National Sections of the L5I:

An historic crisis of the system as a whole – on the meaning of our analysis

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At the eighth congress of the League delegates debated our position on the pre-revolutionary period which we had adopted at previous international meetings. Congress adopted the following resolution which criticised the method we had used to distinguish periods and changed the position adopted in our perspectives.

Adopted by the Congress at its eighth congress in June 2010


The League’s international perspectives, ‘the Crisis of Global Capitalism’, speak of a new period in world history opened up by the Great Capitalist Crisis of 2007 – ‘08. This resolution seeks to clarify two points on the nature of these changes.

We agree with the crux of the League’s thesis: there has been a profound turning point in world history: a new period opened up by the historically severe global economic crisis of 2008 – ‘09. But, in our view, there is an ambiguity in the document on how exactly the architecture of the global political and economic order has been affected by this great turning point. The perspectives document is confusing because it simultaneously speaks of Globalisation as:

a) a phase of history that is finished (the ‘end of the Globalisation period’) and
b) as a global political and economic order that is in crisis

While these facts can co-exist to a degree with one another, we feel it is much more useful to specify which aspects of the international political economy have remained constant, what aspects have changed, and how exactly the contradictions in the system might develop in the period ahead. We do not believe this short resolution is the ‘end of the story’ by any means, but we do think it provides a broad framework for the League’s perspectives on this question and can avoid the mistake of confusing the beginning or mid-point of a process for its final conclusion. The resolution argues, therefore, that we have entered a period marked by the crisis and breakdown of globalisation and that the collapse and negation of this system into economic autarchy is still ahead of us, even if the political actors and social forces who might bring such a collapse into being are becoming clearer.

The conclusion of the resolution seeks to clarify a second aspect of the League’s analysis; what exactly are the features of longer-term instability in the world order and the political economy, that lead us to characterise this new period as one marked by an ‘historic crisis of the system as a whole’. We seek to show how this concept has a concrete meaning, capturing the intensification of struggles within and between classes over the future of the global system. In our view, this formulation is sharper and more clarifying than the alternative formula that has been put forward by some comrades in the League who refer to the new period as a ‘new revolutionary period’. Our view remains that this lacks clarity and confuses terms (revolutionary, pre-revolutionary, transitional) best used to describe specific conjunctures (situations) that are vitally important for communists to inform appropriate revolutionary tactics and strategy at key moments in the class struggle. When used to describe a longer term development – one replete with all the uneven and combined development, which is at the very core of how the international capitalist system works – this phrase acts as an overgeneralisation of a complex set of events and processes.


‘An historic crisis of the system as a whole’ – on the meaning of our analysis

The Great Crisis of 2007 – 2008

The Great Crisis of 2007 and 2008 was a historically severe capitalist crisis – the most synchronised global recession in history and the most serious crisis of its kind since the 1930s. Its main features were:

• A massive over-accumulation of capital that lead to an historic global deflationary collapse, one which had affected every corner of the international system by early-2009.

• This over-accumulation of capital developed in a highly integrated economic order – with particularly powerful integration in the global financial and trading system - that had been made possible by the collapse of the Stalinist states and restoration of capitalism in China.

• Booming financial flows (credit, securities, derivatives), in particular massive financial leveraging on part of the imperial heartlands of finance capital, had disguised stagnation tendencies in core value producing industries through increased parasitism.

• But the combination – at the level of the integrated world market – of two discrete developments: the cyclical downturn and subprime mortgage collapse in the American economy and the return of inflation in the world system due to the maturation of China’s economic development, led to a massive realignment between fictitious and real-values; and, thus, a major destruction of global capital.

• Huge bailouts of the western financial system and historic counter-cyclical measures mobilised by western governments, together acted as a parachute for the recession, preventing a complete and total breakdown of the financial system but storing up tremendous contradictions. By transferring the debts onto the state they have not solved the structural debt problem but instead seek a prolonged phase of attacks on the public sector.

• A massive programme of attacks on the working class through job losses, pay cuts, worsening conditions, along with deepening immiseration for the urban poor and peasants.

This has led to great tensions within the political-economic architecture of the Globalisation world order. But what was it and how do we understand it?

Globalisation can be understood as both:

(a) Phase of world history – i.e. a demarcated period of time in which certain political and economic features predominated in the international political economy; and, as such, a specific, historical phase of capitalist imperialism.

(b) Set of principles, rules, and a judicial and political framework governing the international trade and financial systems under the auspices of US hegemony and the international economic institutions that the latter dominated.

Thus, Globalisation as an historical phase and a certain economic and political order had the following features:

• Financial deregulation and with it an increased role for credit and speculation in maintaining year-on-year growth, particularly through the diversification of financial instruments into new forms of fictitious capital (derivatives, hybrid securities, forms of credit et al).

• Opening up of new markets in the non-imperialist countries, the former workers’ states, to the international trade, capital and credit markets, including sharp and sustained increases in the volumes of international trade and capital flows.

• Internationalisation of the productive forces, including the relocation of whole industries to cheap labour markets.

• Pressure for wholesale privatisation of state industries, public utilities and social services in the imperialist and non-imperialist world. A drive to redistribute wealth from the working classes to the rich – by breaking trade union organisation, holding down wages and restructuring taxation systems to the advantage of the wealthy.

• Dominance of neoliberal ideology and economic policy in the imperialist countries and the imposition of such policies on the semi-colonial world through international financial institutions, such as the IMF and World Bank, dominated by the US.

• Push for “free trade” and the dismantling of tariff barriers in the south and east to the advantage of the imperialist exporters, overseen by GATT and then WTO.

• The central position of the dollar as the global currency; principal settlement currency for international trade and currency of choice for the denomination of fictitious capital assets.

These political and economic features were brought into being by political and social forces, real historical actors, of the western, principally US, bourgeoisie. While the bases were laid in previously, in changes that shaped the world system in preceding decades, they could only reach the full fruition – the drawing together a set of contingent determinations to elicit a change in the world order – in the re-ordering of the international political economy in the 1990s made possible by the collapse of the USSR and restoration of capitalism in China.

The aim of these changes was to fundamentally alter the organisational structure of modern capitalism in the heartlands and its international relationships, with the view of making it more parasitic on the rest of the world. The imperative behind this was the need to offset the crisis in profitability in the core value-producing sectors of the western imperial economies and the US domestic economy in particular. Taking advantage of more open markets internationally by creating more predatory opportunities for finance capital and attacking working classes at home, the US hegemon sought to overcome its domestic stagnation and secure its global domination for years to come. And last of all, this project to strengthen US economic and political hegemony for an entire century found its most explicit expression in its increased propensity to use its overwhelming military strength to secure its interests.

Time and again the south and east, in the periphery of the system, suffered for these policies – the predatory nature of finance capital in particular, paralysed whole states in a series of crises through the 1980s, 1990s and 2000s. The ‘neoliberal offensive’ was a continuous source of instability throughout the Globalisation years - an instability further aggravated by the ‘war on terror’ of US imperialism. From Seattle to Jakarta, from Porto Alegre to Florence, and Paris to Berlin, mass movements assembled contesting and challenging the ‘new world order’ brought into being under the auspices of unchallenged US hegemony. Globalisation, indeed, remained imbued with the longer terms spirits of late capitalist times. The huge demonstrations against imperialism on February 15th 2003, the penumbra of mass movements challenging IMF shock therapy across the globe, the mass workers’ movements defending past gains, this all struck of a world that remained firmly in the imperialist epoch of ‘wars and revolutions’.

The great contradiction of the Globalisation system, which we see is the most obvious source of its crisis today, was that they created conditions favourable to the rise of challengers to US hegemony – as a more open global trading system favoured newer, more-nimble capitalisms with large pools of cheap labour, and some of these emerging powers, like China were large, powerful political actors. But part of the US advantage remained not only its overwhelming military might but also its highly sophisticated and predatory finance capital.

The question, then, is what remains of this set of historic relations? The answer has to draw on both elements of change and continuity in the existing system:

(a) A sharp weakening of US hegemony and the development of a more ‘mutli-polar’ environment in international relations. This was first expressed in its most brutal form by the US inability to stop the Russian war on Georgia. And has been since expressed in a much more subtle form by attitudes the US has taken to its relations with Russia (e.g. arms reductions talks) and China (e.g. silence on human righta, on level of yuan to the dollar). But, most importantly, of all we see the role of the G20 talks, the incorporation into them of the intermediate countries of the imperialist system, the new Great Power China and the promise of greater influence for the later in the IMF, WTO and World Bank.

(b) A contradictory crisis in the policy and ideology of neoliberalism. On one hand counter-cyclical measures flew in the face of ‘orthodox’ neoliberal doctrine. This was an expression of the reality that capitalism is more and more dependent on forms of ‘state trustification’ to socialise its losses while privatising the profits. But, on the other hand, states remain – and, indeed, must remain insofar as they are capitalist states – committed to the principles of private capital accumulation and of creating new markets and avenues favourable to its expanded reproduction. This is the great tension and crisis in bourgeois ideology today.

(c) Sharp and aggressive attacks of the bourgeoisie on the working class. This is a necessary part of the need of the capitalists to destroy capital and one that is consistent with the neoliberal offensive of previous decades. But the speed and tempo of such attacks is contingent on politics and the class struggle including its ideological aspects, and these can often require alliances of the bourgeoisie with sections of the working class and ideologies consistent with this need. Hence we see populism and social democracy, as well as neoliberalism, being key forces for capitalism in the course of the crisis.

(d) Growing competitive pressures between the Great Powers on ‘who should pay the costs’ of the economic crisis. An increased tendency to protectionism not only of finance capital but also through key sectors of industrial capital – cheap government backed credit facilities, greater scope for state intervention into takeovers in the name of ‘national interest’, tensions over tariffs, and continued paralysis of world trade talks. And, finally, there is the increased importance of ‘debtor-creditor’ relations in the contradictory relationships of power and domination existing between these states.

(e) Intensifying conflict between the imperialist heartlands and the peripheries of the system, as the age old mechanisms of economic subordination and bondage – debt, credit, and financial predation underwritten by the imperialist powers, are used to force concessions and subservience from those semi-colonial states who cower to these powers.

7. But if this, broadly speaking, are the changes we see in the international political economy, what then are the continuities? These can be summed up in the continuation of a highly interdependent regime of global capital accumulation based on moderate openness in trading and financial regimes, with a key role for the dollar as global currency:

(a) There have been no radical changes to the international financial system. Indeed finance capital was the principal beneficiary of the bailouts with the bubble in equities in 2009 going alongside the massive contraction in industrial production, for example, expressing the speculative power of finance capital.

(b) Global capital inflows and outflows between the great powers have continued apace, expressing this continued inter-dependence of the major capitalist economies. In 2008 for example the United States was the biggest global beneficiary of capital inflows and China was the biggest global exporter of capital. The reason? China was continuing to use the dollars accumulated through its trade surpluses to buy US bonds.

(c) Though there are pressures and tensions over protectionism none of the Great Powers – with the history of the Great Depression bearing down strongly on them – has driven aggressively into economic autarchy or regional-based protectionism.

(d) The basic political and juridical framework of Globalisation, encapsulated symbolically in the formation of the World Trade Organisation in 1995, for trade and finance remains in place, with the qualification that it is being restructured to strengthen the hand of the non-G8, G20 states and, most importantly, China. And, the further qualification, that the Doha round on further trade liberalisation is completely paralysed amid argument amongst these forces.

Taken together these are features of a period marked by the crisis and breakdown of the Globalisation order but not its end. It’s a period where the ‘relative equilibrium’ of the 1992 – 2008 phase of development is fundamentally absent. Crucially – and it cannot be emphasised enough – this is a period of historic attacks on the working class. Capitalist governments everywhere universally agree the workers and peasants must pay. The Great Powers universally agree the south and east must pay. And the Great Powers each believe that their rivals should pay and they should prosper. It is in short a phase of re-ordering of the world. As Marx once put it, at such moments, ‘All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses, his real conditions of life.’

Economically the features of this new period can be summarised as:

(a) An on-going problem of over-accumulation in the core centres of the imperialist world system, i.e. the old, decaying imperial powers, and stagnatory value production in their core manufacturing centres. Another explosion in fictitious capital could in this context trigger serious inflationary pressures and even a second global financial crisis.

(b) The bailouts have stopped the crisis from ‘doings its job’ for capital, i.e. the bailouts obstructed the necessary destruction of fictitious and real capital assets that still needs to be undertaken to create the conditions for a new round of dynamic, fast-growing expanded reproduction.

(c) China has come out of the crisis growing sharply. And indeed its ability to come out of such a change stronger than other powers, its importation of western manufacturing technologies through buying up firms, its growing domestic market, and the fact that it is going to be one of the main forces in the re-division of the world, all underline its status as one of the Great Powers. The growth of its productive forces on more competitive lines to the decaying imperial centres will be an enormously destabilising feature of the period ahead.

(d) The highly indebted position of the imperial centres, their dependency on the rest of the world, the mounting programmes of austerity at home, will be key to the period too.

(e) The position of the dollar as the only world settlement currency in international trade is in doubt and a key subject in the re-division of the world.

Politically we see the emergence of a new world order whose main features are:

(a) Increased ‘Wilsonian’ attitudes in international relations led by the Obama administration, whereby compromise with other Great Powers is seen as key to securing US interests (e.g. willingness to concede to China to win sanctions on Iran; fallout with Israel over further settlements to appease Gulf allies; restoration of relations with Russia).

(b) Growing multi-polarity in international relations; space for greater assertiveness to America from its rivals, development of influence and power of intermediate, G20 countries.

(c) But equally, the greater potential for instability in international relations as bourgeois leaders are torn between desire to restore a globalisation-like equilibrium and their need to protect their domestic markets – thus, enormous economic pressures can undermines formal commitments to new ‘global partnerships’.

In domestic political life, class, economy and social inequalities are increasingly the key issues in politics. This flows from the capitalists attempt to secure their own wealth through historic attacks on those below them. This means:

(a) The crisis sees workers, poor peasants, the urban poor, and the middle classes see their share of social value (jobs, wages, pensions, welfare, health, education) under attack from capital. In some countries and regions, they face the most appalling immiseration as the drive to make the labouring classes pay the costs of the crisis brings hunger, super-exploitation, precarité, bankruptcy, repossession, homelessness, poverty and insecurity.

(b) We can see increasingly polarised stratification both within society as a whole and within each of the constituent classes. An increase in lumpenisation, the expansion of the informal economy, the immiseration and proletarianisation of the middle strata, and the protectionist impulses of the labour aristocracy, these factors have all impacted on the ability of the bourgeoisie to secure stable class alliances with those below them. This means: potential and actual growth of populism, racism, and far right; instability of social democracies relationship to core sectors of the class; and greater scope for political re-compositions, fusions and splits.

It is in the context of this concrete amalgam of socio-historic contradictions that we can speak of an ‘historic crisis of the system as a whole’. We do not treat this term as an abstract foundation from which we make a series of abstract and self-referential deductions, but have to define this concept of an intensified, global crisis, concretely in terms of the conditions of social power and instability in this new phase of development. Were therefore mean:

(a) The historic character of the crisis derives from the tremendous difficulties that the major world economies now face in restoring the accumulation regime of the Globalisation order.

(b) The growth and expansion of China will be enormously destabilising to the existing international order – sources of raw materials, cheap labour power and markets for commodities, services and finance will be contested with increasing sharpness – poses a re-ordering of the international political economy.

(c) The decline and decay of the old imperial heartlands and their pronounced problems of surplus value production in their core industries demands on-going attacks on the working classes, while their debt crises requires similarly historic attacks across the public sector.

(d) A parallel drive for greater exploitation by imperialist finance capital on semi-colonies takes place within conditions of growth of power of intermediate countries and China; greater scope for third wordlist bourgeois anti-imperialism and regional bloc-building to further challenge the imperialist centres.

(e) The world market becomes the fulcrum through which these contradictions are played out with intensified competition increasingly creating a ‘zero-sum-game’ scenario and the overall decline of the productive forces.

(f) All this takes place within a mounting ecological crisis – with anarchic, polluting capitalist production undermining the very basis for the system itself. The potential human costs are of course huge and devastating.

(g) Last of all, the post-9/11 years already saw an increase in overt military imperialism on the part of the United States. As the challengers to the US become stronger and as it makes greater use of diplomacy after its setbacks in Iraq and Afghanistan, a key question is how bold its rivals will be and how long the US can maintain its formal commitment to multilateralism if it is increasingly defied by hostile states. History ominously tells us that the re-ordering of the world can never be undertaken peacefully. Wars by proxy, with the Great Powers developing better-armed gendarmes, carrying with them the risk of drawing these larger backers into military confrontation for the division and redivision of the world, present a mounting threat in the new unstable world order.

These in ‘the rough’ are the contours of the historic crisis of the capitalist system. These concrete features are more than epiphenomenal expressions of the general contradictions of capital – they are themselves historic determining factors existing at a more specific, concrete level of analysis – but they do nonetheless represent a bringing to the surface of economic, social and political events the historic contradictions of the capitalist system. They underscore its finality – its crisis-ridden and, in the end, doomed nature – and give a tremendous objective basis to convincing millions of workers and youth of the necessity and urgency of revolutionary socialist transformation. But far from being inevitable – requiring us to simply raise our banner and make propaganda – our politics will need to be fought for in the great class struggle battles ahead of us. This means going to the class as they are with all their wrong ideologies, programmes, parties and leaders, and showing in practice - through the workers’ own experience - the need for revolution and socialism.

So, does this analysis mean it is a final crisis? That capitalism cannot escape without some great and final catastrophe? No, it means rather that in order to get through this structural crisis, to create conditions for a new phase of capitalist equilibrium, then a historic destruction of capital – and with it attacks on the working class on a sufficient scale – would be needed, along with a stable global political order arising through a successful re-division of the world. For a new round of expanded growth major, indeed historic, defeats on the working class would be necessary. Does it mean that there cannot be periods of sharp expansion? No not at all. But the prognosis here – and it is only a prognosis based on a concrete and, in the end, fallible set of analyses and perspectives – is that: notwithstanding sharp upswings of the industrial cycle which will doubtless occur in the years ahead in specific countries and regions, the destruction of credit instruments, the emergence of China and a new pattern of global disequilibrium, and the massive encumbrance of state debt incurred in the bailout all mean that over the cycles ahead the curve of capitalist development will be marked by an overall tendency to a decline of the productive forces.

This picture presented here is not a single generalisation of a ‘revolutionary period’, but a new phase of historic crisis in the system, one that will see any number of revolutionary situations, transitional phases, counter-revolutions too. Each conjuncture can change (indeed, on occasion, transform) the pattern and direction of future developments – they will be determined by the outcome of struggles between the classes, amongst the classes, and between the states. What, then, is required to turn this general, structural, and historic crisis of the system into a revolutionary offensive against capital and for lasting, socialist transformation? Key to this is, naturally for Marxists, the ‘subjective’ and not only the ‘objective’ factors: that is, the levels of radicalisation of the oppressed classes, their militancy, determination to resist, the legacy of past battles on this, and, most of all, whether in their struggles, they can be won to revolutionary political leadership, to the building of new revolutionary parties and a fifth, workers’ international.

Indeed, the most transformative event would be the successful seizure of power by the working class. In either a backward or major capitalist state this would completely transform the whole situation – indeed, open a ‘new period’. It is to the preparation of this outcome that revolutionary forces must dedicate themselves. It is in the mass struggles against the effects of the crisis, that the historic, objective, potential for this outcome irrefutably exists. Our conclusion is therefore not that an extended ‘revolutionary period’ will simply exhaust mass illusions in social democracy, Stalinism, and populism, requiring of us simply to set out our stall and inform the vanguard in ever more insistent tones of the urgency of the situation. Rather we believe that, in this time of a historic crisis of the system, which opens a new period of savage attacks on the workers and poor, we must watch closely the rhythms and development of the mass organisations, penetrating their ranks, developing straightforward proposals for a workers’ united front against the crisis, winning workers to a transitional programme of action and strengthening our sections for the future.