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	Workers Vanguard No. 912	11 April 2008

Foreclosures, Unemployment, Union Busting:

Capitalism U.S.A.

Break with the Democrats!

For a Revolutionary Workers Party That Fights for a Workers Government!

Part Three

Parts One and Two of this article, which we conclude below, appeared in WV Nos. 910 (14 March) and 911 (28 March).

The ongoing economic crisis in the U.S. continues to deepen. Poor and minority families are being driven out of their homes through mortgage foreclosures. Meanwhile, the investment bank crisis—exemplified by the near implosion of onetime financial giant Bear Stearns—continues to shake Wall Street and beyond. According to the Bureau of Labor Statistics, some 80,000 jobs disappeared in the month of March alone, the largest job loss since March 2003. Since the start of the year, over 230,000 jobs have been lost. This sustained job loss points to a deep, impending recession.

Compounding the crisis in the U.S. is the federal budget deficit; the world’s wealthiest country is also the biggest debtor nation. Right after George W. Bush took over the White House, he and the Republican majority in Congress pushed through a major tax cut, over 40 percent of which went to the wealthiest 20 percent of U.S. households. At the same time, the attack on the World Trade Center and the Pentagon in September 2001 provided a pretext for the U.S. imperialist ruling class to rev up its military spending in the name of “the war on global terror.” From 2000 to 2007, the federal government went from running a surplus of $236 billion to a deficit of $162 billion.

Both the Reagan and Bush II tax cuts were deliberately intended to produce large federal budget deficits. Why? In order to increase the political pressures for slashing social programs. The late Milton Friedman, dean of U.S. right-wing economists, bluntly stated this strategy in the premier mouthpiece of American capital, the Wall Street Journal (19 January 2003):

“How can we ever cut government down to size? I believe there is one and only one way: the way parents control spendthrift children, cutting their allowance. For government, that means cutting taxes. Resulting deficits will be an effective—I would go so far as to say, the only effective—restraint on the spending propensities of the executive branch and the legislature.”

While using different rhetoric and argumentation, the Democrats’ “solution” to the budget deficit is substantially the same. They contend that the two big entitlement programs—Social Security and Medicare—are an unsustainable burden on the U.S. economy. Thus Alice M. Rivlin (director of the White House Office of Management and Budget under Clinton) and Isabel Sawhill (a Senior Fellow at the Brookings Institution) insist, “Although few elected officials are willing to say so, retirement programs must be modified to avoid their consuming the entire federal budget” (Restoring Fiscal Sanity: How to Balance the Budget, Brookings Institution [2004]). Concretely, these liberal economic advisers to the Democratic Party propose to cut Social Security pension benefits by various mechanisms (increasing the age eligibility for full benefits, adjusting downward the cost-of-living escalator) while reducing spending on Medicare programs.

This country is more than wealthy enough to provide good-paying jobs, a decent living standard and quality medical care, housing and education for everyone who lives here. But for that to be realized requires that the rule of the rapacious capitalist class be overthrown by a proletarian socialist revolution.

Defend the Chinese Deformed Workers State!

In the mid 1960s, manufacturing output was 27 percent of the U.S. gross national product and its share of employment was 24 percent. By the early 2000s, the weight of manufacturing had been reduced to 14 percent of national output while employing 11 percent of the labor force. Three years ago, a mainstream bourgeois academic economist, Ronald McKinnon, pointed to the connection between the deindustrialization of the U.S. economy and its increasing international indebtedness:

“The United States is the world’s champion borrower in international markets. Foreign central banks, which hold more than half the outstanding stock of U.S. Treasury bonds, have become the principal source of finance for the federal government’s burgeoning fiscal deficits…. Besides this massive government dissaving, meager saving by American households forces U.S. corporations also to borrow abroad to supplement finance for domestic investment.”

—“America’s Financial Mess: It’s Time to Eliminate the U.S. Saving Deficiency,” The International Economy, 22 September 2004

Since then, the conditions described by McKinnon have gotten worse. Expending more than it produces, the U.S. consistently runs large balance of trade deficits concentrated in manufactured goods. Over the past few years, the dollar has undergone a substantial depreciation against the euro and more recently also against the Japanese yen and to a lesser extent the Chinese yuan. However, the “cheaper” dollar has had little or no effect in reducing the country’s yawning trade deficit. What then has to date prevented a free-fall plunge of the dollar in world currency markets and/or a quantum leap in global interest rates as investors guard against that risk? Mainly the willingness of the Japanese and Chinese governments to accumulate an ever larger stock of U.S. Treasury bonds and bills as a major component of their foreign-exchange reserves.

The business press sometimes treats the economic motivations of Japan and China in relation to the U.S. as if they were basically similar. That is, both seek to prevent a too sharp appreciation of their respective currencies against the dollar in order to maintain a competitive advantage in world commodity markets. However, Japan and China are two fundamentally different kinds of states and societies and therefore have fundamentally different relationships to U.S. imperialism. Japan is an imperialist country that is both an economic rival and a political-military ally of the U.S., an alliance primarily directed against the Chinese and North Korean deformed workers states.

The 1949 Chinese Revolution overthrew capitalist/landlord rule and ripped the world’s most populous country out of the clutches of the imperialist powers that had long held China in their grip. Emerging from the military victory of peasant-guerrilla forces led by the Stalinist Chinese Communist Party (CCP), the People’s Republic of China was and remains a bureaucratically deformed workers state. Despite Stalinist bureaucratic parasitism and mismanagement, the collectivization of the economy has resulted in enormous social gains for workers, peasants and women.

Following the death of Mao Zedong in 1976, the CCP regime introduced a series of market-oriented policies in the economy. These included attracting large-scale investment, concentrated in manufacturing, by Western and Japanese corporations and offshore Chinese capitalists in Hong Kong and Taiwan. There has also emerged a sizable class of capitalist entrepreneurs on the mainland. As a consequence of these developments, there is now a widespread belief, extending across the political spectrum from right to left, that China has become capitalist or is rapidly and irreversibly becoming so. Pseudo-Marxist groups that promote this illusion do so in the service of lining up with their “own” bourgeois rulers’ drive for capitalist restoration in China.

In maintaining that China continues to be a workers state, we do not deny or minimize the growing social weight in China of both the newly fledged capitalist entrepreneurs on the mainland and the old, established offshore Chinese bourgeoisie in Taiwan and Hong Kong. However, capitalists in China are still prevented from organizing themselves politically and vying for power. At the same time, the political power of the Beijing Stalinist bureaucracy continues to be based on the fact that the core sectors of the industrial economy remain collectivized while the banking system remains effectively state-owned. These factors have been key to the prodigious expansion of industrial capacity in China in recent decades and with it a corresponding increase in the social weight of the urban working class. China has also developed a large technical intelligentsia. The expansion of industrial capacity has not been one-sidedly concentrated in labor-intensive light manufactures. China is now the world’s largest producer of steel and is becoming a major producer of a wide range of industrial goods—for example, automobiles and other motorized vehicles, ships and port cranes—involving relatively advanced technologies, though China’s productivity is substantially lower than that of advanced capitalist countries.

Significantly, during the East Asian financial/economic crisis in the late 1990s, China uniquely maintained a high level of economic growth and industrial development. State ownership of the banking system effectively insulated China from the volatile movements of speculative money-capital that wreaked havoc on the capitalist countries of the region from Indonesia to South Korea. China did experience a decline in exports to the region and also a reduction in investment by offshore Chinese capitalists. However, the Beijing regime was able to offset these losses by expanding and redirecting government and state-owned bank expenditure to industrial construction and infrastructure. While a prolonged international economic downturn today would negatively impact China, the fact that it is a workers state gives the Beijing regime the option of intervening into the economy outside the framework of the global capitalist market to at least partially offset the effects of an economic slowdown. For example, China has the capacity to counteract a steep decline in export earnings by rechanneling investment for domestic purposes.

Smashing the Chinese workers state is a strategic goal for the capitalist powers, centrally the American imperialists, who seek to turn China into a vast sphere of untrammeled exploitation and super-profits. To that end, they are increasing the military pressure on China while pursuing a policy of internal economic and political subversion. The U.S. has continually maintained capitalist Taiwan as a dagger aimed at the Chinese deformed workers state, while promoting counterrevolutionary insurgency such as in Tibet in the name of “human rights.” An 8 March article in Asia Times by Hampshire professor Michael T. Klare points out that on February 4, Bush announced a baseline military budget of some $515.4 billion for the next year, which did not include funds for the Iraq and Afghanistan occupations. While China is not mentioned by name in the Pentagon’s fiscal year request, the largest in inflation-adjusted dollars since World War II, Klare notes, “Probe a little deeper into Pentagon thinking, and only one potential superpower emerges to justify all this vast spending: the People’s Republic of China.”

As Trotskyists (i.e., genuine Marxists), we stand for the unconditional military defense of China against imperialist attack and internal counterrevolution, just as we stand for the military defense of the other remaining deformed workers states: Cuba, North Korea and Vietnam. Defense of the Chinese workers state is undermined by the rule of the nationalist Stalinist bureaucracy whose policies are encapsulated in the anti-Marxist dogma of “building socialism in one country” and “peaceful coexistence” with world imperialism.

Along with the Indonesian Communist Party, the Chinese Stalinist regime (as well as the Stalinists in Moscow) offered political support to Indonesian president Sukarno, subordinating the proletariat to his capitalist government. The result of that treacherous policy was the 1965-66 slaughter of over a million Communists, workers, peasants and ethnic Chinese carried out by an alliance between the army and Islamic fanatics and with the direct involvement of the American CIA and its Australian junior partner. For 32 years afterward, Indonesia was ruled by the blood-drenched Suharto regime. In 1972, when the U.S. was raining bombs down on Vietnam, Mao sealed his anti-Soviet alliance with U.S. imperialism. Mao’s policy was extended under the regime of Deng Xiaoping, which in the 1980s supported the Afghan mujahedin against the Soviet Red Army. Today, in signing on to the U.S.-led “war on terror,” the Beijing Stalinist bureaucrats have encouraged U.S. imperialism in its counterrevolutionary drive.

We call for a proletarian political revolution to oust the venal and oppressive CCP regime and replace it with a government based on democratically elected workers and peasants councils and revolutionary internationalism. Despite the enormous gains of the 1949 Revolution, China remains a majority-peasant country with a relatively low level of productivity at its industrial base. A rational collectivization and modernization of Chinese agriculture and industry will, in the final analysis, hinge on the aid that China would receive from a socialist Japan, Europe or America, underlining again the need for international proletarian revolution.

U.S. Imperialism: Military Superpower, Deteriorating Economic Base

The current commercial and financial relations between the U.S. and China are not just governed by calculations of short-term economic advantage but must be understood in the broader context of American imperialism’s drive to restore capitalism and reduce China to semicolonial subjugation. By opening its domestic market to manufactured goods from China on a massive scale, the U.S. ruling class has sought to foster economic dependency on the part of elements of the CCP officialdom, newly fledged Chinese capitalist entrepreneurs and a section of the administrative and technocratic petty bourgeoisie. By helping to finance the U.S. government debt, the Beijing Stalinists seek to counter moves toward anti-China trade protectionism and otherwise appease the masters of Wall Street and Washington.

However, the sheer magnitude of the U.S. trade deficit on the one side and the enormous stock of depreciating U.S. Treasury IOUs in the coffers of the People’s Bank of China on the other make this arrangement increasingly untenable. Pressure is mounting in Washington for anti-China trade protectionism, especially since the Democrats won the 2006 Congressional elections. Liberal politicians and union bureaucrats use China-bashing to deflect working-class discontent over stagnant wages and corporate attacks on health care and pension benefits. In reality, China has little to do with the U.S. trade deficit, much less the immiseration of the American working class. A large fraction of the goods China exports to North America and West Europe consists of components made in Japan, South Korea and Taiwan. If the U.S. ruling class resorted to general protectionist measures, this could serve to trigger a global trade war, sow chaos in world financial markets and greatly heighten tensions between the major imperialist states, as well as with the Chinese deformed workers state.

For its part, the Beijing Stalinist regime faces a situation in which anti-China sentiment is on the rise in the U.S. while the financial costs of accommodating U.S. imperialism are also increasing. The Chinese central bank has begun, albeit on a very small scale, to shift its foreign-exchange reserves from dollars into other currencies and more lucrative dollar-denominated assets. Last summer, Xia Bin, director of the financial research department of the State Council, suggested that China’s $400 billion in U.S. Treasury securities could be used as a bargaining chip in negotiations with Washington over trade and currency realignment.

Along similar lines, an opinion piece in the official China Daily by He Fan, an economist with the China Academy of Social Sciences, warned that if China accedes to the U.S. demand to sharply appreciate the yuan against the dollar, the central bank would be forced to sell dollars, “which might lead to a mass depreciation of the U.S. dollar against other currencies” (Washington Post, 9 August 2007). Subsequently, the central bank, in an attempt to reassure Washington, announced it had no plans to sell off its dollar assets. Regardless of the short-term policies of the Chinese Stalinist regime and also the Japanese imperialist bourgeoisie, conditions exist for a major international financial crisis disrupting trade and leading to a worldwide recession.

For Workers Revolution!

Following the counterrevolutionary destruction of the Soviet Union in 1991-92, the U.S. ruling class declared its state to be the “world’s only superpower” that would henceforth dominate the rest of the world. At the same time, the post-Soviet period is marked by the reduced weight of American capital in international commodity and financial markets. This gives the American imperialist ruling class an especially irrational, destructive and dangerous character. Witness the murderous occupations of Iraq and Afghanistan on the international scene and the escalating attacks on the working class, black people, immigrants and all the oppressed “at home.”

War, poverty, economic crisis are all endemic to the capitalist system, which is based on the private ownership of the means of production—the factories, electrical power plants and grids, airlines, oil fields, mines, means of transport, etc. It is a system in which production is based on profits for a few wealthy capitalists, while the rest of the population is faced with increasing assaults on its living standards or utter poverty. But capitalism also creates its own gravedigger: the working class, which is forced to sell its labor power in order to survive. Despite the decline in American manufacturing jobs, the U.S. share of global manufacturing has remained around 20 percent since 1982, underlining the strategic importance of this country’s industrial proletariat.

Only the proletariat has the social power and objective interest to sweep away this deeply irrational and inhumane system through social revolution and replace it with a planned economy in which production is based on the human needs of all, rather than profits for the few. The only answer to the anarchy and brutality of the capitalist system lies in the struggle for socialist revolutions internationally to sweep away the bourgeois ruling classes and their capitalist states and forge in their place workers governments where those who labor rule.

As the impending recession signals even greater immiseration for working people in the U.S. and throughout the capitalist world, the need to struggle against this destructive and exploitative system becomes even more urgent and compelling. Key to such a perspective is a political struggle against the labor bureaucracies of the AFL-CIO and Change to Win trade-union federations, which tie the multiracial American proletariat to its class enemy, especially through support to the capitalist Democratic Party, of which the trade-union bureaucracy is a component.

The fight to build a new, class-struggle leadership in the labor movement must be linked to the struggle to forge a revolutionary, multiracial workers party in the U.S., section of a reforged Fourth International. Such a party would be formed in opposition to all capitalist parties and their politicians and built in political struggle against labor bureaucrats who bind the exploited and oppressed to the bloodsuckers of Wall Street. As Trotsky wrote in the 1938 Transitional Program, the founding document of the Fourth International:

“The question is one of guarding the proletariat from decay, demoralization and ruin. The question is one of life or death of the only creative and progressive class, and by that token of the future of mankind. If capitalism is incapable of satisfying the demands inevitably arising from the calamities generated by itself, then let it perish. ‘Realizability’ or ‘unrealizability’ is in the given instance a question of the relationship of forces, which can be decided only by the struggle. By means of this struggle, no matter what its immediate practical successes may be, the workers will best come to understand the necessity of liquidating capitalist slavery.”