Today we publish the second part of the IMT’s analysis of the world situation. This is a draft document that is the basis of a discussion within the Tendency and which will be voted on with possible amendments at this year’s world congress of the IMT.
For part one click here
The crisis of Europe
The global nature of the crisis makes it impossible to “decouple” Europe and America. The announcement that the USA was going to wind down quantitative easing caused an immediate upheaval in the markets, which pushed up interest rates across the eurozone. The effect was to tighten monetary policy when the recession and rising unemployment required precisely the opposite policy.
Nowhere is the crisis revealed in starker terms than in Europe. All the dreams of the European bourgeoisie of a united capitalist Europe have rapidly been reduced to ashes. All the national contradictions have come to the surface, threatening the very future, not only of the euro, but of the European Union itself.
The weight of debt is like a gigantic millstone round the neck of the European economy, dragging it down and preventing a real recovery. Nobody knows the real extent of the debts of Europe’s banks. The bad loans of EU banks have reached at least €1.05 trillion (twice as much as in 2008) according to the Wall Street Journal. But this is only an estimate (i.e., a guess) and the real figure will be much greater. Most investment banks estimate that Europe’s banking sector must shrink by around €2 trillion to €2.5 trillion to reach a size that could be described as adequately capitalized.
There has been a sluggish recovery in Germany, but Italy and Spain remain in recession and Greece is in a deep slump. Italy has lost 9% of its GDP since the beginning of the crisis and Greece at least 25%. Nor will it be possible for Germany to maintain growth if there is no recovery in the eurozone as a whole, which is the main market for its exports. In 2012, European car sales fell to their lowest level since records began 24 years ago, in 1990. Car sales in Europe continued to fall in six of the first eight months of 2013.
The euro’s launch in 1999 was hailed as the key to a golden future of peace, prosperity and European integration. But as we predicted, under conditions of crisis it has become the source of national conflict and disintegration.
Although the euro is not the cause of the problems of countries like Greece, Italy and Spain, as narrow-minded nationalists imagine, it has undoubtedly exacerbated them to the nth degree.
In the past, these countries could find a solution to a crisis through devaluation. Now this is impossible. Instead of boosting their share of markets at the expense of foreign competitors by devaluing the currency, they are compelled to resort to “internal devaluation”, that is to say, savage austerity. But this only has the effect of deepening the slump and sharpening the class divisions in society.
The immediate catalyst was the Greek crisis, which threatens the euro and the European Union itself. It was natural that the crisis should emerge first in the weakest links in the chain of European capitalism. But the repercussions of the Greek crisis affect the whole of Europe. During the upswing that followed the launch of the euro, Germany gained a lot from exporting to the eurozone. What began as a tremendous plus has become a tremendous minus. When Mario Draghi, the European Central Bank president, promised that he would use all the economic resources at his disposal to save the euro, he forgot to say where these resources would come from.
In any fiscal transfer to save the eurozone, the transfer will always be of German taxpayers' money to somewhere else. This poses some serious problems for Angela Merkel. Germany has adopted the position of an implacable defender of austerity and fiscal restraint. It can afford to do so. It is the strongest of the European economies, and economic power must sooner or later be expressed as political power. Despite the illusions of the French bourgeoisie in the past, it is Germany that decides everything.
However, the politics of austerity has definite social and political limits. Countries like Greece and Portugal have already reached these limits, and Spain and Italy are not far behind. Despite the recent optimism of the bourgeoisie, nothing has been solved. The eurozone crisis can erupt again at any moment. The imposition of vicious austerity provoked a severe political crisis in Portugal, where huge mass protests almost led to the collapse of the government. Portugal’s public debt is rising, and is likely to be above 130 per cent of national output by 2015. So what was all the sacrifice and pain for?
Some sections of the "left" in Europe - for example Lafazanis, the leader of the left in SYRIZA - are calling for an exit from the Euro, and even from the EU itself, as a solution to the crisis and the problems of the working class. However, as Marxists we do not see the crisis as being due to the existence of the European Union. It is a crisis of the capitalist system.
The European Union is nothing more than a bosses' union aimed at bolstering the interests of the powerful European capitalists. The EU is imposing anti-working class policies everywhere. And this body cannot be reformed into some kind of “social Europe”. We are opposed to it, but the answer is not a series of little national capitalisms, but the unity of the workers of Europe in the struggle for a United States of Socialist Europe.
The political instability, caused by the austerity measures, is reflected in a series of unstable coalition governments and violent swings of public opinion. In Italy they only managed to put together a coalition of the Democratic Party with Berlusconi with the greatest difficulty, and the leaders of the coalition spend most of their time attacking each other in public. Berlusconi’s main concern is to keep out of gaol. The general interests of Italian capitalism must take a very poor second place to this overriding consideration.
The unedifying spectacle of squabbling and splits at the top, corruption scandals (as in Spain), not delivering on their promises (France), and politicians filling their pockets (Greece), while inflicting severe pain on the rest of society has caused a general backlash against all the existing parties and their leaders. This is an alarming development for the bourgeoisie, which is using up the political reserve weapons it possesses to defend its system. A massive social and political crisis is being prepared in Europe.
The bourgeoisie is staring into the abyss, and may well be forced to retreat. Apart from anything else, austerity has signally failed to reactivate the economy. On the contrary, it has made a bad situation infinitely worse. But what is the alternative? The bourgeoisie is caught between the devil and the deep blue sea. It is not clear whether the eurozone will break up completely—a prospect that terrifies the bourgeoisie and not just in Europe. In order to prevent a complete breakdown, the EU bosses will be forced to abandon some of their more stringent conditions. In the end very little will be left of the original idea of European unification, which is impossible on a capitalist basis.
The problem of the European bourgeoisie is simply stated. The ruling class cannot afford to maintain the concessions that were won by the working class over the last half century, but the working class cannot accept any further cuts in living standards. Everywhere we see sharp falls in living standards; wage cuts; emigration is back as a phenomenon in countries of southern Europe towards countries like Germany. But when Germany is also hit by recession, where will they emigrate to?
The working class has been enormously strengthened since the Second World War. The social reserves of reaction have been sharply reduced. The peasantry, which was a very large proportion of society in the past, not only in Spain, Italy, France and Greece, but also in Germany, has been reduced to a small minority. Sections like the teachers, civil servants and bank employees, who in the past regarded themselves as middle class and would not dream of joining a union or going on strike, are now among the most militant parts of the labour movement. The same is true of the students, who before 1945 were mainly right-wing or even fascists, and are now firmly on the Left and in many cases open to revolutionary ideas.
The European workers have not suffered a decisive defeat for decades. It will not be easy to force them to give up what they have conquered. That was shown in October 2013 by the Belgian firefighters who turned up outside the parliament with thirty lorries, blocked all access, and sprayed the police with water and foam, demanding an extra €75 million to increase staff to acceptable security levels. The government were forced to give in when the railway workers also offered to help firefighters in blocking rail stations. This change in the balance of forces poses a serious dilemma for the bourgeoisie in applying the necessary austerity measures. Nevertheless, the ruling class is compelled by the crisis to continue their attacks.
On the surface it would seem that Germany has escaped the worst of the crisis. But Germany’s turn will come. The Achilles heel of German capitalism is its unprecedented dependence on exports: in 2012 German exports reached a record 44% of GDP (€1.1 trillion). The reason for this apparent success was that the real wages of German workers have been held at the same level that they were in1992. According to the FT: “Germany now has the highest proportion of low-paid workers relative to national median income in western Europe”. One quarter of the workforce are on “low income” wages. The number of temporary workers has trebled in ten years.
German exports, the sole source of growth in the last period, were thus based on low wages and high levels of investment. The high levels of productivity squeezed from the German workers gave German industry a big advantage over its European rivals, as we see from the following figures:
Performance of industrial production 2000-October 2011:
Germany + 19.7%
Portuga - 16.4%
Italy - 17.3%
Spain - 16.4%
Greece - 29.9%
The fact is that German capitalism gained at the expense of its weaker European rivals who could not compete with its industries. Their loss was Germany’s gain. The euro then worked for the benefit of Germany above all. German banks were quite happy to lend money to countries like Greece to enable them to buy German goods. But now this process has turned into its opposite. Although they cannot admit it publicly, the leaked minutes of the first IMF bailout of Greece prove what we have stated in the past, namely that the bailouts to Greece are above all needed to save German (and French) banks.
The right-wing demagogues now heap curses on Europe and the euro. But the more serious strategists of German capitalism are filled with foreboding. They understand that Germany cannot restore its economic equilibrium as long as the rest of the eurozone is immersed in crisis. Where will it export its goods?
Speaking during an important economic summit in the German city of Hamburg, the former leader of the German SPD, Helmut Schmidt warned that: “Public confidence in European governments and the European Union has been shattered and Europe is on the verge of revolution”. He further stressed that major political and economic changes are necessary in Europe. But what changes are needed? And who will ensure that they are carried out?
The former workshop of the world has lost its industrial base and is entirely dominated by parasitic finance Capital and services. The UK has more bankers earning over a million pounds a year than the rest of the EU. Britain was claiming a “recovery” but the underlying picture is one of decline.
The recent period has seen the biggest and most consistent fall in living standards in Britain since the 1860s—over 150 years ago. There have been warnings of a new explosion amongst the youth along the lines of the riots that engulfed towns and cities all over Britain a few years ago. It is estimated that two million children go to school hungry every morning in Britain. This revelation so shocked the public that the government hastily announced the introduction of free meals for all primary school children.
Social attitudes in Britain have seen a massive shift. The old attitudes of respect and deference towards the establishment have turned into hatred. The people who were regarded with reverence in the past, Members of Parliament, the Press, the Judiciary and the Police, are regarded with suspicion and contempt.
“The public seems to think there is something rotten in the establishment”, states John McDermott in the FT. “In 2010, a Policy Exchange poll found that 81% of Britons agreed with the statement: ‘Politicians don’t understand the real world at all’. The British Social Attitude Survey reported that only 18% trusted governments to put the nation’s needs above a party’s, down from 38% in 1986. Banks fare worse. In 1983, 90% thought they were ‘well run’, compared with 19% today, perhaps the most dramatic attitudinal shift in the report’s 30-year history.
“Britain’s views of its institutions wax and wane—ask Her Majesty. But the successive scandals hitting banking, parliament and the media have the feel of an almost operatic collapse of faith in those who exert power in the country… There is a profound ignorance among the powerful as to the depth of anti-elite sentiment, in Britain and beyond.” (FT, 28/9/13)
Labour leader Ed Miliband was finally compelled to echo, even in the mildest way, the growing anger against big business and the banks after mounting pressure from the ranks of the Labour movement. Despite its limited and feeble character, this provoked an outburst of rage from the bourgeois press. The Financial Times accused Miliband of “trafficking in populist gimmickry”. Here we already have an outline of the contradictory pressures that will be multiplied a thousand fold when Labour enters government under conditions of crisis.
The EU was originally intended to be a condominium in which France would be the political leader of Europe and Germany the economic engine. But now these plans of the French ruling class have been exposed as utopian dreams. Berlin decides everything, Paris decides nothing.
At the last elections the Socialist Party won a sweeping victory at every level. But very quickly the support for Hollande has evaporated. Like every other reformist leader he has accepted the role of managing the crisis of capitalism. As a result he now has the worst ratings of any President since 1958. The latest polls register an increase in support for the rightist Marine Le Pen, with Hollande trailing behind.
The media will try to present this as a swing to the right. Actually it expresses a general mood of frustration and discontent with the existing parties and disillusionment with the “Left”, which promised much and has delivered little. It remains to be seen whether the Communist Party with its reformist policies can win support from the Socialists or the Front de Gauche or can recover its earlier electoral successes.
Partly in order to divert attention from his domestic troubles, Hollande has launched a series of foreign military adventures in Africa (Mali and the CAR). Blocked by Germany in Europe, he is trying to revive France’s old role in Africa and the Middle East. But in reality, French imperialism lacks the muscle to play an independent role on a world scale. These military adventures will inevitably end in tears, adding fresh fuel to the flames of discontent at home.
France remains a key country for the class struggle in Europe. The French workers have shown time and time again that they have never forgotten their revolutionary traditions. The masses are seeking a way out of the crisis. They put their trust in the Socialist leaders, but the latter are organically linked to the capitalist system and the existing order. The “Left” dashes the hopes of the masses. Already in the municipal elections, the leaders of the CP and the Parti de Gauche have broken the Left Front. The CP is in alliance with the SP, a party of government, while the Parti de Gauche in some municipalities is in alliance with the Greens, who also have two ministers in the present government. By breaking the Left Front – at least at municipal level – they are disappointing those workers and youth who are seeking an alternative to the left of the SP. It is an indication of the complete reformist blindness of the CP leaders that they are clinging to the SP precisely at a time when Hollande and his government are discredited and deeply unpopular. Instead of maintaining a clear opposition to the government, they are desperately trying to preserve their positions in local government. Marxists should demand the leaders of the Left Front break with the Socialists and the Greens and strengthen the Left Front on the basis of genuine left and socialist policies.
What we see is a clear process of polarisation between the classes that will be expressed in a social explosion at a certain stage. Frustrated on the electoral plane, the workers and youth can take to the streets as they have done so often in the past. A repetition of May 1968 is being prepared. But this time it will be on a higher plane, and the Stalinists no longer possess the strength or authority to betray it.
Italy is teetering on the brink of a downward spiral of downgrades and rising bond yields. The consequences would be disastrous, not just for Italy but for the eurozone. Its accumulated debts amount to around €2 trillion. The government's borrowing costs threaten to strangle the Italian economy in the long run.
Unemployment is rising. In the last three years, one million people between the age of 25 and 34 have lost their jobs. Of those, under age 35 only four out of ten are working. Officially, there are over three million unemployed in total, but many people have given up on looking for a job because they have no confidence that they are going to find one. In 2012, more than 9 million people were classed as poor, of which 4.4 million are living in absolute poverty conditions.
A recent survey carried out by Legacoop (the main supermarket chain) confirms in writing what has been obvious for some time: three million households—12.3 percent of the population—cannot afford a high-protein meal every two days; 9 million Italians would not be able to meet an unexpected expenditure of €800; Italians are increasingly giving up the use of a car (25 per cent of the population); they no longer go on holiday (4 million fewer people this summer); and they don’t buy new clothes (23 per cent of the population). Spending on food in the past six years has fallen by 14 %, falling to the levels of 1971 (€2,400 per capita).
The Financial Times describes the tasks facing Italy as “economically painful and politically suicidal”. (7/10/13) Italian capitalism cannot compete with Germany and France and is falling behind. In the past it would have devalued its currency, but with the euro, that avenue is blocked. Instead it must resort to an “internal devaluation” (that is, deep cuts in living standards). But for this, a strong government is needed. That, however, is not possible.
Every one of the parties in Italy is divided. In the PD there is a split between the old CP apparatus and the openly bourgeois elements from the Christian Democracy. Monti's small party is riven with factions and is expected to fall from 10% down to 4% in the next elections. Even Grillo's Five Stars Movement is divided, with some clearly leaning in favour of collaboration with the PD.
The union leaders have played a pernicious role in supporting the so-called national unity government, swallowing all the anti-working class austerity measures. This particularly applies to the “left” leaders of the metalworkers’ union, the FIOM who, having aroused the hopes of the workers, then dashed them by joining CGIL leader Camusso in signing a common document for the CGIL congress. Here we see the precise role of left reformism in action. The right-wing trade union leaders cling to the bourgeoisie and the left union leaders cling to the right wing. None of them have any faith in the working class, which is left leaderless at the critical moment.
The betrayal of the leaders can lead to temporary demoralization and apathy. But that will not be the end of the matter. The Italian workers—like the Spanish, Greek and French—have a long tradition of spontaneous, insurrectionary movements. Blocked by their traditional mass organizations, they will find a way of expressing their anger in an explosive fashion. That was the meaning of the Hot Autumn of 1969. The five days of open-ended strike against privatisation of the Genoa transport workers in November 2013 show the real mood developing in the Italian working class. Such developments are implicit in the situation in Italy. And this is still truer in the case of the youth.
Five years after the start of the recession, Spain's economy will fall a further 1.4% in 2013. Unemployment is at a record high of nearly 27% of the workforce, with youth unemployment at a painful 57%. Over 6 million jobs have been destroyed since 2007, and hundreds of thousands of young people been forced to emigrate.
After several years of massive packages of austerity cuts, the budget deficit in 2013 is still expected to be a huge 6.5% of GDP, while debt will approach 100% of GDP. Austerity cuts have been combined with sweeping counter-reforms in the labour market which have allowed Spain to regain competitiveness in relation to her European neighbours. In other words, workers have been made to pay the full price of the capitalist crisis. And after all this pain and suffering all that has been achieved is vague talk of a mild recovery next year with growth rates being forecast of a mere 0.2% in 2014 and perhaps a full 1% in 2015. On this basis, it would take until 2021 to even recover the pre-recession level, nearly 15 lost years!
The truth is that the enormous amount of corporate, household and now state debt which was accumulated during the long years of the boom have not yet been absorbed fully by the system. Until that takes place, there can be no real sustainable recovery for Spanish capitalism. The current “optimistic” forecasts are based on a recovery of exports, which is wholly dependent on Europe coming out of recession—a very fragile basis for optimism.
The impact of the economic crisis on the consciousness of the masses has been profound and will be long-lasting. To the economic recession we must add the accompanying corruption scandals affecting all institutions of bourgeois democracy (the judiciary, the Monarchy, Congress, the ruling party). What we see in Spain is a crisis of the regime which is unravelling the whole edifice on which the ruling class had built its legitimacy since the end of the Franco dictatorship. All the old ghosts of the past are coming back to haunt the weak and retrograde Spanish bourgeoisie. The national question in Catalonia, fuelled by the economic crisis, has revived. The struggle for justice for the victims of the Franco regime has come back to the fore uncovering the reactionary character of the state apparatus and the ruling class under a thin veneer of democracy.
There has been a wave after another of mass mobilisations, particularly since 2011. The movement of the indignados, the anti-evictions movement, the education strikes, the battle of the miners, the spontaneous movement of the civil servants, two 24h general strikes, etc. Of course, the masses cannot be in a state of permanent mobilisation and there will be ups and downs, and periods of hiatus. However, the anger which has accumulated under the surface and that finds no channel of expression, is still there and can give rise to explosions at any time.
Portugal remains mired in recession, with forecasts for a 2013 GDP contraction of between 1.6% nd 2.7% and (perhaps) very mild growth in 2014. Unemployment is at a record high of 16%, and the government will miss the deficit reduction targets for this year (5.5% of GDP is the target, the real figure will be more like 6%), despite years of massive austerity cuts imposed by the 2010 €78bn EU bailout.
The 2014 budget includes further cuts in public sector wages of between 2% and 12% per worker, and €728 million in pension cuts. Yet a further €3.3bn cuts are needed in 2014, together with yet another bailout. This has led to a collapse of support for the right-wing government. In the 2013 local elections the parties of the ruling coalition were heavily defeated. “The political environment is deteriorating”, moans the Financial Times.
The Portuguese government, which has slavishly carried out all the austerity measures dictated by the EU, begs for patience: “Please give us a little more time”. But the Money-men in Washington, Brussels and Frankfurt and the troika are not in a mood for patience. As the price for a new bail-out they will demand cast-iron guarantees that the austerity programme will continue to be implemented. The stage is set for even bigger mass protests.
Passos de Coelho, who boasted of being a strong man and a model pupil of the troika when he was elected in June 2011, is now exposed as the weak leader of a divided coalition. His government, which has earned the hatred of the people of Portugal, came very close to collapse after the general strike on June 27, 2013. This was the latest in a series of sustained mass mobilisations against the right-wing coalition.
The Portuguese working class is rediscovering the traditions of the 1974-5 Revolution. One million people came to the streets in September 2012, then one and a half million in March 2013. The problem is one of leadership. The “opposition” Socialist Party is still discredited (it signed the bailout conditions just before being booted out of office) and only gains in percentage terms because of the increased rate of abstention.
The Communist Party is the main beneficiary of this unprecedented wave of discontent. However, the two parties to the left of the SP are afflicted by a lack of a serious alternative to the crisis, the Bloco de Esquerda espousing a reformist-Keynesian “social Europe” and an “audit to the debt”, while the PCP advocates a semi-Stalinist “patriotic and democratic” economy outside of the euro.
After five years of grim austerity the problems of Greece, far from being solved, are worse than ever. The slash-and-burn policies of the troika have plunged the country into a deep slump. 1.4 million people are unemployed, including two out of every three youngsters. Levels of poverty that have not been seen since the war years have become the norm.
The government of Athens complains (with reason) that the cuts demanded by Brussels are pushing the economy further into recession, pushing tax revenues down, increasing the deficit and forcing them to borrow yet more. But these appeals fall on deaf ears. The Germans and other lenders reply that the southern Europeans have lived beyond their means for years and must “learn discipline”.
Each successive rescue package has served merely to gain a little time. But the markets are not deceived. The final denouement of the Greek crisis has only been postponed, but sooner or later it will become inevitable.
At the same time, Greece is a land of opportunity for financial speculators. The Financial Times published an article entitled “Hedge funds profit in land of Greek opportunity” where we read:
“Greece’s banking sector has been the area of greatest interest. Paulson & Co, Baupost, Dromeus, York Capital, Eaglevale and OchZiff are among those to have taken stakes in Alpha Bank and Piraeus Bank. All have profited handsomely. Frenzied trading in the warrants also means that hedge funds could end up dominating Greek bank share registers”. (11/10/13, our emphasis)
This plundering of Greece, the vicious impositions of the troika, and the collapse of living standards have provoked a massive wave of general strikes, demonstrations and mass protests. Two governments have already fallen, and a third is about to fall. Samaras is struggling to hold together a fragile coalition that cannot last long. The main beneficiary will be Syriza. But on the right the Golden Dawn has also grown.
Impressionistic elements have drawn the conclusion from the rise of Golden Dawn that there is an imminent danger of fascism. But what has happened to Golden Dawn confirms our position on prospects for fascism in present epoch. The Greek bourgeoisie is a vicious and reactionary ruling class, and a section of it would probably be prepared to hand power to the Golden Dawn—if they could. In fact, the most reactionary sections of the ruling class (the shipbuilders) have openly backed and financed it.
Unlike other right-wing political formations in Europe (Fini in Italy, Marine le Pen in France), who are striving to disassociate themselves from their fascist past and present a “respectable” parliamentary image, Golden Dawn is an openly fascist organization whose close links with the police and army officers have been exposed. These mad dogs had their own agenda, which seems to have included the seizure of power.
The problem is that the Greek working class is powerful, militant and undefeated. The bourgeoisie fears that by taking premature action, the fascists can provoke a mass movement that will be impossible to control. The Golden Dawn thugs went too far when they murdered a well-known left-wing singer, provoking massive protests. The Greek bourgeoisie was compelled to take some measures against them.
Of course, the bourgeoisie has no intention of wiping out the fascists. They have taken some measures for cosmetic purposes to calm the anger of the masses. Later on, the fascists will regroup under another banner, probably as part of a right-wing coalition with a more respectable (less Nazi) image. Meanwhile, the most rabid lumpenproletarian elements will remain as an auxiliary to the repressive apparatus of the state (to which they are organically linked), acting as strike-breakers and thugs, beating up immigrants and attacking left-wing people.
The immediate perspective for Greece is neither fascism nor Bonapartism but a further swing to the left. The inevitable collapse of the Samaras government will pose the question of a Syriza government. But to the degree that Tsipras gets closer to power, he moderates his language in the hope that he will get more votes. On the contrary, this provokes a mood of scepticism on the part of the Greek people who have grown accustomed to leaders who promise much and deliver little when they are elected.
The real mood of the masses was shown in an opinion poll that revealed that the workers of Greece are already drawing revolutionary conclusions. It stated that 63% of Greek people want a “profound change” in society—which means a revolution—while 23% say directly that they stand for revolution. The problem is not any lack of revolutionary maturity on the part of the masses, but the fact that not one of the existing parties or leaders is prepared to give a conscious expression to the burning desire of the masses to change society.
For the last four or five years the Greek workers have amply demonstrated their will to change society. They have staged one general strike after another. But the seriousness of the crisis is such that even the stormiest strikes and demonstrations cannot solve the problem. The call for more one-day strikes will meet with increased scepticism in the factories. Blocked on the road of strikes and demonstrations, the workers will move onto the electoral plane. Sooner or later they will elect a Left government, which will confront Syriza with a straight choice: either carry out a socialist policy or accept the role of managing corrupt and degenerate Greek capitalism. This will mark a new stage in the Greek revolution, opening up important possibilities for the Greek Marxists.