soros has openly referred to the "irreversible disintegration of the EU”. The IMF has admitted that the uncertainty provoked by Brexit poses a major risk for the world economy. The impact on the markets was immediate with a slump in stock prices, starting with those of the banking sector that saw declines of between 20 and 30% in a single day. There is no other word than "panic" to describe their behaviour after June 23.

Italy was dramatically affected by Brexit with a sudden sharp fall in the shares of Italian banks. In fact, the Italian banks with a staggering figure of 360 billion euro of non-performing loans could trigger a major financial crisis in Europe. Italy has the biggest amount of non-performing loans in Europe. Back in 2008 the figure was still only 42 billion euros.

This is opening up further contradictions within the EU, with the Italian government in desperate need of saving its banks. This explains the tensions between Prime Minister Renzi and the EU on this question. The problem is that Germany, from its own point of view, cannot tolerate a loose policy towards the Italian banks, with the risk of generating "contagion”, in a situation where European banks have a total of one trillion euro in non-performing loans, an equivalent of 7.3% of EU GDP. According to the EBA, the European Banking Authority, this level of non-performing loans is a source of "serious concern". On average, the non-performing loans of European banks amount to 5.6% of total loans, more than double the level in the US, but in Italy it is three times higher at 16.7%.

Only the Cypriot banking system with its 50% of non-performing loans, Slovenia with 28.4%, Ireland with 21.5% and Hungary with 18.9% are in a worse position in percentage terms. The problem of Italy, however, is that in absolute terms its mountain of non-performing loans is far bigger and therefore poses much more of a threat to the stability of the European banking system.

Between October 2008 and October 2014, the EU Commission authorised over 450 state interventions to save banks in crisis to the tune of over 3.8 trillion euro. These are huge figures, and yet the situation not only has not improved but has actually deteriorated. This is due to a simple fact that only Marxist theory can explain: in order to revive the markets what is required is a significant destruction of productive forces and capital assets, a steep cut in its value, which would then create the conditions where the surviving capital could resume the process of accumulation. So a huge amount of capital (and banks) must be destroyed. As Marx said, "in all circumstances the balance will be restored by a greater or lesser destruction of capital". And if banks are not allowed to collapse, then they must at the very least be merged with bigger ones.

The governor of the European Central Bank, Mario Draghi, usually an optimist, at a recent European summit said: "I see the risk of turmoil – and a major factor is the perception that the EU could become ungovernable." Draghi is of the opinion that Brexit has the turned the tide: "The situation was not bad" – before the referendum – “There was stable growth driven by investment, and inflation was low, while the flow of loans was improving as was the job market. Then came June 23 and everything changed."

The situation in Europe is so bad, that there is now serious debate about creating a two-tier EU with two euro currencies, a stronger one for Northern Europe, and another, weaker one, for Southern Europe. This would be unworkable, however, and the most likely scenario is that after the German elections, due to be held by the autumn of next year, Merkel, if she manages to get re-elected – something which is not at all certain – will have to abandon the idea of keeping everyone inside the EU, or at least within the eurozone. During the Greek crisis last year the line of Schäuble, the German finance minister, was that Greece should exit the EU temporarily, at least for a period of five years. This idea will grow among the German bourgeois as they are becoming aware of the fact that the method of bailout accompanied by severe austerity is becoming more and more difficult to impose on countries such as Portugal, Greece and Spain. That is because the governments of these countries are under enormous pressure on the home front.

This situation is leading to a breakdown of the euro zone and will most likely end up with the EU having to retreat to a system similar to that of the EMS (European Monetary System).

Political impact of the crisis in Europe

The crisis in Europe is increasing tensions between the EU member states. The crisis in Greece already revealed the diverging interests of the different members of the EU, which is merely a reflection of the different levels of development in different parts of the Union. But the Brexit vote brought sharply into focus the possibility that under the pressure of the world crisis of capitalism, the EU could actually break up.

However, the tensions are not only between member states and their governments, but also between the classes in each member state. What we are seeing is growing political polarisation in all European countries, which is a reflection of the social polarisation.

There is a growing number of people falling below the poverty line, and those who do have work and jobs are struggling to survive. While this is happening, at the other end of the social spectrum there is a massive accumulation of wealth in fewer and fewer hands.

As an Oxfam report from 2015 states, “Between 2009 and 2013, the number of Europeans living without enough money to heat their homes or cope with unforeseen expenses, known as ‘severe material deprivation’, rose by 7.5 million to 50 million people. These are among the 123 million people - almost a quarter of the EU’s population – at risk of living in poverty, while the continent is home to 342 billionaires.” And the number of billionaires has been growing, as has their overall wealth.

This is happening as austerity is imposed across Europe. This is what explains the growing radicalisation on the left, which is the mirror image of shifts at the other end, to the right. Let us look at the situation in a few European countries to highlight the process.

Germany

The sharp fall in the price of shares in Deutsche bank, one of Europe’s biggest banks, in September highlighted the real situation of the German economy. The crisis of Deutsche bank is a reflection of the crisis of the whole of the German banking system which has been hit by the sharp slowdown in world trade.

Germany relies on exports for almost half of its GDP, and as German exporters and shipping firms enter into difficulties on account of the lack of demand, loan repayments have to be missed and, eventually, bad debts must be written off, causing great harm to lenders’ slender profit margins. Commerzbank, Germany’s second-largest investment bank, has already had to write off a number of loans made to struggling shipping firms

A collapse of any one of the major German banks would have a huge impact on the whole of Europe and the world, leading to an economic and financial crisis far more widespread and deeper than that of 2008.

In the recent period Germany had been booming. The secret behind that boom was an attack on workers’ wages and conditions, leading to a situation where now Germany has the highest number of casualised workers in Europe, combined with high levels of investment. This has made it far more competitive in the world markets, but it also means that it depends heavily on the expansion of world trade.

The slowdown in world trade is affecting Germany and this is also reflected in the growing social and political instability. And Germany is the country with the greatest unequal distribution of wealth in the whole of the euro zone. As a Reuters report from 2014 pointed out,

“Private wealth is more unevenly distributed in Germany, Europe's largest economy and paymaster, than in any other euro zone state...

“While the richest one percent of people in Germany have personal wealth of at least 800,000 euros ($1.09 million), over a quarter of adults have either no wealth or negative wealth because of debt, the study by Germany's DIW think tank showed. ‘Nowhere in the euro zone is wealth so unequally distributed as it is in Germany,’ DIW Research Associate Markus Grabka said in a statement.”

And this is now producing its political effects. In recent elections in Germany, voting patterns have revealed a decline for the major parties, the CDU and the SPD. Local elections have produced what amounts to a vote of no confidence in the major political forces. Merkel’s popularity ratings are at the lowest since she was first elected. All this is part of an expression of unrest and enormous social and political unease which has been building up over the years.

In particular we see the rise of the AfD (Alternative for Germany) party on the right, which in some local elections in some areas has won up to 20% of the vote, while Merkel’s party, the CDU has been doing very badly.

The potential for radicalisation to the left was revealed by the 320,000 protesters who came out on the streets of seven big cities against the free trade deals with the US (TTIP) and with Canada (CETA) on 17th September.

Also last year and this year we saw a series of public sector strikes from train drivers, to nursery workers, to airport workers. In the first half of 2015 there were twice as many days lost through strikes as in the whole of 2014. Among them was the longest ever rails strike in the history of German railways. These strikes are a reaction to the worsening wages and working conditions.

What is holding back the expression of the radicalisation to the left is the behaviour of Die Linke, the party that emerged out of a left split from the SPD and the remnants of the old Communist Party. It has participated in coalitions with the SPD at local level in many areas, taking responsibility for the cuts in local spending, and its leaders still aspire to forming governments with the SPD and the Greens.

Die Linke emerged to the left of the SPD, growing to its left and reaching a peak of around 12% in 2009, buts since then has stagnated and declined somewhat. This shows both the potential for a left alternative in Germany and the weakness of the leadership of Die Linke.

At some point the growing class struggle and social polarisation will produce a shift to the left that will mirror that taking place on the right. The German working class is the most powerful in Europe and it will take its rightful place at the forefront of the class struggle.

France

If the slowdown in world trade is affecting Germany, it is having a tenfold impact on France. The country is in fact on the brink of a recession, as the latest figures indicate. Investment is at a standstill and unemployment is growing, now standing at 10.6%, more than double that of Germany. Since 2012 over a million jobs have been destroyed. Meanwhile, France’s public debt has almost doubled since 2006, reaching almost 100% of GDP.

France is feeling the effects of competition from countries like Germany, its neighbour, but also of China on the global arena. The country’s economy has been falling further and further behind its main competitors. In order to catch up, the French government has been on the offensive against workers’ rights, embodied in the new Labour Law passed this summer. It was a direct attack on many of the gains won by the French working class in the past.

All this explains the events that took place earlier this year. We saw the massive worker protests against the new Labour law, accompanied by the big sit-down occupation of major squares in the cities, in particular in Paris. Because of the lack of a fighting leadership, the law was eventually passed and the movement died down.

In France we have a similar political polarisation on the right that we see across Europe, represented by the growing support for Le Pen’s National Front. Until recently all the attention was on this phenomenon, but the mass movement that took place earlier this year cut across that temporarily. The point we have to understand is that now the effects of that movement are beginning to find a political expression.

Already in 2012 a left alternative the Socialist Party had emerged around the figure of Mélenchon, the candidate of the Left Front. Then he won over 11% of the vote. Next year there are the Presidential elections and he is standing again, but it looks like he will get a much increased vote this time round. In the recent period he has been rising in popularity. In September opinion polls indicated he could win between 12% and 15%. A more recent poll shows that he could win over 20%, putting him in a position where could possibly come ahead of the Socialist Party candidate, whoever that will be.

However, the most important point we have to understand about this most recent development is that in France we are seeing a similar process to what we saw in Greece with SYRIZA and in Spain with Podemos, a radical left emerging from the growing class polarisation. There is the potential for something to develop as a mass force around Mélenchon. Although the most likely perspective is that a bourgeois candidate will eventually win the Presidency, it is clear that a process is in place which will eventually lead to a huge surge to the left in which a figure like Mélenchon could gather around himself the forces that could lead at a later stage to a left government of some kind coming to power.

Spain

Spain is one of the weaker economies in the EU, with high levels of unemployment, 25% overall and for those under 25 up to 50%. Its banks are facing growing levels of non-performing loans and its public debt has more than doubled since the 2008 crisis, reaching around 100% of GDP.

We have dealt with the Spanish crisis in previous documents, but it is worth highlighting one of the key recent developments, the crisis inside the PSOE (the Spanish Socialist Party).

Out of the mass movements against austerity that we have seen in the past few years we saw the rise of Podemos, which from nothing ballooned to a party of 300,000 members and over 20% of the vote. This has upset the balance of Spanish politics.

This was seen in two elections held in the past year within months of each other. They solved nothing, but only served to produce a deadlocked political situation where no party has won enough seats to form a majority government. The Popular Party emerged as the first party but cannot govern on its own.

This comes at a time when the capitalists need to step up their attacks on the working class. The Spanish bourgeois is forced to apply severe austerity measures if it wishes to remain within the euro and the EU. There is open speculation among bourgeois experts that Spain could be a candidate for exiting the EU within the next five years.

Thus, more than anything else, the bourgeois needed the collaboration of the PSOE MPs to allow for the formation of a Popular Party led government.

The enormous pressure that this created eventually produced a crisis in the PSOE. At the end of September the most openly right-wing bourgeois faction of the party moved to remove Pedro Sanchez, the party leader. This led to an open conflict.

Sanchez, while not being in any way a Corbyn-like figure, nonetheless could see that for the PSOE to support the Popular Party in government would produce further decline for the party’s electoral fortunes, and therefore would put at risk many parliamentary careers! But the objective situation is such that the immense pressure was placed on the PSOE and in the end the right wing won the day.

This has now opened up possibilities for Unidos Podemos (the alliance between Podemos and United Left) to grow at the expense of the PSOE, which will continue to shed support to its left, leaving Unidos Podemos as the only real opposition. This in turn prepares the ground for a future left government coming to power in Spain.

Britain

Britain is a country where social polarisation is one of the most evident, with growing levels of poverty at one end of the spectrum and immense wealth accumulated at the other end. The Tories in government have introduced a series of attacks on welfare spending, attacks on workers’ rights, attacks on pensions and sickness benefits that have pushed a significant layer of the population into poverty.

An indication of the situation is the huge growth in household debt, which stood at 30% of GDP in 1971 but has now shot up to around 90%. And although official unemployment is relatively low, the number of “working poor” continues to grow. According to Oxfam, over two million people in Britain are estimated to be malnourished and a further three million are at risk of becoming so and one in six parents has gone without food in order to feed their children.

These conditions and the general onslaught on workers’ living conditions explain the phenomenon of Corbyn within the Labour Party. Since the recent World Perspectives document we have had the result of the election of the Labour Party leader. After the barrage of media propaganda against Corbyn and all the manoeuvres of the Blairites, he has emerged even stronger than he was, going from 59% to 62% in the final vote, and winning the vote of more than 300,000 party members. The Labour Party now has around 650,000 members, making it the biggest party in terms of members in the whole of Europe.

The Corbyn phenomenon expresses the same process that we saw in Spain with the rise of Podemos. The difference is that the radicalisation that was clearly evident in Britain – but up till recently had not found a point of reference – finally found an expression through the Labour Party in the figure of Corbyn.

Having been defeated again for the second time in just over a year, the right wing of the Labour Party are organising all kinds of manoeuvres in an attempt to keep control of the party. Thousands have been expelled, but this does not stop the relentless shift to the left. In the recent period the left has been winning control of some local party structures.

What we have is an ongoing civil war within the Labour Party, that will eventually end up in some kind of split. For now, the right wing are biding their time, playing on the weaknesses of Corbyn and the leaders of the movement around him, who believe they can manoeuvre cleverly to avoid a split, but the more concessions they make, the more emboldened the right wing of the party becomes.

The crisis of capitalism produced the Brexit phenomenon. This was a shock for the British Establishment, but also for the ruling classes of Europe. Britain was suddenly catapulted to the centre ground of the crisis of European and world capitalism.

Now the bourgeois are desperate to get what is known as a “soft Brexit”, i.e. one that will keep Britain’s access to the single market. But for this to happen, the Tory government would have to make significant concessions on immigration, allowing the free movement of EU citizens into Britain.

The recent High Court decision that Parliament has the right to have a say on the outcome of the Brexit negotiations with the EU, reveals the conflicts within the British ruling class, which are reflected in the deep divisions that run through the Tory party. The Court decision has now raised speculation about a possible early election, in which Theresa May would go to the country in an attempt to get a mandate for a “hard Brexit”.

This highlights the crisis facing the British ruling class. Their main party, the Tories, are divided over Europe, and in order to hold the party together, Teresa May is putting at risk fundamental interests of British finance and industrial capital.

An early election, as things stand, may produce a Tory victory, with the Conservatives beating the drums of nationalism. If such a scenario were to materialise, the right wing of the Labour Party would be on the warpath against Corbyn, blaming him for any defeat, and would sharpen the internal conflicts within the party, leading to a further left-right polarisation.

In this milieu, many workers and youth will be radicalised further to the left, creating fertile ground for the growth of Marxist ideas.

Italy

Italy is the third biggest economy of the Eurozone after Germany and France. Its public debt has reached the staggering level of over 2.3 trillion euros, almost 133% of GDP. Greece’s debt, although high in percentage terms, is nothing compared to Italian debt in absolute terms. This mountain of debt could prove to be the undoing of the whole of the European Union.

At this moment in time, however, what is focusing everyone's attention is Italy’s banking crisis. The Italian banks t have had to seek recapitalisation as a guarantee against insolvency in a crisis. The problem is that the Italian state with its huge mountain of debt has no money to take such action in regard to the banks.

The only alternative is to seek private investors. But since Italian operators have little money to risk in the banking sector, the banks have had to resort to foreign markets, leading to a situation where foreign finance capital is increasingly taking control of the Italian economy. It is in fact not a coincidence that The Economist recently published a front cover with an Italian bus on the verge of falling off a cliff just behind a British bus that has met the same fate.

The Italian banking crisis, following on from Brexit is likely to generate uncontrollable shockwaves, which could put in jeopardy the very survival of the EU. According to a Financial Times article, the bubble of non-performing bank debts will burst soon and could lead to Italy being forced out of the EU.

The internal situation in Italy is one of long term economic stagnation. For the past ten years it has had either sluggish growth or actual falls in production. This is reflected in the very high unemployment levels, which have gone from around 6-7% ten years ago to over 12% now. Youth unemployment in 2014 reached around 44%, with areas of the country, such as the South, witnessing even higher levels, while wages have stagnated or fallen.

The widespread malaise among large layers of the population explains the incredible instability and volatility on the political front. The emergence of the Five Stars Movement in 2010-12 with a series of electoral breakthroughs, eventually leading to over 20% in the 2014 European elections, was a reflection of the growing dissatisfaction of wide layers of the population with the status quo. It has now won elections in several major Italian cities and has the mayor of Rome, for example.

The problem with the Five Stars Movement is that it is not the result of mass movements such as those we have seen in Spain in recent years, or those that catapulted SYRIZA to power previously. This explains in part its populist nature, containing within it both left and right elements. It expresses the desire for change on the part of significant layers of the population, but it limits itself to talking about “clean politics” and has no solution to any of the burning social and economic questions affecting millions of working people. Sooner or later, this party will be put to the test and it will fragment and could even collapse.

Its presence in parliament, however, contributes to the growing instability of the situation. The political scene is fragmented as a consequence of this. No one party has majority support. That explains why Renzi has called a referendum on constitutional reform, which would in effect reduce the powers of the elected chambers of parliament and would also introduce a bonus number of MPs for whichever party comes first. It is in essence creeping parliamentary Bonapartism. Renzi earlier this year stated that if he loses the referendum he will resign. Since then he has retracted on that statement, indicating that he too now thinks he could lose it. Such a result would be a clear indication of the widespread opposition to his government.

The tragedy of the Italian situation is the treacherous role played by the old Stalinist leaders of the Communist Party, who first abandoned the name of the party and then fused it with other bourgeois formations to create the present Democratic Party, within which they have now been reduced to a minor faction that counts for little in the present situation.

The Italian workers are without a political voice as a consequence of all this. But this does not stop the process of radicalisation from taking place. The same process can be seen as in other European countries, but so far it has not found an expression and that explains the apparent paralysis of the movement. But the crisis iof Italian capitalism moves on inexorably and sooner or later it will force the immense anger and frustration of the workers and youth to come to the surface, and when it does it will be explosive.

Greece

Greece was in the vanguard of the European revolution, which saw mass demonstrations and 40 general strikes. This eventually led to the collapse of the PASOK and the rise of SYRIZA. The events in Greece were an anticipation of what we will see on a much bigger scale across the whole of Europe.

The radicalisation produced the phenomenon of SYRIZA, and it is the same process which has begun in Spain, Britain, France and other countries. But the experience of Greece is also a warning of what will happen when reformists get into government in a period of deep crisis of capitalism.

Tsipras rose to power and at the height of the SYRIZA government he was extremely popular. That has now turned into its opposite, with Tsipras having become a hated figure and with SYRIZA’s vote collapsing from its high of 36% to the present 17-18% in the latest opinion polls. SYRIZA, according to Public Issue, an opinion pollster, is now trailing New Democracy by 24 percentage points!

This is to be explained by the betrayal of the July 2015 Referendum Result and the total surrender of Tsipras and the SYRIZA leadership to the demands of the Troika. They have gone from their radical reforms promised during the January 2015 election campaign to simply applying the austerity demanded of them by the bourgeois.

The most recent development is that Tsipras recently replaced a number of cabinet members, considered “too left-wing”, by which is meant they were slowing down the process of privatisation and cuts. Dimitri Papadimitriou, head of the US-based levy Economics Institute was given the job of Minister of the Economy.  The new Minister of Labour, Efi Achtsioglou, has now the task of negotiating with the Troika a new round of cuts in pensions and a further reduction in workers’ rights, among them measures to facilitate dismissals. The aim of these changes is to consolidate the bailout measures and improve relations with international lenders.

The SYRIZA government has been promising that the austerity measures it has been implementing will create favourable conditions for investment, but the opposite is the case. The Greek economy continues in its inexorable decline with GDP falling last year by a further 1.3%, and since the beginning of the crisis falling by 24.52%. Last year consumption continued to fall, by 1.9%, which continued into 2016. In the first half of this year, turnover in the supermarkets fell by 8.8% with a 12.6% decline in sales volumes. A fall in the internal market, accompanied by the accumulation of not only family debt but corporate debt, has seen a further fall in investment.

Whereas the European Central Bank and the European Commission continue to pile on the pressure on Greece to meet the Memoranda requirements, the IMF has admitted the inability of Greece to service its debt and has drawn the conclusion that much of it needs to be cancelled. The problem is that the European Union, dominated by German capital, cannot afford to make concessions, because the Greek crisis is an organic part of the crisis of European capitalism and the indebtedness is a common symptom for many Eurozone countries. If the German bourgeoisie were to make any substantial concession on the Greek debt, then it would have knock-on effect across Europe, with many other countries demanding the same concession. This is what explains the intransigence of the German bourgeois.

The truth is that there is a growing consensus among the German bourgeois that Greece will never be able to pay off its debt, and that the only real solution is that Greece must exit the eurozone and possibly even the EU at some stage. Up till now they have delayed going down this road for fear of contagion. But the Brexit vote in the UK has brought this scenario into sharp focus.

The point is that – whether Greece remains for a further period within the EU or not – austerity will continue. For the moment the Greek bourgeoisie is allowing Tsipras to stay in office to do the "dirty work" for them. This is convenient in two ways. One, it further discredits SYRIZA in the eyes of the masses, which they can use to push the idea that there is no alternative on the left, and two, they can keep their main tool, the New Democracy (ND) out of all this, preparing the ground for its return to government. Opinion polls in fact show that ND is on the rise and could win the next election.

The recent experience has sown confusion and frustration among the masses. SYRIZA is falling in the polls, while the split to the left of SYRIZA, the Popular Unity party of Lafazanis – an ex-minister in the first SYRIZA government – has all but collapsed.

The lack of the subjective factor is glaring. The betrayal of SYRIZA, had there been a mass, non-sectarian, left alternative could now have been preparing the ground for a groundswell to the left. Instead we have the present impasse and confusion. In this the trade union leaders have played the role of firemen, damping out all the fires of class struggle and they continue to play this role.

In spite of all this, the most recent polls indicate that the Communist Party is picking up support on the left. This is logical, as a section of the workers and youth begins to draw more radical conclusions in the midst of the confusion. Thus, while we are witnessing a swing towards New Democracy in the polls, there is also a shift to the left within a layer of the working class that has drawn more radical conclusions. Another indication of this process was a recent mass rally held in Athens with thousands of students taking part from dozens of schools, marching with slogans against the underfunding and cuts of public education, but also in solidarity with the refugees.

The most likely next phase in the situation in Greece, however, is a bourgeois government headed by ND. But such a government would simply continue where SYRIZA will have left off. It will in turn prepare the ground at a later stage for a huge working class backlash. How long this process will take, one cannot predict in advance, but it will develop as night follows day. One element that could accelerate it would be an intensification of the class struggle and political radicalisation to the left in a series of European countries, such as Spain, France and even Italy at some stage.

Middle East

Since the writing of the 2016 World Perspectives document nothing fundamental has changed, but some elements in the situation have moved on. As we said, “Together with Saudi Arabia and Israel, Turkey represents the main counter-revolutionary force in the region.”

The 15 July attempted coup was a decisive turning point in Turkey. The following purge of the army carried out by Erdogan has temporarily strengthened his position on the home front, while allowing him to act on his expansionist ambitions in the region. He has intervened inside Syria with de facto tacit support from the Russians. The intervention in Syria is a clear move against the YPG who have been the most reliable ‘boots on the ground’ for the US.

This highlights the weakness of US imperialism, which we have looked at in previous documents, but it is an important factor in understanding the situation. It has opened a vacuum into which Russia has stepped in. This has strengthened the hand of local powers, and also enhanced the weight of Russia in the situation.

The impasse of the Middle East is confirmed by the almost immediate collapse of the ceasefire in September. Assad, with the backing of Russia, has been advancing, so why should he accept any such deal?

The situation is tailor-made for a cynic like Russian president, Vladimir Putin, who has no qualms about playing one group off another and in the process betraying those he had supported previously. For example, by selling out the Kurdish movement in exchange for a deal with Turkey, Iran and Russia managed to isolate the Americans who cannot afford a direct clash with Turkey as a NATO ally. The Kurdish card, however, is the only one US imperialism has in its hands. Of course, they will have no qualms about trading the Kurdish movement in exchange for a greater role in the future imperialist division of Syria.

While all these manoeuvres go on, it is the people of the Middle East, in particular in Syria and Iraq who pay the consequences. The impasse in the situation explains the endless military conflict, which is producing millions of desperate refugees, who are amassed in huge camps across the Middle East, destabilising further the countries bordering Syria, and also spilling over into Europe itself with the constant flow of migrants, which is adding to the internal conflicts within the European Union.

It confirms how the crisis is one world crisis, which no country can escape. Rather than stabilising the Middle East with the intervention in Iraq, and later Syria, the imperialists have enormously destabilised it and in the process added to their own domestic instability. The same can be said of Libya, where the bombing of the country rather than solving anything has enormously exacerbated the contradictions.

The solution to the crisis of the Middle East continues to be socialist revolution in one key country, Egypt, Iran, Turkey or in one of the minor countries that would spark off a movement across the whole region.

The Arab Spring failed to change society. That was because of the lack of the subjective factor in countries like Tunisia and Egypt. Because of that we have seen the situation swing from revolution to counter-revolution. But this will not last for ever, as the recent events in Morocco confirm.

At the end of October we saw tens of thousands of people take to the streets of Moroccan cities after a fisher vendor was crushed to death as he was trying to recover fish from a garbage truck which had been confiscated by the local police. These demonstrations were the largest seen in Morocco since the protests during the Arab Spring in 2011.

The Moroccan authorities in fact have been living in fear of a repeat of the big events of 2011. The Moroccan regime after 2011 manoeuvred by making some concessions, introducing some cosmetic reforms, while at the same time buying off the leaders of the trade unions and the protest movement. Recent events show how superficial that was. They also confirm the potential for revolution in the Arab world, which at some point will resurface.

Latin America: Brazil and Venezuela highlight the process

Events in Brazil and Venezuela in the recent months confirm what we have said in the past. Either a left government abolishes capitalism or it will succumb to its pressures and be forced to carry out the programme of the bourgeoisie. This can be seen clearly in Brazil and Venezuela.

Brazil was not affected in the same way as Europe or North America by the 2007-08 crash, and continued to grow at relatively high rates. As China boomed so did Brazil, but once China began to slow down it impacted massively on Brazil.

It all came to an end in 2013 when the Brazilian economy came to a sudden halt with growth of only 0.1%, followed by a fall of 3.8% last year, with 2016 expected to produce a further fall of 3.5%. How far the country has fallen can be seen by the fact that last year Brazil’s debt was downgraded to the level of junk.

An indication of the changes taking place were the popular protests of June 2013, followed by mass strikes of workers in 2014 and 2015, followed by school occupations by high school youth at the end of 2015 and in 2016, and continuing to this day.

In the process, the PT – the mass party of the working class that emerged out of the metalworkers’ movements of the end of the 1970s and early 1980s – has begun to feel the impact of its experience in government. It suffered big losses in Brazil’s October municipal elections. The party lost control of its historic base in Sao Paulo, the country’s largest city, and won in only one of the 26 capital cities. This is part of a historic crisis the party is facing. In 2012 the PT won 17.3 million votes, emerging as the biggest party. In the recent municipal elections it came fifth with only 6.8 million votes. It also lost more than half the mayors it had previously.

To the left of the PT, the PSOL candidate partially filled the vacuum, with some successes, the most important being in Rio, where they went through to the second round, although they then lost to the right-wing. It also went through to the second round in Belém, and Sorocaba.

Across Brazil, the PSOL elected 53 councillors, 10% more than in 2012, particularly in the large cities. Apart from Rio, the party did relatively well in São Paulo, Porto Alegre and Florianópolis, although at this stage it has not replaced the role of the PT in the past. A key weakness of the PSOL is that while it is seen as anti-racist and defending the rights of women and LGBT, it has not yet connected in a big way on class issues such as jobs, housing etc.

This lack of a viable and credible left alternative explains the massive levels of abstention. In Rio 43% of the electorate either did not turn out to vote or cast a blank or invalid vote! In São Paulo, the figure was almost 40%. This is an incredible level of abstention when one considers that voting is mandatory in Brazil.

The candidate of the right in Rio, Marcelo Crivella, although he won, he did so only with the active support of 35% of the overall electorate.

On the electoral plane, because of the role of the PT in the recent period, the shift has been in favour of the bourgeois parties. But as the figures above show this is more thanks to massive levels of abstention than an actual shift to the right among the masses.

With the right wing now in government and with their vicious anti-working class programme, they will prepare the ground for an ever bigger shift to the left later on, and the PSOL stands to gain from such a situation, with the potential for a future scenario similar to the one we saw in Greece with the collapse of the PASOK and the rise of SYRIZA.

Venezuela, like Greece, is another example of the impasse that is prepared by reformists when they are in government in times of deep crisis of capitalism. In Venezuela the process went much further than in Greece, a process that we have examined thoroughly over the years. The main point we have emphasised throughout this period is that you cannot make half a revolution, and the problem with the Bolivarian leadership is that while it has talked a lot about socialism and revolution, in practice it has left the main levers of economic power in the hands of the capitalist oligarchy.

A revolutionary situation cannot last forever: either one class or the other must prevail, either the workers, pulling behind it the peasants, urban poor and vacillating middle classes, overthrow capitalism, or the initiative eventually swings back to the ruling class. This is the process we are now witnessing.

In Venezuela what we have now are two powers vying for legitimacy, the government versus the National Assembly – but this struggle can only be resolved on the basis of the real social forces each side has in society and their ability to mobilise them.

As long as the Bolivarian government sticks to its reformist policy of class conciliation, it will be impossible to defeat the economic war unleashed by the oligarchy. In fact, it is this policy that has allowed the bourgeoisie to step up its economic sabotage and go on the offensive against the working class. The raising of the prices of regulated products for example, a measure taken to allow higher profits aimed at encouraging an increased production of these products, far from improving the supply, has favoured the bourgeoisie, while the working class is forced to stand in the same queues to pay for regulated products at higher prices.

The bourgeoisie is determined to put an end to the revolution. Therefore, no amount of concessions will make them stop sabotaging the production of basic goods – causing more shortages, inflation and speculation – until they have completely broken the social base of the Bolivarian Government.

Meanwhile, while they carry out these economic manoeuvres, they also prepare on the political front, exploiting the reformist policy of the Bolivarian government to pave the way for the defeat of the revolution.

Now, the suspension of the recall referendum will serve as a basis for the most radical sectors of the bourgeoisie to plot new insurrectionary plans against the government. As we have previously explained, the bourgeoisie saw the referendum as its chance to defeat the revolution by bourgeois democratic means. But once that option is ruled out, the fascist sectors of the bourgeoisie will put the question of overthrowing the government, by violent means, on the agenda again.

The recent manoeuvres in the National Assembly on Sunday, are in practice the legal and political prelude to the new insurrectionary plan against the government. In addition, the resolution of the National Assembly also makes an appeal for foreign intervention in Venezuela, through the International Criminal Court and other international bourgeois institutions. It also issues a formal call to the Armed Forces to ignore the mandate of the executive power and the other powers of the state. There is no doubt that a new coup will be attempted by the bourgeoisie at some point.

A serious threat hangs over the Bolivarian revolution. As long as the reformist policies of class conciliation are maintained, there is no way out of the current economic situation, and as long as that is not solved, the process of demoralisation of the masses will deepen to a dangerous degree, leading inevitably the revolution to defeat in the near future.

Only the radicalisation of the revolution, through the expropriation of the bourgeoisie under workers' control and the dismantling of the bourgeois state, can offer a real way out to the economic war, defeating the bourgeoisie once and for all. Faced with this new coup plan, the working class must take a step forward to definitely radicalising the revolution. Committees against the coup should be organised in all unions, factories, neighbourhoods, universities and in the countryside. These committees must link up at a local, regional and national level, through elected and recallable delegates, accountable to the rank and file in order develop a revolutionary plan of action against the economic war. Worker's control must be applied in the companies which are participating in the economic sabotage, bakeries should be occupied along with supplies stores, warehouses and other shops that are participating in acts of smuggling, hoarding and speculation so that products that are distributed are sold to the communities at fair prices. At the same time the merchandise of black marketeers and smugglers must be confiscated and other revolutionary measures should be taken against the economic sabotage, smuggling and speculation. The time has come to radicalise the revolution, failure to do so will mean to open the doors of the country to the triumph of the counterrevolution.

American elections

The most dramatic change that has taken place since the World Congress is the victory of Trump in the US Presidential elections. Donald Trump's victory has produced the biggest political upset in history; a political earthquake that has shattered the entire global Establishment, making Brexit look like a minor tremor in comparison.

Clinton, who was the clear candidate of the Establishment, of Wall Street, was humiliatingly defeated. The more serious bourgeois analysts have understood that what took place in these elections was a rejection of the politics of the elite. The irony of this is that a billionaire, and no friend of the working class, Donald Trump, became the channel through which this was expressed by a layer of the population.

Trump played the anti-establishment card and he won. Polls show, however, that if Bernie Sanders had been the Democratic candidate, he would have defeated Trump, as his calls for free healthcare, education and so on, would have connected with many of those working class people who voted for Trump.

We have analysed at length in previous documents and articles, the Bernie Sanders phenomenon and there is no need to repeat it here. Suffice it to say that the Sanders campaign revealed the potential for a mass, socialist, workers’ party in the United States. What was brought to the surface  during that campaign is not going to go away, but will eventually lead to the formation of some independent political voice of the American working class.

The spontaneous youth protest across the United States on the day the results were announced give us a foretaste of what the coming period in the United States is going to be like. We can look with confidence to a new period that has opened up in US society, one of polarisation to both the right and the left, of intensified class struggle never seen before in the history of the United States.

General conclusions

As we have explained many times, we have entered a period of sharp turns and sudden changes. That was graphically confirmed by the Brexit vote in the UK, and now by the victory of Trump in the United States. Such phenomena “surprise” and “shock” the reformists and bourgeois liberals, because they do not understand the underlying causes, the deep malaise that affects wide layers of the working class, the youth and the poor in all capitalist countries.

We have had decades of attacks on working people, which accelerated in the recent period after the 2008 crisis. Initially the crisis produced shock and confusion among a wide layer of workers. But since then, this has been translated into anger and a desire to do something to change things.

It is this that explains the rise of SYRIZA – in spite of its later betrayal –the phenomenal growth of Podemos in Spain from practically nothing, the dramatic change in the British Labour Party around Corbyn, the beginnings of a movement around Melenchon in France. It is the early stages of the more advanced layers looking for a sharper, more left-wing alternative.

This is bringing to the forefront the phenomenon of left reformism, but it is also putting into focus all its limitations. Venezuela and Greece are prime examples. All kinds should study these two experiences as they are full of lessons for all countries. It is important that these lessons be learnt, for the same process of radicalisation is taking place on a global level.

We are seeing mass movements erupt all across the globe. The recent 200,000 strong trade union demonstration in South Korea calling for President Park Geun-hye to step down is an example. This latest protest was the biggest for several years and it highlights the deep crisis of the Park government. In South Africa we have seen a wave of mobilisations of thousands of South African students taking their futures into their own hands. This has shaken up South African society. The youth are not content to leave their fate to those politicians and leaders who have adapted themselves to life under capitalism. The youth are now among the most politically active layers in society and they are taking the road of class struggle. This has also been partially expressed on the political front with the emergence of Malema’s Economic Freedom Fighters, EFF, which have partially filled the vacuum left by the decline in support for the ANC. Again, here we have an experience of the leaders of the mass liberation movement being integrated into bourgeois society and the state, and in the process beginning to lose the support of the masses.

Generally speaking, we are seeing polarisation both to the left and the right. This is natural, as it reflects the growing contradictions in capitalist society on a global scale. Capitalism is in an impasse, as it is incapable of guaranteeing the living conditions of the past. Workers everywhere are feeling the pressure of a system that can only survive by squeezing the workers more and more.

This process leads inevitably to revolution, but that road is not a straight line. We will see periods of massive surges in the class struggle, which will produce radical political phenomena, but these will be followed by periods of reaction as the reformist leadership of the movement betrays the aspirations of the masses. In the process, all tendencies on the left will be put to the test. If the Marxists are ready with sufficient forces within the labour and youth movement, they will be able to build mass revolutionary parties like the Bolshevik party of Lenin in 1917. On the eve of the centenary of the October Revolution, the conditions are being prepared once again for socialist revolution, this time on a global level. Our task is to understand and build, first the cadre organisation and later the mass party that will be capable of leading the working class to power, thus completing the unfinished task of October.