the Voice of
The Communist League of Revolutionary Workers–Internationalist
“The emancipation of the working class will only be achieved by the working class itself.”
— Karl Marx
Oct 7, 2019
The following article is a translation of a text adopted by Lutte Ouvrière’s annual Congress; it was published in the monthly journal of the French Trotskyist organization, Lutte de Classe, issue #204, December 2019–January 2020.
The more the crisis of capitalism extends and deepens, the more its economic and political aspects blend together, not only in their fundamental relations, but also in their day-to-day flare-ups.
The economic war between the big powers underlies all international relations, whether in the form of diplomatic clashes or in their continuation by other means: military interventions. At the same time, the tensions in international relations, or worse, the anticipation of what effects they will have on financial markets, have become major elements in the economic crisis. The smallest incident in the Strait of Hormuz, or a tweet from Trump threatening China with a new protectionist measure, can cause the stock market to rise or fall and can affect investments and international capital flows.
The capitalist world is engaged in a chaotic rush into the abyss, which the big bourgeoisie, its economic mouthpieces, and its political representatives are totally incapable of holding back. The predictions made in the declarations of international bodies that specialize in economic forecasting are marked by a deep pessimism about the future.
The Organization for Economic Co-operation and Development (OECD), one of these bodies, predicts that the global economy will return to its worst performance since 2008 (the year of the financial crisis). Its chief economist speaks of a “structural slowdown” and haphazardly blames the flood of protectionist measures, the trade war between China and the United States, Brexit, the rebound in tensions between Japan and South Korea, strains in the oil market, and the rise in the amount of risky debt held by companies.
According to the chief economist, all of this results in “protectionist measures setting in over time,” and commercial exchanges slowing to an “exceptionally low” level.
A cause and consequence of this “structural slowdown” is that investments remain depressed. And the OECD is looking into another “enigma”: even though capitalist companies are no longer investing, they are still more indebted than ever.
But this is a rather transparent enigma! The companies are profiting from the nearly-free credit fed by the money-printing of the central banks in order to borrow, which pushes them into debt. But the money they borrow, even at a very low rate, does not encourage them to invest in production. Manufacturing industry is falling backwards. The companies’ indebtedness feeds financial operations, among which are massive purchases of shares aimed at meeting the greed of their shareholders, even if this means putting at risk their future profits.
The monetary policy of the central banks of the imperialist countries, carried out in the name of “stimulating growth” or “supporting the economy,” provides a supplementary aid to the parasitism of their bourgeoisies. It makes the richest even richer, feeds speculation, and contributes a little more to its instability.
The declaration of the chief economist of the OECD expresses a panicked sense of powerlessness: “Growth prospects have plummeted in the wake of trade and investment.” As she explains: “When companies do not know what tomorrow will bring, they exercise their ‘wait-and-see option.’ Given that an investment is a long-term commitment, they are waiting for this insidious trade war to settle down in order to know where to invest. However, when temporary uncertainty is recurrent and rooted, large amounts of investments are withheld, thereby affecting not just present-day demand but also tomorrow’s growth potential and employment.”
The measures restricting trade between the United States and China provide the most spectacular illustration of the worsening of protectionism. But they are not the only ones, since the forms and causes of protectionism are very diverse.
In the ping-pong match taking place between the United States and China, the increase in tariffs decreed by the U.S. against products from China has resulted in reciprocal tariffs from China, which have themselves brought about new replies from the United States….
The successive measures announced on both sides are just as much bluffing as reality. The warlike posturing is just part of the negotiations. The U.S. and Chinese economies are largely interdependent, given how many U.S. companies rely on Chinese subcontractors and how important the penetration of U.S. capital is in China.
The big U.S. companies, who use Chinese subcontractors to produce, are not eager to shoot themselves in the foot. The influence of a corporation like Apple on the U.S. government is so strong that it had no trouble getting a “tariff exemption” for the 10 parts made by Chinese subcontractors that go into its high-end Mac Pro computer.
The trade war between the United States and the European Union is full of a similar contradiction between the protectionist thrusts and the interconnection of their respective economies. The U.S. company Boeing and the European company Airbus have been engaged in a power struggle, with the support of their respective governments, for the past 14 years.
The World Trade Organization (WTO) just authorized Washington to place tariffs on Airbus airplanes.
But how to ensure that the tariffs on Airbus will not hurt big U.S. companies like American Airlines or Delta?
And how to deal with the fact that many U.S. state governments welcome investment from Airbus, which includes investments of its many subcontractors?
And how can the European Union, as far as its response, place tariffs on Boeing, given that European aviation subcontractors are also connected to the U.S. aeronautics corporation and that so many big European companies buy Boeing aircraft?
For the moment, the sectors that are at risk of becoming the collateral victims of this clash of the titans, are, notably, French wine and cheese, Spanish olive oil, and Italian Parmesan.
But protectionism is not limited to its most basic forms of tariffs and import quotas. It can take an infinite variety of more subtle forms, as the example of the European Union shows.
The European common market, and, even more so, the monetary union of the Eurozone, were both established to encourage trade between the different European countries that were part of it. However, the exports of each member country of the European Union toward the other members have stagnated, or have even shown tendencies to decline. “A surprising phenomenon,” the economist Patrick Artus notes, “which results from the fact that there is not really a common market, since each country in the European Union has wanted to preserve its national companies in many sectors.” Not to mention the different frameworks of taxation and social legislation, when these are not manipulated by the governments to benefit the competitiveness of their own capitalists.
The competition between capitalist companies, like the competition between capitalist states, is a war of all against all, in which allies never stop being rivals, and therefore remain adversaries.
Another aspect of the competition between imperialist powers, for whom political rationales are tightly connected to economic motivations, is the U.S. boycott of Iran and the fact that the United States is imposing it on its European allies who are nevertheless its competition. While boycotting Iran, the U.S. prevents its eventual competitors from profiting by stepping into the void left by U.S. companies.
From Total to Peugeot, and from Airbus to Engie, even the most powerful capitalist companies of Europe are forced to obey the U.S. decrees, under the threat of losing trade orders, or being blocked from U.S. markets and from access to the financial resources in the hands of U.S. investors and bankers. The consequence for Iran is that the volume of oil it can export to the global market has fallen to 10% of what it was.
The Iranian population is and will be the main victim of Trump’s decrees and of the competition between the U.S. and the European Union.
One further aspect of the slowdown of world trade is the modification of the conditions for competition itself. For a quarter of a century—approximately between the 1980s and 2008—world trade increased much more rapidly than did the worldwide Gross Domestic Product (two times as fast between 1990 and 2008, the French newspaper Les Échos has specified). One of the main reasons for this was the tendency for multinational corporations to divide up their production processes.
The different production phases of a single product (automobiles, washing machines, televisions, smartphones, personal computers, etc.) were split up among several countries in order to profit from whatever local situation was most favorable from the point of view of labor costs, property rates, proximity to raw materials, social legislation, tax levels, financial subsidies from governments, etc.
Advances in the means of communication, as well as lowered transportation costs, have made what economists call “supply chain segmentation” more profitable. An important part of trade between countries consisted in the shipment of semi-finished products all within the same big companies or between these big companies and their subcontractors.
This was the time when China developed into the subcontracting workshop of the world and when Eastern European countries (the former Popular Democracies) became more integrated into the production processes of big German, French, and Japanese companies, especially in the auto industry.
In addition to the powerful logic of the international division of labor, there was the desire to maximize profits according to the opportunities of the moment.
However, these opportunities are by their very nature constantly changing. The low cost of labor in China, for example, which was so profitable for a time, has ended up rising, even if this is only relative in comparison to other countries which have comparable technical expertise. Some of the capital which had been invested in China has since shifted to Vietnam.
The important difference in wages at the same level of technical expertise between the Western, imperialist part of Europe and the countries of Eastern Europe has pushed Peugeot, Volkswagen, BMW, and even Toyota and Nissan to relocate into these countries, far beyond the absorption capacity of their markets. But the gap has been growing smaller.
And, above all, despite the drop in transportation costs which increases the capitalists’ profits, the extra profit gained in this way can be eclipsed by a destabilization of the regime in place, or by military or political threats to the means of communication.
To a certain extent, the slowdown in the growth of global trade roughly since the financial crisis of 2008 is due to the fact that investing in production in the so-called developing countries—with a skilled and very low-cost workforce—has become less profitable.
Certain economists of the bourgeoisie are even solemnly asking the question: are we not going toward a “de-globalization,” with a tendency for the big companies to locate closer to the final consumer?
If globalization is irreversible, in the sense of constantly integrating national economies more closely into a single global economy, it clearly bears the mark of the quest for very short-term profits, which is inherent to an increasingly financialized capitalism. In an unstable global situation, the conditions for competition never stop changing, constantly overturning the relations of force between competing capitalist companies.
For the non-imperialist countries, particularly for the poorest countries, a financial collapse would be a catastrophe. The level of foreign debt of the poorest 76 countries has doubled since 2009! Argentina, which is far from being among the least developed countries, provides an illustration of the price that the big bourgeoisie’s financial institutions will make the poor masses pay, in order that loans be repaid.
The stagnation of investment, hiring, and production contrasts with the incessant growth of the volume of financial operations. The weight of finance keeps increasing. Its “raw materials,” if it can be put this way, are credit and its counterpart, debt. The 2008 financial crash was a warning. But the level of debt has continued increasing more strongly than before, as soon as the failure of the banking system was temporarily averted. The colossal sums which were then dumped into the banking system to save it from generalized collapse have pushed public debts to new heights. Since then, the central banks of Europe and the United States have opened their coffers to the big banks’ demands for liquidity. Governments are falling all over themselves to borrow. The public debt of the countries of the OECD, or the most industrialized countries, has risen from 70% to 110% of global GDP (according to the figures of Patrick Artus, chief economist of Natixis, in his book Disciplining Finance). The interest that finance capital draws from this debt is like a parasite on the entire economy, leading to a relative and sometimes absolute drop in any government expenditures which might be of some use to the population (such as hospitals, nursing homes, infrastructure, and public transportation).
The different elements of finance—outstanding credits, bonds, stock market capitalization, and the money supply—have continued to increase in volume. Their mixture, their transformation into a multitude of more or less complex securities, and their commercialization have led to the emergence of gigantic financial institutions such as BlackRock, which has taken a dominant position in the global economy within just a few years. These financial institutions have shares in almost all of the big multinational corporations, including those which are considered to be in direct competition.
While the apologists of capitalism sing the praises of free competition, private capital has become more and more absorbed into the giant octopus of finance.
The long-standing British travel agency Thomas Cook just bit the dust. The company was of course a victim of competition, of its creditors, of bankers, but apparently it also succumbed to the speculative game of the specialized funds that were among its creditors! These funds bet on its failure, and by contributing to bring it about, were able to pocket 250 million dollars. The bankruptcy put out of a job 22,000 Thomas Cook workers scattered around the world. The employees of the travel agency’s many service providers and subcontractors must be added to this. Not to mention the hundreds of thousands of tourists left stranded….
The place that finance occupies in the functioning of the capitalist economy does not only contain the threat of a financial catastrophe. It also changes the way that capitalist companies operate, including the most powerful, run in order to make the quickest profit and the highest possible dividends for the shareholders.
Under the headline “Total Cares for Its Shareholders by Raising Its Dividend,” the French newspaper Les Échos explains: “The oil companies are offering a high yield to their shareholders in order to compensate for less interesting growth prospects.”
Total is acting like all of the owners of big capital at the level of the entire economy. It is precisely because their economic future seems bleak that they devote their profits to “care for” the shareholders at the expense of investment, which is to say, of the future of their companies. Decadent capitalism is devouring itself.
Beyond the cries of alarm raised by a growing number of economists about the threat of an imminent financial crash, the very behavior of the financial markets—of all of the banks, big insurance companies, finance companies, portfolio managers, and all of those who make a living from financial speculations for the benefit of the bourgeoisie with money to spend—shows that they know better than anyone what danger the economic situation holds.
The surge in the price of gold is one of the measures of this. The traditional function of the yellow metal is to serve as a shelter of value. The continuous rise of the securities representing the debt of the rich countries and of the big companies, which results in what the financial companies describe as an increasing frequency of negative interest rates, is another sign. Not only do the lenders not draw interest on their loan, but it is they who must pay to invest their money. The speculators do not want to put all of their eggs in one basket. “In the land of the blind, the one-eyed man is king.” This explains the occasional rush toward securities valued in dollars or toward other values which seem more safe.
But in the capitalist world in crisis, there are no safe values.
In the case of a financial catastrophe, all securities could collapse, since their only value resides in the confidence placed in the debtor who is supposed to repay them.
The financial alert of 2008 proved not only that the United States is not safe from a crash, but also that it can even be the starting point for one (like in 1929).
“Who cares, after we’re dead?” has become the defining behavior of the entire capitalist class. This explains the OECD’s heartfelt appeal, even couched in euphemism: “Governments can reverse the spiraling costs of uncertainty and invest more.”
Not confident in their abilities to convince private companies, the thinking heads of the bourgeoisie are beginning to call for state intervention. They argue that: “There are 6 trillion dollars lacking in annual investments in infrastructure (transportation, education, healthcare, telecommunications, electricity…).” Governments must therefore devote more money to investment, since the low rates of interest would make their indebtedness more bearable.
And yes, the needs for investment in infrastructure are crying, even in the most developed imperialist countries: bridges are collapsing, roads are caving in, railroad lines are rusting, and post offices are closing, not even to mention the disgraceful state of the healthcare system in a country like France, which prides itself in being at the forefront in this area….
The governments have a lot to do! But will they? Can they get the means to do it all while meeting the needs of finance?
Those who profit from financial operations and those who profit from the relaunch of government investment are in reality the same: the capitalist companies, their owners and shareholders, and their executives. But this does not change the contradiction between devoting the state budget to public investment and feeding the financial sector.
The heads of the imperialist states of Europe, for example, begin by asserting the need for big public expenditures. But each one explains above all why it is up to their neighbors “to invest first”—namely Germany, within Europe. The German government recently declared that it intends to invest 100 billion euros in ecological measures between now and 2030. This is only a promise made during an election cycle, but it is attractive to capitalist companies in the ecological conversion sectors, including electric cars, windmills, and the thermal insulation of buildings.
Odes to “private enterprise” and “private initiative” dominate the economists’ speeches and the bourgeoisie’s policies. This does not prevent the thinkers of the bourgeoisie from calling on the state to make up for the shortcomings of their bosses. Contrary to those who only criticize “ultraliberal” policies but not capitalism, the big bourgeoisie has never made it a dogma to “privatize everything.” Yes, it is for private profit, but also for the “socialization” of expenditures, notably of the costly but necessary investments which it is possible to make the state pay for.
The near future will reveal what concrete forms the governments’ responses will take. It is not impossible to see an end to the rush toward privatization of what remains of the public sector, including public services, which has been pursued for several years. This could be replaced by a policy which mixes the privatization of certain sectors—obviously the most profitable ones—and the preservation of the nationalized character of other sectors, or even their re-nationalization.
One illustration of this tendency is the “Project Hercules” plan which was recently announced by the CEO of the French electric utility EDF. The plan aims to split EDF, which is still more or less integrated, into two companies: one dealing with nuclear power, electricity transportation, and probably hydroelectric dams; the other with commercialization and power distribution networks. The first company would have 100% state ownership. This would be a form of re-nationalization, since the state owns 83.7% of EDF at the moment. The capital of the second company would be open to private investment (like other European energy companies in which governments hold a partial stake, such as Total, ENI, and GDF-Suez, among others).
The “reorganizations” and “restructurings” of different services which are today more or less public take the form of dismemberment, separating the profitable parts from those which are not, making them therefore destined to be nationalized or re-nationalized.
The advantage for the bourgeoisie is this: it separates the wheat, which can bring them profit, from the chaff, which requires the support and financing of the state. Another advantage: it introduces finance into the relations between two—or several—economic units, each one with its own budget, where there had previously been a single united entity. Relations which had formerly not been monetized between two services become commercial relations, with the possibility of one or the other going into debt … or both of them. No matter how damaging this might be for the company, for its workers, and for consumers, this provides finance with yet more “raw materials.”
For many years, the very word “growth,” used by the bourgeoisie and its political and media spokespeople, essentially only meant financial growth. Apart from its multiple transformations, the capitalist economy in the imperialist era constantly comes up against the fundamental contradiction that capitalism had at its origins: between the companies’ capacity for production and the limits of the solvent market. This contradiction is further aggravated by the crisis and its consequence, the increasing financialization of the economy.
The capitalist economy is fundamentally characterized by periods of economic expansion followed by periods of crisis. But, to paraphrase Trotsky, with capitalism’s decline, the periods of crisis and mass unemployment have gotten longer, and the recoveries are fragile and mostly effect financial operations.
The financialization of the economy and its consequences, up to and including the management of capitalist companies aiming at short-term profitability, undermine the very foundations of the capitalist economy.
Financial operations do not create profit. They only allow the most powerful capitalists to divide it up in the manner most favorable to themselves.
Profit is extracted from the exploitation of the millions of workers who make the factories produce, extract the mineral wealth, guarantee transportation and distribution, and allow services to function. It depends on the exploitation of those whose activities make the economy run.
No matter how the capitalist class divides up the volume of profit among its members, the only way to maintain and especially to increase its total volume is to aggravate exploitation and to boost profits by taking even more from the working class most of all, but also in different degrees from the other lower classes.
The increasing extractions of big capital, whether directly or by means of governments, are carved into the very logic of the survival of the decaying capitalism of our era. They continue under governments of all political stripes.
The only force capable of stopping this tendency is the collective force of the working class. Even its most powerful struggles can only put a brake on this tendency. The problem posed for all of human society is not to preserve the interests of the exploited classes within the framework of capitalism, but to overthrow capitalism.
The obvious raw power of big capital, the damage it causes, and the dangers it poses all end up causing anxiety and hostility among the population.
The main parties of the left, the Socialist Party and the French Communist Party (PCF), which, here in France, have usurped the heritage of the political workers’ movement, have lost the credit that they had in their distant past. They are not in a position to channel what is only a feeling of disgust and disorientation into the electoral arena, and even less to open up a political perspective.
Faced with the far right, whose goal is to play on these feelings in order to preserve the domination of big capital, the alter-globalization movement, the final avatar of the institutionalized reformist left, denounces many aspects of the evolution of capitalism today. No matter how correct certain aspects of their analysis may be, the perspective that alter-globalization lays out is, behind its various formulas, only the utopia of a less unequal capitalism, one that is regulated and moralized, with a financial system that is supervised and disciplined.
This current can be found at the international level in the person and writings of Joseph Stiglitz, the Nobel Prize-winning economist, former advisor to President Clinton, and later chief economist of the World Bank. He is calling for—to use the expression of his recent interview in the French newspaper Le Monde –“an overhaul of capitalism favoring the regulation and role of the state.” In France, the economist who has emerged over the years to embody this current is Thomas Piketty, who has long been close to the Socialist Party and its leadership. He advised former president François Hollande and supported the party’s candidate Benoît Hamon in the most recent election. He has recently been close to the party that Hamon went on to create, Générations.
Piketty’s two long books, Capital in the Twenty-First Century and Capital and Ideology, have given him the mantle of the theoretician for a left that is looking for one. But what it discovers are banal phrases of this type: “to rest on the experiences of Germanic or Nordic joint management in order to push them even farther” (from an interview that appeared in the newspaper close to the PCF L’Humanité on September 20, 2019 titled A Reflection for a New Socialism). As far as this is new, one can certainly do better than “Germanic or Nordic joint management,” even pushed farther along.
If he attacks the uncontrolled and uncontrollable property of the multinational corporations, it is in the name of dividing up small property more fairly. His analysis of capital in the twenty-first century leads to the proposal of a “temporary property,” meaning “a system of the permanent circulation of property with an annual allocation of capital which would allow everyone over 25 to have ownership.” “A capital of 120,000 euros [$133,000] for everyone,” he specifies. All of this would be financed by a progressive tax on property.
It would be an insult to the nineteenth-century French anarchist Pierre-Joseph Proudhon to remind Piketty that in his time, Proudhon thought that the social organization of the future would be based on small property! Taking up a similar reasoning 200 years later, despite industrialization, the concentration of capital, and imperialism, is surrealistic!
As for the rest, Piketty, whom L’Humanité sympathetically presents as a “specialist in the study of inequality,” is hostile to Marx and to Marxism, to the very idea of class struggle.
Those who contribute to building up the reputation of the relatively moderate Piketty as a progressive economist are even more hostile than he is to Marxism, to the ideas of class struggle. They criticize him for “the radicalism of his proposals,” (in the newspaper L’Opinion), accusing him of desiring “a form of fiscal expropriation of the entrepreneurs.”
Piketty’s intellectual progression remains within the logic of the political conclusion he reaches. “What do we really know about how wealth and income have evolved since the eighteenth century, and what lessons can we derive from that knowledge for the century now under way?” he asks in the introduction to Capital in the Twenty-First Century, in order to state his intention of “putting the distributional question back at the heart of economic analysis.” As if one could understand distribution without analyzing the mode of production and the social relations that it determines. He then pedantically states that: “There are nevertheless ways democracy can regain control over capitalism and ensure that the general interest takes precedence over private interests, while preserving economic openness and avoiding protectionist and nationalist reactions.” A thousand pages of this gibberish, certainly with some interesting data, all to reach this conclusion, while the most determined admirers of capitalism call him reckless!
Consistent with his rejection of the class struggle, in his thousand pages devoted to “capital in the twenty-first century,” there is not a word about the power of the big bourgeoisie over society, hidden behind the fetishism of money and capital. The question of power does not interest him at all, and his vision of the world is limited to the evolution of thought and of collective morality. It is the most bland reformist vision of class relations, professed in an epoch when big capital is waging a war to the death not only against the working class but against all the lower classes. There is nothing here which would frighten even the meekest leader of the Socialist Party.
Even though it was published in 1867, Marx’s Capital illuminates the mechanisms and functioning of capital in the twenty-first century infinitely more than do Piketty’s texts, despite all of their tables and graphs.
The milieu around the PCF makes, along with its nods to economists like Piketty, efforts to “rehabilitate” Marx. It does so in its own way, inherited from the time when the revolutionary theory of the proletariat was transformed into a dogma in order to justify the regime of the Stalinist bureaucracy in the Soviet Union and served as an imitation of ideology for its servants in the PCF in France. L’Humanité publishes testimonies and debates which rediscover Marxism. At least, Marxism insofar as it explains the functioning of the capitalist economy, but not revolutionary Marxism.
“The philosophers have only interpreted the world in various ways; the point, however, is to change it,” Marx wrote in his Theses on Feuerbach. To reduce Marxism to the interpretation of the world is to empty it of the most important part of its content.
Even the most horrible aspects of the evolution of modern capitalism, like the absolute domination of financial multinationals over the economy, underscore the profound tendency of the economy toward the subjugation of small capital to big capital, toward globalization, and toward planning. This evolution is what has long made it necessary and possible to have a society without private property in the means of production, without a market, without competition, and without exploitation.
To quote what Trotsky wrote in the Transitional Program, “The objective prerequisites for the proletarian revolution have not only ripened; they have begun to get somewhat rotten.” Trotsky’s expression sums up the evolution of capitalism in the epoch of imperialist decay and its actual consequences in a range of aspects of political life, culture, social relations, and even individual behavior.
The future of humanity does not depend on an innovative discovery in the realm of ideas. It depends on the capacity of the working class to rediscover consciousness of its task and its historic responsibility, and, in this way, to take hold of the theory of its emancipation, Marxism. It must create parties to embody this consciousness and to give back to the conscious proletariat the will to work for social revolution.