Perspectives for the CWO as discussed in its AGM, November 2019

Overview

Capitalism, the most dynamic mode of production in history, has created a world economy and the material means (productive forces) to support the present world population of 7.7bn. Everyone could be living comfortably without hunger or undue toil. In short, the material basis already exists for a peaceful, prosperous, world community based on production to directly meet the needs of everyone rather than the generation of profit for a tiny few.

Yet capitalism does not lead naturally to its own disappearance or overthrow even if it has an inbuilt tendency to crisis/temporary paralysis. The accumulation of capital has always been accompanied by periodic crises involving bankruptcies, closures and takeovers by firms with technically more advanced equipment which bring ‘higher productivity’, or higher output per employee. Cycles of boom and bust are intrinsic to the capitalist mode of production. They are not the consequence of ‘mis-management’ and, although they may be prolonged by state intervention, this does not solve the problem, because their root cause is to be found in the ineluctable tendency of the rate of profit on industrial/manufacturing capital investment to fall. This in turn is the result of the rising organic composition of capital, or the increasing ratio of dead (machinery, equipment) to living labour (wage workers whose unpaid labour is the source of all new value) as capital introduces more advanced technology and employs fewer workers. At a certain point in each cycle it is no longer profitable for industrial capital to invest in another round of accumulation. Traditionally, after a period of crisis which typically first appeared in the financial sphere but then led to industrial bankruptcies and takeovers, the conditions for a new round of capital accumulation were restored on the basis of more centralised capital until eventually capitalism had expanded to dominate the globe.

But these cyclical crises, which demand the devaluation of capital in order to resume a new cycle of accumulation, long ago ceased to serve a progressive function, i.e. the development of the material basis for a thriving world community without exploitation and wars. On the contrary, ever since 1914, when the First World War confirmed capitalism’s global reach, the boom-bust cycles of the capitalist mode of production which can only be resolved by the massive devaluation of capital have necessarily led to imperialist war and the deaths of millions.

A Crisis with a History

Today we are in the throes of capitalism’s third global crisis of accumulation since the onset of the imperialist phase of its development at the end of the ninetenth century. This crisis has been prolonged by the combined efforts of the leading capitalist states to avoid an international slump which would propel the world towards a third world war. In the early 1970s the post-war boom gave way to a new profitability crisis. Struggling capitalist firms either went bust, or tried to counter falling profit rates by laying off workers and demanding more work for lower wages from those left, running clapped-out machinery and not replacing it etc. etc.: in short, the classical capitalist response to turn to ‘absolute exploitation’. Today wage workers’ share of GDP is much lower than in the 1970s (when it was 64% in UK). For US capitalism the post-war system of fixed exchange rates with the dollar linked to the price of gold established at Bretton Woods started to work against it. (Printing dollars to finance the Vietnam War encouraged others to buy up gold and the US was unable to devalue so long as there was a fixed link.) When Nixon devalued the dollar in August 1971 his Treasury Secretary, John Connally, famously said: “The dollar is our currency but your problem.”

This marked the beginning of the end for the post-war settlement, including the two-bloc imperialist line-up and increasingly, the international institutions associated with it. On the economic front the post-war period of ‘sustained economic growth’ and near full employment gave way to rising unemployment and inflation and around two decades of working class defensive struggles, which in the UK were largely conducted sector by sector. The Keynesian precept of deficit financing and the go-to policy of the state bailing out insolvent industries, particularly maintaining the so-called ‘commanding heights’ of the economy, was gradually abandoned in the face of rising government debt.

However, in a crisis of profitability heavy manufacturing industry was an increasing drain on states. By 1976 the UK’s Labour government was obliged to borrow what at the time was the largest ever loan from the IMF. The famous quote from Prime Minister Jim Callaghan at that year’s Labour Party Conference – “We used to think you could spend your way out of recession and increase employment by boosting government spending, I tell you, in all candour, that that option no longer exists.” – heralded the beginning of a period of massive restructuring where capital was written off. It was a process taken up by the Thatcher government which frontally attacked workers and destroyed their livelihoods. Mass unemployment, which our rulers found also had the advantage of undermining class resistance, now hit the West as capital shifted to low wage economies in the 1980s.

The collapse of the USSR, and its satellites, further undermined the notion that every state had to ensure that it controlled the “commanding heights” of its domestic economy to maintain “national security”. The main aim now was to try to create conditions to maximise inward investment whilst at the same time seek more profitable financial returns in the new financialised economy. Speculating on the Chicago stock exchange in futures was now much more rewarding than actually investing in any company that might want to produce anything. That kind of investment now went to the capitalist periphery where wages were low as in China, S.E. Asia and Latin America. The mostly authoritarian regimes in these places set up “special economic zones” or maquiladoras to facilitate this.

Already, before capitalism’s biggest-ever financial crash in 2008, the economic profile of the once most-advanced Western states had altered dramatically as de-industrialisation and globalisation of production dismembered the traditional industrial working class. In 2008 the banking and wider financial bodies were saved and the appearance of capitalist ‘normality’ maintained only by the concerted injection of gargantuan amounts of fictitious capital by central banks (Quantitative Easing) which is still being used today to maintain the appearance of economic normality. But there is nothing normal about this global capitalism which is still turning to services and financial speculation to generate financial profits, for the most part without the need for any new value to be created. World Bank figures show that ‘services’ represent a higher proportion of GDP for the world economy as a whole. For the UK 77.4% of GDP was attributed to ‘services’ in 2018, while the ‘City’ now claims to represent 10% of UK’s economic output and employ 2.3m people – more than double the figures claimed by Gordon Brown before the financial crash.

As we noted elsewhere, in the UK today 2.7 million people, or 8% of the total workforce of around 32.54 million are employed in manufacturing, producing an estimated contribution to GVA (the new way of calculating GDP!) of 11%. This declining share of manufacturing in national ‘economic growth’ is the pattern all over the world. Yet the UK’s 10-11% still puts it in the top ten “leading countries” for manufacturing output. Here we should remind ourselves that it is only in the aftermath of the financial crash, when total manufacturing production dropped, that the post-war trend of a steady growth in manufacturing even as the labour force diminished (a sign of the increasing organic composition of capital) was reversed. It is an indication of the severity of capitalism’s global crisis of production that ‘manufacturing activity’ has not returned to its pre-crash level.

So, after almost half a century of responding to the effects of the profitability crisis, from Keynesianism through monetarism and ‘globalisation’ to financial speculation and eventually the ‘unconventional monetary policy’ of reviving almost the entire banking and financial system when the financial bubble finally burst in 2007/8, the underlying crisis of the falling rate of profit in the manufacturing and industrial spheres keeps on reasserting itself. And now capital has much less room for manoeuvre.

The world debt pile is now reckoned to be more than three times the value of global GDP. Most of that debt is not being used to finance new productive investment even if the opportunities for gains from financial speculation are declining. (Around a quarter of global debt issued by governments and companies is trading at negative yields.) On the other hand, many companies are not making use of ultra-low interest rates to reinvest in productive capital but simply borrowing to cover the interest due on money they’ve already borrowed. (10.5% of companies in the world’s thirteen most advanced economies are zombies, compared to 6% a decade ago.) At 3%, the IMF’s latest world growth forecasts are the lowest since 2009, just after the financial crash, leading the Financial Times and others to dub the situation one of “secular stagnation”. Within this tightening frame more ‘conventional’ responses to economic crisis are emerging: from trade wars and protectionism on the Right, to calls for an injection of state spending and some sort of New Deal on the Left of capital. But whilst the policies of the Left remain mere aspirations it is the agenda of the Right which dominates the real world of imperialist rivalry.

Imperialist Rivalry and War

In a financialised world the main game in town for each state is to divert revenue, from whatever source, and by whatever means, towards their own jurisdiction. As a result competition is increasing on all fronts – manufacturing and industrial, commercial, monetary, and strategic. In this context the tendency to war is not a warning, but the concrete reality of all international relations, and a state of affairs which involves all the main imperialist powers of the planet in various places around the world like Syria, Yemen, Libya, Ukraine or the Sahel.

The main battle lines are being drawn in the crossroads of Asia, in the Middle East and Central Asia. In Syria the massive presence of all the major culprits in this carnage continually shifts like a kaleidoscope. With their diverse, often conflicting interests, new alliances have been formed and old ones dissolved, in a series of episodes that have brought the ruin of an entire country with two million dead. 11 million have been displaced from their homes and over four million have become refugees outside Syria’s borders. Turkey, Russia, Iran and the Shiite axis line up on one side. The US, Israel and the Sunni axis on the other. Each has its own interests to defend, while, in the middle, the various nationalisms have become the tools of one imperialism and thus the target of attack for others, even though they are part of the same coalition. It does not matter whether the proletarians are Kurds or Arabs, Shiites or Sunnis. The important thing is that they are being dragged into the ideological mechanisms of this or that imperialism and that they act as cannon fodder for the sole benefit of the interests of the imperialism that has ideologically subjugated them. And, as the US demonstrated with its removal of air and ground cover for the YPG in Northern Syria, they can be cast aside as soon as their purpose has been served.

The major imperialist antagonists are already colliding in one of the world’s most important strategic zones. Given the number of powers involved, their areas of influence, their active engagement in the war, we can only conclude that we are already in the midst of a “bizarre” world war where, even China, which has little to no military presence in the area, is highly interested in the outcome. Its new “silk roads” mingles with the bewildering array of rival oil pipeline projects in the battle for control of “Eurasia”. Whilst the US is determined to crush Iran on behalf of its traditional surrogates Israel and Saudi Arabia, Russia and China are more and more being drawn into support for the Ayatollahs’ regime. China buys Iranian oil in defiance of US sanctions. Meanwhile, both China and Russia are drawing Iran further into their incipient trading bloc.

Behind it all lies the struggle of the epoch where a strong, but relatively declining US power, becomes increasingly belligerent against the declared Chinese aim to establish itself as the world’s leading power by 2049. In the face of dollar domination this is still a long way off, as there are no real rivals to the dollar as the world’s main trading currency. It is still to the dollar that the smaller states and their plutocrats flock in times of political crisis (which galls Trump, since he is thus the architect of the strong dollar!). 90% of foreign exchange and 88% of one side of every trade in the world is dollar denominated giving the US the enormous advantage of being able to build up deficits abroad which have little consequence for the economy back home. It also “weaponises” US imperialism. When Trump pulled out of the JCPOA with Iran the EU did not, but it could not persuade its own companies to keep trading with Iran in the face of possible US retaliation. This kind of leverage has been repeated in Venezuela where the economic situation is so dire that the dollar now accounts for about 50% of all transactions and rising. Trump hopes that this will eventually bring about the final collapse of the Maduro government.

China’s prospects look less good than they did 3 years ago. The $1 trillion “Belt and Road” project has been scaled back in the face of lower growth at home (partly a function of the trade war), scandals surrounding some projects and the realization by some participants that they are surrendering their sovreignity to China. Add to that the turmoil in Hong Kong, the increasing awareness of the brutal and organised repression in Xinjiang and inward investment has dropped. The solution would seem to be further devaluation of the renminbi to compete with other low cost exporters. This will also further widen the trade gap between the US and China. These “beggar-my-neighbour policies” are precisely the strategies that Keynes identified as the causes of World War Two. This is not yet where we are but, despite all the financial jiggery pokery of the last ten years, there is a distinct sense that imperialist rivalry is becoming more intense. In some ways we have now reached the point which the early CWO thought we were in 1975. Socialism or barbarism is more real than ever. But the socialism bit depends on the working class. Where does it stand today?

And the Working Class?

Election promises aside, the situation of the working class can be described not so much as secular stagnation, but more like ‘secular decline’. Despite increases in the minimum wage, for example, the Resolution Foundation reckons that half of employed workers have gained absolutely nothing since they “worked fewer hours than the year before”. This also suggests that fundamentally precarious workers are a much bigger part of the workforce than usually estimated. And in any case the material situation of the working class is declining all the time. Under the draconian rules of Universal Credit, unemployment numbers have declined. Meanwhile people are having to work longer before they can collect a pension and company pension schemes are being perpetually robbed and abandoned. (e.g. BMW, Post Office).

For more and more people work is getting harder the older they are. According to the TUC, of the 3.25 million people (more than 1 in 9 workers) who do night shifts – 100,000 more than five years ago – almost 1 million are over 50 years old. (69,000 are over 65.)

On the housing front a property-owning democracy is out of the window. Home ownership (at 62.9% in 2016) is now the lowest since 1985 and the average house costs 7.6x earnings (c.f. 3.6x in 1997); 1 in 5 rented homes are owned by companies while the ‘Bank of Mum and Dad’ is now the ninth biggest lender in the UK (£65bn in loans).

Aside from housing, personal debt levels, encouraged by interest-free credit cards are a ticking time bomb. Credit card debt in the UK hit a record £67.3bn in February. (Last year, UK banks had £19bn of ‘impairments’ on credit cards, compared with £12bn on mortgages.). More generally, 3.3m people are judged to be in “persistent debt”, where the minimum repayments go towards interest and charges, rather than reducing the principal amount borrowed.

In sum, the lowering of living standards is about much more than hourly wage rates. The whole framework for sale of labour power is being steadily undermined and bringing a generally lower standard of living both in terms of social wage (deteriorating NHS and welfare services, holiday entitlements, pensions, etc.) and conditions in the workplace…. Not surprisingly, as increased exploitation moves from relative to absolute, increasing life expectancy is beginning to reverse. The Institute and Faculty of Actuaries, based on death statistics from the Office for National Statistics, suggests that men aged 65 will now live another 22.2 years, down from 22.8 years in 2013. Women aged 65 will now live for a further 24.1 years, down from 25.1 years in 2013.

Looking Ahead

We could go on, but this brings us to the prospect or otherwise of a class-wide movement developing. This we cannot predict. But what we do know is that more and more people are facing a less secure and less prosperous future than previous generations. More and more people are beginning to see capitalism as the root cause of their problems, but it is up to us to clarify what this indicates and pose the revolutionary solution. Those who work for a wage in the professions, for instance, are inclined to focus on the unjustness of capitalism and often focus on ‘elites’ as they demand reform of a system which is eroding their once-secure position in the world. Similarly, they are in the vain of protests demanding governments take radical action against climate change. The petty bourgeois, on the other hand, who don’t live on a wage but in the twilight zone between property ownership and the need for an income, tend to fall for nationalist “solutions” of protectionism, tax cuts and anti-immigration policies. Given what is going on in the wider world, we might expect more ‘cross-class’ protests like the gilets jaunes which have no clear class content and certainly no real revolutionary goals, although they may focus on ‘getting rid of elites’.

As it is, spontaneous protests are proliferating across the planet. Whilst not proletarian in either content or composition, they do involve workers. Some are headed by those same professionals who are being proletarianised but who are not yet ready to accept that either they, or their children, have been reduced to the condition of much of the rest of the population. We see them leading the movements in Sudan, Algeria, and Lebanon. In Iraq, Chile and Ecuador the movements have the support of all sectors from the petty bourgeoisie to those who “have been left behind” over the last several decades. These movements call for “a change to the system” but their broader demands are confined to getting rid of corrupt politicians, “more democracy” or a “new constitution”.

Capitalism is not a form of government but a mode of production based on exploitation of the working class many by the capitalist few. Capitalism will not quietly morph into communism as some deluded souls (who also think the working class no longer exists) believe. The propertied classes have never given up their property without the bitterest of fights. No change of any significance can take place without the working class consciously finishing off this crisis-ridden system and, through its own organisations, starting to build a new society. The current cross-class movements are symptoms of the inability of capitalism to solve its problems. Are they the harbingers of a more clear and conscious class movement to come? This we cannot say.

Yet history tells us that many revolutionary movements began from unpromising beginnings and gradually morphed into a direct clash between classes. The capitalist crisis, which has now lasted so long that it is a manifestation of terminal decline, is not going away and further resistance is more, rather than less likely.

In this context of capitalist economic and political sclerosis, a new generation of political ‘truth-seekers’ is beginning to study and accept the revolutionary programme of the Communist Left, not only in the UK but in many countries across the world (and naturally we are particularly referring to our own Tendency). As with any political re-awakening there will have to be more newcomers before we have a complete game changer. Even so, we are adding more parts to the organisational skeleton which gives us more effective means to carry out the tasks we have set ourselves. A communist organisation cannot be built just on the internet (or behind a typewriter, as Onorato Damen put it in his day). A real communist organisation is part of the class and has to be present wherever it can, whatever the situation. We have to win the confidence of our fellow workers, both by being prepared to relate to any groundswell protest movement and getting a revolutionary voice heard in more traditional struggles. While we support the immediate demands of workers we always need to point out what their long term, wider interests really are. After almost one hundred years of counter-revolution and the discrediting of the very word ‘communism’; of fragmenting of the class, and the betrayal of its former organisations in the trades union and social democratic movements, the difficulties we face are enormous. Not least is the situation of today’s generation of workers who will have to re-discover the forms of struggle organisations created by workers in the past. We don’t fetishise these today but we do promote any form of mass independent class wide body. These are the prefigurations of the future organs of a workers’ society. In 2019 in Chile, in France, in Mexico and Iran we have seen workers seeking to find ways to reinforce their collective struggle. It seems a long road today, but history is beginning to accelerate faster than we once thought possible. It could go in either direction. Socialism and barbarism are still the historic alternatives which will be decided by the outcome of the class war against capital. Whilst the capitalist class everywhere is preparing its own solutions in the shape of nationalism and xenophobia, our task is still to be part of the struggle for an alternative. This means strengthening the organisation as a more solid nucleus of a future international all the more important.

CWO

November 2019