Capitalism in Crisis: Karl Marx Was Right

We Need an All New Ruling Class—the Workers!

In 2007-2008, the world was plunged into an economic crisis unrivaled since the days of the Great Depression. The con men on Wall Street whose financial swindles were central to this collapse were bailed out to the tune of trillions of dollars. The working class, black people, Latinos, the poor, the sick and the aged have been made to foot the bill, losing their jobs, homes, pensions and virtually anything else that makes life remotely livable. Today, one in six people in the U.S. are unemployed, with the average time out of work close to ten months. Forty-five million people are on food stamps, an increase of 34 percent over the past two years. Those who still have a job are being sweated to work harder for lower wages. In racist America, it’s all the worse for black people and Latinos, who were among the main victims of the banks’ subprime mortgage scams. One-third of black and Latino households have no net worth, with many underwater in debt. The capitalist authors of this ruin have, in the meantime, made out like bandits.

During the “jobless and wageless recovery” of the past two years, corporate profits have broken all historic records. This comes on top of the enormous enrichment of the wealthiest 1 percent of the population, who more than doubled their share of the national income in the past three decades. The government’s “welfare for the rich” schemes have boosted financial speculation, artificially driving up the price of stocks, while the already rotting productive capacity of U.S. capitalism goes through the floor. With the U.S. economy overwhelmingly based on consumer spending—and with the vast majority having no money to spend—this whole house of cards is crashing down again as the economy spirals into a double-dip recession.

For over a month, the stock market has been on a wild roller-coaster ride of panicked buying and selling. Among the detonators of this panic were concerns that the Democratic president of the United States, Barack Obama, had lost control of the imperialist “ship of state” to a pack of deranged Republican Tea Party yahoos. Liberal Democrats and others raged that the Republicans were holding America “hostage” by refusing to raise the debt ceiling unless they got trillions in spending cuts and no rise in taxes for the rich. But it was the Democratic Party president himself who manufactured the myth that the “world’s only superpower” was about to default on its debt like some impoverished Third World country. Even if they didn’t have the money—which they do, and plenty of it—they “can always print money,” as former Federal Reserve chairman Alan Greenspan put it.

Obama’s purpose in this charade was not much different from that of the Republicans, as he pushed for a “grand bargain” of massive austerity through slashing more than $4 trillion from so-called “entitlement” programs like Medicare, Medicaid and Social Security over the next decade. His sop of closing a few tax loopholes for the rich was about all the Democrats could choke out to try to maintain the fraud that they are the “friends” of the little guy. And they even caved on that one.

Nonetheless, the recklessness of the Republicans has disturbed Wall Street and even their own party establishment. As Doug Henwood put it in his Left Business Observer (21 August): “Wall Street, the Fortune 500, center-right Dems, non-insane Republicans—who’ve been happy to let the Teabaggers promote the austerity agenda, would now like them to get out of the way. Not only are they undermining the blue-blood status of Treasury bonds, they’re making our political system look foolish on a world stage. But when you use odious and/or lunatic agents, there is always what the CIA types call a ‘disposal problem’.”

The madness of the Republican Party “Tea Baggers” is merely an extreme expression of the depravity of America’s capitalist rulers, who have no other way out of the economic crisis—a crisis of their own making—than to further starve the poor, bust the unions and drive down wages. As the political servants of the same capitalist class, the Democrats are increasingly incapable of even putting a phony “kinder, gentler” facade on the cruel inhumanity of imperialist rule.

It Is Desperately Necessary to Fight!

While Congress was gridlocked over the “debt ceiling,” the imperialist masters of the European Union (EU) were in emergency session to come up with another bailout of Greece—in reality, a bailout of the investments of French and German bankers on the backs of the Greek working class. Then it looked like Spain and Italy might go belly-up as rising interest on their government bonds was freezing them out of money to keep their economies afloat. After EU and IMF bailouts of Greece, Ireland and Portugal totaling hundreds of billions of dollars, the European Central Bank started spending tens of billions more to buy up the bonds of Spain and Italy and drive down interest rates, while the governments of those two countries announced even more savage austerity.

Meanwhile, Britain was exploding in anger ignited by the cop killing of a young black man (see article, page 16). From London to other cities, thousands took to the streets in an upheaval fueled by vicious spending cuts and job slashing. The London Guardian Weekly (19 August) warned: “Together, the global imbalances, the manic-depressive behavior of stock markets, the venalilty of the financial sector, the growing gulf between rich and poor, the high levels of unemployment, the naked consumerism and the English riots are telling us something. This is a system in deep trouble, and it is waiting to blow.”

In Europe, austerity has been met with strikes and protests, at times massive, in defense of workers’ livelihoods. But the workers’ struggles are hamstrung by their reformist misleaders, who accept the inevitability of capitalist austerity while merely pleading that the blows be softened.

In this country, tens of thousands of unionists and their supporters came out in protest early this year against Wisconsin Republican governor Scott Walker’s union-busting law tearing up the collective bargaining rights of public workers unions. With public workers unions everywhere threatened with obliteration, the Wisconsin protests inspired workers across the country who saw them as the beginning of a fightback against the one-sided class war targeting organized labor. But the bureaucratic misleaders of the AFL-CIO worked overtime to squelch any move toward actually using labor’s strike weapon, channeling the anger of the ranks into support for the Democratic Party with a petition campaign to recall Walker and a number of Republican state legislators.

The decades of betrayals by these labor fakers have encouraged the U.S. rulers in the arrogant belief that they can get away with doing anything to the working class, the poor and most everyone else without provoking any social struggle. But the rulers and their labor lieutenants cannot eliminate the class struggle which is born of the irreconcilable conflict of interests between labor and its exploiters. The same conditions that grind down the workers can and will propel them into battle against the capitalist class enemy. This was seen in the midst of the Great Depression, when, at a brief upturn in the economy, workers began to engage in hard-fought battles to organize industrial unions in this country.

The sit-down strikes, mass pickets and other actions that built the CIO were ignited by the 1934 San Francisco general strike and mass strikes in Toledo and Minneapolis the same year. All of those strikes were led by reds. It was to head off the threat that class battles would challenge capitalist rule that New Deal social programs such as Social Security were implemented. Following World War II, Cold War red purges in the unions drove out socialists and Communists, including the Stalinists who had channeled workers’ discontent into support for Roosevelt’s Democratic Party.

Today, there are no longer avowed socialists with a significant base in the unions. But even in the absence of militants inspired by such political convictions, radical leaders will arise and they will be no less militant. Renewed labor battles will lay the basis for reviving and extending the unions, with a new, class-struggle leadership coming to the fore. For the workers to prevail against their exploiters, they must be armed with a Marxist political program that links labor’s fight to the struggle to build a multiracial workers party that will do away with this entire system of wage slavery through socialist revolution. Fight, don’t starve! Those who labor must rule!

The Bourgeoisie: An Unfit Ruling Class

In the Communist Manifesto, written more than 150 years ago, Karl Marx and Friedrich Engels identified the key contradiction of capitalist society, which lies at the root of repeated economic crises. On the one hand, under capitalism production is socialized. But the means of production remain the private property of a few, who appropriate the wealth that is produced by workers’ collective labor.

The boom-bust economic cycles are direct products of the capitalist system of production for profit. Capitalists invest in expanding productive capacity on the assumption that the additional output—autos, houses, etc.—can be sold at the existing rate of profit, at least. However, during periods of expansion the average rate of profit tends to fall. This situation eventually creates a crisis of overproduction, as capitalists produce more goods and services than can be sold at a satisfactory rate of profit. Thus there is the repeated spectacle of masses of workers losing their jobs and being thrown into destitution because too much has been produced. As described by Marx and Engels in the Communist Manifesto:

“Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilization, too much means of subsistence, too much industry, too much commerce…. And how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones.”

Marx and Engels underlined that the rise of capitalism and the destruction of the feudal order represented a historic advance in the development of the productive forces—science, industry and technology. Yet capitalism in turn became a fetter on the further development of those productive forces. Out of the destitution and destruction produced by capitalism’s inevitable economic crises, the means of production came to be monopolized by fewer and bigger conglomerates. Their ever-growing need for investment funds and other financing led to the domination of finance capital, that is, of banking goliaths.

By the late 19th century, capitalism reached its ultimate, imperialist stage. The capitalists in the advanced industrial countries were driven to wage wars to redivide the world in order to plunder markets and secure spheres of exploitation in less-developed countries. In their competition for world domination, the imperialist powers engulfed the peoples of the world in the barbarism of World Wars I and II, as well as waging countless wars in colonial and semicolonial countries.

The utter irrationality of capitalism reached new depths in the epoch of imperialism. While industrial capitalists continued to concentrate on the production of goods for sale (commodities), the machinations of the giant financial institutions took on unheard-of proportions. As revolutionary Marxist leader V.I. Lenin explained in his 1916 study Imperialism: The Highest Stage of Capitalism:

“Although commodity production still ‘reigns’ and continues to be regarded as the basis of economic life, it has in reality been undermined and the bulk of the profits go to the ‘geniuses’ of financial manipulation. At the basis of these manipulations and swindles lies socialised production; but the immense progress of mankind which achieved this socialisation, goes to benefit…the speculators.”

A case in point is the U.S. bourgeoisie, which for decades has shunned investment that would expand and modernize its decaying industrial capacity or repair the country’s crumbling bridges, roads, power lines and levees. Instead, it has squandered much of the economic surplus appropriated through the exploitation of labor on a succession of speculative binges. And in fact it was rampant financial speculation in the housing industry that triggered the current economic crisis.

In Europe, such financial swindles have sharply accentuated the contradictions inherent in the European Union, an unstable consortium of rival capitalist states. At the heart of the EU’s contradictions is the fact that the maintenance of a common currency requires a common state power. That is simply not possible under capitalism. The International Communist League long ago debunked the illusion that the EU could lay the basis for a capitalist United States of Europe. In a statement on the Maastricht Treaty, which laid the basis for the euro, the ICL wrote:

“Since capitalism is organised on the basis of particular national states, itself the cause of repeated imperialist wars to redivide the world, it is impossible to cohere a stable pan-European bourgeois state. A European imperialist ‘superstate’ can be achieved only by the methods of Adolf Hitler, not those of Jacques Delors, the French social-democratic architect of Maastricht.”

—“For a Workers Europe—For Socialist Revolution!”
WV No. 670, 13 June 1997

Only the conquest of state power by the proletariat can lay the basis for a socialist United States of Europe and a rationally planned economy.

As proletarian revolutionary internationalists, we have always opposed the EU as an imperialist trade bloc. Dominated by capitalist France and Germany, the EU’s purpose is to increase their competitive edge against their imperialist rivals in the U.S. and Japan through the increased exploitation of the working class of the EU countries. As the price of entry, the weaker EU states were locked into the euro. Now they are going down, scrambling to meet their debt obligations by driving the working class into the ground. It couldn’t have been otherwise.

In 1848, Marx and Engels indicted the bourgeoisie as “unfit any longer to be the ruling class in society” because “it is incompetent to assure an existence to its slave within his slavery.” If the bourgeoisie of that time was unfit to rule, the imperialist rulers today have long passed their sell-by date.

An Empire in Decline

Beginning with the 1898 Spanish-American War, the capitalist rulers of the rapidly developing U.S. set out to conquer the world, seizing Cuba, Puerto Rico and the Philippines for their own plunder. When they emerged as the dominant imperialist power following World War II, the U.S. imperialists boasted of the beginning of the “American Century.” But by the 1970s, they were seeing their dominance challenged by the rising economic might of Germany and Japan. With its treasury drained by the long, losing war against the Vietnamese workers and peasants, the U.S. was no longer the world’s undisputed capitalist powerhouse. This was signaled by the devaluation of the dollar on 15 August 1971.

To reverse its declining fortunes, the U.S. ruling class launched a campaign to increase profitability through the increased exploitation of the working class—closing auto and steel factories, moving production to low-wage plants in the “open shop” South and to neocolonies in Latin America and Asia, increasing productivity through speedup and the institution of “two-tier” wage and benefits packages for younger workers. A key turning point was the smashing of the PATCO air traffic controllers union in 1981. It was Democratic president Jimmy Carter who drew up the plan to crush PATCO, which was implemented by his Republican successor, Ronald Reagan. The AFL-CIO bureaucrats let Reagan get away with it, crucially by refusing to call out other unions to shut down the airports. This defeat helped usher in a wave of broken unions and busted strikes.

Like Obama today, Reagan manufactured a debt crisis in order to destroy social programs. The “war on poverty” programs enacted to buy social peace in the inner cities following the mass ghetto upheavals of the 1960s were increasingly shredded. But it took Democratic president Bill Clinton to finally eliminate “welfare as we know it.” Acting on Reagan’s racist demagogy about black “welfare queens” living off the back of “hard-working taxpayers,” Clinton abolished Aid to Families with Dependent Children for impoverished single mothers and their families.

Reagan had run a huge deficit spending program, slashing taxes for the rich while borrowing massively from Japanese and German bankers as well as oil-rich Arab sheikdoms. The overriding purpose was a huge military buildup for U.S. imperialism’s Cold War drive against the Soviet Union. Despite its bureaucratic degeneration under Stalin, the Soviet workers state continued to embody the main social gains of the 1917 Russian Revolution. The imperialists were determined to reconquer this vast territory—one-sixth of the planet—for their exploitation.

In 1991-92, the capitalists achieved their counterrevolutionary aim of destroying the world’s first workers state. Coming into office on the back of this “victory,” Clinton promised that the “peace dividend” would revitalize the economy by reducing the massive government debt. But the “dividend” was largely channeled into an orgy of speculative investment in telecommunications and Internet services, the so-called dot-com boom of the mid-late 1990s. That bubble burst in 2000-2001, ushering in another recession.

Clinton’s neoliberal Democrats were followed by the Republican neo-cons of the George W. Bush administration. These nuclear cowboys invaded Afghanistan and Iraq to send a message to the rest of the world that the U.S. remained militarily the top dog on the planet. These wars and occupations were financed through foreign borrowing, while the filthy rich got a tax cut that outdid even the free lunch they got under Reagan. Then the housing-price bubble of the early-mid 2000s burst in 2007-2008, touching off a global financial crisis. Today, we have Barack Obama lamely responding to Standard & Poor’s reduction of its AAA rating of U.S. treasury bonds by declaring that the U.S. has “always been and always will be a triple A country.” The stock market responded by taking a $2 trillion nosedive.

After the Soviet Union’s counterrevolutionary destruction, it appeared that the U.S. imperialists were successful in the quest they had begun almost a century earlier to be the masters of the world. But even as the U.S. has achieved unrivaled military supremacy, its domestic industrial base has continued to corrode. To some in the haughty U.S. ruling class, the decline of the country’s economic might is bereft of any explanation—besides being contrary to “God’s will.” In consequence, a wing of the American bourgeoisie has seemingly gone totally insane.

Even by the lights of their own party’s establishment, the current crop of Republican presidential candidates has gone off the deep end. On the campaign trail in Iowa, Texas governor Rick Perry accused the Chairman of the Federal Reserve, Ben Bernanke, of treason for “printing more money to play politics,” threatening “we would treat him pretty ugly in Texas.” Perry, a dangerous reactionary, is here going after a Republican appointee of the Bush administration whose “soft money” policy has in fact been a boon for the bourgeoisie. By driving real interest rates down below zero, the Fed is essentially paying financial capitalists to borrow from the government—and then invest the money for a profit!

A week before Perry entered the race, he was the star of a 20,000-strong Christian fundamentalist revival meeting where he asked God to save the U.S. economy. Rival presidential candidate Michele Bachmann fervently believes that she and other good Christians are to be gathered in the air to sit at the right hand of God during what some call the coming “Rapture.” In their deranged worldview, Perry and Bachmann have much in common with the mad miracle monk Rasputin, who advised the Russian tsarina in the dying days of the brutal and rotted-out Tsarist Empire. Obama hopes to ride back into the Oval Office as the “sane” alternative, one who can more effectively implement a bipartisan drive to slash every remaining social program that reflects an impulse not to see masses of starving, homeless people in the streets.

There is no question that the current Republican candidates are lunatics. But their lunacy is the reflection of the dangerous irrationality of the U.S. imperialist order. Just as the decadent, crazed and corrupt court of the tsars was swept away by the Russian Revolution, we Marxists are determined to build the revolutionary internationalist party that can lead the workers in overthrowing the decaying rule of American capitalism.

For an International Socialist Planned Economy!

The reformist left pleads that the government “tax the rich” to provide the money for jobs, education, welfare for the poor and other beneficial programs. This refrain was recently taken up by multibillionaire Warren Buffett in a New York Times (14 August) op-ed column titled “Stop Coddling the Super-Rich.” In response, a Fox TV business analyst denounced Buffett, one of the world’s wealthiest financial profiteers, as a “socialist”! Actually, it is the fear that the masses might revolt that concerns Buffett, who opined: “Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.”

Amid a sea of millions of unemployed, the corporations and banks are sitting on mountains of cash. But you aren’t going to get your hands on it by appealing to the tax authority of the capitalist state, whose purpose is to guarantee and defend the interests of the bourgeoisie. To resolve their debt crisis, state and local governments are slashing pensions for retirees to pay off bondholders. To “make the rich pay,” the working class has to smash the rule of the bourgeoisie!

In an ideological climate conditioned by the imperialists’ proclamations that the destruction of the Soviet Union proved Marxism to be a “failed experiment,” the prospect of proletarian socialist revolution might appear implausible. But the collectivized economy in the Soviet Union worked! Despite its isolation in a world dominated by imperialism, the Soviet Union, arising from deep backwardness and the destruction of world war, civil war and imperialist intervention, became an industrial and military powerhouse.

Now, two decades after counterrevolution destroyed the Soviet degenerated workers state, many in Russia hark back to when they were guaranteed a job, education, housing, health care and vacations, regretting that they were taken in by the myth of capitalist “democracy.” What undermined the collectivized economy, and ultimately laid the basis for the destruction of the Soviet Union itself, was the parasitic Stalinist bureaucracy, which robbed the workers of their political power and vainly sought to appease the imperialists by selling out workers’ struggles in other countries.

Today, the deep economic crisis in the capitalist countries contrasts sharply with the situation in China, where the industries central to production are collectivized. At the same time that the U.S. and European governments have been bailing out the financial capitalists while making the workers pay, Beijing has massively channeled investment into developing infrastructure and productive capacity. Faced with a growing number of strikes and protests, the regime has increased the income of workers and peasants. However, China’s Stalinist regime undermines the social gains of the 1949 Revolution by conciliating imperialism and promoting “market reforms” that strengthen internal counterrevolutionary forces. In its “partnership” with world capital, the Beijing bureaucracy is subsidizing American imperialism through its huge investment in U.S. treasury bonds, which, among other things, are used to finance the occupations of Iraq and Afghanistan. As Trotskyists, we stand for the unconditional military defense of the Chinese deformed workers state against imperialism and internal counterrevolution. At the same time, we understand that the defense and international extension of the remaining gains of the 1949 Chinese Revolution require a proletarian political revolution to replace the Stalinist bureaucrats with a revolutionary internationalist leadership and a regime of workers democracy.

As we wrote in our article “Wall Street Nightmare Stalks Working People” (WV No. 921, 26 September 2008):

“You can solve a lot of problems with ‘domestic cash transfers’—make life livable for workers, blacks, Latinos, jobless, homeless, welfare mothers, drug users, etc. And we communists intend to do so. But you have to first smash the power of the bourgeoisie. For that you need to build a workers party, one that doesn’t ‘respect’ the property values of the bourgeoisie, a party that says to the exploited and oppressed: we want more, we want all of it, it ought to be ours, so take it. And when we have the wealth of this country, we will begin to build a planned socialist economy on an international scale. Then we can right some historical wrongs and crimes and pay off some debts left over by our rulers, like some tens of billions of dollars to the Vietnamese and others whose countries have been maimed under the passing treads of American tanks. As for ‘compensation’ to the people who have driven the United States to ruin, we can offer to those who don’t get in our way that they will live to see their grandchildren prosper in a truly humane society.”