The Fall of the Berlin Wall and “The End of History”

Today (‎9/11/19) marks the thirtieth anniversary of the fall of the Berlin Wall (which did not quite make its own thirtieth anniversary). It will be accompanied by the usual capitalist paeans to the wonders of democracy and the capitalist way of doing things. The following article from Communist Review 8 (later Internationalist Communist) appeared in January 1990 but has never been reproduced digitally before. It was our deeper reflection not only on the collapse of the USSR’s empire in the East but the burgeoning crisis of world capitalism as a whole

Submitted by Internationali… on November 13, 2019

For us this was not “the end of history”, as Francis Fukuyama put it at the time but only one stage in the ever-deepening crisis of capitalism. This “secular stagnation” has now lasted forty years. It has been prolonged by the printing of money by the state and by a resort to speculation by a capitalism that can no longer find profitable sources of investment. As we concluded back then

"We are not facing a real economic revival. There is no basis for a long-term revival of the accumulation cycle. In the present phase of management of the crisis based on indebtedness and financial speculation, the certain future is that of a new recession."

We had to wait until 2008 for this to come true but the fundamentals were correct. Today we are living in that recession with no sign of any new magic bullet from the capitalist class to revive it. The march of history goes on … until the world working class decides that capitalism’s time is up and turns the page for a real new beginning.

Internationalist Communist Tendency
9 November 2019

Crisis of Communism or Crisis of Capitalism?

We are witnessing a deep and devastating crisis. The "socialist" world has been engulfed by a gigantic wave welling from the depths of its economic substructure, sweeping away atavistic bureaucratic forms, and the old ideology. It is on a tumultuous and unstoppable course towards disintegration, triggered by an economic crisis whose explosive and unpredictable effects are being felt by the whole society. The result is an entirely new theory of society whose divergence from the previously established model only equals the intensity of the crisis which gave rise to it.

In Russia economic crisis can be seen in the most serious shortage of basic goods since the 2nd World War: rising inflation, increasingly widespread unemployment, and hunger and misery for the vast majority of the population. The standard of living of the proletariat who live and produce on the periphery of the Soviet Empire has been reduced to mere survival. This situation has triggered intense episodes of class struggle, such as the miners‘ strikes; autonomist tendencies in almost every region from the Baltic to the Caucasus, Estonia to Armenia; religious wars between Christians and Muslims of such intensity that they have led to the most disgusting forms of xenophobia.

In China recent events in Tiananmen Square are the tragic demonstration of how the economic troubles which have been dogging the Deng regime for years could lead only to revolt and repression. It is possible to concentrate solely on the democratist petty-bourgeois demands of the Beijing students. However, it was the 40 million unemployed and the generally miserable living conditions which provided the soil for the ferociously repressed protests to grow in. In other words, when the emotive old stereotypes and false ideologies are discarded, it is clear that the two major SELF-PROCLAIMED "communist" countries are in the grip of the most serious social and economic crisis recorded in history.

Certainly, there is plenty of nourishment for bourgeois ideology. But there is also enough ‘food for thought' for an accurate Marxist interpretation, which takes into account the different histories of the two countries, their differing social problems and their different levels of development.

In Russia the earthquake of perestroika was released from above and is seeking a consensus at the base. In China centrifugal forces moved from the streets towards the seat of power. Perestroika is moving against the old world of Stalinist bureaucratic privilege in order to create the conditions for an opening onto the free market. The Chinese events exploded after ten years of "liberal" experiment. While the orphans of Stalin are grappling with the ethnic and national problems which have flared up, the descendants of Mao are confronted with an inflammatory situation even though it hasn't yet assumed any particular regional form. Whatever is happening in terms of social revolts, political and economic experiments, and mass actions reactions from above or vice versa, they are no more than the results of serious economic contradictions.

The Western bourgeois vulture is greedily feeding on this decomposing social material. It presents an opportunity for the West to reinforce the two-fold attempt to hide its own incurable contradictions and to contain the political and economic demands of its own proletariat. The opportunity is so favourable that the bourgeois attack on the supposed communism of the "socialist" countries is not directed, as in the past, against cardinal points of Marxist theory and method, such as the dialectic, the theory of value or economic determinism. Instead they arrogantly and empirically seize on the broken pieces swept up by the economic crisis in the Eastern bloc countries.

The failure is so complete that the bourgeois crow only has to gloat over the defenceless 'victim' and the nervous steps towards "neo-capitalism" which are apparently emerging as the only solution to the "socialist" countries' agony. There isn't a single political commentator who doesn't support the accepted idea that, given their devastating economic crisis, the only road open for the Eastern bloc countries is "a return to capitalism": both in economic terms and in the shape of traditional bourgeois democracy with its political pluralism.

The essence of the question is that we are neither seeing the crisis of Marxism nor the failure of its supposed realisation (in Russia, China or the East European countries), but more simply the consequences of the Stalinist counter-revolution.

What is collapsing in Moscow and Beijing is the great historical fraud which resulted from the construction of state capitalism disguised as socialism. The analytical key to everything still remains having a correct interpretation of that unique and great revolutionary experience of Bolshevik October. A full and exhaustive analysis of this cannot be made here. However, the fundamental stages need to be repeated, if only as a very quick overview.

Although the Russian proletarian revolution — the one and only example of victorious class struggle — created all the political conditions for the construction of a socialist society, there was no possibility of it moving on to a higher economic and social plane. The revolution was strangled by economic backwardness and its isolation from other revolutionary experiences in the advanced capitalist areas. Lenin's great worry, and that of all the major Bolshevik Party leaders, was dramatically articulated many times: this was that either the international revolution would manage to come to the aid of the Russian proletariat or the first experience in the world revolution would be defeated.

All Lenin's efforts, including the New Economic Policy were directed, not at the construction of "socialism in one country" (impossible in any country but particularly in one that was economically devastated), but at political resistance to the revolution's decline whilst waiting for other sectors of the international proletariat to make their absolutely crucial contribution. NEP itself, supported and vigorously defended by Lenin, was not conceived as a necessary precondition for socialism, still less a socialist gain. Rather, it was seen as the only possible policy and a step backwards towards capitalism, even if it was supervised by the state. It was a sort of temporary defensive shield whose power of protection was in inverse proportion to the length of isolation. Only the falsified history of Stalinism, with its talk of "socialism in one country" could distort the uncertainty of this delicate period of waiting and programmatic retreat into a triumphalist take-off point towards the building of socialism. The mystification was all the more delusive and ill-fated, given that the vast majority of the international proletariat were swept along by emotional memories of October. Stalinism did NOT produce socialism of any sort. On the contrary it was the police-state form of the counter-revolution which liquidated the Bolshevik Old Guard in Russia and all the communist oppositions abroad. The theory about "socialism in one country" was just a disguise for the transformation of the economic structure into state capitalism.

Today the international bourgeoisie is tenaciously pursuing its aim of destroying the vision of communism by annihilating Stalinism. In the process it plays on the lies which the counter-revolution itself has created. Under these circumstances it is imperative to reply to the bourgeoisie's expedients by putting Stalinism back into its proper historical context. The political crimes which were committed against first the Russian proletariat and then the international proletariat have to be denounced.

The whole history of Russia from the end of the Twenties to the outbreak of the Second World War clearly demonstrates the total strangulation of the political aims and strategy of October. Not a single postulate held by the Bolshevik Party and the Third International at the outset of the revolution remained in place. Thus, a revolutionary programme with the potential for attacking the international bourgeoisie slowly changed into a programme for the defence of the Russian state. Proletarian internationalism gradually made way for the national path to "socialism".

The Second World War, with its Cold War aftermath, provided the imperialist framework by which the Russian example came to be held up as the obligatory reference point for a succession of social and political movements which either didn't have the strength to free themselves from Russian influence or which, more often, opportunistically acted as its clients in national liberation wars or antifascist fronts. This happened in the immediate post-war period in Eastern Europe following the liberation from Nazism, in Mao's China of 1949 following the civil war against the Kuomintang, in 1950 in Korea and subsequently" in Vietnam. According to this framework even the totally imperialist struggle between the USA and the USSR was depicted as the struggle between world communism and the major imperialist state, or sometimes, if one preferred, as the unavoidable confrontation between the advance of communism and the arrogant defence of capitalism.

In fact, what would have been - if victorious — the mainspring for the revolutionary movement of the world proletariat became instead the most infectious source of contamination by counter-revolutionary ideology. Its devastating consequences still weigh heavily on the world working class. Seventy years of Stalinism, seventy years of counter-revolution, have succeeded in cancelling out the historical memory of the Bolshevik October. Traditional methods of class struggle now appear obsolete in the light of what is happening in the so-called "socialist countries and the world's bourgeoisie has been presented a with a golden opportunity to rage against Marxism – or rather, against what is universally regarded as such. For the economic, social and human tragedies which come with the disintegration of the Russian Empire or the crumbling of the socio-economic order in China, are not the "tangible proof" of the failure of communism's historic programme. They are not evidence of the "obvious impossibility" of constructing anything other than capitalism. They are, however, in contrast to the whole hypocritical stance of the bourgeoisie, the sign of the end of a great deception which for too long has nourished the counter-revolution and the traditional bourgeois order.


Today there are more repentant Marxists than there are algae in the Adriatic. The collapse of the myth of Russia and China has brought with it a crisis for the host of false interpretations and superficial approaches to the proletarian cause. This is certainly a good thing. The international revolutionary movement is so reduced and has to face such enormous problems that the "loss" of this load of rubbish can only be an advantage to it — if only in the sense that it is becoming clear at last that certain "fellow travellers" have never been fellow travellers of the proletariat and that, though they may have a long way to go, there path is different from ours. Moreover, it's painful to see how dramatic events of late, instead of sparking off self-criticism amongst the left, have given rise to the idea that "everything" was a mistake and that they might as well beat an ordered retreat. For certain political animals it is easier to take this apparently obligatory step and declare their own experience as "Marxist" militants over, with the supposed death of Marxism, than make the effort of checking whether it's really Marxism which is dying or that version of "Marxism" which has been continually refined politically by Stalinism itself, by Maoism, or by "Sixty-eightism", etc. Neither able nor willing to definitively sever the umbilical cord which binds them to their political origins, such elements have been easily drawn in the opposite direction by the events which have hit the "communist world" and by the noise the bourgeoisie is making about it.

Nevertheless, a small band of inveterate Stalinists or Stalino-Maoists are still in action and are refusing to liquidate themselves politically. Even here, rather paradoxically, their ultimate polemical venom is reserved, not so much for attacking the key democratist critique of the bourgeoisie (they are themselves beguiled by this), but for criticisms stemming from the left — i.e. from those who condemn Stalinism for the collapse of the Russian Revolution. Their argument can be summarised thus: "Agreed, Stalinism happened, but it hasn't been a complete success only because mistakes and deviations occurred. However, it doesn't follow that these countries haven't been building socialism, that they are capitalist or state capitalist societies. You can say what you like..." continue our "non-deviationists" "... but the Russian and Chinese experiences are based on the socialisation of the means of production, they have eliminated private property and money remains only as the universal medium of exchange, not as capital; is this not socialism!" — A fine speech if it wasn't so outworn and wasn't delving back to a debate of fifty years ago.

Certainly one of the first measures taken by the revolutionary government in Russia was the socialisation of the means of production. All capital was expropriated from the national bourgeoisie who in turn were deprived of military organisation and a say in the decisions of the new-born soviet republic. This, however, is the fundamental content of the dictatorship of the proletariat: the expropriation of the class enemy and resistance against its reactionary return. Both practically and in juridical terns the revolutionary state took into its hands the management of finance capital, the exploitation of mineral resources, the production of important products, foreign trade and a good part of internal trade. That is, it created the political and legal preconditions and organised the factors of production for a future, lengthy process of transformation from capitalist society, subdued as it was, into socialism. But — and here lies the keystone to all analyses of the Russian experience – these achievements of the Bolshevik October represented only the NECESSARY preconditions for the subsequent development of socialism, they were in NO WAY SUFFICIENT. For the full potential of these preconditions to be realised in practice the international revolution would have had to occur and come to the aid of 'poor', backward Russia, otherwise it was goodbye to socialism, and goodbye also to the preconditions so laboriously achieved by the first victorious episode of class struggle.

We have already mentioned the NEP measures of 1921 (Lenin always spoke of them as a step backwards). The reopening of the market, the drive to develop the productive forces all involved a return towards capitalism. Except that, and Lenin emphasised this, it would have to be a "particular" kind of capitalism — state capitalism, directed and administrated by the proletarian dictatorship itself. This was all in the context of the dual perspective of holding on to power whilst waiting for revolutionary upheavals on the international scene. As the second perspective became less and less likely, both in the short and long term, the Russian revolution did not move towards socialism and found itself developing under the aegis of a capitalist economic structure, even if this was state capitalism. In other words, NEP, which had been imposed as a temporary economic necessity, became the definitive economic support for post-revolutionary Russia.

By the beginning of the Twenties then, the revolutionary state was almost completely devoid of the political content it had had in 1917. The state had now taken on the form of a bureaucratic administration that was now subsumed to a centralised, planned, capitalism where every single productive energy had to be channelled towards the accumulation of capital which, even though it was no longer private, was still capital.

Thus depicted, the historical course of the retreat of the Russian revolution can be more easily understood. The necessary preconditions for socialism had disappeared altogether or else they were transformed into their opposite and came to be regarded as the socialisation of the means of production. But socialisation is not just about expropriation, it is also about collective property and therefore non-property. It simply means the communal management of goods and resources without any individual property rights, not even on the part of the state.

But if socialisation is to become more than a mere precondition and have a working 'juridical' structure, the latter has to be connected to a real social content, that is to a socialist development of the forces of production and distribution. In this case, and only in this case, "juridical form" and social content come together and influence each other to give life to a new social dimension. In this collective management from below leads to economic development while the productive apparatus in turn satisfies the needs of the collectivity. In every other case the only thing that can emerge is an insurmountable division between the first and the second (i.e. juridical and productive relations) which removes any meaningful content from either.

Yet, how could a society such as Russia, where capitalist economic forms were being strengthened, not distort the content of socialisation? On the other hand, how could a 'juridical' form such as the socialisation of the means of production — created as part of the development towards socialism — facilitate the growth of capitalism? Either the juridical relations must impede the development of capitalism or, in the long-term, capitalist productive relations would gain superiority over the original thrust towards socialisation.

Given the absence of the first solution, the outcome of the Russian experience is clear. The gradual appearance of capitalism transformed the state from an overseer of the gains of the revolution into the manager of the process of capital accumulation. Consequently socialisation itself was emasculated and redefined as simply the transfer of private property to the state, as the best way to accommodate to reality. The collective management of the means of production gave way to state ownership of them. Added to the fact that the state at this point was no longer a revolutionary state but capitalist with all the bureaucratic/ administrative trappings of such, the fate of the revolution was sealed. It is pure folly to suppose that after thirty or fifty years of solidification of this economic process socialisation can survive, like a laboratory experiment, in complete isolation from the historical context which surrounds it.

The Russian capitalist state emerged out of defeat or, more accurately, as a result of the impossibility of an isolated revolution continuing on its course. The state turned to managing the relations of production as a "collective" capitalist and accommodated itself to the capital-labour relationship. The old revolutionary concept of socialisation began to play an important role in supporting the historical fraud of state capitalism recycled as "socialism". Even though the theoretical justification for this is crude, sometimes very crude, the counter-revolution has exploited the October victory to the full in order to disguise how it has been obliged to survive.

For decades the false dichotomy between capitalism and socialism has held sway (with Russia and the rest of the "socialist" countries held up as examples), thus separating the area of so-called private capitalism from that of statism and reinforcing the lie that state capitalism = socialism. This dichotomy is all the more fraudulent when the development of capitalism itself is considered. As always, but in an accelerated way since the Second World War. capitalism's economic course has given rise to areas of state and areas of mixed capitalism (i.e. where industry is owned by a mixture of private and state capital). Together these represent today 40-50% of GNP in the vast majority of industrialised countries. It is obvious that the tendency towards state capitalism has developed in a different, manner in the West and under different historical circumstances to the Russian counter-revolution. Nevertheless, it is equally obvious that state capitalism is not a historical accident, a new economic form representing a half-way house between capitalism and socialism, but a way of organising production which is entirely in keeping with capitalism.

The most obvious historical difference between the East and the Western world is that in the former state capitalism — given the backwardness of the productive forces, the partial isolation from the international market and the weakness, if not the absence, of private capital — emerged as the necessary condition for the development of capitalist productive relations. In the latter, on the other hand, the state's progressive assumption of responsibility for the productive forces is synonymous with an anti-cyclical economic policy aimed at managing the economic contradictions of the system of production.

Yet this does not mean that in Germany, Sweden or Italy, where state intervention in the economy is most consistent, one can speak of socialised areas or of sectors which have been withdrawn from the logic of profit-making simply because they are managed by the state. In both experiences, whether stemming from a failed revolution or from the normal course of development of private capitalism, capitalism managed by the state does not change its character as exploiter of labour power and it absolutely has nothing to do with any kind of socialisation of the means of production.

To return to Russia and the socialisation-state relationship there is an important point which must be considered. If we accept that what was developing in the Soviet Republic was a revolutionary process and that therefore the state was not degenerating — the only condition which could have saved the social content and political function of socialisation - then there should have been some movement towards the development of socialism. And if this had happened we would have seen, first of all, the disappearance of all capitalist categories such as capital, wage labour, the market, commodity production and eventually the disappearance of the state itself.

But in Russia exactly the opposite happened. Every capitalist economic category was reinforced. The fundamental relationship between capital and labour power became more and more rigid to the point that the Stalinist Five Year Plans could start from calculations of the rate of exploitation of labour and the corresponding remuneration for capital: the amount of investment which would be possible, wage increases and the selling price of goods and services. Equally, the state not only was not extinct but had enormously broadened its functions so that it engulfed all aspects of social life imposing itself as an economic state, a social state, a bureaucratic state, a police state — all in the service of capital accumulation.

Another connected argument is that in the socialist countries the survival of money is only a technicality which simply reflects the necessity to exchange goods, not the existence of money as capital. This distinction, as old as capital itself, and extensively discussed by Marx, is intended to demonstrate that money in its role as the universal medium of exchange must not be confused with money as capital, whose unique goal is represented by the accumulation process. It is a bit like saying: "If I use money to buy the goods and commodities I need, that's one thing; if I use that same money for productive investment, it's another." In the first case, "I use it technically, as a simple means of exchange, typical of every modern society and without contravening the economic prerequisites of socialism." In the second case, "I would be using it capitalistically, but in the "socialist" countries it is prohibited for private citizens (save for a few exceptions) to employ money in the form of capital."

Well said. If only to show that they understand the basic Marxist lesson that money is defined, not by its nominal form, but by the economic role it is called upon to carry out: as the universal medium of exchange, as a reservoir of value and as capital. Only Marx went further in his analysis and distinguished between a lower, or commercial, capitalist society — where the prevalent function of money was the technical one of commodity exchange — and a higher, or industrial capitalism where the fundamental role of money is as capital. This is because Marx foresaw communist society as one without money, either in its first or second function. Once capital is destroyed and with it its role as exploiter of labour power there is no longer any need to fall back on money as the measure of individuals’ needs. It is individual needs themselves which will preside over the distribution of goods and social services. Since in capitalist society the distribution of social wealth is organised on the basis of income, which in turn represents the different relationship the world of labour has with capital, it follows that labour power's income (wages) depends on the need for capital accumulation and not on its own needs. In this case, when the proletariat uses money to buy goods or to benefit from social services it is using it as a means of exchange. But this is always in the context of capital and its law of value. In a communist society the opposite is the case. Given that social needs determine the rhythm of social development and the distribution of wealth, or rather the consumption of goods and services, these are the pivot of the accumulation process (which is obviously a social and not a capitalist process). In this sense money as the representative of income has no reason to exist. The point is that in every capitalist society — both private and in the statified version — money as the universal medium of exchange doesn't exist autonomously but is indissolubly linked to money capital.

If wages exist then capital exists. The one is the condition for and the measure of the other. The more wages are suppressed, the more the working class is prevented from satisfying its needs, the more, that is, the role of money as the means of exchange is suppressed while all the other economic components of capital remain firmly in place, the higher the return for capital.

Whether one likes it or not, fixing the two functions of money into technically diverse and non-communicating roles is a gross blunder, only surpassed by those who can conceive of money functioning purely as a means of exchange inside a commodity-producing society without the existence of money capital. Moreover, in Russia things cannot even be posed in these terms. If it is true that the subjects of the empire are only allowed to make use of money as a means of exchange, it is otherwise for the state enterprise whose task it is to manage money capital: which, far from not existing, settles every kind of payment and distinguishes, like a joint-stock company, between payments for the bureaucrats and those of the workers.

Gosbank is not a wicked invention by critics of "socialism". The existence and operation of capital is evident in every sector of the economy. The only difference is that it isn't in the hands of individual entrepreneurs but is concentrated in the hands of the state, which in turn acts like a private entrepreneur as far as accumulation is concerned.

All enterprises (until the Gorbachev reforms) are in the hands of the state and are financed by it in the form of loans (capital). With these they buy raw materials and production goods, again from the state, pay wages and salaries, produce commodities at a price imposed by the state and return the capital to the state with so much interest. Thus the state takes part in the accumulation of capital without it ever leaving its sphere of jurisdiction. To it, therefore, goes the honour of administering money capital, to the workers the honour of utilising money as the means of exchange.

Only by going back to the same old lie that state capitalism is socialism can it be maintained that in the "socialist" countries money capital does not exist and that the only way the nasty stuff survives is in the very banal role of as the technical means for commodity exchange. This deception equally fraudulently denies the existence of the other elements of capitalism. Even though it is under the omnipresent control of the state, production is not geared towards the satisfaction of social needs, but has as its first priority the satisfaction of the voracious needs of capital. It is not simply goods which are produced but goods in the form of commodities. These are sold at a price which depends on the portion of capital invested, not the consumption needs of the workers. Since both capital proper and its aspect in the form of wages act dialectically inside the whole social organisation, all the typical economic characteristics of capitalism exist, even though they are coordinated by a single superior body, the state entrepreneur acting as the "collective capitalist". But at the end of the day it is history, that chronicle of ugly events, which destroys the flimsy basis of false ideologies. The devastating economic crisis which has burst out in post-Stalinist Russia and which threatens to split up the empire is just the manifestation of the economic crisis from which state capitalism, like that in the West, can no longer escape.

Hundreds of political commentators are spouting from all sides on the political significance of perestroika. Either it is presented as a process of socialist reform, cautiously opening up the market but still firmly anchored in the defence of October, or it is portrayed as the clear defeat of an idealistic political venture which is being forced to fall into line with reality and is now discarding the trappings of an impossible egalitarian society in favour of bourgeois pragmatism.

But we can dismiss these stupidities. The real question which must be answered and which sweeps away the analytical errors of both sides, is, "How has an economic crisis of such vast proportions come about?" and "What are the mechanisms which created it?" And there can be only one reply. That is - the crisis of capitalism; the crisis of state capitalism. This has appeared even without the traditional methods of capital accumulation.

The Russian economy, like every capitalist economy, is suffering the combined effects of low productivity and a high organic composition of capital. With a falling rate of profit, slowdown in productive investments, inflation and unemployment the picture is complete. Just as state capitalism managed to disguise the contradictory development of capital for almost an entire course of the accumulation cycle, so today that same state capitalism magnifies the contradictions which are reaching maturation point. Any other way of analysing events in Russia is destined to fail.

Only by using Marxist economic concepts is it possible to explain today's crisis in these societies, as well as yesterday's defeat of the October revolution. It is no coincidence that bourgeois political 'scientists' themselves have to resort to the laws of determinism or the dialectic (albeit in a distorted form) in order to sharpen and deepen their own critique of the complex events which are unfolding in Russia. The lesson to be drawn from what is happening is that Marxism is not dead (even if we don't hear much about it) and that the validity of its methodology and political goal is destined to hold for capitalism's entire historical existence.


The economic profile of Western capitalism has been clear for at least fifteen years. Since that fateful year of 1973 which signalled the of a period of crisis, its convulsions — though attenuated and circuitous — have periodically broken out in various sectors of the financial and commercial markets. Despite this the leading lights of bourgeois "science" are not disheartened. For Western analysts the worst is over. The two recessions of 1973-76 and 1979-82, which occurred at the same time as the two oil shocks, have definitely been overcome. In the past seven years there has been an economic revival, headed by the USA and unmatched by any other period since the 2nd World War. Everything is growing: industrial output in the EEC countries, investments and international trade are both up (even if the latter hasn't yet reached pre-recession levels).

For the USA the relevant figures appear even better. From 1983 to the present the American economy has experienced an annual growth in industrial output of around 3%. The two deficits — in trade and in the domestic budget - have been substantially reduced, bringing them each down to $150 billion. Domestic demand has increased alongside investment.

So, is everything as before or even better than before? Having overcome the bitter years of the two recessions in the Seventies, is a new period of accumulation now opening up for Western capitalism as the figures now being bandied about appear to indicate? The answer is "No". International capitalism, especially American capitalism, hasn't ceased being a victim of its own contradictions, nor has it escaped the decline which was only recently being talked about. Certainly, the marked contrast with the crisis in the East makes things look better in the Western heartlands. The collapse of the Eastern empire has occurred well after the outbreak of crisis in the West and just at the point when "private" capitalism seems to have regained its health.

Yet there is no question of the crisis being over, or that we are witnessing the start of a new period of development of unknown speed and intensity. The real question is how far the international bourgeoisie can control and decentralise the contradictions involved in the process of accumulation of world capital. So far they have succeeded in saving capitalism's financial and commercial strongholds, though this has been at the expense of the weaker sectors which are now more vulnerable to competition and whose economies have been drained to disastrous levels. Even a superficial glance at this other aspect of the international situation reveals how four-fifths of the world is reduced to mere survival, if not outright hunger and misery, on account of the handful of economies which dominate the world market.

This poses another problem. Basically the question is not just whether capitalism has succeeded in containing its own contradictions, but "How has it managed to regain some of its strength and achieve a kind of "revival" (albeit a temporary one)?"

The problem itself is not new. Nor has capitalism found new mechanisms to help it survive. This is despite the fact that the temporary control capital acquired over the Seventies crisis has highlighted a more sophisticated capacity for intervention by financial and other general economic means. Such methods were little used in the Fifties and Sixties, not to mention the period before the 2nd World War. Today, though, tendencies such as domination by finance capital, parasitism, internationalisation of capital - which have always been part of Marxism's investigations and analyses of capitalism's changing productive relations — have become fully operational. When Lenin wrote "Imperialism, the Highest Stage of Capitalism" in 1916 he anticipated present—day capitalism very well. The parasitic role of finance capital, the interdependence of investment and productive activity, the international nature of capital accumulation; sixty years after Lenin's original elaboration we are wing the full development of all these features. Not that they didn't exist then: only that it has required two world wars, crises and the present accumulation cycle for what was embryonic at the beginning of the century to reach maturity in the Seventies and Eighties.

Put simply, this shows that, in the absence of great social convulsions and direct attacks by the proletariat, it has been easier for capitalism to adjust and refine its techniques for controlling its own contradictions: adjusting the former at the cost of magnifying the latter. It must be understood that 'to control‘ does not mean either 'to resolve‘ or 'to reduce‘ the antithetical and contradictory aspects of the capitalist relations of production. All too often in recent years the apparent versatility and capacity of modern capitalism to play hide and seek with the damage caused by the economic cycle has led sections of the "left-wing" intelligentsia to argue that capitalism is an indestructible economic form. As such, the argument goes, it can only be changed by reforms to create greater equality of income distribution by allocating areas of investment and controlling excess greed for profit. In any event, for them its fundamental economic being is not open to question.

Managing is a most necessary art which has always accompanied the life of capitalism. This art has become ever more refined as it has developed dialectically with the growth of capitalism's contradictions. If this were not the case, if the art of management were to decline or should one of the myriad delicate parts become jammed, putting the whole possibility of capital accumulation at risk, then the solution would be the violent destruction of capital values; that is to say, war.

Capitalism knows no other way. Just as it realises the need to refine its military weapons and make than more sophisticated, so it also realises the necessity to provide itself with the means to "administer" its peaceful existence.

An important historical example of "crisis management" can be found in the years immediately following the ‘Great Depression‘. American capitalism, like that in Europe, was literally caught by surprise by the violence and depth of the crisis and was brought to its knees. The rigidity of the economic system, distinguished by the tight links between financial and industrial capital, by production mainly oriented towards internal domestic markets and yet relatively too much internationalisation of the commercial market, ensured that when the centrifugal effects of the crisis did not find adequate escape routes they eventually burst upon the very market which had engendered them. The new characteristic which followed after all this was the development of the theory and practice of state intervention in the economy. The gravity of the 1929-33 crisis was reflected in the "revolutionary" Keynesian theory of the necessity for state intervention in the operation of the market economy. Before the Keynesian revolution bourgeois political economy faithfully maintained that only the independent strength of the market was capable of averting the danger of economic crisis. However, should a crisis ever occur it was unnecessary to do anything but wait for the market itself to automatically re-establish a new equilibrium and discard the causes of the crisis like an organism rejecting a foreign body. From a totally bourgeois perspective, Keynesian theory argued that crises are an integral part of the capitalist economic cycle and that they should be managed by means of intervention from a body outside of the productive sphere. This outside body was to be the state in the shape of regulator of aggregate demand. Henceforward the so-called anti-cyclical policies implemented by governments have involved a sort of invasion of all the institutions and vital nerve centres of the economic machine.

This new economic phenomenon has certainly not saved capitalism from the inevitable convulsions of the market; it certainly hasn't banished the spectre of war as the ultimate solution to the irreconcilability of its socio-economic contradictions; but equally certainly, it has contributed to a widespread and more efficient administration of all aspects of the economy, including the market for labour power. Bourgeois science arrogantly claimed to have found the panacea for all ills, both present and future; to have resolved once and for all the cyclical nature of its economic existence. This only depended on understanding the correct dose of state intervention: sometimes as aggregate demand, sometimes with the state acting as entrepreneur, sometimes with the state as welfare insurer or as the administrator of various social services on the basis of deficit financing. At times the medicine included a mixture of all these in set proportions.

In its turn the 1970's crisis posed another series of problems. First of all it showed that the established techniques of crisis management hadn't resolved the basic contradictions in the capitalist productive system. Though they had worked for a time and softened the effects of the crisis, the crisis itself refused to go away. In short, evolution of capitalism brought with it manifestations of crisis which made the old techniques for managing it obsolete. Yet the development of the crisis itself brought with it potential means for developing new techniques of "crisis management", more in tune with the needs of capital accumulation. And that is what happened at the beginning of the Seventies.

For world capitalism the accumulation cycle which opened up with post-war reconstruction had now entered its downward phase. This meant the beginning of the crisis: a crisis which brought with it sharpening competition and conflict between productive areas and the absolute internationalisation of the financial market. The partial autonomy of the worlds of finance and productive capital became more pronounced. Meanwhile, the crisis has provoked refinements in credit mechanisms and the management of the world's most important stock markets and has exacerbated financial speculation to the point that this is now the international fulcrum for the parasitic division of the world's surplus value.

Today a rise or fall in the price of any strategic raw material (e.g. something required by almost every productive operation) leads to the growth or decline of entire economic areas. A single point rise or fall in the interest rate of a central bank in one of the world's major financial centres determines the shifting of trillions of dollars from one continent to another, with incalculable repercussions for the weakest economies and those who are not in a position to influence the process as a whole.

Every physical and economic restriction has been broken down by the internationalisation of the commercial market. Big dealers buy and sell whole cargoes in a matter of seconds while they are still being transported from one country to another. The most important stock markets are equipped with computers which can check and update the prices of raw materials coming onto the international market. The same thing goes for the currency and money markets. Internationalisation and the subsequent concentration of production, commerce and financial activity has reached the point where a single deal made in one part of the market can end up having repercussions for the rest of the market. The effect is that all these economic and financial tendencies are expanded and accelerated. This is why current attempts to manage the crisis lead to new ways of controlling the market and a further centralisation of capital.


Yet again it is the United States which has been in the vanguard of the process of "crisis management". The reasons for this are threefold. In the first place, the United States has been the leading power in the West's economy for seventy years. All the conditions for the maturation of capitalist contradictions were to be found in the US economic and financial set-up. Production, control over the market and the parasitic expansion of finance capital had all been able to develop here more than anywhere else. In the second place, the end-of-cycle crisis had appeared in the USA as early as 1971, posing all the typical problems associated with its administration some years ahead of the rest of the Western capitalist market. The third and most obvious point is that where the crisis of modern capitalism begins and is at its most virulent the measures for dealing with it will most fully develop.

The activities of the American government during the so-called oil crisis of 1973 are a prime example. Given that the impetus for any substantial rise in the price of oil came from OPEC's relationship with the rest of the international commercial market, the USA had every interest in seeing such an increase. They could thus to penalise all the other Western economies which depend almost exclusively on OPEC oil by raising their costs of production. At the courts of King Faisal of Saudi Arabia and the Shah of Iran US official and unofficial diplomatic forces (Kissinger and Colby) convinced the two major oil-producing countries to be more bold about implementing measures which would trigger higher prices. In exchange they were promised military and civil technology on top of the financial advantages which would accrue from the price increases themselves.

Given the importance of oil and the insatiable demand for it, the consequences of the manoeuvre were quickly felt. It weighed heavily on the OECD economies which with about 8% inflation were already experiencing an incipient internal crisis. The American objective had succeeded. They had regained the competitive edge for their own productive apparatus which had hitherto scarcely been able to compete (in traditional areas of production such as steel, metallurgy and chemicals this apparatus was quasi-obsolete). In the second half of the Seventies Europe and Japan found themselves having to cope with serious internal economic problems, including two-digit inflation, higher than at any time since the 2nd World War. Thus, a simple market manoeuvre had enabled the centre of Western imperialism to breathe again but had made life more difficult for its economic partners who were obliged to pay for the effects of the US crisis. Another consequence was that the peripheral countries were also forced to submit to the effects of this manoeuvre, with the added disadvantage that they were already starting from an overwhelmingly handicapped economic position.

But the best example of present-day capital's handling of the crisis is in the financial sphere. The enormous centralisation of finance capital, the huge power of the central banks and the centres of international speculation have now reached the point that at every moment they influence all aspects of the world economy. The big financial houses which began at the turn of the century and which were still dominant in the Fifties and Sixties pale into insignificance against contemporary firms. Today the central banks themselves operate incomparably more effectively than in the past. The close ties between them and the State have given given them the power to influence the mass of money, to intervene during fluctuations in currency reserves, to agree in fixing the price of money and consequently to influence — via inflationary or deflationary policies — the economic cycle itself. Manoeuvres with interest rates, deals on the open market (state purchases and/or sales by means of public shares, treasury bonds, stocks) and modifications to the official reserve rates of credit institutions are the sort of instruments now resorted to daily in order to regulate monetary flows which in their turn affect production.

Staying with the American example, the measures taken by the Federal Bank from the end of 1979 to the beginning of 1980 (the start of the Reagan administration) are significant. These were proposed in order to combat a worsening situation in the domestic economy. This was characterised not only by a slowdown in production but also by a crisis of capital accumulation as a result of the difficulty in compensating for the fall in the rate of profit with an adequate rate of productivity.

The measures involved a substantial increase in the central bank's rate of interest which in turn obliged America's major credit institutes to increase their rates proportionally. (In 1981 alone borrowing rates jumped from 7% to 22%.) This created the best conditions for the USA to set itself up as the pole of attraction for worldwide speculative activity and for the recycling of petro-dollars on the international finance market. At the same time, this manoeuvre was assisted by complementary factors such as the relatively low rate of domestic inflation, the existence of an already tried and tested practice in the financial world and the use of outright imperialist instruments such as the multinationals and a semi-monopoly in high technology. The declared objective was to attract capital to the American market where it was becoming increasingly difficult to invest profitably in the traditional economic manner, even at the cost of subsequently penalising the US productive apparatus with a high price money policy. In fact, between 1980-85 there was a sharp increase in banking profits accompanied by a worsening in the competitive position of American industry. During this period the trade deficit also peaked to reach an historic high.

But even here, despite the contradictions and dangers involved, America succeeded in keeping afloat by making use of the mass of finance capital which couldn't be produced in sufficient quantity inside its own productive apparatus. Moreover, to the extent that the high interest rate policy has given renewed life to the major centres of Western imperialism, it has withdrawn it from the periphery of the system, from the so-called under-developed countries which were hit like a bolt from the blue by the sudden increase in debt service payments. These countries now find themselves in the very disturbing situation of buying manufactured goods and technology from the OECD countries and having to pay four times more as a result of the combined effects of the increase in the amount of their debt and rise in interest rates.

As if this wasn't enough, the Seventies‘ crisis (which was prolonged into the early years of the Eighties) visibly diminished productive investments and the demand for raw materials, traditionally produced in the periphery, contracted. When the blackmail of further loans from the industrialised countries, the USA at their head, is taken into account it is clear that the high interest rate policy has taken only a few years to create not only the conditions for the debt explosion in the periphery ($1,400 billion to date) but also their virtual bankruptcy. In effect, a piece of financial manipulation which has allowed the major imperialist centres to resist the agonies of the international market has thrown the already tottering economies of three-fifths of the globe on their knees.

You might think that this is a just normal imperialism. Certainly, ever since capitalism made itself the planet's dominant productive form, its outright arrogance and oppression are burdens humanity has had to bear. Above all, in periods of crisis, the big fish eat the little fish, the stronger capitals crush the weak with an increasing intensity only matched by the growing difficulty of finding profitable outlets for capital. But what is happening today on the international capitalist market is unparalleled in terms of the sophistication of the means adopted, the speed of their execution and the repercussive nature of their effects.

Moreover, the financial administration of the crisis has accelerated another tendency of American imperialism: the decentralisation of production. Here bourgeois sociological experts, who are particularly likely to be influenced by any kind of modernism, have been charged with the task of defining this phenomenon in highly positive terns. As if the decentralisation of production was somehow leading back to a positive development of modern society, to a further progressive development of capitalism.

In other words, when these official spokesmen of the bourgeoisie speak of the "technological revolution", and "post-industrial society" they imagine a capitalism which has resolved all the technical and technological problems associated with the production of machine tools and food and consumption goods, where the only thing left to develop is the service and information sector. As if to say that, once in possession of finance capital and technology production can be geographically established — either in whole or in part — on the periphery of the system. Meanwhile the old centres of industrial power transform themselves into new kinds of social agglomerations based on hi-tech production and an advanced tertiary sector with all the social and economic changes this implies .

Over the last decade a growing section of the left has become attracted to this notion: Theories such as the disappearance of the proletariat, resulting from the gradual extinction of industrial production and a corresponding rise in the tertiary sector; or, the natural corollary of this, theories that deny the political centrality of the proletariat in the class struggle; all show how the dominant bourgeois ideology develops in line with the changing requirements and metamorphoses of the ruling class. In a historical period where 5% of producers dominate 80% of the market, where financial centralisation has reached limits unthinkable only a short time ago, and where financial parasitism and speculation seem to be the most important expression of modem capitalist society, it is clear to Marxists that the most advanced and intelligent sector of the international parasites will produce a neo-ideology capable of reflecting the times and perpetuating justification of their own position.

In fact, behind the theory of a post-industrial society there lies the subliminal message that modern capitalism is really sweeping away all the economic and social problems which afflicted it in the years of its youth. Now we have a very different and technologically superior system to the old industrial society with its fundamentally troublesome characteristics. Marx, 'Capital', the irreconcilability of social contradictions, the proletariat, its exploitation in the production process and the class struggle itself are the remnants of a recent past. Today, in post-industrial society, the most consistent profits are obtained from the tertiary and not the productive sector. Therefore, capital accumulation is the fruit of technology and not of exploitation of the labour force which, moreover, is progressively This is what ruling class ideology is pedalling. Of course it is true that this has been the tendency for some time in some sectors of international capitalism. A relative decline of the industrial proletariat in the technologically advanced areas is statistically verifiable, as is a proportional increase in profits from activities not strictly linked to production. But it is equally true that decentralisation of production, when it involves the periphery of the capitalist market, also creates a neo-proletarianisation of these areas, thus containing, if not absolutely cancelling out, the opposite tendency of deproletarianisation at the centre. It is one thing to establish that modern technological production, based on an enormous increase in exploitation of the labour force, either expels unproductive elements from the restructured economies or else employs proportionally less manpower in the new industrial settlements of the periphery. It is another to blabber on about the socio-economic miracle of the post-industrial society and the supposed extinction of the international working class. To say that profits are the fruits of the application of technology to the tertiary sector is an insult to the Marxist labour theory of value, and is also somewhat laughable. If anything, the contrary is the case. The tendency of contemporary capitalism is both towards increased centralisation and control by finance capital and at the same time towards further investment abroad, where the best opportunities for capital accumulation exist. It is not important for capital where the surplus value is extorted. What is fundamental is the intensity and speed of its realisation.

But basically the question should be posed in different terns. We are not dealing here with a period of positive evolution by certain advanced sectors of capital, but with its opposite. Both de-industrialisation and decentralisation of production are responses to the downward phase of global capital's third accumulation cycle. The shifting of investment from areas with a high organic composition of capital to the periphery demonstrates how, despite the productivity increases, it becomes increasingly difficult for capital to compensate for the fall in the rate of profit. In Latin-America, Asia or Africa, however, capital is able to reduce its costs of production: Here it is closer to raw materials and, above all, it has at its disposal a labour force at about a seventh of the cost at home.

Even this is not new. In the Fifties and Sixties capital moved outside its traditional areas of production to places with higher profit margins. But while yesterday the export of finance capital was limited to investments in places where a combination of cheap raw materials and a labour force to assemble parts produced elsewhere could be exploited, or even where artisan skills developed, today capital is forced to export more than capital but also sophisticated technology, entire production units and capital equipment. The difference between a high organic composition of capital with a relatively high cost labour force and the same organic composition exported to the periphery in the form of industrial plant containing high technology — but with an infinitely cheaper labour force — is self-evident. This is what has happened over the last decade in newly industrialised countries like Taiwan, Singapore, Hong Kong and South Korea, and what is happening today in Thailand, Burma, India and China.

The consequences of the progressive shift of the productive axes from the centre to the periphery will have to be dealt with on another occasion. Suffice it to say that the development of new technology and tertiarisation, technological unemployment in the old centres of production (Europe, USA, Japan) and neo-proletarianisation in the periphery, the explosion of financial speculation (both private and state), are all part of the downward phase of the accumulation cycle.

The paradoxical dialectic of capitalism means that the more it develops the more the contradictions mature. The more refined the financial and commercial weapons for managing the contradictions become, the more developed these contradictions on a planetary scale. Reaganomics is an obvious example. From 1980-88 the starting point for American policy was survival via financial speculation, foreign debt, the export of capital and productive investment in the periphery. The result was that the developing countries were buried under a mountain of debt which contributed to, if not directly determined, the outbreak of uncontrollable social tensions.

It is no accident that the food riots which have erupted in various Latin American countries (e.g. Venezuela), in the Middle East (Jordan) or in Asia (Pakistan, Sri Lanka) have been in countries which are deeply indebted to the IMF or American credit institutes. Indebtedness, insolvency, the undermining of industrial development programmes, hunger and social misery, are the price the periphery of capitalism is paying for the attempt by the advanced sections of the imperialist line-up (headed by the USA) to manage the international crisis.


We have seen how Reaganomics developed as a response to the crisis, as part of the attempt to control its effects. New theories, and to a certain extent a new practice, about the relationship between the state and the economy, between the market and the leading institutions of the administration, have flourished. Deregulation, for example, is essentially about giving back complete autonomy to the laws of the market and thus reducing outside intervention to a minimum. The theory is that the state is thereby absolved from a suffocating presence within the productive and financial apparatus.

This is a blow at Keynesianism, but above all at the left, which reproaches capitalism in general for running unnecessarily from one crisis to another. Their solution is the indiscriminate concentration of the means of production and financial centralisation, accompanied by an increased intervention of state bodies in the economy. However, Reaganism, immediately followed by Thatcherism in Britain, tried to present itself as an experiment which would miraculously get the economy out of recession simply by relying on the free market. Once the state withdrew and the laws of supply and demand were allowed universal freedom of operation the problem would solve itself.

Apart from the implementation of new policies, one of the objectives of deregulation was ideological — to demonstrate that capitalism can go down more than one road. Despite its ups and downs, its contradictions are manageable and this doesn't necessarily mean going the same way as before. In other words, if over the last forty years a fence has been built up around the domestic and international market, leading to a phenomenal process of concentration, and if the capitalist state itself has ended up investing in a good part of economic activity, today it is possible to give autonomy back to the market by privatising firms, by supporting the primacy of the private over the public sector and by posing the "healthy" laws of profit and private initiative against management passivity and parasitic bureaucracy. If such a reversal were really possible then it might be true that capitalism could overcome the contradictions of its very economic being.

But reality is not quite like this. According to statistics put out by government bodies the world economy still shows a constant increase in the concentration of production. In 1980 650 large firms dominated the international commercial market. By 1987 this number had been reduced to 200, with proceeds equalling $3,414 billion and representing 30% of total world production. More than a third of the above national and transnational firms are "made in the USA". In the USA there has also been a dramatic centralisation of finance capital, in both banking and the stock market. A handful of banks, among them Citicorp, America Bank Corporations, Chase Manhattan and JP Morgan, dominate the credit markets. It is the same for stocks and shares, where amongst the twenty major dealers five of them have proceeds equal to 40% of all the others put together. Merril Lynch, Shearson, Lehman Brothers, Salomon Brothers, Hutton Financial Services and Dean Witter Financial Services determine the good or bad tines on the US markets. the same process of concentration and centralisation can be read into the figures showing the distribution of wealth. In 1949 1.1% of the population held 20% of total wealth, in 1962 the latter figure had become 27%, in 1983 34.3% and by 1988 the concentration of wealth accruing to the same 1% of the population had leaped to 38%.

The statistics also confirm increased government intervention in the economy. In the ten years from 1920 to 1930 there were 31 government acts relating to the economy. In the following decade which included the Great Depression, the figure had jumped to 48. Between 1960-70 there were 73 government economic decrees and 125 in the following decade. At present, after eight years of deregulation and only one year short of the decade, there have been 189 decrees whose regulatory content applies to every sector of the economy from production to finance, from the distribution of goods to the stock and money markets.

These are just a few facts but they are sufficient to show how the tendency towards more and more concentration is ingrained in the contradictory nature of capitalism's economic mechanism and that this has not lessened, even in a period of deregulation. The organisational form of a monopolistic market, the absolute predominance of financial cartels, the requirement of a centralised management of production and distribution on a par with intrusiveness of the state in the vital sectors of the domestic and international market, are the necessary consequences of the impossibility of capitalism to regulate itself.

Thus, although to some extent we are talking about the collapse of the Keynesian myth, if we remain in the precarious world of bourgeois political economy's conceptions we'll never get to the bottom of the problem. There are more convincing explanations for the rise of privatisation and de-statification on both sides of the Atlantic.

In the first place the false notion that the state sector is subject to different economic laws than those operating in the private sector has been abandoned. It is now recognised that the laws of return on capital are identical for the state and private sectors and it is no accident that once the crisis began to make itself felt the process of privatisation began with the least rewarding sectors of the economy. In other words, the state has behaved just like every other capitalist in a crisis.

Moreover, the policy of cutting out "dead wood" has made relatively little impact on the totality of state interventions. Despite the theory of disengagement, the much-acclaimed reversal of the tendency hasn't produced a great deal in global terms. In many countries, for example, the key sectors have remained untouched by the "danger" of privatisation. Italy is a case in point, where amongst all the cuts, transfers and privatisations, 43% of GNP is still in the hands of IRI and ENI (the state investment and holding organisations) and their financiers.

In addition there are also financial and political reasons for the state's delicate disengagement manoeuvres. In the last few years almost all governments in the larger industrialised states have had to deal with the problems of restructuring and a budget deficit. In both cases, though for different reasons, privatisation has been seen as one of the most useful weapons to use in times of particular economic difficulty and social tension. The transfer of some state activities to the private sector has allowed capital to be drawn in from elsewhere. This was all the more necessary the deeper the abyss of public debt became. In itself such measures are inadequate but when the worst comes to the worst capital has no alternative! The same could be said about restructuring the productive apparatus and the social consequences involved.

Even the most stupid bourgeois policy has had to give some protection from competition to key sectors of production during reorganisation and has had to base itself on the acquisition of advanced technology, with a consequent reduction of the labour force. Not only that, it became clear that "technological" unemployment as the result of industrial restructuring would have to hit both public and private sectors.

Where privatisation took place before restructuring there was the added advantage that the state would not have to take political responsibility for the lay-offs. At the same time it would save some of the welfare costs involved and its reputation in the process. The Italian example of rail privatisation is valid here. The 'Schimberni (Head of Italian Railways) Project', in typical private-managerial style, anticipated, and in part has already carried out, fare increases and the reorganisation of the management of the whole railway network, at the centre of which was the reduction of the workforce by 50,000-70,000.

In fact the railways never left state control. Privatisation has been a kind of pantomime, successful only in hiding who is really running the railways. Today state intervention is not under discussion, only the nature of that intervention. Those who believe deregulation is a symptom of a change in the direction of capitalism, or worse still, that a dialectical analysis is unable to coherently explain its causes, have understood absolutely nothing.

In the era of the domination of finance capital where the productive world itself has as its precondition credit, the cost of money, its mass and volume in circulation, the state has no alternative but to reflect the needs of the historic period and take this domination upon itself. The recent years of crisis have been years of heightening competition, of a savage process of restructuring and/or productive decentralisation, but above all of the most ferocious struggle for the domination of the financial market.

The role of the modern state is prevalently financial. This doesn't mean that it is in the process of completely losing its role as external stimulator of the market or as a real capitalist entrepreneur. Today, however, it is the financial role that the state is obliged to play which most closely reflects the evolution of capital. It is through measures such as manipulation of interest rates that the state expands or restricts credit and thereby monetary liquidity by influencing the cost of money. It is capable of taking on itself the burden of credit, at the same time as implementing deflationary domestic policies. More and more it is the state which assumes responsibility for the social amortisation of the crisis (via redundancy schemes, pension funds, etc.) and which thus supports the private productive apparatus. When the bourgeoisie talks about financial control of the economy they are really talking about the state's attempts to control finance capital, both on the domestic and international markets, in order to maintain competivity and financial liquidity.

It is simply laughable, therefore, to talk of the state disengaging itself from the economy. In the face of the state's withdrawal, albeit temporary and limited, from the traditional productive sectors and from certain aspects of social welfare (public spending cuts in schooling, pensions, health, etc. as always hit the less well-off workers most.) its invasion of the financial sector has increased enormously. The basis of the recent revival in the major industrialised countries has been, in fact, the financial intervention of the state.

In the last decade the state's attempts to manage the crisis has resulted in the major problem of the budget deficit. Everything has a price — including the mechanisms capital develops for absorbing the shocks created by its own contradictions. Whilst on the labour front it is the working class everywhere who pays this price through unemployment, intensified exploitation, hunger, poverty and social degradation; on the financial front it is the state which takes upon itself the greatest burden, amassing intractable debts in order to 'assure' economic revival. There is hardly an industrialised country which doesn't have a budget deficit less than 50% of GDP.

If we ignore Italy and Germany who, for different reasons, are outside 'normal' limits of state indebtedness, most countries are in the grip of an economic problem which is difficult to resolve. Either the state stands above the fray, leaving the entire process of capital accumulation to market mechanisms and waits for an automatic recovery from the lowest depths of recession — so that the diminished capacity of capital for productive investment eventually jeopardises the whole economic system — or it must decide on intervention using public finances as the stop-gap for the deficiencies of the productive apparatus. In effect the state is making a sort of social security payment to crisis-ridden capital in the form of the budget deficit. This kind of financial control puts the state first in line to plug the most obvious leaks but it cannot solve the contradictions of the economic system. The crisis can be prolonged and its consequences pushed onto the weakest sections of the market but in the end the same problems return and continue to develop towards a final explosion.

The serious problem worrying economists is that there is no such thing in the Western sector of capitalism as a state which is not forced to continually increase its debts in order to be able to honour the interest payments already acquired. The service costs of the debt end up increasing the mass of debt, driving the state to adopt further financial measures. This economic retribution is destroying the heart of the centre of world capitalism with the same ‘cancer’ which has annihilated the periphery. To be sure, the reasons for their respective debts are different, but they have in common the same matrix of financial management and circularity of the crisis. This is why the much-publicised economic revival of the last six years represents simply a moment in the management of the crisis rather than its surmounting.

To take another example from the US economy, both because it has been the lynchpin of these financial manoeuvres and because its revival was supposed to extend to the whole Western market. The same analysts who for years called on the American "locomotive" to start again and draw the rest of the world out of the tunnel of the crisis, in the second half of the Eighties have been shouting about a miracle. Glancing at the figures, it would seem that the Reagan administration has indeed resolved a number of the problems which afflicted the US economy in the Seventies.

While it is true that the two deficits — that of the Federal budget and in trade — have been lowered and that the dizzy yet guided fall in the dollar on the exchange markets has led to a small increase in productivity, it is also true that the ceiling of the two deficits remains frighteningly high, that the domestic debt has leapt to $2,600 billions, the foreign to $532.5 billions, of which 350 billions represents the amount owed by US business to foreign creditors. Only last year Paul Volcker, commenting on the "artificially stimulated revival", underlined the necessity of finding $100 billion a year on the international financial markets as a result of the internal scarcity of capital.

Meanwhile, on the trade front the last act of the Reagan administration, the Trade Act, imposed a harsh protectionist policy in order to try to put a brake on the invasion of foreign goods. It's not for nothing that the same economists who sang the praises of the remarkable figures showing economic revival are now obliged to calculate that for the US and Western economies in general, the future choice is only between a "soft landing" or a "depression".

We are not facing a real economic revival. There is no basis for a long-term revival of the accumulation cycle. In the present phase of management of the crisis based on indebtedness and financial speculation, the certain future is that of a new recession.




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Submitted by eattherich on November 18, 2019

Great find and good read. Thanks